--------------------------------------------------------------------------------

                     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, 1999

     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)

                                 (904) 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                  514,478 shares
--------------------------------------            --------------------------
                 (class)                        Outstanding at October 20, 1999


--------------------------------------------------------------------------------

                                                                (CONFORMED COPY)

<PAGE>






                       PSB BANCGROUP, INC. AND SUBSIDIARY

                                      INDEX
<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION

<S>                                                                                                          <C>
   Item 1. Financial Statements                                                                              Page
   ----------------------------                                                                              ----

     Condensed Consolidated Balance Sheets -
       At September 30, 1999 (unaudited) and At December 31, 1998 (unaudited)...................................2

     Condensed Consolidated Statements of Operations -
       Three and Nine Months ended September 30, 1999 and 1998 (unaudited)......................................3

     Condensed Consolidated Statement of Stockholders' Equity (Deficit)
       Nine Months Ended September 30, 1999 (unaudited).........................................................4

     Condensed Consolidated Statements of Cash Flows -
       Nine Months Ended September 30, 1999 and 1998 (unaudited)................................................5

     Notes to Condensed Consolidated Financial Statements (unaudited).........................................6-8

   Item 2.  Management's Discussion and Analysis of Financial Condition
     and Results of Operations...............................................................................9-10

PART II. OTHER INFORMATION

   Item 1.  Legal Proceedings..................................................................................11

   Item 6.  Exhibits and Reports on Form 8-K...................................................................11

SIGNATURES.....................................................................................................12


</TABLE>

<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY


                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements

                      Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                                        September 30,      December 31,
                                                                                        -------------      ------------
    Assets                                                                                1999                 1998
                                                                                          ----                 ----
                                                                                                   (unaudited)

<S>                                                                                      <C>                   <C>
Cash and due from banks                                                                  $    686,905           17,520
Interest-bearing deposits                                                                     144,256           27,048
Federal funds sold                                                                          3,732,000           -
                                                                                            ----------          -------

            Total cash and cash equivalents                                                 4,563,161           44,568

Securities available for sale                                                                 525,380           -
Securities held to maturity                                                                 1,000,000           -
Loans, net of allowance for loan losses of $16,158 in 1999                                  1,885,738           -
Premises and equipment, net                                                                   335,106          232,687
Restricted security, Federal Home Loan Bank stock, at cost                                      9,400           -
Deferred tax asset                                                                            205,785          119,285
Accrued interest receivable and other assets                                                  135,376           47,043
                                                                                           ----------         --------

            Total                                                                         $ 8,659,946          443,583
                                                                                            =========          =======


    Liabilities and Stockholders' Equity (Deficit)

Deposits:
    Demand deposits                                                                           811,022           -
    Savings and NOW deposits                                                                  808,875           -
    Money-market deposits                                                                     631,414           -
    Time deposits                                                                           2,016,735           -
                                                                                            ---------          -------

            Total deposits                                                                  4,268,046           -

Borrowings                                                                                        -            465,000
Accrued interest payable and other liabilities                                                141,291           -
                                                                                           ----------          -------

            Total liabilities                                                               4,409,337          465,000
                                                                                            ---------          -------

Stockholders' equity (deficit):
    Preferred stock, $.01 par value, 2,000,000 shares authorized,
        none issued or outstanding                                                             -                -
    Common stock, $.01 par value, 8,000,000 shares authorized,
        514,478 and 3,942 shares issued and outstanding in
        1999 and 1998, respectively                                                             5,145               40
    Additional paid-in capital                                                              4,587,657          177,350
    Accumulated deficit                                                                      (342,193)        (198,807)
                                                                                           ----------          -------

            Total stockholders' equity (deficit)                                            4,250,609          (21,417)
                                                                                            ---------          -------

            Total                                                                         $ 8,659,946          443,583
                                                                                            =========          =======
</TABLE>






See Accompanying Notes to Condensed Consolidated Financial Statements.


<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY


                 Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
                                                                      Three Months Ended          Nine Months Ended
                                                                         September 30,               September 30,
                                                                         -------------               -------------
                                                                     1999            1998        1999            1998
                                                                     ----            ----        ----            ----
                                                                         (unaudited)                 (unaudited)
<S>                                                              <C>             <C>            <C>           <C>
Interest income:
     Loans                                                        $  37,976         -            45,521         -
     Securities                                                      21,604         -            22,110         -
     Other interest-earning assets                                   48,093        10,034       145,927        10,501
                                                                   --------        ------       -------      --------

               Total interest income                                107,673        10,034       213,558        10,501
                                                                    -------        ------       -------       -------

Interest expense:
     Deposits                                                        23,644         -            29,764         -
     Borrowings                                                      -              3,496        12,071         4,336
                                                                -----------       -------       -------      --------

               Total interest expense                                23,644         3,496        41,835         4,336
                                                                    -------       -------       -------      --------

               Net interest income                                   84,029         6,538       171,723         6,165

Provision for loan losses                                            10,686         -            16,158         -
                                                                    -------       -------       -------         ------

Net interest income after provision
     for loan losses                                                 73,343         6,538       155,565         6,165
                                                                    -------       -------       -------      --------

Noninterest income-
     Service charges on deposit accounts
          and other fees                                              4,554         -             5,403        -
                                                                    -------       -------       -------      --------

Noninterest expense:
     Salaries and employee benefits                                  87,543        46,712       237,148        97,732
     Occupancy expense                                               20,819        15,434        44,272        46,975
     Professional fees                                                4,352        15,000        19,752        31,648
     Printing and office supplies                                     5,352           896        14,728         6,572
     Telephone expense                                                1,689         1,689         8,288         3,689
     Other                                                           35,078         6,840        66,666        21,647
                                                                    -------       -------       -------      --------

               Total other expense                                  154,833        86,571       390,854       208,263
                                                                    -------        ------       -------       -------

Loss before income tax benefit                                      (76,936)      (80,033)     (229,886)     (202,098)

Income tax benefit                                                  (29,185)      (30,012)      (86,500)      (75,786)
                                                                    -------        ------       -------       -------

Net loss                                                          $ (47,751)      (50,021)     (143,386)     (126,312)
                                                                    =======        ======       =======       =======

Loss per share, basic and diluted                                 $    (.09)       (12.69)         (.37)       (32.04)
                                                                  =========       =======     =========      ========

Weighted-average number of shares
     outstanding, basic and diluted                                 513,967         3,942       388,253         3,942
                                                                    =======        ======       =======      ========

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

See Accompanying Notes to Condensed Consolidated Financial Statements.


<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY


       Condensed Consolidated Statement of Stockholders' Equity (Deficit)

                  For the Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
                                                                                                           Total
                                                                             Additional                  Stockholders'
                                                    Preferred    Common      Paid-In       Accumulated      Equity
                                                     Stock       Stock       Capital         Deficit       (Deficit)
                                                     -----       -----       -------         -------       ---------
<S>                                                <C>             <C>       <C>            <C>            <C>

Balance at December 31, 1998 (unaudited)           $     -             40       177,350      (198,807)        (21,417)

Retire common stock (3,942 shares)                       -            (40)     (177,350)       -             (177,390)
         (unaudited)

Common stock issuance (513,478 shares)
         net of stock issuance costs of
         $37,500 (unaudited)                             -          5,135     4,578,667        -            4,583,802

Proceeds from issuance of common stock,
         exercise of warrants (1,000 shares)
         (unaudited)                                     -             10         8,990        -                9,000

Net loss (unaudited)                                     -          -            -           (143,386)       (143,386)
                                                      -------    ----------------------       -------      ----------

Balance at September 30, 1999 (unaudited)           $    -          5,145     4,587,657      (342,193)      4,250,609
                                                      =======       =====     =========       =======       =========

</TABLE>
























See Accompanying Notes to Condensed Consolidated Financial Statements.


<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY


                 Condensed Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                              Nine Months Ended
                                                                                                September 30,
                                                                                                -------------
                                                                                             1999            1998
                                                                                             ----            ----
                                                                                                (unaudited)
<S>                                                                                     <C>                  <C>
Cash flows from operating activities:
     Net loss                                                                           $  (143,386)         (126,312)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
         Depreciation and amortization                                                        8,120              -
         Provision for loan losses                                                           16,158              -
         Credit for deferred income taxes                                                   (86,500)          (75,786)
         Increase in accrued interest receivable and other assets                           (88,333)           (9,508)
         Increase in accrued interest payable and other liabilities                         141,291               -
                                                                                         ----------            ------

               Net cash used in operating activities                                       (152,650)         (211,606)
                                                                                         ----------           -------

Cash flows from investing activities:
     Purchase of securities available for sale                                             (525,380)          -
     Purchase of securities held to maturity                                             (1,000,000)          -
     Purchase of property and equipment                                                    (110,539)          (53,443)
     Net increase in loans                                                               (1,901,896)          -
     Purchase of restricted security                                                         (9,400)          -
                                                                                        -----------           -------

               Net cash used in investing activities                                     (3,547,215)          (53,443)
                                                                                          ---------           -------

Cash flows from financing activities:
     Net increase in demand, savings, NOW and money-
         market deposits                                                                  2,251,311           -
     Net increase in time deposits                                                        2,016,735           -
     Net (decrease) increase in borrowings                                                 (465,000)          200,000
     Retirement of common stock                                                            (177,390)          -
     Net proceeds from issuance of common stock                                           4,592,802           -
                                                                                          ---------           -------

               Net cash provided by financing activities                                  8,218,458           200,000
                                                                                          ---------           -------

Net increase (decrease) in cash and cash equivalents                                      4,518,593           (65,049)

Cash and cash equivalents at beginning of period                                             44,568            77,842
                                                                                        -----------           -------

Cash and cash equivalents at end of period                                              $ 4,563,161            12,793
                                                                                          =========           =======

Supplemental  disclosure of cash flow  information-
   Cash paid during the period
     for:
         Interest                                                                     $      23,621             4,336
                                                                                        ===========          ========

         Income taxes                                                                $         -                 -
                                                                                        ===========          ========

See Accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>


<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY


        Notes to Condensed Consolidated Financial Statements (unaudited)


(1) Description of Business and Summary of Significant Accounting Policies
     General. PSB BancGroup, Inc. ("PSB") was incorporated on June 30, 1997. PSB
         owns  100% of the  outstanding  common  stock  of  Peoples  State  Bank
         ("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.
         The Company's fiscal year end is December 31.

         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,  1999,  the results of  operations  for the
         three- and  nine-month  periods  ended  September 30, 1999 and 1998 and
         cash flows for the  nine-month  periods  ended  September  30, 1999 and
         1998.  The results of  operations  for the three and nine months  ended
         September 30, 1999 are not necessarily  indicative of the results to be
         expected for the year ending December 31, 1999.

     Basis of Presentation.  The accompanying  condensed  consolidated financial
         statements  include the accounts of PSB and the Bank.  All  significant
         intercompany   accounts  and  transactions   have  been  eliminated  in
         consolidation.  The accounting  and reporting  practices of the Company
         conform to  generally  accepted  accounting  principles  and to general
         practices within the banking industry.

     Estimates.  The  preparation  of financial  statements in  conformity  with
         generally accepted  accounting  principles  requires management to make
         estimates and  assumptions  that affect the reported  amounts of assets
         and liabilities and disclosure of contingent  assets and liabilities at
         the  date of the  financial  statements  and the  reported  amounts  of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates.

     Securities.  Securities  may be  classified  as  either  trading,  held  to
         maturity or available for sale. Trading securities are held principally
         for resale and  recorded  at their fair  values.  Unrealized  gains and
         losses on trading  securities  are  included  immediately  in earnings.
         Held-to-maturity  securities  are  those  which  the  Company  has  the
         positive  intent and  ability to hold to maturity  and are  reported at
         amortized cost. Available-for-sale securities consist of securities not
         classified as trading  securities nor as  held-to-maturity  securities.
         Unrealized holding gains and losses, net of tax, on  available-for-sale
         securities  are  reported  as a net amount in a separate  component  of
         stockholders'  equity  until  realized.  At September  30,  1999,  cost
         approximated market value for securities  available for sale. Gains and
         losses  on the sale of  available-for-sale  securities  are  determined
         using the  specific-identification  method.  Premiums and  discounts on
         securities  available for sale are recognized in interest  income using
         the interest method over the period to maturity.



<PAGE>





                       PSB BANCGROUP, INC. AND SUBSIDIARY

   Notes to Condensed Consolidated Financial Statements (unaudited), Continued


(1)      Description of Business and Summary of Significant Accounting Policies,
             Continued

     Loans  Receivable.  Loans  receivable  that  management  has the intent and
         ability to hold for the foreseeable future or until maturity or pay-off
         are  reported  at  their   outstanding   principal   adjusted  for  any
         charge-offs,  the allowance  for loan losses,  and any deferred fees or
         costs on originated loans.

         Loan  origination  fees  and  certain  direct   origination  costs  are
         capitalized and recognized as an adjustment of the yield of the related
         loan.

         The  accrual of interest on impaired  loans is  discontinued  when,  in
         management's  opinion,  the borrower may be unable to meet  payments as
         they become due.  When  interest  accrual is  discontinued,  all unpaid
         accrued   interest  is  reversed.   Interest   income  is  subsequently
         recognized only to the extent cash payments are received.

         The  allowance  for loan losses is  increased  by charges to income and
         decreased by charge-offs  (net of  recoveries).  Management's  periodic
         evaluation  of the adequacy of the  allowance is based on the Company's
         past loan loss  experience,  known and inherent risks in the portfolio,
         adverse situations that may affect the borrower's ability to repay, the
         estimated  value of any  underlying  collateral,  and current  economic
         conditions.

     Premises and  Equipment.  Premises  and  equipment  are stated at cost less
         accumulated  depreciation.  Depreciation  expense  is  computed  on the
         straight-line  basis  over the  estimated  useful  life of each type of
         asset.

     Income  Taxes.  Deferred  tax  assets  and  liabilities  are  reflected  at
         currently  enacted  income tax rates  applicable to the period in which
         the deferred tax assets or  liabilities  are expected to be realized or
         settled.  As changes  in tax laws or rates are  enacted,  deferred  tax
         assets and  liabilities  are adjusted  through the provision for income
         taxes.

     Organizational and Preopening  Costs.  Organizational  and preopening costs
         totaled $363,523 and were charged to expense as incurred.

     Off-Balance-Sheet  Instruments.  In the  ordinary  course of  business  the
         Company  has  entered  into  off-balance-sheet   financial  instruments
         consisting of commitments to extend credit. Such financial  instruments
         are recorded in the financial statements when they are funded.

     Advertising.  The Company expenses all media advertising as incurred.

     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 period.











<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY


   Notes to Condensed Consolidated Financial Statements (unaudited), Continued


(1)      Description of Business and Summary of Significant Accounting Policies,
             Continued

     Future  Accounting  Requirements.  Financial  Accounting  Standards  133  -
         Accounting for Derivative  Investments and Hedging Activities  requires
         companies  to  record  derivatives  on the  balance  sheet as assets or
         liabilities,  measured at fair value.  Gains or losses  resulting  from
         changes  in the  values of those  derivatives  would be  accounted  for
         depending  on the use of the  derivatives  and whether they qualify for
         hedge  accounting.  The key criterion for hedge  accounting is that the
         hedging  relationship must be highly effective in achieving  offsetting
         changes in fair value or cash flows.  The  Company  will be required to
         adopt this Statement  January 1, 2001.  Management  does not anticipate
         that this Statement will have a material impact on the Company.

(2)      Loan  Impairment and Loan Losses.  No loans were identified as impaired
         at September  30, 1999 or 1998.  The activity in the allowance for loan
         losses is as follows:
<TABLE>
<CAPTION>

                                                                  Three Months Ended             Nine Months Ended
                                                                    September 30,                  September 30,
                                                                  -------------------            -----------------
                                                                    1999           1998            1999          1998
                                                                    ----           ----            ----          ----
<S>                                                               <C>              <C>           <C>             <C>
            Balance at beginning of period                      $  5,472           -               -             -
            Provision charged to earnings                         10,686           -             16,158          -
                                                                  ------         ------          ------        ---

            Balance at end of period                            $ 16,158           -             16,158          -
                                                                  ======         ======          ======        ===
</TABLE>

 (3)     Regulatory  Matters.  PSB's primary source of generating income is from
             the  Bank's  operations.  Banking  laws and  regulations  limit the
             amount of  dividends  that may be paid by the Bank to PSB. The FDIC
             requires  insured  banks to maintain  certain  specified  levels of
             capital.

            Leverage-Capital  Ratio.  The  FDIC  requires  banks to  maintain  a
            minimum  leverage-capital  ratio  of Tier I (as  defined)  to  total
            assets.  The  leverage-capital  ratio generally ranges from 3% to 5%
            based on the bank's rating under the regulatory  rating system.  The
            Bank's required leverage-capital ratio at September 30, 1999 was 4%.

            Risk-Weighted  Assets  Capital  Ratios.  The FDIC has also adopted a
            risk-based  capital  statement of policy which imposes an additional
            capital  standard on insured banks.  Under this  regulation,  a bank
            must classify its assets and certain  off-balance  sheet  activities
            into categories,  and maintain  specified levels of capital for each
            category.  The amount of capital that is required is dependent  upon
            the amount of risk  attributed  to each category by the FDIC. A bank
            must have a total risk-based  capital ratio of no less than 8% and a
            Tier I capital  to  risk-weighted  assets  ratio of no less than 4%.
            Under the  statement  of policy,  certain  assets are required to be
            deducted  from  risk-based  capital.  Such  assets  include  certain
            nonqualifying intangible assets,  unconsolidated banking and finance
            subsidiaries,  investments in securities subsidiaries and reciprocal
            holdings of capital  instruments with other banks. In addition,  the
            FDIC may consider  deducting other assets on a case-by-case basis or
            investments in other  subsidiaries on a case-by-case  basis or based
            on  the  general   characteristics   or  functional  nature  of  the
            subsidiaries.

            At  September  30,  1999,  the  Bank  was  in  compliance  with  all
            regulatory capital requirements.
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

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

             Three and Nine Months Ended September 30, 1999 and 1998

General

    PSB BancGroup,  Inc. ("PSB"),  which was incorporated on June 30, 1997, owns
    100%  of the  outstanding  common  stock  of  Peoples  State  Bank  ("Bank")
    (collectively  the  "Company").  PSB's 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 Company's fiscal year end is December 31.

Liquidity and Capital Resources

    The Company's  primary source of cash during the nine months ended September
    30,  1999 was from the net  proceeds  from the sale of common  stock of $4.6
    million and net deposit inflows of $4.3 million.  Cash was used primarily to
    purchase  securities  of $1.5  million,  originate  loans,  net of principal
    repayments  totaling $1.9 million and repay  borrowings  of $.5 million.  At
    September 30, 1999,  the Company had  outstanding  commitments  to originate
    loans  totaling $.4 million.  At September  30, 1999,  the Bank exceeded its
    regulatory liquidity requirements.

Common Stock Offering

    As of  September  30, 1999,  the Company has sold  514,478  shares of common
    stock,  which  includes the exercise of 1,000  warrants (see below),  for an
    aggregate of $4.6 million. The Company incurred $37,500 in offering expenses
    relating  to  their  public  offering  of the  Company's  common  stock  and
    warrants.  Offering  expenses were deducted from the proceeds  received from
    the sale of common stock and warrants.

Common Stock Warrants

    During the initial  offering period shares have been offered in units with a
    unit  consisting of one share of common stock and one warrant.  Each warrant
    entitles the holder thereof to purchase one share of additional common stock
    for $9 per share during the 48 month period  following the effective date of
    registration  of the shares.  As of September  30, 1999,  there were 512,478
    warrants outstanding entitling the holders to purchase 512,478 shares of the
    Company's  common  stock.  During the nine months ended  September 30, 1999,
    1,000 warrants were exercised to purchase 1,000 shares of common stock.

Results of Operations:

    General.  Net losses for the three and nine months ended September 30, 1999,
    were $47,751 and $143,386,  respectively.  The Bank commenced  operations on
    April 28, 1999. A discussion of operating  results at September 30, 1999, or
    for the three and nine months ended September 30, 1999 and 1998 would not be
    meaningful.  At September  30, 1999,  the Company had not achieved the asset
    size to operate profitably.


<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY


                                    Year 2000

The  Company  is  acutely  aware of the many  areas  affected  by the Year  2000
computer issue,  including those addressed by the Federal Financial Institutions
Examination  Council  ("FFIEC") in its  interagency  statement which provided an
outline for institutions to effectively manage the Year 2000 challenges.  A Year
2000 plan has been approved by the Board of Directors  which  includes  multiple
phases, tasks to be completed, and target dates for completion. Issues addressed
therein include awareness, assessment, renovation,  validation,  implementation,
testing and contingency planning.

The Company has formed a Year 2000  committee that is charged with the oversight
of completing the Year 2000 project on a timely basis. The Company has completed
its awareness, assessment,  renovation,  validation,  implementation and testing
phases.  Since it routinely  upgrades  and  purchases  technologically  advanced
software and hardware on a continual  bases, the Company has determined that the
costs  of  making  modifications  to  correct  any  Year  2000  issues  will not
materially affect reported results from operations.

The Company's vendors and suppliers have been contacted for written confirmation
of their  product's  readiness  for the Year 2000  compliance.  All  significant
vendors  of the  Company  have  provided  confirmation  that  they are Year 2000
compliant.  The Company's  main service  provider has  completed  testing of its
mission  critical  application  software;  the test  results,  which  have  been
documented and validated,  are deemed to be Year 2000 compliant.  FFIEC guidance
on testing Year 2000 compliance of service providers states that proxy tests are
acceptable compliance tests. In proxy testing, the service provider tests with a
representative  sample of financial  institutions that use a particular service,
with the results of such testing shared with all similarly  situated  clients of
the service provider. The Company has authorized the acceptance of proxy testing
since the proxy tests have been conducted with financial  institutions  that are
similar in type and  complexity to its own,  using the same version of Year 2000
ready  software  and the  same  hardware  and  operating  systems.  The  Company
personnel have also performed Year 2000 testing on their computer  databases and
software applications and have found them to be Year 2000 ready.

The Company also recognizes the importance of determining that its borrowers are
facing the Year 2000 problem in a timely  manner to avoid  deterioration  of the
loan portfolio  solely due to this issue. All material  relationships  have been
identified and questionnaires  have been completed to assess the inherent risks.
Deposit customers have received statement  stuffers and information  material in
this regard.  The Company plans to work on a one-on-one  basis with any borrower
who has been identified as having high Year 2000 risk exposure.

Accordingly,  management  does not believe that the Company has incurred or will
incur material costs  associated with the Year 2000 issue.  Yet, there can be no
assurances that all hardware and software that the Company will use will be Year
2000 compliant.  Management cannot predict the amount of financial  difficulties
it may incur due to  customers  and vendors  inability  to perform  according to
their  agreements  with the Company or the effects that other third  parties may
cause as a result of this issue.  Therefore,  there can be no assurance that the
failure or delay of others to address  the issue or that the costs  involved  in
such process will not have a material adverse effect on the Company's  business,
financial condition, and results of operations.

The  Company's  contingency  plans  relative  to  Year  2000  issues  have  been
finalized. Based on testing results, the Company's mission critical systems have
been deemed to be Year 2000 compliant and,  therefore a contingency plan has not
been developed with respect to those systems. A Business Resumption  Contingency
Plan (the ABRCP@) has been developed and approved by the Board of Directors. The
BRCP assumes power outages and telephone disruptions. The Company has tested and
validated the BRCP. It is anticipated that The Company's  deposit customers will
have increased  demands for cash in the latter part of 1999 and  correspondingly
the Company will maintain higher liquidity levels.


<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY



                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

        On August 27, 1999,  the Board of Directors of the Bank  terminated  the
        employment of the Bank's President,  C.F.  Douglas.  The termination was
        for just  cause due to Mr.  Douglas'  failure  to abide by the  specific
        directives of the Board which  emanated from the hiring of his son under
        circumstances  that violated  Florida banking  statutes.  In conjunction
        with the  termination  of  employment,  PSB  removed  Mr.  Douglas  as a
        director of the Bank. On September 14, 1999,  Mr.  Douglas filed a civil
        suit in the Circuit Court for Columbia County, Florida, against PSB, the
        Bank,  and seven of the eight  Bank  directors.  The  compliant  alleges
        breach of contract,  tortious  interference with his employment contract
        and a claim of  fraudulent  inducement  with  regard to his  agreeing to
        enter into his employment  contract.  The suit alleges damages in excess
        of $15,000.  The Company and the named  directors have filed a motion to
        dismiss the lawsuit.

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 exhibits marked by a single asterisk (*)
        were previously filed as a part of PSB's Registration  Statement on Form
        SB-2,  as  effective  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 PSB's  Amendment No. 3 to the  Registration
        Statement  on Form  SB-2 as  filed  with  the  Securities  and  Exchange
        Commission  on May 18,  1998,  Registration  No.  333-44161  and  hereby
        incorporated by reference. The exhibit numbers correspond to the exhibit
        numbers in the referenced documents.

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

         *3.1             Articles of Incorporation of PSB Bancgroup, Inc.
         *3.2             Bylaws of PSB Bancgroup, Inc.
         *4.1             Specimen Common Stock Certificate
         *4.2             Specimen Warrant Certificate
         *4.4             PSB Bancgroup, Inc. Warrant Plan
        **4.5             Amended and Restated Warrant Plan
        *10.1             Employment Agreement with Robert W. Woodard
        *10.2             Land Purchase Agreement
       **10.3             Addendum to Land Purchase Agreement
       **10.4             Amended Employment Agreement with Robert W. Woodard
         10.5             Employment Agreement with C.F. Douglas
         27               Financial Data Schedule (for SEC use only)

(b)     Reports on Form 8-K.  There were no reports on Form 8-K filed during the
        three months ended September 30, 1999.



<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 2, 1999                              By:   /s/ Robert W. Woodard
      --------------------------                         -----------------------
                                                    Robert W. Woodard, President
                                                    and Chief Executive Officer
                                                      (Chief Accounting Officer)