================================================================================
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB
(Mark One)

[X]  Quarterly  report  under Section 13 or 15(d) of the Securities Exchange Act
     of 1934

For the quarterly period ended September 30, 2001

[ ]  Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from ___________ to _____________

Commission file number   333-44161
                         ---------

                               PSB BANCGROUP, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)


             Florida                                             59-3454146
             -------                                             ----------
(State or Other Jurisdiction                                  (I.R.S. Employer
of Incorporation or Organization)                            Identification No.)

                             500 South First Street
                            Lake City, Florida 32025
                            ------------------------
                    (Address of Principal Executive Offices)

                                 (386) 754-0002
                                 --------------
                (Issuer's Telephone Number, Including Area Code)


         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section  12, 13 or 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 requirements 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 latest practicable date;



Common stock, par value $.01 per share                            517,884 shares
--------------------------------------                            --------------
             (class)                             Outstanding at October 25, 2001

================================================================================


<PAGE>
<TABLE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

                                      INDEX


PART I. FINANCIAL INFORMATION

   Item 1. Financial Statements                                                                              Page
     <S>                                                                                                                         <C>
     Condensed Consolidated Balance Sheets -
       At September 30, 2001 (Unaudited) and At December 31, 2000................................................................2

     Condensed Consolidated Statements of Operations (Unaudited) -
       Three and Nine Months ended September 30, 2001 and 2000...................................................................3

     Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) -
       Nine Months Ended September 30, 2001......................................................................................4

     Condensed Consolidated Statements of Cash Flows (Unaudited) -
       Nine Months Ended September 30, 2001 and 2000.............................................................................5

     Notes to Condensed Consolidated Financial Statements (Unaudited)..........................................................6-7

     Review by Independent Certified Public Accountants..........................................................................8

     Report on Review by Independent Certified Public Accountants................................................................9

   Item 2.  Management's Discussion and Analysis of Financial Condition
     and Results of Operations...............................................................................................10-15

PART II. OTHER INFORMATION

   Item 6.  Exhibits and Reports on Form 8-K....................................................................................16

SIGNATURES......................................................................................................................17






</TABLE>


                                       1
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements

                      Condensed Consolidated Balance Sheets



<TABLE>

                                                                                        September 30,                   December 31,
                                                                                        -------------                   ------------
    Assets                                                                                  2001                             2000
    ------                                                                                  ----                             ----
                                                                                         (Unaudited)

<S>                                                                                              <C>                        <C>
Cash and due from banks                                                                          $    879,975               599,621
Federal funds sold                                                                                  1,715,000                  -
                                                                                                    ---------              ---------

Total cash and cash equivalents                                                                     2,594,975               599,621

Securities available for sale                                                                       4,979,416             3,896,400
Loans, net of allowance for loan losses of $226,221 in
2001 and $139,224 in 2000                                                                          17,564,343            11,153,659
Premises and equipment, net                                                                         1,447,604             1,457,695
Accrued interest receivable                                                                           141,123               149,257
Federal Home Loan Bank stock, at cost                                                                  24,800                14,400
Deferred income taxes                                                                                 463,662               387,808
Other assets                                                                                           77,674                80,734
                                                                                                       ------                ------

Total assets                                                                                     $ 27,293,597            17,739,574
                                                                                                 ============            ==========


Liabilities and Stockholders' Equity

Liabilities:
Noninterest-bearing demand deposits                                                                 1,892,394             1,211,172
Savings, NOW and money-market deposits                                                              4,841,104             2,953,923
Time deposits                                                                                      16,248,773             8,936,588
                                                                                                   ----------             ---------

Total deposits                                                                                     22,982,271            13,101,683

Federal funds purchased                                                                                  -                  245,000
Other liabilities                                                                                     444,951               425,120
                                                                                                      -------               -------

Total liabilities                                                                                  23,427,222            13,771,803
                                                                                                   ----------            ----------

Stockholders' equity:
Preferred stock                                                                                          -                      -
Common stock                                                                                            5,179                 5,158
Additional paid-in capital                                                                          4,618,277             4,599,398
Accumulated deficit                                                                                  (854,246)             (677,354)
Accumulated other comprehensive income                                                                 97,165                40,569
                                                                                                       ------                ------

Total stockholders' equity                                                                          3,866,375             3,967,771
                                                                                                    ---------             ---------

Total liabilities and stockholders' equity                                                       $ 27,293,597            17,739,574
                                                                                                 ============            ==========

</TABLE>



See Accompanying Notes to Condensed Consolidated Financial Statements.


                                       2
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

           Condensed Consolidated Statements of Operations (Unaudited)

<TABLE>

                                                                   Three Months Ended                       Nine Months Ended
                                                                     September 30,                             September 30,
                                                                   -------------------                      -----------------
                                                                 2001                2000                2001                2000
<S>                                                          <C>                    <C>                 <C>                 <C>
Interest income:
   Loans                                                     $  341,090             190,183             907,655             457,704
   Securities                                                    68,989              59,071             202,355             143,796
   Other interest-earning assets                                 17,000               9,650              62,731              63,145
                                                                 ------               -----              ------              ------

     Total interest income                                      427,079             258,904           1,172,741             664,645
                                                                -------             -------           ---------             -------

Interest expense:
   Deposits                                                     242,679             131,257             676,491             302,101
   Borrowings                                                         -                 458               2,362                 458

     Total interest expense                                     242,679             131,715             678,853             302,559
                                                                -------             -------             -------             -------

Net interest income                                             184,400             127,189             493,888             362,086

     Provision for loan losses                                   17,402              26,710             159,442              74,843
                                                                 ------              ------             -------              ------

Net interest income after provision
   for loan losses                                              166,998             100,479             334,446             287,243
                                                                -------             -------             -------             -------

Noninterest income:
   Service charges on deposit accounts                           21,373               9,329              56,101              23,735
   Other service charges and fees                                 3,956               4,623              12,884              16,990
   Other                                                         19,360               9,464              43,636              18,852
                                                                 ------               -----              ------              ------

     Total noninterest income                                    44,689              23,416             112,621              59,577
                                                                 ------              ------             -------              ------

Noninterest expense:
   Salaries and employee benefits                               113,348             111,064             342,791             297,812
   Occupancy expense                                             36,231              28,778             115,472             112,332
   Professional fees                                             17,603              23,926              53,356              68,243
   Data processing                                               26,564              26,624              74,681              72,303
   Litigation expense                                                 -             (64,000)                  -              25,382
   Other                                                         48,590              59,376             147,659             113,838
                                                                 ------              ------             -------             -------

     Total noninterest expense                                  242,336             185,768             733,959             689,910
                                                                -------             -------             -------             -------

     Loss before income tax benefit                             (30,649)            (61,873)           (286,892)           (343,090)

Income tax benefit                                              (11,000)            (21,289)           (110,000)           (130,000)
                                                                -------             -------            --------            --------

     Net loss                                                $  (19,649)            (40,584)           (176,892)           (213,090)
                                                             ==========             =======            ========            ========

Loss per share, basic and diluted                            $     (.04)               (.08)               (.34)               (.41)
                                                             ==========                ====                ====                ====

Weighted-average number of shares
   outstanding, basic and diluted                               517,016             515,711             516,573             515,248
                                                                =======             =======             =======             =======

Dividends per share                                          $        -                   -                   -                   -
                                                             ==========             =======             =======             =======
</TABLE>


See Accompanying Notes to Condensed Consolidated Financial Statements.

                                       3
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

       Condensed Consolidated Statement of Changes in Stockholders' Equity

                  For the Nine Months Ended September 30, 2001


<TABLE>


                                                                                                      Accumulated
                                                                                                         Other
                                        Common Stock            Additional                              Compre-          Total
                                        ------------              Paid-In           Accumulated         hensive       Stockholders'
                                     Shares      Amount           Capital             Deficit           Income           Equity
                                     ------      ------           -------             -------           ------           ------

<S>                                 <C>         <C>              <C>                 <C>                 <C>            <C>
Balance at December 31, 2000        515,784     $ 5,158          4,599,398           (677,354)           40,569         3,967,771
                                    -------     -------          ---------           --------            ------         ---------

Comprehensive income (loss):
Net loss (unaudited)                      -           -                  -           (176,892)               -           (176,892)

Net change in unrealized
gain on securities
available for sale,
net of income taxes
of $34,146 (unaudited)                    -           -                  -                   -           56,596            56,596
   -------                                                                                               ------            ------

Comprehensive income (loss)
(unaudited)                                                                                                              (120,296)
                                                                                                                         --------

Proceeds from issuance of common
stock, exercise of warrants
(unaudited)                           2,100          21             18,879                   -                -            18,900
                                      -----          --             ------                  --               --            ------

Balance at September 30, 2001
(unaudited)                         517,884     $ 5,179          4,618,277            (854,246)          97,165         3,866,375
                                    =======     =======          =========            ========           ======         =========
</TABLE>


See Accompanying Notes to Condensed Consolidated Financial Statements.

                                       4
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

           Condensed Consolidated Statements of Cash Flows (Unaudited)

<TABLE>

                                                                                                             Nine Months Ended
                                                                                                                September 30,
                                                                                                                -------------
                                                                                                           2001               2000

<S>                                                                                                    <C>                 <C>
Cash flows from operating activities:
   Net loss                                                                                            $  (176,892)        (213,090)
   Adjustments to reconcile net loss to net cash
    used in operating activities:
     Depreciation and amortization                                                                          41,629           41,607
     Provision for loan losses                                                                             159,442           74,843
     Deferred income tax benefit                                                                          (110,000)        (130,000)
     Net amortization of fees, costs, premiums and discounts                                                 5,240            9,254
     Decrease in accrued interest receivable and other assets                                               11,194            6,305
     Increase in other liabilities                                                                          19,831          177,760
                                                                                                            ------          -------

          Net cash used in operating activities                                                            (49,556)         (33,321)
                                                                                                           --------         --------
Cash flows from investing activities:
   Purchase of securities available for sale                                                            (1,985,939)      (1,832,447)
   Proceeds from maturities of securities held to maturity                                                       -          500,000
   Proceeds from calls and maturities of securities available for sale                                   1,000,000                -
   Principal repayments on securities available for sale                                                     3,966                -
   Purchase of premises and equipment                                                                      (31,538)      (1,150,216)
   Net increase in loans                                                                                (6,585,667)      (4,515,986)
   Purchase of Federal Home Loan Bank stock                                                                (10,400)          (5,000)
                                                                                                           --------          -------

          Net cash used in investing activities                                                         (7,609,578)      (7,003,649)
                                                                                                        -----------      -----------
Cash flows from financing activities:
   Net increase in deposits                                                                              9,880,588        5,054,821
   Net decrease in federal funds purchased                                                                (245,000)               -
   Net proceeds from issuance of common stock                                                               18,900           11,754
                                                                                                            ------           ------

          Net cash provided by financing activities                                                      9,654,488        5,066,575
                                                                                                         ---------        ---------

Net increase (decrease) in cash and cash equivalents                                                     1,995,354       (1,970,395)

Cash and cash equivalents at beginning of period                                                           599,621        3,257,670

Cash and cash equivalents at end of period                                                             $ 2,594,975        1,287,275
                                                                                                       ===========        =========
Supplemental disclosure of cash flow information-
   Cash paid during the period for:
     Interest                                                                                          $   588,369          189,980
                                                                                                       ===========          =======

Income taxes                                                                                           $         -                -
                                                                                                       ===========          =======
Noncash transaction-
Accumulated other comprehensive income, change
in unrealized gain on securities available
for sale, net of tax                                                                                   $    56,596           11,468
                                                                                                       ===========           ======
</TABLE>


See Accompanying Notes to Condensed Consolidated Financial Statements.

<PAGE>




                       PSB BANCGROUP, INC. AND SUBSIDIARY

        Notes to Condensed Consolidated Financial Statements (Unaudited)


(1) Description of Business and Basis of Presentation
     General.  In  the  opinion  of  management,   the  accompanying   condensed
        consolidated  financial  statements contain all adjustments  (consisting
        principally of normal  recurring  accruals)  necessary to present fairly
        the financial  position at September 30, 2001, the results of operations
        for the three- and nine-month  periods ended September 30, 2001 and 2000
        and cash flows for the nine-month  periods ended  September 30, 2001 and
        2000.  The results of  operations  for the three and nine  months  ended
        September 30, 2001 are not  necessarily  indicative of the results to be
        expected for the year ending December 31, 2001.

     PSB BancGroup,  Inc.  ("PSB") was  incorporated on June 30, 1997.  PSB owns
        100% of the outstanding  common stock of Peoples State Bank (the "Bank")
        (collectively the "Company").  PSB was organized simultaneously with the
        Bank and its only  business is the  ownership and operation of the Bank.
        The Bank is a Florida  state-chartered  commercial bank and its deposits
        are  insured by the  Federal  Deposit  Insurance  Corporation.  The Bank
        opened for  business on April 28, 1999 and  provides  community  banking
        services to businesses and individuals in Lake City, Florida.

(2) Loan Impairment and Loan Losses
     TheCompany  performs a monthly  loan loss  analysis  to  identify  impaired
        loans.  No loans  were  identified  as  impaired  during  the year ended
        December 31, 2000.  The Company's  impaired  loans at September 30, 2001
        were as follows (in thousands):


Loans identified as impaired:
    Gross loans with no related allowance for losses                     $    -
    Gross loans with related allowance for losses recorded                  211
    Less:  Allowance on these loans                                         (15)
                                                                            ---

    Net investment in impaired loans                                      $ 196
                                                                          =====

     The average net  investment  in  collateral-dependent  impaired  loans  and
        interest  income  recognized and received on these loans were as follows
        (in thousands):

                                                   Thee                 Nine
                                               Months Ended         Months Ended
                                               September 30,       September 30,
                                               -------------       -------------

                                                  2001                  2001
                                                  ----                  ----

Average investment in impaired loans            $  237                   183
                                                ======                   ===

Interest income recognized on impaired
     loans                                      $    -                     2
                                                ======                   ===

Interest income received on impaired loans      $    -                     2
                                                ======                   ===



                                                                     (continued)



                                       6
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

<TABLE>

(2) Loan  Impairment  and  Loan  Losses, Continued The activity in the allowance
     for loan losses is as follows:

                                                                    Three Months Ended                        Nine Months Ended
                                                                       September 30,                            September 30,
                                                                2001                  2000               2001                 2000

<S>                                                             <C>                  <C>                <C>                  <C>
Balance at beginning of period                                  $208,622             90,515             139,224              42,382
Provision charged to operations                                   17,402             26,710             159,442              74,843
Net recoveries (charge-offs)                                         197             (3,976)            (72,445)             (3,976)

Balance at end of period                                        $226,221            113,249             226,221             113,249
</TABLE>

(3) Loss Per Share
    Basic  and  diluted  loss  per share have been computed on the basis  of the
        weighted-average number of shares of common stock outstanding during the
        periods.  The Company's common stock equivalents are not dilutive due to
        the net losses incurred by the Company.

<TABLE>

(4) Regulatory Matters
    The  Bank  is  required  to  maintain  certain  minimum  regulatory  capital
        requirements.  The  following is a summary at September  30, 2001 of the
        regulatory  capital  requirements  and the  Bank's  actual  capital on a
        percentage basis:

                                                                                                                   Regulatory
                                                                                                Actual             Requirement

<S>                                                                                             <C>                    <C>
Total capital to risk-weighted assets                                                           16.63%                 8.00%
Tier I capital to risk-weighted assets                                                          15.51%                 4.00%
Tier I capital to total assets - leverage ratio                                                 12.38%                 4.00%
</TABLE>







                                       7
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

               Review by Independent Certified Public Accountants


Hacker,   Johnson  &  Smith  PA,  the  Company's  independent  certified  public
accountants,  have made a limited  review of the financial  data as of September
30, 2001, and for the three- and nine-month periods ended September 30, 2001 and
2000 presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.

Their  report  furnished  pursuant to Article 10 of  Regulation  S-X is included
herein.















                                       8
<PAGE>






          Report on Review by Independent Certified Public Accountants



The Board of Directors
PSB BancGroup, Inc.
Lake City, Florida:

     We have reviewed the accompanying  condensed  consolidated balance sheet of
PSB BancGroup, Inc. and Subsidiary (the "Company") as of September 30, 2001, the
related  condensed  consolidated  statements  of  operations  for the three- and
nine-month  periods  ended  September 30, 2001 and 2000,  the related  condensed
consolidated  statement  of changes in  stockholders'  equity for the nine month
period  ended  September  30,  2001  and  the  related  condensed   consolidated
statements of cash flows for the nine-month periods ended September 30, 2001 and
2000.  These  financial  statements  are  the  responsibility  of the  Company's
management.

     We conducted our reviews in accordance  with  standards  established by the
American  Institute  of  Certified  Public  Accountants.  A  review  of  interim
financial  information consists principally of applying analytical procedures to
financial  data and making  inquiries of persons  responsible  for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing  standards  generally  accepted in the United States of
America,  the objective of which is the  expression of an opinion  regarding the
financial  statements taken as a whole.  Accordingly,  we do not express such an
opinion.

     Based on our reviews,  we are not aware of any material  modifications that
should be made to the condensed  consolidated  financial  statements referred to
above for them to be in conformity with accounting principles generally accepted
in the United States of America.

     We have previously audited, in accordance with auditing standards generally
accepted in the United States of America,  the consolidated  balance sheet as of
December  31,  2000,  and the related  consolidated  statements  of  operations,
changes  in  stockholders'  equity  and cash  flows for the year then ended (not
presented  herein);  and in our  report  dated  March 8,  2001 we  expressed  an
unqualified opinion on those consolidated financial statements.  In our opinion,
the information set forth in the  accompanying  condensed  consolidated  balance
sheet as of December 31, 2000, is fairly stated,  in all material  respects,  in
relation to the consolidated balance sheet from which it has been derived.




HACKER, JOHNSON & SMITH PA
Tampa, Florida
October 25, 2001







                                       9
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

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

             Comparison of September 30, 2001 and December 31, 2000


General

PSB BancGroup,  Inc. ("PSB") was incorporated on June 30, 1997. PSB owns 100% of
the  outstanding  common stock of Peoples State Bank (the "Bank")  (collectively
the  "Company").  PSB was  organized  simultaneously  with the Bank and its only
business is the  ownership  and  operation of the Bank.  The Bank is a (Florida)
state-chartered  commercial  bank and its  deposits  are  insured by the Federal
Deposit  Insurance  Corporation.  The Bank opened for business on April 28, 1999
and provides  community  banking services to businesses and individuals  through
its banking office located in Lake City, Florida.

Liquidity and Capital Resources

During the nine months ended September 30, 2001, the Company's primary source of
funds consisted of deposit inflows of $9.9 million. The Company used its capital
resources  principally  to fund existing and  continuing  loan  commitments  and
purchase  securities  available for sale. At September 30, 2001, the Company had
commitments  to  originate  loans and  unfunded  lines of credit  totaling  $2.6
million.  Management believes the Company has adequate resources to fund all its
commitments  and that  substantially  all of its  existing  commitments  will be
funded in 2001.  At September  30, 2001,  the Company had $14.5  million in time
deposits that mature in one year or less.  Management  also believes that, if so
desired,  it can  adjust  the rates on time  deposits  to retain  deposits  in a
changing interest rate environment.

As a  Florida-chartered  commercial  bank,  the Bank is  required  to maintain a
liquidity  reserve of at least 15% of its total  transaction  accounts and 8% of
its total  nontransaction  accounts less those deposits of certain public funds.
The  liquidity  reserve may  consist of cash on hand,  cash on demand with other
correspondent banks and other investments and short-term  marketable  securities
as  defined,  such as  federal  funds  sold  and  United  States  securities  or
securities  guaranteed by the United States.  As of September 30, 2001, the Bank
exceeded all liquidity requirements to which it was subject.














                                       10
<PAGE>
<TABLE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY



The  following  ratios  and  rates  are  presented  for the  dates  and  periods
indicated:


                                                                        Nine Months                                   Nine Months
                                                                           Ended             Year Ended                  Ended
                                                                        September 30,        December 31,            September 30,
                                                                           2001                 2000                     2000
                                                                           ----                 ----                     ----

<S>                                                                       <C>                  <C>                      <C>
Average equity as a percentage
   of average assets                                                      17.00%               27.60%                   31.60%

Equity to total assets at end of period                                   14.17%               22.37%                   25.17%

Return on average assets (1)                                              (1.02%)              (1.96%)                  (2.20%)

Return on average equity (1)                                              (6.02%)              (7.10%)                  (6.96%)

Noninterest expenses to average assets (1)                                 4.25%                6.72%                    7.12%

Nonperforming loans and foreclosed real estate as
   a percentage of total assets at end of period                            .77%                 -  %                     -  %

----------
<FN>
(1)      Annualized for the nine months ended September 30.
</FN>
</TABLE>


                                                                     (continued)











                                       11
<PAGE>
<TABLE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

Results of Operations

The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend  income of the Company from
interest-earning  assets and the resultant average yields; (ii) the total dollar
amount of interest  expense on  interest-bearing  liabilities  and the resultant
average cost; (iii) net interest income; (iv) interest-rate  spread; and (v) net
interest margin.

                                                                                                    Three Months Ended September 30,
                                                                                       ---------------------------------------------
                                                                                       2001                                  2000
                                                                                       ---------------------------------------------
                                                                        Interest      Average                 Interest      Average
                                                          Average          and         Yield/    Average        and          Yield/
                                                          Balance       Dividends       Rate     Balance      Dividends       Rate
                                                          -------       ---------       ----     -------      ---------       ----
                                                                                                 (Dollars in thousands)

<S>                                                      <C>               <C>          <C>     <C>              <C>         <C>
Interest-earning assets:
   Loans                                                 $16,265           341          8.39%   $ 7,322          190         10.38%
   Securities                                              4,438            69          6.22      3,594           59          6.57
   Other interest-earning assets (1)                       1,927            17          3.53        547           10          7.31
                                                           -----            --                      ---           --          ----

       Total interest-earning assets                      22,630           427          7.55     11,463          259          9.04
                                                                           ---                                   ---
Noninterest-earning assets (2)                             3,112                                  3,352
                           --                              -----                                  -----

       Total assets                                      $25,742                                $14,815
                                                         =======                                =======

Interest-bearing liabilities:
   Savings, NOW, money-market
       deposit accounts                                    4,420            29          2.62      2,434           16          2.63
   Time deposits                                          15,239           214          5.62      7,345          115          6.26
   Other borrowings (3)                                        -             -             -         66            1          6.06
                                                          ------           ---          ----      -----          ---          ----

       Total interest-bearing liabilities                 19,659           243          4.94      9,845          132          5.36
                                                                           ---                                   ---

Noninterest-bearing demand deposits                        1,859                                    893
Noninterest-bearing liabilities                              361                                     62
Stockholders' equity                                       3,863                                  4,015
                                                           -----                                  -----

       Total liabilities and
           stockholders' equity                          $25,742                                $14,815
                                                         =======                                =======

Net interest income                                                    $   184                               $   127
                                                                       =======                               =======

Interest-rate spread (4)                                                                2.61%                                 3.68%
                     ==                                                                 ====                                  ====

Net interest margin (5)                                                                 3.25%                                 4.43%
                    ==                                                                  ====                                  ====

Ratio of average interest-earning assets to
   average interest-bearing liabilities                     1.15                                   1.16
                                                            ====                                   ====
----------
<FN>
(1)  Includes   Federal   Home  Loan  Bank   stock,   federal   funds  sold  and
     interest-bearing deposits.
(2)  Includes nonaccrual loans.
(3)  Includes federal funds purchased.
(4)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   rate  of   interest-bearing
     liabilities.
(5)  Net interest  margin is annualized  net interest  income divided by average
     interest-earning assets.
</FN>
</TABLE>



                                       12
<PAGE>
<TABLE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY


The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend  income of the Company from
interest-earning  assets and the resultant average yields; (ii) the total dollar
amount of interest  expense on  interest-bearing  liabilities  and the resultant
average cost; (iii) net interest income; (iv) interest-rate  spread; and (v) net
interest margin.

                                                                                      Nine Months Ended September 30,
                                                                                      -------------------------------
                                                                                  2001                               2000
                                                                          ---------------------                -------------------
                                                                          Interest      Average                Interest   Average
                                                           Average          and          Yield/      Average     and       Yield/
                                                           Balance       Dividends        Rate       Balance   Dividends    Rate
                                                           -------       ---------        ----       -------   ---------    ----
                                                                                                    (Dollars in thousands)

<S>                                                        <C>               <C>          <C>     <C>              <C>         <C>
Interest-earning assets:
   Loans                                                   $15,559           908          7.78%   $ 6,393          458         9.55%
   Securities                                                4,242           202          6.35      3,011          144         6.38
   Other interest-earning assets (1)                         1,860            63          4.52      1,400           63         6.00
                                                             -----            --                    -----           --

       Total interest-earning assets                        21,661         1,173          7.22     10,804          665         8.21
                                                                           -----                                   ---

Noninterest-earning assets (2)                               1,381                                  2,112
                                                             -----                                  -----

       Total assets                                        $23,042                                $12,916
                                                           =======                                =======

Interest-bearing liabilities:
   Savings, NOW, money-market
       deposit accounts                                      3,852            76          2.63      2,217           44         2.65
   Time deposits                                            13,358           601          6.00      5,759          258         5.97
   Other borrowings (3)                                         42             2          6.35         22            1         6.06
                                                                --            --                       --           --

       Total interest-bearing liabilities                   17,252           679          5.25      7,998          303         5.05
                                                                             ---                                   ---

Noninterest-bearing demand deposits                          1,559                                    788
Noninterest-bearing liabilities                                314                                     48
Stockholders' equity                                         3,917                                  4,082
                                                             -----                                  -----

       Total liabilities and
           stockholders' equity                            $23,042                                $12,916
                                                           =======                                =======

Net interest income                                                      $   494                               $   362
                                                                         =======                               =======

Interest-rate spread (4)                                                                  1.97%                                3.16%
                                                                                          ====                                 ====

Net interest margin (5)                                                                   3.04%                                4.47%
                                                                                          ====                                 ====

Ratio of average interest-earning assets to
   average interest-bearing liabilities                       1.26                                   1.35
                                                              ====                                   ====
----------
<FN>
(1)  Includes   Federal   Home  Loan  Bank   stock,   federal   funds  sold  and
     interest-bearing deposits.
(2)  Includes nonaccrual loans.
(3)  Includes federal funds purchased.
(4)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   rate  of   interest-bearing
     liabilities.
(5)  Net interest  margin is annualized  net interest  income divided by average
     interest-earning assets.
</FN>
</TABLE>



                                       13
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

          Comparison of Three Months Ended September 30, 2001 and 2000


General.  Net loss for the three months ended  September 30, 2001 was $19,649 or
   $.04 per basic and  diluted  share  compared to a net loss of $40,584 or $.08
   per  basic and  diluted  share for the  comparable  period in 2000.  The Bank
   commenced  operations  on April  28,  1999.  During  the three  months  ended
   September  30,  2001,  the Company had not achieved the asset size to operate
   profitably based on its operating expenses.

Interest Income.  Interest income for the three-months  ended September 30, 2001
   was $427,079  compared to $258,904 for the  three-months  ended September 30,
   2000. Interest income earned on loans was $341,090 for the three-months ended
   September  30, 2001  compared to $190,183  for the  three-month  period ended
   September  30, 2000.  The increase was due to an increase in the average loan
   portfolio  balance to $16.3 million for the three-months  ended September 30,
   2001 from $7.3 million for the comparable period in 2000, partially offset by
   a decrease in the average yield earned from 10.38% to 8.39%.  Interest income
   earned on  securities  was $68,989 for the three months ended  September  30,
   2001 compared to $59,071 for the three months ended  September 30, 2000.  The
   increase  was due to an increase in the average  security  portfolio  balance
   from $3.6  million  for the three  months  ended  September  30, 2000 to $4.4
   million for the comparable 2001 period, partially offset by a decrease in the
   average yield earned from 6.57% in 2000 to 6.22% for the 2001 period.

Interest Expense. Interest expense for the three-months ended September 30, 2001
   was $242,679  compared to $131,715 for the  three-months  ended September 30,
   2000.  The  increase  was  due to an  increase  in  the  average  balance  of
   interest-bearing  liabilities  from $9.8 million for the  three-months  ended
   September 30, 2000 to $19.7 million for the three-months  ended September 30,
   2001,  partially  offset by a decrease in the average cost from 5.36% for the
   three-months  ended  September 30, 2000 to 4.94% for the  three-months  ended
   September 30, 2001.

Provision  for  Loan  Losses.  The  provision  for loan  losses  is  charged  to
   operations to increase the total  allowance to a level deemed  appropriate by
   management and is based upon the volume and type of lending  conducted by the
   Company,  industry  standards,  the amount of nonperforming loans and general
   economic  conditions,  particularly  as they relate to the  Company's  market
   areas, and other factors related to the  collectibility of the Company's loan
   portfolio.  The  Company  recorded  a  provision  for  loan  losses  for  the
   three-months  ended  September  30,  2001 and 2000 of  $17,402  and  $26,710,
   respectively.  The  allowance  for loan losses was $226,221 at September  30,
   2001. Management believes the allowance is adequate at September 30, 2001.

Non interest Income.  Noninterest income was $44,689 for the three-months  ended
   September  30, 2001  compared  to $23,416  for the same  period in 2000.  The
   majority  of this  increase  relates to an  increase  in  service  charges on
   deposits accounts.

Non interest Expense.  Noninterest  expense  was  $242,336  for the three-months
   ended  September  30, 2001  compared to $185,768 for the  three-months  ended
   September  30, 2000.  The 2000 period  included a $64,000  recovery  from the
   Company's  insurance  carrier for expenses  incurred in  litigation  with the
   Bank's  former  President  and Chief  Executive  Officer  and the  settlement
   thereof.

Income Tax Benefit.  The income tax benefit for the three months ended September
   30,  2001 was $11,000 (an  effective  rate of 35.9%)  compared to $21,289 (an
   effective tax rate of 34.4%) for the three months ended September 30, 2000.

                                       14
<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY

         Comparison of the Nine Months Ended September 30, 2001 and 2000


General.  Net loss for the nine months ended  September 30, 2001 was $176,892 or
   $.34 per basic and diluted  share  compared to a net loss of $213,090 or $.41
   per  basic and  diluted  share for the  comparable  period in 2000.  The Bank
   commenced  operations  on  April  28,  1999.  During  the nine  months  ended
   September  30,  2001,  the Company had not achieved the asset size to operate
   profitably based on its operating expenses.

Interest Income.  Interest income for the  nine-months  ended September 30, 2001
   was $1,172,741  compared to $664,645 for the nine-months  ended September 30,
   2000.  Interest income earned on loans was $907,655 for the nine-months ended
   September  30, 2001  compared to $457,704  for the  nine-month  period  ended
   September  30, 2000.  The increase was due to an increase in the average loan
   portfolio  balance to $15.6 million for the  nine-months  ended September 30,
   2001 from $6.4 million for the comparable period in 2000, partially offset by
   a decrease in the average yield earned from 9.55% to 7.78%.  Interest  income
   earned on  securities  was $202,355 for the nine months ended  September  30,
   2001 compared to $143,796 for the nine months ended  September 30, 2000.  The
   increase was primarily due to an increase in the average  security  portfolio
   balance  from $3.0 million for the nine months  ended  September  30, 2000 to
   $4.2 million for the comparable 2001 period.

Interest Expense.  Interest expense for the nine-months ended September 30, 2001
   was $678,853  compared to $302,559 for the  nine-months  ended  September 30,
   2000.  The  increase  was  due to an  increase  in  the  average  balance  of
   interest-bearing  liabilities  from $8.0  million for the  nine-months  ended
   September 30, 2000 to $17.3 million for the  nine-months  ended September 30,
   2001 and an increase in the average cost from 5.05% for the nine-months ended
   September 30, 2000 to 5.25% for the nine-months ended September 30, 2001.

Provision  for  Loan  Losses.  The  provision  for loan  losses  is  charged  to
   operations to increase the total  allowance to a level deemed  appropriate by
   management and is based upon the volume and type of lending  conducted by the
   Company,  industry  standards,  the amount of nonperforming loans and general
   economic  conditions,  particularly  as they relate to the  Company's  market
   areas, and other factors related to the  collectibility of the Company's loan
   portfolio.  The  Company  recorded  a  provision  for  loan  losses  for  the
   nine-months  ended  September  30,  2001 and 2000 of  $159,442  and  $74,843,
   respectively.  The increase relates to three loans becoming  impaired and the
   subsequent  write-off  of one of these  loans  during the nine  months  ended
   September  30, 2001.  The allowance for loan losses was $226,221 at September
   30,  2001.  Management  believes the  allowance is adequate at September  30,
   2001.

Non interest Income.  Noninterest income was $112,621 for the nine-months  ended
   September  30, 2001  compared  to $59,577  for the same  period in 2000.  The
   majority  of this  increase  relates to an  increase  in  service  charges on
   deposits accounts.

Non interest Expense.  Noninterest  expense  was  $733,959  for  the nine-months
   ended  September  30, 2001  compared to $689,910  for the  nine-months  ended
   September  30, 2000.  In 2000,  the Company  incurred  $89,352 in  litigation
   expenses  associated  with the civil suit brought  against the Company by the
   former  president  of the Bank,  of which  $64,000 was  recovered  from their
   insurance  carrier  in the  third  quarter  of  2000.  The  net  increase  in
   noninterest  expense,  excluding these  litigation  expenses,  was $69,431 or
   10.4% and is due to the overall  growth of the Company and occupancy  expense
   relating to the new building.

Income Tax Benefit. The income tax benefit for the nine months ended September
   30, 2001 was $110,000 (an effective rate of 38.3%) compared to $130,000 (an
   effective tax rate of 37.9%) for the nine months ended September 30, 2000.




                                       15
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

                           PART II. OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

(a)    Exhibits.  The  following  exhibits  are filed  with or  incorporated  by
       reference into this report.  The exhibit(s)  marked by a single  asterisk
       (*) were previously filed as a part of the PSB's  Registration  Statement
       on Form SB-2,  filed  with the  Securities  and  Exchange  Commission  on
       January 13, 1998,  Registration No. 333-44161 and are hereby incorporated
       by  reference.  The  exhibits  marked  by a  double  asterisk  (**)  were
       previously filed as part of the PSB's Amendment No. 3 to the Registration
       Statement  on  Form  SB-2 as  filed  with  the  Securities  and  Exchange
       Commission  on May  20,  1998,  Registration  No.  333-44161  and  hereby
       incorporated by reference.  The exhibit marked by a triple asterisk (***)
       was  previously  filed as part of the PSB's Form 10-QSB as filed with the
       Securities  and  Exchange  Commission  on May 15,  2000  and  are  hereby
       incorporated by reference.  The exhibit marked by the quadruple  asterisk
       (****) was previously filed as part of the PSB's Definitive Form 14-A, as
       filed with the Securities  and Exchange  Commission on March 16, 2000 and
       is hereby  incorporated by reference.  The exhibit numbers  correspond to
       the exhibit numbers in the referenced  documents,  except for Exhibit No.
       10.7, which was designated  Appendix A in the referenced  Definitive Form
       14-A.

   Exhibit No.        Description of Exhibit
   -----------        ----------------------

      *3.1            Articles of Incorporation of PSB
      *3.2            Bylaws of PSB
      *4.1            Specimen Common Stock Certificate
      *4.2            Specimen Warrant Certificate
     **4.5            Amended and Restated Warrant Plan
     *10.1            Employment Agreement by and among PSB, the Bank and Robert
                      W. Woodard
     *10.2            Land Purchase Agreement
    **10.3            Addendum to Land Purchase Agreement
    **10.4            Amended Employment Agreement with Robert W. Woodard
   ***10.6            Employment Agreement with Wesley T. Small
  ****10.7            Amended 1998 Employee Stock Option and Limited Rights Plan

(b)    Reports on Form 8-K.  There were no reports on Form 8-K filed  during the
       three months ended September 30, 2001.





                                       16
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY


                                   SIGNATURES



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


                                      PSB BANCGROUP, INC.
                                         (Registrant)





Date:  November 8, 2001               By: /s/ Robert W. Woodard
       ----------------                   -------------------------
                                          Robert W. Woodard, President and Chief
                                          Executive Officer


Date:  November 8, 2001               By: /s/ Thomas M. Riherd, II
       ----------------                   -------------------------
                                          Thomas M. Riherd, II, Chief  Financial
                                          Officer








                                       17