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Exhibit 99.3

PRO FORMA VALUATION
MUTUAL HOLDING COMPANY
STOCK OFFERING

PSB HOLDINGS, INC.
PUTNAM, CONNECTICUT

DATED AS OF:
MAY 21, 2004

PREPARED BY:

RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209

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May 21, 2004

Board of Directors
Putnam Bancorp, MHC
PSB Holdings, Inc.
Putnam Savings Bank
40 Main Street
Putnam, Connecticut 06260

Members of the Boards of Directors:

At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the common
stock which is to be offered in connection with the plan of stock issuance
described below.

This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). Specifically, this
Appraisal has been prepared in accordance with the "Guidelines for Appraisal
Reports for the Valuation of Savings and Loan Associations Converting from
Mutual to Stock Form of Organization" as set forth by the OTS, and applicable
regulatory interpretations thereof.

DESCRIPTION OF REORGANIZATION AND PLAN OF STOCK ISSUANCE

In May 2003, Putnam Savings Bank ("Putnam Savings" or the "Bank")
reorganized into the two-tier mutual holding company structure. As part of the
reorganization, Putnam Savings formed PSB Holdings, Inc. ("PSB Holdings" or the
"Company") and Putnam Bancorp MHC, Inc. (the "MHC"), a Connecticut-chartered
mid-tier stock holding company and mutual holding company, respectively. Putnam
Savings became a Connecticut-chartered capital stock savings bank, and a
wholly-owned subsidiary of PSB Holdings, and PSB Holdings became the
wholly-owned subsidiary of the MHC.

On April 7, 2004, the Board of Directors of PSB Holdings adopted a plan of
stock issuance. Pursuant to the plan of stock issuance, PSB Holdings will issue
a majority of its common stock to the MHC and sell a minority of its common
stock to the public. Concurrent with the completion of the public stock
offering, the Company will retain up to 50% of the net stock proceeds. The MHC
will own a controlling interest in the Company of at least 51%, and the Company
will be the sole subsidiary of the MHC. The Company will own 100% of the Bank's
outstanding stock. The Company's initial activity will be ownership of its
subsidiary, Putnam Savings, investment of the net cash proceeds retained at the
holding company level and extending a loan to the employee stock ownership plan
("ESOP"). In connection with the public stock offering, Putnam Savings, PSB
Holdings and the MHC are converting to federal charters and will be chartered
and regulated by the OTS. Putnam Bancorp MHC, Inc. will change its name to
Putnam Bancorp, MHC.

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BOARDS OF DIRECTORS
MAY 21, 2004
PAGE 2

It is anticipated that the public shares will be offered in a subscription
offering to the Bank's Eligible Account Holders, Tax-Qualified Employee Plans
including the ESOP, Supplemental Eligible Account Holders and employees,
officers and directors of Putnam Savings. To the extent that shares remain
available for purchase after satisfaction of all subscriptions received in the
subscription offering, the shares may be offered for sale in a community
offering. The total shares offered for sale to the public will constitute a
minority interest of the Company's stock (49% or less).

The plan of stock issuance provides for the establishment of the Putnam
Savings Foundation (the "Foundation") as a non-stock, nonprofit Delaware
corporation. The Foundation will be funded with authorized but unissued shares
of common stock contributed by PSB Holdings in an amount equal to 4.0% of the
shares sold in the public stock offering. The purpose of the Foundation is to
enhance the relationship between Putnam Savings and the communities in which the
Bank operates and to enable the communities served by the Bank to share in the
Bank's long-term growth.

RP FINANCIAL, LC.

RP Financial, LC. ("RP Financial") is a financial consulting firm serving
the financial services industry nationwide that, among other things, specializes
in financial valuations and analyses of business enterprises and securities,
including the pro forma valuation for savings institutions converting from
mutual-to-stock form. The background and experience of RP Financial is detailed
in Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal and assisting in the preparation of the business plan to reflect the
public stock offering, we are independent of the Bank, the Company and the MHC
and the other parties engaged by the Bank to assist in the stock issuance
process.

VALUATION METHODOLOGY

In preparing our appraisal, we have reviewed the Bank's, the Company's and
MHC's regulatory applications, including the prospectus as filed with the OTS
and the Securities and Exchange Commission ("SEC"). We have conducted a
financial analysis of the Company and the Bank that has included a review of its
audited financial information for the fiscal years ended June 30, 1999 through
June 30, 2003, various unaudited information and internal financial reports
through March 31, 2004 and due diligence related discussions with the Bank's
management; Snyder & Haller, P.C., the Company's independent auditor; Luse
Gorman Pomerenk & Schick, P.C., the Company's counsel in connection with the
plan of stock issuance; and Keefe, Bruyette & Woods, Inc., the Company's
financial and marketing advisor in connection with the stock offering. All
conclusions set forth in the Appraisal were reached independently from such
discussions. In addition, where appropriate, we have considered information
based on other available published sources that we believe are reliable. While
we believe the information and data gathered from all these sources are
reliable, we cannot guarantee the accuracy and completeness of such information.

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BOARD OF DIRECTORS
MAY 21, 2004
PAGE 3

We have investigated the competitive environment within which the Company
operates and have assessed the Company's relative strengths and weaknesses. We
have kept abreast of the changing regulatory and legislative environment for
financial institutions and analyzed the potential impact on the Company and the
industry as a whole. We have analyzed the potential effects of the minority
stock offering on the Company's operating characteristics and financial
performance as they relate to the pro forma market value. We have reviewed the
economy in the Company's primary market area and have compared the Company's
financial performance and condition with publicly-traded thrifts in mutual
holding company form, as well as all publicly-traded thrifts. We have reviewed
market conditions for stocks in general and market conditions for thrift stocks
in particular, including the market for existing thrift issues and the market
for initial public offerings by thrifts. We have considered the market for the
stocks of all publicly-traded mutual holding companies. We have also considered
the expected market for the Company's public shares. We have excluded from such
analyses thrifts subject to announced or rumored acquisition, mutual holding
company institutions that have announced their intent to pursue second step
conversions, and/or those institutions that exhibit other unusual
characteristics.

Our Appraisal is based on the Company's representation that the information
contained in the regulatory applications and additional information furnished to
us by the Company, its independent auditors, legal counsel and other authorized
agents are truthful, accurate and complete. We did not independently verify the
financial statements and other information provided by the Company, its
independent auditors, legal counsel and other authorized agents nor did we
independently value the assets or liabilities of the Company. The valuation
considers the Company only as a going concern and should not be considered as an
indication of the Company's liquidation value.

Our appraised value is predicated on a continuation of the current
operating environment for the Bank, the MHC and the Company and for all thrifts
and their holding companies. Changes in the local, state and national economy,
the legislative and regulatory environment for financial institutions and mutual
holding companies, the stock market, interest rates, and other external forces
(such as natural disasters or significant world events) may occur from time to
time, often with great unpredictability, and may materially impact the value of
thrift stocks as a whole or the Company's value alone. It is our understanding
that there are no current plans for pursuing a second step conversion or for
selling control of the Company or the Bank following the offering. To the extent
that such factors can be foreseen, they have been factored into our analysis.

Pro forma market value is defined as the price at which the Company's
stock, immediately upon completion of the offering, would change hands between a
willing buyer and a willing seller, neither being under any compulsion to buy or
sell and both having reasonable knowledge of relevant facts.

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BOARDS OF DIRECTORS
MAY 21, 2004
PAGE 4

VALUATION CONCLUSION

It is our opinion that, as of May 21, 2004, the estimated aggregate pro
forma market value of the shares to be issued immediately following the
conversion, both shares issued publicly as well as to the MHC, equaled
$52,500,000 at the midpoint, equal to 5,250,000 shares offered at a per share
value of $10.00. Pursuant to conversion guidelines, the 15% offering range
indicates a minimum value of $44.625 million and a maximum value of $60.375
million. Based on the $10.00 per share offering price determined by the Board,
this valuation range equates to total shares outstanding of 4,462,500 at the
minimum and 6,037,500 at the maximum. In the event the appraised value is
subject to an increase, the aggregate pro forma market value may be increased up
to a supermaximum value of $69.431 million without a resolicitation. Based on
the $10.00 per share offering price, the supermaximum value would result in
total shares outstanding of 6,943,125. The Board of Directors has established a
public offering range such that the public ownership of the Company will
constitute a 44.5% ownership interest prior to the issuance of shares to the
Foundation. Accordingly, the offering to the public of the minority stock will
equal $19.858 million at the minimum, $23.363 million at the midpoint, $26.867
million at the maximum and $30.897 million at the supermaximum of the valuation
range. Based on the public offering range and inclusive of the shares issued to
the Foundation, equal to 4.0% of the offering shares, the public ownership of
shares will represent 46.28% of the total shares issued throughout the valuation
range.

LIMITING FACTORS AND CONSIDERATIONS

Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.

RP Financial's valuation was determined based on the financial condition
and operations of PSB Holdings as of March 31, 2004, the date of the financial
data included in the regulatory applications and prospectus.

RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.

The valuation will be updated as provided for in the conversion regulations
and guidelines. These updates will consider, among other things, any
developments or changes in the Company's financial performance and condition,
management policies, and current conditions in the equity markets for thrift
stocks. These updates may also consider changes in other external factors which
impact value including, but not limited to: various changes in the

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BOARD OF DIRECTORS
MAY 21, 2004
PAGE 5

legislative and regulatory environment, the stock market and the market for
thrift stocks, and interest rates. Should any such new developments or changes
be material, in our opinion, to the valuation of the shares, appropriate
adjustments to the estimated pro forma market value will be made. The reasons
for any such adjustments will be explained in the update at the date of the
release of the update.

Respectfully submitted,
RP FINANCIAL, LC.

/s/ William E. Pommerening

William E. Pommerening
Chief Executive Officer

/s/ Gregory E. Dunn

Gregory E. Dunn
Senior Vice President

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RP FINANCIAL, LC.

TABLE OF CONTENTS
PSB HOLDINGS, INC.
PUTNAM, CONNECTICUT

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PAGE
DESCRIPTION NUMBER
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CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS

Introduction 1.1
Plan of Stock Issuance 1.1
Strategic Overview 1.2
Balance Sheet Trends 1.5
Income and Expense Trends 1.9
Interest Rate Risk Management 1.13
Lending Activities and Strategy 1.14
Asset Quality 1.18
Funding Composition and Strategy 1.19
Subsidiaries and Other Activities 1.20
Legal Proceedings 1.20

CHAPTER TWO MARKET AREA

Introduction 2.1
Market Area Demographics 2.1
National Economic Factors 2.3
Local Economy 2.8
Market Area Deposit Characteristics and Competition 2.9

CHAPTER THREE PEER GROUP ANALYSIS

Peer Group Selection 3.1
Basis of Comparison 3.2
PSB Holdings' Peer Group 3.3
Financial Condition 3.6
Income and Expense Components 3.9
Loan Composition 3.12
Interest Rate Risk 3.14
Credit Risk 3.16
Summary 3.16
</Table>

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RP FINANCIAL, LC.

TABLE OF CONTENTS
PSB HOLDINGS, INC.
PUTNAM, CONNECTICUT
(CONTINUED)

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PAGE
DESCRIPTION NUMBER
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CHAPTER FOUR VALUATION ANALYSIS

Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.2
Valuation Analysis 4.3
1. Financial Condition 4.3
2. Profitability, Growth and Viability of Earnings 4.5
3. Asset Growth 4.7
4. Primary Market Area 4.7
5. Dividends 4.8
6. Liquidity of the Shares 4.9
7. Marketing of the Issue 4.10
A. The Public Market 4.10
B. The New Issue Market 4.14
C. The Acquisition Market 4.18
8. Management 4.18
9. Effect of Government Regulation and Regulatory Reform 4.19
Summary of Adjustments 4.19
Basis of Valuation - Fully-Converted Pricing Ratios 4.20
Valuation Approaches: Fully-Converted Basis 4.21
1. Price-to-Earnings ("P/E") 4.23
2. Price-to-Book ("P/B") 4.26
3. Price-to-Assets ("P/A") 4.26
Comparison to Recent Offerings 4.26
Valuation Conclusion 4.27
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RP FINANCIAL, LC.

LIST OF TABLES
PSB HOLDINGS, INC.
PUTNAM, CONNECTICUT

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TABLE
NUMBER DESCRIPTION PAGE
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1.1 Historical Balance Sheets 1.6
1.2 Historical Income Statements 1.10

2.1 Summary Demographic Data 2.2
2.2 Windham County Employment Sectors 2.8
2.3 Market Area Unemployment Trends 2.9
2.4 Deposit Summary 2.10
2.5 Market Area Deposit Competitors 2.11

3.1 Peer Group of Publicly-Traded Thrifts 3.5
3.2 Balance Sheet Composition and Growth Rates 3.7
3.3 Income as a Percent of Average Assets and Yields, Costs, Spreads 3.10
3.4 Loan Portfolio Composition Comparative Analysis 3.13
3.5 Interest Rate Risk Measures and Net Interest Income Volatility 3.15
3.6 Credit Risk Measures and Related Information 3.17

4.1 Market Area Unemployment Rates 4.8
4.2 Recent Conversion Pricing Characteristics 4.16
4.3 Market Pricing Comparatives 4.17
4.4 Calculation of Implied Per Share Data 4.22
4.5 MHC Institutions - Implied Pricing Ratios, Full Conversion Basis 4.25
4.6 Pricing Table: MHC Public Market Pricing 4.29
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RP FINANCIAL, LC.
PAGE 1.1

I. OVERVIEW AND FINANCIAL ANALYSIS

INTRODUCTION

PSB Holdings serves northeastern Connecticut through its main office in
Putnam, three branch offices located in the towns of Pomfret, Danielson and
Plainfield, and a loan center also located in Putnam. The markets served by the
Company's offices are all part of Windham County. A map of the Company's branch
offices is provided in Exhibit I-1. The Company's wholly-owned subsidiary,
Putnam Savings, is a member of the Federal Home Loan Bank ("FHLB") system, and
its deposits are insured up to the regulatory maximums by the Bank Insurance
Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"). At March 31,
2004, PSB Holdings had $252.7 million in assets, $197.3 million in deposits and
consolidated equity of $24.2 million equal to 9.6% of total assets. PSB
Holdings' audited financial statements are included by reference as Exhibit I-2.

PLAN OF STOCK ISSUANCE

On April 7, 2004, the Board of Directors of PSB Holdings adopted a plan to
stock issuance (the "plan"). Pursuant to the plan, PSB Holdings will issue a
majority of its common stock to the MHC and sell a minority of its common stock
to the public. Concurrent with the completion of the public stock offering, the
Company will retain up to 50.0% of the net stock proceeds.

The MHC will own a controlling interest in the Company of at least 51%, and
the Company will be the sole subsidiary of the MHC. The Company will own 100% of
the Bank's outstanding stock. The Company's initial activity will be ownership
of its subsidiary, Putnam Savings, investment of the net cash proceeds retained
at the holding company level (initially in short- and intermediate-term
investment securities) and extending a loan to the employee stock ownership plan
("ESOP"). Subsequent activities of the Company may include payment of regular or
special dividends, acquisitions of other financial institutions, acquisitions of
other financial service providers and/or stock repurchases.

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RP FINANCIAL, LC.
PAGE 1.2

In connection with the public stock offering, a charitable foundation will
be established (the "Foundation"). The Foundation will be funded with authorized
but unissued shares of common stock contributed by PSB Holdings in an amount
equal to 4.0% of the shares sold in the public stock offering. The purpose of
the Foundation is to enhance the relationship between Putnam Savings and the
communities in which the Bank operates and to enable the communities served by
the Bank to share in the Bank's long-term growth.

STRATEGIC OVERVIEW

PSB Holdings maintains a local community banking emphasis, with a primary
strategic objective of meeting the borrowing and savings needs of its local
customer base. Historically, PSB Holdings' operating strategy has been fairly
reflective of a traditional thrift operating strategy in which 1-4 family
residential mortgage loans and retail deposits have constituted the principal
components of the Company's assets and liabilities, respectively. Beyond 1-4
family permanent mortgage loans, the Company's loan portfolio includes
diversification in construction, commercial real estate, consumer, home equity
and commercial business loans. Pursuant to the Company's current strategic plan,
PSB Holdings will continue to emphasize 1-4 family lending, but will also
continue to pursuer greater diversification in which growth of commercial real
estate and commercial business loans will be emphasized.

Investments serve as a supplement to the Company's lending activities and
the investment portfolio is considered to be indicative of a low risk investment
philosophy. The investment portfolio is comprised primarily of mortgage-backed
securities, with the balance of the portfolio consisting of U.S. Government and
agency securities, corporate bonds, marketable equity securities, municipal
bonds and FHLB stock.

Retail deposits have consistently served as the primary interest-bearing
funding source for the Company. In recent years, growth of transaction and
savings accounts has constituted the primary source of deposit growth for the
Company. Factors contributing to growth of the Company's core deposits include
realizing growth in checking accounts as the result of developing commercial
account relationships and offering an attractive money market rate on accounts
with balances of $25,000 or more. The low interest rate environment is also
believed to

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RP FINANCIAL, LC.
PAGE 1.3

have contributed to the increase in transaction and savings accounts maintained
by the Company, as the general decline in CD rates has increased depositor
preference to hold funds in liquid transaction accounts. The Company utilizes
borrowings as a supplemental funding source to facilitate management of funding
costs and interest rate risk. FHLB advances constitute the Company's only source
of borrowings, which have fixed rate terms with laddered maturities. Following
the conversion, the Company may use additional borrowings to facilitate
leveraging of its higher capital position that will result from the stock
offering, in which borrowings would be utilized to fund purchases of investment
securities at a positive spread to improve earnings and return on equity. To the
extent additional borrowings are utilized by the Company, FHLB advances would
likely continue to be the principal source of such borrowings.

PSB Holdings' earnings base is largely dependent upon net interest income
and operating expense levels, although sources of non-interest operating have
become a more significant earnings contributor in recent years. Overall, PSB
Holdings' operating strategy has provided for a relatively low but stable net
interest margin. In particular, the Company's emphasis on managing the interest
rate risk and credit risk associated with the net interest margin has somewhat
limited the earnings potential that can be realized from the yield-cost spread.
Growth of non-interest operating income has been primarily realized through
increased fee income. Operating expenses represent the other major component of
the Company's earnings and, in recent years, operating expenses have in general
creased as a percent of average assets. Higher operating expenses have been
attributable to expansion of staff to support and manage the Company's growth
and diversification of products and services. Higher operating expenses have
also resulted from opening a fourth branch in the fiscal year ended June 30,
2000, as well as from growth of transaction and savings account deposits that
are more costly to service than time deposits.

The Company's business plan following the public stock offering is expected
to continue to focus on products and services which have facilitated PSB
Holdings' recent growth. Specifically, PSB Holdings will continue to be an
independent community-oriented financial institution with a commitment to local
real estate and non-mortgage financing with operations funded by retail
deposits, borrowings, equity capital and internal cash flows. In addition, the
Company will emphasize increasing the diversification of its loan portfolio
composition into

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RP FINANCIAL, LC.
PAGE 1.4

commercial real estate and commercial business loans, as well as expansion and
diversification of other products and services.

The Company's Board of Directors has elected to complete a public stock
offering to improve the competitive position of PSB Holdings. The capital
realized from the minority stock offering will increase the operating
flexibility and overall financial strength of PSB Holdings. The additional
capital realized from stock proceeds will increase liquidity to support funding
of future loan growth and other interest-earning assets. PSB Holdings' higher
capital position resulting from the infusion of stock proceeds will also serve
to reduce interest rate risk, through enhancing the Company's
interest-earning-assets-to-interest-bearing-liabilities ("IEA/IBL") ratio. The
additional funds realized from the stock offering will provide an alternative
funding source to deposits and borrowings in meeting the Company's future
funding needs, which may facilitate a reduction in PSB Holdings' funding costs.
Additionally, PSB Holdings' higher equity-to-assets ratio will also better
position the Company to take advantage of expansion opportunities as they arise.
Such expansion would most likely occur through the establishment or acquisition
of additional banking offices or customer facilities that would provide for
further penetration in the markets currently served by the Company or nearby
surrounding markets. The Company will also be bettered position to pursue growth
through acquisition of other financial service providers following the stock
offering, given its strengthened capital position. At this time, the Company has
no specific plans for expansion other than through establishing additional
branches. The projected use of proceeds are highlighted below.

- PSB HOLDINGS The Company is expected to retain up to 50% of the net
offering proceeds. At present, funds at the Company level, net of the
loan to the ESOP, are expected to be primarily invested initially into
short-term investment grade securities. Over time, the funds may be
utilized for various corporate purposes, possibly including
acquisitions, infusing additional equity into the Bank, repurchases of
common stock, and the payment of regular and/or special cash
dividends.

- PUTNAM SAVINGS. Approximately 50% of the net conversion proceeds will
be infused into the Bank. Cash proceeds (i.e., net proceeds less
deposits withdrawn to fund stock purchases) infused into the Bank are
anticipated to become part of general operating funds, and are
expected to be primarily utilized to fund growth of loans and
investments.

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RP FINANCIAL, LC.
PAGE 1.5

Overall, it is the Company's objective to pursue growth that will serve to
increase returns, while, at the same time, growth will not be pursued that could
potentially compromise the overall risk associated with PSB Holdings'
operations. The Company has acknowledged that it intends to operate with excess
capital in the near term, operating with a below market return on equity
("ROE"), until such time as the new capital can be leveraged in a safe and sound
manner over an extended period of time.

BALANCE SHEET TRENDS

Table 1.1 shows the Company's historical balance sheet data for the past
five and three-quarter fiscal years. From June 30, 1999 through March 31, 2004,
PSB Holdings' assets increased at an 11.1% annual rate. Asset growth was mostly
realized through growth of interest-earning assets, which was fairly evenly
disturbed between investments and loans. Asset growth has been funded with a
combination of deposits and borrowings, as well as retained earnings. A summary
of PSB Holdings' key operating ratios for the past five and three-quarter fiscal
years is presented in Exhibit I-3.

PSB Holdings' loans receivable portfolio increased at a 9.7% annual rate
from fiscal year end 1999 through March 31, 2004, with the portfolio exhibiting
positive growth throughout the period. The Company's lower loan growth rate
compared to its asset growth rate served to reduce the loans-to-assets ratio
from 55.7% at fiscal year end 1999 to 52.5% at March 31, 2004. PSB Holdings'
historical emphasis on 1-4 family lending is reflected in its loan portfolio
composition, as 75.4% of total loans receivable consisted of 1-4 family
permanent mortgage loans at March 31, 2004. Trends in the Company's loan
portfolio composition over the past five and three-quarter fiscal years show
that the concentration of 1-4 family permanent mortgage loans comprising total
loans declined from a high of 90.2% at fiscal year end 2000 to a low of 75.4% at
March 31, 2004. Over the past five and one-quarter years lending diversification
by the Company has emphasized origination of commercial real estate loans, with
the level of permanent commercial real estate loans comprising total loans
increasing from a low of 5.9% at fiscal year end 2000 to a high of 17.1% at
March 31, 20004. Construction loans represent the second largest area of lending
diversification for the Company, equaling 4.2% of the total loan portfolio at
March 31, 2004. Commercial business lending has also been an area of loan growth

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RP FINANCIAL, LC.
PAGE 1.7

for the Company, as the Company did not offering commercial business loans prior
to fiscal 2001. As of March 31, 2004, commercial business loans equaled 2.6% of
the total loan portfolio. Consumer lending, other than home equity loans which
are included in the 1-4 family loan portfolio, has not been an area of lending
emphasis for the Company, with such loans ranging from a high of 2.4% of total
loans at fiscal year end 1999 to a low of 0.8% of total loans at March 31, 2004.

The intent of the Company's investment policy is to provide adequate
liquidity and to generate a favorable return within the context of supporting
PSB Holdings' overall credit and interest rate risk objectives. It is
anticipated that proceeds retained at the holding company level will primarily
be invested into investments with short-term maturities. Over the past five and
three-quarter fiscal years, the Company's level of cash and investment
securities (inclusive of FHLB stock) ranged from a low of 41.2% of assets at
fiscal year end 2001 to a high of 47.6% of assets at fiscal year end 2003. As of
March 31, 2004, cash and investments maintained by the Company equaled 44.3% of
assets. Mortgage-backed securities comprise the most significant component of
the Company's investment portfolio, with the portfolio consisting substantially
of securities guaranteed or insured by a federal agency. The portfolio also
includes collateralized mortgage obligations ("CMOs") of private issuers
(approximately $1.9 million at March 31, 2004). Mortgage-backed securities are
generally purchased as a means to deploy excess liquidity at more favorable
yields than other investment alternatives that are consistent with PSB Holdings'
investment philosophy. As of March 31, 2004, the portfolio consisted mostly of
fixed rate mortgage pass through securities with blended maturities ranging
between three and fifteen years. The mortgage-backed securities portfolio
totaled $47.4 million at March 31, 2004 and was classified as available for
sale. As of March 31, 2004, the net unrealized gain on the mortgage-backed
securities portfolio equaled $495,000.

Beyond the Company's investment in mortgage-backed securities, investment
securities held by the Company at March 31, 2004 consisted of U.S. Government
and agency securities ($7.1 million), corporate bonds ($33.1 million),
marketable equity securities ($8.0 million), municipal bonds ($9.6 million) and
FHLB stock ($2.3 million). To facilitate management of interest rate risk, most
of the investment portfolio matures or reprices within five years and the entire
portfolio is maintained as available for sale. As of March 31, 2004, the net
unrealized gain

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RP FINANCIAL, LC.
PAGE 1.8

on the Company's investment portfolio, excluding mortgage-backed securities and
CMOs, equaled $2.1 million. The Company also maintained cash and cash
equivalents of $4.5 million as of March 31, 2004, which equaled 1.8% of assets.
Exhibit I-4 provides historical detail of the Company's investment portfolio.

The Company also maintains an investment in bank-owned life insurance
("BOLI") policies, which cover the lives of some of the Company's officers and
directors. The purpose of the investment is to provide funding for employee and
director benefit plans. The life insurance policies earn tax-exempt income
through cash value accumulation and death proceeds. As of March 31, 2004, the
cash surrender value of the Company's BOLI equaled $2.1 million.

Over the past five and three-quarter fiscal years, PSB Holdings' funding
needs have been substantially met through retail deposits, internal cash flows,
borrowings and retained earnings. From fiscal year end 1999 through March 31,
2004, the Company's deposits increased at an annual rate of 13.0%. Positive
deposit growth was sustained throughout the period covered in Table 1.1, with
the most significant growth realized during fiscal years 2001 through 2003. The
Company's stronger deposit growth relative to asset growth served to increase
the ratio of deposits-to-assets from 72.1% at fiscal year end 1999 to 78.1% at
March 31, 2004. Transaction and savings accounts equaled 61.3% of the Company's
total deposits at March 31, 2004, versus a comparable ratio of 41.7% at fiscal
year end 2001. Money market accounts have been the largest source of deposit
growth for the Company since fiscal year end 2001 and at March 31, 2004 money
market accounts comprised the largest component of the Company's transaction and
savings account deposits. As of March 31, 2004, money market deposits totaled
$47.0 million, equal to 37.1% of PSB Holdings' total transaction and savings
account deposits.

Borrowings serve as an alternative funding source for the Company to
address funding needs for growth and to support control of deposit costs.
Borrowings have become a less prominent funding source for the Company since
peaking at 24.1% of total assets at fiscal year end 2000. Comparatively, as of
March 31, 2004, the Company's borrowings-to-assets ratio equaled 11.6%. The
Company's use of borrowings has generally been limited to FHLB advances. The
Company held $29.3 million of FHLB advances at March 31, 2004, which have
laddered terms of up to ten years.

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PAGE 1.9

Since fiscal year end 1999, retention of earnings and the adjustment for
accumulated other comprehensive income translated into an annual capital growth
rate of 7.7% for the Company. Asset growth outpaced the Company's equity growth
rate, as PSB Holdings' equity-to-assets ratio declined from 11.1% at fiscal year
end 1999 to 9.6% percent at March 31, 2004. All of the Company's capital is
tangible capital, and the Bank maintained capital surpluses relative to all of
its regulatory capital requirements at March 31, 2004. The addition of stock
proceeds will serve to strengthen the Company's capital position and competitive
posture within its primary market area, as well as possibly support expansion
into other nearby markets if favorable growth opportunities are presented. At
the same time, as the result of the Company's relatively high pro forma capital
position, PSB Holdings' ROE can be expected to be below industry averages
following its conversion.

INCOME AND EXPENSE TRENDS

Table 1.2 shows the Company's historical income statements for the past
five fiscal years and for the twelve months ended March 31, 2004. The Company
reported positive earnings over the past five and three-quarter fiscal years,
ranging from a low of 0.18% of average assets during fiscal 2001 to a high of
0.83% of average assets during fiscal 2000. For the twelve months ended March
31, 2004, the Company's reported net income of $1.4 million equaled 0.58% of
average assets. The lower return posted in fiscal 2001 was in part attributable
to losses incurred from investment in derivative instruments, in which the
Company recorded an unrealized loss on stocks with expired options during fiscal
2001. The higher return posted in fiscal 2000 was supported by gains on the sale
of investments. Net interest income and operating expenses represent the primary
components of PSB Holdings' core earnings. Non-interest operating income is a
less a significant contributor to the Company's core earnings, but has been a
source of earnings growth. The amount of loan loss provisions established over
the past five and three-quarter fiscal years has varied, but in general loss
provisions have not been a significant factor in the Company's earnings. Gains
realized from the sale of fixed rate loans have increased in recent years,
reflecting an increase in the demand for longer term fixed rate loans, while
gains and loss on the sale of investments typically have not been a significant
factor in the Company's earnings.

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PAGE 1.11

PSB Holdings has maintained a relatively low net interest margin throughout
the period shown in Table 1.2, reflecting the Company's emphasis on managing
interest rate risk and credit risk at the expense of potentially realizing wider
yield-cost spreads in certain interest rate environments. Over the past five and
three-quarter years, the Company's net interest income to average assets ratio
ranged from a low of 2.65% during fiscal 2001 to a high of 3.06% during fiscal
1999. For the twelve months ended March 31, 2004, the Company's net interest
income to average assets ratio equaled 2.89%. The increase realized in the
Company's net interest income ratio since fiscal 2001 has been facilitated by a
widening of the yield-cost spread, which has resulted from the more immediate
impact that the decline in short-term interest rates has had on the Company's
funding costs relative to asset yields. Accordingly, the Company's net interest
spread increased from 2.21% in 2001 to 2.73% for the twelve months ended March
31, 2004. Over the same time period, the Company's interest income ratio
declined by 192 basis points, versus a more significant decline of 215 basis
points for the interest expense ratio. The Company's historical net interest
rate spreads and yields and costs are set forth in Exhibits I-3 and I-5.

Non-interest operating income has trended higher over the past five and
three-quarter fiscal years, increasing from a low of 0.26% of average assets
during fiscal 2000 to a high of 0.47% of average assets during the twelve months
ended March 31, 2004. Growth of non-interest operating income has been mostly
realized through increased service fees generated from transaction deposits and
other products and services offered to the Bank's retail customers. The increase
in non-interest operating income also reflects growth of commission income
generated through the sale of non-deposit investment products. The major portion
of the Company's non-interest operating income is derived through service fees,
which increased from $357,000 during fiscal 2000 to $843,000 for the twelve
months ended March 31, 2004.

Operating expenses represent the other major component of the Company's
earnings, ranging from a low of 2.28% of average assets during fiscal 1999 to a
high of 2.55% of average assets during the twelve months ended March 31, 2004.
The upward trend in the operating expense ratio reflects the impact of opening a
fourth branch in fiscal 2000, deposit growth consisting most of transaction and
savings accounts that are more cost to service than CDs, and expansion of staff
to facilitate implementation of a more diversified lending strategy,
particularly

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PAGE 1.12

in the area of commercial loan production. Upward pressure will be placed on the
Company's operating expense ratio following the stock offering, due to expenses
associated with operating as a publicly-traded company, including expenses
related to the stock benefit plans. At the same, the increase in capital
realized from the stock offering will increase the Company's capacity to
leverage operating expenses through pursuing a more aggressive growth strategy.

Overall, the general trends in the Company's net interest margin and
operating expense ratio since fiscal 1999 reflect a decline in core earnings, as
indicated by the Company's expense coverage ratio (net interest income divided
by operating expenses). PSB Holdings' expense coverage ratio equaled 1.34 times
in fiscal 1999, versus a comparable ratio of 1.13 times for the twelve months
ended March 31, 2004. The decline in the expense coverage ratio was the result
of both a decline in the net interest income ratio and an increase in the
operating expense ratio. Similarly, PSB Holdings' efficiency ratio (operating
expenses, net of amortization of intangibles, as a percent of the sum of net
interest income and other operating income) of 67.3% in fiscal 1999 was more
favorable than the 75.9% efficiency ratio maintained for the twelve months ended
March 31, 2004.

Over the past five and three-quarter fiscal years, maintenance of generally
favorable credit quality measures has served to limit the amount of loss
provisions established during the period. Loan loss provisions established by
the Company ranged from a low of 0.02% of average assets for the twelve months
ended March 31, 2004 to a high of 0.09% of average assets during fiscal 1999. As
of March 31, 2004, the Company maintained valuation allowances of $1.3 million,
equal to 0.96% of net loans receivable and 169.9% of non-accruing loans. Exhibit
I-6 sets forth the Company's loan loss allowance activity during the past five
and three-quarter fiscal years.

The Company records gains on the sale of loans from the sale of fixed rate
loan originations to the secondary market. Most loans are sold with servicing
retained. Gains realized from the sale of loans were a larger source of earnings
in fiscal 2003, as historically low mortgage rates supported a significant
increase in the Company's lending volume for longer term 1-4 family fixed rate
loans. Gains on the sale of loans equaled 0.13% of average assets in fiscal 2003
and then declined to 0.05% of average assets during the twelve months ended
March 31,

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RP FINANCIAL, LC.
PAGE 1.13

2004. The Company recorded gains and losses from the sale of investment
securities throughout past five and three-quarter fiscal years, reflecting
ongoing management of the investment portfolio for purposes of enhancing returns
and managing interest rate risk. With the exception of fiscal 2000, gains and
losses from the sale of investments have not been a significant factor in the
Company's earnings. During fiscal 2000, gains realized from the sale of
investments equaled $481,000 or 0.30% of average assets. The gains and losses
realized from the sale of investment securities are viewed as non-recurring
income items, while gains generated from the sale of fixed rate loan
originations have been an ongoing activity for the Company particularly in the
prevailing low interest rate environment. However, gains realized through
secondary market activities are subject to a certain degree of volatility as
well, given the dependence of such gains on the interest rate environment and
resulting demand for longer term fixed rate loans.

During fiscal years 2000 through 2002, the Company engaged in sale of
covered options for the purpose of generating income. The Company's investment
in derivative instruments provided income equal to 0.11% of average assets
during fiscal 2000, while losses equal to 0.20% of average assets and 0.03% of
average were recognized from the Company's investment in derivative instruments
during fiscal years 2001 and 2002, respectively. The program was discontinued on
December 31, 2001. The Company's earnings were negatively impacted by one time
expenses recorded in fiscal 1999 and fiscal 2001. The one time expense recorded
in fiscal 1999 was a legal settlement expense equal to 0.12% of average assets
and the one time expense recorded in fiscal 2001 was the cumulative effect of a
change in accounting principle in accounting for derivative instruments equal to
0.08% of average assets.

The Company's effective tax equaled 28.9% for the twelve months ended March
31, 2004, which was less than the effective statutory rate as the result of tax
exempt income and dividends earned on certain investments that are subject to a
lower effective tax rate. As set forth in the prospectus, the Company's
effective statutory tax rate equals 39.9%.

INTEREST RATE RISK MANAGEMENT

The Company's balance sheet is liability-sensitive in the short-term (less
than one year) and, thus, the net interest margin will typically be adversely
affected during periods of rising and

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PAGE 1.14

higher interest rates. As of March 31, 2004, the Company's net portfolio value
("NPV") under a 200 basis point instantaneous and sustained rise in interest
rates reflected a decline of 3.9% (see Exhibit I-7).

The Company pursues a number of strategies to manage interest rate risk,
particularly with respect to seeking to limit the repricing mismatch between
interest rate sensitive assets and liabilities. The Company manages interest
rate risk from the asset side of the balance sheet through selling originations
of 1-4 family fixed rate loans with 30-year terms and monthly payments,
maintaining investments as available for sale, emphasizing investments that
mature or reprice in less than five years and diversifying into other types of
lending beyond 1-4 family permanent mortgage loans which consists primarily of
short-term and adjustable rate loans. As of June 30, 2003, of the Company's
total loans due after June 30, 2004, ARM loans comprised 20.2% of those loans
(see Exhibit I-8). On the liability side of the balance sheet, management of
interest rate risk has been pursued through utilizing fixed rate FHLB advances
with laddered maturities out to ten years and emphasizing growth of lower cost
and less interest rate sensitive transaction and savings accounts. Transaction
and savings accounts comprised 61.3% of the Company's deposits at March 31,
2004.

The infusion of stock proceeds will serve to further limit the Company's
interest rate risk exposure, as most of the net proceeds will be redeployed into
interest-earning assets and the increase in the Company's capital will lessen
the proportion of interest rate sensitive liabilities funding assets.

LENDING ACTIVITIES AND STRATEGY

PSB Holdings' lending activities have traditionally emphasized 1-4 family
permanent mortgage loans and such loans continue to comprise the largest
component of the Company's loan portfolio. Beyond 1-4 family loans, lending
diversification by the Company has emphasized commercial real estate, home
equity, construction, land and commercial business loans. To a lesser extent,
the Company's lending activities include consumer loans. Going forward, the
Company's lending strategy is to pursue further diversification of the loan
portfolio, whereby growth of commercial real estate and commercial business
loans will be emphasized.

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PAGE 1.15

However, the origination of 1-4 family permanent mortgage loans is expected to
remain as the Company's most prominent lending activity. It is anticipated that
growth of the 1- 4 family portfolio will be slowed somewhat by the sale of a
portion of the fixed rate originations, thereby providing for a gradual shift in
the Company's loan portfolio composition towards a higher concentration of
commercial real estate and commercial business loans. Exhibit I-9 provides
historical detail of PSB Holdings' loan portfolio composition over the past five
and three-quarter fiscal years and Exhibit I-10 provides the contractual
maturity of the Company's loan portfolio by loan type as of June 30, 2003.

PSB Holdings' originates both fixed rate and adjustable rate 1-4 family
permanent mortgage loans. The Company's current practice is to sell originations
of conforming fixed rate 30-year monthly payment loans and to hold originations
of 30-year bi-weekly fixed rate loans, as well as to hold originations of fixed
rate loans with terms of 15 years or less and adjustable rate loans. The Company
retains the servicing on loans that are sold, with the exception of loans
insured by the Federal Housing Authority ("FHA"), Veterans Administration
("VA"), Connecticut Housing Finance Authority ("CHFA") and USDA Rural Housing
loans. In the current interest rate environment, most of the Company's 1-4
family lending volume consists of fixed rate loans. ARM loans offered by the
Company include loans with repricing terms of one, three, five, seven or ten
years and are indexed to U.S. Treasury notes of comparable maturities as the
repricing term. Initial rates on ARM loans are typically discounted from the
fully-indexed rate. After the initial repricing period, ARM loans convert to a
one-year ARM loan for the balance of the mortgage term. The Company typically
requires a loan-to-value ("LTV") ratio of 80.0% or less for 1-4 family loans,
but will lend up to a 95.0% LTV ratio with private mortgage insurance ("PMI").
The substantial portion of the Company's 1-4 family permanent mortgage loans are
underwritten to secondary market standards specified by Fannie Mae.

The Company offers fixed-term home improvement loans, as well as variable
rate home equity lines of credit ("HELOCs") in its primary market area. Fixed
term home improvement loans are offered up to a LTV ratio of 100.0% inclusive of
other liens on the property, while HELOCs are offered up to a 90.0% LTV ratio
inclusive of other liens on the property. Fixed term home improvements loans are
offered for terms of up to ten years. HELOCS with LTV ratios of 80.0% or less
have a maximum draw period of ten years followed by a ten year

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RP FINANCIAL, LC.
PAGE 1.16

repayment term. HELOCs with LTV ratios above 80.0% have a maximum draw period of
five years followed by a ten year repayment term.

The residential mortgage loan portfolio includes land loans that are
extended to finance lots that will be used for residential development. Land
development loans generally require a loan-to-value ("LTV") ratio of 75.0% or
less and are offered as fixed rate loans with a maximum term of 15 years. As of
March 31, 2004, the Company's portfolio of residential mortgage loans, including
home equity loans and residential land loans, totaled $102.4 million or 75.4% of
total loans outstanding.

Construction loans originated by the Company consist mostly of loans to
finance the construction of 1-4 family residences and, to a lesser extent,
financing for the construction of multi-family and commercial properties.
Construction loans extended for 1-4 family properties are typically for the
construction of pre-sold homes. In addition, the Company makes construction
loans to home builders on a speculative basis, but such loans are typically
limited to one loan per builder and do not constitute a significant part of the
Company's construction lending activities. Construction/permanent loans are
offered on comparable terms as 1-4 family permanent mortgage loan rates and
require payment of interest only during the construction period. The Company
will originate construction/permanent loans up to a LTV ratio of 95.0% for
properties with completed values of $150,000 or less and up to a LTV ratio of
90.0% for properties with completed values greater than $150,000. Commercial
real estate and multi-family construction loans are generally originated as
construction/permanent loans and are subject to the same underwriting criteria
as required for permanent mortgage loans, as well as submission of completed
plans, specifications and cost estimates related to the proposed construction.
Loans for the construction of commercial real estate and multi-family loans are
extended up to a LTV ratio of 80.0% based on the lesser of the appraised value
of the property or cost of construction. As of March 31, 2004, PSB Holdings'
outstanding balance of construction loans totaled $5.6 million or 4.2% of total
loans outstanding.

The balance of the mortgage loan portfolio consists of commercial real
estate loans, which are collateralized by properties in the Company's primary
market area. PSB Holdings' originates commercial real estate loans up to a
maximum LTV ratio of 80.0% and requires a minimum debt-coverage ratio of 1.25
times. Loan terms typically provide for up to 20-year

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RP FINANCIAL, LC.
PAGE 1.17

amortizations and are offered as fixed rate or adjustable rate loans with a
balloon provision of five years. Commercial real estate loans are generally
priced off of the comparable FHLB advance term plus a 300 basis point margin.
Properties securing the commercial real estate loan portfolio consist primarily
of retail properties, a hotel, industrial buildings and apartment buildings.
Growth of commercial real estate lending is currently an area of lending
emphasis for the Company. As of March 31, 2004, the Company's commercial real
estate loan portfolio totaled $23.2 million or 17.1% of the total loan
portfolio.

The Company's diversification into non-mortgage loans consists primarily of
commercial business loans and, to a lesser extent, consumer loans. The Company
offers commercial business loans and lines of credit to small and medium sized
companies in its market area. Commercial business loans offered by the Company
consist of floating rate loans indexed to the prime rate and fixed rate terms
loans for terms of up to seven years. The commercial business loan portfolio
consists primarily of secured loans, while the portfolio also includes a minor
amount of unsecured loans for purposes of financing expansion or providing
working capital for general business purposes. Commercial business lending is
being emphasized as a source of loan growth for the Company. As of March 31,
2004, PSB Holdings' outstanding balance of commercial business loans totaled
$3.5 million or 2.6% of total loans outstanding.

Consumer lending has been a minor area of lending diversification for the
Company, with the consumer loan portfolio consisting primarily of installment
loans extended directly to the end borrower. Consumer lending is expected to
remain as a limited area of loan diversification for the Company. As of March
31, 2004, the Company's consumer loan portfolio totaled $1.0 million or 0.8% of
total loans outstanding.

Exhibit I-11 provides a summary of the Company's lending activities over
the past three and three-quarter fiscal years. The Company's lending volume
increased significantly over the past three fiscal years, which was supported by
increased originations of residential mortgage loans. Originations of
residential mortgage loans increased from $26.6 million in fiscal 2001 to $68.7
million in fiscal 2003, as borrowers took advantage of historically low mortgage
rates to finance new home purchases or to refinance their existing mortgages.
During the past three fiscal years, originations of residential mortgage loans
accounted for 78.3% of the total loans originated by the Company. The Company's
implementation of a more diversified lending

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RP FINANCIAL, LC.
PAGE 1.18

strategy that has emphasized growth of commercial real estate and commercial
business loans is reflected by the upward trend in originations of both
commercial real estate loans and commercial business loans. Originations of
commercial real estate loans increased from $3.0 million during fiscal 2001 to
$11.2 million during the nine months ended March 31, 2004 and originations of
commercial business loans increased from $761,000 to $4.8 million over the same
time period. While the Company's lending volume increased notably in fiscal 2002
and 2003, loan growth was less significant than the pick-up in loan volume as
loan repayments and loan sales increased as well. For the nine months ended
March 31, 2004, the Company's residential lending volume declined slightly from
the comparable year ago period, but total lending volume was higher for most
recent nine month period due to increased originations of commercial real estate
loans, construction loans and commercial business loans.

ASSET QUALITY

The Company's 1-4 family lending emphasis has generally supported favorable
credit quality measures. Over the past five and three-quarter fiscal years, PSB
Holdings' balance of non-performing assets ranged from a low of 0.29% of assets
at fiscal year end 2001 to a high of 0.74% of assets at fiscal year end 1999.
The Company held $925,000 of non-performing assets at March 31, 2004, equal to
0.37% of assets. The higher ratio of non-performing assets maintained at fiscal
year end 1999 consisted mostly of non-accruing residential mortgage loans. As
shown in Exhibit I-12, the Company's balance of non-performing assets at March
31, 2004 consisted of $747,000 of non-accruing loans, $128,000 of accruing loans
under 90 days past due and $50,000 of accruing loans past due 90 days or more.

To track the Company's asset quality and the adequacy of valuation
allowances, PSB Holdings has established detailed asset classification policies
and procedures which are consistent with regulatory guidelines. Detailed asset
classifications are reviewed monthly by senior management and quarterly by the
Board. Additionally, the Company has retained an independent consulting firm to
perform a semi-annual review of the loan portfolio. Pursuant to these
procedures, when needed, the Company establishes additional valuation allowances
to cover anticipated losses in classified or non-classified assets. As of March
31, 2004, the

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PAGE 1.19

Company maintained valuation allowances of $1.3 million, equal to 0.96% of net
loans receivable and 137.2% percent of non-performing loans.

FUNDING COMPOSITION AND STRATEGY

Deposits have consistently accounted for the substantial portion of the
Company's interest-bearing funding composition and at March 31, 2004 deposits
equaled 87.1% of PSB Holdings' interest-bearing funding composition. Exhibit
I-13 sets forth the Company's deposit composition for the past three and
three-quarter fiscal years and Exhibit I-14 provides the interest rate and
maturity composition of the CD portfolio at March 31, 2004. Transaction and
savings account deposits constitute the largest portion of the Company's deposit
base, which in aggregate equaled $120.8 million or 61.2% of total deposits at
March 31, 2004. Factors contributing to growth of the Company's core deposits
include realizing growth in checking accounts as the result of developing
commercial account relationships and offering an attractive money market rate on
accounts with balances of $25,000 or more. The low interest rate environment is
also believed to have contributed to the increase in transaction and savings
accounts maintained by the Company, as the general decline in CD rates has
increased depositor preference to hold funds in liquid transaction accounts. CDs
comprise the balance of the Company's deposits, equaling $76.5 million or 38.8%
of total deposits at March 31, 2004. As of March 31, 2004, 46.9% of the
Company's CDs were scheduled to mature in one year or less. As of March 31,
2004, jumbo CDs (CD accounts with balances of $100,000 or more) amounted to
$25.0 million or 32.7% of total CDs. PSB Holdings does not maintain any brokered
CDs.

Borrowings serve as an alternative funding source for the Company to
facilitate management of funding costs and interest rate risk. Borrowings held
by the Company consist of FHLB advances with laddered terms of up to ten years.
As of March 31, 2004, the Company maintained $29.3 million of FHLB advances.
Exhibit I-15 provides further detail of PSB Holdings' borrowing activities
during the past three and three-quarter fiscal years. Following the stock
offering, the Company may add borrowings for purposes of leveraging the balance
sheet, in which borrowings would be utilized to fund purchases of investment
securities at a positive spread to improve ROE. To the extent borrowings are
added by the Company, FHLB advances would likely continue to be the primary
source of borrowings utilized.

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PAGE 1.20

SUBSIDIARIES AND OTHER ACTIVITIES

PSB Holdings' only subsidiary is Putnam Savings. Putnam Savings has two
subsidiaries, Windham North Properties, LLC and PSB Realty, LLC. Windham North
Properties, LLC is used to acquire title to selected properties on which the
Bank forecloses. As of March 31, 2004, Windham North Properties, LLC, did not
own any such properties. PBS Realty, LLC owns a single parcel of real estate
located immediately adjacent to Putnam Savings' main office. This real estate is
utilized as a loan center for the Bank and there are no outside tenants that
occupy the premises.

Putnam Savings also maintains a partnership with Infinex Investments, Inc.
("Infinex") to provide non-depository investment services and products to the
Bank's customers. Products and services offered through Infinex include
annuities, mutual funds, life insurance, long term care insurance, brokerage
accounts, stock and bond mutual funds, 529 College Savings Plans, and estate
planning.

LEGAL PROCEEDINGS

PSB Holdings is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by management
to be immaterial to the financial condition of the Company.

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PAGE 2.1

II. MARKET AREA

INTRODUCTION

The primary market area served by the Company, which is centrally located
between the cities of Hartford, Connecticut and Providence, Rhode Island, is
largely suburban and rural in nature. The Company's competitive environment
includes a large number of thrifts, commercial banks and other financial service
providers, some of which have a regional or national presence. Due to its small
size, the Company has more limited resources and a smaller market presence than
many of its competitors. The primary market area economy is fairly diversified,
with services, wholesale/retail trade and manufacturing constituting the basis
of the primary market area economy.

Future business and growth opportunities will be partially influenced by
economic and demographic characteristics of the markets served by the Company,
particularly the future growth and stability of the regional economy,
demographic growth trends, and the nature and intensity of the competitive
environment for financial institutions. These factors have been examined to help
determine the growth potential that exists for the Company and the relative
economic health of the Company's market area.

MARKET AREA DEMOGRAPHICS

Key demographic and economic indicators in the Company's market include
population, number of households and household/per capita income levels.
Demographic data for Windham County, as well as comparative data for Connecticut
and the U.S., is provided in Table 2.1. From 2000 through 2003, Windham County's
population increased at a 0.5% annual rate, which

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PAGE 2.3

was comparable to Connecticut's annual population growth rate of 0.4%. Both the
county and state population growth rates lagged the U.S. population growth rate
of 1.2%. Growth in the number of households paralleled the population growth
rates, with the U.S. household growth rate exceeding both the Connecticut and
Windham County household growth rates. Projected five year population and
household growth rates for Windham County reflect no change from the 2000 to
2003 growth rates. Similarly, the projected population and household rates for
Connecticut and the U.S. are consistent with their recent historical growth
rates.

Median household income in Windham County was slightly above median
household income for the U.S., but well below Connecticut's median household
income as certain regions of the state contain highly affluent markets
particularly with respect to markets in the southwestern region of the state.
Windham County's per capita income was lower than both the U.S. and Connecticut
per capita income measures, which is indicative of the market area's more rural
nature that provides for a lower cost of living than the more heavily populated
markets within the state. Household income distribution measures show that in
comparison to Windham County, both the U.S. and Connecticut maintain a higher
percentage of households with incomes of $100,000 or more. From 2000 to 2003,
household income and per capita income increased at a slower rate in Windham
County compared to the U.S. and Connecticut. Over the next five years, growth in
household income for Windham County is projected to remain below the comparable
Connecticut and U.S. growth rates.

NATIONAL ECONOMIC FACTORS

The future success of the Company's operations is partially dependent upon
various national and local economic trends. In assessing economic trends over
the past year, the beginning of the second quarter of 2003 provided mixed
economic signals. Initial jobless claims hit a one-year high in late-April, but
consumer sentiment also edged higher in April. Despite the improvement in
consumer sentiment, which was expected to support an increase in spending, the
outlook for job growth remained dim. Job losses continued in April for the third
month in a row and the national unemployment rate rose to 6.0% in April. The
manufacturing sector also continued to struggle in April, as industrial
production declined for the second straight month

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PAGE 2.4

and factories were operating at their lowest rate in 20 years. Comparatively,
economic data for May exhibited some positive signs, as a regional manufacturing
report showed factory expansion and May consumer sentiment improved from April.
Factory orders and retail sales also increased in May, but business investment
and the labor market remained weak. Despite growing expectations for a rebound
in the economy, the manufacturing sector continued to contract in June. Job
losses concentrated in the manufacturing sector pushed the nation's unemployment
rate to 6.4% in June, the highest level in more than nine years. The housing
market remained a bright spot in the economy during the second quarter, as low
mortgage rates continued to fuel strong demand for purchases of new and existing
homes.

The national economy showed signs of strengthening at the beginning of the
third quarter of 2003, as the U.S. economy grew at a stronger-than-expected 3.1%
annual rate in the second quarter. Second quarter growth was fueled by brisk
consumer and business spending, as well as a surge in defense expenditures.
Manufacturing activity increased for the second straight month in August and
retail sales were stronger in August as well. However, despite the apparent
improvement in the U.S. economy, the number of employed fell in August for the
seventh consecutive month. The August unemployment rate of 6.1% reflected a
slight decline from the July rate of 6.2%, which was attributable to contraction
in the size of the labor force as opposed to jobs being added. However,
employment data for September reflected a more promising outlook for the
economy, as non-farm payrolls rose for the first time in eight months. The
national unemployment rate for September remained at 6.1%, as the increase in
jobs was offset by a larger increase in new labor force entrants. Despite higher
mortgage rates, sales of new and existing homes were strong in September.

Third quarter GDP growth of 8.2% and data reflecting that the recovery was
starting to translate into gains in employment provided further evidence that
the national economy was gaining momentum. Job growth pushed the national
unemployment rate down to 6.0% in October and 5.9% in November. Employment gains
were aided by a pick-up in manufacturing activity, which was attributable to a
surge in new orders. Despite the pick-up in economic activity, inflation
remained low as core consumer prices fell in November for the first time since
1982. The December national unemployment rate unexpectedly dropped to a 14-month
low of 5.7%; however, the decline was attributable to workers exiting the labor
force rather than new

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RP FINANCIAL, LC.
PAGE 2.5

jobs beings created.

Economic data for January 2004 suggested that the economic recovery was
gaining traction, as evidenced by a strong increase in U.S. industrial
production for the month of January. Factory activity continued to rise in
January and non-manufacturing activity grew for a tenth consecutive month in
January 2004. The U.S. unemployment rate fell to a two-year low of 5.6% in
January, as the pace of job growth picked-up. However, consumer confidence
slipped in February, as hiring activity continued to lag the pace of the
economic expansion. Employment data for February showed that jobs were added but
well below expectations and the unemployment rate was unchanged at 5.6%. A
stronger than expected increase in U.S. industrial production in February and
initial jobless claims falling to their lowest level in three years in mid-March
provided further indications that the U.S. economy was improving. Housing starts
slowed in February for a second straight month, but demand for new homes
remained strong.

The March unemployment rate edged up to 5.7%, although job growth for the
month was the strongest in four years and for the first time in 44 months there
was no decline in manufacturing jobs. March economic data also showed
manufacturing activity accelerating, a strong increase in retail sales, a surge
in housing starts and new home sales, and a strong increase in durable-goods
orders. While first quarter GDP rose at a slower than expected 4.2% annual rate,
the economy in general showed signs of accelerating going into the second
quarter. Job growth in April exceeded expectations, as the economy created
288,000 new jobs and the national unemployment rate fell to 5.6% in April. Some
other economic data for April was not as strong, as higher interest rates slowed
new housing starts and sales of new homes. Orders for durable goods also
declined in April. However, fears of higher interest rates fueled a strong
increase in home resales during April.

In terms of interest rate trends over the past year, Treasury prices moved
lower at the beginning of the second quarter of 2003 as the bond market ignored
weak economic data and focused mainly on news of U.S. war successes in Iraq that
sparked a rally in stocks. Weak economic data provided support for Treasury
prices in mid-April, as the yield on the 10-year U.S. Treasury note stabilized
at slightly below 4.0% through the end of April. The Federal Reserve concluded
to leave short-term interest rates unchanged at its meeting in early-May.

<Page>

RP FINANCIAL, LC.
PAGE 2.6

However, in a major shift, the central bank signaled the possibility of a rate
cut later to ward off deflation, which served to boost Treasury prices following
the Federal Reserve meeting. Amid more signs of economic sluggishness and
growing concerns of deflation, Treasury yields plunged to their lowest levels in
45 years through the end of May and into early-June. Treasury yields declined
further in mid-June on news of a shake-up among Freddie Mac's top executives due
to accounting concerns and growing expectations that the Federal Reserve would
cut rates again. A smaller than hoped for 0.25% rate cut by the Federal Reserve
in late-June prompted a sell-off in Treasury issues at the close of the second
quarter.

The decline in bond prices became more pronounced at the beginning of the
third quarter of 2003, with the yield on the 10-year Treasury increasing from
3.56% on July 1, 2003 to 4.43% on July 31, 2003. Investors dumped bonds in favor
of stocks during July on growing optimism of an economic recovery that would
lead to an end of further rate cuts by the Federal Reserve. The Federal Reserve
kept its interest rate target at a 45-year low of 1.0% at its mid-August meeting
and predicted that rates would stay near that level for some time. Treasury
yields continued to climb higher through the balance of August, as the U.S. and
global economy showed signs of improving and the Dow Jones Industrial Average
rose to a 14-month high. However, weak employment data for August provided a
boost to the bond market in early-September. U.S. Treasury bonds continued to
strengthen through mid-September, as the Federal Reserve left interest rates
unchanged and indicated they would remain low, as government data showed
underlying inflation at a 37-year low. Weaker than expected economic data that
showed a decline in consumer confidence and a slow down in manufacturing
activity further contributed to the decline in Treasury yields at the close of
the third quarter.

The decline in interest rates was reversed in the fourth quarter, as data
indicating that the economic recovery was strengthening pushed Treasury yields
higher during October and early-November 2003. Indications that the Federal
Reserve would keep interest rates low and favorable inflation data served to
push interest rates lower in mid-November. Treasury yields moved up again in
early-December, largely on the basis of economic data that showed an increase in
manufacturing activity and the Federal Reserve's more upbeat assessment of the
economy. The Federal Reserve concluded its December meeting with no change in
the federal funds target rate of 1% and indicated that low interest rate levels
could be maintained for a

<Page>

RP FINANCIAL, LC.
PAGE 2.7

considerable period. Favorable inflation data supported a relatively stable
interest rate environment at the close of 2003.

Treasury bonds rallied at the beginning of 2004 on news of a weaker than
expected December employment report, which showed job creation far below
forecasted levels. In late-January, the Federal Reserve concluded to leave
short-term interest rates unchanged at a 45-year low of 1%, but dropped its
commitment to keep rates low for a considerable period of time. The change in
the Federal Reserve's wording pushed Treasury yields higher at the end of
January and into early-February. Following the spike-up in bond yields, interest
rates eased lower into mid-February as January employment data showed that job
growth remained less than robust. Interest rates stabilized during the second
half of February, with the yield on the 10-year Treasury note edging below 4.0%
at the end of the month. A weaker than expected employment report for February
sparked a rally in Treasury bonds in early-March, as the lack of meaningful job
growth raised expectations that the Federal Reserve would not increase rates
anytime soon. The Federal Reserve left rates unchanged at its mid-March meeting,
indicating that it could be patient about increasing rates because of low
inflation, unused factory capacity and limited jog growth. Treasury yields
dropped to an eight month low following the Federal Reserve meeting and then
eased higher through the end of March on indications that the economy was
getting stronger.

The upward trend in interest rates continued into the beginning of the
second quarter of 2004, as strong economic data increased expectations that the
Federal Reserve would increase interest rates. Bond yields were also pushed
higher by signs of inflation coming back into the economy, as the consumer price
index for March rose 0.5%. March economic data that showed a strengthening
economy pressured bond yields higher through the end of April. Robust job growth
in April, combined with rising oil prices, sharpened the sell-off in long-term
Treasurys during the first half of May, reflecting increased expectations that
the Federal Reserve would raise interest rates soon. Treasury yields eased lower
during mid-May, as investors shifted money to the relative safety of bonds in
reaction to India's election results and the assassination of the head of the
Iraqi Governing Council. As of May 21, 2004, one- and 10-year U.S. government
bonds were yielding 1.73% and 4.71%, respectively, versus comparable year ago
yields of 1.13% and 3.39%. Exhibit II-2 provides historical interest rate trends
from 1995

<Page>

RP FINANCIAL, LC.
PAGE 2.8

through May 21, 2004.

LOCAL ECONOMY

The Company's primary market area has a fairly diversified local economy,
with employment in services, wholesale/retail trade and manufacturing serving as
the basis of the local economy. As shown in Table 2.2, service jobs represent
the largest employer in Windham County, followed by employment in the
wholesale/retail and manufacturing sectors. Most sectors of the Windham County
economy added jobs from 1996 through 2000 and similar to national trends, the
service industry experienced the strongest job growth during the period.
However, manufacturing jobs, which tend to be higher paying jobs, contracted
slightly from 1996 to 2000.

Table 2.2
Windham County Employment Sectors(1)

<Table>
<Caption>
EMPLOYMENT SECTORS % OF LABOR FORCE
------------------ ----------------

Services 27.2%
Wholesale/Retail Trade 22.9
Manufacturing 19.0
Government 14.3
Construction 5.7
Finance, insurance and real estate 4.6
Other 6.3
-----
100.0%
</Table>

(1) As of 2000.

Source: Regional Economic Information System Bureau of Economic Analysis.

Comparative unemployment rates for Windham County, as well as for the U.S.
and Connecticut, are shown in Table 2.3. Windham County's March 2004
unemployment rate of 6.0% was higher than the comparable Connecticut
unemployment rate of 5.2% and equal to the national unemployment rate.
Consistent with the U.S. and Connecticut unemployment trends, Windham County's
March 2004 unemployment rate was lower compared to the year ago rate of 6.9%.

<Page>

RP FINANCIAL, LC.
PAGE 2.9

Table 2.3
Unemployment Trends(1)

<Table>
<Caption>
MARCH 2003 MARCH 2004
REGION UNEMPLOYMENT UNEMPLOYMENT
------ ------------ --------------

United States 6.2% 6.0%
Connecticut 5.9 5.2
Windham County 6.9 6.0
</Table>

(1) Unemployment rates have not been seasonally adjusted.

Source: U.S. Bureau of Labor Statistics.

MARKET AREA DEPOSIT CHARACTERISTICS AND COMPETITION

The Company's retail deposit base is closely tied to the economic fortunes
of Windham County and, in particular, the areas of the county that are nearby to
one of PSB Holdings' four branches. Table 2.4 displays deposit market trends
from June 30, 2000 through June 30, 2003 for PSB Holdings, as well as for all
commercial bank and savings institution branches located in Windham County and
the State of Connecticut. The data indicates that bank and thrift deposits in
Windham County increased at a 9.9% annual rate from June 30, 2000 through June
30, 2003, which exceeded the 6.1% deposit growth rate posted by all Connecticut
banks and thrifts. Consistent with the state of Connecticut, savings
institutions maintained a larger market share of deposits than commercial banks
in Windham County. The larger deposit market share maintained by savings
institutions was supported by their larger branch presence, as savings
institution branches accounted for 58% of the total branches in Connecticut and
60% of the total branches in Windham County. During the period covered in Table
2.4, savings institutions experienced a decline in deposit market share in both
Windham County and the state of Connecticut, reflecting a decline in savings
institution branches in both the county and the state. Comparatively, commercial
banks added branches in both Windham County and Connecticut during the three
year period.

The Company's $192.3 million of deposits at June 30, 2003 represented a
15.1% market share of the Windham County thrift and bank deposits. PSB Holdings'
deposits increased at a 20.1% annual rate from June 30, 2000 through June 30,
2003, which served to increase its

<Page>

RP FINANCIAL, LC.
PAGE 2.11

market share of Windham County deposits from 10.5% at June 30, 2000 to
15.1% at June 30, 2003. PSB Holdings' stronger deposit growth rate was
facilitated by the opening of its fourth branch office during the three year
period covered in Table 2.4.

The Company faces notable competition in both deposit gathering and lending
activities, including direct competition with several financial institutions
that primarily have a local or regional presence. Securities firms, credit
unions and mutual funds also represent major sources of competition in raising
deposits. In many cases, these competitors are also seeking to provide some or
all of the community-oriented services as PSB Holdings'. With regard to lending
competition, the Company encounters the most significant competition from the
same institutions providing deposit services. In addition, the Company competes
with mortgage companies, independent mortgage brokers, and credit unions in
originating mortgage loans. Table 2.5 lists the Company's largest competitors in
Windham County, based on deposit market share as noted parenthetically. As of
June 30, 2003, the Company maintained a 15.1% market share of deposits in
Windham County, which represented the 3rd largest market share of deposits in
the county.

Table 2.5
PSB Holdings
Market Area Deposit Competitors

<Table>
<Caption>
LOCATION NAME
-------- ----

Windham County SI Bancorp (17.3%)
Bank of America Corp. (16.0%)
Citizens National Bancorp (11.7%)
PSB Holdings (15.1%) - Rank of 3
</Table>

Sources: SNL Financial and FDIC.

<Page>

RP FINANCIAL, LC.
PAGE 3.1

III. PEER GROUP ANALYSIS

This chapter presents an analysis of PSB Holdings' operations versus a
group of comparable companies (the "Peer Group") selected from the universe of
all publicly-traded savings institutions. The primary basis of the pro forma
market valuation of PSB Holdings is provided by these public companies. Factors
affecting the Company's pro forma market value such as financial condition,
credit risk, interest rate risk, and recent operating results can be readily
assessed in relation to the Peer Group. Current market pricing of the Peer
Group, subject to appropriate adjustments to account for differences between PSB
Holdings and the Peer Group, will then be used as a basis for the valuation of
PSB Holdings' to-be-issued common stock.

PEER GROUP SELECTION

The mutual holding company form of ownership has been in existence in its
present form since 1991. As of the date of this appraisal, there were
approximately 20 publicly-traded institutions operating as subsidiaries of MHCs.
We believe there are a number of characteristics of MHC shares that make them
different from the shares of fully-converted companies. These factors include:
(1) lower aftermarket liquidity in the MHC shares since less than 50% of the
shares are available for trading; (2) guaranteed minority ownership interest,
with no opportunity of exercising voting control of the institution in the MHC
form of organization; (3) the potential impact of "second-step" conversions on
the pricing of public MHC institutions; (4) the regulatory policies regarding
the dividend waiver by MHC institutions; and (5) most MHCs have formed mid-tier
holding companies, facilitating the ability for stock repurchases, thus
improving the liquidity of the stock on an interim basis. We believe that each
of these factors has an impact on the pricing of the shares of MHC institutions,
and that such factors are not reflected in the pricing of fully-converted public
companies.

Given the unique characteristics of the MHC form of ownership, RP Financial
concluded that the appropriate Peer Group for PSB Holdings' valuation should be
comprised of subsidiary institutions of mutual holding companies. The selection
of publicly-traded mutual holding companies for the Company's Peer Group is
consistent with the regulatory guidelines and other recently completed MHC
transactions. Further, the Peer Group should be comprised of only

<Page>

RP FINANCIAL, LC.
PAGE 3.2

those MHC institutions whose common stock is either listed on a national
exchange or is NASDAQ listed, since the market for companies trading in this
fashion is regular and reported. We believe non-listed MHC institutions are
inappropriate for the Peer Group, since the trading activity for thinly-traded
stocks is typically highly irregular in terms of frequency and price and may not
be a reliable indicator of market value. We have excluded from the Peer Group
those public MHC institutions that are currently pursuing a "second-step"
conversion and/or companies whose market prices appear to be distorted by
speculative factors or unusual operating conditions. MHCs which have recently
completed a minority stock offering have been excluded as well, due to the lack
of a seasoned trading history and insufficient quarterly financial data that
includes the impact of the offering proceeds. The universe of all
publicly-traded institutions is included as Exhibit III-1.

BASIS OF COMPARISON

This appraisal includes two sets of financial data and ratios for the Peer
Group institutions. The first set of financial data reflects the actual book
value, earnings, assets and operating results reported by the Peer Group
institutions in its public filings inclusive of the minority ownership interest
outstanding to the public. The second set of financial data, discussed at length
in the following chapter, places the Peer Group institutions on equal footing by
restating their financial data and pricing ratios on a "fully-converted" basis
through assuming the sale of the majority shares held by the MHCs in public
offerings based on their current trading prices and standard assumptions for a
thrift conversion offering. Throughout the appraisal, the adjusted figures will
be specifically identified as being on a "fully-converted" basis. Unless so
noted, the figures referred to in the appraisal will be actual financial data
reported by the Peer Group institutions.

Both sets of financial data have their specific use and applicability to
the appraisal. The actual financial data, as reported by the Peer Group
companies and reflective of the minority interest outstanding, will be used in
Chapter III to make financial comparisons between the Peer Group and the
Company. The differences between the Peer Group's reported financial data and
the financial data of PSB Holdings are not significant enough to distort the
conclusions of the

<Page>

RP FINANCIAL, LC.
PAGE 3.3

comparison (in fact, such differences are greater in a standard conversion
appraisal). The adjusted financial data (fully-converted basis) will be more
fully described and quantified in the pricing analysis discussed in Chapter IV.
The fully-converted pricing ratios are considered critical to the valuation
analysis in Chapter IV, because they place each Peer Group institution on a
fully-converted basis (making their pricing ratios comparable to the pro forma
valuation conclusion reached herein), eliminate distortion in pricing ratios
between Peer Group institutions that have sold different percentage ownership
interests to the public, and reflect the implied pricing ratios being placed on
the Peer Group institutions in the market today to reflect the unique trading
characteristics of publicly-traded MHC institutions.

PSB HOLDINGS' PEER GROUP

Under ideal circumstances, the Peer Group would be comprised of ten
publicly-traded Connecticut-based MHC institutions with capital, earnings,
credit quality and interest rate risk comparable to PSB Holdings. However, given
the limited number of publicly-traded institutions in the MHC form of ownership,
the selection criteria was necessarily broad-based and not confined to a
particular geographic market area. In light of the relatively small asset size
of the Company, the selection criteria used for the Peer Group was the ten
smallest publicly-traded MHCs in terms of asset size. The asset sizes of the
Peer Group companies ranged from $95 million to $795 million. The universe of
all publicly-traded MHC institutions, exclusive of institutions that have
announced second-step conversions, is included as Exhibit III-2 and Exhibit
III-3 provides summary demographic and deposit market share data for the primary
market areas served by each of the Peer Group companies.

Unlike the universe of fully-converted publicly-traded thrifts, which
includes approximately 203 companies, the universe of public MHC institutions is
small, thereby reducing the prospects of a highly comparable Peer Group.
Nonetheless, because the trading characteristics of public MHC institution
shares are significantly different from those of fully-converted companies,
public MHC institutions were the most appropriate group to consider as Peer
Group candidates for this valuation. Relying solely on full stock public
companies for the Peer Group would not capture the difference in current market
pricing for public MHC

<Page>

RP FINANCIAL, LC.
PAGE 3.4

institutions and thus could lead to distorted valuation conclusions. The federal
regulatory agencies have previously concurred with this selection procedure of
the Peer Group for MHC valuations. To account for differences between PSB
Holdings and the MHC Peer Group in reaching a valuation conclusion, it will be
necessary to make certain valuation adjustments. The following discussion
addresses financial similarities and differences between PSB Holdings Federal
and the Peer Group.

Table 3.1 on the following page lists key general characteristics of the
Peer Group companies. Although there are differences among several of the Peer
Group members, by and large they are well-capitalized and profitable
institutions and their decision to reorganize in MHC form suggests a commonality
of operating philosophy. Importantly, the trading prices of the Peer Group
companies reflect the unique operating and other characteristics of public MHC
institutions. While the Peer Group is not exactly comparable to PSB Holdings, we
believe such companies form a good basis for the valuation of PSB Holdings,
subject to certain valuation adjustments.

In aggregate, the Peer Group companies maintain a higher level of
capitalization relative to the universe of all public thrifts (12.41% of assets
versus 10.86% for the all public average), generate lower earnings on a return
on average assets basis (0.61% ROAA versus 0.84% for the all public average),
and generate a lower return on equity (4.93% ROE versus 9.10% for the all public
average). The summary table below underscores the key differences, particularly
in the average pricing ratios between full stock and MHC institutions (both as
reported and on a fully-converted basis).

<Table>
<Caption>
FULLY
PEER GROUP CONVERTED
ALL REPORTED BASIS
PUBLICLY-TRADED BASIS (PRO FORMA)
--------------- ---------- -----------

FINANCIAL CHARACTERISTICS (AVERAGES)
Assets ($Mil) 2,615 361 404
Equity/Assets (%) 10.86% 12.41% 22.61
Return on Assets (%) 0.84 0.61 0.66
Return on Equity (%) 9.10 4.93 2.94
</Table>

<Page>

RP FINANCIAL, LC.
PAGE 3.6

<Table>
<Caption>
FULLY
PEER GROUP CONVERTED
ALL REPORTED BASIS
PUBLICLY-TRADED BASIS (PRO FORMA)
--------------- ---------- -----------

PRICING RATIOS (AVERAGES)(1)
Price/Earnings (x) 17.29x 23.07x 25.37x
Price/Book (%) 152.21% 186.39% 95.38%
Price/Assets (%) 16.65 25.92 22.21
</Table>

(1) Based on market prices as of May 21, 2004.

The following sections present a comparison of PSB Holdings' financial
condition, income and expense trends, loan composition, interest rate risk and
credit risk versus the figures reported by the Peer Group. The conclusions drawn
from the comparative analysis are then factored into the valuation analysis
discussed in the final chapter.

FINANCIAL CONDITION

Table 3.2 shows comparative balance sheet measures for PSB Holdings and the
Peer Group. PSB Holdings' and the Peer Group's ratios reflect balances as of
March 31, 2004, unless otherwise indicated for the Peer Group companies. PSB
Holdings' net worth base of 9.6% was below the Peer Group's average net worth
ratio of 12.4%. However, the Bank's pro forma capital position will increase
with the addition of stock proceeds and will be comparable to or exceed the Peer
Group's ratio following the conversion. Tangible equity-to-assets ratios for the
Company and the Peer Group equaled 9.6% and 11.8%, respectively, as goodwill and
intangibles maintained by the Peer Group equaled 0.6% of assets. The increase in
PSB Holdings' pro forma capital position will be favorable from a risk
perspective and in terms of future earnings potential that could be realized
through leverage and lower funding costs. At the same time, the Company's higher
pro forma capitalization will also result in a relatively low return on equity.
Both Putnam Savings' and the Peer Group's capital ratios reflected capital
surpluses with respect to the regulatory capital requirements, with the Peer
Group's ratios currently exceeding the Bank's ratios. On a pro forma basis, the
Bank's regulatory surpluses will likely be comparable to or more significant
than indicated for the Peer Group.

<Page>

RP FINANCIAL, LC.
PAGE 3.8

The interest-earning asset compositions for the Company and the Peer Group
were somewhat similar, with loans constituting the bulk of interest-earning
assets for both PSB Holdings and the Peer Group. The Company's loans-to-assets
ratio of 52.7% was less than the comparable Peer Group ratio of 58.6%.
Comparatively, the Company's cash and investments-to-assets ratio of 44.4%
exceeded the comparable ratio for the Peer Group of 36.3%, as the Company's
higher ratio of investment securities more than offset the Peer Group's higher
ratio of cash and cash equivalents. Overall, PSB Holdings' interest-earning
assets amounted to 97.1% of assets, which exceeded the comparable Peer Group
ratio of 94.9%.

PSB Holdings' funding liabilities reflected a funding strategy that was
somewhat similar to that of the Peer Group's funding composition. The Company's
deposits equaled 78.1% of assets, which was slightly above the Peer Group's
ratio of 75.9%. Similarly, borrowings accounted for a higher portion of the
Company's interest-bearing funding composition, as indicated by
borrowings-to-assets ratios of 11.6% and 10.1% for PSB Holdings and the Peer
Group, respectively. Total interest-bearing liabilities maintained by the
Company and the Peer Group, as a percent of assets, equaled 89.7% and 86.0%,
respectively. Following the increase in capital provided by the net proceeds of
the stock offering, the Company's ratio of interest-bearing liabilities as a
percent of assets will likely be less than the Peer Group's ratio.

A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Peer Group's IEA/IBL ratio is slightly stronger
than the Company's ratio, based on IEA/IBL ratios of 110.4% and 108.3%,
respectively. The additional capital realized from stock proceeds should serve
to provide PSB Holdings with an IEA/IBL ratio that exceeds the Peer Group's
ratio, as the increase in capital provided by the infusion of stock proceeds
will serve to lower the level of interest-bearing liabilities funding assets and
will be primarily deployed into interest-earning assets.

The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. PSB Holdings' growth rates are based on annualized growth
for the nine month period ended March 31, 2004, while the Peer Group's growth
rates are based on annual growth for the twelve months ended March 31, 2004 or
the most recent period available. PSB Holdings' assets increased at a 4.9%
annualized rate, which approximated the Peer Group's asset growth rate of

<Page>

RP FINANCIAL, LC.
PAGE 3.9

4.4%. Asset growth for the Company was largely the result of loan growth, which
was in part funded a decline in cash and investments. Asset growth for the Peer
Group was realized through a combination of loan growth as well as growth of
cash and investments.

A combination of deposits and borrowings were used by both the Company and
the Peer Group to fund asset growth, with the Company's deposit and borrowing
growth rates being above and below the respective Peer Group growth rates for
deposits and borrowings. Capital growth rates posted by the Company and the Peer
Group equaled 6.9% and 1.0%, respectively. Factors contributing to the Company's
higher capital growth rate included its lower level of capital as well as
retention of all of its earnings. Comparatively, despite recording a slightly
higher return on assets than the Company, the Peer Group's capital growth rate
was slowed by dividend payments as well as stock repurchases. The increase in
capital realized from stock proceeds, as well as possible dividend payments and
stock repurchases, will depress the Company's capital growth rate following the
stock offering.

INCOME AND EXPENSE COMPONENTS

Table 3.3 displays comparable statements of operations for the Company and
the Peer Group, based on earnings for the twelve months ended March 31, 2004,
unless otherwise indicated for the Peer Group companies. PSB Holdings and the
Peer Group reported net income to average assets ratios of 0.58% and 0.61%,
respectively. Higher levels of net interest income, non-interest operating
income and net gains accounted for the Peer Group's higher return. The Company's
earnings reflected comparative earnings advantages with respect to lower levels
of operating expenses and loan loss provisions.

The Peer Group's stronger net interest margin was realized through
maintenance of a higher interest income ratio and a lower interest expense
ratio. The Peer Group's higher interest income ratio was realized through
earning a higher yield on interest-earning assets (5.39% versus 5.16% for the
Company), which was supported by the Peer Group's interest-earning asset
composition that reflected a high concentration of loans than maintained by the
Company. Interest expense ratios for the Company and the Peer Group equaled
1.99% and 1.90% of average assets, respectively. The Peer Group's lower interest
expense ratio was supported by a lower cost of funds (2.21% versus 2.43% for the
Company) and a lower level of interest-bearing

<Page>

RP FINANCIAL, LC.
PAGE 3.11

liabilities funding assets. Overall, PSB Holdings and the Peer Group reported
net interest income to average assets ratios of 2.89% and 3.23%, respectively.

In another key area of core earnings strength, the Peer Group maintained a
higher level of operating expenses than the Company. For the period covered in
Table 3.3, the Company and the Peer Group reported operating expense to average
assets ratios of 2.55% and 2.92%, respectively. The Company's lower operating
expense ratio was achieved despite maintaining a comparable number of employees
as the Peer Group relative to their respective asset sizes. Assets per full time
equivalent employee equaled $3.5 million for the both the Company and the Peer
Group. On a post-offering basis, the Company's operating expenses can be
expected to increase with the addition of stock benefit plans and certain
expenses that result from being a publicly traded company, with such expenses
already impacting the Peer Group's operating expenses. At the same time, PSB
Holdings' capacity to leverage operating expenses will be comparable to or
greater than the Peer Group's leverage capacity following the increase in
capital realized from the infusion of net stock proceeds.

When viewed together, net interest income and operating expenses provide
considerable insight into a thrift's earnings strength, since those sources of
income and expenses are typically the most prominent components of earnings and
are generally more predictable than losses and gains realized from the sale of
assets or other non-recurring activities. In this regard, as measured by their
expense coverage ratios (net interest income divided by operating expenses), the
Company's and the Peer Group's earnings strength were comparable. Expense
coverage ratios posted by PSB Holdings and the Peer Group equaled 1.13x and
1.11x, respectively. An expense coverage ratio of greater than 1.0x indicates
that an institution is able to sustain pre-tax profitability without having to
rely on non-interest sources of income.

Sources of non-interest operating income provided a larger contribution to
the Peer Group's earnings, with such income amounting to 0.68% and 0.47% of the
Peer Group's and PSB Holdings' average assets, respectively. Taking non-interest
operating income into account in comparing the Company's and the Peer Group's
earnings, PSB Holdings' efficiency ratio (operating expenses, net of
amortization of intangibles, as a percent of the sum of non-interest operating
income and net interest income) of 75.9% was slightly less favorable than the
Peer

<Page>

RP FINANCIAL, LC.
PAGE 3.12

Group's efficiency ratio of 74.4%. The Peer Group's more favorable efficiency
ratio was realized through earning a higher level of non-interest operating
income and maintaining a higher net interest income ratio, which more than
Company's lower operating expense ratio.

Loan loss provisions had a larger impact on the Peer Group's earnings, with
loss provisions established by PSB Holdings and the Peer Group equaling 0.02%
and 0.16% of average assets, respectively. The higher level of loss provisions
established by the Peer Group was consistent with its greater degree of
diversification into higher risk types of lending (see Table 3.4), as well as
the Peer Group's higher ratio of total loans-to-assets.

Net gains realized from the sale of assets were a slightly larger
contributor to the Peer Group's earnings, with such gains amounting to 0.07% and
0.02% of average assets for the Peer Group and PSB Holdings, respectively. Given
the generally non-recurring nature of gains and losses resulting from the sale
of loans, investments and other assets, the net gains reflected in the Company's
and the Peer Group's earnings will be discounted in evaluating the relative
strengths and weaknesses of their respective earnings. Extraordinary items were
not a factor in either the Company's or the Peer Group's earnings.

Taxes had a slightly larger impact on the Company's earnings, as PSB
Holdings and the Peer Group posted effective tax rates of 28.9% and 27.7%,
respectively.

LOAN COMPOSITION

Table 3.4 presents data related to the Company's and the Peer Group's loan
portfolio compositions and investment in mortgage-backed securities. The
Company's loan portfolio composition reflected a higher concentration of 1-4
family permanent mortgage loans and mortgage-backed securities than maintained
by the Peer Group (59.3% versus 47.4% for the Peer Group). The Company's higher
ratio was attributable to maintaining higher concentrations of both 1-4 family
loans and mortgage-backed securities relative to the comparable Peer Group
ratios. Loans serviced for others equaled 11.3% and 10.0% of the Company's and
the Peer Group's assets, respectively, thereby indicating a comparable influence
of mortgage banking activities on their respective operations. The Peer Group's
balance of loans serviced for others translated into a modest balance of
servicing intangibles, versus a zero balance for the Company.

<Page>

RP FINANCIAL, LC.
PAGE 3.14

Diversification into higher risk types of lending was more significant for
the Peer Group companies on average. Commercial real estate/multi-family loans
represented the most significant area of lending diversification for the Peer
Group (11.1% of assets), followed by commercial business loans (5.6% of assets).
The Company's lending diversification consisted primarily of commercial real
estate/multi-family loans and construction/land loans, with those portfolios
equaling 9.2% and 1.5% of assets, respectively. Construction/land loans
accounted for the only lending area where the Company maintained a greater
degree of lending diversification than the Peer Group. Notwithstanding the Peer
Group's more significant diversification into higher risk types of lending, the
Company maintained a slightly higher risk-weighted assets-to-assets ratio than
maintained by the Peer Group (58.90% versus 56.12% for the Peer Group).

INTEREST RATE RISK

Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Company versus the Peer Group companies. In terms of
balance sheet composition, PSB Holdings' interest rate risk characteristics were
considered to be slightly less favorable than the Peer Group's. Most notably,
PSB Holdings' lower tangible capital position and lower IEA/IBL ratio indicate a
greater dependence on the yield-cost spread to sustain the net interest margin.
However, a lower level of non-interest earning assets represented an advantage
for the Company with respect to capacity to generate net interest income and, in
turn, limit the interest rate risk associated with the balance sheet. On a pro
forma basis, the infusion of stock proceeds should provide the Company with
comparable or slightly more favorable balance sheet interest rate risk
characteristics than currently maintained by the Peer Group, particularly with
respect to the increases that will be realized in Company's equity-to-assets and
IEA/IBL ratios.

To analyze interest rate risk associated with the net interest margin, we
reviewed quarterly changes in net interest income as a percent of average assets
for PSB Holdings and the Peer Group. In general, the was a slightly greater
degree of volatility reflected in the quarterly changes in the Company's net
interest income ratios, based on the interest rate environment that prevailed
during the period covered in Table 3.5. However, the stability of the Company's
net

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RP FINANCIAL, LC.
PAGE 3.16

interest margin should be enhanced by the infusion of stock proceeds, since
interest rate sensitive liabilities will be funding a lower portion of the
Company's assets.

CREDIT RISK

Overall, the credit risk associated with the Company's loan portfolio was
considered to be slightly less than the Peer Group's, as implied by the
Company's more favorable credit quality measures for non-performing loans and
less significant diversification into higher risk types of lending. As shown in
Table 3.6, PSB Holdings' ratio of non-performing assets and accruing loans that
are more than 90 days past due as a percent of assets was less than the
comparable Peer Group ratio (0.32% versus 0.61% for the Peer Group). Likewise,
PSB Holdings' non-performing loans-to-loans ratio, which does not include
accruing loans that are more than 90 days past due, was lower than the Peer
Group's ratio (0.56% versus 0.71% for the Peer Group). The Company's credit risk
exposure was also considered to be more favorable with respect to the less
significant impact of net charge-offs recorded for the twelve month period, as
net loan charge-offs equaled 0.06% and 0.15% of net loans receivable for the
Company and the Peer Group, respectively. However, the greater credit risk
exposure implied by the Peer Group's less favorable credit quality measures was
somewhat offset by the Peer Group's maintenance of stronger reserve ratios, as
the Peer Group maintained a higher level of loss reserves as a percent of
non-performing assets and accruing loans that are more than 90 days past due
(175.0% versus 159.2% for the Company) and a slightly higher level of reserves
as a percent of loans (1.01% versus 0.96% for the Company).

SUMMARY

Based on the above analysis, RP Financial concluded that the Peer Group
forms a reasonable basis for determining the pro forma market value of PSB
Holdings. Such general characteristics as asset size, capital position,
interest-earning asset composition, funding composition, core earnings measures,
loan composition, credit quality and exposure to interest rate risk all tend to
support the reasonability of the Peer Group from a financial standpoint. Those
areas where differences exist will be addressed in the form of valuation
adjustments to the extent necessary.

<Page>

RP FINANCIAL, LC.
PAGE 4.1

IV. VALUATION ANALYSIS

INTRODUCTION

This chapter presents the valuation analysis and methodology used to
determine PSB Holdings' estimated pro forma market value for purposes of pricing
the minority stock. The valuation incorporates the appraisal methodology
promulgated by the OTS and adopted in practice by the FDIC for standard
conversions and mutual holding company offerings, particularly regarding
selection of the Peer Group, fundamental analysis on both the Company and the
Peer Group, and determination of the Company's pro forma market value utilizing
the market value approach.

APPRAISAL GUIDELINES

The OTS written appraisal guidelines specify the market value methodology
for estimating the pro forma market value of an institution. The FDIC, state
banking agencies and other Federal agencies have endorsed the OTS appraisal
guidelines as the appropriate guidelines involving mutual-to-stock conversions.
As previously noted, the appraisal guidelines for MHC offerings is somewhat
different, particularly in the Peer Group selection process. Specifically, the
regulatory agencies have indicated that the Peer Group should be based on the
pro forma fully-converted pricing characteristics of publicly-traded MHCs,
rather than on already fully-converted publicly-traded stock thrifts, given the
unique differences in stock pricing of MHCs and fully-converted stock thrifts.
Pursuant to this methodology: (1) a peer group of comparable publicly-traded MHC
institutions is selected; (2) a financial and operational comparison of the
subject company to the peer group is conducted to discern key differences; and
(3) the pro forma market value of the subject company is determined based on the
market pricing of the peer group, subject to certain valuation adjustments based
on key differences. In addition, the pricing characteristics of recent
conversions and MHC offerings must be considered.

<Page>

RP FINANCIAL, LC.
PAGE 4.2

RP FINANCIAL APPROACH TO THE VALUATION

The valuation analysis herein complies with such regulatory approval
guidelines. Accordingly, the valuation incorporates a detailed analysis based on
the Peer Group, discussed in Chapter III, which constitutes "fundamental
analysis" techniques. Additionally, the valuation incorporates a "technical
analysis" of recently completed conversions and stock offerings of comparable
MHCs, including closing pricing and aftermarket trading of such offerings. It
should be noted that these valuation analyses, based on either the Peer Group or
the recent conversions and MHC transactions, cannot possibly fully account for
all the market forces which impact trading activity and pricing characteristics
of a stock on a given day.

The pro forma market value determined herein is a preliminary value for the
Company's to-be-issued stock. Throughout the MHC process, RP Financial will: (1)
review changes in the Company's operations and financial condition; (2) monitor
the Company's operations and financial condition relative to the Peer Group to
identify any fundamental changes; (3) monitor the external factors affecting
value including, but not limited to, local and national economic conditions,
interest rates, and the stock market environment, including the market for
thrift stocks; and (4) monitor pending MHC offerings, and to a lesser extent,
standard conversion offerings, both regionally and nationally. If material
changes should occur prior to close of the offering, RP Financial will evaluate
if updated valuation reports should be prepared reflecting such changes and
their related impact on value, if any. RP Financial will also prepare a final
valuation update at the closing of the offering to determine if the prepared
valuation analysis and resulting range of value continues to be appropriate.

The appraised value determined herein is based on the current market and
operating environment for the Company and for all thrifts. Subsequent changes in
the local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or major world events), which may occur from time to time (often with
great unpredictability) may materially impact the market value of all thrift
stocks, including PSB Holdings' value, the market value of the stocks of public
MHC institutions, or PSB Holdings' value alone. To the extent a change in
factors impacting the

<Page>

RP FINANCIAL, LC.
PAGE 4.3

Company's value can be reasonably anticipated and/or quantified, RP Financial
has incorporated the estimated impact into its analysis.

VALUATION ANALYSIS

A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections summarize
the key differences between the Company and the Peer Group and how those
differences affect the pro forma valuation. Emphasis is placed on the specific
strengths and weaknesses of the Company relative to the Peer Group in such key
areas as financial condition, profitability, growth and viability of earnings,
asset growth, primary market area, dividends, liquidity of the shares, marketing
of the issue, management, and the effect of government regulations and/or
regulatory reform. We have also considered the market for thrift stocks, in
particular new issues, to assess the impact on value of PSB Holdings coming to
market at this time.

1. FINANCIAL CONDITION

The financial condition of an institution is an important determinant in
pro forma market value because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Company's and the Peer Group's financial strength are noted as follows:

- OVERALL A/L COMPOSITION. Loans funded by retail deposits were the primary
components of both PSB Holdings' and the Peer Group's balance sheets. The
Peer Group's interest-earning asset composition exhibited a higher
concentration of loans and the Peer Group's loan portfolio composition
reflected a greater degree of diversification into higher risk and higher
yielding types of loans. Despite the Peer Group's more notable
diversification into higher risk types of loans, the Company maintained a
slightly higher risk weighted assets-to-assets ratio than the Peer Group.
PSB Holdings' funding composition reflected similar concentrations of
deposits and borrowings relative to the Peer Group's ratios. Overall, as a
percent of assets, the Company maintained a higher level of
interest-earning assets and a higher level of interest-bearing liabilities
than indicated for the Peer Group, which resulted in a slightly lower
IEA/IBL ratio for the Company. The infusion of stock proceeds should serve
to increase the Company's IEA/IBL ratio and, thus, eliminate the
comparative advantage currently indicated in the Peer Group's IEA/IBL
ratio. For

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RP FINANCIAL, LC.
PAGE 4.4

valuation purposes, RP Financial concluded no adjustment was warranted for
the Company's overall asset/liability composition.

- CREDIT QUALITY. The Company maintained lower ratios of non-performing
assets-to-assets and non-performing loans-to-loans. Reserve coverage ratios
were stronger for the Peer Group, both as a percent of loans and as a
percent of non-performing loans. Net loan charge-offs were slightly higher
for the Peer Group, while the Company maintained a slightly higher risk
weighted assets-to-assets ratio. Overall, in comparison to the Peer Group,
the Company's measures imply a lower degree of credit exposure and, thus,
RP Financial concluded that a slight upward adjustment was warranted for
the Company's credit quality.

- BALANCE SHEET LIQUIDITY. The Company operated with a higher level of cash
and investment securities relative to the Peer Group (44.4% of assets
versus 36.3% for the Peer Group). PSB Holdings' future borrowing capacity
was considered to be comparable to the Peer Group's, in light of the
similar level of borrowings that were maintained by the Company and the
Peer Group. Overall, balance sheet liquidity for the Company and the Peer
Group were not viewed as being materially different and, thus, RP Financial
concluded that no adjustment was warranted for the Company's balance sheet
liquidity.

- FUNDING LIABILITIES. Retail deposits and borrowings comprised a similar
portion of the Company's and the Peer Group's respective funding
compositions. The Company's overall funding composition provided for a
slightly higher cost of funds than maintained by the Peer Group. In total,
the Company maintained a higher level of interest-bearing liabilities than
the Peer Group, which was attributable to PSB Holdings' lower capital
position. Following the stock offering, the increase in the Company's
capital position should provide PSB Holdings' with a comparable or lower
level of interest-bearing liabilities than maintained by the Peer Group.
Overall, RP Financial concluded that no adjustment was warranted for PSB
Holdings' funding composition.

- CAPITAL. The Peer Group operates with a higher equity-to-assets ratio than
the Company. However, following the stock offering, PSB Holdings' pro forma
capital position will likely exceed the Peer Group's equity-to-assets
ratio. The Company's higher pro forma capital position will result in
greater leverage potential and reduce the level of interest-bearing
liabilities utilized to fund assets. At the same time, the Company's more
significant capital surplus will likely result in a depressed ROE. Overall,
RP Financial concluded that a slight upward adjustment was warranted for
the Company's pro forma capital position.

On balance, PSB Holdings' balance sheet strength was considered to be
slightly more favorable than Peer Group's, as implied by the Company's slightly
more favorable credit quality and slightly stronger pro forma capital position.
Accordingly, we concluded that a slight upward valuation adjustment was
warranted for the Company's financial condition.

<Page>

RP FINANCIAL, LC.
PAGE 4.5

2. PROFITABILITY, GROWTH AND VIABILITY OF EARNINGS

Earnings are a key factor in determining pro forma market value, as the
level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings heavily influence the multiple
that the investment community will pay for earnings. The major factors
considered in the valuation are described below.

- REPORTED EARNINGS. The Company reported slightly lower earnings on a
ROAA basis (0.58% of average assets versus 0.61% for the Peer Group).
Higher levels of net interest income and non-interest operating income
supported the Peer Group's higher return, which was largely offset by
the Company's lower level of loss provisions and operating expenses. A
lower effective tax rate and higher net gains also represented modest
earnings advantages for the Peer Group. Reinvestment and leveraging of
the net stock proceeds should enhance returns for the Company, but the
pick-up in earnings will be somewhat offset by the increase in
operating expenses that will result from the implementation of the
stock benefit plans and expenses related to operating as a
publicly-traded company with shareholders to report to. Overall, the
Company's and the Peer Group's reported earnings were considered to be
fairly comparable and, thus, RP Financial concluded that no adjustment
was appropriate for the Company's reported earnings.

- CORE EARNINGS. The Company's and the Peer Group's earnings were
derived largely from recurring sources, including net interest income,
operating expenses, and non-interest operating income. In these
measures, the Company operated with a lower net interest margin, a
lower operating expense ratio and a lower level of non-interest
operating income. The Company's lower net interest margin and lower
level of operating expenses translated into an expense coverage ratio
that was comparable to the Peer Group's ratio (1.13x versus 1.11x for
the Peer Group). PSB Holdings' efficiency ratio of 75.9% was also
comparable to the Peer Group's efficiency ratio of 74.4%. Loss
provisions had a larger impact on the Peer Group's earnings, which was
consistent with the Peer Group's slightly less favorable credit
quality measures and greater diversification into higher risk types of
lending. Overall, these measures, as well as the expected earnings
benefits the Company should realize from the redeployment of stock
proceeds into interest-earning assets, which will somewhat be negated
by expenses associated with the stock benefit plans and operating as a
publicly-traded company, indicate that the Company's and the Peer
Group's core are fairly comparable. Therefore, RP Financial concluded
that no adjustment was necessary for core earnings.

- INTEREST RATE RISK. Quarterly changes in the Company's and the Peer
Group's net interest income to average assets ratios indicated that a
slightly higher degree of volatility was associated with the Company's
net interest margin. The Peer Group's stronger capital and IEA/IBL
ratios, partially offset by the Company's lower level of

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RP FINANCIAL, LC.
PAGE 4.6

non-interest earning assets, implied a lower dependence on the
yield-cost spread to sustain net interest income. On a pro forma
basis, the Company's capital position and IEA/IBL ratio will be
enhanced by the infusion of stock proceeds and should eliminate the
current advantages indicated for the Peer Group's ratios. Overall, RP
Financial concluded that the interest rate risk associated with the
Company's earnings was comparable to the Peer Group's earnings
interest rate risk exposure and no valuation adjustment was necessary
for this factor.

- CREDIT RISK. Loan loss provisions were a larger factor in the Peer
Group's earnings, as only a modest amount of loss provisions were
established by the Company for the twelve months ended March 31, 2004.
In terms of future exposure to credit quality related losses, the
Company's and the Peer Group's credit quality measures generally
implied a comparable degree of earnings credit risk exposure. In
particular, the lower earnings credit risk associated with the
Company's lower ratios of non-performing assets and non-performing
loans was considered to be offset by the lower earnings credit risk
associated with the Peer Group's stronger reserve coverage ratios as a
percent of loans and non-performing loans. Overall, RP Financial
concluded that no adjustment was warranted for this factor.

- EARNINGS GROWTH POTENTIAL. Several factors were considered in
assessing earnings growth potential. First, the Company's and the Peer
Group's recent historical balance sheet growth was comparable. Second,
the infusion of stock proceeds will increase the Company's earnings
growth potential with respect to leverage capacity, as the Company's
pro forma leverage capacity should be comparable to or greater than
the Peer Group's. Lastly, the Peer Group's more diversified operations
into areas that generate non-interest operating income provides
greater earnings growth potential and sustainability of earnings
during periods when net interest margins come under pressure as the
result of higher interest rates. Overall, the Company's earnings
growth potential appears to be comparable to the Peer Group's, and,
thus, we concluded that no adjustment was warranted for this factor.

- RETURN ON EQUITY. As the result of the increase in capital that will
be realized from the infusion of net stock proceeds, the Company's
return on equity will be below the comparable averages for the Peer
Group and all publicly-traded thrifts. In view of the lower capital
growth rate that will be imposed by PSB Holdings' lower ROE, we
concluded that a slight downward adjustment was warranted for the
Company's ROE.

Overall, no adjustment was applied for the Company's profitability, growth
and viability of earnings.

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RP FINANCIAL, LC.
PAGE 4.7

3. ASSET GROWTH

PSB Holdings' asset growth rate was similar to the Peer Group's during the
period covered in our comparative analysis (4.9% versus 4.4% for the Peer
Group). Additionally, both the Company's and the Peer Group's asset growth was
realized through growth of loans, as opposed to lower yielding cash and
investments. On a pro forma basis, the Company's tangible equity-to-assets ratio
will be above the Peer Group's tangible equity-to-assets ratio, indicating
greater leverage capacity for the Company. On average, the demographic
characteristics of the Company's primary market area were considered to be
comparable to the markets served by the Peer Group companies with respect to
supporting lending and deposit growth opportunities. On balance, we concluded
that a slight upward adjustment was warranted for this factor.

4. PRIMARY MARKET AREA

The general condition of an institution's market area has an impact on
value, as future success is in part dependent upon opportunities for profitable
activities in the local market served. PSB Holdings' primary market area for
loans and deposits is considered to be Windham County, where the main office and
all of its branches are located. Windham County has experienced growth in
population and household income since 2000, with such growth being comparable to
the Connecticut growth rates but lower than the U.S. growth rates. Household and
per capita income measures for Windham County were less than Connecticut
measures, reflecting the more rural characteristics of the Company's market
area.

Overall, the markets served by the Peer Group companies were viewed as
being comparable with respect to supporting growth opportunities. Windham
County's population growth was stronger than the markets served by the Peer
Group companies, but, on average, the Peer Group companies serve more populous
markets than Windham County. Per capita income for the markets served by the
Peer Group companies was on average comparable to Windham County's per capita
income. The average deposit market share maintained by the Peer Group companies
was comparable to the Company's market share of deposits in Windham County. In
general, the degree of competition faced by the Peer Group companies was viewed
as being comparable to the Company's competitive environment. Summary
demographic and deposit

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RP FINANCIAL, LC.
PAGE 4.8

market share data for the Company and the Peer Group companies is provided in
Exhibit III-3. As shown in Table 4.1, March 2004 unemployment rates for the
majority of the markets served by the Peer Group companies were higher than the
unemployment rate reflected for Windham County. On balance, we concluded that no
adjustment was appropriate for the Company's market area.

Table 4.1
Market Area Unemployment Rates
PSB Holdings, Inc. and the Peer Group Companies(1)

<Table>
<Caption>
MARCH 2004
COUNTY UNEMPLOYMENT
------ ------------

PSB Holdings - CT Windham 6.0%

THE PEER GROUP

Alliance Bank MHC - PA Delaware 5.0%
BCSB Bankcorp MHC - MD Baltimore 4.3
Gouverneur Bancorp MHC - NY St. Lawrence 10.4
Greene Co. Bancorp MHC - NY Greene 6.3
Jacksonville SB MHC - IL Morgan 6.0
Oneida Financial MHC - NY Madison 7.9
Pathfinder Bancorp MHC - NY Oswego 10.2
Rome Bancorp MHC - NY Oneida 6.2
Westfield Financial Group MHC- MA Hampden 6.7
Webster City Fed Bancorp MHC - IA Hamilton 4.1
</Table>

(1) Unemployment rates are not seasonally adjusted.

Source: U.S. Bureau of Labor Statistics.

5. DIVIDENDS

At this time the Company has not established a dividend policy. Future
declarations of dividends by the Board of Directors will depend upon a number of
factors, including investment opportunities, growth objectives, financial
condition, profitability, tax considerations, minimum capital requirements,
regulatory limitations, stock market characteristics and general economic
conditions.

All ten of the Peer Group companies pay regular cash dividends, with
implied dividend yields ranging from 1.00% to 4.86%. The average dividend yield
on the stocks of the Peer

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RP FINANCIAL, LC.
PAGE 4.9

Group institutions equaled 2.59% as of May 21, 2004. As of May 21, 2004,
approximately 89% of all publicly-traded thrifts had adopted cash dividend
policies (see Exhibit IV-1), exhibiting an average yield of 2.18%. The dividend
paying thrifts generally maintain higher than average profitability ratios,
facilitating their ability to pay cash dividends.

Our valuation adjustment for dividends for PSB Holdings also considered the
regulatory policy with regard to waiver of dividends by the MHC. Under current
policy, any waiver of dividends by an FDIC regulated MHC requires that the
minority stockholders' ownership interest be reduced in a second-step conversion
to reflect the cumulative waived dividend account. Comparatively, no adjustment
for waived dividends is required for OTS regulated companies in a second-step
conversion. As an MHC operating under OTS regulation, the Company will be
subject to the same regulatory dividend policy as a large majority of the Peer
Group companies (nine of the Peer Group companies operate under OTS regulation).
Accordingly, we believe that to the extent PSB Holdings' pro forma market value
would be influenced by the OTS' dividend policy regarding MHC institutions, it
has been sufficiently captured in the pricing of the Peer Group companies.

While the Company has not established a definitive dividend policy prior to
converting, the Company will have the capacity to pay a dividend comparable to
the Peer Group's average dividend yield based on pro forma earnings and
capitalization. On balance, we concluded that no adjustment was warranted for
purposes of the Company's dividend policy.

6. LIQUIDITY OF THE SHARES

The Peer Group is by definition composed of companies that are traded in
the public markets. Eight of the Peer Group members trade on the NASDAQ system
and two of the Peer Group members trade on the AMEX. Typically, the number of
shares outstanding and market capitalization provides an indication of how much
liquidity there will be in a particular stock. The market capitalization of the
Peer Group companies, based on the shares issued and outstanding to public
shareholders (i.e., excluding the majority ownership interest owned by the
respective MHCs) ranged from $11.8 million to $97.5 million as of May 21, 2004,
with average and median market values of $31.7 million and $24.0 million,
respectively. The shares issued

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RP FINANCIAL, LC.
PAGE 4.10

and outstanding to the public shareholders of the Peer Group members ranged from
688,000 to 4.9 million, with average and median shares outstanding of 1.8
million and 1.2 million, respectively. The Company's minority stock offering is
expected to have a pro forma market value that is comparable to the Peer Group
average, while public shares outstanding for the Company is expected to be in
the upper end of the range of shares outstanding maintained by the individual
Peer Group companies. Like the majority of the Peer Group companies, the
Company's stock will be quoted on the NASDAQ National Market System following
the stock offering. Overall, we anticipate that the Company's public stock will
have a comparable trading market as the Peer Group companies on average and,
therefore, concluded no adjustment was necessary for this factor.

7. MARKETING OF THE ISSUE

Three separate markets exist for thrift stocks: (1) the after-market for
public companies, both fully-converted stock companies and MHCs, in which
trading activity is regular and investment decisions are made based upon
financial condition, earnings, capital, ROE, dividends and future prospects; (2)
the new issue market in which converting thrifts are evaluated on the basis of
the same factors but on a pro forma basis without the benefit of prior
operations as a publicly-held company and stock trading history; and (3) the
thrift acquisition market. All three of these markets were considered in the
valuation of the Company's to-be-issued stock.

A. THE PUBLIC MARKET

The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.

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RP FINANCIAL, LC.
PAGE 4.11

In terms of assessing general stock market conditions, the performance
of the overall stock market has been mixed over the past year. The broader stock
market sustained a positive trend through the second half of May and into
early-June 2003, as the Dow Jones Industrial Average ("DJIA") moved above 9000
on investor optimism that low interest rates, the tax-cut plan and improving
consumer confidence would boost the economy. After experiencing a mild set back
following an earnings warning from Motorola and news of a shake-up in Freddie
Mac's top management due to accounting concerns, the stock market recovered in
mid-June on growing expectations that the Federal Reserve would cut rates
further to stimulate the economy. Stocks eased lower at the close of the second
quarter largely on profit taking.

The broader stock market surged higher at the beginning of the third
quarter of 2003 on growing optimism about the economy and the sustainability of
the bull market. The NASDAQ posted a 14-month high in early-July, before
declining slightly on profit taking and disappointing economic data related to
an increase in jobless claims. Generally upbeat second quarter earnings and more
signs of an economic upturn provided for a positive trend in the broader stock
market in mid- and late-July, as the DJIA posted its fifth straight monthly
gain. Economic data that showed a strengthening economy, particularly in the
manufacturing sector, sustained the upward momentum in stocks through August and
into-early September, as the DJIA and NASDAQ posted respective 14-month and
16-month highs. Stocks retreated following the release of August employment data
which showed further job losses, but then recovered in mid-September as the
Federal Reserve indicated that it would not raise rates in the near term. Weaker
than expected numbers for consumer confidence and manufacturing activity pulled
the boarder market lower at the close of the third quarter, which ended a streak
of six monthly gains in the DJIA.

Comparatively, at the start of the fourth quarter stocks showed
renewed strength, as optimism about third quarter earnings and employment data
for September provided a boost to stocks. In mid-October, the DJIA and the
NASDAQ hit 16- and 19-month highs, respectively, primarily on the basis of some
favorable third quarter earnings reports. The broader stock market rally cooled
in mid-October, as the result of profit taking and the posting of some less
favorable third quarter earnings by some of the bellwether technology and
manufacturing stocks. Indications that the economic recovery was gaining
momentum, including an annualized GDP

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RP FINANCIAL, LC.
PAGE 4.12

growth rate of 8.2% in the third quarter, as well as the Federal Reserve's
statement that it would not raise its target interest rates for a considerable
period, supported a stock market rally during late-October and into
early-November. Despite upbeat economic news, including employment data that
showed the size of the U.S. workforce increased in October, stocks edged lower
in mid-November on profit taking and concerns over increased terrorism in the
Middle East. In late-November and early-December 2003, positive economic news
such as improved third quarter corporate profits and a strong start to the
Christmas shopping season provided a boost to stocks. Stocks continued to move
higher at the close of 2003, as key sectors of the economy continued to show
signs of strengthening.

Year end momentum in the stock market was sustained at the beginning
of 2004, reflecting generally favorable fourth quarter earnings and an increase
in consumer confidence. Profit taking and slower than expected GDP growth in the
fourth quarter of 2003 caused stocks to falter in late-January. However, aided
by January employment data that showed jobs were added and a decline in the
national unemployment rate to 5.6%, the broader stock market moved higher during
the first half of February. Stocks generally declined during the balance of
February and during the first half of March, reflecting valuation concerns
following a year of strong gains and weaker than expected job growth during
February. Concerns about terrorism and higher oil prices caused stocks to tumble
in late-March, before rebounding at the close of the first quarter on more
attractive fundamentals and optimism about first quarter earnings.

Stocks moved higher in early April 2004, as investors reacted
favorably to a strong employment report for March. For the balance of April
trading in the broader market produced uneven results, as generally favorable
first quarter earnings and strong economic data weighed against the growing
threat of inflation and higher interest rates. The DJIA closed below 10000 for
the first time in 2004 in the second week of May, as strong job growth during
April raised expectations of a rate increase by the Federal Reserve. The
downward trend in stocks prevailed through most of May, on concerns about higher
oil prices, violence in the Middle East and higher interest rates. As an
indication of the general trends in the nation's stock markets over the past
year, as of May 21, 2004, the DJIA closed at 9966.74 an increase of 15.9% from
one year ago and a decline of 4.7% year-to-date, and the NASDAQ closed at
1912.09, an increase of 26.6% from one year ago and a decline of 4.6%
year-to-date. The Standard & Poors 500 Index

<Page>

RP FINANCIAL, LC.
PAGE 4.13

closed at 1093.56 on May 21, 2004 an increase of 17.2% from one year ago and a
decline of 1.7% year-to-date.

The market for thrift stocks has been mixed during the past twelve
months, but, in general, thrift stocks have appreciated in conjunction with the
broader market. Thrift stocks participated in the broader stock market rally in
late-May and the first half of June 2003, largely on the basis of recent deal
activity in the thrift sector and some favorable economic data. Freddie Mac's
management shake-up had a negative ripple effect throughout the thrift sector,
but the pullback was only temporary as thrift issues recovered in conjunction
with the broader stock market. Profit taking pulled the thrift sector lower in
late-June. However, thrift issues recovered modestly at the close of the second
quarter, which was supported by merger speculation following New York Community
Bancorp's announced acquisition of Roslyn Bancorp.

The rally in the broader stock market combined with acquisition
speculation in certain regional markets lifted thrift issues higher at the
beginning of the third quarter of 2003. Thrift issues traded in a narrow range
through most of July, reflecting mixed earnings in the sector. Higher mortgage
rates and strength in technology stocks pushed thrift stocks lower in
early-August, as investors rotated into sectors that were expected to benefit
the most from an economic recovery. After edging higher in mid-August, thrift
stocks eased lower at the end of August on expectations that interest rates
would continue to move higher as the economic recovery gained momentum. Merger
activity and acquisition speculation in the thrift sector provided a boost to
thrift prices in early-September. After easing lower into mid-September on data
that showed a slow down in refinancing activity, thrift stocks strengthened
following the Federal Reserve's decision to leave interest rates unchanged at
its mid-September meeting.

After following the broader stock market lower in late-September 2003,
thrift issues posted solid gains at the beginning of the fourth quarter. A rally
in the broader stock market and acquisition activity were noteworthy factors
that supported the positive trend in thrift stocks. Following a two week run-up,
thrift stocks declined in mid-October on profit taking and a pullback in the
broader market. Merger activity, most notably Bank America's announced
acquisition of FleetBoston Financial Corp., along with strength in the broader
market, provided for gains in the thrift sector during late-October. The
positive trend in thrift stocks carried into

<Page>

RP FINANCIAL, LC.
PAGE 4.14

early-November, reflecting expectations of improving net interest margins and
more consolidation among thrift stocks. Thrifts stocks eased lower in
mid-November in conjunction with the decline in the broader market. In
late-November and early-December 2003, thrift stocks followed the broader market
higher and then stabilized at the close of the fourth quarter.

After trading in a narrow range at the beginning of 2004, thrift
issues trended higher in late-January and the first half of February. The
positive trend was supported by further consolidation in the thrift sector,
including GreenPoint Financial's agreement to sell to North Fork Bancorp, as
well as generally favorable fourth quarter earnings. Indications that interest
rates would continue to remain low provided further support to thrift prices.
Thrift stocks followed the broader market lower in mid-February, before
recovering in late-February following a dip in long term Treasury yields. Thrift
issues generally experienced some selling pressure during the first half of
March, reflecting profit taking and weakness in the broader stock market. Higher
interest rates and weakness in the broader market pressured thrift issues lower
in late-March, which was followed by an upward move in thrift prices at the
close of the first quarter.

Thrifts stocks generally traded lower at the start of the second
quarter of 2004, as a strong employment report for March pushed interest rates
higher. Higher interest rates and inflation worries pressured interest rate
sensitive issues lower through most of April, with the sell-off sharpening in
early-May following another strong employment report for April. Thrift stocks
recovered modestly in mid-May as the yield on 10-year Treasury note declined
slightly. On May 21, 2004, the SNL Index for all publicly-traded thrifts closed
at 1,468.1, an increase of 22.1% from one year ago and a decline of 1.0%
year-to-date. The SNL MHC Index closed at 2,550.7 on May 21, 2004, an increase
of 34.2% from one year ago and a decline of 4.2% year-to-date.

B. THE NEW ISSUE MARKET

In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Company's pro forma market value. The new issue market is
separate and distinct from the market for seasoned thrift stocks in that the
pricing ratios for converting issues are computed on a pro forma basis,

<Page>

RP FINANCIAL, LC.
PAGE 4.15

specifically: (1) the numerator and denominator are both impacted by the
conversion offering amount, unlike existing stock issues in which price change
affects only the numerator; and (2) the pro forma pricing ratio incorporates
assumptions regarding source and use of proceeds, effective tax rates, stock
plan purchases, etc. which impact pro forma financials, whereas pricing for
existing issues are based on reported financials. The distinction between
pricing of converting and existing issues is perhaps no clearer than in the case
of the price/tangible book ("P/TB") ratio in that the P/TB ratio of a converting
thrift will typically result in a discount to tangible book value whereas in the
current market for existing thrifts the P/TB ratio often reflects a premium to
tangible book value. Therefore, it is appropriate to also consider the market
for new issues, both at the time of the conversion and in the aftermarket.

Thrift offerings completed in 2004 have generally been well received,
with most offerings being oversubscribed and trading higher in initial trading
activity. However, reflecting the general pull back in thrift stocks, the most
recent stand conversion, SE Financial Corp., traded below its IPO price in
initial trading activity and the recently completed MHC offerings have traded
down from their initial price appreciation following the close of their
respective offerings. As shown in Table 4.2, two standard conversion offerings
and five mutual holding company offerings were completed during the past three
months. The mutual holding company offerings are considered to be more relevant
for purposes of our analysis. All five of the MHC offerings were closed at the
top of the super range. On a fully-converted basis, the average closing pro
forma price/tangible book ratio of the recent MHC offerings equaled 88.5%. On
average, the prices of the recent MHC offerings reflected price appreciation of
29.0% after the first week of trading and then reflected lower price
appreciation of 17.6% after one month of trading.

Shown in Table 4.3 are the current pricing ratios of NewAlliance
Bancshares, which is the only NASDAQ or Exchange listed fully-converted offering
that has been completed within the past three months. NewAlliance's closing
market price of $13.75 on May 21, 2004 represented a 37.5% increase from its IPO
price.

<Page>

RP FINANCIAL, LC.
PAGE 4.18

C. THE ACQUISITION MARKET

Also considered in the valuation was the potential impact on PSB
Holdings' stock price of recently completed and pending acquisitions of other
savings institutions operating in Connecticut. As shown in Exhibit IV-4, there
were eight Connecticut thrift acquisitions completed from 2001 through
year-to-date 2004, and there are currently no pending acquisitions of a
Connecticut savings institution. To the extent that acquisition speculation may
impact the Company's valuation, we have largely taken this into account in
selecting companies which operate in the MHC form of ownership. Accordingly, the
Peer Group companies are considered to be subject to the same type of
acquisition speculation that may influence PSB Holdings' trading price.

* * * * * * * * * * *

In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market, the new issue market
including the new issue market for MHC shares and the local acquisition market
for thrift stocks. Taking these factors and trends into account, RP Financial
concluded that no adjustment was appropriate in the valuation analysis for
purposes of marketing of the issue.

8. MANAGEMENT

PSB Holdings' management team appears to have experience and expertise in
all of the key areas of the Company's operations. Exhibit IV-5 provides summary
resumes of PSB Holdings' Board of Directors and senior management. While the
Company does not have the resources to develop a great deal of management depth,
given its asset size and the impact it would have on operating expenses,
management and the Board have been effective in implementing an operating
strategy that can be well managed by the Company's present organizational
structure.

Similarly, the returns, capital positions and other operating measures of
the Peer Group companies are indicative of well-managed financial institutions,
which have Boards and management teams that have been effective in implementing
competitive operating strategies.

<Page>

RP FINANCIAL, LC.
PAGE 4.19

Therefore, on balance, we concluded no valuation adjustment relative to the Peer
Group was appropriate for this factor.

9. EFFECT OF GOVERNMENT REGULATION AND REGULATORY REFORM

In summary, as a federally-insured savings bank operating in the MHC form
of ownership, Putnam Savings will operate in substantially the same regulatory
environment as the Peer Group members -- all of whom are adequately capitalized
institutions and are operating with no apparent restrictions. Exhibit IV-6
reflects the Bank's pro forma regulatory capital ratios. The one difference
noted between PSB Holdings' and the small minority of Peer Group companies that
operate as FDIC regulated institutions was in the area of regulatory policy
regarding dividend waivers (see the discussion above for "Dividends"). Since
this factor was already accounted for in the "Dividends" section of this
appraisal, no further adjustment has been applied for the effect of government
regulation and regulatory reform.

SUMMARY OF ADJUSTMENTS

Overall, based on the factors discussed above, we concluded that the
Company's pro forma market value should reflect the following valuation
adjustments relative to the Peer Group:

<Table>
<Caption>
KEY VALUATION PARAMETERS: VALUATION ADJUSTMENT
------------------------ --------------------

Financial Condition Slight Upward
Profitability, Growth and Viability of Earnings No Adjustment
Asset Growth Slight Upward
Primary Market Area No Adjustment
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
</Table>

<Page>

RP FINANCIAL, LC.
PAGE 4.20

BASIS OF VALUATION - FULLY-CONVERTED PRICING RATIOS

As indicated in Chapter III, the valuation analysis included in this
section places the Peer Group institutions on equal footing by restating their
financial data and pricing ratios on a "fully-converted" basis. We believe there
are a number of characteristics of MHC shares that make them different from the
shares of fully-converted companies. These factors include: (1) lower
aftermarket liquidity in the MHC shares since less than 50% of the shares are
available for trading; (2) no opportunity for public shareholders to exercise
voting control; (3) the potential pro forma impact of second-step conversions on
the pricing of MHC institutions; (4) the regulatory policies regarding the
dividend waiver policy by MHC institutions; and (5) the middle-tier structure
maintained by most MHCs facilitates the ability for stock repurchases. The above
characteristics of MHC shares have provided MHC shares with different trading
characteristics versus fully-converted companies. To account for the unique
trading characteristics of MHC shares, RP Financial has placed the financial
data and pricing ratios of the Peer Group on a fully-converted basis to make
them comparable for valuation purposes. Using the per share and pricing
information of the Peer Group on a fully-converted basis accomplishes a number
of objectives. First, such figures eliminate distortions that result when trying
to compare institutions that have different public ownership interests
outstanding. Secondly, such an analysis provides ratios that are comparable to
the pricing information of fully-converted public companies, and more
importantly, are directly applicable to determining the pro forma market value
range of the 100% ownership interest in PSB Holdings as an MHC. Lastly, such an
analysis allows for consideration of the potential dilutive impact of dividend
waiver policies adopted by the Federal agencies. This technique is validated by
the investment community's evaluation of MHC pricing, which also incorporates
the pro forma impact of a second-step conversion based on the current market
price.

To calculate the fully-converted pricing information for MHCs, the reported
financial information for the public MHCs must incorporate the following
assumptions, based on completed second step conversions to date: (1) all shares
owned by the MHC are assumed to be sold at the current trading price in a second
step-conversion; (2) the gross proceeds from such a sale were adjusted to
reflect reasonable offering expenses and standard stock based benefit plan
parameters that would be factored into a second-step conversion of MHC
institutions; (3) net

<Page>

RP FINANCIAL, LC.
PAGE 4.21

proceeds are assumed to be reinvested at market rates on a tax effected basis;
and (4) the public ownership interest is adjusted to reflect the pro forma
impact of the waived dividends pursuant to applicable regulatory policy. Book
value per share and earnings per share figures for the public MHCs were adjusted
by the impact of the assumed second step-conversion, resulting in an estimation
of book value per share and earnings per share figures on a fully-converted
basis. Table 4.4 on the following page shows the calculation of per share
financial data (fully-converted basis) for each of the ten public MHC
institutions that form the Peer Group.

VALUATION APPROACHES: FULLY-CONVERTED BASIS

In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, including the
fully-converted analysis described above, we considered the three key pricing
ratios in valuing PSB Holdings' to-be-issued stock -- price/earnings ("P/E"),
price/book ("P/B"), and price/assets ("P/A") approaches -- all performed on a
pro forma basis including the effects of the stock proceeds. In computing the
pro forma impact of the conversion and the related pricing ratios, we have
incorporated the valuation parameters disclosed in PSB Holdings' prospectus for
reinvestment rate, effective tax rate, stock benefit plan assumptions and the
Foundation (summarized in Exhibits IV-7 and IV-8). Pursuant to the minority
stock offering, we have also incorporated the valuation parameters disclosed in
PSB Holdings' prospectus for offering expenses. The assumptions utilized in the
pro forma analysis in calculating the Company's full conversion value were
consistent with the assumptions utilized for the minority stock offering, except
expenses were assumed to equal 2.0% of gross proceeds.

In our estimate of value, we assessed the relationship of the pro forma
pricing ratios relative to the Peer Group, recent conversions and MHC offerings.

RP Financial's valuation placed an emphasis on the following:

- P/E APPROACH. The P/E approach is generally the best indicator of
long-term value for a stock. Given the similarities between the
Company's and the Peer Group's earnings composition and overall
financial condition, the P/E approach was carefully considered in this
valuation. At the same time, recognizing that (1) the earnings

<Page>

RP FINANCIAL, LC.
PAGE 4.23

multiples will be evaluated on a pro forma fully-converted basis for
the Company as well as for the Peer Group; and (2) the Peer Group on
average has had the opportunity to realize the benefit of reinvesting
the minority offering proceeds, we also gave weight to the other
valuation approaches.

- P/B APPROACH. P/B ratios have generally served as a useful benchmark
in the valuation of thrift stocks, particularly in the context of an
initial public offering, as the earnings approach involves assumptions
regarding the use of proceeds. RP Financial considered the P/B
approach to be a valuable indicator of pro forma value taking into
account the pricing ratios under the P/E and P/A approaches. We have
also modified the P/B approach to exclude the impact of intangible
assets (i.e., price/tangible book value or "P/TB"), in that the
investment community frequently makes this adjustment in its
evaluation of this pricing approach.

- P/A APPROACH. P/A ratios are generally a less reliable indicator of
market value, as investors typically assign less weight to assets and
attribute greater weight to book value and earnings. Furthermore, this
approach as set forth in the regulatory valuation guidelines does not
take into account the amount of stock purchases funded by deposit
withdrawals, thus understating the pro forma P/A ratio. At the same
time, the P/A ratio is an indicator of franchise value, and, in the
case of highly capitalized institutions, high P/A ratios may limit the
investment community's willingness to pay market multiples for
earnings or book value when ROE is expected to be low.

The Company will adopt Statement of Position ("SOP") 93-6, which will cause
earnings per share computations to be based on shares issued and outstanding
excluding unreleased ESOP shares. For purposes of preparing the pro forma
pricing analyses, we have reflected all shares issued in the offering, including
all ESOP shares, to capture the full dilutive impact, particularly since the
ESOP shares are economically dilutive, receive dividends and can be voted.
However, we did consider the impact of the adoption of SOP 93-6 in the
valuation.

Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, RP Financial concluded
that as of May 21, 2004, the pro forma market value of PSB Holdings' full
conversion offering, taking into account the dilutive impact of the stock
contribution to the Foundation, equaled $52,500,000 at the midpoint, equal to
5,250,000 shares at $10.00 per share.

1. PRICE-TO-EARNINGS ("P/E"). The application of the P/E valuation
method requires calculating the Company's pro forma market value by
applying a valuation P/E multiple (fully-converted basis) to the pro forma
earnings base. In applying this

<Page>

RP FINANCIAL, LC.
PAGE 4.24

technique, we considered both reported earnings and a recurring earnings
base, that is, earnings adjusted to exclude any one-time non-operating
items, plus the estimated after-tax earnings benefit of the reinvestment of
the net proceeds. The Company's reported earnings equaled $1.417 million
for the twelve months ended March 31, 2004. In deriving PSB Holdings' core
earnings, the only adjustments made to reported earnings were to eliminate
net gains on the sale of loans and net losses on the sale of investments,
which equaled $117,000 and $67,000, respectively, for the twelve months
ended March 31, 2004. As shown below, on a tax effected basis, assuming an
effective marginal tax rate of 39.9% for the gains and losses eliminated,
the Company's core earnings were determined to equal $1.387 million for the
twelve months ended March 31, 2004. (Note: see Exhibit IV-9 for the
adjustments applied to the Peer Group's earnings in the calculation of core
earnings).

<Table>
<Caption>
AMOUNT
-------
($000)

Net income $ 1,417
Gain on sale of loans(1) (70)
Loss on sale of investments(1) 40
--------
Core earnings estimate $ 1,387
</Table>

(1) Tax effected at 39.9%.

Based on PSB Holdings' reported and estimated core earnings, and
incorporating the impact of the pro forma assumptions discussed previously, the
Company's pro forma reported and core P/E multiples (fully-converted basis) at
the $52.5 million midpoint value equaled 38.90 times and 39.78 times,
respectively, which provided for premiums of 53.3% and 43.7% relative to the
Peer Group's average reported and core P/E multiples (fully-converted basis) of
25.37 times and 27.69 times, respectively (see Table 4.5). The implied premiums
reflected in the Company's pro forma P/E multiples take into consideration the
Company's pro forma P/B and P/A ratios. It also should be noted that in
assessing the relative premiums indicated for the Company's P/E multiples, the
P/E multiples for the Peer Group excluded multiples above 35

<Page>

RP FINANCIAL, LC.
PAGE 4.26

times which accounted for half of the Peer Group companies and are shown as "NM"
in Table 4.5.

2. PRICE-TO-BOOK ("P/B"). The application of the P/B valuation method
requires calculating the Company's pro forma market value by applying a
valuation P/B ratio, as derived from the Peer Group's P/B ratio (fully-converted
basis), to PSB Holdings' pro forma book value (fully-converted basis). Based on
the $52.5 million midpoint valuation, PSB Holdings' pro forma P/B and P/TB
ratios both equaled 76.96%. In comparison to the average P/B and P/TB ratios for
the Peer Group of 95.38% and 99.00%, the Company's ratios reflected a discount
of 19.3% on a P/B basis and a discount of 22.3% on a P/TB basis. RP Financial
considered the discounts under the P/B approach to be reasonable, in light of
the previously referenced valuation adjustments, the nature of the calculation
of the P/B ratio which mathematically results in a ratio discounted to book
value and the resulting premium pricing ratios indicated under the earnings
approach.

3. PRICE-TO-ASSETS ("P/A"). The P/A valuation methodology determines
market value by applying a valuation P/A ratio (fully-converted basis) to the
Company's pro forma asset base, conservatively assuming no deposit withdrawals
are made to fund stock purchases. In all likelihood there will be deposit
withdrawals, which results in understating the pro forma P/A ratio which is
computed herein. At the midpoint of the valuation range, PSB Holdings' full
conversion value equaled 17.70% of pro forma assets. Comparatively, the Peer
Group companies exhibited an average P/A ratio (fully-converted basis) of
22.21%, which implies a discount of 20.3% has been applied to the Company's pro
forma P/A ratio (fully-converted basis).

COMPARISON TO RECENT OFFERINGS

As indicated at the beginning of this chapter, RP Financial's analysis
of recent conversion and MHC offering pricing characteristics at closing and in
the aftermarket has been limited to a "technical" analysis and, thus, the
pricing characteristics of recent conversion offerings can not be a primary
determinate of value. Particular focus was placed on the P/TB approach in this
analysis, since the P/E multiples do not reflect the actual impact of
reinvestment

<Page>

RP FINANCIAL, LC.
PAGE 4.27

and the source of the stock proceeds (i.e., external funds vs. deposit
withdrawals). The five recently completed MHC offerings closed at a
price/tangible book ratio of 88.5% (fully-converted basis) and, on average,
appreciated 29.0% during the first week of trading and then reflected lower
price appreciation of 17.6% after one month of trading. In comparison, the
Company's P/TB ratio of 77.0% at the midpoint value reflects an implied discount
of 13.0% relative to the average closing P/TB ratio of the recent MHC offerings.
At the top of the super range, the Company's P/TB ratio of 84.3% reflected an
implied discount of 4.7% relative to the average closing P/TB ratio of the
recent MHC offerings. Of the five recent MHC offerings, only K-Fed Bancorp and
Clifton Savings Bancorp were traded on NASDAQ. Based on K-Fed Bancorp's and
Clifton Savings Bancorp's average current P/TB ratio of 99.4% (fully-converted
basis), the Company's P/TB ratio at the midpoint reflects an implied discount of
22.6% and at the top of the super range reflects an implied discount of 15.2%.

VALUATION CONCLUSION

Based on the foregoing, it is our opinion that, as of May 21, 2004, the
estimated aggregate pro forma market value of the shares to be issued
immediately following the conversion, both shares issued publicly as well as to
the MHC, equaled $52,500,000 at the midpoint, equal to 5,250,000 shares offered
at a per share value of $10.00. Pursuant to conversion guidelines, the 15%
offering range indicates a minimum value of $44.625 million and a maximum value
of $60.375 million. Based on the $10.00 per share offering price determined by
the Board, this valuation range equates to total shares outstanding of 4,462,500
at the minimum and 6,037,500 at the maximum. In the event the appraised value is
subject to an increase, the aggregate pro forma market value may be increased up
to a supermaximum value of $69.431 million without a resolicitation. Based on
the $10.00 per share offering price, the supermaximum value would result in
total shares outstanding of 6,943,125. The Board of Directors has established a
public offering range such that the public ownership of the Company will
constitute a 44.5% ownership interest prior to the issuance of shares to the
Foundation. Accordingly, the offering to the public of the minority stock will
equal $19.858 million at the minimum, $23.363 million at the midpoint, $26.867
million at the maximum and $30.897 million at the supermaximum of the valuation
range. Based on the public offering range and

<Page>

RP FINANCIAL, LC.
PAGE 4.28

inclusive of the shares issued to the Foundation, equal to 4.0% of the offering
shares, the public ownership of shares will represent 46.28% of the shares
issued throughout the valuation range. The pro forma valuation calculations
relative to the Peer Group (fully-converted basis) are shown in Table 4.5 and
are detailed in Exhibit IV-7 and Exhibit IV-8; the pro forma valuation
calculations relative to the Peer Group based on reported financials are shown
in Table 4.6 and are detailed in Exhibits IV-10 and IV-11.