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



                     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 June 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)

                                 (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                      516,784 shares
--------------------------------------                      --------------
              (class)                               Outstanding at July 18, 2001



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

<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

                                      INDEX


PART I. FINANCIAL INFORMATION

 Item 1. Financial Statements                                               Page
                                                                            ----

   Condensed Consolidated Balance Sheets -

     At June 30, 2001 (Unaudited) and At December 31, 2000.....................2

   Condensed Consolidated Statements of Operations (Unaudited) -

     Three and Six Months ended June 30, 2001 and 2000.........................3

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

   Condensed Consolidated Statements of Cash Flows (Unaudited) -

     Six Months Ended June 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 4.  Submission of Matters to a Vote of Security Holders.................16

 Item 6.  Exhibits and Reports on Form 8-K....................................17

SIGNATURES....................................................................18








                                       1
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements

                      Condensed Consolidated Balance Sheets


<TABLE>

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

<S>                                                                                           <C>                           <C>
Cash and due from banks                                                                       $    895,598                  599,621
Federal funds sold                                                                               2,008,000                        -
                                                                                                 ---------                ----------

              Total cash and cash equivalents                                                    2,903,598                  599,621

Securities available for sale                                                                    4,962,129                3,896,400
Loans, net of allowance for loan losses of $208,622 in
    2001 and $139,224 in 2000                                                                   14,906,822               11,153,659
Premises and equipment, net                                                                      1,461,934                1,457,695
Accrued interest receivable                                                                        155,240                  149,257
Federal Home Loan Bank stock, at cost                                                               24,800                   14,400
Deferred income taxes                                                                              463,287                  387,808
Other assets                                                                                        88,223                   80,734
                                                                                                    ------                   ------

              Total assets                                                                    $ 24,966,033               17,739,574
                                                                                              ============               ==========

    Liabilities and Stockholders' Equity

Liabilities:
    Noninterest-bearing demand deposits                                                          1,691,783                1,211,172
    Savings, NOW and money-market deposits                                                       3,771,957                2,953,923
    Time deposits                                                                               14,970,512                8,936,588

              Total deposits                                                                    20,434,252               13,101,683

    Federal funds purchased                                                                              -                  245,000
    Other liabilities                                                                              673,267                  425,120
                                                                                                   -------                  -------

              Total liabilities                                                                 21,107,519               13,771,803
                                                                                                ----------               ----------
Stockholders' equity:
    Preferred stock                                                                                      -                        -
    Common stock                                                                                     5,168                    5,158
    Additional paid-in capital                                                                   4,608,388                4,599,398
    Accumulated deficit                                                                           (834,597)                (677,354)
    Accumulated other comprehensive income                                                          79,555                   40,569
                                                                                                    ------                   ------

              Total stockholders' equity                                                         3,858,514                3,967,771
                                                                                                 ---------                ---------

              Total liabilities and stockholders' equity                                      $ 24,966,033               17,739,574
                                                                                              ============               ==========
See Accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>


                                       2
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

           Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>

                                                                              Three
                                                                           Months Ended                        Six Months Ended
                                                                             June 30,                              June 30,
                                                                        2001             2000               2001              2000
Interest income:
<S>                                                                 <C>                 <C>               <C>               <C>
     Loans                                                          $ 295,159           153,933           566,565           267,520
     Securities                                                        70,592            46,347           133,366            84,725
     Other interest-earning assets                                     23,663            18,481            45,731            53,495
                                                                       ------            ------            ------            ------

               Total interest income                                  389,414           218,761           745,662           405,740
                                                                      -------           -------           -------           -------

Interest expense:
     Deposits                                                         229,995            97,264           433,812           170,843
     Borrowings                                                             -                 -             2,362                 -
                                                                      -------           -------           -------           -------

               Total interest expense                                 229,995            97,264           436,174           170,843

Net interest income                                                   159,419           121,497           309,488           234,897

               Provision for loan losses                               76,493            35,088           142,040            48,132
                                                                       ------            ------           -------            ------

Net interest income after provision
     for loan losses                                                   82,926            86,409           167,448           186,765
                                                                       ------            ------           -------           -------

Noninterest income:
     Service charges on deposit accounts                               21,284             7,298            34,728            14,406
     Other service charges and fees                                     3,806             2,311             8,928            12,367
     Other                                                             11,874             9,388            24,276             9,388
                                                                       ------             -----            ------             -----

               Total noninterest income                                36,964            18,997            67,932            36,161
                                                                       ------            ------            ------            ------

Noninterest expense:
     Salaries and employee benefits                                   114,781            99,265           229,443           186,748
     Occupancy expense                                                 40,512            46,139            79,241            83,553
     Professional fees                                                 19,273            30,415            35,753            39,935
     Data processing                                                   24,326            23,504            48,117            45,679
     Litigation expense                                                     -                 -                 -            89,382
     Other                                                             56,686            31,622            99,069            58,844
                                                                       ------            ------            ------            ------

               Total noninterest expense                              255,578           230,945           491,623           504,141
                                                                      -------           -------           -------           -------

               Loss before income tax benefit                        (135,688)         (125,539)         (256,243)         (281,215)

Income tax benefit                                                    (53,000)          (49,335)          (99,000)         (108,710)
                                                                      -------           -------           -------          --------

               Net loss                                             $ (82,688)          (76,204)         (157,243)         (172,505)

Loss per share, basic and diluted                                   $    (.16)             (.15)             (.30)             (.34)
                                                                    =========              ====              ====              ====

Weighted-average number of shares
     outstanding, basic and diluted                                   516,784           515,146           516,355           515,013
                                                                      =======           =======           =======           =======

Dividends per share                                                 $       -                 -                 -                 -
                                                                      =======           =======           =======           =======

See Accompanying Notes to Condensed Consolidated Financial Statements.


</TABLE>


                                       3
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

       Condensed Consolidated Statement of Changes in Stockholders' Equity

                     For the Six Months Ended June 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)                      -              -             -      (157,243)             -           (157,243)

         Net change in unrealized
             gain on securities
             available for sale,
             net of income taxes
             of $23,521 (unaudited)                -              -             -             -         38,986             38,986

Comprehensive income (loss)
             (unaudited)                                                                                                 (118,257)

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

Balance at June 30, 2001
         (unaudited)                         516,784     $    5,168     4,608,388      (834,597)        79,555          3,858,514
                                             =======     ==========     =========      ========         ======          =========
</TABLE>





See Accompanying Notes to Condensed Consolidated Financial Statements.



                                       4
<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY

           Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>


                                                                                                             Six Months Ended
                                                                                                                 June 30,
                                                                                                             ----------------

                                                                                                         2001                 2000
                                                                                                         ----                 ----
Cash flows from operating activities:
<S>                                                                                                <C>                     <C>
     Net loss                                                                                      $  (157,243)            (172,505)
     Adjustments to reconcile net loss to net cash provided by
       (used in) operating activities:
         Depreciation and amortization                                                                  27,299               23,777
         Provision for loan losses                                                                     142,040               48,132
         Deferred income tax benefit                                                                   (99,000)            (108,710)
         Net amortization of fees, costs, premiums and discounts                                       (11,196)               8,364
         Increase in accrued interest receivable and other assets                                      (13,472)             (41,318)
         Increase in other liabilities                                                                 248,147               74,861
                                                                                                       -------               ------

               Net cash provided by (used in) operating activities                                     136,575             (167,399)
                                                                                                       -------             --------

Cash flows used in investing activities:
     Purchase of securities available for sale                                                        (999,219)          (1,336,154)
     Proceeds from maturities of securities held to maturity                                                 -              500,000
     Principal repayments on securities available for sale                                               2,637                    -
     Purchase of premises and equipment                                                                (31,538)            (962,287)
     Net increase in loans                                                                          (3,890,647)          (3,046,135)
     Purchase of Federal Home Loan Bank stock                                                          (10,400)              (5,000)
                                                                                                       -------               ------

               Net cash used in investing activities                                                (4,929,167)          (4,849,576)
                                                                                                    ----------           ----------

Cash flows from financing activities:
     Net increase in deposits                                                                        7,332,569            2,810,716
     Net decrease in federal funds purchased                                                          (245,000)                   -
     Net proceeds from issuance of common stock                                                          9,000                6,804
                                                                                                         -----                -----

               Net cash provided by financing activities                                             7,096,569            2,817,520
                                                                                                     ---------            ---------

Net increase (decrease) in cash and cash equivalents                                                 2,303,977           (2,199,455)

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

Cash and cash equivalents at end of period                                                         $ 2,903,598            1,058,215
                                                                                                   ===========            =========

Supplemental disclosure of cash flow information-
     Cash paid during the period for:
         Interest                                                                                  $   364,931              110,290
                                                                                                   ===========              =======

         Income taxes                                                                              $         -                    -
                                                                                                   ===========              =======
     Noncash transaction-
         Accumulated other comprehensive income (loss), change
               in unrealized gain (loss) on securities available for sale,
               net of tax                                                                          $    38,986               (5,240)
                                                                                                   ===========               ======

</TABLE>

See Accompanying Notes to Condensed Consolidated Financial Statements.


                                       5
<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 June 30, 2001, the results of operations for
         the three- and six-month  periods ended June 30, 2001 and 2000 and cash
         flows for the  six-month  periods  ended  June 30,  2001 and 2000.  The
         results of operations  for the three and six months ended June 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
     The Company performs a monthly loan loss analysis to also identify impaired
         loans. The Company's impaired loans were as follows:

<TABLE>

                                                                                  At June 30,         At December 31,
                                                                                  -----------         ---------------
                                                                                    2001                   2000
Loans identified as impaired:
<S>                                                                             <C>
    Gross loans with no related allowance for losses                            $     -                     -
    Gross loans with related allowance for losses recorded                         313,607                  -
    Less:  Allowance on these loans                                                (36,458)                 -
                                                                                   -------               -------

    Net investment in impaired loans                                             $ 277,149                  -
                                                                                 =========               =======

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

                                                                 Three Months Ended               Six Months Ended
                                                                     June 30,                         June 30,
                                                              -------------------------          -------------------
                                                                 2001              2000          2001           2000

Average investment in impaired loans                          $352,552              -           176,276           -
                                                              ========           ========       =======       ========

Interest income recognized on impaired
     loans                                                    $  2,403              -            2,403              -
                                                              ========           ========       =======       ========

Interest income received on impaired loans                    $  2,403              -            2,403              -
                                                              ========           ========       =======       ========
</TABLE>

                                                                     (continued)

                                       6
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

   Notes to Condensed Consolidated Financial Statements (Unaudited), Continued


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


                                                                    Three Months Ended           Six Months Ended
                                                                         June 30,                     June 30,
                                                                   ---------------------       --------------------
                                                                   2001             2000       2001            2000
                                                                   ----             ----       ----            ----

<S>                                                             <C>                <C>        <C>              <C>
                Balance at beginning of period                  $ 204,771          55,426     139,224          42,382
                Provision for loan losses                          76,493          35,088     142,040          48,132
                Charge-offs                                       (72,642)           -        (72,642)           -
                                                                  -------         -------     -------          -------

                Balance at end of period                        $ 208,622          90,514     208,622          90,514
                                                                =========          ======     =======          ======
</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.

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

                                                                                         Regulatory
                                                                            Actual       Requirement
                                                                            ------       -----------

<S>                                                                         <C>              <C>
                Total capital to risk-weighted assets                       18.88%           8.00%
                Tier I capital to risk-weighted assets                      17.70%           4.00%
                Tier I capital to total assets - leverage ratio             14.01%           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 June 30,
2001,  and for the three- and  six-month  periods  ended June 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 June 30, 2001, the
related  condensed  consolidated  statements  of  operations  for the three- and
six-month   periods  ended  June  30,  2001  and  2000,  the  related  condensed
consolidated  statement  of changes in  stockholders'  equity for the  six-month
period ended June 30, 2001 and the related condensed consolidated  statements of
cash  flows for the  six-month  periods  ended  June 30,  2001 and  2000.  These
financial statements are the responsibility of the Company's management.

     We conducted our review 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 review,  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
July 18, 2001





                                       9
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

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

                Comparison of June 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 six months ended June 30, 2001, the Company's primary source of funds
consisted  of deposit  inflows of $7.3  million.  The  Company  used its capital
resources principally to fund existing and continuing loan commitments.  At June
30, 2001, the Company had  commitments to originate  loans and unfunded lines of
credit  totaling  $2.1  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 June 30,  2001,  the  Company had $12.4
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 June 30,  2001,  the Bank
exceeded all liquidity requirements to which it was subject.

















                                       10
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY



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


                                                                    Six Months                    Six Months
                                                                      Ended        Year Ended       Ended
                                                                     June 30,      December 31,    June 30,
                                                                       2001           2000           2000
                                                                       ----           ----           ----
<S>                                                                    <C>            <C>            <C>
Average equity as a percentage
   of average assets                                                   17.98%         27.60%         32.98%

Equity to total assets at end of period                                15.46%         22.37%         29.65%

Return on average assets (1)                                           (1.44%)        (1.96%)        (2.78%)

Return on average equity (1)                                           (8.01%)        (7.10%)        (8.43%)

Noninterest expenses to average assets (1)                              4.50%          6.72%          8.13%

Nonperforming loans and foreclosed real estate as
   a percentage of total assets at end of period                        1.26%           -  %            - %


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


                                                                     (continued)















                                       11
<PAGE>

                       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.

<TABLE>
                                                               Three Months Ended June 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                                      $  13,377            295      8.82%    $  6,297         154      9.78%
   Securities                                     4,449             70      6.29        2,914          46      6.31
   Other interest-earning assets (1)              2,091             24      4.59        1,184          19      6.41
                                                  -----             --                  -----          --

       Total interest-earning assets             19,917            389      7.81       10,395         219      8.43
                                                                   ---                                ---
Noninterest-earning assets (2)                    3,278                                 2,714
                                                  -----                                 -----

       Total assets                            $ 23,195                              $ 13,109
                                               ========                              ========

Interest-bearing liabilities:
   Savings, NOW, money-market
       deposit accounts                           3,796             24      2.53        2,116          14      2.65
   Time deposits                                 13,567            206      6.07        5,690          83      5.83
                                                 ------                                 -----

       Total interest-bearing liabilities        17,363            230      5.30        7,806          97      4.97

Noninterest-bearing demand deposits               1,467                                 1,091
Noninterest-bearing liabilities                     467                                   167
Stockholders' equity                              3,898                                 4,045
                                                  -----                                 -----
       Total liabilities and
           stockholders' equity                $ 23,195                              $ 13,109
                                               ========                              ========

Net interest income                                              $ 159                              $ 122
                                                                 =====                              =====

Interest-rate spread (3)                                                    2.51%                              3.46%
                                                                            ====                               ====

Net interest margin (4)                                                     3.19%                              4.69%
                                                                            ====                               ====

Ratio of average interest-earning assets to
   average interest-bearing liabilities            1.15                                 1.33
                                                   ====                                 ====
----------
<FN>
(1)    Includes   Federal  Home  Loan  Bank  stock,   federal   funds  sold  and
       interest-bearing deposits.
(2)    Includes nonaccrual loans.
(3)    Interest-rate  spread represents the difference between the average yield
       on  interest-earning  assets  and the  average  rate of  interest-bearing
       liabilities.
(4)    Net interest  margin is annualized net interest income divided by average
       interest-earning assets.
</FN>
</TABLE>


                                       12
<PAGE>

                       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.
<TABLE>
                                                                   Six Months Ended June 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                                       $ 12,629            567      8.98%    $  5,560         268      9.64%
   Securities                                     4,142            133      6.42        2,704          85      6.29
   Other interest-earning assets (1)              1,826             46      5.04        1,831          53      5.79
                                                  -----             --      ----        -----          --      ----

       Total interest-earning assets             18,597            746      8.02       10,095         406      8.04

Noninterest-earning assets (2)                    3,235                                 2,311
                                                  -----                                 -----

       Total assets                            $ 21,832                              $ 12,406
                                               ========                              ========

Interest-bearing liabilities:
   Savings, NOW, money-market
       deposit accounts                           3,563             47      2.64        2,106          28      2.66
   Time deposits                                 12,401            387      6.24        4,957         143      5.77
   Borrowings (3)                                    63              2      6.35          -            -         -
                                                 ------          -----      ----        -----        -----     -----

       Total interest-bearing liabilities        16,027            436      5.44        7,063         171      4.84

Noninterest-bearing demand deposits               1,407                                 1,034
Noninterest-bearing liabilities                     473                                   217
Stockholders' equity                              3,925                                 4,092
                                                  -----                                 -----

       Total liabilities and
           stockholders' equity                $ 21,832                              $ 12,406
                                               ========                              ========

Net interest income                                              $ 310                              $ 235
                                                                 =====                              =====


Interest-rate spread (4)                                                    2.58%                              3.20%
                                                                            ====                               ====

Net interest margin (5)                                                     3.33%                              4.66%
                                                                            ====                               ====

Ratio of average interest-earning assets to
   average interest-bearing liabilities            1.16                                  1.43
                                                   ====                                  ====

----------
<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 the Three-Month Periods Ended June 30, 2001 and 2000

General. Net loss for the three  months  ended June 30, 2001 was $82,688 or $.16
     per basic and diluted  share  compared to a net loss of $76,204 or $.15 per
     basic  and  diluted  share  for the  comparable  period  in 2000.  The Bank
     commenced  operations on April 28, 1999. At June 30, 2001,  the Company had
     not achieved the asset size to operate profitably.

Interest Income.  Interest income for the  three-months  ended June 30, 2001 was
     $389,414  compared to $218,761  for the  three-months  ended June 30, 2000.
     Interest  income  earned on loans was $295,159 for the  three-months  ended
     June 30, 2001  compared to $153,933 for the  three-month  period ended June
     30, 2000. The increase was due to an increase in the average loan portfolio
     balance to $13.4 million for the three-months ended June 30, 2001 from $6.3
     million for the comparable  period in 2000,  partially offset by a decrease
     in the average yield earned from 9.78% to 8.82%.  Interest income earned on
     securities was $70,592 for the three months ended June 30, 2001 compared to
     $46,347 for the three months  ended June 30, 2000.  The increase was due to
     an increase in the average security portfolio balance from $2.9 million for
     the three  months  ended June 30, 2000 to $4.4  million for the  comparable
     2001  period,  partially  offset by a decrease in the average  yield earned
     from 6.31% in 2000 to 6.29% for the 2001 period.

Interest Expense.  Interest expense for the three-months ended June 30, 2001 was
     $229,995 compared to $97,264 for the three-months  ended June 30, 2000. The
     increase was due to an increase in the average balance of  interest-bearing
     deposits  from $7.8  million  for the  three-months  ended June 30, 2000 to
     $17.4 million for the  three-months  ended June 30, 2001 and an increase in
     the  average  cost from 4.97% for the  three-months  ended June 30, 2000 to
     5.30% for the three-months ended June 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 June 30, 2001 and 2000 of $76,493 and $35,088,
     respectively.  The increase  relates to three loans  becoming  impaired and
     subsequent  write-off  of one of these loans  during the three months ended
     June 30, 2001. The allowance for loan losses was $208,622 at June 30, 2001.
     Management believes the allowance is adequate at June 30, 2001.

Noninterest Income.  Noninterest  income was $36,964 for the three-months  ended
     June 30, 2001 compared to $18,997 for the same period in 2000. The majority
     of this  increase  relates to an  increase  in service  charges on deposits
     accounts.

Noninterest Expense. Noninterest expense was $255,578 for the three-months ended
     June 30,  2001  compared to $230,945  for the  three-months  ended June 30,
     2000.  This  increase  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 three months ended June 30,
     2001 was  $53,000  (an  effective  rate of 39.1%)  compared  to $49,335 (an
     effective tax rate of 39.3%) for the three months ended June 30, 2000.



                                       14
<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY

        Comparison of the Six-Months Periods Ended June 30, 2001 and 2000


General. Net loss for the six months  ended June 30,  2001 was  $157,243 or $.30
     per basic and diluted share  compared to a net loss of $172,505 or $.34 per
     basic  and  diluted  share  for the  comparable  period  in 2000.  The Bank
     commenced  operations on April 28, 1999. At June 30, 2001,  the Company had
     not achieved the asset size to operate profitably.

Interest  Income.  Interest  income for the  six-months  ended June 30, 2001 was
     $745,662  compared  to $405,740  for the  six-months  ended June 30,  2000.
     Interest income earned on loans was $566,565 for the six-months  ended June
     30, 2001 compared to $267,520 for the six-month period ended June 30, 2000.
     The increase was due to an increase in the average loan  portfolio  balance
     to $12.6 million for the  six-months  ended June 30, 2001 from $5.6 million
     for the comparable  period in 2000,  partially  offset by a decrease in the
     average  yield  earned  from  9.64% to  8.98%.  Interest  income  earned on
     securities  was $133,366 for the six months ended June 30, 2001 compared to
     $84,725 for the six months ended June 30, 2000.  The increase was primarily
     due to an increase  in the average  security  portfolio  balance  from $2.7
     million  for the six months  ended June 30,  2000 to $4.1  million  for the
     comparable 2001 period.

Interest Expense.  Interest  expense for the six-months  ended June 30, 2001 was
     $436,174  compared to $170,843 for the six-months  ended June 30, 2000. The
     increase was due to an increase in the average balance of  interest-bearing
     deposits from $7.1 million for the six-months  ended June 30, 2000 to $16.0
     million  for the  six-months  ended June 30,  2001 and an  increase  in the
     average cost from 4.84% for the six-months ended June 30, 2000 to 5.44% for
     the six-months ended June 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  six-months  ended June 30, 2001 and 2000 of $142,040  and $48,132,
     respectively. The increase relates to three loans becoming impaired and the
     subsequent write-off of one of these loans during the six months ended June
     30,  2001.  The  allowance  for loan losses was  $208,622 at June 30, 2001.
     Management believes the allowance is adequate at June 30, 2001.

Noninterest Income. Noninterest income was $67,932 for the six-months ended June
     30, 2001  compared to $36,161 for the same period in 2000.  The majority of
     this  increase  relates  to an  increase  in service  charges  on  deposits
     accounts.

Noninterest Expense.  Noninterest  expense was $491,623 for the six-months ended
     June 30, 2001 compared to $504,141 for the six-months  ended June 30, 2000.
     In 2000, the Company  incurred  $89,382 in litigation  expenses  associated
     with the civil suit brought against the Company by the former  president of
     the Bank, a majority of which was recovered from their insurance carrier in
     the  third  quarter  of 2000.  The net  increase  in  noninterest  expense,
     excluding these litigation expenses,  was $76,864 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 six months  ended June 30,
     2001 was  $99,000 (an  effective  rate of 38.6%)  compared to $108,710  (an
     effective tax rate of 38.7%) for the six months ended June 30, 2000.



                                       15
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY


                           PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders (the "Annual Meeting") of PSB BancGroup, Inc.
was held on April 17, 2001, to consider the election of two directors each for a
term of three years and the  ratification  of the  appointment  of the Company's
independent auditors for the year ending December 31, 2001.

At the Annual  Meeting,  340,702 shares were present in person or by proxy.  The
following is a summary and tabulation of the matters that were voted upon at the
Annual Meeting:

   Proposal I.

   The election of two directors, each for a term of three years:

                                                                   Abstentions
                                                                    and Broker
                                 For        Withheld      Against     Nonvotes

      Shilpa U. Mhatre         340,702         -             -           -
                               =======      =======       =======     =======

      Alton C. Milton, Jr.     340,702         -             -           -
                               =======      =======       =======     =======

   Proposal II:

   To ratify  the  appointment  of Hacker,  Johnson & Smith PA as the  Company's
   independent auditors for the year ending December 31, 2001:

                                                      Abstentions
                                                       and Broker
                 For        Withheld      Against       Nonvotes
                 ---        --------      -------       --------

               340,702         -             -             -
               =======      =======       =======       =======



                                       16
<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY

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  exhibits  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 June 30, 2001.










                                       17
<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:  August 6, 2001                 By: /s/ Robert W. Woodard
                                          --------------------------------------
                                              Robert W. Woodard,
                                          President and Chief Executive Officer


Date:  August 6, 2001                 By: /s/ Thomas M. Riherd, II
                                          --------------------------------------
                                              Thomas M. Riherd, II,
                                          Chief  Financial Officer








                                       18