Exhibit 10.3

                              PEOPLES STATE BANK

                 SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN

                                  BASIC PLAN


1.    PURPOSE

      The purpose of the Senior Management Incentive Compensation Plan (the
      "Plan") is to maximize the achievement of the Bank's objectives by
      providing incentives and awards to those senior-level executives who
      attain and sustain consistently high levels of performance which exceed
      normal expectations and which contribute to the success and profitability
      of the Bank.  The Plan is designed to support the key goals and
      objectives of the Bank.

2.    GENERAL DESCRIPTION

      Each fiscal year, the Board of Directors of the Bank (the "Board") shall
      establish Bank-wide, department, and individual performance criteria for
      participants in the Plan, the achievement of which shall make such
      participants eligible to receive individual incentive compensation
      awards.  Such performance criteria shall be determined from year to year
      in the sole discretion of the Board and may include performance targets
      related to specified critical operating ratios, selected financial
      ratios, loan growth, deposit growth, net income, operating
      expenses, product referrals, development or marketing of banking
      services, administrative systems or procedures, and any other
      criteria or factors deemed important by the Board to the financial
      performance, operating efficiency, or overall financial condition of the
      Bank.

      The performance criteria shall be determined by the Board to provide a
      level of incentive compensation that is competitive with comparable
      levels of performance in other financial institutions, to assist the Bank
      in retaining and motivating key executives, and to ensure the Bank's
      continued growth and profitability.

      The incentive awards are to be supplemental compensation in the form of
      cash paid on an annual basis.  The Plan is established and maintained in
      addition to regular salary and benefits programs.  The Plan presumes an
      equitable base compensation system and a competitive benefits program.

3.    ADMINISTRATION

      The Board has the responsibility to interpret, administer, and amend the
      Plan.  The Board may delegate all or any part of its responsibilities
      under the Plan to its Compensation Committee.
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      Bank officers who are members of the Board shall not be entitled to vote
      on matters relating to the eligibility for and/or determination of their
      own incentive compensation award.
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      Prior to the beginning of each fiscal year, the Board shall review and
      revise, if deemed advisable, the operating rules for implementing the
      Plan for the year.

      Computation of incentive awards will be performed by senior management
      and reviewed by the Board.

      The Board may deem to exclude extraordinary occurrences which could
      impact the incentive awards, either positively or negatively, but are, by
      their nature, outside the significant influence of Plan participants.

      The actions of the Board as to the interpretation, construction, and
      administration of the Plan shall be final and binding for all parties,
      including the Bank and its employees.

4.    PARTICIPANTS

      Eligibility for participation in the Plan shall be limited to those
      individuals approved by the Board who, in the judgment of the President
      and the Board, are responsible for directing functions which have a
      significant bearing on the growth and profitability of the Bank.

5.    DEFINITIONS

      For the purpose of determining the amount of the incentive compensation
      awards under the Plan, the following definitions shall apply:

    (circle)Individual Goals - An individual participant's goals and
            measurement system shall be indicated on the participant's
            standardized annual goal setting form.

    (circle)Department Goals - Department goals are set during the normal
            participant goal setting process and shall be indicated
            on the participant's standardized annual goal setting form.

    (circle)Incentive Factor Weighting - A percentage for each of the
            incentive factors for each participating position which is used to
            modify the basic incentive percentage to reflect the relative
            importance of the factor to that position.

    (circle)Threshold Performance - The performance level applied to the
            weighted total of the performance factors; also, the minimum
            overall performance level for a single performance ratio chosen to
            show overall profitability, currently net income.  Thresholds of
            performance shall be established for each performance measure and
            are included in each incentive formula.
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    (circle)Position Level Multipliers - A multiplier used to recognize the
            impact that each senior-level officer has on overall Bank
            performance.

    (circle)Discretionary / Individual Performance Adjustment - A multiplier
            which allows the Board some subjective discretion in the
            determination of the final incentive award for each participant.
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    (circle)Extraordinary Occurrences - Those events which, in the opinion of
            the Board of Directors, are outside the significant influence of
            Plan participants and would, by their inclusion, cause a
            significant unintended effect, positive or negative, on the Bank's
            operating and financial performance results.

6.    INCENTIVE COMPUTATION - GENERAL PROCEDURES

The general formula for converting overall Bank results into individual
incentive awards is as follows:

1.    BASE INCENTIVE COMPENSATION

      Net Income           ______  (percent achieved) x 33.3%  =(a)________

      Departmental Goals   ______  (percent achieved) x 33.3%  =(b) ________

      Individual Goals     ______  (percent achieved) x 33.3%  =(c) ________

      Total (a) + (b) + (c)                                      ________

2.    MULTIPLY BY NET INCOME FACTOR                            x  ______%
      (Tier I = 10%; Tier II = 20%; Tier III = 30%)
                                                                 ________

3.    ADJUST FOR RESPONSIBILITY FACTOR                         x ________
      (CEO, 1.5; Senior Vice President, 1.2)

4.    PERCENT OF SALARY PAYABLE AS INCENTIVE COMPENSATION


7.    PAYMENT OF INDIVIDUAL INCENTIVE COMPENSATION AWARDS

      When the Bank's year-end financial results are independently
      audited, participants will receive the incentive payment determined
      by evaluating their performance for the year using the formula
      established for their position.  The award will be paid following
      completion of the audit of the holding company's consolidated
      financial statements.  Applicable withholding of taxes will be deducted
      from each payment.
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8.    PARTIAL PAYMENTS - TERMINATION OF EMPLOYMENT / NEW HIRES

      In the event of termination of employment through retirement or death,
      the participant shall be considered to have earned one-twelfth of the
      annual incentive compensation award of a particular year for each full
      month of employment in the fiscal year of his/her retirement or death.

      If a participant dies, any unpaid incentive awards shall be paid to the
      estate, or designated beneficiary, in one lump sum.

      Participants may not be added to the Plan after June 1 of the plan year.
      Effective date of participation is based on date of employment unless
      modified by the Board.  If an individual becomes a new participant
      prior to June 1 during the plan year, the incentive compensation award
      will be earned on the basis of one-twelfth of the annual incentive
      compensation for each full month of participation.
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      In all other cases of termination, the employee forfeits any unpaid
      awards.

9.    INCENTIVE COMPENSATION OPERATING RULES

      As of the beginning of each fiscal year, the Board shall take the
      following steps with respect to the operation of the Plan for the year:

         a. Select employees for participation in the Plan.

         b. Approve three threshold amounts for net income for the year.  The
            Tier 1 threshold is Board approved budgeted net income.  Tier 2 is
            7.5% higher than budgeted net income, and Tier 3 is 15% higher than
            budgeted net income. The calculated thresholds are rounded up to
            the nearest thousand dollars.

         c. Determine position level multipliers, performance measurement
            factors and weightings, department goals, and individual goals for
            the fiscal year.

         d. Adopt such other administrative and procedural rules which the
            Board considers appropriate.

      In the event the lowest threshold net income is not reached, no credit
      will be given for the 1/3 portion of the incentive tied to net income.
      However, the participant could still earn up to 2/3 of the lowest
      threshold incentive even if the Bank net income threshold is not
      reached.

      After approval by the Board, Bank management shall, as soon as practical,
      inform each of the participants under the Plan of the Operating Rules for
      the fiscal year then beginning.
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10.   PERFORMANCE PROGRESS REPORTING

      The Bank's President, or his designee, will be responsible for written
      quarterly reporting to the Board of Bank performance during the course of
      the year. This data is to be made available to the Board within 30 days
      of its date of availability.

11.   AMENDMENT OR TERMINATION OF PLAN

      The Board may modify, amend, or terminate this Plan at any time effective
      at the end of a fiscal year.  The modification, amendment, or termination
      of the Plan shall in no way affect a participant's right to unpaid
      incentive compensation awards for the year prior to termination or
      modification.

12.   EFFECTIVE DATE

      This Plan was originally effective January 1, 2000, amendments
      were approved by the Board effective January 1, 2004.
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