<PAGE>
                            FORM 10-K

                SECURITIES AND EXCHANGE COMMISSION

                      Washington, D.C.  20549

    (Mark One)
      [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

      [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

            For the transition period from __________ to __________

                        COMMISSION FILE NO. 0-26480

                             PSB HOLDINGS, INC.
            (Exact name of registrant as specified in charter)

      1905 W. STEWART AVENUE                   WISCONSIN
      WAUSAU, WI  54401                  (State of incorporation)
                                               39-1804877
 (Address of principal executive office)    (I.R.S. Employer
                                          Identification Number)

       Registrant's telephone number, including area code: 715-842-2191

       Securities registered pursuant to Section 12(b) of the Act: NONE

          Securities registered pursuant to Section 12(g) of the Act:

                          COMMON STOCK, NO PAR VALUE
                             (Title of each class)

 Indicate by check whether the registrant (1) has filed all reports required to
 be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
 the preceding 12 months (or for such shorter period that the registrant was
 required to file such report), and (2) has been subject to such filing
 requirements for the past 90 days.
                                   Yes   X      No ______
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
 of Regulation S-K is not contained herein, and will not be contained, to the
 best of registrant's knowledge, in definitive proxy or information statements
 incorporated by reference in Part III of this Form 10-K or any amendment to
 this Form 10-K.  X

 There is no established trading market for the common stock.  As of March 15,
 1998, 883,235 shares of common stock were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE
                PROXY STATEMENT DATED MARCH 31, 1998 (PART III)
                         * TO THE EXTENT NOTED HEREIN

                                    -1-
<PAGE>
                         TABLE OF CONTENTS
                                                            PAGE

 PART I

 Item 1.  Business ............................................  3

 Item 2.  Properties ..........................................  8

 Item 3.  Legal Proceedings ...................................  8

 Item 4.  Submission of Matters to a Vote of Security Holders .  8

 PART II

 Item 5.  Market for Registrant's Common Equity and Related
          Security Holder Matters .............................  9

 Item 6.  Selected Financial Data ............................. 10

 Item 7.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations ................. 11

 Item 7A. Quantitative and Qualitative Disclosure About
          Market Risk ......................................... 26

 Item 8.  Financial Statements and Supplementary Data ......... 28

 Item 9.  Changes in and Disagreements With Accountants on
          Accounting and Financial Disclosure ................. 57

 PART III

 Item 10.  Directors and Executive Officers of Registrant ..... 58

 Item 11.  Executive Compensation ............................. 58

 Item 12.  Security Ownership of Certain Beneficial Owners
           and Management ..................................... 58

 Item 13.  Certain Relationships and Related Transactions ..... 58

 PART IV

 Item 14.  Exhibits, Financial Statement Schedules and
           Reports on Form 8-K ................................ 59

                                    -2-
<PAGE>
                              PART I


 ITEM 1.  BUSINESS.

 FORMATION

     PSB Holdings, Inc., a Wisconsin corporation (the "Company"), is a one-
 bank holding company formed in 1995.  The Company owns 100% of the common
 stock of Peoples State Bank, Wausau, Wisconsin (the "Bank").

 BUSINESS OF THE COMPANY

     The Company is a one-bank holding company regulated by the Board of
 Governors of the Federal Reserve System (the "Board") under the authority
 of the Bank Holding Company Act of 1956, as amended (the "BHCA").  The
 Company's sole business is the ownership and management of the Bank.

 BUSINESS OF THE BANK

     The Bank was organized as a state banking corporation under the laws
 of the state of Wisconsin in 1962.  In addition to its main office in
 Wausau, the Bank operates branch offices in the city of Wausau, Rib
 Mountain Township and Marathon City, Wisconsin.  The Bank offers personal
 and commercial deposit services, including checking and savings accounts
 of various kinds, IRA and other deposit instruments, ATM service and night
 depository and safety deposit box services.  The Bank also engages in
 consumer and commercial lending, including secured and unsecured term
 loans and real estate financing.  New services are frequently added to the
 Bank's retail banking business.  The Bank offers discount brokerage
 services at its Wausau branch location, including the sale of annuities,
 mutual funds and other investments to Bank customers and the general
 public.  Trust services are also provided through affiliations with other
 independent financial institutions.  The Bank maintains an investment
 subsidiary in Nevada to manage, hold and trade cash and securities.

 BANK MARKET AREA AND COMPETITION

     The Bank's primary trade area consists of the greater Wausau,
 Wisconsin area.  The Bank's general trade area encompasses the area within
 a fifteen-mile radius of the city of Wausau and the area within a ten-mile
 radius of Marathon City, Wisconsin.  There is a mix of retail,
 manufacturing, agricultural and service businesses in the areas served by
 the Bank.

     Commercial and retail banking in the state of Wisconsin, and in the
 Wausau area in particular, is highly competitive with respect to price and
 services.  "Price" includes interest rates paid on deposits, interest
 rates charged on borrowings and fees charged for fiduciary

                                    -3-

 services, while "services" includes the types of loan, deposit and other
 products offered, convenience of banking locations and the quality of
 service rendered to customers.  In addition to competition from other
 commercial banks, the Bank faces significant competition from savings and
 loan associations, credit unions and other financial institutions or
 financial service companies within its market area.  Savings and loan
 association deposits constitute a substantial portion of all financial
<PAGE>
 institution deposits within the state of Wisconsin and these associations
 compete aggressively with commercial banks in the important area of
 consumer lending and interest-bearing checking accounts.

     The Bank is subject to direct competition in its trade area from six
 commercial banks which offer a full line of competitive bank services,
 loan production offices of banks located outside of the region and
 numerous savings and loan associations and credit unions.  Several of the
 financial institutions with which the Bank competes are subsidiaries of
 the three largest state-wide multi-bank holding companies and many of the
 other financial institutions are also significantly larger and have more
 resources than the Bank.  In its primary trade area, the Bank has
 approximately 15% of total financial institution assets, deposits and
 loans.

     In addition to competition, the business of the Bank will be affected
 by general economic conditions, including the level of interest rates and
 the monetary policies of the Board (see "Monetary Policy").

 EMPLOYEES

     The Company has no employees.  Officers of the Company serve as full
 time employees of the Bank.

     As of December 31, 1997, the Bank had 91 employees, including 21
 employed on a part-time basis.  All officers, supervisors and full-time
 employees are salaried and all part-time employees are paid on an hourly
 basis.  The Bank considers its relations with its employees to be
 excellent.  None of the Bank's employees is covered by a collective
 bargaining agreement.


 REGULATION AND SUPERVISION

     The Company and the Bank are subject to regulation under both federal
 and state law.  The information given below consists of summaries of
 certain, but not all statutory provisions which regulate the Company's
 business.  These summaries are qualified in their entirety by reference to
 the statutory provisions.

     The Company is directly regulated by the Board pursuant to the BHCA
 and must file reports on a periodic basis.  Among other limitations
 imposed by the BHCA, the Company must obtain prior approval from the Board
 before acquiring direct or indirect ownership or

                                    -4-

 control of more than 5% of any bank or bank holding company.  The BHCA
 also regulates the entry by the Company into a business other than
 banking.  Wisconsin law provides that the Company may not acquire more
 than 10% of the stock of an existing Wisconsin state bank unless such
 acquisition is approved by 75% of the shares of the bank entitled to vote.

     The deposits of the Bank are insured under the provisions of the
 Federal Deposit Insurance Act, and the Bank is, therefore, subject to
 regulation and examination by the FDIC.  As a Wisconsin chartered bank,
 the Bank and the Company are also subject to periodic examination and the
 regulations of the Wisconsin Department of Financial Institutions.
<PAGE>
     State and federal banking authorities regulate the Bank's capital
 adequacy, loans and loan policies (including the extension of credit to
 affiliates), payment of dividends, establishment of branch offices,
 mergers and other acquisitions, management personnel, interlocking
 directors and other aspects of the operation of the Bank.  The Bank is
 subject to civil fines, penalties or imposition of regulatory control for
 noncompliance with applicable banking regulations and policies.  Other
 financial institutions with which the Bank competes, such as national
 banking associations, savings and loan associations or credit unions, are
 subject to regulations which are generally similar, but may be more or
 less restrictive in certain areas or permit activities or practices
 unavailable to the Bank.

     Banking laws and regulations have undergone periodic revisions which
 often have a direct effect on the Bank's operations and its competitive
 environment.   Certain provisions of the Financial Institutions Reform,
 Recovery, and Enforcement Act of 1989, for example, included a provision
 setting the Bank's FDIC deposit insurance premiums at a level which
 reflects certain risk factors, included immediate authority to acquire
 healthy capital-impaired thrift institutions and eliminated
 cross-marketing restrictions on bank holding companies which own thrift
 institutions.  Under the Deposit Insurance Funds Act of 1996, the FDIC has
 lowered the rates on assessments paid to the Saving Association Insurance
 Fund ("SAIF") while simultaneously widening the spread between the lowest
 and highest rates to improve the effectiveness of the FDIC's risk-based
 premium system.  The FDIC also established a process, similar to that
 which was applied to the Bank Insurance Fund ("BIF"), for adjusting the
 rate schedules for both the SAIF and the BIF within a limited range to
 maintain each of the fund balances at the target designated reserve ratio.

     The Riegle-Neal Interstate Banking and Branching Efficiency Act of
 1994 (the "Riegle-Neal Act") significantly expanded interstate banking
 opportunities in Wisconsin.  Subject to certain exceptions for banks which
 have not been in existence and in continuous operations for at least five
 years, bank holding companies may acquire control of an existing or DE
 NOVO bank in Wisconsin upon application and approval by the Administrator
 of the Division of Banking, Wisconsin Department of Financial
 Institutions.  Banks are also permitted to operate interstate branches
 beginning in Wisconsin.  The effect of the new

                                    -5-

 Wisconsin banking provisions will be to increase the level of banking
 competition for the Bank by broadening the impact of interstate banking
 within Wisconsin.

     The activities and operations of the Company and the Bank are subject
 to a number of other federal and state laws and regulations, including,
 among others, state usury and consumer credit laws, the Truth-In-Lending
 Act and Regulation Z, Truth in Savings Act and Regulation DD, the Equal
 Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act,
 the Community Reinvestment Act, anti-redlining legislation and the
 antitrust laws.

 MONETARY POLICY

     The earnings and growth of the Bank, and therefore the Company, are
 affected by the monetary and fiscal policies of the federal government and
 governmental agencies.  The Board has broad power to expand and contract
<PAGE>
 the supply of money and credit and to regulate the rates which its member
 banks can pay on time and savings deposits.  These broad powers are used
 to influence inflation and the growth of the economy and directly affect
 the growth of bank loans, investments and deposits, and may also affect
 the interest rates charged by banks on loans paid by banks in respect of
 deposits.  Governmental and Board monetary policies have had a significant
 effect on the operating results of commercial banks in the past and are
 expected to do so in the future.  Management of the Company is not able to
 anticipate the future impact of such policies and practices on the growth
 or profitability of the Company.

 CHANGES IN FEDERAL REGULATORY SCHEME

     From time to time various formal or informal proposals, including new
 legislation, relating to, among other things, additional changes with
 respect to deposit insurance, permitted bank activities and restructuring
 of the federal regulatory scheme have been made and may be made in the
 future.  Depending on the scope and timing of future regulatory changes,
 it is possible that there may be a significant impact in the future on the
 competitive circumstances which will affect the Company.  At this time,
 the Company is unable to predict whether any such changes will be adopted
 or the effect of any such changes on its future business or operations.


 EXECUTIVE OFFICERS

     The executive officers of the Company as of March 18, 1998, their ages
 and principal occupations during the last five years are set forth below.
<TABLE>
<CAPTION>
     <S>                          <C>
     Gordon C. Gullickson, 69     President of the Company and the Bank.

                                    -6-

     Kenneth M. Selner, 51        Vice President & Secretary of the
                                  Company; Executive Vice President of the
                                  Bank.

     Todd R. Toppen, 39           Treasurer of the Company; Vice President
                                  of the Bank since 1994, Assistant Vice
                                  President 1988 to 1993.
</TABLE>
 CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

     Certain statements contained in each of the Company's annual reports
 to shareholders, Forms 10-K, 8-K and 10-Q, proxy statements, prospectuses
 and any other written or oral statement made by or on behalf of the
 Company subsequent to filing of this Form 10-K may include one or more
 "forward-looking statements" within the meaning of Sections 27A of the
 Securities Act of 1933 and 21E of the Securities Exchange Act of 1934 as
 enacted in the Private Securities Litigation Reform Act of 1995 (the
 "Reform Act").  In addition, certain statements in future filings by the
 Company with the Securities and Exchange Commission, in press releases,
 and in oral and written statements made by or with the approval of the
 Company which are not statements of historical fact will constitute
 forward-looking statements within the meaning of the Reform Act.
 Examples of forward-looking statements include, but are not limited to:
 (i) expectations concerning financial performance of the Company, (ii)
<PAGE>
 expectations concerning the payment of dividends, (iii) statements of
 plans and objectives of the Company, (iv) statements of future economic
 performance and (v) statements of assumptions underlying such statements.
 Words such as "believes", "anticipates", "expects", "intends", "targeted"
 and similar expressions are intended to identify forward-looking
 statements but are not the exclusive means of identifying such statements.
 In making forward-looking statements within the meaning of the Reform Act,
 the Company undertakes no obligation to publicly update or revise any such
 statement.

 Forward-looking statements of the Company are based on information
 available to the Company as of the date of such statements and reflect the
 Company's expectations as of such date, but are subject to risks and
 uncertainties that may cause actual results to vary materially.  In
 addition to specific factors which may be described in connection with any
 of the Company's forward-looking statements, factors which could cause
 actual results to differ materially from those discussed in the forward-
 looking statements include, but are not limited to the following:  (i) the
 strength of the U.S. economy in general and the strength of the local
 economy; (ii) the effects of and changes in government policies, including
 interest rate policies of the Board of Governors of the Federal Reserve
 System; (iii) inflation, interest rate, market and monetary fluctuations;
 (iv) the timely development of and acceptance of new products and
 services, (v) changes in consumer spending, borrowing and saving habits;
 (vi) increased competition in the Company's principal market area; (vii)
 technological changes; (viii) acquisitions; (ix) the effect of changes in
 laws and regulations, (x) the effect of changes

                                    -7-

 in accounting policies and practices, and (xi) the costs and effects of
 litigation and of unexpected or adverse outcomes in such litigation.


 ITEM 2.  PROPERTIES.

     The Company shares office space with the Bank.  The Bank operates a
 total of four office locations.  The Bank owns each of the buildings in
 which it conducts operations and each building is occupied solely by the
 Bank.  All buildings are designed for commercial banking operations and
 are suitable for current operations and anticipated future needs.  Each
 facility contains teller and loan facilities and drive-up teller stations.


 ITEM 3.  LEGAL PROCEEDINGS.

     As of the date of this report, the Company was not involved in any
 legal proceedings.

     In the ordinary course of its business, the Bank is engaged from time
 to time in legal actions as both a plaintiff and a defendant.  In some
 cases, claims for significant compensatory or punitive damages, or
 unspecified damages, may be made against the Bank.  As of the date of this
 report, the Bank was not a party to any legal or administrative
 proceedings which, in the opinion of Bank management, would have a
 material adverse effect on the financial condition of the Bank.  As of the
 date of this report, no director, officer, affiliate of the Bank, or any
 associate of any such person, is an adverse party in any legal proceedings
 involving the Bank.
<PAGE>
 ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were submitted to a vote of the Company's shareholders
 during the fourth quarter of 1997.

                                    -8-

                              PART II


 ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
 MATTERS.

 MARKET

     There is no active public market for the Company's common stock.
 Transactions in the Company's common stock are sporadic and limited and
 effected at prices determined by the buyer and seller.  Management is not
 advised as to the terms of all such transactions.

 HOLDERS

     As of December 31, 1997 there were approximately 974 holders of record
 of the Company's common stock.

 DIVIDENDS

     Per share dividends declared by the Company in its two most recent
 fiscal years were:
<TABLE>
<CAPTION>
                         1997     1996
      <S>                <C>      <C>
      Second Quarter     $.35     $.33
      Fourth Quarter     $.55     $.52
</TABLE>

     The Company's source of funds for the payment of dividends is
 dividends paid by the Bank.  The payment of dividends by the Bank is
 limited by Wisconsin law to payment from retained earnings.  Among other
 things, Wisconsin chartered banks cannot pay dividends if (1) the payment
 of a dividend would impair the bank's capital structure, (2) in certain
 cases, the bank's surplus is not equal to its common capital or (3)
 dividends declared in any one year would exceed the total net profits in
 that year after deducting losses and bad debts and any required transfers
 to surplus.  Federal regulatory approval is required if the total
 dividends declared by a bank in any year will exceed the total of its net
 profits for that year combined with its retained net profits for the
 preceding two years less any required transfers to surplus.  Federal
 regulators also have authority to prohibit a bank from engaging in what,
 in their opinion, constitutes an unsafe or unsound practice in conducting
 its business, including the payment of dividends.  There are no
 contractual limits presently in effect which limit the Bank's ability to
 pay dividends to the Company or which limit the Company's ability to pay
 dividends to its shareholders.

                                    -9-
<PAGE>
 ITEM 6.   SELECTED FINANCIAL DATA.

     The following table presents consolidated financial data of the
 Company and its subsidiary.  This information and the following discussion
 and analysis should be read in conjunction with other financial
 information presented elsewhere in this report.
<TABLE>
                               FINANCIAL SUMMARY
                                 AT PERIOD END
<CAPTION>
                 ($ in thousands, except per share amounts)

                             1997      1996      1995      1994      1993      1992
 <S>                      <C>       <C>       <C>       <C>       <C>       <C>
 Interest Income          $ 15,744  $ 14,824  $ 13,654  $ 11,555  $ 11,103  $ 11,136
 Net Interest Margin         7,491     7,055     6,599     6,619     6,347     5,703
 Net Income                  2,103     2,157     2,020     1,951     2,100     1,778
 Total Assets              215,019   204,158   190,781   171,470   158,108   146,320
 Mortgages                 103,254    93,450    84,221    75,953    70,194    59,653
 Total Capital Base         21,062    20,214    19,232    16,742    16,015    14,055
 Shareholders' Equity       19,217    18,289    17,452    15,098    14,644    12,958
 Basic and diluted
   earnings per share     $   2.37  $   2.39  $   2.24  $   2.17  $   2.28  $   2.01
  Cash dividends per
   share                       .90       .85       .82       .80       .75       .65
 Book value per share        21.76     20.42     19.34     16.73     16.32     14.76
</TABLE>
                                   -10-

 ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS.

     The following discussion relates to Company and the Bank.  The Company
 was formed in 1995 and, unless noted, references to "the Company" mean the
 Company and the Bank on a consolidated basis.  Years prior to 1995 refer
 to the Bank.

     Management's discussion and analysis contains forward-looking
 statements that are provided to assist in the understanding of anticipated
 future financial performance.  However, such performance involves risks
 and uncertainties which may cause actual results to differ materially from
 those in such statements.  For a discussion of certain factors that may
 cause such forward-looking statements to differ materially from actual
 results see Item 1, Cautionary Statement Regarding Forward-Looking
 Information.

 RESULTS OF OPERATIONS

     The Company's consolidated net income for 1997 was $2,102,709 compared
 with $2,156,597 in 1996, and $2,020,170 in 1995.  Net income decreased
 2.5% in 1997 from 1996 and increased 6.7% in 1996 from 1995.  The main
 factor contributing to the decrease in net earnings in 1997 is that in
 1996 a gain was realized on the sale of other real estate.  Other factors,
 including net interest margin, were higher in 1997.  The Company continues
 to provide funds for loans in its market area.  The Company promotes
 quality service in order to attract new customers and build stronger
 relationships with existing customers.
<PAGE>
     Return on average common stockholders' equity amounted to 11.15% in
 1997 compared to 11.98% in 1996, and 12.15% in 1995.

     Return on average assets for 1997 amounted to 1.02% compared to 1.10%
 for 1996 and 1.13% in 1995.

     Net income per share amounted to $2.37 in 1997, compared to $2.39 in
 1996 and $2.24 in 1995.  Cash dividend declared in 1997 were $.90,
 compared to $.85 per share in 1996 and $.82 in 1995.  The per share ratio
 of dividends to shareholders to net income was 37.85% in 1997, compared to
 35.40 in 1996 and 36.63% in 1995.

                                   -11-
<PAGE>
 NET INTEREST INCOME

     The following table shows how net interest income is impacted by the
 change in volume and interest rates.  1997 and 1996 data shows a favorable
 spread due to both increased volume and rate changes.  Growth in net
 interest income will continue to be moderate and interest margins will
 need to be managed carefully during 1998.
<TABLE>
                    INTEREST INCOME & EXPENSE VOLUME & RATE CHANGE
<CAPTION>
                      1997 compared to 1996  1996 compared to 1995  1995 compared to 1994  1994 compared to 1993
                       increase (decrease)    increase (decrease)    increase (decrease)    increase (decrease)
                            due to (1)             due to (1)             due to (1)             due to (1)

 ($ in thousands)     VOLUME   RATE    NET   VOLUME   RATE    NET   VOLUME   RATE    NET   VOLUME   RATE    NET
 <S>                  <C>       <C>   <C>   <C>       <C>   <C>     <C>     <C>    <C>     <C>      <C>     <C>
 Interest earned on:
   Loans (2)          $  916     15    931   $  994    (30)   964   $ 1,244   608  1,852   $  643   (305)   338
   Taxable investment
     securities          (22)    62     40      227    (14)   213        72    47    119      261   (151)   110
   Non-taxable
     investment
     securities (2)       74    (32)    42       31    (51)   (20)       29   (16)    13        4    (14)   (10)
   Other interest
     income             (118)    39   ( 79)      (1)    (2)    (3)       74    51    125        4     11     15

 Total                   850     84    934    1,251    (97) 1,154     1,419   690  2,109      912   (459)   453

 Interest paid on:
   Savings and
   demand deposits       175     72    247      101    (64)    37       (58)  213    155      157    (35)   122
   Time deposits         493    (24)   469      616     94    710       795   984  1,779      160   (174)   (14)
   Other borrowings     (235)     2   (233)     (29)    (4)   (33)       55   130    185       44     28     72

 Total                   433     50    483      688     26    714       792 1,327  2,119      361   (181)   180

 Net interest
   earnings           $  417     34    451   $  563   (123)   440   $   627  (637)   (10)  $  551   (278)   273
<FN>
 (1)  The change in interest due to both rate and volume has been allocated to
      volume and rate changes in proportion to the relationship of the absolute
      dollar amounts of change in each.
 (2)  The amount of interest income on non-taxable loans and investment
      securities has been adjusted to its fully taxable equivalent using a 34% tax
      rate.
</TABLE>
<PAGE>
 The following table demonstrates how the changing interest rate
 environment affected the net yield on earning assets (on fully tax
 equivalent basis) for the three-year period ending December 31, 1997.
<TABLE>
<CAPTION>
 Year Ended December 31,            1997              1996              1995
                                Yield  Change     Yield  Change     Yield  Change
 <S>                            <C>    <C>        <C>    <C>        <C>   <C>
 Yield on earning assets        8.36%  .09%       8.27%   -.03%     8.30%  + .41
 Effective rate on all
   liabilities as a % of
   earning assets               5.13   .00        5.13     .05      5.08   +1.05

 Net yield on earning assets    4.07   .05        4.02   (-.11)     4.13  (  .47)
</TABLE>
                                   -12-

      The 1997 figures as a percent of average assets reflect an increase in
 interest income.  The increase is due to the strategic pricing of loans and
 deposits during 1997.  The Company will focus on increasing net interest
 income in 1998 through continued control of interest expense, maintaining the
 level of interest rates on loans, and managing rates on the investment
 portfolio.

     Average earing assets increased 5.05% to $191,926 in 1997, from
 $182,718 in 1995.  Included in this increase was a 7.78% increase in
 average loans to $140,962 in 1997, up from $130,783 in 1996, and an 8.88%
 increase in average tax exempt investments to $12,197 in 1997, up from
 $11,202 in 1996.

     The following table sets forth average consolidated balance sheet data
 and average rate data on a tax equivalent basis for the periods,
 indicated.

                                   -13-
<PAGE>
<TABLE>
 DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY - INTEREST RATES
 AND DIFFERENTIALS
<CAPTION>
                                        1997                        1996                        1995
                            Average            Yield/   Average            Yield/   Average            Yield/
 ($ in thousands)           Balance   Interest  Rate    Balance   Interest  Rate    Balance   Interest  Rate
 <S>                        <C>       <C>       <C>     <C>       <C>       <C>     <C>       <C>       <C>
 Assets
 Interest earning assets
   Loans (1)(2)(3)          $140,962  $12,692   9.00%   $130,783  $11,766   9.00%   $119,657  $10,802   9.03%
   Taxable investment
     securities               37,877    2,427   6.41%     38,239    2,376   6.21%     35,428    2,163   6.11%
   Nontaxable investment
     securities(2)            12,197      879   7.21%     11,202      836   7.46%     10,698      856   8.00%
   Federal funds sold            890       48   5.39%      2,494      139   5.57%      2,515      142   5.65%
   Total (2)                 191,926   16,046   8.36%    182,718   15,117   8.27%    168,298   13,963   8.30%
 Non-interesting earning
   assets
   Cash and due from banks     8,347                       8,790                       7,958
   Premises & equip. - net     3,660                       3,742                       2,637
   Other assets                3,981                       3,046                       2,212
   Less: Allow. loan loss     (1,846)                     (1,875)                     (1,751)
   Total                     206,068                     196,421                     179,354

 Liabilities & Stockholders'
   Equity
 Interest Bearing liabili-
   ties
   Savings and demand
   deposits                   52,265    1,867   3.57%     47,179    1,620   3.43%     44,708    1,583   3.54%
   Time deposits             102,566    6,005   5.85%     94,179    5,536   5.88%     83,518    4,826   5.78%
   Short-term borrowings       5,556      343   6.18%     10,169      613   6.03%     10,732      646   6.02%
   Long-term Borrowings          638       38   5.96%
   Total                     161,025    8,253   5.13%    151,527    7,769   5.13%    138,958    7,055   5.08%
 Non-interest bearing
   liabilities
   Demand deposits            24,403                      24,729                      22,594
   Other liabilities           1,788                       2,169                       1,176
   Stockholders' equity       18,852                      17,996                      16,626
   Total                     206,068                     196,421                     179,354

 Net interest income                    7,793                       7,348                       6,908
 Rate Spread                                    3.23%                       3.14%                       3.22%
 Net yield on interest
   earnings assets                              4.07%                       4.02%                       4.13%
<FN>
 (1)  For purposes of these computations, non-accruing loans are included in the
      daily average loan amounts outstanding.
 (2)  The amount of interest income on non-taxable investment securities and
      loans has been adjusted to its fully taxable equivalent.
 (3)  Loan fees are included in total interest income as follows: 1997-$164,
      1996-$80, 1995-$55, 1994-$77, 1993-$152.
</TABLE>
<PAGE>
<TABLE>
 DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY - INTEREST RATES
 AND DIFFERENTIALS (Continued)
<CAPTION>
                                        1994                        1993
                            Average            Yield/   Average            Yield/
 ($ in thousands)           Balance   Interest  Rate    Balance   Interest  Rate
 <S>                        <C>       <C>       <C>     <C>       <C>       <C>
 Assets
 Interest earning assets
   Loans (1)(2)(3)          $105,209  $ 8,950   8.51%   $ 97,705  $ 8,614   8.82%
   Taxable investment
     securities               34,045    2,029   5.96%     29,706    1,916   6.45%
   Nontaxable investment
     securities(2)            10,242      843   8.19%     10,299      853   8.28%
   Federal funds sold            757       32   4.23%        615       17   2.76%
   Total (2)                 150,253   11,854   7.89%    138,325   11,400   8.24%
 Non-interesting earning
   assets
   Cash and due from banks     7,946                       7,885
   Premises & equip. - net     2,040                       2,011
   Other assets                2,004                       1,799
   Less: Allow. loan loss     (1,506)                     (1,228)
   Total                     160,737                     148,792

 Liabilities & Stockholders'
   Equity
 Interest Bearing liabili-
   ties
   Savings and demand
   deposits                   46,594    1,428   3.06%     41,588    1,306   3.14%
   Time deposits              66,241    3,047   4.60%     62,953    3,061   4.86%
   Short-term borrowings       9,597      461   4.80%      8,622      389   4.51%
   Long-term Borrowings
   Total                     122,432    4,936   4.03%    113,163    4,756   4.20%
 Non-interest bearing
   liabilities
   Demand deposits            21,950                      20,784
   Other liabilities             951                         916
   Stockholders' equity       15,404                      13,929
   Total                     160,737                     148,792

 Net interest income                    6,918                       6,644
 Rate Spread                                    3.86%                       4.04%
 Net yield on interest
   earnings assets                              4.60%                       4.82%
<FN>
 (1)  For purposes of these computations, non-accruing loans are included in the
      daily average loan amounts outstanding.
 (2)  The amount of interest income on non-taxable investment securities and
      loans has been adjusted to its fully taxable equivalent.
 (3)  Loan fees are included in total interest income as follows: 1997-$164,
      1996-$80, 1995-$55, 1994-$77, 1993-$152.
</TABLE>
                                   -14-
<PAGE>
     The preceding table shows a 1997 increase of .05% on net yield on
 interest earning assets.  The average rate on taxable investment
 securities increased .20% in 1997 to 6.41%, up from 6.21% in 1996.  Time
 deposits decreased slightly by .03% while funds shifted into the more
 liquid money market deposit accounts, which the Company offered throughout
 1997 in an effort to retain deposits to support loan demand.  Total
 deposits at December 31, 1997 showed an increase of $8,473,802 increasing
 to $186,602,705 from $178,128,903 at December 31, 1996.  Average deposits
 for 1997 increased $13,473,000 to $154,831,000 from $141,358,000 in 1996.
 Average short term borrowing decreased $4,613,000 from $10,169,000 in 1996
 to $5,556,000 in 1997.  The average rate on all interest bearing
 liabilities remained the same in 1997 as in 1996.

     Loan growth is expected to increase in 1998 due to the increase in
 fixed rate and in house home equity loan products being offered and
 promoted.  The sale of additional real estate loans in the secondary
 market will also provide increased loan servicing income.
<TABLE>
<CAPTION>

 Year Ended December 31,          1997     1996     1995     1994     1993
 <S>                              <C>      <C>      <C>      <C>      <C>
 Item of income
 Interest and fees on loans and
   short-term borrowings          76.9%    74.3%    75.2%    73.2%    73.3%
 Interest of securities           17.9%    18.2%    18.8%    21.0%    21.1%
 Total operating income           16,489   15,814   14,336   12,218   11,762
   (000's omitted)
<FN>
      The bank does not have any foreign deposits or operations
</TABLE>
 NON-INTEREST INCOME

     The following table shows the major components of non-interest income.
<TABLE>
<CAPTION>
                                     1997        1996        1995
 <S>                                 <C>         <C>         <C>
 Noninterest income:
   Service fees                      $483,756    $518,271    $468,219
   Net realized gain on sale of
     securities available for sale      3,120                  26,415
   Gain on sale of other real estate              202,398
   Other operating income             257,828     269,486     188,055

     Total noninterest income         744,704     990,155     682,689
</TABLE>
     Service fees decreased to $483,756 in 1997, compared to $518,271 in
 1996 primarily because business checking account net charges were lower in
 1997 as a result of higher earnings credit rates.

                                   -15-
<PAGE>
 NON-INTEREST EXPENSE

     The following table shows the major components on non-interest
 expense.
<TABLE>
<CAPTION>
                                          1997         1996         1995
 <S>                                  <C>          <C>          <C>
 Salaries and employee benefits       $2,948,292   $2,701,445   $2,313,123
 Occupancy                               727,583      708,288      526,912
 Federal deposit insurance premiums       21,442        2,000      160,621
 Data processing                          74,701      195,261      190,864
 Director expense                        179,800      163,923      138,730
 Other operating                         980,222      943,938      859,959

    Total noninterest expense         $4,932,040   $4,714,855   $4,190,209
</TABLE>
     Salaries increased $246,847 primarily due to the increased number of
 employees.  The number of full-time equivalent employees at the end of
 1997 were 78 compared to 70 at the end of 1996.

     Occupancy expense increased slightly in 1997 after a significant
 increase in 1996 due to the acquisition of the in-house data processing
 system.  Data processing costs decreased by 61.7% in 1997 compared to 1996
 as a result of efficiencies gained by the in-house system.  Other
 operating expense increased in 1997 due to an increase in educational,
 marketing, and charitable contribution expense.

 PROVISIONS FOR LOAN LOSSES

     Management determines the adequacy of the allowance for loan losses
 based on past loan experience, current economic conditions, composition of
 the loan portfolio, and the potential for future loss.  Accordingly, the
 amount charged to expense is based on management's evaluation of the loan
 portfolio.  It is the Company's policy that when available information
 confirms that specific loans, or portions thereof, including impaired
 loans, are uncollectible, these amounts are promptly charged off against
 the allowance.  The provision for loan losses was $230,000 in 1997;
 compared to $180,000 in 1996 and $180,000 in 1995.  The allowance for loan
 losses as a percentage of gross loans outstanding was 1.24% at December
 31, 1997; 1.39% at December 31, 1996; and 1.42% at December 31, 1995.  The
 increased provision in 1997 is intended to provide adequate reserves for
 potential losses.  Charge-offs as a percentage of average loans
 outstanding were .22% in 1997; .03% in 1996; and .04% in 1995.  Charge-
 offs have not been concentrated in any industry or business segment as
 reflected in the schedule below.

     Management feels the allowance for loan losses is adequate as of
 December 31, 1997.

                                   -16-
<PAGE>
     The allowance for loan losses shown in the following table represents
 a general allowance available to absorb future losses within the entire
 portfolio.
<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31
                                  1997       1996      1995        1994       1993
 <S>                           <C>       <C>        <C>        <C>        <C>
 Average balance of loans
   for period ($ in thousands)  $140,823   $130,783   $119,657   $105,027    $97,705

 Allowance for loan losses at
   beginning of period         1,924,686  1,780,893  1,643,646  1,370,621  1,096,654

 Loans charged off
   Commercial & Industrial      (155,650)   (47,809)   (54,088)   (27,864)   (95,561)
   Agriculture                         0          0          0          0          0
   Real Estate - Mortgage       (136,011)         0          0    (10,711)         0
   Installment & Other
     Consumer Loans              (58,581)   (25,133)   (15,174)   (10,100)   (11,151)

   Total Charge Offs            (350,242)   (72,942)   (69,262)   (48,675)  (106,712)

 Recoveries on loans
   previously charged off
   Commercial & Industrial        17,538     33,236     22,168          0     22,583
   Agricultural                        0          0          0          0          0
   Real Estate - Mortgage         18,582          0          0     11,810          0
   Installment & Other
     Consumer Loans                4,500      3,499      4,341      9,890      8,096

   Total Recoveries              $40,620    $36,735    $26,509    $21,700    $30,679

 Net loans charged off         ($309,622)  ($36,207)  ($42,753)  ($26,975)  ($76,033)

 Additions charged to
   operations                    230,000    180,000    180,000    300,000    350,000

 Allowance for loan losses
   at end of period           $1,845,064 $1,924,686 $1,780,893 $1,643,646 $1,370,621

 Ratio of net charge offs
   during period to average
   loans outstanding               0.22%      0.03%      0.04%      0.03%      0.08%
</TABLE>
 LIQUIDITY AND INTEREST SENSITIVITY

     The Company's Asset Liability Management process provides an approach
 to management of liquidity, capital and interest rate risk, and to provide
 adequate funds to support the borrowing requirements and deposit flow of
 its customers.  Management views liquidity as the ability to raise cash at
 a reasonable cost of with a minimum of loss and as a measure of balance
 sheet flexibility to react to market-place, regulatory, and competitive

                                   -17-

 changes.  The primary sources of the Company's liquidity are marketable
 assets maturing within one year.  The Company attempts, when possible to
 match relative maturities of assets and liabilities, while maintaining the
 desired net interest margin.  Management believes liquidity is adequate.
<PAGE>
     Management's overall strategy is to coordinate the volume of rate
 sensitive assets and liabilities to minimize the impact of interest rate
 movement on the net interest margin.  From time to time, the Bank develops
 special term deposit products to attract present and potential customers.
 A significant portion of consumer deposits do not reprice or mature on a
 contractual basis.  These deposit balances and rates are considered to be
 core deposits since these balances are generally not susceptible to
 significant interest rate changes.  The Bank's Asset Liability Committee
 distributes these deposits over a number of periods to reflect those
 portions of such accounts that are expected to reprice fully with market
 rates over the simulation period.  The assumptions are based on historical
 experience with the Bank's individual markets and customers and include
 projections for how management expects to continue to price in response to
 marketplace and market changes.  However, markets and consumer behavior do
 change and adjustments are necessary as customer preferences, competitive
 market conditions, liquidity, loan growth rates, and mix change.
 Management considers that an acceptable ratio for the rate sensitive
 assets to rate sensitive liabilities during periods of extended and less
 volatile rate increases or decreases between .75 and 1.25.  The Bank is to
 generally maintain a one-year ratio of 1.00 - i.e., balanced ratio.  At
 December 31, 1997 the Company was within the ratio limits.

                                   -18-
<PAGE>
 INVESTMENT PORTFOLIO

     The following table shows the relative maturities of the investment
 portfolio as of December 31, 1997.  Weighted average yields on tax-exempt
 securities have been calculated on a tax equivalent basis using a tax rate
 of 34%
<TABLE>
<CAPTION>
                                       After one           After two        After five
                       Within          but within          but within       but within          Over
 ($ in thousands)     ONE YEAR         TWO YEARS           FIVE YEARS       TEN YEARS        TEN YEARS

                  AMOUNT    YIELD    AMOUNT    YIELD    AMOUNT     YIELD   AMOUNT  YIELD   AMOUNT    YIELD
 <S>              <C>       <C>      <C>       <C>      <C>        <C>     <C>     <C>     <C>       <C>
 U.S. Treasury    $1,984    5.04%    $ --       --      $ --       --      $ --     --     $ --       --

 U.S. Government
   agencies and
   corporations    4,500    6.40%     3,550    6.89%     18,354    6.33%    3,530  6.83%    5,014    6.41%

 State and
   political sub-
   divisions
   (domestic)      1,341    6.99%     2,020    6.91%      3,847    7.18%    5,341  7.09%     --       --

 Other bonds,
   notes, and
   debentures        647    5.75%      --       --         --       --       --     --       --       --

 Total            $8,472    6.16%    $5,570    6.89%    $22,201    6.48%   $8,871  6.99%   $5,014    6.41%
</TABLE>
      On January 1, 1994, the Company adopted Statement of Financial Accounting
 Standards No. 115, "Accounting for Certain Investments in Debt and Equity
 Securities" (SFAS 115), which specifies the accounting for investments in
 securities that have readily determinable fair values.  During 1995, the Bank
 reclassified all U.S. Treasury and other U.S. Government Agencies &
 Corporations as available-for-sale.  State and Political subdivisions were
 classified as held-to maturity.

      At December 31, 1997 the net unrealized gain on securities available for
 sale, recorded as a separate component of stockholder's equity, was $100,543,
 net of deferred income taxes of $56,747.

      Securities with an approximate carrying value of $8,352,470 and
 $9,353,917, at December 31, 1997 and 1996 respectively, were pledged primarily
 to secure public deposits and for repurchase agreements.

                                   -19-
<PAGE>
      The following table sets forth the distribution of investment securities
 as of the dates indicated.
<TABLE>
<CAPTION>
    ($ in
  thousands)                                  DECEMBER 31

                                 1997       1996      1995      1994      1993
 <S>                          <C>        <C>       <C>       <C>       <C>
 U.S. Treasury and
 other U.S. Government
 agencies and corporations    $36,932    $ 39,224  $ 34,597  $ 35,573  $ 31,327

 State and political
 subdivisions
   (domestic)                  12,549      11,714    10,333    10,981    10,259
 Other securities                 647         647        45        94       358

    Total                     $50,128    $ 51,585  $ 44,975  $ 46,648  $ 41,944
</TABLE>
      An investment subsidiary, PSB Investments, Inc., was formed in May 1992,
 and currently holds approximately $36,531,815 in securities.  Income tax
 expense was approximately $112,000 lower as a result of holding these
 securities at the subsidiary.

                                   -20-
<PAGE>
 LOAN PORTFOLIO

      The following table sets forth the approximate maturities of the loan
 portfolio, excluding non-accrual loans; and the sensitivity of  loans to
 interest changes as of December 31, 1997.
<TABLE>
<CAPTION>
                                              MATURITY
                                              Over one
 ($ in thousands)                One year     year thru           Over
                                 OR LESS      FIVE YEARS       FIVE YEARS
 <S>                             <C>            <C>             <C>
 Commercial, industrial,
   and financial                 $ 24,190       $  8,882        $    250
 Agricultural                       2,033             41               0
 Real estate mortgage            $ 46,200       $ 51,770        $ 2 ,928
 Installment & other
   consumer loans                $  4,598       $  7,474        $    116

 Total                           $ 77,021       $ 68,167        $  3,294

 INTEREST SENSITIVITY

 Amounts of loans due after
  one year with:                                   Fixed         Variable
  ($ IN THOUSANDS)                                  RATE            RATE
 Commercial, industrial, and
   financial                                    $ 8,781         $    798
 Agriculture                                         41                0
 Real estate mortgage                            17,808           37,223
 Installment & other
   consumer loans                                 6,622            1,023

 Total                                          $33,252         $ 39,044
</TABLE>
     Loan growth for the year ended December 31, 1997 was 8.19%; increasing
 from $138,011,133 at December 31, 1996 to $149,317,462 at December 31, 1997.
 The composition of loans outstanding as of the dates indicated are as follows:
<TABLE>
<CAPTION>
 DECEMBER 31                 1997       1996       1995       1994       1993
 ($ in thousands)
 <S>                      <C>        <C>        <C>        <C>        <C>
 Commercial, industrial
   and financial          $ 31,314   $ 28,531   $ 27,291   $ 23,821   $ 24,432
 Agricultural                2,488      1,820      2,356      2,899      2,566
 Real estate:
   Mortgage                103,253     93,450     84,221     75,994     70,193
 Installment and other
   consumer loans           12,262     14,210     11,457      9,960      8,489

 Total                    $149,317   $138,011   $125,325   $112,674   $105,680
</TABLE>
                                   -21

     The composition of loans in the loan portfolio shows a decrease in
 installment and other consumer loans.  Competition in this market area is the
 main reason for this decline.  All other loan categories have been steadily
 increasing every year.
<PAGE>
     The Company's process for monitoring loan quality includes monthly
 analysis of delinquencies, risk element loans and potential problem loans.
 The Company's policy is to place loans on a non-accrual status when they
 become contractually past due 90 days or more as to interest or principal
 payments.  All interest accrued (including applicable impaired loans) but not
 collected for loans that are placed on nonaccrual or charged off is reversed
 to interest income.  The interest on these loans is accounted for on the cash
 basis until qualifying for return to accrual.  Loans are returned to accrual
 status when all the principal and interest amounts contractually due have been
 collected and there is reasonable assurance that repayment will continue
 within a reasonable time frame.

     A loan is impaired when, based on current information, it is probable that
 the Company will not collect all amounts due in accordance with the
 contractual terms of the loan agreement.  Impairment is based on discounted
 cash flows of expected future payments using the loan's initial effective
 interest rate or the fair value of the collateral if the loan is collateral
 dependent.

     The Company maintained generally high loan quality during 1997.  The
 following table sets forth the amount of risk element loans as of the dates
 indicated.
<TABLE>
<CAPTION>
    ($ in
  thousands)                                            DECEMBER 31
                                     1997      1996      1995      1994      1993
 <S>                                <C>      <C>       <C>       <C>       <C>
 Loans on a non-accrual basis       $  835   $   247   $   376   $   646   $1,374
 Loans contractually past due
     ninety days or more as to
     interest or principal payments $    7   $   275   $     0   $     0   $    0
</TABLE>
                                   -22-

 DEPOSITS

     The average balances of deposits and the average rate paid on these
 deposits during the years ended December 31, 1997, 1996, 1995, 1994, and
 1993 are:
<TABLE>
<CAPTION>
                             1997             1996           1995           1994           1993

($ in thousands)       BALANCE   RATE   BALANCE   RATE  BALANCE   RATE  BALANCE   RATE  BALANCE   RATE
 <S>                   <C>       <C>    <C>       <C>   <C>       <C>   <C>       <C>   <C>       <C>
 Non-interest bearing
   demand deposits     $ 24,403         $ 24,729        $ 22,594        $ 21,950        $ 20,784

 Interest bearing
   demand and
   savings deposits      52,265  3.57%    47,179  3.43%   44,708  3.54%   46,593  3.06%   41,588  3.14%

 Time deposits          102,566  5.85%    94,179  5.88%   83,518  5.78%   66,241  4.60%   62,953  4.86%

 Total                 $179,234         $166,087        $150,820        $134,784        $125,325
</TABLE>
<PAGE>
     The amount of time certificates of deposit issued in amounts of
 $100,000 or more and outstanding as of December 31, 1997 is approximately
 $28,046,000.  Their maturity distribution is as follows:
<TABLE>
<CAPTION>
     <S>                                           <C>
     - three months or less                        $ 8,264,000
     - over three months and through twelve months $16,750,000
     - over one year through five years            $ 3,032,000
     - over five years                             $       -0-
</TABLE>
     The Bank does not have any deposits in foreign banking offices.

 YEAR 2000

 The Company has conducted a comprehensive review of its computer system to
 identify the systems that could be affected by the "Year 2000 Issue" and
 is developing an implementation plan to resolve the issue.  The Year 2000
 Issue is the result of computer programs being written using two digits
 rather than four to define the applicable year.  Any of the Company's
 programs that have time-sensitive software may recognize a date using "00"
 as the year 1900 rather than the year 2000.  This could result in a major
 system failure or miscalculations.  The Company presently believes that,
 with modifications to existing software and conversions to new software,
 the Year 2000 problem will not pose significant operational problems and
 that the Company will experience no material adverse effect with respect
 to its operation, liquidity or consolidated financial condition.  All
 costs incurred

                                   -23-

 which have been expensed and future costs to be incurred are not expected
 to materially impact the Company's results of operations and capital
 resources.

 FUTURE ACCOUNTING CHANGES

     The financial Accounting Standards Board (FASB) issued Statement of
 Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
 Income," in June 1997.  SFAS No. 130 requires all items recognized under
 accounting standards as components of comprehensive income to be reported in a
 financial statement that is displayed with the same prominence as other
 financial statements.  The adoption of SFAS No. 130 will not have an impact on
 the Company's financial condition or results of operations once implemented.

     The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise
 and Related Information," in June 1997, SFAS No. 131 requires the Company
 report financial and descriptive information about its reportable operating
 segments.  Operating segments are components of an enterprise about which
 separate financial information is available that is evaluated regularly by the
 chief operating decision maker in deciding how to allocate resources and in
 assessing performance.  Generally, financial information is required to be
 reported on the basis that is used internally for evaluating segment
 performance and deciding how to allocated resources to segments.  The adoption
 of SFAS No. 131 will not have an impact on the Company's financial condition
 or results of operations once implemented.

                                   -24-
<PAGE>
<TABLE>
 SELECTED FINANCIAL DATA
<CAPTION>
                                                Year Ended December 31
 ($ IN THOUSANDS)                    1997      1996      1995      1994      1993
 <S>                              <C>       <C>       <C>       <C>       <C>
 Income Statement Data:
 Interest Income                  $15,744   $14,824   $13,654   $11,555   $11,103
 Interest Expense                   8,253     7,769     7,055     4,936     4,757
 Net Income                         2,103     2,157     2,020     1,951     2,100
 Basic and Diluted Earnings Per
   Average Share of Common Stock     2.37      2.39      2.24      2.17      2.38
 Dividends Per Share on
   Common Stock                      0.90      0.85      0.82      0.80      0.75


 ($ IN THOUSANDS)

 Balance Sheet Data:
 Total Assets                    $215,019  $204,158  $190,781  $171,470  $158,108
 Total Deposits                   186,603   178,129   160,445   140,476   133,769
 Common Equity                      1,805     1,805     1,805     1,805     1,795
 Total Stockholders Equity         19,217    18,289    17,452    15,098    14,644
 Book Value Per Share of
   Common Stock                     21.76     20.42     19.34     16.73     16.32
</TABLE>
      The ratio of net income to average total assets and shareholders' equity
 and certain other ratios are presented below for the years ended December 31:
<TABLE>
<CAPTION>
                             1997        1996       1995        1994        1993
 <S>                       <C>         <C>        <C>         <C>         <C>
 Net income as a
 percentage of:

 Average total assets       1.02%       1.10%      1.13%       1.21%       1.41%
 Average shareholders'
   equity                  11.15%      11.98%     12.15%      12.66%      15.08%
 Dividend payout ratio
   (dividends declared
   divided by net income)  37.85%      35.40%     36.63%      37.00%      31.78%
 Average shareholders'
   equity to average        9.15%       9.16%      9.27%       9.58%       9.36%
   total assets
</TABLE>
                                   -25-
<PAGE>
<TABLE>
 SUMMARY QUARTERLY FINANCIAL INFORMATION
<CAPTION>
 The following is a summary of the quarterly results of operations for the
 years ended December 31, 1997, 1996 and 1995.

                                              Three months ended

                                        March 31    June 30    September 30    December 31

 (in thousands, except per share data)
 <S>                                      <C>        <C>             <C>            <C>
 1997
 Interest income                          $3,757     $3,898          $3,977         $4,112
 Interest expense                         $1,978     $2,041          $2,088         $2,146
 Net interest income                      $1,779     $1,857          $1,889         $1,966
 Provision for loan losses                   $45        $45             $65            $75
 Net income applicable to common stock      $581       $561            $626           $335
 Earnings per common share                 $0.65      $0.63           $0.70          $0.39

 1996
 Interest income                          $3,644     $3,624          $3,722         $3,834
 Interest expense                         $1,919     $1,912          $1,960         $1,978
 Net interest income                      $1,725     $1,712          $1,762         $1,856
 Provision for loan losses                   $45        $45             $45            $45
 Net income applicable to common stock      $656       $495            $617           $389
 Earnings per common share                 $0.73      $0.55           $0.68          $0.43

 1995
 Interest income                          $3,210     $3,366          $3,477         $3,601
 Interest expense                         $1,535     $1,772          $1,839         $1,909
 Net interest income                      $1,675     $1,594          $1,638         $1,692
 Provision for loan losses                   $75        $75             $15            $15
 Net income applicable to common stock      $528       $453            $606           $433
 Earnings per common share                 $0.58      $0.51           $0.67          $0.48
</TABLE>

 ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Market risk is the risk of loss from adverse changes in market prices and
 rates.  The Company's market risk arises primarily from interest-rate risk
 inherent in its lending and deposit taking activities.  Management actively
 monitors and manages its interest-rate risk exposure.  The measurement of then
 market risk associated with financial instruments is meaningful only when all
 related and offsetting on- and off-balance sheet transactions are aggregated,
 and the resulting net positions are identified.  Disclosures about the fair
 value of financial instruments which reflect changes in market prices and
 rates, can be found in footnotes 15 and 18 on the Notes to The Financial
 Statements.

                                   -26-

     The Company's primary objective in managing interest-rate risk is to
 minimize the adverse impact of changes in interest rates on the Company's net
 interest income and capital, while adjusting the Company's asset-liability
 structure ot obtain the maximum yield-cost spread on that structure.  The
 Company relies primarily on its asset-liability structure to control interest-
 rate risk.  However, a sudden and substantial increase in interest rates may
 adversely impact the Company's earnings, to the extent that the interest rates
<PAGE>
 borne by assets and liabilities do not change at the same speed, to the same
 extent, or on the same basis.  The Company does not engage in trading
 activities.

     Additional information required by this Item 7A is set forth in Item 6,
 "Selected Financial Data" and under subcaptions "Results of Operations", "Net
 Interest Income", "Provision for Loan Losses", "Liquidity and Interest
 Sensitivity", "Investment Portfolio", and "Deposits" under Item 7,
 Management's Discussion and Analysis of Financial Conditions.

                                   -27
<PAGE>
 Item 8.  Financial Statements and Supplementary Data.


                            INDEPENDENT AUDITOR'S REPORT




 Board of Directors
 PSB Holdings, Inc.
 Wausau, Wisconsin


 We have audited the accompanying consolidated balance sheets of PSB HOLDINGS,
 INC. and Subsidiary as of December 31, 1997 and 1996, and the related
 consolidated statements of income, changes in stockholders' equity, and cash
 flows for the three years ended December 31, 1997.  These financial statements
 are the responsibility of the Company's management.  Our responsibility is to
 express an opinion on these financial statements based on our audits.

 We conducted our audits in accordance with generally accepted auditing
 standards.  Those standards require that we plan and perform the audit to
 obtain reasonable assurance about whether the financial statements are free of
 material misstatement.  An audit includes examining, on a test basis, evidence
 supporting the amounts and disclosures in the financial statements.  An audit
 also includes assessing the accounting principles used and significant
 estimates made by management, as well as evaluating the overall financial
 statement presentation.  We believe that our audits provide a reasonable basis
 for our opinion.

 In our opinion, the consolidated financial statements referred to above
 present fairly, in all material respects, the financial position of PSB
 HOLDINGS, INC. and Subsidiary at December 31, 1997 and 1996, and the results
 of their operations and their cash flows for the three years ended December
 31, 1997 in conformity with generally accepted accounting principles.



                                    WIPFLI ULLRICH BERTELSON LLP
                                    Wipfli Ullrich Bertelson LLP


 February 3, 1998
 Wausau, Wisconsin

                                   -28-
<PAGE>
<TABLE>
                                 PSB HOLDINGS, INC.
                                   AND SUBSIDIARY

                             CONSOLIDATED BALANCE SHEETS
                             December 31, 1997 and 1996
<CAPTION>
                                                        1997            1996
 <S>                                              <C>             <C>
 ASSETS

 Cash and due from banks                          $  10,622,727   $   9,982,974
 Interest-bearing deposits with banks                   153,271         169,303
 Investment securities:
   Held to maturity (fair values of $12,704,104
     and $11,762,878, respectively)                  12,549,359      11,713,698
   Available for sale (at fair value)                37,579,114      39,871,099
 Loans held for sale                                    300,500         279,675
 Loans receivable, net of allowance for loan
   losses of $1,845,064 and $1,924,686 in
   1997 and 1996, respectively                      147,171,898     135,806,772
 Accrued interest receivable                          1,737,493       1,790,905
 Premises and equipment                               3,746,432       3,701,187
 Other assets                                         1,158,255         842,799

 TOTAL ASSETS                                     $ 215,019,049   $ 204,158,412


 LIABILITIES AND STOCKHOLDERS' EQUITY

 Noninterest-bearing deposits                     $  27,564,502   $  28,486,255
 Interest-bearing deposits                          159,038,203     149,642,648

   Total deposits                                   186,602,705     178,128,903

 Short-term borrowings                                3,960,042       5,766,631
 Long-term borrowings                                 3,000,000
 Other liabilities                                    2,239,127       1,973,954

      Total liabilities                             195,801,874     185,869,488

 Stockholders' equity:
   Common stock - No-par value with a stated
   value of $2 per share:
      Authorized - 1,000,000 shares
      Issued     -   902,425 shares                   1,804,850       1,804,850
   Additional paid-in capital                         7,158,505       7,158,505
   Retained earnings                                 10,955,877       9,649,112
   Unrealized gain (loss) on securities
     available for sale, net of tax                     100,543          (8,543)
   Treasury stock, at cost - 19,190 shares
     in 1997 and 7,000 shares in 1996                  (802,600)       (315,000)

      Total stockholders' equity                     19,217,175      18,288,924

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY       $ 215,019,049   $ 204,158,412
<FN>
            See accompanying notes to consolidated financial statements.
</TABLE>
                                   -29-
<PAGE>
<TABLE>                           PSB HOLDINGS, INC.
                                   AND SUBSIDIARY

                          CONSOLIDATED STATEMENTS OF INCOME
                    Years Ended December 31, 1997, 1996, and 1995
<CAPTION>
                                                     1997          1996        1995
 <S>                                          <C>            <C>            <C>
 Interest income:
   Interest and fees on loans                 $ 12,688,023   $ 11,757,028   $ 10,783,294
   Interest on investment securities:
      Taxable                                    2,370,859      2,330,456      2,129,632
      Tax-exempt                                   580,323        552,324        564,702
   Other interest and dividends                    104,758        184,151        175,908

      Total interest income                     15,743,963     14,823,959     13,653,536

 Interest expense:
   Deposits                                      7,871,730      7,156,077      6,408,608
   Short-term borrowings                           343,207        612,585        646,238
   Long-term borrowings                             37,981

      Total interest expense                     8,252,918      7,768,662      7,054,846

 Net interest income                             7,491,045      7,055,297      6,598,690
 Provision for loan losses                         230,000        180,000        180,000

 Net interest income after provision for
   loan losses                                   7,261,045      6,875,297      6,418,690

 Noninterest income:
   Service fees                                    483,756        518,271        468,219
   Net realized gain on sale of securities
     available for sale                              3,120                        26,415
   Gain on sale of other real estate                              202,398
   Other operating income                          257,828        269,486        188,055

      Total noninterest income                     744,704        990,155        682,689

 Noninterest expenses:
   Salaries and employee benefits                2,948,292      2,701,445      2,313,123
   Occupancy                                       727,583        708,288        526,912
   Federal deposit insurance premiums               21,442          2,000        160,621
   Data processing                                  74,701        195,261        190,864
   Director expense                                179,800        163,923        138,730
   Other operating                                 980,222        943,938        859,959

      Total noninterest expenses                 4,932,040      4,714,855      4,190,209

 Income before income taxes                      3,073,709      3,150,597      2,911,170
 Provision for income taxes                        971,000        994,000        891,000

 Net income                                   $  2,102,709   $  2,156,597   $  2,020,170

 Basic and diluted earnings per share         $       2.37   $       2.39   $       2.24

 Weighted average shares outstanding               887,988        900,641        902,425
<FN>
            See accompanying notes to consolidated financial statements.
</TABLE>
                                   -30-
<PAGE>
<TABLE>
                                 PSB HOLDINGS, INC.
                                   AND SUBSIDIARY

             CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                    Years Ended December 31, 1997, 1996, and 1995
<CAPTION>
                                                                  Unrealized
                                                                  Gain (Loss)
                                                                  on Securi-
                                         Additional               ties Avail-
                                Common    Paid-In     Retained      able For    Treasury
                                Stock     Capital     Earnings      For Sale     Stock
 <S>                         <C>         <C>         <C>          <C>          <C>
 Balance, January 1, 1995    $1,804,850  $5,123,505  $ 9,010,755  $ (840,791)  $
 Net income                                            2,020,170
 Transferred from retained
   earnings                                 803,000     (803,000)
 Cash dividend (at $.82
   per share)                                           (739,989)
 Unrealized gain on
   securities available
   for sale - Net of tax                                           1,073,064

 Balance, December 31, 1995   1,804,850   5,926,505    9,487,936     232,273
 Net income                                            2,156,597
 Transferred from retained
   earnings                               1,232,000   (1,232,000)
 Cash dividend (at $.85
   per share)                                           (763,421)
 Purchase of treasury stock                                                      (315,000)
 Unrealized loss on
   securities available
   for sale - Net of tax                                            (240,816)

 Balance, December 31, 1996   1,804,850   7,158,505    9,649,112      (8,543)    (315,000)
 Net income                                            2,102,709
 Cash dividend (at $.90
   per share)                                           (795,944)
 Purchase of treasury stock                                                      (487,600)
 Unrealized gain on
   securities available
   for sale - Net of tax                                             109,086

 Balance, December 31, 1997  $1,804,850  $7,158,505  $10,955,877  $  100,543   $ (802,600)
<FN>
            See accompanying notes to consolidated financial statements.
</TABLE>
                                   -31-
<PAGE>
<TABLE>                           PSB HOLDINGS, INC.
                                   AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                    Years Ended December 31, 1997, 1996, and 1995
<CAPTION>
                                                      1997          1996          1995
 <S>                                              <C>           <C>           <C>
 Cash flows from operating activities:
  Net income                                      $ 2,102,709   $ 2,156,597   $ 2,020,170
  Adjustments to reconcile net income to net
    cash provided by operating activities:
     Provision for depreciation and net
      amortization                                     482,664      448,472       315,897
     Benefit from deferred income taxes               (108,900)     (52,300)      (41,300)
     Provision for loan losses                         230,000      180,000       180,000
     Proceeds from sales of loans held for sale      4,369,580    1,058,993       656,519
     Originations of loans held for sale            (4,344,817)  (1,325,480)     (650,000)
     Gain on sale of loans                             (45,588)     (13,188)       (6,519)
     Net gain on sale of other real estate                         (202,398)
     Net gain on sale of securities available for
      sale                                              (3,120)                   (26,415)
     Changes in operating assets and liabilities:
       Accrued interest receivable                      53,412     (248,004)     (111,307)
       Other assets                                   (285,484)    (118,169)       40,681
       Other liabilities                               265,173      188,535       101,168

  Net cash provided by operating activities          2,715,629    2,073,058     2,478,894

  Cash flows from investing activities:
     Proceeds from sale and maturities of:
       Held to maturity securities                   2,366,913    2,565,079     2,130,000
       Available for sale securities                10,953,084   13,109,137    10,309,545
     Payment for purchase of:
       Held to maturity securities                  (3,221,710)  (3,963,240)   (1,492,188)
       Available for sale securities                (8,496,561) (18,583,686)   (7,821,452)
     Net increase in loans                         (11,595,126) (12,227,971)  (12,693,393)
     Net (increase) decrease in interest-
       bearing deposits with banks                      16,032    1,448,830    (1,608,331)
     Net decrease (increase) in federal funds sold                5,683,000    (5,683,000)
     Capital expenditures                             (482,177)    (659,051)   (1,494,890)
     Proceeds from sale of other real estate                         14,500

  Net cash used in investing activities            (10,459,545) (12,613,402)  (18,353,709)

  Cash flows from financing activities:
     Net increase (decrease) in noninterest-
      bearing deposits                                (921,753)   1,926,820     1,539,190
     Net increase in interest-bearing deposits       9,395,555   15,757,491    18,429,033
     Net decrease in short-term borrowings          (1,806,589)  (5,332,867)   (3,111,159)
     Proceeds from issuance of long-term
      borrowings                                     3,000,000
     Dividends paid                                   (795,944)    (763,421)     (739,989)
     Purchase of treasury stock                       (487,600)    (315,000)

  Net cash provided by financing activities          8,383,669   11,273,023    16,117,075

 Net increase in cash and due from banks               639,753      732,679       242,260
 Cash and due from banks at beginning                9,982,974    9,250,295     9,008,035

 Cash and due from banks at end                   $ 10,622,727  $ 9,982,974   $ 9,250,295
</TABLE>
                                   -32-
<PAGE>
<TABLE>                           PSB HOLDINGS, INC.
                                   AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                    Years Ended December 31, 1997, 1996, and 1995
 (Continued)
<CAPTION>
                                                     1997         1996          1995
<S>                                             <C>            <C>           <C>
 Supplemental cash flow information:
  Cash paid during the year for:
     Interest                                   $  8,101,757   $ 7,738,779   $ 6,873,206
     Income taxes                                  1,008,124       960,348       935,424
 Noncash investing and financing activities:
  Loans charged off                                  350,242        72,942        69,262
  Loans refinanced from other real estate                         (215,000)
  Loans transferred to other real estate             300,989
<FN>
            See accompanying notes to consolidated financial statements.
</TABLE>
                                   -33-
<PAGE>
                                 PSB HOLDINGS, INC.
                                   AND SUBSIDIARY

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 PRINCIPAL BUSINESS ACTIVITY

 PSB Holdings, Inc. and Subsidiary (the "Company"), operates Peoples State Bank
 (the "Bank"), a full service financial institution with a primary marketing
 area including, but not limited to, the greater Wausau, Wisconsin area and
 Marathon County.  It provides a variety of banking products.

 PRINCIPLES OF CONSOLIDATION

 All significant intercompany balances and transactions have been eliminated.
 The accounting and reporting policies of the Company conform to generally
 accepted accounting principles and to the general practices within the banking
 industry.

 USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

 The preparation of financial statements in conformity with generally accepted
 accounting principles requires management to make estimates and assumptions
 that affect the reported amounts of assets and liabilities and disclosure of
 contingent assets and liabilities at the date of the financial statements and
 the reported amounts of revenue and expenses during the reporting period.
 Actual results could differ from those estimates.

 CASH EQUIVALENTS

 For the purpose of presentation in the consolidated statements of cash flows,
 cash and cash equivalents are defined as those amounts included in the balance
 sheet caption "cash and due from banks."

 INVESTMENT SECURITIES

 Investment securities are assigned an appropriate classification at the time
 of purchase in accordance with management's intent.  Securities held to
 maturity represent those securities for which the Company has the positive
 intent and ability to hold to maturity.  Accordingly, these securities are
 carried at cost adjusted for amortization of premium and accretion of discount
 calculated using the effective yield method.  Unrealized gains and losses on
 securities held to maturity are not recognized in the financial statements.

 Trading securities include those securities bought and held principally for
 the purpose of selling them in the near future.  The Company has no trading
 securities.

 Securities not classified as either securities held to maturity or trading
 securities are considered available for sale and reported at fair value
 determined from estimates of brokers or other sources.  Unrealized gains and
 losses are excluded from earnings but are reported as a separate component of
 stockholders' equity, net of income tax effects.

 Any gains and losses on sales of securities are recognized at the time of sale
 using the specific identification method.

                                   -34-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 INTEREST AND FEES ON LOANS

 Interest on loans is credited to income as earned.  Interest income is not
 accrued on loans where management has determined collection of such interest
 doubtful.  When a loan is placed on nonaccrual status, previously accrued but
 unpaid interest deemed uncollectible is reversed and charged against current
 income.  Fees received on loans are credited to income when received.

 ALLOWANCE FOR LOAN LOSSES

 The allowance for loan losses is maintained at a level believed adequate by
 management to absorb potential losses in the loan portfolio.  Management's
 determination of the adequacy of the allowance is based upon reviews of
 individual credits, recent loss experience, current economic conditions,
 composition of the loan portfolio, and other relevant factors.  Provisions for
 loan losses and recoveries on loans previously charged off are added to the
 allowance.
 LOANS HELD FOR SALE

 Mortgage loans originated and intended for sale in the secondary market are
 carried at the lower cost or estimated market value in the aggregate.  Net
 unrealized losses are recognized through a valuation allowance by charges to
 income.

 PREMISES AND EQUIPMENT

 Premises and equipment are stated at cost.  Maintenance and repair costs are
 charged to expense as incurred.  Gains or losses on disposition of property
 and equipment are reflected in income.  Depreciation is computed principally
 on the straight-line method and is based on the estimated useful lives of the
 assets varying from 5 to 40 years on buildings, 5 to 20 years on equipment,
 and 3 years on software.

 FORECLOSED REAL ESTATE

 Real estate properties acquired through, or in lieu of, loan foreclosure are
 to be sold and are initially recorded at fair value at the date of foreclosure
 establishing a new cost basis.  After foreclosure, valuations are periodically
 performed by management and the real estate is carried at the lower of
 carrying amount or fair value less cost to sell.  Revenue and expenses from
 operations and changes in any valuation allowance are included in loss on
 foreclosed real estate.

 RETIREMENT PLANS

 The Company had a noncontributory defined benefit pension plan which covered
 substantially all full-time employees.  The Company also maintains a defined
 contribution 401(k) profit-sharing plan which covers substantially all full-
 time employees.

                                   -35-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 INCOME TAXES

 Deferred income taxes have been provided under the liability method.  Deferred
 tax assets and liabilities are determined based on the difference between the
 financial statement and tax bases of assets and liabilities as measured by the
 enacted tax rates which will be in effect when these differences are expected
 to reverse.  Deferred tax expense is the result of changes in the deferred tax
 asset and liability.

 EARNINGS PER SHARE

 Earnings per share are based upon the weighted average number of shares
 outstanding.

 RECLASSIFICATIONS

 Certain prior year balances have been reclassified to conform to current year
 presentation.

 NOTE 2 - FORMATION OF THE HOLDING COMPANY

 The Company was formed in 1995.  The Bank shareholders received the Company's
 common stock in exchange for all the outstanding shares of the Bank.  This
 business combination has been accounted for as a pooling of interests and
 accordingly, the operations of the Bank are included for all years presented.

 NOTE 3 - CHANGE IN ACCOUNTING PRINCIPLES

 Effective January 1, 1997, the Company adopted Statement of Financial
 Accounting Standards (SFAS) No. 125, "Accounting for Transfers and Servicing
 of Financial Assets and Extinguishments of Liabilities."  In part, this SFAS
 changed the method of accounting for serviced loans and superseded SFAS No.
 122, "Accounting for Mortgage Servicing Rights," which was adopted by the
 Company during 1996.  The adoption had no effect on the financial statements
 during the year of adoption.

 Effective January 1, 1997, the Company adopted SFAS No. 128, "Earnings Per
 Share."  There is no impact on net income as a result of the adoption of SFAS
 No. 128.  This statement requires the reporting of both basic and diluted
 earnings per share.

 Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting for
 the Impairment of Long-Lived Assets to be Disposed of."  There was no impact
 on net income as a result of the adoption of SFAS No. 121.  The Company had no
 long-lived assets considered to be impaired at the time of adopting the
 standard.

 Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
 Creditors for Impairment of a Loan," as amended by SFAS No. 118, "Accounting
 by Creditors for Impairment of a Loan - Income Recognition and Disclosures."
 There was no impact on net income as a result of the adoption of SFAS No. 114
 at January 1, 1995.
<PAGE>
 NOTE 4 - RESTRICTIONS ON CASH AND DUE FROM BANKS

 Cash and due from banks in the amount of $742,000 was restricted at December
 31, 1997 to meet the reserve requirements of the Federal Reserve System.

                                   -36-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 5 - INVESTMENT SECURITIES

 The amortized cost and estimated fair value of investment securities are as
 follows:
<CAPTION>
                                                   Gross       Gross     Estimated
                                     Amortized  Unrealized  Unrealized      Fair
                                       COST        GAINS      LOSSES       VALUE
 DECEMBER 31, 1997
 <S>                             <C>            <C>        <C>         <C>
 Securities held to maturity:
  Obligations of states and
    political subdivisions       $  12,549,359  $ 156,452  $   1,707   $ 12,704,104

 Securities available for sale:
  U.S. Treasury securities
    and obligations of U.S.
    government corporations
    and agencies                 $  36,774,446  $ 219,733  $  62,443   $ 36,931,736

  Other equity securities              647,378                              647,378

 Totals                          $  37,421,824  $ 219,733  $  62,443   $ 37,579,114

 DECEMBER 31, 1996

 Securities held to maturity:
  Obligations of states and
    political subdivisions       $  11,713,698  $  88,365  $  39,185   $ 11,762,878

 Securities available for sale:
  U.S. Treasury securities
    and obligations of U.S.
    government corporations
    and agencies                 $  39,233,521  $ 247,027  $  256,827  $ 39,223,721

  Other equity securities              647,378                              647,378

 Totals                          $  39,880,899  $ 247,027  $  256,827  $ 39,871,099
</TABLE>
                                   -37-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 5 - INVESTMENT SECURITIES (CONTINUED)

 The amortized cost and estimated fair value of debt securities held to
 maturity and securities available for sale at December 31, 1997, by
 contractual maturity, are shown below.  Expected maturities will differ from
 contractual maturities because borrowers may have the right to call or prepay
 obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
                                                                   Estimated
                                                  Amortized           Fair
                                                     Cost            Value
 <S>                                           <C>             <C>
    SECURITIES HELD TO MATURITY

 Due in one year or less                       $  1,341,161    $   1,345,274
 Due after one year through five years            5,868,525        5,939,060
 Due after five years through ten years           5,339,673        5,419,770

 Totals                                        $  12,549,359   $  12,704,104

     SECURITIES AVAILABLE FOR SALE

 Due in one year or less                       $  6,487,915    $   6,484,650
 Due after one year through five years           21,284,693       21,402,327
 Due after five years through ten years           2,998,447        3,001,046

 Totals                                          30,771,055       30,888,023

 Mortgage-backed securities                       6,003,391        6,043,713

 Totals                                        $  36,774,446   $  36,931,736
</TABLE>
 Securities with an approximate carrying value of $8,352,470 and $9,353,917 at
 December 31, 1997 and 1996, respectively, were pledged to secure public
 deposits, short-term borrowings, and for other purposes required by law.

 During 1997, proceeds from security sales were $2,351,230.  Gross gains and
 losses on those sales were $17,656 and $14,536, respectively.  During 1996, no
 investment securities were sold.  Proceeds from securities sales in 1995 were
 $4,543,438.  Gross gains of $26,415 were realized on those sales.

 As a member of the Federal Home Loan Bank (FHLB) system, the Bank is required
 to hold stock in the FHLB based on asset size.  This stock is recorded at cost
 which approximates fair value.  Transfer of the stock is substantially
 restricted.  Equity securities include $602,000 of FHLB stock at December 31,
 1997 and 1996.

                                   -38-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 6 - LOANS

 The composition of loans is as follows:
<CAPTION>
                                             1997             1996
          <S>                           <C>             <C>
          Commercial                    $  33,801,290   $  30,350,578
          Real estate                     102,953,287      93,170,562
          Consumer                         12,262,385      14,210,318

          Subtotals                       149,016,962     137,731,458
          Allowance for loan losses        (1,845,064)     (1,924,686)

          Net loans                     $ 147,171,898   $ 135,806,772
</TABLE>

 The Company, in the ordinary course of business, grants loans to its executive
 officers and directors, including their families and firms in which they are
 principal owners.  All loans to executive officers and directors are made on
 substantially the same terms, including interest rates and collateral, as
 those prevailing at the time for comparable transactions with others and, in
 the opinion of management, did not involve more than the normal risk of
 collectibility or present other unfavorable features.  Activity in such loans
 is summarized below:
<TABLE>
<CAPTION>
                                                1997            1996
          <S>                              <C>             <C>
          Loans outstanding, January 1     $  2,594,547    $  2,757,077
          New loans                          10,308,486         474,182
          Repayment                          (5,110,047)       (636,712)

          Loans outstanding, December 31   $  7,792,986    $  2,594,547
</TABLE>
 The allowance for loan losses includes specific allowances related to loans
 which have been judged to be impaired and which fall within the scope of SFAS
 No. 114.  A loan is impaired when, based on current information, it is
 probable that the Company will not collect all amounts due in accordance with
 the contractual terms of the loan agreement.  These specific allowances are
 based on discounted cash flows of expected future payments using the loan's
 initial effective interest rate or the fair value of the collateral if the
 loan is collateral dependent.

                                   -39-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 6 - LOANS (CONTINUED)

 An analysis of impaired loans follows:
<CAPTION>
     AT DECEMBER 31,                                    1997         1996
 <S>                                   <C>           <C>          <C>
 Nonaccrual                                          $  484,290   $   42,769
 Accruing income                                        639,827      269,537

 Total impaired loans                                 1,124,117      312,306
 Less - Allowance for loan losses                       178,000       20,000

 Net investment in impaired loans                    $  946,117   $  292,306

     YEARS ENDED DECEMBER 31,              1997         1996         1995

 Average recorded investment, net of
   allowance for loan losses           $1,191,098    $  304,400   $  590,000

 Interest income recognized            $   83,195    $   23,001   $   63,481
</TABLE>
 The Company continues to maintain a general allowance for loan losses for
 loans outside of the scope of SFAS No. 114.  The allowance for loan losses is
 maintained at a level which management believes is adequate for possible loan
 losses.  Management periodically evaluates the adequacy of the allowance using
 the Company's past loan loss experience, known and inherent risks in the
 portfolio, composition of the portfolio, current economic conditions, and
 other relevant factors.  This evaluation is inherently subjective since it
 requires material estimates that may be susceptible to significant change.
<TABLE>
 An analysis of the allowance for loan losses for the three years ended
 December 31, follows:
<CAPTION>
                                               1997          1996          1995
 <S>                                      <C>            <C>           <C>
 Balance, January 1                       $  1,924,686   $ 1,780,893   $ 1,643,646
 Provision charged to operating expense        230,000       180,000       180,000
 Recoveries on loans                            40,620        36,735        26,509
 Loans charged off                            (350,242)      (72,942)      (69,262)

 Balance, December 31                     $  1,845,064   $ 1,924,686   $ 1,780,893
</TABLE>
                                   -40-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 7 - PREMISES AND EQUIPMENT

 An analysis of premises and equipment follows:
<CAPTION>
                                                          1997          1996
          <S>                                        <C>            <C>
          Land                                       $    627,345   $   570,946
          Buildings and improvements                    3,163,710     2,949,856
          Furniture and equipment                       2,623,199     2,414,111
          Construction in progress                          2,836

          Totals                                        6,417,090     5,934,913
          Accumulated depreciation and amortization     2,670,658    (2,233,726)

          Net book value                             $  3,746,432   $ 3,701,187
</TABLE>
 Depreciation and amortization charged to operating expenses amounted to
 $436,933 in 1997, $402,589 in 1996, and $253,596 in 1995.
<TABLE>
 NOTE 8 - DEPOSITS

 At December 31, 1997, certificate and IRA accounts have scheduled maturity
 dates as follows:
<CAPTION>
          <S>                                     <C>
          1998                                    $  86,682,202
          1999                                       14,150,354
          2000                                        2,981,157
          2001                                          319,901

          Total                                   $ 104,133,614
</TABLE>
 Certificate of deposit accounts with individual balances greater than $100,000
 totaled $23,045,981 and $10,916,231 at December 31, 1997 and 1996,
 respectively.

 Deposits from Company directors, officers, and related parties at December 31,
 1997 and 1996 totaled $7,866,698 and $5,608,102, respectively.
<TABLE>
 NOTE 9 - SHORT-TERM BORROWINGS

 The composition of short-term borrowings at December 31, follows:
<CAPTION>
                                                            1997         1996
          <S>                                           <C>          <C>
          Securities sold under repurchase agreements   $ 3,960,042  $ 3,569,631
          Federal funds purchased                         2,197,000
          Total short-term borrowings                   $ 3,960,042  $ 5,766,631
</TABLE>
                                   -41-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 9 - SHORT-TERM BORROWINGS (CONTINUED)

 As a member of the FHLB system, the Company may draw on a line of credit
 totaling $12,040,000.  At December 31, 1997, the Company had drawn $3,000,000
 as detailed in Note 10.
<TABLE>
 The following information relates to federal funds purchased and securities
 sold under repurchase agreements for the years ended December 31:
<CAPTION>
                                          1997           1996            1995
 <S>                                <C>              <C>             <C>
 As of end of year:
   Weighted average rate                     6.14%           5.53%           6.18%
 For the year:
   Highest month-end balance        $  11,983,134    $ 15,503,184    $ 13,410,236
   Daily average balance                5,555,857      10,168,909      10,732,363
   Weighted average rate                     6.18%           6.03%           6.00%
</TABLE>
<TABLE>
 NOTE 10 - LONG-TERM BORROWINGS
<CAPTION>
 Long-term borrowings at December 31, 1997, consist of the following:
 <S>                                                                    <C>
 Note payable to the FHLB, monthly interest payments only at 5.70%,
   due April 5, 1999                                                    $  2,000,000
 Note payable to the FHLB, monthly interest payments only at 5.90%,
   due April 30, 1999                                                      1,000,000

 Totals                                                                 $  3,000,000
</TABLE>
 The FHLB advances are secured by a blanket lien consisting principally of one-
 to-four family real estate loans totaling in excess of $5,000,000 at December
 31, 1997.

                                   -42-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 11 - RETIREMENT PLANS

 Effective January 1, 1997, the Company terminated its defined benefit pension
 plan.  Monthly benefits currently paid to retirees were not affected by the
 plan's termination.  The Company received regulatory approval to distribute
 participants' vested defined benefit pension plan balances to participants or
 into the Company's 401(k) profit-sharing plan.  All assets were distributed in
 January 1998.

 The benefits were based on years of service and the employee's highest
 consecutive five-year average earnings.  Contributions were intended to
 provide not only benefits attributed for service to date but also for those
 expected to be earned in the future.  The Company's funding policy was to
 annually contribute the maximum amount deductible for federal income tax
 purposes.

 The plan assets were invested primarily in U.S. Treasury and Agency issues,
 with approximately $250,000 and $375,000 invested in certificates of deposit
 of the Bank at December 31, 1997 and 1996, respectively.
<TABLE>
 Under the provisions of SFAS No. 88, "Employers' Accounting for Settlements
 and Curtailments of Defined Benefit Pension Plans and for Termination
 Benefits," this transaction constitutes a curtailment, which resulted in the
 recognition of a gain to the Company as of December 31, 1996, determined as
 follows:
<CAPTION>
                                                               Effect of
                                                  Before      Curtailment      After
                                               CURTAILMENT    (GAIN) LOSS   CURTAILMENT
 <S>                                          <C>             <C>           <C>
 Actuarial present value of benefit
   obligations:
     Vested benefit obligation                $ (1,544,424)   $             $ (1,544,424)
     Nonvested benefit obligation                  (50,786)                      (50,786)

   Accumulated benefit obligation               (1,595,210)                   (1,595,210)
   Effect of projected future compensation
     levels                                       (635,379)     635,379

   Projected benefit obligation                 (2,230,589)     635,379       (1,595,210)
   Plan assets at fair value                     1,643,439                     1,643,439

   Projected benefit obligation in excess
     of plan assets                               (587,150)     635,379           48,229
   Unrecognized net loss                           696,176     (634,047)          62,129
   Unrecognized net transition asset               (62,129)                      (62,129)

 Prepaid pension cost recognized in the
   consolidated balance sheets                $     46,897    $   1,332     $     48,229
</TABLE>
                                   -43-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 11 - RETIREMENT PLANS (CONTINUED)

 The following table sets forth the plan's funded status and the amounts
 reflected in the accompanying balance sheets at December 31:
<CAPTION>
                                                      1997          1996
 <S>                                              <C>           <C>           <C>
 Actuarial present value of benefit obligations:
   Vested benefit obligation                      $(1,666,759)  $(1,544,424)
   Nonvested benefit obligation                                     (50,786)

   Accumulated benefit obligation                  (1,666,759)   (1,595,210)
   Effect of projected future compensation levels

   Projected benefit obligation                    (1,666,759)   (1,595,210)
   Plan assets at fair value                        1,855,500     1,643,439

   Plan assets in excess of projected benefit
     obligation                                       188,741        48,229
   Unrecognized net loss                               78,411        62,129
   Unrecognized net transition asset                  (55,343)      (62,129)

 Prepaid pension cost recognized in the balance
   sheet                                          $   211,809   $    48,229

 Net pension cost for December 31 included the
   following components:

                                                      1997        1996           1995

 Service cost - Benefits earned during the period $             $   108,080   $  93,390
 Interest cost on projected benefit obligation        110,308       141,725     131,350
 Actual return on plan assets                         (87,256)      (79,499)   (133,375)
 Net amortization and deferral                        (23,068)       (9,345)     47,661

 Net periodic pension cost                        $       (16)  $   160,961   $ 139,026

 The following assumptions were used in
   determining the projected benefit obligation:

                                                        1997          1996       1995

 Discount rate                                          7.00%         7.00%       7.00%
 Rates of increase in future compensation levels        0.00%         0.00%       5.00%
 Expected long-term rate of return on assets            5.79%         7.00%       7.00%
</TABLE>
                                   -44-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 11 - RETIREMENT PLANS (CONTINUED)

 On January 30, 1998, the Company settled the defined benefit pension plan
 obligation by transferring existing plan assets to the 401(k) profit-sharing
 plan.  However, the benefit plan obligation exceeded existing plan assets by
 $202,738.  This shortfall was eliminated by the Company via a final cash
 payment to the plan.  Under the provisions of SFAS No. 88, this transaction
 constitutes a settlement, which results in the recognition of a loss to the
 Company to be recorded during 1998, determined as follows:
<CAPTION>
          <S>                                          <C>
          Excess of plan benefit obligations over
            plan assets at settlement of plan          $    202,738
          Prepaid pension cost at settlement date           203,153

          Loss on pension settlement                   $    405,891
</TABLE>
 The Company also maintains a 401(k) profit-sharing plan for its employees.
 The Company matches 50 percent of the employee's deferrals up to the first 4
 percent of pay deferred.  During 1997, the Company also declared a
 discretionary profit-sharing contribution.  The expense of the plan for the
 years ended December 31, 1997, 1996, and 1995 was $143,940, $30,442, and
 $26,846, respectively.

 The Company also maintains an unfunded retirement plan for its directors.  The
 plan pays directors who have at least 15 years of service at retirement 50
 percent of the fees received during their final five years as a director.
 Currently five directors are eligible for benefits.  The plan expense totaled
 $46,000 and $40,000 for the years ended December 31, 1997 and 1996,
 respectively.  There was no plan expense in 1995.  The liability in the
 financial statements for this plan was $156,285 and $130,488 at December 31,
 1997 and 1996, respectively.

 NOTE 12 - POST-RETIREMENT HEALTH CARE BENEFITS

 The Company maintains a post-retirement health care benefit plan which covers
 the officers of the Company.  After retirement, the Company will pay between
 25 percent and 50 percent of the health insurance premiums for Company
 officers.  To qualify, an officer must have at least 15 years of service, be
 at the Company at retirement, and must be at least 62 years of age at
 retirement.  The actual amount paid is based upon years of service.

                                   -45-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 12 - POST-RETIREMENT HEALTH CARE BENEFITS (CONTINUED)

 The following table sets forth the plan's funded status and the amounts
 reflected in the accompanying balance sheets at December 31:
<CAPTION>
                                                                   1997          1996
     <S>                                                      <C>            <C>
     Accumulated post-retirement benefit obligation (APBO):
       Retirees                                               $   (46,596)   $ (47,212)
       Fully eligible actives                                     (35,330)     (31,299)
       Other actives                                             (127,853)    (113,264)

     Total APBO                                               $  (209,779)   $ (191,775)

       Funded status                                          $  (209,779)   $ (191,775)
       Unrecognized:
       Prior service cost                                          88,009        95,405
       Net gain                                                   (14,409)      (14,409)

     Accumulated post-retirement benefit cost                 $  (136,179)   $ (110,779)
</TABLE>
 The accumulated post-retirement benefit cost is classified on the balance
 sheets in other liabilities.
<TABLE>
 Net post-retirement health care cost for December 31 included the following
 components:
<CAPTION>
                                            1997       1996        1995
 <S>                                      <C>        <C>         <C>
 Service cost                             $ 7,778    $ 7,235     $ 5,889
 Interest cost                             14,233     13,001      11,840
 Amortization of:
   Prior service cost                       7,396      7,396       7,396
   Net gain                                                       (1,109)

   Net periodic benefit cost              $29,407    $27,632     $24,016
</TABLE>
<TABLE>
 The following assumptions were used to determine the accumulated benefit
 obligation at December 31:
<CAPTION>
                                                            1997    1996
 <S>                                                        <C>     <C>
 Discount rate                                              7.50%   7.50%

 Health care cost trend rate                                7.25%   7.50%
</TABLE>
                                   -46-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 12 - POST-RETIREMENT HEALTH CARE BENEFITS (CONTINUED)

 The health care cost trend rate is anticipated to decrease to 5 percent in
 0.25 percent per year decrements over a ten-year period.
<CAPTION>
                                                            1997      1996       1995
 <S>                                                      <C>       <C>        <C>
 Impact of 1 percent increase in medical trend rate:
   On service cost and interest cost                      $   847   $   778    $   684
   On APBO, December 31                                     8,362     7,644      6,981
</TABLE>
<TABLE>
 NOTE 13 - INCOME TAXES

 The components of the income tax provision are as follows:
<CAPTION>
                                                           1997        1996        1995
 <S>                                                  <C>           <C>        <C>
 Current income tax provision:
   Federal                                            $   965,900   $ 902,300  $ 819,000
   State                                                  114,000     144,000    113,300
 Total current                                          1,079,900   1,046,300    932,300

 Deferred income tax benefit:
   Federal                                                (85,900)    (41,300)   (32,600)
   State                                                  (23,000)    (11,000)    (8,700)

 Total deferred                                          (108,900)    (52,300)   (41,300)

 Total provision for income taxes                     $   971,000   $ 994,000  $ 891,000
</TABLE>
                                   -47-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 13 - INCOME TAXES (CONTINUED)

 Deferred income taxes are provided for the temporary differences between the
 financial reporting basis and the tax basis of the Company's assets and
 liabilities.  The major components of the net deferred tax assets are as
 follows:
<CAPTION>
                                                              1997        1996
 <S>                                                      <C>          <C>
 Deferred tax assets:
   Allowance for loan losses                              $  613,600   $ 645,000
   Deferred compensation                                      69,300      59,100
   Post-retirement health care benefits                       56,500      47,400
   Unrealized loss on securities available for sale                          663

 Gross deferred tax assets                                   739,400     752,163

 Deferred tax liabilities:
   Unrealized gain on securities available for sale           56,747
   Premises and equipment                                    151,300     115,600
   Employee pension plan                                      80,200      19,100

 Gross deferred tax liabilities                              288,247     134,700

 Net deferred tax assets                                  $  451,153   $ 617,463
</TABLE>
<TABLE>
 A summary of the source of differences between income taxes at the federal
 statutory rate and the provision for income taxes for the years ended December
 31, follows:
<CAPTION>
                                        1997                1996              1995
                                         Percent of          Percent of         Percent of
                                           Pretax              Pretax            Pretax
                                  AMOUNT   INCOME     AMOUNT   INCOME   AMOUNT   INCOME
 <S>                           <C>         <C>     <C>         <C>    <C>        <C>
 Tax expense at statutory rate $1,045,000  34.0%   $1,071,200  34.0%  $ 989,800  34.0%
 Increase (decrease) in taxes
   resulting from:
   Tax-exempt interest           (174,500) (5.7%)    (169,200) (5.4%)  (173,400) (6.0%)
   State income tax                60,000   2.0%       88,000   2.8%     69,000   2.4%
   Other                           40,500   1.3%        4,000    .1%      5,600    .2%

 Provision for income taxes    $  971,000  31.6%   $  994,000  31.5%  $ 891,000  30.6%
</TABLE>
                                   -48-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 14 - LEASES

 The Company leases various pieces of equipment under cancelable leases and
 space for a branch location under a noncancelable lease.  All leases are
 classified as operating.  Future minimum payments under the noncancelable
 lease are as follows:
<CAPTION>
          <S>                                       <C>
          1998                                      $     22,000
          1999                                            24,726
          2000                                            25,540
          2001                                            26,389
          2002                                            27,252
          Thereafter                                       2,277

          Total                                     $    128,184
</TABLE>
 Rental expense for all operating leases was $12,735, $10,926, and $10,363 for
 the years ended December 31, 1997, 1996, and 1995, respectively.

 NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

 CREDIT RISK

 The Company is a party to financial instruments with off-balance sheet risk in
 the normal course of business to meet the financing needs of its customers.
 These financial instruments include commitments to extend credit and standby
 letters of credit.  Those instruments involve, to varying degrees, elements of
 credit risk in excess of the amount recognized in the balance sheets.
<TABLE>
 The Company's exposure to credit loss in the event of nonperformance by the
 other party to the financial instrument for commitments to extend credit and
 standby letters of credit is represented by the contractual amount of those
 instruments.  The Company uses the same credit policies in making commitments
 and conditional obligations as it does for on-balance sheet instruments.
 These commitments at December 31 are as follows:
<CAPTION>
                                                    1997             1996
 <S>                                          <C>               <C>
 Commitments to extend credit                 $  17,678,590     $ 14,162,116
 Letters of credit                                  924,841        1,341,142
 Credit card commitments                          2,388,240        1,837,542

 Totals                                       $  20,991,671     $ 17,340,800
</TABLE>

 Commitments to extend credit are agreements to lend to a customer as long as
 there is no violation of any condition established in the contract.
 Commitments generally have fixed expiration dates or other termination
 clauses.  Since many of the commitments are expected to expire without being
 drawn upon, the total commitment amounts do not necessarily represent future
 cash requirements.  The Company evaluates each customer's credit-worthiness on
 a case by case basis.  The amount of collateral obtained, if deemed necessary
<PAGE>
 upon extension of credit, is based on management's credit evaluation of the
 party.  Collateral held varies but may include accounts receivable, inventory,
 property, plant, and equipment, and income-producing commercial properties.

                                   -49-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED)

 Letters of credit are conditional commitments issued to guarantee the
 performance of a customer to a third party.  Those guarantees are primarily
 issued to support public and private borrowing arrangements.  The credit risk
 involved in issuing letters of credit is essentially the same as that involved
 in extending loan facilities to customers.  Collateral held varies as
 specified above and is required in instances which the Company deems
 necessary.  The commitments are structured to allow for 100 percent
 collateralization on all letters of credit.

 Credit card commitments are commitments on credit cards issued by the Company
 and serviced by Elan Financial Services.  These commitments are unsecured.

 CONCENTRATION OF CREDIT RISK

 The Company grants residential mortgage, commercial and consumer loans
 predominantly in the greater Wausau area and Marathon County.  There are no
 significant concentrations of credit to any one debtor or industry group.  It
 is felt that the diversity of the local economy will prevent significant
 losses in the event of an economic downturn.

 CONTINGENCIES

 In the normal course of business, the Company is involved in various legal
 proceedings.  In the opinion of management, any liability resulting from such
 proceedings would not have a material adverse effect on the consolidated
 financial statements.

 INTEREST RATE RISK

 The Company originates and holds adjustable rate mortgage loans with variable
 rates of interest.  The rate of interest on these loans is capped over the
 life of the loan.  At December 31, 1997, none of the approximately $841,873 of
 variable rate loans had reached the interest rate cap.

 NOTE 16 - CAPITAL REQUIREMENTS

 The Company and the Bank are subject to various regulatory capital
 requirements administered by the federal banking agencies.  Failure to meet
 minimum capital requirements can initiate certain mandatory-and possibly
 additional discretionary-actions by regulators that, if undertaken, could have
 a direct material effect on the Company's financial statements.  Under capital
 adequacy guidelines and the regulatory framework for prompt corrective action,
 the bank must meet specific capital guidelines that involve quantitative
 measures of the bank's assets, liabilities, and certain off-balance sheet
 items as calculated under regulatory accounting practices.  The Bank's capital
 amounts and classification are also subject to qualitative judgments by the
 regulators about components, risk weightings, and other factors.

 Quantitative measures established by regulation to ensure capital adequacy
 require the Bank to maintain minimum amounts and ratios (set forth in the
 table below) of total and Tier I capital (as defined in the regulations) to
<PAGE>
 risk-weighted assets (as defined), and of Tier I capital (as defined) to
 average assets (as defined).  Management believes, as of December 31, 1997,
 that the Bank meets all capital adequacy requirements to which it is subject.

                                   -50-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 16 - CAPITAL REQUIREMENTS (CONTINUED)

 As of December 31, 1997 and 1996, the most recent notification from the
 Federal Deposit Insurance Corporation categorized the Bank as well capitalized
 under the regulatory framework for prompt corrective action.  To be
 categorized as well capitalized, the Bank must maintain minimum total risk-
 based, Tier I risk-based, and Tier I leverage ratios as set forth in the
 table.  There are no conditions or events since that notification that
 management believes have changed the Bank's category.

 The Company's and the Bank's actual capital amounts and ratios are also
 presented in the table.
<TABLE>
<CAPTION>
                                                                           To Be Well
                                                                       Capitalized Under
                                                      For Capital      Prompt Corrective
                                    ACTUAL         ADEQUACY PURPOSES   ACTION PROVISIONS
                              AMOUNT      RATIO      AMOUNT    RATIO     AMOUNT    RATIO
 <S>                       <C>            <C>    <C>           <C>   <C>           <C>
 As of December 31, 1997:
  Total capital (to risk
    weighted assets):
    Consolidated           $  20,964,000  14.2%  $ 11,818,000  8.0%           N/A
    Subsidiary bank        $  20,830,000  14.1%  $ 11,818,000  8.0%  $ 14,772,000  10.0%

  Tier I capital (to
    risk weighted assets):
    Consolidated           $  19,117,000  12.9%  $  5,909,000  4.0%           N/A
    Subsidiary bank        $  18,983,000  12.8%  $  5,909,000  4.0%  $  8,863,000   6.0%

  Tier I capital (to
    average assets):
    Consolidated           $  19,117,000   9.0%  $  8,492,000  4.0%           N/A
    Subsidiary bank        $  18,983,000   8.9%  $  8,492,000  4.0%  $ 10,615,000   5.0%

 As of December 31, 1996:
  Total capital (to risk
    weighted assets):
    Consolidated           $  19,878,000  15.7%  $ 10,118,000  8.0%           N/A
    Subsidiary bank        $  19,729,000  15.6%  $ 10,118,000  8.0%  $ 12,647,000  10.0%

  Tier I capital (to
   risk weighted assets):
    Consolidated           $  18,297,000  14.5%  $ 5,059,000   4.0%           N/A
    Subsidiary bank        $  18,148,000  14.4%  $ 5,059,000   4.0%  $  7,588,000   6.0%

  Tier I capital (to
    average assets):
    Consolidated           $  18,297,000   9.1%  $ 8,061,000   4.0%           N/A
    Subsidiary bank        $  18,148,000   9.0%  $ 8,061,000   4.0%  $10,076,000    5.0%
</TABLE>
                                   -51-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 17 - RESTRICTIONS ON RETAINED EARNINGS

 The Bank is restricted by banking regulations from making dividend
 distributions above prescribed amounts and is limited in making loans and
 advances to the Company.  At December 31, 1997, the retained earnings of the
 subsidiary available for distribution as dividends without regulatory approval
 was approximately $7,819,000.

 NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS

 SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" requires
 that the Company disclose estimated fair values for its financial instruments.
 Fair value estimates, methods, and assumptions are set forth below for the
 Company's financial instruments.

 The following methods and assumptions were used by the Company in estimating
 its fair value disclosures for financial statements:

 CASH AND SHORT-TERM INVESTMENTS:  The carrying amounts reported in the balance
 sheets for cash and due from banks, interest-bearing deposits in other
 financial institutions, and federal funds sold approximate the fair value of
 these assets.

 INVESTMENT SECURITIES:  Fair values for investment securities are based on
 quoted market prices.
 LOANS:  For variable rate loans that reprice frequently and with no
 significant change in credit risk, fair values are based on carrying values.
 The fair value for other loans is estimated using discounted cash flow
 analyses, using interest rates currently being offered for loans with similar
 terms to borrowers of similar credit quality.  In addition, for impaired
 loans, marketability and appraisal values were considered in the fair value
 determination.  The carrying amount of accrued interest approximates its fair
 value.

 DEPOSIT LIABILITIES:  The fair value of deposits with no stated maturity, such
 as demand deposits, NOW accounts, savings and money market accounts, is equal
 to the amount payable on demand at the reporting date.  Fair value for fixed
 rate certificates of deposit is estimated using a discounted cash flow
 calculation that applies interest rates currently being offered on
 certificates to a schedule of aggregated expected maturities on time deposits.

 SHORT-TERM BORROWINGS:  The carrying amount of short-term borrowings
 approximates their fair value.

 LONG-TERM BORROWINGS:  The fair value of the Company's long-term borrowings
 (other than deposits) is estimated using discounted cash flow analyses based
 on the Company's current incremental borrowing rates for similar types of
 borrowing arrangements.

 OFF-BALANCE SHEET INSTRUMENTS:  The fair value of commitments would be
 estimated using the fees currently charged to enter into similar agreements,
 taking into account the remaining terms of the agreements, the current
 interest rates, and the present credit worthiness of the counter parties.
 Since this amount is immaterial, no amounts for fair value are presented.

                                   -52-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
 NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

 The carrying amounts and fair values of the Company's financial instruments
 consisted of the following at December 31:
<CAPTION>
                                                1997                        1996
                                      Carrying      Estimated     Carrying      Estimated
                                       AMOUNT      FAIR VALUE      AMOUNT      FAIR VALUE
 <S>                                <C>           <C>           <C>           <C>
 Financial assets:
   Cash and short-term investments  $ 10,775,998  $ 10,775,998  $ 10,152,277  $ 10,152,277
   Investment securities              50,128,473    50,283,218    51,584,797    51,633,977
   Net loans                         147,437,398   147,309,558   136,086,447   136,038,108

 Financial liabilities:
   Deposits                          186,602,705   186,951,870   178,128,903   178,548,854
   Short-term borrowings               3,960,042     3,960,042     5,766,631     5,766,631
   Long-term borrowings                3,000,000     2,960,274
</TABLE>
 LIMITATIONS

 Fair value estimates are made at a specific point in time, based on relevant
 market information and information about the financial instrument.  These
 estimates do not reflect any premium or discount that could result from
 offering for sale at one time the Company's entire holdings of a particular
 financial instrument.  Because no market exists for a significant portion of
 the Company's financial instruments, fair value estimates are based on
 judgments regarding future expected loss experience, current economic
 conditions, risk characteristics of various financial instruments, and other
 factors.  These estimates are subjective in nature and involve uncertainties
 and matters of significant judgement and therefore cannot be determined with
 precision.  Changes in assumptions could significantly affect the estimates.
 Fair value estimates are based on existing on- and off-balance sheet financial
 instruments without attempting to estimate the value of anticipated future
 business and the value of assets and liabilities that are not considered
 financial instruments.  Significant assets, and liabilities that are not
 considered financial assets or liabilities include premises and equipment,
 other assets, and other liabilities.  In addition, the tax ramifications
 related to the realization of the unrealized gains or losses can have a
 significant effect on fair value estimates and have not been considered in the
 estimates.

                                   -53-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 19 - CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

 The following condensed balance sheets as of December 31, 1997 and 1996, and
 condensed statements of income and cash flows for the years ended December 31,
 1997, 1996, and the seven-month period ended December 31, 1995 (from date of
 parent company inception) for PSB Holdings, Inc. should be read in conjunction
 with the consolidated financial statements and the notes thereto.
<TABLE>
                                   BALANCE SHEETS
                             December 31, 1997 and 1996
<CAPTION>
ASSETS
                                                1997            1996
 <S>                                      <C>              <C>
 Cash and due from banks                  $    535,485     $    529,371
 Investment in subsidiary                   19,082,913       18,139,868
 Other assets                                   97,001           98,516

 Total assets                             $ 19,715,399     $ 18,767,755


LIABILITIES AND STOCKHOLDERS' EQUITY

 Accrued dividends payable                $    498,224     $    478,831
 Total stockholders' equity                 19,217,175       18,288,924

 Total liabilities and stockholders'
   equity                                 $ 19,715,399     $ 18,767,755
</TABLE>
                                   -54-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 19 - CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
                                STATEMENTS OF INCOME
                     Years Ended December 31, 1997 and 1996, and
                     Seven-Month Period Ended December 31, 1995
<CAPTION>
                                                          1997        1996         1995
 <S>                                                <C>           <C>          <C>
 Income:
   Dividends from subsidiary                        $  1,311,000  $ 1,157,800  $ 1,238,047
   Interest                                                2,893           11

     Total income                                      1,313,893    1,157,811    1,238,047

 Expenses:
   Interest                                                6,782        5,919
   Other                                                  58,360       59,923       12,552

     Total expenses                                       65,142       65,842       12,552

 Income before income taxes and equity in
   undistributed net income of subsidiary              1,248,751    1,091,969    1,225,495
 Income tax benefit                                       20,000       21,000        4,000

 Net income before equity in undistributed
   net income of subsidiary                            1,268,751    1,112,969    1,229,495
 Equity in undistributed net income of subsidiary        833,958    1,043,628      790,675

 Net income                                         $  2,102,709  $ 2,156,597  $ 2,020,170
</TABLE>
                                   -55-
<PAGE>
                             PSB HOLDINGS, INC.
                               AND SUBSIDIARY

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 NOTE 19 - CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
                              STATEMENTS OF CASH FLOWS
                      Years Ended December 31, 1997, 1996, and
                     Seven-Month Period Ended December 31, 1995
<CAPTION>
                                                 1997          1996          1995
<S>                                         <C>            <C>           <C>
 Cash flows from operating activities:
  Net income                                $  2,102,709   $ 2,156,597   $ 2,020,170
  Adjustments to reconcile net income
    to net cash provided by (used in)
    operating activities:
     Equity in net income of subsidiary       (2,144,958)   (2,201,428)   (2,028,722)
     Net amortization                             21,517        21,518        12,552
     Increase in other assets                    (20,003)      (21,000)     (111,584)
     Increase in other liabilities                19,393         8,020       470,811

  Net cash provided by (used in) operating
    activities                                   (21,342)      (36,293)      363,227

  Cash flows from investing activities -
    Dividends received from subsidiary         1,311,000     1,157,800       863,047

  Cash flows from financing activities:
     Dividends paid                             (795,944)     (763,421)     (739,989)
     Purchase of treasury stock                 (487,600)     (315,000)

  Net cash used in financing activities       (1,283,544)   (1,078,421)     (739,989)

 Net increase in cash and due from banks           6,114        43,086       486,285
 Cash and due from banks at beginning            529,371       486,285

 Cash and due from banks at end             $    535,485   $   529,371   $   486,285
</TABLE>
                                   -56-
<PAGE>

 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
 FINANCIAL DISCLOSURE.

     None.

                                   -57-
<PAGE>
                             PART III

 ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.


     Information relating to directors of the Company is incorporated into
 this Form 10-K by this reference to the material set forth in the table
 under the caption "Election of Directors", pages 2 and 3, of the Company's
 proxy statement dated March 31, 1998 (the "1998 Proxy Statement").
 Information relating to executive officers is found in Part I of this Form
 10-K, page 7.


 ITEM 11.   EXECUTIVE COMPENSATION.

     Information relating to director compensation is incorporated into
 this Form 10-K by this reference to the 1998 Proxy Statement under the
 subcaption "Compensation of Directors", page 4.  Information relating to
 the compensation of executive officers is incorporated into this Form 10-K
 by this reference to (1) the material set forth under the caption
 "Executive Officer Compensation" and ending with the subcaption
 "Committee's and Board's Report on Compensation Policies", pages 6 through
 7, in the 1998 Proxy Statement and (2) the material set forth under the
 subcaption "Compensation Committee and Board Interlocks and Insider
 Participation", page 8, in the 1998 Proxy Statement.


 ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Information relating to security ownership of certain beneficial
 owners and management is incorporated into this Form 10-K by this
 reference to the material set forth under the caption "Beneficial
 Ownership of Common Stock", pages 5 and 6, in the 1998 Proxy Statement.


 ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Information relating to transactions with management is incorporated
 into this Form 10-K by this reference to the material set forth under the
 caption "Certain Relationships and Related Transactions", page 8, in the
 1998 Proxy Statement.

                                   -58-
<PAGE>
                              PART IV

 ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

 (a)  Financial statements and financial statement schedules filed as part
      of this report and required by Item 14(d) are set forth on page 28
      herein.

 (b)  No reports on Form 8-K were filed by the Company during the fourth
      quarter of 1997.

 (c)  Exhibits

      The following exhibits required by Item 601 of Regulation S-K are
      filed with the Securities and Exchange Commission as part of this
      report.

     EXHIBIT (3) - ARTICLES OF INCORPORATION AND BYLAWS
                                                           PAGE OR
                                                         INCORPORATED
                                                           EXHIBIT<dagger>

     (i)  Restated Articles of Incorporation, as amended . . . 4(a)(1)

     (ii)  Bylaws  . . . . . . . . . . . . . . . . . . . . . . 4(b)(1)

     EXHIBIT (4) - INSTRUMENTS DEFINING THE RIGHTS OF
                   SECURITY HOLDERS

     (a)  Articles of Incorporation and
          Bylaws (see Exhibits 3(a) and (b))

     EXHIBIT (10) - MATERIAL CONTRACTS

     (a)  Bonus Plan of Directors of the Bank* . . . . . . . .10(a)(2)

     (b)  Bonus Plan of Officers and Employees of the Bank*. .10(b)(2)

     (c)  Non-Qualified Retirement Plan for Directors of
          the Bank*  . . . . . . . . . . . . . . . . . . . . .10(c)(2)

     EXHIBIT (21) - SUBSIDIARIES OF THE REGISTRANT . . . . . .22(2)

     EXHIBIT (27) - FINANCIAL DATA SCHEDULE

     *Denotes Executive Compensation Plans and Arrangements.

     <dagger>Where exhibit has been previously filed and is incorporated
             herein by reference, exhibit numbers set forth herein
             correspond to the exhibit number where such exhibit can be
             found in the following reports of the registrant

                                   -59-
<PAGE>
             (Commission File No. 0-26480) filed with the Securities and
             Exchange Commission:

     (1)  Registrant's current report on Form 8-K dated May 30, 1995

     (2)  Registrant's annual report on Form 10-K for the fiscal year
          ended December 31, 1995

                                   -60-
<PAGE>
                            SIGNATURES

     Pursuant to the requirements of Section 13 of the Securities Exchange
 Act of 1934, the Company has duly caused this report to be signed on its
 behalf by the undersigned, thereunto duly authorized.

     PSB Holdings, Inc.

     By GORDON P. GULLICKSON                    March 25, 1998
        Gordon P. Gullickson, President

        Pursuant to the requirement of the Securities Exchange Act of 1934,
 this report has been signed below by the following persons on behalf of
 the registrant and in the capacities indicated on this 31st day of March,
 1998.

        SIGNATURE AND TITLE                  SIGNATURE AND TITLE

 GORDON P. GULLICKSON                     TODD R. TOPPEN
 Gordon P. Gullickson, President          Todd R. Toppen, Treasurer
 Chief Executive Officer and a Director   (Chief Financial and
                                          Principal Accounting Officer)

 DIRECTORS:

 LEONARD C. BRITTEN
 Leonard C. Britten                    Gordon P. Connor


 PATRICK L. CROOKS                     WILLIAM J. FISH
 Patrick L. Crooks                     William J. Fish


 CHARLES A. GHIDORZI                   GEORGE L. GEISLER
 Charles A. Ghidorzi                   George L. Geisler


 LAWRENCE HANZ, JR.                    THOMAS R. POLZER
 Lawrence Hanz, Jr.                    Thomas R. Polzer


 THOMAS A. RIISER
 Thomas A. Riiser                      William M. Reif


                                       EUGENE WITTER
                                       Eugene Witter
<PAGE>
                              EXHIBIT INDEX<dagger>
                                     TO
                                 FORM 10-K
                                     OF
                             PSB HOLDINGS, INC.
                   FOR THE PERIOD ENDED DECEMBER 31, 1997
                Pursuant to Section 102(d) of Regulation S-T
                          (17 C.f.R. <section>232.102(d))


EXHIBIT 27 - FINANCIAL DATA SCHEDULE


     <dagger>Exhibits required by Item 601 of Regulation S-K which have
     been previously filed and are incorporated by reference are set
     forth in Part IV, Item 14(c) of the Form 10-K to which this Exhibit
     Index relates.