U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934


For quarter ended June 30, 2003		Commission File Number

THE PB FINANCIAL SERVICES CORPORATION

(Exact name of registrant as specified in its charter)


Georgia		58-2466560

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

9570 Medlock Bridge Road
Duluth, Georgia 30097
(Address of Principal Executive
Offices, including Zip Code)

(770) 814-8100

(Issuer’s telephone number, including area code)

Not Applicable
(Former name, former address and former
fiscal year, if changed since last report)

Check whether the issuer: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirement for the past 90 days.

Yes [X] No [ ]

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the last practicable date.

Common Stock, $5.00 par value, 942,176 shares as of August 14, 2003

TABLE OF CONTENTS


		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF EARNINGS
		CONSOLIDATED STATEMENTS OF EARNINGS
		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENTS OF CASH FLOW
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	ITEM 3. Controls and Procedures
Part II Other Information
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
SECTION 302 CERTIFICATION OF CEO AND CFO
SECTION 906 CERTIFICATION OF CEO AND CFO

INDEX


			Page
Part I	Financial Information
		Consolidated Balance Sheets June 30, 2003 (Unaudited) and December 31, 2002		3
		Consolidated Statements of Earnings Six months Ended June 30, 2003 and 2002 (Unaudited)		4
		Consolidated Statements of Earnings Three months Ended June 30, 2003 and 2002 (Unaudited)		5
		Consolidated Statements of Comprehensive Income Six months Ended June 30, 2003 and 2002 (Unaudited)		6
		Consolidated Statements of Cash Flow Six months Ended June 30, 2003 and 2002 (Unaudited)		7
		Notes to Consolidated Financial Statements		8-12
		Management’s Discussion and Analysis of Financial Condition and Results of Operations		12-17
		Controls and Procedures		17
Part II	Other Information
		Item 1. Legal Proceedings		18
		Item 2. Changes in Securities and Use of Proceeds		18
		Item 3. Defaults Upon Senior Securities		18
		Item 4. Submission of Matters to a Vote of Security Holders		18
		Item 5. Other Information		18
		Item 6. Exhibits and Reports on Form 8-K		19
		Signature		20

Item 1. Financial Statements

THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2003 and December 31, 2002


					June 30, 2003		December 31,
					(Unaudited)		2002

ASSETS
	Cash and due from banks				$	5,457,025	$	8,092,709
	Interest bearing deposits with banks					219,000		647,729
	Federal funds sold					5,106,000		6,812,000
	Investment securities available for sale, at market value					37,691,233		17,071,978
	Other investments					725,000		670,600
	Loans, net					153,536,297		139,178,889
	Property and equipment, net					4,018,626		4,031,909
	Other assets					4,096,469		3,767,038

TOTAL ASSETS					$	210,849,650	$	180,272,852

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
			Deposits
				Noninterest-bearing demand		23,131,920		15,825,206
				Interest-bearing demand and money market		44,197,340		34,295,234
				Savings		14,956,475		7,767,153
				Time deposits of $100,000 or more		47,535,034		49,870,527
				Other time deposits		55,722,333		48,230,919

				Total deposits		185,543,102		155,989,039
			Repurchase agreements			2,015,902		1,379,781
			Borrowings			6,400,000		6,400,000
			Trust Preferred Securities			4,000,000		4,000,000
			Other liabilities			421,365		666,748

				Total liabilities		198,380,369		168,435,568

Stockholders’ equity:
		Common stock, $5.00 par value, 10,000,000 shares authorized 942,176 shares issued and outstanding				4,710,880		4,710,880
		Additional paid in capital				5,295,775		5,295,775
		Retained earnings				2,133,996		1,550,530
		Accumulated other comprehensive income				328,630		280,099

				Total stockholders’ equity		12,469,281		11,837,284

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY					$	210,849,650	$	180,272,852

** See accompanying notes to consolidated financial statements.

THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
For the Six Months Ended June 30, 2003 and 2002
(Unaudited)


			Six Months		Six Months
			Ended		Ended
			June 30, 2003		June 30, 2002

INTEREST INCOME
	Interest and fees on loans		$	4,782,876	$	3,842,213
	Interest on investment securities			372,055		381,451
	Interest on federal funds sold			46,904		47,305

		Total interest income		5,201,835		4,270,969

INTEREST EXPENSE
	Interest-bearing demand and money market			132,877		195,357
	Savings			94,435		6,563
	Time deposits of $100,000 or more			693,038		758,409
	Other time deposits			753,131		657,763
	Repurchase agreements			8,544		16,371
	Trust Preferred			108,255		—
	Other borrowings			65,323		54,244

		Total interest expense		1,855,603		1,688,707

		Net interest income		3,346,232		2,582,262
PROVISION FOR LOAN LOSSES				351,831		196,207

		Net interest income after provision for loan losses		2,994,401		2,386,055

OTHER OPERATING INCOME
	Service charges on deposit accounts			160,737		166,539
	Mortgage referral commissions			282,305		233,415
	Gain on Sale of OREO			73,459		—
	Other income			180,822		137,768

		Total other income		697,323		537,722

OTHER OPERATING EXPENSE
	Salaries and benefits			1,489,921		1,255,107
	Occupancy and FF&E Expense			332,999		293,832
	Other expense			910,132		653,406

		Total other operating expense		2,733,052		2,202,345

EARNINGS BEFORE INCOME TAXES				958,672		721,432
INCOME TAXES				375,206		251,246

NET EARNINGS			$	583,466	$	470,186

BASIC EARNINGS PER COMMON SHARE			$	0.62	$	0.50

DILUTED EARNINGS PER COMMON SHARE			$	0.57	$	0.47

THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
For the Three Months Ended June 30, 2003 and 2002
(Unaudited)


			Three Months		Three Months
			Ended		Ended
			June 30, 2003		June 30, 2002

INTEREST INCOME
	Interest and fees on loans		$	2,326,544	$	2,052,750
	Interest on investment securities			185,017		205,389
	Interest on federal funds sold			31,521		28,851

		Total interest income		2,543,082		2,286,990

INTEREST EXPENSE
	Interest-bearing demand and money market			72,669		97,044
	Savings			53,680		5,976
	Time deposits of $100,000 or more			326,794		380,109
	Other time deposits			375,112		370,679
	Repurchase agreements			4,387		6,531
	Trust Preferred			54,128		—
	Other borrowings			32,809		28,837

		Total interest expense		919,579		889,176

		Net interest income		1,623,503		1,397,814
PROVISION FOR LOAN LOSSES				98,956		121,842

		Net interest income after provision for loan losses		1,524,547		1,275,972

OTHER OPERATING INCOME
	Service charges on deposit accounts			87,627		83,086
	Mortgage referral commissions			164,049		84,564
	Gain on sale of OREO			73,459		—
	Other income			114,271		88,399

		Total other income		439,406		256,049

OTHER OPERATING EXPENSE
	Salaries and benefits			835,823		618,483
	Occupancy and FF&E Expense			190,763		169,120
	Other expense			497,748		333,710

		Total other operating expense		1,524,334		1,121,313

EARNINGS BEFORE INCOME TAXES				439,619		410,708
INCOME TAXES				172,814		144,680

NET EARNINGS			$	266,805	$	266,028

BASIC EARNINGS PER COMMON SHARE			$	0.28	$	0.28

DILUTED EARNINGS PER COMMON SHARE			$	0.26	$	0.27

** See accompanying notes to consolidated financial statements

THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Six Months Ended June 30, 2003 and 2002
(Unaudited)


		Six Months Ended			Six Months Ended
		June 30, 2003			June 30, 2002

Net earnings		$	583,466		$	470,186
Other comprehensive income, net of tax:
	Unrealized gain on securities available for sale		73,532			249,324
	Income tax effect		(25,001	)		(84,770	)

Unrealized gain arising during the period, net of tax:			48,531			164,554

Other comprehensive income			48,531			164,554

Comprehensive income		$	631,997		$	634,740

** See accompanying notes to consolidated financial statements

THE PB FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
Six Months Ended June 30, 2003 and 2002
(Unaudited)


					Six Months Ended			Six Months Ended
					June 30, 2003			June 30, 2002

Cash flows from operating activities
	Net earnings				$	583,466		$	470,186
	Adjustments to reconcile net earnings to net cash provided by operating activities:
				Depreciation of premises and equipment		168,893			150,308
				Amortization of investment securities available for sale		83,120			22,987
				Provision for loan losses		351,831			196,207
				Change in net deferred loan fees		(82,609	)		5,173
				Change in other assets		(77,432	)		(85,432	)
				Change in other liabilities		(245,383	)		(111,994	)

	Net cash provided by operating activities					781,886			647,435

Cash flows from investing activities
	Purchases of cash surrender value life insurance					(277,000	)		(277,000	)
	Purchases of investment securities available for sale					(24,561,486	)		(6,135,634	)
	Principal repayments of investment securities available for sale					3,932,643			1,098,241
	Purchases of other investment securities					(54,400	)		—
	Loans originated, net of principal repayments					(14,626,630	)		(20,152,574	)
	Acquisition of premises and equipment					(155,610	)		(146,727	)

Net cash used by investing activities						(35,742,483	)		(25,613,694	)

Cash flows from financing activities
	Increase in borrowings					—			1,216,000
	Net change in repurchase agreements					636,121			(2,211,565	)
	Net increase in demand, money market and savings deposits					24,398,142			11,483,042
	Time deposits accepted, net of repayments					5,155,921			21,374,835
	Proceeds from issuance of common stock					—			358,379

Net cash provided by financing activities						30,190,184			32,220,691

Net increase in cash and cash equivalents						(4,770,413	)		7,254,432
Cash and cash equivalents at beginning of period						15,552,438			11,628,756

Cash and cash equivalents at end of period					$	10,782,025		$	18,883,188

Supplemental disclosures of cashflow information:
		Cash paid during the year for:
			Interest		$	1,915,950		$	1,702,741
			Income Taxes		$	658,000		$	323,750
		Noncash investing and financing activities:
			Change in accumulated other comprehensive income, net of tax		$	48,531		$	164,554

** See accompanying notes to consolidated financial statements

THE PB FINANCIAL SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – Basis of Presentation

The consolidated financial statements include the financial statements of The PB Financial Services Corporation and its wholly owned subsidiary, The Peachtree Bank (collectively called the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements for The PB Financial Services Corporation have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-QSB. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three-month period ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information, refer to the financial statements and footnotes included in the Bank’s annual report included on Form 10-KSB for the year ended December 31, 2002.

Critical Accounting Policies

The Company’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. Many of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of the specific accounting guidance. A description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2002 Annual Report to Shareholders. The following is a summary of the more judgmental and complex accounting policies of the Company.

Some of the Company’s assets and liabilities are recorded using various valuation techniques that require significant judgment as to recoverability. The collectibility of loans is reflected through the Company’s estimate of the allowance for loan losses. The Company performs periodic and systematic detailed reviews of its lending portfolio to assess overall collectability. In addition, certain assets and liabilities are reflected at their estimated fair value in the consolidated financial statements. Such amounts are based on either quoted market prices or estimated values derived by the Company utilizing dealer quotes or market comparisons.

Use of Estimates

Management of the Company has made a number of estimates and assumptions relating to reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

Note 2 – Organization of the Business

The Bank was organized under the laws of the State of Georgia as a state-chartered commercial bank and began its banking operations on October 5, 1998. On July 15, 1999, the Bank became a subsidiary of The PB Financial Services Corporation (the “Company”) as a result of a tax-free reorganization in which the stockholders of the Bank exchanged all outstanding Bank stock for stock in the Company.

The Bank’s main office is located in Duluth, Georgia in North Fulton County. The Bank currently has a branch in Lawrenceville, Georgia operating under the trade name of “The Peachtree Bank of Gwinnett” and another branch in Dunwoody, Georgia operating under the trade name of “The Peachtree Bank of Dunwoody.” In July 2001, the Bank received Trust Powers from the Georgia Department of Banking and Finance and the FDIC. The Trust and Financial Services Division of the Bank began operations during the first quarter of 2002. During the second quarter of 2003, the Bank opened two loan production offices, one in Roswell, Georgia and another in Cumming, Georgia. The Roswell, Georgia location is expected to be moved to a permanent facility and begin operations as a full service branch sometime during the fourth quarter.

Note 3 – Loans and Allowance for Loan Losses

Loans are reported at the gross amount outstanding, reduced by net deferred loan fees and a valuation allowance for loan losses. Interest income is recognized over the term of the loans based on the unpaid daily principal amount outstanding. Loan origination fees are deferred and recognized as income over the actual life of the loan using the interest method. Loans are generally placed on nonaccrual status when the payment of principal and/or interest is past due 90 days or more.

The following is an analysis of the allowance for loan losses for the six months ended June 30, 2003 and 2002:


		2003		2002

Balance, beginning of period		$	1,382,676	$	981,639
Provision for loan losses			351,831		196,207
Less:
	Charge-offs		223,432		10,682
	Recoveries		—		—

Net charge-offs			223,432		10,682

Balance, end of period		$	1,511,075	$	1,167,164

Note 4 – Earnings Per Share

Basic earnings per share is based on the weighted average number of common shares outstanding during the period while the effects of potential shares outstanding during the period are included in diluted earnings per share. The average market price during the year is used to compute equivalent shares.

The reconciliation of the amounts used in the computation of both “basic earnings per share” and “diluted earnings per share” for the six months ended June 30, 2003 is as follows:

For the six months ended June 30, 2003


		Net Earnings		Common Shares		Amount Per Share

Basic earnings per share		$	583,466		942,176	$	0.62
Effect of dilutive securities:
	Stock options				73,218

Diluted earnings per share		$	583,466		1,015,394	$	0.57

The reconciliation of the amounts of both “basic earnings per share” and “diluted earnings per share” for the six months ended June 30, 2002 is as follows:

For the six months ended June 30, 2002


		Net Earnings		Common Shares		Amount Per Share

Basic earnings per share		$	470,186		938,009	$	0.50
Effect of dilutive securities:
	Stock options				59,778

Diluted earnings per share		$	470,186		997,787	$	0.47

The reconciliation of the amounts used in the computation of both “basic earnings per share” and “diluted earnings per share” for the three months ended June 30, 2003 is as follows:

For the three months ended June 30, 2003


		Net Earnings		Common Shares		Amount Per Share

Basic earnings per share		$	266,805		942,176	$	0.28
Effect of dilutive securities:
	Stock options				87,997

Diluted earnings per share		$	266,805		1,030,173	$	0.26

The reconciliation of the amounts of both “basic earnings per share” and “diluted earnings per share” for the three months ended June 30, 2002 is as follows:

For the three months ended June 30, 2002


		Net Earnings		Common Shares		Amount Per Share

Basic earnings per share		$	266,028		941,576	$	0.28
Effect of dilutive securities:
	Stock options				59,722

Diluted earnings per share		$	266,028		1,001,298	$	0.27

Note 5 – Stock-Based Compensation

The Company has an employee stock option plan and a director stock option plan. The plans were adopted for the benefit of directors and key officers and employees in order that they may purchase Company stock at a price equal to the fair market value on the date of grant. A total of 200,000 shares were reserved for possible issuance under the employee stock option plan. A total of 157,612 shares were reserved for possible issuance under the director stock option plan. The options vest over periods of time as specified in the option agreements and expire after ten years. During the six months ended June 30, 2003, 7,500 options were granted and no options were cancelled or exercised.

At June 30, 2003, a total of 255,198 options were outstanding and 207,848 option shares were exercisable at a weighted average option price per share of $10.01.

As allowed under GAAP, no compensation expense has been recognized related to these plans. Had compensation cost been determined based upon the fair value of the options at the grant dates, the Company’s net earnings and net earnings per share would have been reduced to the proforma amounts indicated below.


		Six Months
			Ended

		June 30, 2003

Net earnings	As reported	$	583,466
	Effect of stock option grant, net of tax		(19,273	)

	Proforma	$	564,193

Basic earnings per share	As reported	$	.62
	Proforma	$	.60
Diluted earnings per share	As reported	$	.57
	Proforma	$	.56

The weighted average grant-date fair value of options granted in 2003 and 2002 was $4.35. The fair value of each option is estimated on the date of grant using the Minimum Value options-pricing model with the following weighted average assumptions used for grants in 2003 and 2002: dividend yield of 0%, risk-free interest rate of 4% and an expected life of ten years. The options have a weighted average remaining contractual life of approximately six years.

Note 6 – Shareholders’ Equity

During the first quarter 2002, the company issued 26,332 shares of common stock through a private placement at a price of $13.61 per share. The private placement resulted in a total of 166,201 share of common stock (139,869 shares sold in 2001), with

total proceeds of $2,261,996. The proceeds of this offering were used to increase the Bank’s regulatory capital ratios and for general corporate purposes.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of certain significant factors which have affected the Company’s financial position and operating results during the periods included in the accompanying consolidated financial statements.

This discussion contains certain forward-looking statements including statements relating to present or future trends or factors generally affecting the banking industry and specifically affecting The PB Financial Corporation’s operations, markets and products. Without limiting the foregoing, the words “anticipates”, “believes”, “intends”, “expects” or similar expressions are intended to identify forward-looking statements. These forward-looking statements involve certain risks and uncertainties. Actual results could differ materially from those projected for many reasons including, without limitation, changing events and trends that have influenced the Company’s assumptions. These trends and events include (1) changes in the interest rate environment which may reduce margins, (2) non-achievement of expected growth, (3) less favorable than anticipated changes in national and local business environments and securities markets (4) adverse changes in the regulatory requirements affecting the Company, (5) greater competitive pressures among financial institutions in the Company’s market, and (6) greater than expected loan losses. Additional information and other factors that could affect future financial results are included in the Company’s annual report included on Form 10-KSB for the year ended December 31, 2002.

FINANCIAL CONDITION

At June 30, 2003, the Company’s total assets increased $30.6 million or 17.0% from December 31, 2002. Net loans, the primary category of assets, grew from $139.2 million to $153.5 million, an increase of $10.4 million. The majority of this increase was due to loan growth of approximately $4.5 million in the commercial loan portfolio at the Duluth office and $3.7 million increase in the commercial loan portfolio of our expanded Gwinnett office. Investment securities increased $20.6 due to excess liquidity from a significant increase in deposit accounts. Approximately $16.0 million was used to purchase a short term US Treasury Bill that matured in July 2003 with the proceeds being used to fund expected loan demand in the third quarter.

Deposits increased $29.6 million to $185.5 million during 2003. The majority of this deposit growth was in interest bearing demand and money market accounts which increased $9.9 million, certificate of deposit accounts which increased $5.2 million and savings deposits which increased $7.2 million. Savings deposits increases were primarily attributable to the “The Peachtree Prime” account. This product is available for individuals and businesses with a rate of Prime less 2.5%. The majority of demand deposit growth is due to a new deposit relationship which has resulted in an average monthly balance of $5.0 million in non interest bearing accounts and $10.0 million in interest bearing demand. Time deposit growth is attributed to The Peachtree Bank offering a competitive interest rate in order to fund loan demand. The ratio of loans to deposits was 83.6% at June 30, 2003 and 90.0% at June 20, 2002.

Investments

The investment portfolio consists of federal funds sold, U.S. Government agency obligations, corporate bonds, state and county municipals and Federal Home Loan Bank stock, which provide the Bank with a source of liquidity and a long-term and relatively stable source of income. Additionally, the investment portfolio provides a balance to interest rate and credit risk in other categories of the balance sheet while providing a vehicle for the investment of available funds and furnishing liquidity to The Peachtree Bank.

Loans and Allowance for Loan Losses

At June 30, 2003, gross loans amounted to $155.1 million compared to $140.9 million at December 31, 2002, an increase of $14.2 million. Average loans represented 80.9% of total average earning assets for the six months ended June 30, 2003, compared to 88.3% for the year ended December 31, 2002.

Major classifications of loans are as follows:


		June 30,		Percent of			December 31,		Percent of
		2003		Total			2002		Total

		(In Thousands)
Commercial		$	24,922		16.04	%	$	24,517		17.41	%
Real estate-construction			50,483		32.48	%		44,309		31.46	%
Real estate-commercial and residential			66,478		42.77	%		59,851		42.48	%
Installment loans to individuals			8,918		5.74	%		8,038		5.71	%
Real estate-home equity			4,620		2.97	%		4,138		2.94	%

Total loans			155,421		100.00	%		140,853		100.00	%
Less: Allowance for loan losses			1,511					1,383
	Net deferred loan fees		374					291

Loans, net		$	153,536				$	139,179

The allowance for loan losses reflects management’s assessment and estimate of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. The Bank periodically analyzes the loan portfolio in an effort to review asset quality and to establish an allowance for loan losses that management believes will be adequate in light of anticipated risks and loan losses. In assessing the adequacy of the allowance, size, quality and risk of loans in the portfolio are reviewed.

An analysis of the credit quality of the loan portfolio and the adequacy of the allowance for loan losses is prepared by management and presented to the Board of Directors on a quarterly basis. The Bank uses a methodology whereby all loans are assigned a risk rating of one (superior quality) to nine (loss). Loans are categorized as one of the nine risk grades based on management’s assessment of the overall credit quality of the loan, including payment history, financial position of the borrower, underlying collateral and

internal credit review. The reserve percentages are determined by management based on its evaluation of losses inherent in the various risk grades. A required reserve percentage is assigned for loans within that risk rating. In addition, the Bank has engaged an outside loan review consultant to perform, and report on an annual basis, an independent review of the quality of the loan portfolio relative to the accurateness of the Bank’s loan grading system. The allowance for loan losses is established through charges to expense in the form of a provision for loan losses. Loan losses and recoveries are charged and credited directly to the allowance. The allowance for loan losses was .98% of total loans outstanding at June 30, 2003 and December 31, 2002.

The Bank’s allowance for loan losses is also subject to regulatory examinations and determinations as to adequacy, which may take into account such factors as the methodology used to calculate the allowance for loan losses and the size of the allowance for loan losses compared to a group of peer banks identified by the regulators. During their routine examinations of banks, the Federal Reserve and the Department of Banking and Finance may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.

While it is the Bank’s policy to charge off in the current period loans for which a loss is considered probable, there are additional risks of future losses which cannot be quantified precisely or attributed to particular loans or classes of loans. Because these risks include the state of the economy, management’s judgment as to the adequacy of the allowance is necessarily approximate and imprecise. After review of all relevant matters affecting loan collectability, management believes that the allowance for loan losses is appropriate.

At June 30, 2003, there were no non-accrual loans and as of December 31, 2002, there was one loan on non-accrual in the amount of $588,204. Total loans past due greater than 30 days, including non-accrual loans, at June 30, 2003, were approximately $2,938,000 or 1.89 % of total loans compared to $1,575,000 or 1.12% of total loans as December 31, 2002.

Liquidity

The Peachtree Bank must maintain, on a daily basis, sufficient funds to cover the withdrawals from depositors’ accounts and to supply new borrowers with funds. To meet these obligations, the Bank keeps cash on hand, maintains account balances with its correspondent banks, and purchases and sells federal funds and other short-term investments. Asset and liability maturities are monitored in an attempt to match these to meet liquidity needs. It is the policy of the Bank to monitor its liquidity to meet regulatory requirements and the local funding requirements. The Bank calculates Liquidity Ratio by calculating the ratio of net cash, short term and marketable assets to deposits and short-term liabilities. As of June 30, 2003, the ratio was 24%, which is within the Banks policy that requires a Liquidity Ratio of 15%.

In addition, the Bank has arrangements with correspondent banks for short-term unsecured advances up to $4,000,000. A minimal amount was borrowed under these arrangements in 2003 and 2002.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND 2002

The Company reported net income for the six months ended June 30, 2003 of $583,466 compared to $470,186 for the same period one year ago. The increase in net interest income was the largest reason for the increase in net income. Net interest income for the six months ended June 30, 2003 was $3,346,232 compared to $2,582,262 for the same period in 2002, with the increase attributed to a greater volume of interest earning assets that earn a higher interest rate than the rate paid on interest bearing liabilities. The increase in interest income due to volume of average earning assets was partially offset by the decrease in the yields for average earning assets. As of June 30, 2003, the Company’s net interest margin was 3.74% compared to 4.04% for June 30, 2002. As of June 30, 2003, the yield on average earning assets was 5.52% compared to 6.45% for June 30, 2002. The decrease in the yield on average earning assets can be attributed to the reductions in the prime lending rate of the Bank.

The provision for loan losses for the six months ended June 30, 2003 was $351,831 compared to $196,207 for 2002. The provision for loan losses reflects management’s estimate of potential loan losses inherent in the portfolio and the creation of an allowance for loan losses adequate to absorb such losses. The allowance for loan losses represented approximately 1.0% of total loans outstanding at June 30, 2003 and 2002.

Non interest income for the six months ended June 30, 2003 was $697,323 compared to $537,722 for the same period one year ago. The largest component of this increase was a $73,459 gain recognized on sale of two properties that were foreclosed on April 1, 2003 and subsequently sold during the second quarter. Additionally, the increase in non interest income is attributable to the increase in mortgage referral fee commissions of $49,000, a result of the increase in the number mortgage loans originated by the Bank. Additionally, the trust department recognized approximately $25,000 in income compared to $7,000 in the previous year and the cash surrender value of life insurance increased $15,000.

Non-interest expense was $2,733,052 as of June 30, 2003, compared to $2,202,345 for the same period one year ago. The largest component of non-interest expense is salaries and benefits, which increased to $1,498,921 for the three-month period ended June 30, 2003 compared to $1,255,107 for the same period in the prior year. This increase was primarily due the Buford branch relocating to Lawrenceville during the second quarter, 2003. In conjunction with this move an additional six employees were added to staff the larger location. Also, the Bank opened two loan production offices during the second quarter which resulted in an additional six salaried employees and fourteen commissioned based mortgage employees.

In addition, occupancy and FF&E expense increased $39,167 from $293,832 for the six months ended June 30, 2002 to $332,999 for the six months ended June 30, 2003. This increase is primarily attributed to relocation of our Gwinnett office to a larger location and the opening of two loan production offices.

Other expenses increased $256,726 from $653,406 as of June 30, 2002 to $910,132 as of June 30, 2003. Other operating expenses associated with the new locations were

approximately $10,000. Other factors contributing to the increase in other expenses include a $35,000 increase in cash surrender value life insurance benefit expense and a $48,000 increase in directors fees (directors fees increased from $500 per month to $1,000 and committee fees increased to $300 per meeting). Additionally, legal fees increase $23,000 due to an increased number of loan charge offs during 2003 and other various legal costs. In addition, due to the increased number of branch locations, the Bank has experienced such increases as $19,000 in data processing and $10,000 in meals and entertainment. During the second quarter 2003, the Company incurred approximately $22,000 in other real estate owned expenses for loans that foreclosed in April 2003.

Income tax expense for June 30, 2003 was $375,206 compared to $251,246 for the same period one year ago. For the six month period ended June 30, 2003 and 2002 the Company used an effective tax rate of 39.1% and 34.8%, respectively.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002

The Company reported net income for the three months ended June 30, 2003 of $266,805 compared to $266,028 for the same period one year ago. Net interest income for the three months ended June 30, 2003 was $1,623,503 compared to $1,397,814 for the same period in 2002.

The provision for loan losses for the three months ended June 30, 2003 was $98,956 compared to $121,842 for 2002. The provision for loan losses reflects management’s estimate of potential loan losses inherent in the portfolio and the creation of an allowance for loan losses adequate to absorb such losses. The allowance for loan losses represented approximately 1.0% of total loans outstanding at June 30, 2003 and 2002.

Non interest income for the three months ended June 30, 2003 was $439,406 compared to $256,049 for the same period one year ago. The largest component of this increase was a $73,459 gain recognized on the sale of two properties that were foreclosed on April 1, 2003 and sold during the quarter ended June 30, 2003. The increase in non interest income was also due to the increase in mortgage referral fee commissions of $79,000, a result of the increase in the number mortgage originations at the Bank and the trust department which recognized approximately $13,000 for the same three month period.

Non-interest expense was $1,524,334 as of June 30, 2003, compared to $1,121,313 for the same period one year ago. The largest component of non-interest expense is salaries and benefits, which increased to $835,823 for the three-month period ended June 30, 2003 compared to $618,483 for the same period in the prior year. This increase is due to an increase in the number of employees as a result of recent branch relocation and formation. In addition, occupancy and FF&E expense increased $21,643 from $169,120 for the three months ended June 30, 2002 to $190,763 for the three months ended June 30, 2003.

Other expenses increased $164,038 from $333,710 at June 30, 2002 to $497,748 as of June 30, 2003. The increase is attributable to various items including operating expenses associated with the new locations totaling approximately $10,000, a $12,000 increase in cash surrender value life insurance benefit expense, a $15,000 increase in legal fees and

a $25,000 increase in directors fees (directors fees increased from $500 per month to $1,000 and committee fees increased to $300 per meeting). Additionally, due to the increased number of branch locations, the Bank has experienced such increases as $14,000 in data processing, $5,000 in donations and charity, $8,000 in dues and subscriptions, $6,000 in meals and entertainments and $6,000 in postage and freight. During the second quarter 2003, the Company incurred approximately $16,000 in Other real estate owned expenses for loans that foreclosed in April 2003.

Capital Resources

At June 30, 2003, the capital ratios of the Bank were adequate based on regulatory minimum capital requirements. The minimum capital requirements for banks and bank holding companies require a leverage capital to total assets ratio of at least 4% and total capital to risk-weighted assets of 8%. The following table presents the Bank’s and Company’s compliance with regulatory capital requirements at June 30, 2003.

In December of 2002, the Company participated in an offering of trust preferred securities in the amount of $4 million. The Company has treated the trust preferred securities as Tier 1 capital to the extent allowed for regulatory purposes, and the remainder as Tier 2 capital.


		The Peachtree Bank			Consolidated
Leverage capital ratio:			8.28	%		8.47	%
Risk-based capital ratios:
	Tier 1 capital		9.38	%		9.60	%
	Total capital		10.28	%		10.50	%

ITEM 3. Controls and Procedures

Within 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) that is required to be included in the Company’s periodic filings with the Securities and Exchange Commission. There have been no significant changes in the Company’s internal controls or, to the Company’s knowledge, in other factors that could significantly affect those internal controls subsequent to the date the Company carried out its evaluation, and there have been no corrective actions with respect to significant deficiencies and material weaknesses.

Part II Other Information

			ITEM 1. LEGAL PROCEEDINGS

			The Company is party to claims and lawsuits arising in the course of their normal business activities. Although the ultimate outcome of these suits cannot be ascertained at this time, it is the opinion of management and counsel that none of these matters, when resolved, will have a material effect on the Company’s consolidated results of operations or financial position.

			ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

			None

			ITEM 3. DEFAULTS UPON SENIOR SECURITIES

			None

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

			At the Company’s Annual Meeting of Shareholders held on April 29, 2003, the following Class II directors were reelected as directors of The PB Financial Services Corporation and were approved to serve an additional three year term ending in 2006.


	Votes For		Votes Withheld

Charles L. Douglas		540,004		3,560
Dexter R. Floyd		540,004		3,560
J. Edwin Howard		540,004		3,560
John J. Howard		540,004		3,560

At the Company’s Annual Meeting of Shareholders held on April 29, 2003, The Peachtree Bank’s 1998 Stock Option plan was amended to increase the number of shares reserved for issuance under the Plan from 100,000 to 200,000 and to extend the Company’s commitment to issue shares of its common stock upon exercise of the options that may be issued under the Plan.


Votes For	Votes Against		Votes Withheld

500,529		24,660		18,375

			ITEM 5. OTHER INFORMATION

			None

			ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

	(a)		Exhibits

			Exhibit 31

			CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

			Exhibit 32

			CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

	(b)		Report on Form 8-K

There were no reports on Form 8-K filed during the quarter ended June 30, 2003.

SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE PB FINANCIAL SERVICES CORPORATION


		August 14, 2003		/s/ MONTY G. WATSON

				Monty G. Watson
				President and Chief Executive
				Officer (Principal Executive Officer)

		August 14, 2003		/s/ KELLY J. JOHNSON

				Kelly J. Johnson
				Chief and Principal Financial Officer
				(Principal Financial and Principal
				Accounting Officer)

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P B FINANCIAL SERVICES CORP 10-Q