<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 December 31, 2000
                                -----------------
                                      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 February 9, 2001, there were 451,792 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
                               DECEMBER 31, 2000



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                   7-9

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

ITEM 1.  LEGAL PROCEEDINGS                                      10

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS              10

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                        10

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS    10

ITEM 5.  OTHER INFORMATION                                      10

SIGNATURES                                                      11


<PAGE>

                      PFSB BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                                     December 31,   September 30,
                                                                                                         2000            2000
                                                                                                   ------------------------------
ASSETS                                                                                               (Unaudited)     (Unaudited)
<S>                                                                                                  <C>            <C>
   Cash (includes interest-bearing deposits of $2,534 and $3,490, respectively)                           $ 2,803         $ 3,792
   Investment securities:
       Available-for-sale, at fair value                                                                    9,095           8,870
       Held-to-maturity (fair value of $7,378 and $7,217, respectively)                                     7,427           7,427
   Mortgage-backed securities held-to-maturity (fair value of $2,948 and $3,008 respectively)               2,947           3,099
   Stock in Federal Home Loan Bank of Des Moines ("FHLB")                                                     403             403
   Loans receivable, net (allowance for loan losses of $280 at December 31, 2000 and                       44,686          44,529
       September 30, 2000)
   Accrued interest receivable                                                                                478             600
   Premises and equipment                                                                                   1,074           1,082
   Foreclosed real estate                                                                                     105             105
   Other assets                                                                                                48             137
                                                                                                          -------         -------
                TOTAL ASSETS                                                                              $69,066         $70,044
                                                                                                          -------         -------
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Deposits                                                                                                56,735          56,385
   Advances from FHLB                                                                                       2,750           4,250
   Advances from borrowers for property taxes and insurance                                                    34              51
   Other Liabilities                                                                                          124              95
                                                                                                          -------         -------
                TOTAL LIABILITIES                                                                         $59,643         $60,781

STOCKHOLDERS' EQUITY
   Common stock, $.01 par value per share; 5,000,000 authorized, 559,000 issued                                 6               6
   Additional paid-in capital                                                                               4,932           4,929
   Retained earnings-substantially restricted                                                               6,345           6,348
   Unrealized (loss) on securities, net of taxes                                                              (59)           (197)
   Unearned ESOP shares                                                                                      (369)           (380)
   Unearned SBIP shares                                                                                      (195)           (206)
   Treasury Stock (107,208 shares at cost)                                                                 (1,237)         (1,237)
                                                                                                          -------         -------
                TOTAL STOCKHOLDERS' EQUITY                                                                $ 9,423         $ 9,263
                                                                                                          -------         -------
                TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                $69,066         $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
                                                                        December 31,
                                                                      2000         1999
                                                                  ------------------------
                                                                        (Unaudited)
<S>                                                                  <C>          <C>
INTEREST INCOME
   Mortgage loans                                                  $  846         $  769
   Consumer and other loans                                            13              9
   Interest-bearing deposits                                           44             14
   Investment securities                                              257            270
   Mortgage-backed securities                                          49             57
                                                                   ------         ------
TOTAL INTEREST INCOME                                              $1,209         $1,119

INTEREST EXPENSE
   Deposits                                                           781            637
   Advances from FHLB                                                  64             41
                                                                   ------         ------
TOTAL INTEREST EXPENSE                                             $  845         $  678
                                                                   ------         ------
NET INTEREST INCOME                                                   364            441

PROVISION FOR LOAN LOSSES                                               -              -
                                                                   ------         ------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                   364            441

NON-INTEREST INCOME
   Service charges and other fees                                      16             12
   Income (loss) from foreclosed assets                                (2)            (1)
   Other                                                               10              3
                                                                   ------         ------
TOTAL NON-INTEREST INCOME                                              24             14

NON-INTEREST EXPENSE
   Employee salaries and benefits                                     201            169
   Occupancy costs                                                     44             35
   Advertising                                                         13             11
   Data processing                                                     23             22
   Federal insurance premiums                                           3              8
   Other                                                              109            104
                                                                   ------         ------
TOTAL NON-INTEREST EXPENSE                                            393            349
                                                                   ------         ------
INCOME (LOSS) BEFORE INCOME TAXES                                      (5)           106

INCOME TAXES (INCOME TAX BENEFIT)                                      (2)            39
                                                                   ------         ------
NET INCOME (LOSS)                                                  $   (3)        $   67
                                                                   ======         ======
BASIC INCOME (LOSS) PER SHARE                                      $(0.01)        $ 0.14
                                                                   ======         ======
DILUTED INCOME (LOSS) PER SHARE                                    $(0.01)           N/A
                                                                   ======         ======
</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>
                                                                                                             Three Months Ended
                                                                                                                December 31,
                                                                                                              2000      1999
                                                                                                          ---------------------
                                                                                                                (Unaudited)
<S>                                                                                                         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                                                                $    (3)   $   67
   Adjustments to reconcile net income to net cash provided by operating activities
   Depreciation and amortization                                                                               21        16
   Amortization of premiums and discounts                                                                      (1)       (1)
   ESOP shares released                                                                                        13        11
   SBIP shares released                                                                                        11        --
   Changes to assets and liabilities increasing (decreasing) cash flows
      Accrued interest receivable                                                                             123       175
      Other assets                                                                                             87       (20)
      Other liabilities                                                                                       (56)       75
                                                                                                          -------    ------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                                                     195       323

CASH FLOWS FROM INVESTING ACTIVITIES
   Principal collected on mortgage-backed securities                                                          152       126
   Loans originated, net of repayments                                                                        215      (323)
   Purchase of mortgage loans                                                                                (399)      (67)
   Proceeds from sale of education loans                                                                       27        19
   Purchase of premises and equipment                                                                         (12)     (102)
   Proceeds from sales of foreclosed real estate                                                               --         3
   Expenditures on foreclosed real estate                                                                      --        (1)
                                                                                                          -------    ------
NET CASH USED BY INVESTING ACTIVITIES                                                                     $   (17)   $ (345)

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits                                                                                   350      (587)
   Advances from FHLB
      Borrowings                                                                                               --     1,500
      Repayments                                                                                           (1,500)       --
   Net increase (decrease) in advances for taxes and insurance                                                (17)      (24)
   Purchase of treasury stock                                                                                  --      (945)
                                                                                                          -------    ------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                                          $(1,167)   $  (56)
                                                                                                          -------    ------
NET INCREASE (DECREASE) IN CASH                                                                              (989)      (78)
CASH, BEGINNING OF PERIOD                                                                                   3,792     2,341
                                                                                                          -------    ------
CASH, END OF PERIOD                                                                                       $ 2,803    $2,263
                                                                                                          =======    ======
</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 the 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 December 31, 2000, interim financial statements.

The results of operations for the period ended December 31, 2000, 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, 2000.

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").  The
financial statements included herein have not been restated as a result of the
consummation of the conversion.


NOTE C--Net Income (Loss) Per Share
-----------------------------------

Basic income (loss) 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 (loss) 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
                                                               December 31,
                                                           2000           1999
                                                         -----------------------
                                                         (In thousands,  except
                                                           per share amounts)
<S>                                                       <C>            <C>
Basic earnings per share:

 Income (loss) available to common shareholders          $   (3)         $  67
                                                         ======          =====

 Average common shares outstanding                          442            487
                                                         ======          =====

 Basic income (loss) per share                           $(0.01)         $0.14
                                                         ======          =====

 Diluted income (loss) per share                         $(0.01)           N/A
                                                         ======          =====
</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 December 31, 2000 is as follows:

<TABLE>
<S>                                                               <C>
   Shares committed for release                                       4,472
   Shares released                                                    3,354
   Unreleased shares                                                 36,894
                                                                   --------

                        TOTAL                                        44,720
                                                                   ========

   Fair value of unreleased shares                                 $468,093
                                                                   ========
</TABLE>


NOTE E--Stock Based Compensation Plans
--------------------------------------

The Board of Directors adopted and the shareholders subsequently approved
(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 will be
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 reserved for restricted stock awards.

The options will enable the recipient to purchase stock at the exercise price
above.  The options will vest over three years following date of grant and are
exercisable for up to 10 years.  No options have vested at December 31, 2000.

The restricted stock award does not require any payment by the recipient and
will vest over five years beginning after the award.  The Company funded the
restricted stock award 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 $50,316. Amortization of the award
resulted in a charge to compensation and benefit expense of $11,460 for the
three month period ended December 31, 2000.

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 month period ended December 31, 2000 and
1999, 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 month period ended December 31, 2000 and 1999
is summarized as follows:

<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                                      December 31,
                                                                     2000           1999
                                                              -----------------------------
                                                                (Dollars in thousands)
<S>                                                              <C>            <C>
Net Income (Loss)                                                 $  (3)         $  67

Other comprehensive income:
  Net unrealized holding gains (losses) on investments
   in debt and equity securities available-for-sale                 139            (50)

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

Total other comprehensive income                                  $ 136          $  17
                                                                  =====          =====
</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 the 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 December 31, 2000 and 1999 as
well as those material changes in liquidity and capital resources that have
occurred since September 30, 2000.

Financial Condition at December 31, 2000 and September 30, 2000
---------------------------------------------------------------

Total assets decreased $978,000 to $69.1 million at December 31, 2000.  There
was a $989,000 decrease in cash, a $225,000 increase in investment securities, a
$153,000 decrease in mortgage-backed securities, a $157,000 increase in loans
receivable, and a $122,000 decrease in accrued interest receivable.  The decease
in cash was due to the repayment of $1.5 million in FHLB advances.  The
quarterly mark to market adjustment was the primary reason for the increase in
investment securities.

Total liabilities decreased $1.1 million to $59.6 million at December 31, 2000
as compared to September 30, 2000.  The decrease was due to a $1.5 million
decrease in FHLB advances and a $350,000 increase in deposits.

Stockholders' equity at December 31, 2000 increased $160,000 to $9.4 million or
13.6% of total assets, as compared to $9.3 million at September 30, 2000.  The
increase was primarily the result of a decrease in unrealized loss on securities
for the quarter of $138,000.  This accounted for the increase in stockholders'
equity despite the Company's net loss for the quarter of $3,000.

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 for the
periods indicated.

                                      -7-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                      December 31,     September 30,
                                                                                         2000              2000
                                                                                  ------------------------------------
<S>                                                                                 <C>               <C>
  Non-accrual loans...........................................................           $ 138             $ 151
  Loans past due 90 days or more and still accruing interest..................              --                --
  Foreclosed real estate and other repossessed assets ........................             105               105
                                                                                         -----             -----
       Total non-performing assets ...........................................           $ 242             $ 256
                                                                                         =====             =====
</TABLE>

Non-accrual loans at December 31, 2000 and September 30, 2000 consisted
primarily of residential real estate loans.

Results of Operations for the Three Months Ended December 31, 2000 and 1999
---------------------------------------------------------------------------

Net Income - There was a net loss of $3,000 for the quarter ended December 31,
2000 as compared to net income of $67,000 for the quarter ended December 31,
1999.  Basic income per share decreased from $0.14 for the 1999 quarter end to
$(0.01) for the 2000 quarter end.

Net Interest Income - Net interest income decreased $77,000 to $364,000 for the
three months ended December 31, 2000.  Interest income increased $90,000 for the
three month period ended December 31, 2000 as compared to the three month period
ended December 31, 1999, while interest expense increased $167,000, resulting in
a decrease in net interest income of $77,000.  The increase in interest income
was due to an increase in loans receivable of $2.9 million, which was partially
offset by a decrease in mortgage-backed investments of $577,000, along with a
decrease in investment securities of $700,000.  Interest expense increased
$167,000 from the three month period ended December 31, 2000 as compared to the
same period ended December 31, 1999.  This was primarily due to the increase in
deposit expense of $144,000.  The increase in deposit expense was a direct
result of an increase in deposits, primarily certificates of deposit, of $4.2
million and an increase in the cost of deposits from 4.76% to 5.50% from
December 31, 1999 to December 31, 2000.

Provision for Loan Losses - The allowance for  loan losses remained unchanged
from December 31, 1999 to December 31, 2000.  Management believes the overall
allowance is adequate to meet any potential losses in the loan portfolio.

Noninterest Income - Total noninterest income increased $10,000 to $24,000 for
December 31, 2000. This increase was due to several non-recurring transactions
that took place in the quarter ended December 31, 2000.

Noninterest Expense - Total noninterest expense increased $44,000 to $393,000
for December 31, 2000.  Of the increase, $32,000 was due to increased employee
cost which included compensation expenses which are associated with the addition
of the Stock-Based Incentive Plan and a 20% increase in employee insurance
costs.  Occupancy costs increased $9,000 primarily due to costs associated with
the Kahoka branch office building opened in the spring of 2000.

Income Taxes - Income taxes decreased from a $39,000 tax expense for the quarter
ended December 31,1999 to a $2,000 tax benefit for the three month period ended
December 31, 2000.  This was a result of lower income before income taxes in
2000.

Liquidity and Capital Resources
-------------------------------

Palmyra Savings' 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.

Office of Thrift Supervision regulations require savings institutions to
maintain an average daily balance of liquid assets equal to at least 4.0% (which
percentage is subject to change) of the average daily balance of its net
withdrawable deposits and short-term borrowings.  The Bank's actual liquidity
ratio at December 31, 2000 was 22.4%.

                                      -8-
<PAGE>

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


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 December 31,
2000, cash and interest-bearing deposits totaled $2.8 million, or 4.1% of total
assets, and investment securities classified as available-for-sale totaled $9.1
million.  At December 31, 2000, the Bank had outstanding FHLB advances in the
amount of $2.75 million.

The Bank's primary investing activity is the origination and purchase of one- to
four-family mortgage loans.  At December 31, 2000, the Bank had outstanding loan
commitments totaling $2.2 million and had undisbursed loans in process totaling
$412,000.  Certificates of deposit that are scheduled to mature in less than one
year from December 31, 2000 totaled $30.6 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
savings deposits, loan payments, maturities of investment securities and the
ability to obtain advances from the Federal Home Loan Bank.

Office of Thrift Supervision regulations require Palmyra Savings to maintain
specific amounts of regulatory capital.  As of December 31, 2000 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 December 31, 2000.

<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 December 31, 2000
  Total Risk-Based Capital
  (to Risk Weighted Assets)             $8,368  25.67%  greater than      $2,608  8.0%  greater than      $3,259     10.0%
  Tier 1 Capital                                        or equal to                     or equal to
  (to Risk Weighted Assets)             $8,088  24.81%  greater than      $1,304  4.0%  greater than      $1,956      6.0%
  Tier 1 Capital                                        or equal to                     or equal to
  (to Adjusted Assets)                  $8,088  11.70%  greater than      $2,074  3.0%  greater than      $3,456      5.0%
  Tangible Capital                                      or equal to                     or equal to
  (to Adjusted Assets)                  $8,088  11.70%  greater than      $1,037  1.5%  greater than         N/A      N/A
                                                        or equal to                     or equal to
</TABLE>

                                      -9-
<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 AND USE OF PROCEEDS

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 * * *

b.  Reports on Form 8-K

    On November 8, 2000, the Company filed a Current Report on Form 8-K
    announcing the date for the company's 2001 annual meeting of stockholders.
    The press release announcing the meeting date is attached as an exhibit to
    the Form 8-K.


*      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.

                                      -10-
<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:  February 14, 2001      By:    /s/ Eldon R. Mette
                                          --------------------------------------
                                          Eldon R. Mette
                                          President and Chief Executive Officer



      Date:  February 14, 2001      By:    /s/ Ronald L. Nelson
                                          --------------------------------------
                                          Ronald L. Nelson
                                          Vice President, Treasurer
                                          and Secretary

                                      -11-