I worked out another way to do it also, but no sure if it is correct but seems to work ok for me
b0=portb
b1=b0 & %11110000
b2=b1/16
That will definitely work but, b0 = PORTB >> 4 gives you the same result, uses less program code space, and saves you 2 RAM variables.

also can you please explain
OPTION_REG.7 = 0 ' Pull-ups on for inputs
I am currently using external resistors for pull-ups and I would like to get rid of them if I can
On most PIC's (check your datasheet) bit #7 of the OPTION_REG register turns ON or OFF PORTB internal pull-ups. OPTION_REG.7 = 0 turns them ON. OPTION_REG.7 = 1 turns them OFF.

PORTB pins set to inputs will have the weak internal pull-ups. PORTB pins configured as outputs are not affected.