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, 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 (Company
has been subject to filing requirements since April 28, 1999):

YES       NO  X

     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           513,478 shares
--------------------------------------     ----------------------------
              (class)                      Outstanding at July 23, 1999


<PAGE>




                       PSB BANCGROUP, INC. AND SUBSIDIARY

                                      INDEX


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements                                               Page

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

Condensed Consolidated  Statements of Operations
     Three and Six Months ended June 30, 1999 and 1998 (unaudited)............3

Condensed Consolidated Statement of Stockholders? Equity (Deficit)
     Six Months Ended June 30, 1999 (unaudited)...............................4

Condensed Consolidated Statements of Cash Flows -
     Six Months Ended June 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

Item 3.  Qualitative and Quantative Disclosures About Market Risk............11

PART II. OTHER INFORMATION

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

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

<PAGE>
<TABLE>
<CAPTION>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements

                      Condensed Consolidated Balance Sheets

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

<S>                                                              <C>              <C>
Cash and due from banks                                          $  627,565         17,520
Interest-bearing deposits                                           117,078         27,048
Federal funds sold                                                3,414,000           --
                                                                -----------        -------

Total cash and cash equivalents                                   4,158,643         44,568

Securities held to maturity                                       1,000,000           --
Loans, net of allowance for loan losses of $5,472 in 1999           743,443           --
Premises and equipment, net                                         275,563        232,687
Restricted security, Federal Home Loan Bank stock, at cost            9,400           --
Deferred tax asset                                                  176,600        119,285
Accrued interest receivable and other assets                        111,113         47,043
                                                                -----------        -------

Total                                                           $ 6,474,762        443,583
                                                                ===========        =======


Liabilities and Stockholders' Equity (Deficit)

Deposits:
Demand deposits                                                     437,354           --
Savings and NOW deposits                                            497,200           --
Money-market deposits                                               284,017           --
Time deposits                                                       916,745           --
                                                                -----------        -------

Total deposits                                                    2,135,316           --

Borrowings                                                             --          465,000
Accrued interest payable and other liabilities                       50,086           --
                                                                -----------        -------

Total liabilities                                                 2,185,402        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,
513,478 and 3,942 shares issued and outstanding in
1999 and 1998, respectively                                           5,135             40
Additional paid-in capital                                        4,578,667        177,350
Accumulated deficit                                                (294,442)      (198,807)
                                                                -----------        -------

Total stockholders' equity (deficit)                              4,289,360        (21,417)
                                                                -----------        -------

Total                                                           $ 6,474,762        443,583
                                                                ===========        =======

</TABLE>



See Accompanying Notes to Condensed Consolidated Financial Statements.

                                       2

<PAGE>
<TABLE>
<CAPTION>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

                 Condensed Consolidated Statements of Operations

                                                   Three Months Ended         Six Months Ended
                                                        June 30,                  June 30,
                                                   ------------------         ----------------
                                                   1999          1998         1999         1998
                                                   ----          ----         ----         ----
                                                       (unaudited)                (unaudited)
<S>                                             <C>             <C>        <C>          <C>
Interest income:
Loans                                           $   7,545         --          7,545         --
Securities held to maturity                           506         --            506         --
Other interest-earning assets                      45,445         --         97,834          467
                                                ---------      -------      -------      -------

Total interest income                              53,496         --        105,885          467
                                                ---------      -------      -------      -------

Interest expense:
Deposits                                            6,120         --          6,120         --
Borrowings                                          4,342          840       12,071          840
                                                ---------      -------      -------      -------

Total interest expense                             10,462          840       18,191          840
                                                ---------      -------      -------      -------

Net interest income (expense)                      43,034         (840)      87,694         (373)

Provision for loan losses                           5,472         --          5,472         --
                                                ---------      -------      -------      -------

Net interest income (expense) after provision
for loan losses                                    37,562         (840)      82,222         (373)
                                                ---------      -------      -------      -------

Noninterest income-
Service charges on deposit accounts                   849         --            849         --
                                                ---------      -------      -------      -------

Noninterest expense:
Salaries and employee benefits                    100,042       29,617      149,605       51,020
Occupancy expense                                  19,214       15,609       23,453       31,541
Professional fees                                  14,860        1,500       15,400       16,648
Printing and office supplies                        6,678        3,701        9,376        5,676
Telephone expense                                   2,766        1,442        6,599        2,000
Other                                              26,365        7,011       31,588       14,807
                                                ---------      -------      -------      -------

Total other expense                               169,925       58,880      236,021      121,692
                                                ---------      -------      -------      -------

Loss before income tax benefit                   (131,514)     (59,720)    (152,950)    (122,065)

Income tax benefit                                (49,318)     (22,395)     (57,315)     (45,774)
                                                ---------      -------      -------      -------

Net loss                                        $ (82,196)     (37,325)     (95,635)     (76,291)
                                                 ========      =======     ========     ========

Loss per share, basic and diluted               $    (.16)       (9.47)        (.30)      (19.35)
                                                 ========      =======     ========     ========

Weighted-average number of shares
outstanding, basic and diluted                    512,163        3,942      323,999        3,942
                                                 ========      =======     ========     ========

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

</TABLE>

See Accompanying Notes to Condensed Consolidated Financial Statements.

                                       3

<PAGE>
<TABLE>
<CAPTION>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

       Condensed Consolidated Statement of Stockholders? Equity (Deficit)

                     For the Six Months Ended June 30, 1999


                                                                                  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)
(unaudited)                                 --           (40)     (177,350)         --        (177,390)

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

Net loss (unaudited)                        --          --            --         (95,635)      (95,635)
                                           ---         -----     ---------      --------     ---------

Balance at June 30, 1999 (unaudited)       $--         5,135     4,578,667      (294,442)    4,289,360
                                           ===         =====     =========      ========     =========

</TABLE>
























See Accompanying Notes to Condensed Consolidated Financial Statements.

                                       4
<PAGE>
<TABLE>
<CAPTION>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

                 Condensed Consolidated Statements of Cash Flows



                                                                                    Six Months Ended
                                                                                        June 30,
                                                                                  --------------------
                                                                                  1999            1998
                                                                                  ----            ----
                                                                                       (unaudited)
Cash flows from operating activities:
<S>                                                                          <C>               <C>
Net loss                                                                     $   (95,635)       (76,291)
Adjustments to reconcile net loss to net cash
  used in operating activities:
Depreciation and amortization                                                      1,336           --
Provision for loan losses                                                          5,472           --
Credit for deferred income taxes                                                 (57,315)       (45,774)
Increase in accrued interest receivable and other assets                         (64,070)        (6,208)
                Increase in accrued interest payable and other liabilities        50,086           --
                                                                              ----------       --------

Net cash used in operating activities                                           (160,126)      (128,273)
                                                                              ----------       --------

Cash flows from investing activities:
Purchase of securities held to maturity                                       (1,000,000)          --
Purchase of property and equipment                                               (44,212)       (45,237)
Net increase in loans                                                           (748,915)          --
Purchase of restricted security                                                   (9,400)          --
                                                                              ----------       --------

Net cash used in investing activities                                         (1,802,527)       (45,237)
                                                                              ----------       --------

Cash flows from financing activities:
Net increase in demand, savings, NOW and money-
market deposits                                                                1,218,571           --
Net increase in time deposits                                                    916,745           --
Net (decrease) increase in borrowings                                           (465,000)       100,000
Retirement of common stock                                                      (177,390)          --
Net proceeds from issuance of common stock                                     4,583,802           --
                                                                              ----------       --------

                        Net cash provided by financing activities              6,076,728        100,000
                                                                              ----------       --------

Net increase (decrease) in cash and cash equivalents                           4,114,075        (73,510)

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

Cash and cash equivalents at end of period                                   $ 4,158,643          4,332
                                                                              ==========       ========

Supplemental disclosure of cash flow information-
Cash paid during the period for:
Interest                                                                     $    14,110            840
                                                                              ==========       ========

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

</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 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 the management of the Company, 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,  1999,  the results of  operations  for the
     three- and  six-month  periods  ended June 30, 1999 and 1998 and cash flows
     for the  six-month  periods  ended June 30,  1999 and 1998.  The results of
     operations  for the  three  and six  months  ended  June  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  of the Company  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. 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.


                                       6

<PAGE>






                       PSB BANCGROUP, INC. AND SUBSIDIARY

        Notes to Condensed Consolidated Financial Statements (unaudited)


(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.


                                       7


<PAGE>




                       PSB BANCGROUP, INC. AND SUBSIDIARY

        Notes to Condensed Consolidated Financial Statements (unaudited)


(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
     June 30, 1999 or 1998.  The activity in the allowance for loan losses is as
     follows:

                              Three Months Ended  Six Months Ended
                                    June 30,        June 30,
                              ------------------  ----------------
                                   1999   1998     1999   1998
                                   ----   ----     ----   ----

Balance at beginning of period   $ --     --       --     --
Provision charged to earnings     5,472   --      5,472   --
                                  -----   ---     -----   ---

Balance at end of period         $5,472   --      5,472   --
                                 ======   ===     =====   ===

(3)  Regulatory  Matters.  Banking  laws and  regulations  limit  the  amount of
     dividends that may be paid by the Bank. 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 June 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 June 30, 1999, the Bank was in compliance  with all  regulatory  capital
     requirements.

                                       8

<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

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

                Three and Six Months Ended June 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 six months ended June 30,
     1999 was  from the net  proceeds  from  the  sale of  common  stock of $4.6
     million and net deposit inflows of $2.1 million. Cash was used primarily to
     purchase  securities of $1.0 million,  fund loans  totaling $.7 million and
     repay  borrowings  of $.5  million.  At June  30,  1999,  the  Company  had
     outstanding  commitments to originate  loans totaling $.4 million.  At June
     30, 1999, the Bank exceeded its regulatory liquidity requirements.

Common Stock Offering

     As of June 30, 1999,  the Company has sold  513,478  shares of common stock
     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 June 30, 1999, there were 513,478
     warrants  outstanding  entitling the holders to purchase  513,478 shares of
     the Company's common stock. No warrants have been exercised.

Results of Operations:

     General.  Net losses for the three and six months  ended June 30,  1999 was
     $82,196 and $95,635,  respectively.  The Bank commenced operations on April
     28, 1999. A discussion  of operating  results at June 30, 1999,  or for the
     three and six months ended June 30, 1999 and 1998 would not be  meaningful.
     At June 30,  1999,  the Company had not  achieved the asset size to operate
     profitably.

                                       9

<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

Year 2000 Issues

The  Company  is  acutely  aware of the many  areas  affected  by the Year  2000
computer issue, as 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 and  renovation  phases and is actively  involved in
validating and  implementing  its plan. At the present time, the Company is into
its testing phase and anticipates that this phase will be substantially complete
by September 30, 1999. Since it routinely upgrades and purchases technologically
advanced  software and hardware on a continual basis, the Company has determined
that the cost of making  modifications  to correct any Year 2000 issues will not
substantially affect reported operating results.

The  main  service  provider  has  completed  testing  of its  mission  critical
application  software and item processing  software.  The test results have been
documented and validated.

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.  Significant  relationships  have been
identified and questionnaires  have been completed to assess the inherent risks.
Deposit customers have received statement stuffers and informational material in
this  regard.  The  Company  plans to be  prepared  on a  one-on-one  basis with
significant  borrowers  who has been  identified  as having  high Year 2000 risk
exposure.

Accordingly,  management  does not believe that the Company has incurred or will
incur  substantial  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 significant adverse effect on the
Company?s business, financial condition, and results of operations.

The  contingency  plans  relative to Year 2000 issues have not been  finalized -
these plans are  evolving as the testing of systems  proceeds.  Management  will
develop a ?worst case  scenario?  contingency  plan.  With regards to nonmission
critical internal systems, the Company?s contingency plans are to replace and/or
upgrade  those  systems  that test as being  noncompliant.  Alternatively,  some
systems could be handled  manually on an interim basis.  Should outside  service
providers not be able to provide compliant  systems,  the Company will terminate
those  relationships  and transfer to other vendors.  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.

                                       11

<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates.
The Company?s market risk arises primarily from  interest-rate  risk inherent in
its lending and deposit  taking  activities.  To that end,  management  actively
monitors and manages its interest rate risk exposure.  The measurement of market
risk associated  with financial  instruments is meaningful only when all related
and offsetting on- and  off-balance-sheet  transactions are aggregated,  and the
resulting net positions are identified.  At June 30, 1999, the book value of the
Company?s financial instruments approximates their fair value.

The primary objective in managing  interest-rate risk is to minimize the adverse
impact of  changes in  interest  rates on the  Bank?s  net  interest  income and
capital,  while  adjusting the  asset-liability  structure to obtain the maximum
yield-cost  spread  on that  structure.  The  Company  relies  primarily  on its
asset-liability  structure to control interest rate risk.  However, a sudden and
substantial  increase  in  interest  rates may  adversely  impact the  Company?s
earnings,  to the extent that the interest rates borne by assets and liabilities
do not change at the same speed, to the same extent,  or on the same basis.  The
Company does not engage in trading activities.


                           PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits.  The  following  exhibits  are  filed  with  or  incorporated  by
     reference into this report.  The 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 June 30, 1999.

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


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