UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, DC  20549

                            FORM 10-Q

(x)  Quarterly report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934 for the quarterly period
     ended June 30, 2001 or

( )  Transition report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934 for the transition period
     from _______________.

                           No. 000-24601
                     ------------------------
                     (Commission File Number)

                          PSB BANCORP, INC.
      ------------------------------------------------------
      (Exact Name of Registrant as Specified in its Charter)

        Pennsylvania                           23-2930740
  ------------------------              ------------------------
  (State of Incorporation)              (IRS Employer ID Number)

11 Penn Center, Suite 2601
1835 Market Street, Philadelphia, PA                    19103
----------------------------------------              ----------
(Address of Principal Executive Offices)              (Zip Code)

                          (215) 979-7900
                 -------------------------------
                 (Registrant's Telephone Number)

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

Securities registered pursuant to Section 12(g) of the Exchange
Act:  Common Stock, no par value per share.

Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes (X)     No ( )

Number of shares outstanding as of June 30, 2001

     COMMON STOCK (No Par Value)            4,493,776
     ---------------------------       --------------------
         (Title of Class)              (Outstanding Shares)



                         PSB Bancorp, Inc.
                            FORM 10-Q

               For the Quarter Ended June 30, 2001

                             Contents

                                                             Page

PART I.  FINANCIAL INFORMATION.

Item 1.  Financial Statements

         Consolidated Statements of Financial Condition
         as of June 30, 2001 (Unaudited) and December  31,
         2000                                                  4

         Consolidated Statements of Income (Unaudited)
         for the Three and Six Month Periods Ended June 30,
         2001 and 2000                                         6

         Consolidated Statements of Cash Flows (Unaudited)
         for the Six Month Periods Ended June 30, 2001
         and 2000                                             10

         Consolidated Statements of Comprehensive Income
         (Unaudited) for the Three and Six Month Periods
         Ended June 30, 2001 and 2000                         12

         Notes to Consolidated Financial Statements           13

Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations                  20

PART II. Other Information                                    35

         Exhibits and Reports on Form 8-K



Part I  FINANCIAL INFORMATION

Item 1  Financial Statements

                          PSB BANCORP, INC
                  STATEMENTS OF FINANCIAL CONDITION
                           (In thousands)

<table>
<caption>
                                                   June 30,     December  31,
                                                      2001         2000
                                                  -----------   -------------
                                                  (unaudited)     (audited)

                                               <c>           <c>
ASSETS
  Cash and due from banks                          $ 10,511       $  2,937
  Interest bearing deposits with banks               47,583         14,969
  Investment securities available-for-
    sale, at fair value                              39,538         24,558
  Mortgage-backed securities available-for-
    sale, at fair value                              48,046         42,228
  Mortgage-backed securities held-to-maturity
    (fair value of $3,022 and $1,032)                 2,997            910
  Investment securities held-to-maturity
    (fair value of $3,799 and $4,896)                 2,000          4,000
  Other investments                                   1,813          1,649
  Loans, less allowance for loan losses of
    $3,083 and $1,349, respectively                 300,925        145,856
  Loans held for sale                                12,871          9,080
  Property acquired through loan foreclosure
    actions, net                                      1,103          1,046
  Premises and equipment, net                         1,786          1,820
  Accrued interest receivable                         2,692          2,165
  Bank owned life insurance (BOLI)                   10,851              0
  Deferred tax asset                                  4,192          1,379
  Prepaid expenses and other assets                   3,094          2,222
                                                   --------       --------
     TOTAL ASSETS                                  $490,002       $254,819
                                                   ========       ========

LIABILITIES
  Deposits
    Non-interest bearing                           $ 29,685       $ 15,287
    Interest bearing                                378,806        188,888
                                                   --------       --------
  Total Deposits                                    408,491        204,175

  Borrowed funds                                      4,000              0
  Securities sold under agreements to repurchase     13,334         13,402
  Income taxes payable                                    0              0
  Accrued interest payable                              454            442
  Other liabilities                                  25,465            818
                                                   --------       --------
     Total liabilities                              451,744        218,837
                                                   --------       --------

SHAREHOLDERS' EQUITY
  Common stock authorized, 15,000,000 shares
    no par value, issued and outstanding,
    4,493,776, June 30, 2001                              0
  Common stock authorized, 15,000,000 shares
    no par value, issued and outstanding,
    4,095,751, December 31, 2000                                         0
  Additional paid-in capital                         40,634         40,710
  Employee stock ownership plan                      (1,907)        (1,111)
  Retained earnings                                      64           (971)
  Accumulated other comprehensive income, net          (268)          (367)
  Treasury stock 446,756 shares, at cost,
     December 31, 2000                                              (2,279)
  Treasury stock 48,731 shares, at cost
     June 30, 2001                                     (265)
                                                   --------       --------
     Total shareholders' equity                      38,258         35,982
                                                   --------       --------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $490,002       $254,819
                                                   ========       ========
</table>

The accompanying notes are an integral part of these financial
statements.



                          PSB BANCORP, INC
                 CONSOLIDATED STATEMENTS OF INCOME
               (In thousands, except per share data)

                                             Three months ended
                                                 June 30,
                                              2001        2000
                                             ------     -------
                                                (unaudited)
INTEREST INCOME
  Loans, including fees                      $3,778     $4,007
  Investment securities                       1,062      1,230
  Deposits with banks                           105         16
                                             ------     ------
     Total interest income                    4,945      5,253

INTEREST EXPENSE
  Interest on deposits                        2,617      1,911
  Interest on borrowings                        162        582
  Interest - other                                0          0
                                             ------     ------
     Total interest expense                   2,779      2,493

        Net interest income                   2,166      2,760

PROVISION FOR LOAN LOSSES                         0          0
                                             ------     ------
       Net interest income after provision
         for loan losses                      2,166      2,760
                                             ------     ------

NON-INTEREST INCOME                             309        167
                                             ------     ------
NON-INTEREST EXPENSES
  Salaries and employee benefits                907      1,079
  Occupancy and equipment                       301        293
  Other operating                               728        724
                                             ------     ------
     Total non-interest expenses              1,936      2,096
                                             ------     ------
LOSS ON INVESTMENT                               41          0
                                             ------     ------

     Income before income taxes                 498        831

INCOME TAXES                                     61        240
                                             ------     ------
NET INCOME                                   $  437     $  591
                                             ======     ======

  Net income per common share
    Basic                                    $  .11     $  .14
    Diluted                                     .10        .13

The accompanying notes are an integral part of these financial
statements.



                          PSB BANCORP, INC
                 CONSOLIDATED STATEMENTS OF INCOME
               (In thousands, except per share data)

                                                 Six months ended
                                                     June 30,
                                                  2001      2000
                                                -------   -------
                                                  (unaudited)
INTEREST INCOME
  Loans, including fees                         $ 7,577   $ 8,141
  Investment securities                           2,143     2,489
  Deposits with banks                               314        43
                                                 ------   -------
     Total interest income                       10,034    10,673

INTEREST EXPENSE
  Interest on deposits                            5,191     3,922
  Interest on borrowings                            352     1,152
  Interest - other                                    0         0
                                                 ------   -------
     Total interest expense                       5,543     5,074

        Net interest income                       4,491     5,599

PROVISION FOR LOAN LOSSES                             0       100
                                                 ------   -------
  Net interest income after provision
         for loan losses                          4,491     5,499
                                                 ------   -------

NON-INTEREST INCOME                                 580       324
                                                 ------   -------
NON-INTEREST EXPENSES
  Salaries and employee benefits                  1,886     2,155
  Occupancy and equipment                           615       564
  Other operating                                 1,314     1,284
                                                 ------   -------
     Total non-interest expenses                  3,815     4,003
                                                 ------   -------
LOSS ON INVESTMENT                                  130         0
                                                 ------   -------

     Income before income taxes                   1,126     1,820

INCOME TAXES                                        136       475
                                                 ------   -------
NET INCOME                                       $  990   $ 1,345
                                                 ======   =======

  Net income per common share
    Basic                                        $  .25   $   .31
    Diluted                                         .22       .28

The accompanying notes are an integral part of these financial
statements.



                PSB BANCORP, INC. AND SUBSIDIARY
              CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (In thousands)
         Increase (Decrease) in Cash and Cash Equivalents

<table>
<caption>
                                                                           Six Months Ended
                                                                               June 30,
                                                                         --------------------
                                                                            2001        2000
                                                                         ---------   ---------
                                                                              (Unaudited)

                                                                      <c>         <c>
CASH FLOWS BY OPERATING ACTIVITIES:
  Net income                                                             $    990    $  1,345
                                                                         --------    --------
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
      Amortization of premium/discount on mortgage-backed
        securities                                                            139         23
      Depreciation and amortization                                           203         43
      Write-down and expenses of real estate owned                            192         96
      (Gain) loss on sale of real estate owned                                  0       (151)
      (Gain) loss on sale of loans                                              0         82
      Loss on investment                                                      131          0
      Provision for losses on loans                                             0        118
      Deferred taxes                                                          121       (668)
      Compensation expense-Employee Stock Ownership Plan                       42         80
      Change in assets and liabilities:
        (Increase)decrease in loans held for sale                          (3,791)       699
        (Increase) decrease in accrued interest receivable                    148        112
        Increase in prepaid expenses and other assets                        (645)       113
        (Increase) decrease in prepaid corporate taxes                       (142)      (150)
        Increase in corporate taxes payable                                     0        475
        Increase (decrease) in accrued interest payable                        12        (17)
        Increase in accrued expenses                                          823        443
                                                                          -------    -------
     Total adjustments                                                     (2,767)     1,298
                                                                          -------    -------
     Net cash (used in) provided by operating activities                   (1,777)     2,643
                                                                          -------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of mortgage-backed securities, available-for-sale              (10,000)         0
  Purchase of investment securities, available-for-sale                    (1,659)      (500)
  Investments and Mortgage-backed security maturities and
    principal repayments                                                   14,943      2,178
  Acquisition costs of and proceeds from the sale of Federal
    Home Loan Bank stock                                                    1,157       (150)
  Proceeds from sale of real estate owned net of improvements                 600        164
  Capital expenditures                                                       (169)      (245)
  Increase in total loans receivable, net                                 (26,359)    16,884
  Cash received in acquisition                                             40,521          0
                                                                          -------    -------
     Net cash provided by investing activities                             19,034     18,331
                                                                          -------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase (decrease) in deposits, net                                     19,040    (19,293)
  Change in advances for borrowers' taxes and
   insurance                                                                 (177)      (126)
  Proceeds (repayments) of borrowed funds                                   4,000     (7,500)
  Change in securities purchased under agreements to resell                    68     (2,213)
                                                                          -------    -------
     Net cash provided by (used in) financing activities                   22,931    (29,132)
                                                                          -------   --------

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS                       40,188     (8,158)

  Cash and Cash equivalents, beginning of period                           17,906     17,275
                                                                         --------   --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                   58,094      9,117
                                                                         ========   ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

  Cash paid during the period for:

    Interest on deposits and borrowings                                  $  3,082   $  3,922
                                                                         ========   ========

    Income taxes                                                         $      0   $    475
                                                                         ========   ========
NON CASH ACTIVITIES

  Loans transferred to real estate owned                                 $    849   $    304
                                                                         ========   ========
</table>



                PSB BANCORP, INC. AND SUBSIDIARY
          CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                        (In thousands)

<table>
<caption>
                                         Six Months Ended   Three Months Ended
                                             June 30,            June 30,
                                            (Unaudited)         (Unaudited)
                                         2001      2000        2001     2000

                                     <c>       <c>         <c>       <c>
Net income                              $  990    $1,345      $ 437     $591

Other comprehensive income, net of
  tax:

  Accumulated comprehensive gain (loss),
  Investments available-for-sale           412       218       (100)     342
                                        ------    ------      -----     ----

Other comprehensive income                 412       218       (100)     342
                                        ------    ------      -----     ----

Comprehensive income                    $1,402    $1,563      $ 337     $933
                                        ======    ======      =====     ====
</table>



                          PSB BANCORP, INC.
                    NOTES TO FINANCIAL STATEMENTS
                          June 30, 2001
                            (UNAUDITED)

Basis of Presentation:

     The consolidated financial statements include the accounts
of PSB Bancorp, Inc. ("PSB") and its wholly-owned subsidiary,
First Penn Bank (the "Bank").  Significant inter-company accounts
and transactions have been eliminated. The accompanying unaudited
consolidated financial statements have been prepared in
accordance with US generally accepted accounting principles.
Accordingly, they do not include all of the information and
footnotes required by US generally accepted accounting principles
for complete financial statements.  In the opinion of management,
all adjustments considered necessary for fair presentation have
been included. Operating results for the three months and six
months ended June 30, 2001 are not necessarily indicative of the
results that may be expected for the full fiscal year. For
further information, refer to the financial statements and
footnotes thereto included in PSB's Annual Report on form 10-K
for the year ended December 31, 2000.

     On June 29, 2001 PSB Bancorp, Inc. acquired Jade Financial
Corp. and its wholly-owned subsidiary, IGA Federal Savings Bank,
in a cash transaction valued at approximately $24.1 million. The
acquisition was accounted for using the purchase method of
accounting (see Note 7). The statement of financial condition
included herein as of June 30, 2001 includes the effect of the
acquisition of Jade Financial Corp. The results of operations of
Jade Financial Corp. for June 30, 2001 have not been included in
this report because they were deemed immaterial to these
statements taken as a whole.

     PSB Bancorp, Inc.'s consolidated statements of financial
condition do not include the consolidation of the assets of Iron
Bridge Holdings, Inc. ("Iron Bridge"), however, the Bank's 56.9%
ownership interest in Iron Bridge is accounted for in the results
of operations using the equity method due to the immateriality of
the Bank's total investment in Iron Bridge.

Note 1.  Earnings Per Share

     Basic earnings per share ("EPS") is computed based on the
weighted average number of shares of common stock outstanding
during the periods presented.  Outstanding stock options are
considered common stock equivalents and are included in the
computation of dilutive EPS using the treasury stock method,
unless anti-dilutive.

     The following table reconciles the numerators and
denominators of the basic and diluted EPS computations for PSB's
net income for the three months ended June 30, 2001:

<table>
<caption>
                                          Income         Shares      Per-Share
                                       (Numerator)   (Denominator)     Amount

                                    <c>           <c>             <c>
Basic EPS:
Income available to common
  shareholders                           $436,629      3,973,088        $.11
                                                                        ====

Effect of Dilutive Securities:
Options                                                  525,881
                                                       ---------

Diluted EPS:
Income available to common
  shareholders                           $436,629      4,498,969        $.10
                                                                        ====
</table>

     The following table reconciles the numerators and
denominators of the basic and diluted EPS computations for PSB's
net income for the six months ended June 30, 2001:

<table>
<caption>
                                          Income         Shares      Per-Share
                                       (Numerator)   (Denominator)     Amount

                                    <c>           <c>             <c>
Basic EPS:
Income available to common
  shareholders                           $990,179      3,973,088        $.25
                                                                        ====

Effect of Dilutive Securities:
Options                                                  525,881
                                                       ---------

Diluted EPS:
Income available to common
  shareholders                           $990,179      4,498,969        $.22
                                                                        ====
</table>

     The following table reconciles the numerators and
denominators of the basic and diluted EPS computations for PSB's
net income for the three months ended June 30, 2000:

<table>
<caption>
                                          Income         Shares      Per-Share
                                       (Numerator)   (Denominator)     Amount

                                    <c>           <c>             <c>
Basic EPS:
Income available to common
  shareholders                           $591,000      4,288,097        $.14
                                                                        ====

Effect of Dilutive Securities:
Options                                                  531,571
                                                       ---------

Diluted EPS:
Income available to common
  shareholders                           $591,000      4,819,668        $.13
                                                                        ====
</table>

     The following table reconciles the numerators and
denominators of the basic and diluted EPS computations for PSB's
net income for the six months ended June 30, 2000:

<table>
<caption>
                                          Income         Shares      Per-Share
                                       (Numerator)   (Denominator)     Amount

                                    <c>           <c>             <c>
Basic EPS:
Income available to common
  shareholders                          $1,345,000     4,288,097        $.31
                                                                        ====

Effect of Dilutive Securities:
Options                                                  531,571
                                                       ---------

Diluted EPS:
Income available to common
  shareholders                          $1,345,000     4,819,668        $.28
                                                                        ====
</table>

Note 2.  Summary of Significant Accounting Policies

     In the opinion of management, the accompanying unaudited
financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the
financial position of PSB as of June 30, 2001 and December 31,
2000 and the results of its operations for the three and six
month periods ended June 30, 2001 and 2000. The accounting
policies and reporting practices of PSB are in accordance with US
generally accepted accounting principles and have been followed
on a consistent basis.

     The accompanying financial statements have been prepared in
accordance with instructions for Form 10-Q and accordingly do not
include all of the detailed schedules, information and notes
necessary for a full presentation of financial condition, results
of operations and cash flows in accordance with US generally
accepted accounting principles.

     The results of operations for the three and six month
periods ended June 30, 2001 and 2000 are not necessarily
indicative of the results to be expected for the full year.

Note 3.  Stock Option Plan

     PSB accounts for its stock option plan in accordance with
the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued To Employees", and related
interpretations.  As such, compensation expense would be reported
on the date of grant only if the current market price of the
underlying stock exceeds the exercise price.  PSB has adopted
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation", which permits entities
to recognize as expense over the vesting period the fair value of
all stock-based awards on the date of grant.  Alternatively, SFAS
No. 123 also allows entities to continue to apply the provisions
of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option
grants made in 1995 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied.  PSB has elected
to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123.

Note 4.  Effect of New Accounting Standards

     SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was effective for PSB on June 30, 2000. PSB
has no activity subject to SFAS 133.

     SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" replaced
SFAS No. 125 and is effective for all transactions after March
31, 2001.  PSB has no activity subject to SFAS 140.

     In July of 2001, the Financial Accounting Standards Board
issued Statement No. 141, "Business Combinations", and Statement
No. 142, "Goodwill and Other Intangible Assets".

     Statement No. 141 requires all business combinations to be
accounted for using the purchase method of accounting as use of
the pooling-of-interests method is prohibited. In addition, this
statement requires that negative goodwill that exists after the
basis of certain acquired assets is reduced to zero should be
recognized as an extraordinary gain. The provisions of this
statement apply to all business combinations initiated after
June 30, 2001.

     Statement No. 142 prescribes that goodwill associated with a
business combination and intangible assets with an indefinite
useful life should not be amortized but should be tested for
impairment at least annually.  The statement requires intangibles
that are separable from goodwill and that have a determinable
useful life to be amortized over the determinable useful life.
The provisions of this statement will become effective for PSB on
January 1, 2002.

     On January 1, 2002, PSB will recognize the unamortized
portion of negative goodwill associated with its acquisition of
Jade Financial Corp. as the cumulative effect of a change in
accounting principle.  On that date, the negative goodwill is
expected to approximate $2.1 million. Also, beginning January 1,
2002, the Bank will no longer recognize income associated with
the amortization of the negative goodwill, which is expected to
approximate $108,000 in 2001 and was zero for 2000.

Note 5.  Securities

     The Bank divides its securities portfolio into two segments:
(a) held-to-maturity and (b) available-for-sale.  Held-to-
maturity securities are accounted for at cost, adjusted for
amortization of premiums and accretion of discounts, using the
level-yield method, based on the Bank's intent and ability to
hold the securities until maturity.  Marketable securities
included in the available-for-sale category are accounted for at
fair value, with unrealized gains or losses, net of taxes, being
reflected as adjustments to equity.  The fair value of marketable
securities available-for-sale is determined from publicly quoted
market prices.  Securities available-for-sale that are not
readily marketable, which include Federal Reserve Bank stock, are
carried at cost which approximates liquidation value.  At the
time of purchase, the Bank makes a determination of whether or
not it will hold the securities to maturity, based upon an
evaluation of the probability of future events.  Securities that
the Bank believes may be involved in interest rate risk,
liquidity, or other asset/liability management decisions, which
might reasonably result in such securities not being held-to-
maturity, are classified as available-for-sale.  If securities
are sold, a gain or loss is determined by a specific
identification method and is reflected in the operating results
in the period the sale occurs.  Gains and losses realized on
sales of investment securities represent differences between the
net proceeds and carrying values determined by the specific
identification method.

Note 6.  Income Taxes

     PSB accounts for income taxes under the asset and liability
method.  Deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases.  Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be resolved or settled.  The effect on deferred taxes
of a change in tax rates is recognizable in income in the period
that includes the enactment date.

Note 7.  Acquisition of Jade Financial Corp.

     On June 29, 2001 PSB Bancorp, Inc acquired Jade Financial
Corp. and its wholly-owned subsidiary, IGA Federal Savings Bank,
in a cash transaction valued at approximately $24.1 million. The
acquisition was accounted for using the purchase method. On
June 29, 2001 each outstanding share of Jade Financial Corp.
common stock, other than those shares held by the Jade Financial
Corp. Employee Stock Ownership Plan (the "ESOP"), was
automatically converted into the right to receive a cash payment
equal to $13.55 per share. Those shares held by the ESOP were
converted into a right to receive, at the ESOP participant's
election, either a cash payment equal to $13.55 per share or the
number of shares of PSB common stock equal to an exchange ratio
of 2.745 shares of PSB common stock for each share of Jade
Financial Corp. common stock held by the ESOP and the ESOP
participants.

Note 8.  Pro Forma Results of Operations Reflecting the
         Acquisition of Jade Financial Corp.

     Pro forma results of operations for the six months ended
June 30, 2001 and June 30, 2000 as though PSB Bancorp, Inc. and
Jade Financial Corp. had been combined at the beginning of the
six month periods are as follows (in thousands):

                                   Six Months Ended June 30, 2001
                                       PSB     Jade    Combined

Net interest income                  $4,491   $3,330    $7,821
Net income                              990      736     1,726
Diluted EPS                             .22      .42       .39

                                   Six Months Ended June 30, 2000
                                       PSB     Jade    Combined

Net interest income                  $5,599   $3,634    $9,233
Net income                            1,345      452     1,797
Diluted EPS                             .28      .26       .38



Item 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

General

     The Bank's results of operations depend primarily on its net
interest income, which is the difference between interest income
on interest-earning assets, and interest expense on its interest-
bearing liabilities.  Its interest-earning assets consist
primarily of loans receivable and investment securities, while
its interest-bearing liabilities consist primarily of deposits
and borrowings.  The Bank's net income is also affected by its
provision for loan losses and its level of non-interest income as
well as its non-interest expense, such as salary and employee
benefits, occupancy costs and charges relating to non-performing
and other classified assets. The following discussion does not
include Jade Financial Corp. results of operations because the
acquisition was completed on June 29, 2001, and the Bank
determined that the inclusion of one day of Jade Financial Corp.
results of operations was immaterial to the results of operations
taken as a whole.

Net Income

     The Bank's net income totaled $437,000 and $591,000 for the
three months ended June 30, 2001 and 2000, respectively. PSB's
basic and diluted earnings per share for the three months ended
June 30, 2001 were $0.11 and $.0.10 respectively, compared to
$0.14 and $0.13 per share for the three months ended June 30,
2000, respectively.

     The Bank's net income totaled $990,000 and $1.3 million for
the six months ended June 30, 2001 and 2000, respectively. PSB's
basic and diluted earnings per share for the six months ended
June 30, 2001 were $0.25 and $.0.22 respectively, compared to
$0.31 and $0.28 per share for the six months ended June 30, 2000,
respectively. The decrease in earnings per share for both the
three and six month periods ended June 30, 2001 reflects a
narrowing of the net interest margin that was caused by a rapid
decrease in the overall interest rate environment.  Additionally,
the Bank's decision to utilize short term higher interest rate
certificates of deposits, in an attempt to increase the Bank's
core deposits and provide opportunities to cross sell other
services to these depositors, was also a substantial factor in
the narrowing of the net interest margin.

Net Interest Income and Average Balances

     Net interest income is a key component of the Bank's
profitability and is managed in coordination with the Bank's
interest rate sensitivity position.  Net interest income for the
second quarter of 2001 was $2.2 million compared to $2.8 million,
or 21.43% less than the second quarter of 2000.  Net interest
income for the six month period ended June 30, 2001 was $4.5
million compared to $5.6 million, or 19.64% less than the same
period in 2000. The decrease in net interest income reflects a
narrowing in the net interest margin that was caused by a rapid
decrease in the general interest rate environment.  This general
decline resulted in a decrease of 118 and 99 basis points in
PSB's net interest margin for the three and six months ended
June 30, 2001, respectively.

     Overall, average total interest-earning assets provided a
yield of 7.62% for the three months ended June 30, 2001, compared
to 8.60% for the same period in 2000.  The average yield for the
three months ended June 30, 2001 decreased primarily due to a
significant decline in the average yield on our loan portfolio,
investment securities portfolio and our interest-earning
deposits. Additionally, because of market uncertainty, some of
our investment assets were liquidated and held in lower yielding
deposit accounts.  Average total loans of $171.5 million for the
three months ended June 30, 2001, provided a yield of 8.81% for
the period, compared to average total loans of $166.4 million for
the three months ended June 30, 2000, which provided a yield of
9.63% for the period.  The increase in average total loans was
primarily due to an increase in non-residential, SBA and student
loans.

     Average total interest-bearing liabilities increased from
$202.9 million to $217.9 million or 7.39% for the three months
ended June 30, 2001 and 2000. The average rate on total interest-
bearing liabilities increased 19 basis points from 4.91% for the
three months ended June 30, 2000 to 5.10% for the three months
ended June 30, 2001.  The change in total interest-bearing
liabilities was the result of an increase in higher rate-bearing
certificate of deposit accounts, due to the Bank's marketing
efforts to attract these core deposits as previously discussed.

     Overall, average total interest-earning assets provided a
yield of 7.82% for the six months ended June 30, 2001, compared
to 8.56% for the same period in 2000.  The average yield for the
six months ended June 30, 2001 decreased primarily due to a
decline in the average yields on our interest-earning deposits.
Average total loans of $165.6 million for the six months ended
June 30, 2001, provided a yield of 9.15% for the period, compared
to average total loans of $172.0 million for the six months ended
June 30, 2000 that provided a yield of 9.46% for the period. The
decrease in average total loans was primarily due to a decrease
in the average volume of the student loan program.

     Average total interest-bearing liabilities decreased from
$211.3 million to $207.2 million or 1.94% for the six months
ended June 30, 2001 and 2000.  The primary reason for the change
in total interest-bearing liabilities was a decrease in average
borrowings by the Bank.  The average rate on interest-bearing
liabilities for the six month period ending June 30, 2001
increased 55 basis points from 4.80% for the six months ended
June 30, 2000 to 5.35% for the six months ended June 30, 2001.



Average Balance Sheets and Rate/Yield Analysis

     Net interest income is effected by changes in both average
interest rates and average volumes of interest-earning assets and
interest-bearing liabilities.  The following tables present the
average daily balances of assets, liabilities and shareholders'
equity and the respective interest earned or paid on interest-
earning assets and interest-bearing liabilities, as well as
average rates for the period indicated (in thousands):

<table>
<caption>
                                                                      Three Months Ended June 30,
                                                  -------------------------------------------------------------
                                                                  2001                            2000
                                                  -----------------------------   -----------------------------
                                                              Interest                       Interest
                                                   Average    Income/    Yield/    Average    Income/    Yield/
                                                   Balance    Expense     Rate     Balance    Expense     Rate
                                                  ---------  ---------   ------   --------   ---------   ------

                                               <c>        <c>         <c>      <c>        <c>         <c>
ASSETS
Interest-earning assets:
  Interest-earning deposits                       $ 17,780     $  105     2.36%   $    981     $   16     6.52%
  Investment securities                             20,169        264     5.24%     31,564        478     6.06%
  Mortgage-backed securities                        50,276        798     6.35%     45,218        752     6.65%
  Net loans                                        171,497      3,778     8.81%    166,447      4,007     9.63%
                                                  --------     ------     ----    --------     ------     -----
    Total interest-earning assets                  259,722     $4,945     7.62%    244,210     $5,253     8.60%
                                                  ========     ======     ====    ========     ======     ====
Noninterest-earning assets                           9,340                          13,136
    Total assets                                  $269,062                        $257,346
                                                  ========                        ========

LIABILITIES
Interest-bearing liabilities:
  Now checking accounts                           $ 15,051     $   53     1.41%   $ 12,302     $   92     2.99%
  Money market accounts                             13,391        108     3.23%     11,606        108     3.72%
  Savings deposits                                  29,106        211     2.90%     29,217        210     2.88%
  Certificates                                     145,985      2,245     6.15%    111,813      1,501     5.37%
                                                  --------     ------    -----    --------     ------     ----
     Total deposits                                203,533      2,617     5.14%    164,938      1,911     4.63%
  Borrowed money                                    14,331        162     4.52%     38,005        582     6.13%
                                                  --------     ------    -----    --------     ------     ----
     Total interest-bearing liabilities            217,864      2,779     5.10%    202,943      2,493     4.91%
Non-interest-bearing liabilities                    13,928                         17,409
                                                  --------                       --------
     Total liabilities                             231,792                        220,352
Retained earnings or shareholders' equity           37,270                         36,994
     Total liabilities and retained earnings
       or shareholders' equity                    $269,062                       $257,346
                                                  ========                       ========
Net interest income                                           $ 2,166                          $2,760
                                                              =======                          ======
Interest rate spread                                                      2.52%                           3.69%
Net yield on interest-earning assets                                      3.34%                           4.52%
Ratio of interest-earning assets to
  interest-bearing liabilities                                            1.19x                           1.20x
</table>



<table>
<caption>
                                                                       Six Months Ended June 30,
                                                     -------------------------------------------------------------
                                                                  2001                            2000
                                                     -----------------------------   -----------------------------
                                                      Average   Interest/   Yield/    Average   Interest/   Yield/
                                                      Balance    Expense     Rate     Balance    Expense     Rate
                                                     ---------  ---------   ------   --------   ---------   ------

                                                  <c>        <c>         <c>      <c>        <c>         <c>
ASSETS
Interest-earning assets:
  Interest-earning deposits                          $ 20,027    $   314     3.14%   $  1,372    $    43     6.27%
  Investment securities                                23,317        650     5.58%     31,192        940     6.03%
  Mortgage-backed securities                           47,730      1,493     6.26%     44,807      1,549     6.91%
  Net loans                                           165,552      7,577     9.15%    172,034      8,141     9.46%
                                                     --------    -------     ----    --------     ------     ----
    Total interest-earning assets                     256,626    $10,034     7.82%    249,405    $10,673     8.56%
                                                     ========    =======     ====    ========    =======     ====
Noninterest-earning assets                              7,576                          15,362
    Total assets                                     $264,202                        $264,767
                                                     ========                        ========

LIABILITIES
Interest-bearing liabilities:
  Now checking accounts                              $ 15,337     $   106    1.38%   $ 12,312    $   126     2.05%
  Money market accounts                                12,156         206    3.39%     12,687        230     3.63%
  Savings deposits                                     28,987         416    2.87%     29,403        420     2.86%
  Certificates                                        136,788       4,463    6.53%    115,053      3,146     5.47%
                                                     --------     -------    ----    --------    -------     ----
     Total deposits                                   193,268       5,191    5.37%    169,455      3,922     4.63%
  Borrowed money                                       13,895         352    5.07%     41,884      1,152     5.50%
                                                     --------     -------    ----    --------    -------     -----
     Total interest-bearing liabilities               207,163       5,543    5.35%    211,339      5,074     4.80%
Non-interest-bearing liabilities                       20,198                          16,750
                                                     --------                        --------
     Total liabilities                                227,361                         228,089
Retained earnings or shareholders' equity              36,841                          36,678
     Total liabilities and retained earnings
       or shareholders' equity                       $264,202                        $264,767
                                                     ========                        ========
Net interest income                                               $ 4,491                        $ 5,599
                                                                  =======                        =======
Interest rate spread                                                         2.47%                           3.76%
Net yield on interest-earning assets                                         3.50%                           4.49%
Ratio of interest-earning assets to
  interest-bearing liabilities                                               1.24x                           1.18x
</table>



Provision for Loan Losses

     The provision for loan losses represents the charge against
earnings that is required to fund the allowance for loan losses.
The Bank determines the level of the allowance for loan losses
through a regular review of the loan portfolio.  Management's
evaluation of the adequacy of the allowance for loan losses is
based upon an examination of the portfolio as well as such
factors as declining trends, the volume of loan concentrations,
adverse situations that may affect the borrowers ability to pay,
prior loss experience within the portfolio, current economic
conditions and the results of the most recent regulatory
examinations.  The adequacy of the loan loss allowance is
reviewed monthly by the Board of Directors.  See "Asset Quality -
Allowance for Loan Losses." The Bank had no provision for loan
losses during the three and six months ended June 30, 2001
compared to $0 and $100,000 for the three and six months ended
June 30, 2000. Additionally, the Bank did not have any charge-
offs or recovery against the allowance for loan losses during
either the three or six month periods ended June 30, 2001.

Non-interest Income

     Non-interest income consists of gain on sale of loans, loan
fees, service charges, rental income and other income.  Non-
interest income increased  by $142,000, or 85.03%, to $309,000
for the three months ended June 30, 2001, from $167,000 for the
three months ended June 30, 2000 and for the six months ended
June 30, 2001.  Non-interest income increased by $256,000, or
79.01%, to $580,000 from $324,000. The increase for both the
three and six month periods ended June 30, 2001 was a result of
increases in service fees, return check fees, and the sale of
loans.

Non-interest Expense

     Non-interest expense principally consists of employees'
compensation and benefits, deposit insurance premiums and
premises and occupancy costs.  Non-interest expense decreased by
9.52%, from $2.1 million to $1.9 million for the three months
ended June 30, 2001 and for the six months ended June 30, 2001
non-interest expense decreased by 5.00%, to $3.8 million from
$4.0 million. The principal reason for the decrease in non-
interest expense was a decrease in salary and employee benefits.

Provision for Income Taxes

     Income tax provisions for the three and six month periods
ended June 30, 2001 were $61,000 and $136,000, respectively,
compared to $240,000 and $475,000, respectively, for the same
periods in 2000, This provision generally reflects the Bank's
pre-tax income in accordance with the principles of SFAS No. 109,
"Accounting for Income Taxes."

Liquidity and Interest Rate Sensitivity

     The maintenance of adequate liquidity and the mitigation of
interest rate risk is integral to the management of the Bank's
balance sheet. Liquidity represents the ability to meet potential
cash outflows resulting from deposit customers who need to
withdraw funds or borrowers who need available credit.  Interest
rate sensitivity focuses on the impact of fluctuating interest
rates and the re-pricing characteristics of rate sensitive assets
and liabilities on net interest income.

     The Bank's asset/liability management committee monitors the
level of short-term assets and liabilities to maintain an
appropriate balance between liquidity, risk and return.
Liquidity is derived from various sources which includes
increases in core deposits, sales of certificates of deposits,
the amortization and prepayment of loans and mortgage-backed
securities, maturities of investment securities and other short-
term investments.  The liquidity position of the Bank is also
strengthened by a $117 million credit facility with the Federal
Home Loan Bank ("FHLB").  Advances are secured by all FHLB stock
and qualifying mortgage loans. The Bank had $4.0 million in
outstanding borrowings from the FHLB as of June 30, 2001.

     Maximizing cash flow over time is crucial to the maintenance
of adequate liquidity.  The Bank's total cash flow is a product
of its operating activities, investing activities and financing
activities.  During the six months ended June 30, 2001, net cash
used by operating activities was $1.8 million, compared to net
cash provided by operating activities of $2.6 million for the
same period of 2000.  During the six months ended June 30, 2001,
net cash provided in investing activities was $19.0 million,
compared to net cash provided by investing activities of $18.3
million for the same period of 2000. Financing activities
provided net cash of $22.9 million during the six months ended
June 30, 2001, compared to $29.1 million in net cash used in
financing activities for the same period of 2000.  The net result
of these items was a $40.2 million increase in cash and cash
equivalents for the six months ended June 30, 2001, compared to a
$8.2 million decrease in cash and cash equivalents for the same
period of 2000.

     Interest rate sensitivity is closely related to liquidity
since each is directly affected by the maturity of assets and
liabilities.  Rate sensitivity also deals with exposure to
fluctuations in interest rates and its effect on net interest
income.  The primary function of the Bank's interest rate
sensitivity management is to reduce exposure to interest rate
risk through an appropriate balance between interest-earning
assets and interest-bearing liabilities.  The goal is to minimize
fluctuations in the net interest margin of the Bank due to
general changes in interest rates.

     The blending of fixed and floating rate loans and
investments to match the re-pricing and maturity characteristics
of the various funding sources is a continuous process in an
attempt to minimize any fluctuations in net interest income. The
composition of the balance sheet is designed to minimize any
significant fluctuation in net interest income and to maximize
liquidity.  Management believes that the accessibility to FHLB
borrowings will provide the flexibility to assist in keeping
fluctuations in net interest income under control and to maintain
an adequate liquidity position.

Capital Adequacy

     The Bank is required to maintain minimum ratios of Tier I
and total capital to total "risk weighted" assets and a minimum
Tier I leverage ratio, as defined by the banking regulators. The
Bank's liquidity is quantified through the use of a standard
liquidity ratio of liquid assets (cash and cash equivalents,
investment securities available-for-sale, mortgage-backed
securities available-for-sale and Federal Home Loan Bank stock)
to short-term borrowings plus deposits. At June 30, 2001, the
Bank was required to have a minimum Tier I and total capital
ratios of 4.0% and 8.0%, respectively, and a minimum Tier I
leverage ratio of 4.0%.  The Bank's actual Tier I and total
capital ratios at June 30, 2001, were 20.39% and 21.17%,
respectively, and the Bank's Tier I leverage ratio was 13.30%.
These ratios exceed the requirements for classification as a
"well capitalized" institution, the industry's highest capital
category.

    On June 30, 2001, the Bank was in compliance with regulatory
capital requirements as follows:

<table>
<caption>
                                   Well Capitalized   June 30,*   December 31,
                                        Ratios           2001         2000
                                   ----------------   ---------   ------------

                                <c>                <c>         <c>
Tier I Capital                                        $ 35,226      $ 34,183
Tier II Capital                                          1,349         1,349
                                                      --------      --------
Total Qualifying Capital                              $ 36,575      $ 35,532

Risk Adjusted Total Assets                             172,779      $146,793

Tier I Risk Based Capital Ratio          6.00%           20.39%        23.29%
Total Risk Based Capital Ratio          10.00%           21.17%        24.21%
Leverage Ratio                           5.00%           13.30%        13.21%
</table>

-  The above capital ratios are computed without the inclusion of
   IGA Federal Savings Bank capital.  The acquisition of Jade
   Financial Corp. occurred on June 29, 2001; however, First Penn
   Bank and IGA Federal Savings Bank did not merge until after
   the June 30, 2001 reporting date.

     Following are the pro forma capital ratios as if First Penn
Bank and IGA Federal Savings Bank had merged prior to the
June 30, 2001 reporting date:

                                 Well Capitalized     Pro Forma
                                       Ratios       June 30, 2001

Tier I Capital                                        $ 57,010
Tier II Capital                                          3,083
                                                      --------
Total Qualifying Capital                              $ 60,093

Risk Adjusted Total Assets                             312,499

Tier I Risk Based Capital Ratio          6.00%           11.90%
Total Risk Based Capital Ratio          10.00%           18.24%
Leverage Ratio                           5.00%           19.22%



FINANCIAL CONDITION

General

     The Bank's total assets increased $235.2 million or 92.31%
from $254.8 million at December 31, 2000 to $490.0 million at
June 30, 2001. The increase in assets was primarily due to the
acquisition of the assets of Jade Financial Corp. which
represented $210.1 million or 89.33% of the increase. The
increase in assets attributable solely to the operations of PSB
was $25.1 million or 10.67% of the increase. PSB assets (not
inclusive of Jade Financial Corp. assets acquired as a result of
the acquisition) increased $25.1 million or 9.85% from $254.8
million at December 31, 2000 to $279.9 million at June 30, 2001,
resulting from an increase in net loans and loans held for sale.

     At June 30, 2001 the Bank's net loan portfolio totaled
$313.8 million compared to $154.9 million at December 31, 2000.
The net loan portfolio includes $128.7 million of loans acquired
from Jade Financial Corp. The increase in the net loan portfolio
attributable solely to the Bank is $30.2 million or 19.00%. The
increase is primarily attributable to an increase in the volume
of non-residential, SBA and student loans as indicated in the
table below.

     The following tables summarize the loan portfolios of both
Jade Financial Corp. and the Bank by loan category and amount at
June 30, 2001 compared to December  31, 2000, respectively.  From
time to time, TransNational Mortgage Corp., a subsidiary of First
Penn Bank, has originated and sold mortgage loans to third party
investors within the Bank's financial reporting periods.
Similarly, student loans are frequently originated and sold
within the Bank's financial reporting periods.  Such mortgage and
student loans are not reflected in the financial tables and
financial statements pertaining to a particular period to the
extent that such loans were sold prior to any period end. The
loan categories correspond to the Bank's general classifications
(in thousands, except for percentage):

<table>
<caption>
                                              Jade                  PSB
                                           At June 30,          At June 30,
                                              2001                 2001
                                        Amount    Percent    Amount    Percent

                                    <c>        <c>       <c>        <c>
Real Estate Loans:
  One to four-family(1)                $ 78,214    59.90%   $ 66,405    35.58%
  Construction loans                          -        -%     24,045    12.88%
  Five or more family residence           1,020      .79%      2,425     1.30%
  Nonresidential                          4,024     3.08%     38,745    20.75%

Commercial loans                          3,476     2.66%     17,496     9.37%
SBA loans                                     -        -%     11,512     6.17%
Student loans                             1,288      .99%     18,392     9.85%
Consumer loans                           42,542    32.58%      7,659     4.10%
                                       --------   ------    --------   ------
     Total loans                       $130,564   100.00%   $186,679   100.00%
                                       ========   ======    ========   ======

Less:
  Unearned fees and discounts          $    120             $    244
  Undisbursed loan proceeds                   -                    -
  Allowance for loan losses               1,734                1,349
                                       --------             --------
  Net Loans                            $128,710             $185,086
                                       ========             ========
</table>

<table>
<caption>
                                                   At December 31,
                                                        2000
                                       Amount    Percent   Variance   % Change

                                   <c>        <c>       <c>        <c>
Real Estate Loans:
  One-to-four family(1)               $ 63,557    40.60%   $ 2,848      -4.48%
  Construction loans             -      23,328    14.90%       717       3.07%
  Five or more family residence          2,552     1.63%      (127)     -4.97%
  Nonresidential                        28,805    18.40%     9,940      34.50%

Commercial loans                        13,902     8.88%     3,594      25.85%
SBA loans                               11,029     7.04%       483       4.37%
Student loans                           11,288     7.21%     7,104     -62.93%
Consumer loans                           2,099     1.34%     5,560     264.88%
                                      --------   ------    -------     ------
     Total loans                      $156,560   100.00%   $30,119       4.32%
                                      ========   ======    =======     ======

Less:
  Unearned fees and discounts         $    275
  Undisbursed loan proceeds                  -
  Allowance for loan losses              1,349
                                      --------
  Net Loans                           $154,936
                                      ========
</table>

(1)  Includes loans held for sale



     Total investment securities (including mortgage-backed
securities) increased $21.1 million, or 28.79%, to $94.4 million
at June 30, 2001, from $73.3 million at December 31, 2000.
Without the effect of the addition of the $26.2 million of the
investment portfolio of Jade Financial Corp on June 30, 2001, PSB
Bancorp Inc. investment portfolio decreased $5.1 million or 6.96%
for the six month period ended June 30, 2001.

     Cash and cash equivalents, including interest-earning
deposits with banks, increased $40.2 million or 224.58% to $58.1
million at June 30, 2001, from $17.9 million at December 31,
2000. The primary change in cash and cash equivalents was the
acquisition of $40.2 million in cash and cash equivalents of Jade
Financial Corp.

     Total liabilities increased $232.9 million or 106.44% to
$451.7 million at June 30, 2001 from $218.8 million at December
31, 2000. The increase primarily represents the addition of
$186.4 million of liabilities of Jade Financial Corp. as a result
of the acquisition. Ignoring the effect of the acquisition of the
liabilities of Jade Financial Corp., the total liabilities of the
Bank increased $23.7 million or 10.83% to $242.5 million at
June 30, 2001 from $218.8 million at December 31, 2000. This
increase reflected an increase in the Bank's deposits due to the
aggressive pricing of the Bank's certificates of deposit and an
increase in other liabilities.

Asset Quality

Delinquent Loans

     When a borrower fails to make a required payment on a loan,
the Bank attempts to cure the deficiency by contacting the
borrower and seeking payment.  Contacts are generally made on the
15th day after a payment is due.  In most cases, deficiencies are
cured promptly.  If a delinquency extends beyond 30 days, the
loan and payment history is carefully reviewed, additional
notices are sent to the borrower and efforts are made to collect
the loan.  While the Bank generally prefers to work with
borrowers to resolve such problems, when the account becomes
90 days delinquent, the Bank does institute foreclosure or other
proceedings, as necessary, to minimize any potential loss.

Non-Performing Assets

    The Bank's level of non-performing assets increased
$1.1 million, or 26.83% to $5.2 million at June 30, 2001, from
$4.1 million at December  31, 2000. The amount of non-performing
assets attributable to Jade Financial Corp is immaterial. As a
matter of policy, the accrual of loan interest is discontinued if
management believes that, after considering economic and business
conditions and collection efforts, the borrower's financial
condition is such that collection of interest becomes doubtful.
This is normally done when a loan reaches 90 days delinquent.  At
this time, all accrued but unpaid interest is reversed.  There
are occasional exceptions if the loans are in the process of
collection and the loan is fully secured.

     The following table sets forth non-performing assets as of
June 30, 2001 and December  31, 2000 (dollars in thousands):

<table>
<caption>
                                                 At June 30,   At December 31,
                                                     2001*            2000

                                              <c>           <c>
Loans past due 90 days or more as to interest
  or principal and accruing interest               $    -          $    -
Nonaccrual loans                                    4,114           3,095
Loans restructured to provided a reduction or
  deferral of interest or principal                     -               -
                                                   ------          ------
Total nonperforming loans                           4,114           3,095
Real estate owned (REO)                             1,103           1,046
                                                   ------          ------
     Total nonperforming assets                    $5,217          $4,141
                                                   ======          ======

Nonperforming loans to total loans                   1.30%           1.98%
Nonperforming assets to total assets                 1.06%           1.63%
Allowance for loan losses to total loans             0.97%           0.86%
Allowance for loan losses to nonperforming
  loans                                             74.94%          43.59%
Allowance for loan losses to nonperforming
  assets                                            59.10%          32.58%
Net charge-offs as a percentage of total loans        .02%              -
</table>

*  The non-performing assets as of June 30, 2001 is inclusive of
   Jade Financial Corp.

Allowance for Loan Losses

     The provision for loan losses is an amount charged against
earnings to fund the allowance for possible future losses on
existing loans.  In order to determine the amount of the
provision for loan losses, the Bank conducts a monthly review of
the loan portfolio to evaluate overall credit quality.  In
establishing its allowance for loan losses, management considers
the size and risk exposure for each segment of the loan
portfolio, past loss experience, current indicators such as the
present levels and trends of delinquency rates and collateral
values, and the potential losses for future periods.  The
provisions are based on management's review of the economy,
interest rates, general market conditions, and in certain
instances, an estimate of net realizable value (or fair value) of
the collateral, as applicable, considering the current and
anticipated future operating environment.  These estimates are
particularly susceptible to changes that may result in a material
adjustment to the allowance for loan losses.  As adjustments
become identified, they are reported in earnings for the period
in which they become known.  Management believes that it makes an
informed judgment based upon available information.  The adequacy
of the allowance is reviewed monthly by the Board of Directors.

     It is the objective of the Bank's evaluation process to
establish the following components of the allowance for loan
losses:  a specific allocation for certain identified loans, a
general allocation for pools of loans based on risk rating, and a
general allocation for inherent loan portfolio losses.
Management performs current evaluations of its criticized and
classified loan portfolios and assigns specific reserves that
reflects the current risk to the Bank.  As a general rule,
special mention assets will have a minimum reserve of 5%,
substandard assets will have a minimum reserve of 10%, and
doubtful assets will have a minimum reserve of 50%.  A general
reserve allocation is applied for pools of loans based on risk
rating for all loans not specifically reserved for as described
previously.

     Based upon management's analysis, the Bank recorded no
provision for loan losses during the three and six month periods
ended June 30, 2001.  Provision for loan losses during the three
and six month periods ended June 30, 2000 were $0 and $100,000,
respectively

Quantitative and Qualitative Disclosures About Market Risk

     For information regarding the market risk of PSB's financial
instruments, see "Liquidity and Interest Rate Sensitivity" in the
MD&A.  PSB's principal market risk exposure is to interest rate
changes.



Part II.  OTHER INFORMATION

Item 1    Legal Proceedings
          None

Item 2    Changes in Securities
          None

Item 3    Defaults upon Senior Securities
          Not Applicable

Item 4    Submission of Matters to a Vote of Security Holders
          None

Item 5    Other Information.
          None

Item 6    Exhibits and Reports on Form 8-K
          None

Exhibit Index.

Exhibit No.     Document

    2.1         Agreement and Plan of Reorganization,
                dated as of March 19, 1999, between
                PSB Bancorp, Inc. and First Bank of
                Philadelphia. (incorporated herein by
                reference to Exhibit 2.1 of the S-4
                Registration Statement of PSB Bancorp,
                Inc. filed June 25, 1999).

    2.2         Agreement and Plan of Reorganization
                among PSB Bancorp, Inc., PSB Merger
                Sub, Inc. and Jade Financial Corp.
                (incorporated herein by reference to
                Exhibit 2.2 of the Registration
                Statement on Form S-4 of PSB Bancorp,
                Inc. filed January 16, 2001.)

    3.1         Articles of Incorporation of First
                Penn Bank (incorporated herein by
                reference to Exhibit 3.1 of the SB-2
                Registration Statement of PSB Bancorp,
                Inc. filed October 9, 1997).

    3.2         Bylaws of First Penn Bank
                (incorporated herein by reference to
                Exhibit 3.2 of the SB-2 Registration
                Statement of PSB Bancorp, Inc. filed
                October 9, 1997).

   10.1*        First Penn Bank's Retirement Plan
                (incorporated herein by reference to
                Exhibit 10.1 of the SB-2 Registration
                Statement of PSB Bancorp, Inc. filed
                October 9, 1997).

   10.2*        First Penn Bank's Cash or Deferred
                Profit Sharing Plan (incorporated
                herein by reference to Exhibit 10.2
                of the SB-2 Registration Statement of
                PSB Bancorp, Inc.  filed October 9,
                1997).

   10.3*        First Penn Bank's Profit Sharing Plan
                (incorporated herein by reference to
                Exhibit 10.3 of the SB-2 Registration
                Statement of PSB Bancorp, Inc filed
                October 9, 1997).

   10.4*        Employment Agreement with Vincent J.
                Fumo (incorporated herein by reference
                to Exhibit 7.1 of the SB-2
                Registration Statement of PSB Bancorp,
                Inc filed October 9, 1997).

   10.5*        Employment Agreement with Anthony
                DiSandro (incorporated herein by
                reference to Exhibit 7.2 of the SB-2
                Registration Statement of PSB Bancorp,
                Inc filed October 9, 1997).

   10.6*        First Penn Bank's Employee Stock
                Ownership Plan (incorporated herein by
                reference to Exhibit 10.4 of the SB-2
                Registration Statement of PSB Bancorp,
                Inc. filed on October 9, 1997).

   10.7         First Penn Bank's Stock Option Plan
                (incorporated herein by reference to
                Exhibit 10.9 of the S-4 Registration
                Statement of PSB Bancorp, Inc. filed
                June 25, 1999).

   10.8         First Penn Bank's Management
                Recognition Plan (incorporated herein
                by reference to Exhibit 10.10 of the
                S-4 Registration Statement of PSB
                Bancorp, Inc. filed June 25, 1999).

   10.9*        Employment Agreement with John J.
                O'Connell (incorporated herein by
                Reference to Exhibit 10.11 of the S-4
                Registration Statement of PSB Bancorp,
                Inc. filed January 16, 2001.)

   10.10*       Employment Agreement with Mario L.
                Incollingo, Jr. (incorporated herein by
                Reference to Exhibit 10.11 of the S-4
                Registration Statement of PSB Bancorp,
                Inc. filed January 16, 2001.)

   10.11*       Jade Financial Corp. Employee Stock
                Ownership Plan (filed herewith).

   21           Schedule of Subsidiaries (filed
                herewith).

____________
*  Denotes a management contract or compensatory plan or
   arrangement.

(b)  Reports on Form 8-K

     None



                           SIGNATURES

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

                              PSB BANCORP, INC


                              By:/s/Anthony DiSandro
                                 Anthony DiSandro,
                                 President, Chief Executive
                                   Officer & Director



                              By:/s/Karen Washington
                                 Karen Washington
                                 (Principal Financial Officer and
                                   Chief Accounting Officer)



August 14, 2001