<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                                   -----------

(X)  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

                 For the quarterly period ending June 30, 2002
                                                 -------------

                                       or

( )  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

      For the transition period from                 to
                                     ---------------    ---------------

                         Commission File Number 0-25355
                                                -------

                               PFSB BANCORP, INC.
     ----------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

                   Missouri                                     31-1627743
------------------------------------------------            -------------------
       (State or other jurisdiction of                       (I.R.S. Employer
        incorporation or organization)                      Identification No.)

 123 W. Lafayette St., P.O. Box 72, Palmyra, MO                   63461
------------------------------------------------            -------------------
  (Address of principal executive offices)                      (Zip Code)

                 573-769-2134
------------------------------------------------
          (Issuer's telephone number)


As of August 14, 2002, there were 418,195 shares of the Registrant's Common
Stock, $.01 par value per share, outstanding.

                 Transitional Small Business Disclosure Format

                            Yes            No     X
                                ----------     ----------

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                                   FORM 10-QSB
                                  JUNE 30, 2002

INDEX                                                                      PAGE
-----                                                                      ----

PART I -  FINANCIAL INFORMATION
-------------------------------

ITEM 1 -  FINANCIAL STATEMENTS (UNAUDITED)

   CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                             1

   CONSOLIDATED STATEMENTS OF INCOME                                          2

   CONSOLIDATED STATEMENTS OF CASH FLOWS                                      3

   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                               4-6

ITEM 2 -  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS                              7-10

PART II - OTHER INFORMATION
---------------------------

ITEM 1.   LEGAL PROCEEDINGS                                                  11

ITEM 2.   CHANGES IN SECURITIES                                              11

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES                                    11

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                11

ITEM 5.   OTHER INFORMATION                                                  11

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                                   11

SIGNATURES                                                                   12



<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                 June 30,    September 30,
                                                                                                   2002          2001
                                                                                               ---------------------------
                                                                                               (Unaudited)   (Unaudited)
<S>                                                                                              <C>         <C>
ASSETS
   Cash (includes interest-bearing deposits of $5,013 and $3,883, respectively)                  $  5,261      $  4,185
   Investment securities:
       Available-for-sale, at fair value                                                            8,346         6,036
       Held-to-maturity (fair value of $256 and $912, respectively)                                   175           900
   Mortgage-backed securities held-to-maturity (fair value of $5,709 and $7,061, respectively)      5,602         6,970
   Stock in Federal Home Loan Bank of Des Moines ("FHLB")                                             509           427
   Loans receivable, net (allowance for loan losses of $341 and $299 respectively)                 50,128        49,901
   Accrued interest receivable                                                                        499           538
   Premises and equipment                                                                             968         1,030
   Foreclosed Real Estate                                                                              57            --
   Other assets                                                                                        48            57
                                                                                                 --------      --------
                                              TOTAL ASSETS                                       $ 71,593      $ 70,044
                                                                                                 ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

   Deposits                                                                                      $ 62,060      $ 60,736
   Advances from borrowers for property taxes and insurance                                            57            55
   Dividends Payable                                                                                   63            --
   Other liabilities                                                                                  187           117
                                                                                                 --------      --------
                                           TOTAL LIABILITIES                                       62,367        60,908

STOCKHOLDERS' EQUITY
   Common stock, $.01 par value per share; 5,000,000 authorized, 559,000 issued                         6             6
   Additional paid-in capital                                                                       4,950         4,937
   Retained earnings-substantially restricted                                                       6,301         6,317
   Accumulated other comprehensive income                                                              35            28
   Unearned ESOP shares                                                                              (302)         (335)
   Unearned SBIP shares                                                                              (119)         (157)
   Treasury stock, at cost (140,805 and 142,048 shares of common stock, respectively)              (1,645)       (1,660)
                                                                                                 --------      --------
                                       TOTAL STOCKHOLDERS' EQUITY                                   9,226         9,136
                                                                                                 --------      --------
                               TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $ 71,593      $ 70,044
                                                                                                 ========      ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       -1-

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                (Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                         Three Months Ended    Nine Months Ended
                                                                               June 30,              June 30,
                                                                           2002       2001       2002       2001
                                                                         ----------------------------------------
                                                                                       (Unaudited)
<S>                                                                      <C>        <C>        <C>        <C>
INTEREST INCOME
   Mortgage loans                                                        $   916    $   883    $ 2,774    $ 2,582
   Consumer and other loans                                                    6          9         18         32
   Interest-bearing deposits                                                   2         19         27         88
   Investment securities                                                     126        202        328        697
   Mortgage-backed securities                                                 86         57        285        155
                                                                         -------    -------    -------    -------
TOTAL INTEREST INCOME                                                    $ 1,136    $ 1,170    $ 3,432    $ 3,554

INTEREST EXPENSE
   Deposits                                                                  573        763      1,855      2,321
   Advances from FHLB                                                         --          5         --         93
                                                                         -------    -------    -------    -------
TOTAL INTEREST EXPENSE                                                   $   573    $   768    $ 1,855    $ 2,414
                                                                         -------    -------    -------    -------
NET INTEREST INCOME                                                          563        402      1,577      1,140

PROVISION FOR LOAN LOSSES                                                     --          8         41          8
                                                                         -------    -------    -------    -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                          563        394      1,536      1,132

NON-INTEREST INCOME
   Service charges and other fees                                             19         17         69         49
   Loss from foreclosed assets                                               (10)       (19)       (17)       (32)
   Gain from sale of investments                                               1          8          3         10
   Other income                                                                1         12         11         28
                                                                         -------    -------    -------    -------
TOTAL NON-INTEREST INCOME                                                     11         18         66         55

NON-INTEREST EXPENSE
   Employee salaries and benefits                                            214        194        637        604
   Occupancy costs                                                            42         43        126        131
   Advertising                                                                12         11         34         33
   Data processing                                                            24         23         77         72
   Federal insurance premiums                                                  3          4          8          8
   Professional fees                                                         105         25        261        110
   Directors' fees                                                            20         19         55         52
   Other expenses                                                             82         49        204        158
                                                                         -------    -------    -------    -------
TOTAL NON-INTEREST EXPENSE                                                   502        368      1,402      1,168
                                                                         -------    -------    -------    -------

INCOME BEFORE INCOME TAXES                                                    72         44        200         19

INCOME TAXES (INCOME TAX BENEFIT)                                             58          9         90         (4)
                                                                         -------    -------    -------    -------
NET INCOME                                                               $    14    $    35    $   110    $    23
                                                                         =======    =======    =======    =======
BASIC INCOME PER SHARE                                                   $  0.04    $  0.10    $  0.30    $  0.06
                                                                         =======    =======    =======    =======
DILUTED INCOME PER SHARE                                                 $  0.03    $  0.09    $  0.28    $  0.06
                                                                         =======    =======    =======    =======

</TABLE>

See accompanying notes to Consolidated Financial Statements


                                       -2-

<PAGE>
                       PFSB BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                       Nine Months Ended
                                                                                            June 30
                                                                                        2002       2001
                                                                                      -------------------
                                                                                          (Unaudited)
<S>                                                                                   <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                                            $   110    $    23
   Adjustments to reconcile net income to net cash provided by operating activities
   Depreciation and amortization                                                           66         63
   Amortization of premiums and discounts                                                   4         (1)
   Provisions for loan losses                                                              42         --
   Gain on sale of investments                                                             (3)       (10)
   Loss on sale of foreclosed real estate                                                  16         28
   ESOP shares released                                                                    45         40
   Amortization of SBIP                                                                    37         31
   Stock Option Expense                                                                     3         --
   Changes to assets and liabilities increasing (decreasing) cash flows
      Accrued interest receivable                                                          39        115
      Other assets                                                                         11         90
      Other liabilities                                                                    67       (106)
                                                                                      -------    -------

NET CASH PROVIDED BY OPERATING ACTIVITIES                                                 437        273

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from maturities and calls of investment securities, held-to-maturity          725      5,189
   Purchase of investment securities, available-for-sale                               (8,045)    (6,868)
   Proceeds from maturities and calls of investment securities, available-for-sale      5,747      8,437
   Purchase of mortgage-backed securities                                                (978)    (2,098)
   Principal collected on mortgage-backed securities                                    2,340        437
   Purchase of FHLB Stock                                                                 (83)       (24)
   Loans originated, net of repayments                                                  1,700       (807)
   Purchase of mortgage loans                                                          (2,079)    (2,071)
   Proceeds from sale of education loans                                                   37         41
   Purchase of premises and equipment                                                      (4)       (24)
   Proceeds from sales of foreclosed real estate                                            1         76
   Expenditures on foreclosed real estate                                                              2
                                                                                      -------    -------
NET CASH USED BY INVESTING ACTIVITIES                                                 $  (639)   $ 2,290

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits                                                             1,325      2,911
   Advances from FHLB
      Borrowings                                                                           --         --
      Repayments                                                                           --     (4,250)
  Net increase in advances for taxes and insurance                                          2          4
  Proceeds from exercise of stock options                                                  13         --
  Dividends paid                                                                          (62)       (68)
  Purchase of treasury stock                                                               --       (422)
                                                                                      -------    -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                      $ 1,278    $(1,825)
                                                                                      -------    -------
NET INCREASE IN CASH                                                                    1,076        738
CASH, BEGINNING OF PERIOD                                                               4,185      3,792
                                                                                      -------    -------
CASH, END OF PERIOD                                                                   $ 5,261    $ 4,530
                                                                                      =======    =======
</TABLE>

See accompanying notes to Consolidated Financial Statements


                                       -3-

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A--Basis of Presentation

The accompanying unaudited, consolidated financial statements have been prepared
by PFSB Bancorp, Inc. (the "Company") in accordance with instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation are reflected in
the June 30, 2002, interim financial statements.

The results of operations for the period ended June 30, 2002, are not
necessarily indicative of the operating results for the full year. The
accompanying consolidated financial statements and related notes of PFSB
Bancorp, Inc. should be read in conjunction with the audited financial
statements and related notes included in the Company's Annual Report for the
year ended September 30, 2001.


NOTE B--Formation of Holding Company and Conversion to Stock Form

On March 31, 1999, the Company became the holding company for Palmyra Savings
(the "Bank) upon the Bank's conversion from a federally chartered mutual savings
association to a federally chartered capital stock savings bank. The conversion
was accomplished through the sale and issuance by the Company of 559,000 shares
of common stock at $10 per share. Proceeds from the sale of common stock, net of
expenses incurred of $608,237, were $4,981,763, inclusive of $447,200 related to
shares held by Palmyra Savings' Employee Stock Ownership Plan ("ESOP").


NOTE C--Net Income (Loss) Per Share

Basic income per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted income per common share reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.

<TABLE>
<CAPTION>
                                                      Three Months Ended      Nine Months Ended
                                                           June 30,                June 30,
                                                       2002       2001         2002       2001
                                                    ---------------------------------------------
                                                    (In thousands, except   (In thousands, except
                                                      per share amounts)      per share amounts)
<S>                                                   <C>       <C>           <C>       <C>
Basic earnings per share:

   Income (loss) available to common shareholders     $  14     $    35       $ 110     $    23
                                                      =====     =======       =====     =======

   Average common shares outstanding                    375         367         370         381
                                                      =====     =======       =====     =======

   Basic income (loss) per share                      $0.04     $  0.10       $0.30     $  0.06
                                                      =====     =======       =====     =======

   Diluted income (loss) per share                    $0.03     $  0.09       $0.28     $  0.06
                                                      =====     =======       =====     =======
</TABLE>


                                       -4-

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


NOTE D--Employee Stock Ownership Plan

In connection with the conversion to stock form, Palmyra Savings established an
ESOP for the exclusive benefit of participating employees (all salaried
employees who have completed at least 1000 hours of service in a twelve-month
period and have attained the age of 21). The ESOP borrowed funds from the
Company in an amount sufficient to purchase 44,720 shares (8% of the Common
Stock issued in the stock offering). The loan is secured by the shares purchased
and will be repaid by the ESOP with funds from contributions made by Palmyra
Savings, dividends received by the ESOP and any other earnings on ESOP assets.
Contributions will be applied to repay interest on the loan first, and then the
remainder will be applied to principal. The loan is expected to be repaid in
approximately 10 years. Shares purchased with the loan proceeds are held in a
suspense account for allocation among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense account are
allocated among participants in proportion to their compensation relative to
total compensation of all active participants. Participants will vest in their
accrued benefits under the employee stock ownership plan at the rate of 20% per
year, beginning upon the completion of two years of service. Vesting is
accelerated upon retirement, death or disability of the participant. Forfeitures
will be reallocated to remaining plan participants. Benefits may be payable upon
retirement, death, disability or separation from service. Since Palmyra Savings'
annual contributions are discretionary, benefits payable under the ESOP cannot
be estimated.

The Company accounts for its ESOP in accordance with Statement of Position
("SOP") 93-6, Employers Accounting for Employee Stock Ownership Plans.
Accordingly, the debt of the ESOP is eliminated in consolidation and the shares
pledged as collateral are reported as unearned ESOP shares in the consolidated
statements of financial condition. Contributions to the ESOP shall be sufficient
to pay principal and interest currently due under the loan agreement. As shares
are committed to be released from collateral, the Company reports compensation
expense equal to the average market price of the shares for the respective
period, and the shares become outstanding for earnings per share computations.
Dividends on allocated ESOP shares are recorded as a reduction of retained
earnings; dividends on unallocated ESOP shares are recorded as a reduction of
debt and accrued interest.

A summary of ESOP shares at June 30, 2002 is as follows:

   Shares committed for release                                       2,236
   Shares released                                                   12,298
   Unreleased shares                                                 30,186
                                                                  ---------
                   TOTAL                                             44,720
                                                                  =========
   Fair value of unreleased shares                                $ 617,606
                                                                  =========


NOTE E--Stock Based Compensation Plans

The Board of Directors adopted, and the shareholders subsequently approved on
January 27, 2000, the PFSB Bancorp, Inc. 2000 Stock-Based Incentive Plan
("SBIP"). The purpose of the SBIP is to attract and retain qualified personnel
in key positions, provide officers, employees and non-employee directors of the
Company and Palmyra Savings, with a proprietary interest in the Company as an
incentive to contribute to the success of the Company, promote the attention of
management to other stockholder's concerns, and reward employees for outstanding
performance.

The SBIP authorizes the granting of options to purchase common stock of the
Company and awards of restricted shares of common stock. Subject to certain
adjustments to prevent dilution of awards to participants, the number of shares
of common stock reserved for awards under the SBIP is 78,260 shares, consisting
of 55,900 shares reserved for options and 22,360 shares reserved for restricted
stock awards. All employees and non-employee directors of the Company and its
affiliates are eligible to receive awards under the SBIP. The SBIP is
administered by a committee consisting of members of the Board of Directors who
are not employees of the Company or its affiliates.



                                       -5-

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

On April 6, 2000, the Company granted options for 44,720 shares at $10.25 per
share and awarded the 22,360 shares of restricted stock pursuant to the SBIP.

The options will enable the recipient to purchase stock at the exercise price
above. The options vest over three years following the date of grant and are
exercisable for up to 10 years. As of June 30, 2002, options for 31,059 shares
had vested, and options for 2,461 shares were exercised.

The restricted stock awards do not require any payment by the recipient and vest
over five years following the date of the award. The Company funded the
restricted stock awards with Treasury Stock which was purchased at a price above
the fair market value of the Company's stock at the award date resulting in an
increase in additional paid-in capital of $50,310. Amortization of the awards
resulted in a charge to compensation and benefit expense of $10,478 for the
three month period ended June 30, 2002.

The Company adopted SFAS No. 123, Accounting for Stock-Based Compensation, which
permits entities to recognize, as expense over the vesting period, the fair
value of all stock-based awards on the date of grant. Alternatively, SFAS No.
123 allows entities to disclose pro forma net income and income per share as if
the fair value-based method defined in SFAS No. 123 has been applied, while
continuing to apply the provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, under which
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeds the exercise price.

As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation" the
Company has elected to apply the recognition provisions of Accounting Principles
Board Opinion No. 25, under which compensation expense is recorded on the date
of grant only if the current market price of the underlying stock exceeds the
exercise price. Accordingly, adoption of SFAS No. 123 will have no impact on the
Company's consolidated financial position or results of operations.


NOTE F--Comprehensive Income

On October 1, 1998 the Company adopted the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", which
established standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. For the three and nine month periods ended
June 30, 2002 and 2001, unrealized holding gains and losses on investments in
debt and equity securities available-for-sale were the Company's only other
comprehensive income component.

Comprehensive income for the three and nine month periods ended June 30, 2002
and 2001 is summarized as follows:

<TABLE>
<CAPTION>
                                                              Three Months Ended      Nine Months Ended
                                                                   June 30,                June 30,
                                                               2002        2001        2002        2001
                                                          ------------------------------------------------
                                                          (Dollars in thousands)    (Dollars in thousands)
<S>                                                           <C>         <C>         <C>         <C>
Net Income (loss)                                             $  14       $  35       $ 110       $  23

Other comprehensive income:
  Net unrealized holding gains (losses) on investments
   in debt and equity securities available-for-sale             162         (58)         10         151

  Adjustments for net securities (gains) losses realized
   in net income, net of applicable income taxes                 (1)         (5)         (3)         (6)
                                                              -----       -----       -----       -----

Total other comprehensive income (loss)                       $ 175       $ (28)      $ 117       $ 168
                                                              =====       =====       =====       =====
</TABLE>


                                       -6-

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Forward Looking Statements

This report contains forward-looking statements within the meaning of the
federal securities laws. These statements are not historical facts, rather they
are statements based on PFSB Bancorp, Inc.'s (the "Company's") current
expectations regarding its business strategies and their intended results and
its future performance. Forward-looking statements are preceded by terms such as
"expects," "believes," "anticipates," "intends," and similar expressions.
Forward-looking statements are not guarantees of future performance. Numerous
risks and uncertainties could cause or contribute to the Company's actual
results; performance and achievements to be materially different from those
expressed or implied by the forward-looking statements. Factors that may cause
or contribute to these differences include, without limitation, general economic
conditions, including changes in market interest rates and changes in monetary
and fiscal policies of the federal government; legislative and regulatory
changes; and other factors disclosed periodically in the Company's filings with
the Securities and Exchange Commission. Because of the risks and uncertainties
inherent in forward-looking statements, readers are cautioned not to place undue
reliance on them, whether included in this report or made elsewhere from time to
time by the Company or on its behalf. The Company assumes no obligation to
update any forward-looking statements.


General

The Company is a Missouri corporation that was organized for the purpose of
becoming the holding company for Palmyra Savings ("Bank") upon the Bank's
conversion from a federal mutual savings association to a federal stock savings
bank. The Bank's conversion was completed on March 31, 1999. The Bank's business
consists principally of attracting retail deposits from the general public and
using these funds to originate and purchase residential mortgage loans generally
located in Missouri.

The Company's operating results depend primarily on its net interest income,
which is the difference between the income it receives from its loans and
investments, and the interest paid on deposits and borrowings. Non-interest
income and expenses also affect the Company's operating results. Non-interest
income would include such items as loan service fees, service charges, and other
fees. Non-interest expense would include such items as salaries and benefits,
occupancy costs, data processing expenses, and other expenses.

The discussion and analysis included herein covers material changes in results
of operations during the three month periods ended June 30, 2002 and 2001 as
well as those material changes in liquidity and capital resources that have
occurred since September 30, 2001.


Merger

Pursuant to an Agreement and Plan of Merger dated as of June 4, 2002, by and
between the Company and First Federal Bancshares, Inc. ("First Federal
Bancshares"), the Company has agreed to merge with First Federal Bancshares with
First Federal Bancshares being the surviving corporation. As a result of this
transaction, the Company and Palmyra Savings will cease to exist. First Federal
Bancshares intends to operate Palmyra Savings' three locations as branches of
First Federal Bank, the sole subsidiary of First Federal Bancshares. Under the
terms of the merger agreement, shareholders of the Company will be entitled to
receive either $21.00 in cash, shares of First Federal Bancshares common stock,
or a combination of both in exchange for each share of the Company's common
stock.


Financial Condition at June 30, 2002 and September 30, 2001

Total assets increased $1.5 million to $71.6 million at June 30, 2002. There was
a $1.1 million increase in cash and interest bearing deposits, a $1.6 million
increase in investment securities, a $1.4 million decrease in mortgage-backed
securities, a $82,000 increase in FHLB Stock, a $227,000 increase in loans
receivable, a $39,000 decrease in accrued interest receivable, a $62,000
decrease in premises and equipment, a $57,000 increase in foreclosed real
estate, and a $9,000 decrease in other assets. There were $5.7 million in
securities which were called or matured in the period, $747,750 which were sold,
and $8.0 million in securities which were purchased. The increases in cash and
interest bearing deposits, investment securities, and loans receivable were
primarily funded by a $1.3 million increase in deposits. Five properties were
foreclosed and two were sold during the period.



                                       -7-

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)

Total liabilities increased $1.5 million to $62.4 million at June 30, 2002 as
compared to September 30, 2001. The increase was due to an increase in deposits
of $1.3 million, an increase in advances for taxes and insurance of $2,000, an
increase in dividends payable of $63,000, and an increase in other liabilities
of $70,000.

Stockholders' equity at June 30, 2002 increased $90,000 to $9.2 million or 12.9%
of total assets as compared to September 30, 2001. The majority of the $16,000
increase in retained earnings was due to earnings of $110,000 and dividends of
$125,000. Other components contributing to the change in stockholders' equity
were an increase in additional paid-in capital of $13,000, a decrease in
unrealized losses on securities of $7,000, a decrease in unearned ESOP and SBIP
shares of $71,000, and a decrease in treasury stock of $15,000 due to the
exercise of stock options.

Non-performing assets include non-accrual loans, loans 90 days or more
delinquent and still accruing interest, foreclosed real estate and other
repossessed assets. The following table presents non-performing assets at the
dates indicated.

<TABLE>
<CAPTION>
                                                                   June 30,     September 30,
                                                                     2002            2001
                                                                   --------------------------
<S>                                                                  <C>             <C>
    Non-accrual loans ............................................   $215            $339
    Loans past due 90 days or more and still accruing interest ...    --               73
    Foreclosed real estate and other repossessed assets ..........     57             --
                                                                     ----            ----
         Total non-performing assets .............................   $272            $412
                                                                     ====            ====
</TABLE>

Non-accrual loans at June 30, 2002 and September 30, 2001 consisted primarily of
residential real estate loans. All non-accrual loans are classified as
substandard. As of June 30, 2002, one current loan was classified as $92,000
substandard and $5,000 loss due to value of the collateral securing the loan.


Results of Operations for the Three Months Ended June 30, 2002 and 2001

Net Income - Net income decreased $21,000 to $14,000 for the quarter ended June
30, 2002 as compared to $35,000 for the quarter ended June 30, 2001. Diluted
income per share decreased from $0.09 for the 2001 quarter end to $0.03 for the
2002 quarter end.

Net Interest Income - Net interest income increased $161,000 to $563,000 for the
three months ended June 30, 2002. Interest income decreased $34,000 for the
three month period ended June 30, 2002 as compared to the three month period
ended June 30, 2001, while interest expense decreased $195,000, resulting in an
increase in net interest income of $161,000. The increase in interest income was
due to an increase in loans receivable of $2.8 million along with an increase in
mortgage-backed investments of $845,000, partially offset by a decrease in
investment securities of $1.3 million. Interest expense decreased $195,000 from
the three month period ended June 30, 2002 as compared to the same period ended
June 30, 2001. This was primarily due to the decrease in deposit expense of
$190,000 along with a decrease in interest expense on FHLB advances of $5,000.
Although there was a $2.8 million increase in deposits, primarily in
certificates of deposit, interest expense on deposits decreased $190,000 due to
a decrease in the cost of deposits from 5.11% to 3.67% from June 30, 2001 to
June 30, 2002. The decrease in interest on FHLB advances was due to the
repayment of all FHLB advances in the prior fiscal year.

Provision for Loan Losses - The provision for loan losses decreased $8,000 from
June 30, 2001 to June 30, 2002. The allowance for loan losses is maintained at a
level which, in management's judgment, is adequate to absorb credit losses
inherent in the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan portfolio, including
the nature of the portfolio, credit concentrations, trends in historical loss
experience, specific impaired loans and economic conditions. Allowances for
impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is increased by a provision
for loan losses, which is charged to expense, and reduced by charge-offs, net of
recoveries.


                                       -8-

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)

Management applies its normal loan review procedures in determining when a loan
is impaired. All nonaccrual loans are considered impaired except those
classified as small-balance homogeneous loans which are collectively evaluated
for impairment. The Company considers all one-to four-family residential
mortgage loans, residential construction loans, and all consumer and other loans
to be smaller homogeneous loans. Impaired loans are assessed individually and
impairment identified when the accrual of interest has been discontinued, loans
have been restructured or management has serious doubts about the future
collectibility of principal and interest, even though the loans are currently
performing. Factors considered in determining impairment include, but are not
limited to, expected future cash flow, the financial condition of the borrower
and current economic conditions. The Company measures each impaired loan based
on the fair value of its collateral and charges off those loans or portions of
loans deemed uncollectible. Management has elected to continue to use its
existing nonaccrual methods for recognizing interest income on impaired loans.

Noninterest Income - Total noninterest income decreased $7,000 to $11,000 for
June 30, 2002. Service charges and other fees increased $2,000 for the three
month period ended June 30, 2002 as compared to the three month period ended
June 30, 2001. Also contributing to this decrease was a decrease in loss from
foreclosed assets of $9,000, a decrease in gain from sale of investments of
$7,000, and a decrease in other income of $11,000.

Noninterest Expense - Total noninterest expense increased $134,000 to $502,000
for June 30, 2002. Of this increase, $80,000 was due to an increase in
professional fees primarily due to the pending merger, $20,000 was due to an
increase in employee's salaries and benefits, and $33,000 was due to an increase
in other expenses.

Income Taxes - Income taxes increased from $9,000 for the quarter ended June 30,
2001 to $58,000 for the quarter ended June 30, 2002 primarily due to $64,000 in
non tax deductible expenses relating to the pending merger.


Results of Operations for the Nine Months Ended June 30, 2002 and 2001

Net Income - Net income increased $87,000 to $110,000 for the nine month period
ended June 30, 2002 as compared to net income of $23,000 for the same period
ended June 30, 2001. Diluted income per share increased from $0.06 for the 2001
period end to $0.28 for the 2002 period end.

Net Interest Income - Net interest income increased $437,000 to $1.6 million for
the nine months ended June 30, 2002. Interest income decreased $122,000 for the
nine month period ended June 30, 2002 as compared to the nine month period ended
June 30, 2001, while interest expense decreased $559,000, resulting in the
increase net interest income of $437,000. The increase in interest income was
due to an increase in loans receivable of $2.8 million along with an increase in
mortgage-backed investments of $845,000, partially offset by a decrease in
investment securities of $1.3 million. Interest expense decreased $559,000 from
the nine month period ended June 30, 2002 as compared to the same period ended
June 30, 2001. This was primarily due to the decrease in deposit expense of
$466,000 along with a decrease in interest expense on FHLB advances of $93,000.
Although there was a $2.8 million increase in deposits, primarily certificates
of deposit, interest expense on deposits decreased $466,000 due to a decrease in
the cost of deposits from 5.11% to 3.67% from June 30, 2001 to June 30, 2002.
The decrease in interest on FHLB advances was due to the repayment of all FHLB
advances in the prior fiscal year.

Provision for Loan Losses - The provision for loan losses increased $33,000 from
June 30, 2001 to June 30, 2002. The majority of the increase was due to an
increase in 1-4 family non-owner occupied loans and commercial loans for the
nine month period ended June 30, 2002. The allowance for loan losses is
maintained at a level which, in management's judgment, is adequate to absorb
credit losses inherent in the loan portfolio. The amount of the allowance is
based on management's evaluation of the collectibility of the loan portfolio,
including the nature of the portfolio, credit concentrations, trends in
historical loss experience, specific impaired loans and economic conditions.
Allowances for impaired loans are generally determined based on collateral
values or the present value of estimated cash flows. The allowance is increased
by a provision for loan losses, which is charged to expense, and reduced by
charge-offs, net of recoveries.


                                       -9-

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)

Noninterest Income - Total noninterest income increased $11,000 to $66,000 for
June 30, 2002. Service charges and other fees increased $20,000 for the nine
month period ended June 30, 2002 as compared to the nine month period ended June
30, 2001. There was a decrease in loss from foreclosed assets of $15,000, offset
by a decrease in gain from sale of investments of $7,000 and a decrease in other
income of $17,000.

Noninterest Expense - Total noninterest expense increased $234,000 to $1.4
million for June 30, 2002. Of this increase, $33,000 was due to an increase in
employee salaries and benefits, $151,000 was due to an increase in professional
fees primarily relating to the pending merger, and $46,000 was due to an
increase in other expenses.

Income Taxes - Income taxes increased from a $4,000 tax benefit for the nine
months ended June 30, 2001 to a $90,000 tax expense for the same period ended
June 30, 2002 primarily due to $108,000 in non tax deductable expenses relating
to the pending merger.


Liquidity and Capital Resources

The Company's primary sources of funds are maturities and prepayments of
investment securities, customer deposits, proceeds from principal and interest
payments on loans and Federal Home Loan Bank of Des Moines advances. While
investment securities maturities and scheduled amortization of loans are a
predictable source of funds, deposit flows, investment securities prepayments
and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition.

Palmyra Savings must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. Palmyra Savings generally maintains sufficient cash
and short-term investments to meet short-term liquidity needs. At June 30, 2002,
cash and interest-bearing deposits totaled $5.3 million, or 7.4% of total
assets. Investment securities classified as available-for-sale totaled $8.3
million at June 30, 2002.

The Bank's primary investing activity is the origination and purchase of one- to
four-family mortgage loans. At June 30, 2002, the Bank had outstanding loan
commitments totaling $1.5 million and had undisbursed loans in process totaling
$639,000. Certificates of deposit that are scheduled to mature in less than one
year from June 30, 2002 totaled $28.7 million. Historically, the Bank has been
able to retain a significant amount of its deposits as they mature. Management
believes it has adequate resources to fund all loan commitments from the cash
inflow from savings deposits, loan payments and maturities of investment
securities. Management also has the ability to obtain advances from the Federal
Home Loan Bank to supplement liquidity.

Office of Thrift Supervision regulations require Palmyra Savings to maintain
specific amounts of regulatory capital. As of June 30, 2002, Palmyra Savings
complied with all regulatory capital requirements stated below. The following
table summarizes Palmyra Savings' capital ratios and the ratios required by
regulation at June 30, 2002.

<TABLE>
<CAPTION>
                                                                           To Be Well Capitalized
                                                          For Capital      Under Prompt Corrective
                                     Actual            Adequacy Purposes      Action Provisions
                                -----------------      -----------------   -----------------------
                                Amount      Ratio       Amount    Ratio       Amount    Ratio
                                ------      -----       ------    -----       ------    -----
                                                    (Dollars in thousands)
<S>                             <C>         <C>         <C>        <C>        <C>        <C>
As of June 30, 2002
  Total Risk-Based Capital
  (to Risk Weighted Assets)     $8,981      24.22%      $2,967     8.0%       $3,708     10.0%
  Tier 1 Capital
  (to Risk Weighted Assets)     $8,646      23.32%      $1,483     4.0%       $2,225      6.0%
  Tier 1 Capital
  (to Adjusted Assets)          $8,646      12.07%      $2,149     3.0%       $3,581      5.0%
  Tangible Capital
  (to Adjusted Assets)          $8,646      12.07%      $1,074     1.5%          N/A       N/A
</TABLE>


                                       -10-

<PAGE>

                       PFSB BANCORP, INC. AND SUBSIDIARIES
                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Neither the Company nor Palmyra Savings is a party to any material legal
proceedings at this time. From time to time Palmyra Savings is involved in
various claims and legal actions arising in the ordinary course of business.


ITEM 2.  CHANGES IN SECURITIES

None


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None


ITEM 5.  OTHER INFORMATION

None


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

a.       Exhibits

          3.1  Articles of Incorporation of PFSB Bancorp, Inc.*

          3.2  Bylaws of PFSB Bancorp, Inc.*

          4.0  Form of Stock Certificate of PFSB Bancorp, Inc.*

         10.1  Employment Agreement with Eldon R. Mette **

         10.2  Employment Agreement with Ronald L. Nelson **

         10.3  PFSB Bancorp, Inc. 2000 Stock-Based Incentive Plan ***

         99.1  Chief Executive Officer Certification

         99.2  Chief Financial Officer Certification

b.       Reports on Form 8-K

         On June 6, 2002, the Company filed a Current Report on Form 8-K
         disclosing that it had entered into an Agreement and Plan of Merger
         with First Federal Bancshares, Inc. pursuant to which the Company will
         merge with and into First Federal Bancshares, Inc. The Agreement and
         Plan of Merger and the press release announcing the merger were filed
         as exhibits.


*    Incorporated by reference from the Form SB-2 (Registration No. 333-69191),
     as amended, as filed on December 18, 1998.

**   Incorporated by reference from the Form 10-QSB for the quarter ended March
     31, 1999, as filed on May 17, 1999.

***  Incorporated by reference from the Definitive Proxy Statement for the 2000
     Annual Meeting of Stockholders, as filed on December 15, 1999.



                                       -11-

<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                        PFSB Bancorp, Inc.

Date:  August 14, 2002                  By: /s/ Eldon R. Mette
                                            -----------------------------
                                                Eldon R. Mette
                                                President and Chief
                                                Executive Officer


Date:  August 14, 2002                  By: /s/ Ronald L. Nelson
                                            -----------------------------
                                                Ronald L. Nelson
                                                Vice President, Treasurer
                                                and Secretary



                                       -12-