SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
                1934 For the Fiscal Year Ended December 31, 1999

                          Commission File No. 333-44161

                               PSB BANCGROUP, INC.

       A Florida Corporation (IRS Employer Identification No. 59-3454146)
                              500 South 1st Street
                               Lake City, FL 32025
                                 (904) 754-0002

Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act
of 1934:

                                      NONE

Securities Registered Pursuant to Section 12(g) of the Securities Exchange Act
of 1934:

                                      NONE

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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

Check if disclosure of delinquent  filers pursuant to Item 405 of Regulation S-B
is not  contained  in this  form,  and  will  not be  contained,  to the best of
Registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by  reference  in Part III of the Firm 10-KSB or any  amendment to
this Form 10-KSB. [ ]

Revenues for the fiscal year ended December 31, 1999: $379,056

The  aggregate  market  value  of the  common  stock of the  Registrant  held by
nonaffiliates  of  the  Registrant  (323,654  shares)  on  March  3,  2000,  was
approximately  $2,912,886.  As of such date, no organized trading market existed
for the common stock of the Registrant.  The aggregate market value was computed
by reference to recent trading activity of the common stock of the registrant at
$9.00 per share.  For the  purposes of this  response,  directors,  officers and
holders  of 5% or more of the  Registrant's  common  stock  are  considered  the
affiliates of the Registrant at that date.

The number of shares  outstanding of the Registrant's  common stock, as of March
3, 2000: 514,478 shares of $0.01 par value common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Audited  Consolidated  Financial  Statements  for the year
     ended December 31, 1999. (Part II)

2.   Portions of Proxy  Statement for the 2000 Annual  Meeting of  Shareholders.
     (Part III)



<PAGE>



                                TABLE OF CONTENTS

Consolidated  -- PSB BancGroup, Inc., and its subsidiary are referred to as
("Registrant").



                                                                     Page Number

 PART I

 Item 1     Business ...................................................... 3
 Item 2     Properties ....................................................11
 Item 3     Legal Proceedings .............................................11
 Item 4     Submission of Matters to a Vote of Security Holders ...........12(1)

 PART II

 Item 5     Market for Common Equity and Related Stockholder Matters ......12(1)
 Item 6     Management's Discussion and Analysis of Financial Condition and
            Results of Operations .........................................12(1)
 Item 7     Financial Statements and Supplementary Data ...................19(1)
 Item 8     Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure ...........................19

 PART III

 Item 9     Directors and Executive Officers of the Registrant ............19(2)
 Item 10    Executive Compensation ........................................20(2)
 Item 11    Security Ownership of Certain Beneficial Owners
              and Management ..............................................20(2)
 Item 12    Certain Relationships and Related Transactions ................20

 PART IV

 Item 13    Exhibits, Financial Statement Schedules, and Reports on
              Form 8-KSB ..................................................20


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

(1)      These items are  incorporated  by reference from  Registrant's  Audited
         Consolidated Financial Statements for the year ended December 31, 1999.

(2)      The material  required by Items 9 through 11 is hereby  incorporated by
         reference from  Registrant's  definitive  Proxy  Statement  pursuant to
         Instruction G of Form 10-KSB.

                                       -2-


<PAGE>



                                     PART I

ITEM 1. - BUSINESS

General

PSB BancGroup, Inc. ("PSB") is a one-bank holding company as defined by the Bank
Holding  Company Act of 1956, as amended.  PSB, which is  headquartered  in Lake
City,  Florida,  owns 100% of the issued and outstanding common stock of Peoples
State  Bank  ("Bank").  Collectively,  PSB and the Bank are  referred  to as the
"Company."

PSB was incorporated under the laws of the State of Florida on June 30, 1997, to
acquire  100  percent  of  the  share  to be  issued  by  the  Bank  during  its
organizational  stage and to  enhance  the  Bank's  ability  to serve its future
customers'  requirements for financial  services.  PSB provides  flexibility for
expansion of the Company's  banking  business  through  possible  acquisition of
other financial institutions and to provide additional  banking-related services
which the traditional commercial bank may not provide under present laws.

Subsidiaries

As of  December  31,  1999,  PSB had  one  subsidiary,  Peoples  State  Bank,  a
state-chartered commercial bank. The Bank opened for business on April 28, 1999.

The Bank is a full service  commercial  bank,  without  trust  powers.  The Bank
provides such consumer services as U.S. Savings Bonds,  travelers  checks,  Bank
checks and cashier's  checks.  The Bank offers a full range of  interest-bearing
and noninterest-bearing deposit accounts, which include:

                     Commercial and Retail Checking Accounts
                   Competitively Priced Money Market Accounts
                         Individual Retirement Accounts
               Regular Interest Bearing Statement Savings Accounts
                          U.S. Certificates of Deposit

The Bank also offers a wide range of loan products, which include:

                                Commercial Loans
                                Real Estate Loans
                                 Consumer Loans

Forward-Looking Statements

This  report  contains  certain  "forward-looking"  statements,  as such term is
defined  in the  Private  Securities  Litigation  Reform  Act of  1995 or by the
Securities and Exchange Commission in its rules, regulations and releases, which
represent the company's expectations or beliefs,  including, but not limited to,
statements concerning the Company's operations, economic performance,  financial
condition, growth and acquisition strategies, investments and future operational
plans. For this purpose, any statements contained herein that are not statements
of  historical  fact may be deemed  to be  forward-looking  statements.  Without
limiting the generality of the foregoing, words such as "may", "will", "expect",
"relieve", "anticipate",  "intent", "could", "estimate", "might", or "continue",
or the  negative  or other  variations  thereof or  comparable  terminology  are
intended to  identify  forward-looking  statements.  These  statements  by their
nature involve substantial risks and uncertainties,  certain of which are beyond
our control, and actual results may differ materially, depending on a variety of
important factors,  including uncertainty related to our operations,  mergers or
acquisitions,  governmental  regulation,  the value of the  assets and any other
factors  discussed in this and other  Company  filings with the  Securities  and
Exchange Commission.

Year 2000 Compliance

Our operating and  financial  systems have been found to be compliant;  the "Y2K
Problem" did not adversely affect our operations.

                                       -3-


<PAGE>

<TABLE>


                                              SELECTED FINANCIAL DATA

                                    At December 31, or for the Year then Ended
                                 (Dollars in thousands, except per share figures)


                                                                          1999            1998
At Year End:
<S>                                                                        <C>           <C>
Cash and Cash Equivalents .........................................        $   3,258     $       45
Securities ........................................................            2,475              -
Loans, Net ........................................................            4,235              -
All Other Assets ..................................................              828            399
                                                                              ------        -------
         Total Assets .............................................        $  10,796      $     444
                                                                              ======        =======

Deposit Accounts ..................................................        $   6,560      $       -
All Other Liabilities .............................................               59            465
Stockholders' Equity (Deficit) ....................................            4,177            (21)
                                                                              ------        -------
         Total Liabilities and Stockholders' Equity (Deficit)......        $  10,796      $     444
                                                                              ======        =======

For the Year:
Total Interest Income .............................................        $     366      $      28
Total Interest Expense ............................................               91              9
                                                                              ------         ------
Net Interest Income ...............................................              275             19
Provision for Loan Losses .........................................               42              -
                                                                              ======         ======

Net Interest Income After Provision for Loan Losses ...............              233             19
Noninterest Income ................................................               12              -
Noninterest Expenses ..............................................              574            280
                                                                              ======         ======

Loss Before Income Tax Credit .....................................             (329)          (261)
Income Taxes (benefit) ............................................             (124)           (98)
                                                                              ------         ------
Net Loss ..........................................................        $    (205)     $    (163)
                                                                              ======         ======
Basic Loss Per Share ..............................................        $    (.49)     $  (41.39)
                                                                              ======         ======
Diluted Loss Per Share  ...........................................        $    (.49)     $  (41.39)
                                                                              ======         ======

Ratios and Other Data:
Return on Average Assets ..........................................            (3.32%)           (1)
Return on Average Equity ..........................................            (6.71%)           (1)
Average Equity to Average Assets ..................................            49.42%            (1)
Interest-Rate Spread During the Period ............................             2.12%            (1)
Net Yield on Average Interest-Earning Assets ......................             4.64%            (1)
Noninterest Expenses to Average Assets ............................             9.30%            (1)
Ratio of Average Interest-Earning Assets to
   Average Interest-Bearing Liabilities ...........................             2.65%            (1)
Nonperforming Loans and Foreclosed Real Estate as
   A Percentage of Total Assets at End of Year ....................                -              -
Allowance for Loan Losses as a Percentage
   Of Total Loans at End of Year ..................................              .99%            (1)
Total Number of Banking Offices ...................................                1             (1)
Total Shares Outstanding at End of Year ...........................          514,478           3,942
Book Value Per Share at End of Year ...............................     $       8.12     $     (5.43)

--------------------------------------
<FN>
(1)  The Bank  began  operations  on April 28,  1999,  such  information  is not
     meaningful in 1998.
</FN>
</TABLE>

                                       -4-


<PAGE>

Market Area and Competition

Our primary service are is Lake City,  Florida.  Lake City has been experiencing
steady growth in both  population and banking  deposits in recent years,  is the
primary  commercial  and  residential  center  located in the  Northern  part of
Columbia  County,  Florida.  Columbia  County  maintains  a  steady  commercial,
industrial and agricultural  base, which has been expanding in recent years. The
largest employers in the County include:

   o    Columbia County School                  o      Homes of Merit
   o    VA Medical Center                       o      Lake City Medical Center
   o    Aero Corporation                        o      PCS Phosphate
   o    Florida Department of Transportation    o      Wal-Mart
   o    Columbia Correctional Center            o      Anderson Columbia Company

Agricultural  activities in Columbia County center around the cattle, timber and
other  farming   operations.   There  is  strong   competition  among  financial
institutions  in Lake City.  There are six  commercial  banking  offices and one
savings  and loan  office  within  our  primary  service  area.  There  are five
commercial  banks with a total of 11 branches  operating in Lake City.  Of these
five banks,  one is affiliated with a major bank holding  company.  There are no
savings   associations   headquartered  in  Lake  City,  however,   one  savings
association  and one credit  union  operate  two  branches  in Lake City and one
credit  union is  headquartered  there.  Financial  products are now provided by
financial  institutions  located outside of the primary service area through the
Internet.  The Company also competes  with  non-financial  institutions  such as
insurance  companies,  consumer  finance  companies,  brokerage houses and other
business entities that now target once traditional banking business.

We believe that we can meet these  competitive  challenges by providing  prompt,
personalized service to our customers. "People" answer our telephones, not voice
mail and customers are notified promptly as to whether we can satisfy their loan
request.

Investments

As  of  December  31,  1999,  investment  securities,  federal  funds  sold  and
interest-earning  deposits in other banks comprised  approximately  44.5% of the
Company's  assets and net loans comprised  approximately  39.2% of the Company's
assets. To date, we have invested  primarily in obligations of the United States
or  obligations  guaranteed as to principal  and interest by the United  States,
other taxable securities and in time deposits.  In addition,  the Company enters
into Federal Funds transactions with its principal correspondent banks, and acts
as a seller of such funds.

Deposits

We  offer a wide  range  of  interest-bearing  and  noninterest-bearing  deposit
accounts,  including  commercial  and retail  checking  accounts,  money  market
accounts,  individual  retirement  accounts,  regular interest bearing statement
savings  accounts and certificate of deposit with fixed and variable rates and a
range of maturity  date  options.  The sources of our  deposits  are  residents,
businesses  and  employees  of  businesses  within  our market  area,  which are
generated  through the personal  solicitation  of our  officers  and  directors,
direct mail solicitation and advertisements published in the local media. We pay
competitive interest rates on time and savings deposits to meet our loan funding
needs.  See  "ITEM  6. -  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Asset and Liability Management."

                                       -5-


<PAGE>



Loan Portfolio

We offer a full  complement  of  lending  services,  which  include  commercial,
consumer/installment and real estate loans.

Commercial  lending is directed  principally toward businesses whose demands for
funds fall  within our legal  lending  limits  and which are  potential  deposit
customers  of  the  Bank..  This  category  of  loans  includes  loans  made  to
individual,  partnership or corporate  borrowers,  and obtained for a variety of
business  purposes.  Particular  emphasis  is  placed  on  loans  to  small  and
medium-sized businesses.

Real  estate  loans  consist  of  residential  and  commercial  first and second
mortgage loans.

Consumer  loans  consist  primarily  of  installment  loans to  individuals  for
personal,   family  and  household  purposes,   including  automobile  loans  to
individuals  and  pre-approved  lines of  credit.  This  category  of loans also
includes term loans secured by second  mortgages on the  residences of borrowers
for a variety of  purposes  including  home  improvements,  education  and other
personal expenditures.

Our general practice is not to accrue interest on loans delinquent over 90 days,
unless fully  secured and in the process of  collection.  The accrued and unpaid
interest  is  reversed  against  current  income  and  thereafter   interest  is
recognized  only to the extent  payments  are  received.  Non-accrual  loans are
restored to accrual basis when  interest and principal  payments are current and
prospects for recovery are no longer in doubt.

As of December  31,  1999,  there were no loans where  known  information  about
possible credit problems of borrowers  causes  management to have serious doubts
as to the ability of such  borrowers to comply with the present  loan  repayment
terms.

The  majority  of our loans are  secured  by real  estate  in  Columbia  County,
Florida.  Accordingly,  the ultimate  collectibility of a substantial portion of
the loan portfolio is susceptible to changes in market conditions in the County.
See "ITEM 6. - MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS, Asset and Liability Management."

Loan Loss Reserves

In considering the adequacy of our allowance for loan losses, we considered that
as of December 31, 1999,  71.9% of our  outstanding  loans are in the commercial
loan category,  including  loans secured by commercial  real estate.  Commercial
loans are  generally  considered  by  management to have greater risk than other
categories  of loans in our  loan  portfolio.  However,  the  majority  of these
commercial  loans at  December  31,  1999,  were made on a secured  basis,  with
collateral consisting primarily of real estate, accounts receivable,  inventory,
assignment of mortgages and equipment.  We believe that the secured condition of
the  preponderant  portion of its commercial loan portfolio  reduces any risk of
loss inherently present in commercial loans.

Our consumer loan portfolio at December 31, 1999,  consisted  primarily of lines
of credit and installment loans secured by automobiles, boats and other consumer
goods.  We believe that the risk  associated  with these types of loans has been
adequately provided for in the loan loss reserve.

Residential real estate mortgage loans constitute 13.0% of outstanding  loans at
December 31, 1999.  These loans are  considered  to have minimal risk due to the
fact that these loans represent  conventional  residential real estate mortgages
where the amount of the original loan does not exceed 80% of the appraisal value
of the collateral or is otherwise covered by private mortgage insurance.

                                       -6-


<PAGE>



The Company's Board of Directors monitors the loan portfolio monthly in order to
enable it to  evaluate  the  adequacy  of the  allowance  for loan  losses.  The
allowance for loan losses represents the cumulative total of monthly  provisions
for loan losses plus  recoveries  of amounts  previously  charged off,  less net
charge-offs.  The allowance for loan losses is  established  through a provision
for loan losses charged to expense.  Loans are charged off against the allowance
when management believe the collectibility of principal is unlikely. The monthly
provision for loan losses is based on our judgment,  after considering known and
inherent risks in the portfolio,  past loss  experience of the Company,  adverse
situations  that may affect the borrower's  ability to repay,  assumed values of
the  underlying  collateral  securing  the loans,  the current  and  prospective
financial condition of the borrower, and the prevailing and anticipated economic
condition of the local market.

The Company maintains an allowance for loan losses at a level that we believe is
sufficient to absorb all estimated  losses in the loan portfolio.  The allowance
for loan losses is made up of two primary  components:  (i) amounts allocated to
loans based on collateral type and (ii) amounts  allocated for loans reviewed on
an individual basis in accordance with a credit risk grading system. At December
31,  1999,  $42,382  or .9% of  outstanding  loans had been  allocated  for loan
losses.

Correspondent Banking

Correspondent  banking involves the providing of services by one bank to another
bank which cannot  provide that service for itself from an economic or practical
standpoint.   We  purchase  correspondent  services  offered  by  larger  banks,
including  check  collections,  purchase  or sale  of  Federal  Funds,  security
safekeeping,  investment  services,  coin and  current  supplies,  overline  and
liquidity  loan  participations  and  sales of loans to or  participations  with
correspondent banks.

As of December 31, 1999,  the Company did not have any loan  participations.  As
our  loan  demand  grows,  our  intent  is  to  sell  loan   participations   to
correspondent  banks with  respect to loans which  exceed our  lending  limit of
approximately $1,044,000.

Data Processing

Our data  processing  servicing  agreement  is with  The  InterCept  Group.  The
servicing  agreement  provides us with a full range of data processing  services
including an automated  general ledger,  deposit  accounting,  commercial,  real
estate and installment lending data processing, central information file ("CIF")
and ATM processing.  Under our data processing servicing agreement,  the Company
pays a  monthly  fee  based on the  type,  kind and  volume  of data  processing
services provided, priced at a stipulated rate schedule.

Employees

The Company  currently  employs 8 full time persons,  including  three officers.
Additional persons will be hired as needed.

Monetary Policies

The  results  of  operations  of the Bank are  affected  by credit  policies  of
monetary authorities, particularly the Federal Reserve Board. The instruments of
monetary  policy  employed  by the Federal  Reserve  Board  include  open market
operations in U.S. Government securities, changes in the discount rate on member
bank borrowings,  changes in reserve  requirements  against member bank deposits
and limitations on interest rates which member banks may pay on time and savings
deposits.  In view of changing  conditions  in the  national  economy and in the
money  market,  as  well  as  the  effect  of  action  by  monetary  and  fiscal
authorities,  including the Federal  Reserve Board, no prediction can be made as
to possible future changes in interest rates,  deposit levels,  loan demands, or
the business and earnings of the Company.

                                       -7-


<PAGE>



Supervision and Regulation

General.  The Company operates in a highly regulated  environment.  Our business
activities,  which  are  governed  by  statute,  regulation  and  administrative
policies, are supervised by the Federal Reserve Board, the Florida Department of
Banking and Finance ("Department") and the Federal Deposit Insurance Corporation
("FDIC").

PSB is regulated by the Federal Reserve Board under the Bank Holding Company Act
of 1956, as amended,  which  requires  every bank holding  company to obtain the
prior approval of the Federal Reserve Board before acquiring more than 5% of the
voting shares of any bank or all or  substantially  all of the assets of a bank,
and before  merging or  consolidating  with another bank  holding  company.  The
Federal Reserve Board (pursuant to regulation and published  policy  statements)
has maintained  that a bank holding  company must serve as a source of financial
strength to its  subsidiary  banks.  In adhering  to the Federal  Reserve  Board
policy,  PSB may be required to provide  financial support for a subsidiary bank
at a time when,  absent such Federal  Reserve Board policy,  PSB may not deem it
advisable to provide such assistance.

A bank holding  company is generally  prohibited  from acquiring  control of any
company  which is not a bank and from  engaging in any  business  other than the
business  of banking or  managing  and  controlling  banks.  However,  there are
certain activities which have been identified by the Federal Reserve Board to be
so  closely  related  to banking  as to be a proper  incident  thereto  and thus
permissible for bank holding companies.

As a  state-chartered  bank,  the  Bank is  subject  to the  supervision  of the
Department,  the FDIC and the  Federal  Reserve  Board.  The Bank may  establish
branch offices anywhere within the State of Florida. The Bank is also subject to
the Florida  banking and usury laws  restricting the amount of interest which it
may charge in making loans or other extensions of credit.

Lending  Limits.  Loans and  extensions  of credit by state banks are subject to
legal  lending  limitations.  Under state law, a state bank may grant  unsecured
loans and extensions of credit in an amount up to 15% of its unimpaired  capital
and surplus to any person. In addition,  a state bank may grant additional loans
and extensions of credit to the same person up to 10% of its unimpaired  capital
and  surplus,  provided  that  the  transactions  are  fully  secured.  This 10%
limitation  is  separate  from,  and in  addition  to,  the 15%  limitation  for
unsecured  loans.  Loans and extensions of credit may exceed the general lending
limit if they qualify under one of several exceptions. At December 31, 1999, our
loans to one borrower limit was  $1,044,000.  The Bank had no loans in excess of
its legal lending limit.

Capital  Requirements.  Both PSB and the Bank are subject to regulatory  capital
requirements  imposed by the Federal Reserve Board, the FDIC and the Department.
Both the Federal Reserve Board and the FDIC have established  risk-based capital
guidelines  for bank holding  companies and bank which make  regulatory  capital
requirements  more sensitive to differences in risk profiles of various  banking
organizations.  The capital  adequacy  guidelines  issued by the Federal Reserve
Board are applied to bank  holding  companies on a  consolidated  basis with the
banks owned by the holding  company.  The FDIC's risk capital  guidelines  apply
directly to state banks  regardless  of whether they are a subsidiary  of a bank
holding company. Both agencies'  requirements (which are substantially  similar)
provide  that  banking  organizations  must  have  capital  equivalent  to 8% of
weighted risk assets. The risk weights assigned to assets are based primarily on
credit risks. Depending upon the riskiness of a particular asset, it is assigned
to a risk category. For example,  securities with an unconditional  guarantee by
the United States  government are assigned to the lowest risk  category.  A risk
weight of 50% is assigned to loans secured by owner-occupied  one to four family
residential  mortgages.  The  aggregate  amount of assets  assigned to each risk
category is m8ultipled by the risk weight assigned to that category to determine
the  weighted   values,   which  are  added  together  to  determine  the  total
risk-weighted  assets. At December 31, 1999, the Bank's total risk-based capital
and Tier I ratio were 65.37% and 64.68%, respectively.  Both the Federal Reserve


                                       -8-


<PAGE>


Board and the FDIC have also  implemented  minimum capital leverage ratios to be
used in tandem with the risk-based  guidelines in assessing the overall  capital
adequacy  of bank  and  bank  holding  companies.  Under  these  rules,  banking
institutions  are  required  to maintain a ratio of 3% "Tier I" capital to total
assets (net of goodwill).  Tier I capital includes common  stockholders  equity,
noncumulative  perpetual  preferred  stock and minority  interests in the equity
accounts of consolidated subsidiaries.

Both the  risk-based  capital  guidelines  and the  leverage  ratio are  minimum
requirements,  applicable only to top-rated banking  institutions.  Institutions
operating at or near these levels are expected to have well-  diversified  risk,
excellent asset quality,  high liquidity,  good earnings and in general, have to
be considered strong banking  organizations,  rated composite 1 under the CAMELS
rating system for banks or the BOPEC rating  system for bank holding  companies.
Institutions  with lower  rating and  institutions  with high  levels of risk or
experiencing  or anticipating  significant  growth would be expected to maintain
ratios 100 to 200 basis points above the stated minimums.

The Federal Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA"),
created five "capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized,"    "significantly    undercapitalized"    and    "critically
undercapitalized")  which are defined in the Act and which are used to determine
the severity of  corrective  action the  appropriate  regulator  may take in the
event an institution reaches a given level of undercapitalization.  For example,
an  institution   which  becomes   "undercapitalized"   must  submit  a  capital
restoration plan to the appropriate  regulator  outlining the steps it will take
to become adequately  capitalized.  Upon approving the plan, the regulatory will
monitor the institutions' compliance.  Before a capital restoration plan will be
approved, any entity controlling a bank (i.e., a consecutive calendar quarters).
The  liability  of the  holding  company  is  limited to the lesser of 5% of the
institution's  total  assets  or the  amount  which is  necessary  to bring  the
institution   into   compliance  with  all  capital   standards.   In  addition,
"undercapitalized"  institutions will be restricted from paying management fees,
dividends  and other  capital  distributions,  will be subject to certain  asset
growth  restrictions  and will be required  to obtain  prior  approval  from the
appropriate regulator to open new branches or expand into new lines of business.
As an  institution  drops to lower  capital  levels,  the extent of action to be
taken  by  the  appropriate  regulatory  increases,  restricting  the  types  of
transactions in which the  institution  may engage and ultimately  providing for
the appointment of a receiver for certain  institutions  deemed to be critically
undercapitalized.

In response to the directive  issued under the Act, the regulators  have adopted
regulations which, among other things, prescribe the capital thresholds for each
of the five  capital  categories  established  by the Act. The  following  table
reflects the capital thresholds:

                                      Total Risk-      Tier I Risk -     Tier I
                                    Based Capital    Based Capital     Leverage
                                          Ratio             Ratio         Ratio
Well capitalized(1)                       10%               6%             5%
Adequately Capitalized(1)                  8%               4%             4%(2)
Undercapitalized(3)                      < 8%             < 4%           < 4%
Significantly Undercapitalized(3)        < 6%             < 3%           < 3%
Critically Undercapitalized                 -                -           < 2%
------------------

(1)  An institution must meet all three minimums.
(2)  3% for  composite  1-rated  institutions,  subject to  appropriate  federal
     banking agency guidelines.
(3)  An  institution  falls  into this  category  if it is below  the  specified
     capital level for any of the three capital measures.



                                       -9-


<PAGE>



As of December 31, 1999, our Bank was considered to be well capitalized, in that
we had $4.0 million in Total Capital (to risk weighted assets) or a 65.4% ratio;
$3.9 million in Tier I Capital (to risk  weighted  assets) or 64.7%  ratio;  and
$3.9 million in Tier I Capital (to average assets) or a 42.3% ratio.

The Act also provided  that banks must meet new safety and soundness  standards.
In order to comply with the Act, the Federal  Reserve Board and the FDIC adopted
a final Rule which  institutes  guidelines  defining  operational and managerial
standards   relating   to  internal   controls,   loan   documentation,   credit
underwriting,  interest  rate  exposure,  asset  growth,  director  and  officer
compensation,  asset  quality,  earnings and stock  valuation.  Both the capital
standards and the safety and soundness standards, which the Act implements, were
designed to bolster and protect the deposit insurance fund.

Regulatory  Examinations.  As a bank holding company, PSB and its subsidiary are
subject to  examination by the Federal  Reserve  Board.  PSB is required to file
with the Federal  Reserve Board an annual report of its operations at the end of
each fiscal year and such  additional  information as the Federal  Reserve Board
may require pursuant to the Act.

The Bank is subject to  examination  and review by the  Department and the FDIC.
The Bank submits to the Department and the FDIC quarterly  reports of condition,
as well as such additional  reports as may be required by the state banking laws
and FDIC regulations.

Interstate  Branching.  Under the Riegle-Neal  Interstate  Banking and Branching
Efficiency Act of 1994, restrictions on interstate acquisitions of banks by bank
holding  companies  were  repealed,  such  that PSB and any other  bank  holding
company is able to acquire any  Florida-based  bank,  subject to certain deposit
percentage and other restrictions. The legislation also provides that, unless an
individual state elects beforehand either: (i) to accelerate the effective date,
or (ii) to prohibit out-of-state banks from operating interstate branches within
its territory,  on or after June 1, 1997, adequately  capitalized and management
bank holding  companies  will be able to  consolidate.  De novo  branching by an
out-of-state bank is permitted only if it is expressly  permitted by the laws of
the host state. The authority of a bank to establish and operate branches within
a state will continue to be subject to applicable state branching laws.  Florida
permits  interstate  branching  by  acquisition,  but  does  not  allow  de novo
branching.

Recent  Legislation.  In November 1999, the financial services  regulations were
significantly  reformed with the passage of the  Gramm-Leach-Bliley Act ("GLA").
The GLA provides for streamlining of the regulatory  oversight  functions of the
various federal banking agencies. Of significance,  the GLA permits bank holding
companies  that are well  managed,  well  capitalized  and that  have at least a
satisfactory  Community  Reinvestment Act rating to operate as Financial Holding
Companies  ("FHC").  In addition to  activities  that are  permissible  for bank
holding  companies  and  their  subsidiaries,  the GLA  permits  FHCs and  their
subsidiaries  to engage in a wide range of other  activities that are "financial
in nature" or are incidental to financial activities.  These new activities will
enable the Company to engage in new lines of business.

The GLA also requires  financial  institutions  to permit,  with few exceptions,
their  customers to "opt out" of having  their  personal  financial  information
shared  with   nonaffiliated   third  parties.   The  GLA  also  bars  financial
institutions  from disclosing  customer  account numbers to direct marketers and
mandates  that  institutions   provide  annual  disclosure  to  their  customers
regarding the institution's privacy policies and procedures.

34 Act  Reporting.  PSB's  shares  of  common  stock  are  registered  under the
Securities  Act of 1933.  PSB is required  to file  periodic  public  disclosure
reports with the  Securities  and Exchange  Commission  ("SEC")  pursuant to the
Securities and Exchange Act of 1934 and the regulations  promulgated thereunder.
Reports  include a Form  10-KSB,  a required  annual  report that must contain a
complete overview of our business,  financial,  management,  regulatory,  legal,
ownership and organizational  status and a Form 10-QSB, which must be filed with
the SEC at the end of each fiscal quarter.

                                      -10-


<PAGE>


Although  Form 10-KSB  requires the inclusion of audited  financial  statements,
unaudited statements are sufficient for inclusion on Form 10-QSB.  Additionally,
any significant  non-recurring  events that occur during the subject quarter, as
well as changes in securities, any defaults and the submission of any matters to
a vote of security holders, must also be reported on Form 10-QSB.

Additionally,  if any  of six  significant  events  (a  change  in  control,  an
acquisition or disposition of significant assets, bankruptcy or receivership,  a
change in certifying  accountant,  any  resignation  of directors or a change in
fiscal year end) occurs in a period  between the filing of Form 10-KSB or a Form
10-QSB, such event must be reported on a Form 8-KSB within 15 days of the event.

PSB is also  subject to the Proxy  Rules  contained  in Rule 14A with  regard to
soliciting proxies for annual or special meetings of shareholders.

Individual  directors,  officers and owners of more than 10% of our stock,  must
also file individual disclosures of the amount of our securities (stock, options
or warrants) they beneficially own and of any transactions in such securities to
which they are parties.  The initial  status of all such persons was reported on
individual Form 3s. Subsequent securities  transactions will be reported on Form
4 as they  occur,  and an  annual  report  of  ownership  is filed on Form 5. In
certain instances,  the filing of a Form 4 or a Form 5 can relieve the reporting
individual of their duty to file the other.

Recently,  the  National  Association  of  Securities  Dealers  adopted  a  rule
requiring the audit  committees of Board of Directors of reporting  corporations
such as PSB to undertake  certain  organizational  and  operational  steps.  The
Securities and Exchange Commission is considering adopting a similar rule. These
standards  will  require  our  audit   committee  to  be  comprised   solely  of
independent,  non-employee directors who are financially literate.  Furthermore,
the audit  committee will need to adopt a formal charter  defining the scope for
its operations. The SEC's proposed rule will also require our auditors to review
the financial  statements contained in our Form 10-QSBs, in addition to our Form
10-KSBs.

The scope of regulation and permissible  activities of the Company is subject to
change by future federal and state legislation.

ITEM 2. - DESCRIPTION OF PROPERTY

The Bank commenced operations on April 28, 1999, in a temporary facility located
at 500 South First Street,  Lake City,  Florida.  On December 19, 1999, we broke
ground on the permanent facility, a one-story,  5,487 square foot bank building,
located on the same property  immediately behind the temporary  facility.  PSB's
headquarters will also be located at the permanent facility.

ITEM 3. - LEGAL PROCEEDINGS

The only material pending legal proceedings to which PSB and the Bank is a party
is the lawsuit  filed by C.F.  Douglas,  the Bank's  former  President and Chief
Executive  Officer.  The lawsuit was filed  following his  termination for "just
cause".  Mr.  Douglas is  alleging  that the  Company  breached  his  employment
contract and that certain  officers  tortiously  interfered  with his employment
contract. He further alleges that he was mislead by certain directors during his
contra  negotiations.  This matter has been stayed by the Circuit Court, pending
arbitration.  The Company  believes  that it will be successful in defending its
position.

There are no other material  proceedings known to the Company to be contemplated
by any governmental  authority;  nor are there material proceedings known to the
Company, pending or contemplated,  in which any director,  officer, affiliate or
any  principal  security  holder of the Company,  or any associate of any of the
foregoing is a party or has an interest adverse to the Company.

                                      -11-


<PAGE>




ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                     PART II

ITEM 5. - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

During  the  period  covered  by this  report  and to  date,  there  has been no
established public trading market for Registrant's common stock.

As of March 3, 2000, the approximate number of holders of record of PSB's common
stock was 198.  The exact  number is not known since some of the shares are held
by brokers in street name. To date, PSB has not paid any dividends on its common
stock.  It is the present policy of the Board of Directors to reinvest  earnings
for such period of time as is necessary to ensure the success of the  operations
of the  Company.  There  are no  current  plans  to  initiate  payment  of  cash
dividends,  and future  dividend  policy  will depend on our  earnings,  capital
requirements,  financial  condition and other factors considered relevant by the
Board of Directors of the Company.

The Bank is  restricted in its ability to pay  dividends  under Florida  banking
laws and by regulations of the Federal Deposit Insurance  corporation.  Pursuant
to Section 658.37, Florida Statutes, a state bank may not pay dividends from its
capital.  All  dividends  must be paid out of net  profits  then on hand,  after
charging off bad debts,  depreciation,  and other worthless  assets.  Payment of
dividends  out of net  profits is further  limited by Federal  regulation  which
prohibits  the  payment of  dividends,  if such  payment  would bring the Bank's
capital below required levels.

ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONS

                          Year Ended December 31, 1999

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,
PSB and the Bank are referred to as 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 Bank  opened for
business  on  April  28,  1999,  and  provides  community  banking  services  to
businesses and individuals in Columbia County, Florida.

Credit Risk

Our primary business is making  commercial,  business,  consumer and real estate
loans.  That  activity  entails  potential  loan losses,  the magnitude of which
depend on a variety of economic factors affecting borrowers which are beyond our
control.  While  underwriting  guidelines and credit review procedures have been
instituted to protect the Company from avoidable credit losses, some losses will
inevitably occur. At December 31, 1999, the Company had no nonperforming  assets
or charge-off experience.

                                      -12-


<PAGE>



The following table presents information regarding the Company's total allowance
for losses, as well as the allocation of such amounts to the various  categories
of loans (dollars in thousands):

                                                       At December 31, 1999
                                                          Loans to Total
                                                       ----------------------
                                                        Amount          Loans
                                                        ------          -----
Commercial Real Estate Loans ..................     $    23              53.9%
Residential Real Estate Loans .................           5              13.0
Commercial Loans ..............................           8              18.0
Consumer Loans ................................           6              15.1
                                                        ---             -----
Total Allowance for Loan Losses ...............     $    42             100.0%
                                                        ===             =====

The allowance for loan losses represented .99% of the total loans outstanding at
December 31, 1999.

The following  table sets forth the  composition of the Company's loan portfolio
at December 31, 1999 (dollars in thousands):

                                                                         % of
                                                     Amount              Total
                                                     ------              -----
Commercial Real Estate .........................   $  2,311               53.9%
Residential Real Estate ........................        558               13.0
Commercial .....................................        770               18.0
Consumer .......................................        645               15.1
                                                      -----              -----
                                                      4,284              100.0%
                                                                         =====
Less:
         Deferred Fees .........................         (7)
         Allowance for Credit Losses ...........        (42)
                                                      -----
Loans, net .....................................   $  4,235
                                                      =====

Liquidity and Capital Resources

The Company's  primary  source of cash during the year ended  December 31, 1999,
was from the proceeds  from the sale of the common stock of $4.4 million and net
deposit inflows of $6.6 million.  Cash was used primarily to purchase investment
securities, to originate loans and to fund construction of a permanent building.
Outstanding loan  commitments at December 31, 1999,  totaled $0.7 million and we
exceeded our regulatory liquidity requirements.

The following  table sets forth the carrying  value of the Company's  securities
portfolio:

                                                        At December 31, 1999
                                                            (In thousands)

Securities Held to Maturity -
         U.S. Government Agency Securities ............     $    1,000
                                                            ==========
Securities Available for Sale -
         U.S. Government Agency Securities ............     $    1,475
                                                            ==========



                                      -13-


<PAGE>



The following table sets forth,  by maturity  distribution at December 31, 1999,
certain information  pertaining to the securities  portfolio as follows (dollars
in thousands):
<TABLE>

                                                                                After One Year
                                                 One Year or Less                to Five Years                       Total
                                              ----------------------        -----------------------       -----------------------
                                              Carrying       Average        Carrying        Average       Carrying        Average
                                               Value          Yield          Value           Yield          Value          Yield
Securities Held To Maturity -
     <S>                                       <C>            <C>           <C>              <C>           <C>             <C>
     U.S. Government Agency
         Securities .....................      $ 500          5.21%         $  500           5.58%         $1,000          5.39%
                                               =====          ====           =====           ====          ======          ====
Securities Available For Sale -
     U.S. Government Agency
         Securities......................      $  -            -  %         $1,475           6.45%         $1,475          6.45%
                                               =====          ====           =====           ====          ======
</TABLE>

Results of Operations

Our operating  results  depend  primarily on the Company's net interest  income,
which is the difference between interest income on  interest-earning  assets and
interest  expense  on  interest-bearing  liabilities,  consisting  primarily  of
deposits.  Net interest  income is determined by the  difference  between yields
earned on interest-earning assets and rates paid on interest-bearing liabilities
("interest-rate spread") and the relative amounts of interest-earning assets and
interest-bearing   liabilities.   Our   interest-rate   spread  is  affected  by
regulatory, economic and competitive factors that influence interest rates, loan
demand and deposit flows. In addition, our net earnings are also affected by the
level of nonperforming loans and foreclosed real estate, as well as the level of
its  noninterest  income,  and its  noninterest  expense,  such as salaries  and
employee benefits, occupancy and equipment costs and income taxes.

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 yield; (ii) the
total dollar amount of interest expense on interest-bearing  liabilities and the
resultant average costs; (iii) net interest/dividend  income; (iv) interest rate
spread;  (v) net interest  margin.  Average  balances are based on average daily
balances.

                            [TABLE FOLLOWS THIS PAGE]






                                      -14-


<PAGE>

<TABLE>




                                                                            Year Ended December 31, 1999
                                                                  ---------------------------------------------------
                                                                      Average           Interest and          Average
                                                                      Balance            Dividends            Yield/Rate
                                                                  -------------         ------------          ----------
                                                                                    (Dollars in thousands)
Interest-Earning Assets:
<S>                                                                 <C>                    <C>                  <C>
         Loans ...............................................      $   1,357              $   131              9.65%
         Securities ..........................................            930                   58              6.24%
         Other Interest-Earning Assets (1)....................          3,661                  178              4.86%
                                                                        -----                  ---
                  Total Interest-Earning Assets ..............          5,948              $   367              6.17%
Noninterest-Earning Assets ...................................            236                  ===              ====
                                                                        -----
                  Total Assets ...............................          6,184
                                                                        =====
Interest-Bearing Liabilities:
         Savings, Money Market and NOW Deposits ..............      $     813              $    20              2.46%
         Certificates of Deposit .............................          1,297                   59              4.55%
         Other Borrowings ....................................            136                   12              8.82%
                                                                        -----                  ---
                  Total Interest-Bearing Liabilities .........          2,246                   91              4.05%
Noninterest Bearing Demand Deposits ..........................            614                  ===

Other Noninterest-Bearing Liabilities ........................            268

Stockholders' Equity .........................................          3,056
                                                                        -----
                  Total Liabilities and Stockholders'
                  Equity .....................................     $    6,184
                                                                        =====
Net Interest/Dividend Income .................................                             $   276
                                                                                               ===
Interest-Rate Spread (2) .....................................                                                  2.12%
                                                                                                                ====
Net Interest Margin (3) ......................................                                                  4.64%
                                                                                                                ====
Ratio of Average Interest -Earning Assets to Average
         Interest-Bearing Liabilities ........................           2.65
-----------------------------                                           =====
<FN>
(1)     Includes interest-bearing deposits and federal funds sold.
(2)     Interest-rate  spread  represents  the  difference  between the average
        yield   on   interest-earning   assets   and   the   average   cost  of
        interest-bearing liabilities.
(3)     Net interest margin is net interest income dividend by average interest-
        earning assets.

</FN>
</TABLE>


Results of Operations For Year Ended December 31, 1999

General. Net loss for the year ended December 31, 1999, was $(205,437) or $(.49)
         per share. During the year ended December 31, 1999, the Company had not
         achieved the average asset size necessary to operate profitably.

Interest Income and Expense. Interest income totaled $366,992 for the year ended
         December 31, 1999,  Interest  income earned on loans was $130,804.  The
         average loan  portfolio  balance for the year ended  December 31, 1999,
         was $1.4 million and the weighted average yield was 9.65%.

                                      -15-


<PAGE>



         Interest on securities was $57,608.  The average investment  securities
         portfolio  was $.9  million,  with a weighted  average  yield of 6.24%.
         Interest on federal funds sold and deposits in banks totaled  $178,580.
         The average  balance of these assets was $3.7 million,  with a weighted
         average yield of 4.86%.

         Interest expense on deposit  accounts  amounted to $79,226 for the year
         ended  December  31, 1999.  The  weighted  average cost of deposits was
         3.74%.

Provision for Loan Losses.  The provision for loan losses is charged to earnings
         to  bring  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  provision  for the year ended
         December 31, 1999, was $42,382.

Other Expense.  Other expense totaled $574,814 for the year ended  December  31,
         1999. Compensation and benefits was the largest, amounting to $324,670.

Income   Taxes.  The Company  recognized a credit for income taxes, as well as a
         deferred tax asset,  because we believe it is more likely than not that
         the Company  will be able to generate  taxable  income in the future to
         offset these amounts.

Asset and Liability Management

As part of our  asset and  liability  management,  the  Company  has  emphasized
establishing and implementing internal  asset-liability  decision processes,  as
well as communications  and control  procedures to aid in managing our earnings.
We believe that these  processes and procedures  provide the Company with better
capital planning, asset mix and volume controls,  loan-pricing  guidelines,  and
deposit  interest-rate  guidelines,  which should result in tighter controls and
less exposure to interest-rate risk.

The matching of assets and  liabilities  may be analyzed by examining the extent
to which such  assets and  liabilities  are  "interest  rate  sensitive"  and by
monitoring  an  institution's  interest  rate  sensitivity  "gap".  An  asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap  is  defined  as  the  difference   between   interest-earning   assets  and
interest-bearing  liabilities  maturing or repricing within a given period.  The
gap  ratio is  computed  as  RSA/RSL.  A gap  ratio of 1.0%  represents  perfect
matching.  A gap  is  considered  negative  when  the  amount  of  interest-rate
sensitive liabilities exceeds interest-rate sensitive assets. During a period of
rising  interest  rates,  a negative  gap would  adversely  affect net  interest
income, while a positive gap would result in an increase in net interest income.
During a period of falling  interest  rates,  a negative  gap would result in an
increase in net interest income, while a positive gap would adversely affect net
interest  income.  In order to minimize  the  potential  for adverse  effects of
material and prolonged increases in interest rates on the results of operations,
we continue to monitor asset and liability  management  policies to better match
the  maturities  and  repricing  terms  of  its   interest-earning   assets  and
interest-bearing  liabilities.  Such policies have  consisted  primarily of: (i)
emphasizing the origination of adjustable-rate  loans; (ii) maintaining a stable
core deposit base; and (iii) maintaining a significant  portion of liquid assets
(cash and short-term securities).

The  following  table sets froth certain  information  relating to the Company's
interest-earning  assets and interest-bearing  liabilities at December 31, 1999,
that are estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):

                            [TABLE FOLLOWS THIS PAGE]

                                      -16-


<PAGE>
<TABLE>

                                                                                         More
                                                            More           More        Than One        More
                                                          Than Three      Than Six      Year to        Than          Over
                                                Three     Months to      Months to       Five          Five          Ten
                                                Months    Six Months      One Year       Years        Years         Years    Total
                                                ------    ----------     ---------     --------      -------       ------    -----
Loans (1):
<S>                                             <C>       <C>             <C>          <C>           <C>           <C>       <C>
         Variable Rate ...................      $ 2,148   $        -      $      -     $      -      $     -       $    -    $ 2,148
         Fixed Rate ......................          304            -             -        1,184          434          214      2,136
                                                 ------    ---------       -------      -------       ------        -----     ------
                  Total Loans ............        2,452            -             -        1,184          434          214      4,284
Federal Funds Sold and Interest-
   Bearing Deposits ......................        2,328            -             -            -            -            -      2,328
Securities (2) ...........................            -          500             -        1,975            -            9      2,484
                                                 ------    ---------       -------       ------       ------        -----     ------
         Total Rate-Sensitive Assets .....      $ 4,780   $      500      $      -     $  3,159     $    434      $   223    $ 9,096
                                                 ======    =========       =======       ======       ======        =====     ======
Deposit Accounts (3):
   Savings, NOW and Money Market

       Deposits ..........................      $ 2,267   $        -      $      -     $      -     $      -      $     -    $ 2,267
   Time Deposits .........................          264          997         1,532          593            -            -      3,386
                                                 ------    ---------       -------       ------       ------        -----     ------
         Total Rate-Sensitive                   $ 2,531   $      997      $  1,532     $    593     $      -      $     -    $ 5,653
                                                 ======    =========       =======       ======       ======        =====     ======
         Liabilities
GAP Repricing Differences.................      $ 2,249   $     (497)     $ (1,532)    $  2,566     $    434      $   223    $ 3,443
                                                 ======    =========       =======       ======       ======        =====     ======
Cumulative GAP ...........................      $ 2,249   $    1,752      $    220     $  2,786     $  3,220      $ 3,443
                                                 ======    =========       =======       ======       ======        =====
Cumulative GAP/Total Assets ..............        20.83%       16.23%         2.04%       25.81%       29.83%       31.89%
                                                  =====        =====          ====        =====        =====        =====
--------------------------

<FN>
(1)  In  preparing  the table above,  adjustable-rate  loans are included in the
     period in which the interest  rates are next  scheduled  to adjust,  rather
     than in the  period  in  which  the  loans  mature.  Fixed-rate  loans  are
     scheduled, including repayment, according to their maturities.
(2)  Securities are scheduled through the maturity dates,  includes Federal Home
     Loan Bank stock.
(3)  Money market, NOW, and savings deposits are regarded as readily accessible,
     withdrawable  accounts.  All other time deposits are scheduled  through the
     maturity dates.
</FN>
</TABLE>

The following table reflects the contractual  principal  repayments by period of
the Company's loan portfolio at December 31, 1999 (in thousands):
<TABLE>

                                                                Residential        Commercial
                                              Commercial          Mortgage         Real Estate         Consumer
Years Ending December 31,                        Loans             Loans             Loans               Loans           Total
------------------------                      -----------       ------------       ------------        ---------      --------
<S>                                             <C>               <C>              <C>                 <C>            <C>
2000 .................................          $     326         $       52       $        879        $     192      $  1,449
2001 .................................                160                 46                477              168           851
2002 .................................                 89                 45                249              147           530
2003 .................................                 85                 40                228              132           485
2004 & Beyond ........................                110                375                478                6           969
                                                    -----              -----              -----            -----         -----
     Total ...........................          $     770           $    558        $     2,311        $     645      $  4,284
                                                    =====              =====              =====            =====         =====
</TABLE>

Of the $2.8  million of loans due after  2000,  75.2% of these  loans have fixed
interest rates and 24.8% have adjustable interest rates.

                                      -17-


<PAGE>




The following table sets forth total loans originated and repaid during 1999 (in
thousands):

                                                 Year Ended
                                              December 31, 1999
Originations:
     Commercial Loans ........................   $       810
     Commercial Real Estate Loans ............         2,402
     Residential Mortgage Loans ..............           725
     Consumer Loans ..........................           685
                                                       -----
         Total Loans Originated ..............         4,622
Principal Reductions .........................          (338)
                                                       -----
Increase In Total Loans ......................     $   4,284
                                                       =====


The following  table shows the  distribution  of, and certain other  information
relating to, the Company's deposit accounts by type (dollars in thousands):

                                                     At December 31, 1999
                                                     --------------------
                                                                      % of
                                                    Amount           Deposits
                                                    ------           --------
Demand Deposits .............................   $      907              13.8%
NOW Deposits ................................          749              11.5
Money Market Deposits .......................        1,410              21.5
Savings Deposits ............................          108               1.6
                                                     -----             -----
     Subtotal ...............................        3,174              48.4
                                                     -----             -----
Certificate of Deposits:
     4.00% - 4.99% ..........................          944              14.4
     5.00% - 5.99% ..........................        2,018              30.7
     6.00% - 6.99% ..........................          424               6.5
                                                     -----             -----
Total Certificates of Deposit (1) ...........        3,386              51.6
                                                     -----             -----
Total Deposit ...............................   $    6,560             100.0%
                                                     =====             =====
--------------------------

(1)  Included  individual  retirement  accounts  ("IRAs")  totaling  $264,000 at
     December 31, 1999, all of which are in the form of certificates of deposit.

The following table presents, by various interest rates categories,  the amounts
of certificates of deposit at December 31, 1999, which mature during the periods
indicated (in thousands):
<TABLE>

                                                                  Year Ending December 31,
                                                        ---------------------------------------------------
                                                         2000       2001       2002       2003        Total
                                                        -----      -----      -----      -----        -----
<S>     <C>                                          <C>           <C>      <C>         <C>          <C>
4.00% - 4.99% ..................................     $    944      $  -     $    -      $    -       $  944
5.00% - 5.99% ..................................        1,792       135          8          83        2,018
6.00% - 6.99% ..................................           57       350          -          17          424
                                                        -----       ---       ----        ----        -----
     Total Certificates of Deposit .............     $  2,793      $485     $    8      $  100       $3,386
                                                        =====       ===       ====        ====        =====
</TABLE>

                                      -18-

<PAGE>


Jumbo certificates ($100,000 and over) mature as follows (in thousands):


December 31, 1999:
Due Three Months or Less ...........................  $      -

Due Over Three Months to Six Months ................       400

Due Over six Months to One Year ....................       801

Due Over One Year ..................................         -

     Total .........................................  $  1,201

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in
accordance with GAAP,  which requires the measurement of financial  position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time, due to inflation.  Unlike most
industrial  companies,  substantially  all of the assets and  liabilities of the
Company  are  monetary  in  nature.  As a  result,  interest  rates  have a more
significant  impact on the  Company's  performance  than the  effects of general
levels  of  inflation.  Interest  rates  do not  necessarily  move  in the  same
direction or in the same  magnitude as the prices of goods and  services,  since
such prices are affected by inflation to a larger extent than interest rates.

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 market value or cash
flows.  The Company  will be required to adopt this  Statement  January 1, 2001.
This Statement is not expected to have a material impact on the Company.

ITEM 7. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Registrant  hereby  incorporates  by  reference  the  Report of the  Independent
Auditors and the 1999 Audited Consolidated Financial Statements filed as Exhibit
22.2 under Item 13 herein.

ITEM 8. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURE MATTERS

None.

                                    PART III

ITEM 9. - DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Registrant hereby  incorporates by reference the sections entitled  "Election of
Directors"  and "Board of Directors  Meeting"  contained at pages 4 through 6 of
the Proxy Statement filed as Exhibit 22.1 under Item 13 herein.

                                      -19-


<PAGE>



ITEM 10. - EXECUTIVE COMPENSATION

Registrant  hereby  incorporates  by reference the section  entitled  "Executive
Compensation"  contained  at pages 6 through 8 of the Proxy  Statement  filed as
Exhibit 22.1 under Item 13 herein.

ITEM 11. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)      Security Ownership of Certain Beneficial Owners

         Registrant  hereby  incorporates  by reference  the  sections  entitled
         "Security  Ownership  of Certain  beneficial  Owners" and  "Election of
         Directors"  contained at pages 2 through 6 of the Proxy Statement filed
         as Exhibit 22.1 under Item 13 herein.

(b)      Security Ownership of Management

         Registrant  hereby  incorporates  by  reference  the  section  entitled
         "Election  of  Directors"  contained  at pages 3 through 6 of the Proxy
         Statement filed as Exhibit 22.1 under Item 13 herein.

(c)      Changes in Control

         Management  is not aware of any  arrangements,  including any pledge by
         any person of securities of Registrant,  which the operation of may, at
         a subsequent date, result in a change of control of the Company.

ITEM 12. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Bank has $1.2 million of loans outstanding to the PSB's directors, executive
officers,  their  associates  and  members  of the  immediate  families  of such
directors and executive officers.

                                     PART IV

ITEM 13. - EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits.  The  following  exhibits  are  filed  with  or  incorporated  by
     reference  into this  report.  The  exhibits  which are  denominated  by an
     asterisk  (*)  were  previously   filed  as  a  part  of,  and  are  hereby
     incorporated  by reference from PSB's  Registration  Statement on Form SB-2
     under the Securities Act of 1933, ad declared effective with the Securities
     and Exchange  Commission on June 8, 1998,  Registration No. 333-44161.  The
     exhibit  numbers  correspond  to  the  exhibit  numbers  in  the  reference
     documents.

     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
     *  4.4        PSB's January 9, 1998 Warrant Plan
     * 10.1        Employment Agreement by and among PSB, the Bank and Robert W.
                   Woodard
     * 10.2        Land Purchase Agreement
       10.3        Employment Agreement by and among PSB, the Bank and Wesley T.
                   Small
       22.1        PSB's 2000 Annual Meeting Proxy Statement
       22.2        Audited Consolidated Financial Statements for the year ended
                   December 31, 1999.
       27.0        Financial Data Schedule

(b)  Reports on Form 8-KSB.   Registrant did not file any reports on Form 8-KSB
     during the last quarter of 1999.

                                      -20-


<PAGE>



                                   SIGNATURES

Pursuant to the requirements of Section 15(d) 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.

Dated: March 21, 2000           By:      /s/Alton C. Milton, Sr.
                                         ------------------------------------
                                         Alton C. Milton, Sr.
                                         Chairman of the Board


Dated: March 21, 2000           By:      /s/Robert W. Woodard
                                         ------------------------------------
                                         Robert W. Woodard
                                         Chief Executive Officer, President and
                                             Principal Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the Registrant and in
the capacities and on the dates indicated:

/s/John W. Burns, III                                         March 21, 2000
------------------------------
JOHN W. BURNS, III
Class I Director

/s/Robert M. Eadie                                            March 21, 2000
------------------------------
ROBERT M. EADIE
Class I Director

/s/Shipla U. Mhatre                                           March 21, 2000
------------------------------
SHIPLA U. MHATRE
Class II Director

/s/Alton C. Milton, Jr.                                       March 21, 2000
------------------------------
ALTON C. MILTON, JR.
Class II Director

/s/Alton C. Milton, Sr.                                       March 21, 2000
------------------------------
ALTON C. MILTON, SR.
Chairman of the Board and Class III Director


/s/Andrew T. Moore                                            March 21, 2000
------------------------------
ANDREW T. MOORE
Class III Director

/s/Robert W. Woodard                                          March 21, 2000
------------------------------
ROBERT W. WOODARD
Chief Executive Officer, President
       and Principal Financial Officer

     SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
        SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
                  SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

 PSB's Proxy Statement and the 1999 audited Consolidated Financial Statements
             are included as Exhibits 22.1 and 22.2 of this filing.

                                      -21-