EXHIBIT 10.3

                              Employment Agreement
                                  by and among
                                PSB, the Bank and
                                 Wesley T. Small




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                              EMPLOYMENT AGREEMENT
                                  BY AND AMONG
                               PEOPLES STATE BANK
                                       AND
                               PSB BANCGROUP, INC.
                                       AND
                                 WESLEY T. SMALL


         THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into this 9th day of
November 1999, by and among PEOPLES STATE BANK, a Florida  chartered  commercial
bank ("Bank"),  PSB BANCGROUP,  INC.,  the Bank's parent  holding-company  and a
Florida Corporation ("Corporation"), and WESLEY T. SMALL ("Employee"). The Bank,
the  Corporation  and the  Employee are  collectively  referred to herein as the
"Parties."

                                    RECITALS

         WHEREAS,  the Bank and the  Corporation  wish to retain Employee as the
Bank's  President  and  Chief  Executive  Officer  to  perform  the  duties  and
responsibilities  as are described in this  Agreement and as the Bank's Board of
Directors ("Board") may assign to Employee from time to time; and

         WHEREAS,  Employee  desires to become employed by the Bank and to serve
as the Bank's President and Chief Executive Officer in accordance with the terms
and provisions of this Agreement.

         NOW,  THEREFORE,  in consideration of the mutual  agreements  contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto represent, warrant, undertake,
covenant and agree as follows:

                                 OPERATIVE TERMS

         1.  Employment  and Term.  The Bank shall employ  Employee and Employee
shall be  employed  pursuant  to the  terms of this  Agreement  to  perform  the
services  specified in Section 2 herein. The initial term of employment shall be
for a period of twelve (12) months, commencing on November 15, 1999.

         Upon mutual written agreement,  the Parties may extend the term of this
Agreement  for two six- month periods (the  "Extensions").  Prior to agreeing to
either of the Extensions, the Board shall review Employee's performance and this
Agreement.

         In the event the Employee  gives notice of  termination  of employment,
the  Bank may  elect,  at its sole  option,  to have the term of this  Agreement
expire  immediately  or upon the thirtieth  (30th) day following the delivery to
the Bank and the Corporation of such notice of termination.  Except as otherwise
provided in the following paragraph with respect to a voluntary  termination for
Good Reason, a voluntary employment  termination by the Employee shall result in
the  termination  of the  rights  and  obligations  of the  Parties  under  this
Agreement;  provided, however, that the terms and provisions of Section 12 shall
continue to apply.

         In the event the Bank desires to involuntarily terminate the employment
of Employee (for purposes of this Agreement,  a voluntary employment termination

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by the Employee for Good Reason shall be treated as an  involuntary  termination
of the  Employee's  employment  without  Cause),  the Bank shall  deliver to the
Employee a notice of termination, and the following provisions shall apply:

     (a) In the event the involuntary  termination is for Cause,  this Agreement
     shall terminate immediately upon delivery to the Employee of such notice of
     termination.  Such a termination  for Cause shall result in the termination
     of all rights and obligations of the Parties under this Agreement.

     (b) In the event the involuntary termination is without Cause, the Employee
     shall be entitled to receive the  severance  benefits set forth in Sections
     9(f) and 9(g) herein.

         2.       Position, Responsibilities and Duties.   During the term of
this Agreement, Employee shall serve in the following capacities and shall
fulfill the following responsibilities and duties:

               (a) Specific Duties: Employee shall serve as the Bank's President
               and Chief Executive  Officer,  through  election by the Board. In
               such capacity,  Employee  shall have the same powers,  duties and
               responsibilities  of  supervision  and  management  of  the  Bank
               usually  accorded to a President and Chief  Executive  Officer of
               similar financial institutions.  In addition,  Employee shall use
               his best  efforts  to perform  the  duties  and  responsibilities
               enumerated  in this  Agreement  and any other duties  assigned to
               Employee  by the Board and to utilize and  develop  contacts  and
               customers  to enhance  the  business  of the Bank.  Specifically,
               Employee  shall devote his full  business  time and attention and
               use his best  efforts to  accomplish  and fulfill  the  following
               duties and responsibilities,  as well as other duties assigned to
               Employee from time to time by the Board:

                  (i)    manage Bank personnel;

                  (ii)   serve on such committees as appointed by the Board from
                         time to time;

                  (iii)  supervise all Bank activities;

                  (iv)   work closely with the Bank's  Executive Vice President,
                         Robert  W.  Woodard,  specifically  in the area of Bank
                         operations;

                  (v)    keep  the  Board  informed  of  important  developments
                         concerning the Bank's activities, industry developments
                         and regulatory initiatives affecting the Bank;

                  (vi)   maintain   adequate   expense   records   relating   to
                         Employee's activities on behalf of the Bank;

                  (vii)  recommend  marketing  efforts to increase  the business
                         of the Bank;

                  (viii) coordinate with the Bank's  Executive Vice President,
                         other  officers,  accountants,  auditors and counsel to
                         the extent  necessary  to further  the  business of the
                         Bank, keeping in compliance with government

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                         laws and regulations and otherwise  keeping the Bank in
                         as good a financial and legal posture as possible; and

                  (ix)   conduct   and   undertake    all   other    activities,
                         responsibilities,  and duties  normally  expected to be
                         undertaken  and  accomplished  by a President and Chief
                         Executive Officer of a financial institution similar in
                         scope and operation to the Bank's business.

               (b) General Duties: During the term of this Agreement, and except
               for illness,  vacation  periods and leaves of absences,  Employee
               shall devote all of his working time,  attention,  skill and best
               efforts to accomplish  and  faithfully  perform all of the duties
               assigned to Employee on a full-time basis. Employee shall, at all
               times,  conduct himself in a manner that will reflect  positively
               upon the Bank. Employee shall obtain such licenses, certificates,
               accreditations  and professional  memberships and designations as
               the Bank may reasonably require. Employee shall join and maintain
               membership in such social and civic  organizations as Employee or
               the Board deems  appropriate  to foster the Bank's  contacts  and
               business network in the community.

         3.       Compensation.   During  the term  of this  Agreement, Employee
shall be compensated as follows:

               (a) Base  Salary:  Employee  shall  receive  an annual  salary of
               $75,000 (the "Base Salary") in equal installments,  in accordance
               with the Bank's standard payroll practices, reduced appropriately
               by  deductions  for  federal  income  withholding  taxes,  social
               security taxes and other deductions  required by applicable laws.
               The Bank may adjust the Base  Salary from time to time based upon
               the Board's  evaluation of Employee's  performance.  In no event,
               however,  will the Base  Salary  be  reduced  without  Employee's
               written concurrence.

               (b)  Benefit  Plans:  During  the  term  of this  Agreement,  the
               Employee  will be  entitled  to  participate  in and  receive the
               benefits of any  profit-sharing  plans,  401(k)  plans,  deferred
               compensation plans, or other plans, benefits and privileges given
               to employees  and  executives  of the Bank which are currently in
               effect at the execution of this  Agreement or which may come into
               existence  thereafter,  to the extent the  Employee is  otherwise
               eligible  and  qualifies  to so  participate  in and receive such
               benefits  or  privileges.  The Bank shall not make any changes in
               such plans,  benefits or privileges  which would adversely affect
               the Employee's rights or benefits thereunder,  unless such change
               occurs pursuant to a program applicable to all executive officers
               (Vice  President  or above) of the Bank and does not  result in a
               proportionately  greater  adverse  change  in  the  rights  of or
               benefits to the  Employee as  compared  with any other  executive
               officer of the Bank.  Nothing paid to the Employee under any plan
               or  arrangement  presently  in  effect or made  available  in the
               future  shall be deemed to be in lieu of the Base Salary  payable
               to the Employee pursuant to Section 3 herein.

         4.       Payment of Business Expenses. Employee is authorized to incur
reasonable expenses in performing his duties.  The Bank will reimburse Employee
for authorized expenses, according to the Bank's established policies,  promptly
after Employee's presentation of an itemized account of such expenditures.

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         5.       Vacation.   Employee is entitled to three (3) weeks paid
vacation time per year on a non-cumulative basis.   Two (2) weeks of the
vacation must be taken during two (2) consecutive weeks.

         6.       Fringe Benefits.

               (a) Medical Benefits:  Employee is entitled to participate in all
               medical and health care benefit plans through  health  insurance,
               corporate funds,  medical  reimbursement plans or other plans, if
               any, provided, or to be provided, by the Bank for its employees.

               (b) Club  Memberships  and  Education:  The Bank  will  reimburse
               Employee for membership  dues for joining  service  organizations
               such as the  Rotary  Club or  Kiwanis  Club.  The Bank  will also
               reimburse   Employee  for  admission  or   attendance   fees  for
               educational meetings or seminars offered by such organizations as
               the Florida Bankers Association.

         7.       Disability/Illness.

               (a) Illness:  Employee shall be paid his full Base Salary for any
               period of his illness or  incapacity:  provided that such illness
               or  incapacity  does not render  Employee  unable to perform  his
               duties under this  Agreement  for a period  longer than three (3)
               consecutive  months. At the end of such three-month  period,  the
               Bank may terminate Employee's employment and this Agreement.

               (b) Disability: If the Bank terminates this Agreement pursuant to
               Employee's  disability as  determined  under Section 7(a) herein,
               the Bank  shall pay to  Employee,  as a  disability  payment,  an
               amount  equal to  Employee's  monthly  Base  Salary,  payable  in
               accordance with the Bank's standard payroll practices, commencing
               on the effective date of Employee's termination and ending on the
               earlier of:

                    (i)  the date  Employee  returns to full time  employment in
                         his  capacity  as  the  Bank's   President   and  Chief
                         Executive Officer;

                    (ii) Employee's  full time  employment by another  financial
                         institution;

                   (iii) three (3)  months  after the date of such  termination,
                         after  which  Employee  will  be  entitled  to  receive
                         benefits under any  disability  insurance plan provided
                         by the Bank; or

                    (iv) the date of Employee's death.

         The Bank may satisfy its obligations under this Section, at its option,
         through the purchase of disability  insurance.  The  provisions of such
         policy will  control  the amounts  paid to  Employee.  Such  disability
         insurance will be coordinated  with any disability plans made available
         to Employee pursuant to Section 6 herein.

               (c)  Continuation  of Coverages:  During any period of illness or
               disability,  the Bank will  continue  any other life,  health and
               disability coverages for Employee substantially identical to the

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               coverages   maintained   prior  to  Employee's   termination  for
               disability. Such coverages shall cease upon the earlier of:

                    (i)  Employee's  full time  employment by another  financial
                         institution;

                    (ii) one (1) year after the date of such  termination  (with
                         the exception of disability insurance coverage); or

                    (iii) the date of Employee's death.

               (d) No  Reduction  in Base  Salary:  During  the  period in which
               Employee is disabled or subject to illness or  incapacity,  other
               than as  described  in Section  7(b)  herein,  there  shall be no
               reduction in Employee's Base Salary.

         8.      Death During Employment.  In the event of Employee's death
during the term of this  Agreement,  the Bank's  obligation to Employee shall be
limited to the portion of Employee's  compensation  which would be payable up to
the first working day of the first month after Employee's death, except that any
compensation  payable to Employee under any benefit plan  maintained by the Bank
will be paid pursuant to its terms.

         9.       Termination.

               (a) Illness,  Incapacity or Death: This Agreement shall terminate
               upon Employee's  illness,  incapacity or death in accordance with
               the provisions of Sections 7 and 8 herein.

               (b) Termination for Cause:  The Bank shall have the right, at any
               time,  upon prior written  notice of  termination  satisfying the
               requirements  of Section 11 herein,  to terminate the  Employee's
               employment  hereunder,  including  termination for Cause. For the
               purpose  of this  Agreement,  termination  for Cause  shall  mean
               termination  for  personal  dishonesty,   incompetence,   willful
               misconduct,   material  breach  of  fiduciary  duty,  intentional
               failure to perform the duties stated in this  Agreement,  willful
               violation  of any law,  rule or  regulation  (other than  traffic
               violations  or similar  offenses),  willful  violation of a final
               cease-and-desist  order,  personal  default on  indebtedness to a
               third party which is not  corrected  within 30 days from the date
               of  default,  willful  or  intentional  breach or  negligence  or
               misconduct in the  performance of such duties or material  breach
               of any  provision of this  Agreement as  determined by a court of
               competent  jurisdiction or in final agency action by a federal or
               state regulatory  agency having  jurisdiction  over the Bank. For
               purposes  of this  Section,  no act,  or failure  to act,  on the
               Employee's  part shall be  considered  "willful"  unless done, or
               omitted  to be  done,  by  him  not in  good  faith  and  without
               reasonable  belief  that his action or  omission  was in the best
               interest of the Bank; provided that any act or omission to act by
               the Employee in reasonable reliance upon an opinion of counsel to
               The Bank shall not be deemed to be willful. In the event Employee
               is  terminated  for  Cause,  Employee  shall  have  no  right  to
               compensation  or other benefits for any period after such date of
               termination.

               (c) Involuntary Termination: If the Employee is terminated by the
               Bank   other   than   for   Cause   or  in   connection   with  a
               Change-in-Control  of the Corporation (as defined in Section 9[e]
               herein),  Employee's  right to  compensation  and other  benefits

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               under this  Agreement  shall be as set forth in Sections  9(f)(i)
               and 9(g) herein.  In the event the Employee is  terminated by the
               Bank in connection with a  Change-in-Control  of the Corporation,
               Employee's  right to  compensation  and other benefits under this
               Agreement  shall be as set forth in  Sections  9(f)(ii)  and 9(h)
               herein.

               (d)  Termination  for Good  Reason:  Employee may  terminate  his
               employment  hereunder  for  Good  Reason.  For  purposes  of this
               Agreement,  "Good Reason" shall mean (i) a failure by the Bank to
               comply  with any  material  provision  of this  Agreement,  which
               failure has not been cured within ten business  (10) days after a
               notice of such  noncompliance  has been given by the  Employee to
               the  Bank;  or  (ii)  subsequent  to a  Change-in-Control  of the
               Corporation  as defined in Section  9(e)  herein and  without the
               Employee's  express written  consent,  any of the following shall
               occur: the assignment to the Employee of any duties  inconsistent
               with  the  Employee's  positions,  duties,  responsibilities  and
               status with the Bank immediately prior to a Change-in-Control  of
               the   Corporation;   a  change   in  the   Employee's   reporting
               responsibilities,  titles or  offices  as in  effect  immediately
               prior to a Change-in- Control of the Corporation;  any removal of
               the  Employee  from,  or any failure to re-elect the Employee to,
               any of such positions, except in connection with a termination of
               employment for Cause,  disability,  death, or removal pursuant to
               Sections  9(a) or 9(b)  herein;  a  reduction  by the Bank in the
               Employee's  annual  salary  as in effect  immediately  prior to a
               Change-in- Control of the Corporation; the failure of the Bank to
               continue in effect any bonus,  benefit or compensation plan, life
               insurance  plan,  health and accident plan or disability  plan in
               which  the   Employee   is   participating   at  the  time  of  a
               Change-in-Control of the Corporation, or the taking of any action
               by  the  Bank  which  would   adversely   affect  the  Employee's
               participation  in or materially  reduce the  Employee's  benefits
               under any of such plans,  or the  transfer of the Employee to any
               location outside of Columbia County, Florida or the assignment of
               substantial  duties  to  the  Employee  to be  completed  outside
               Columbia County, Florida.

               (e)  Change-in-Control:  "Change-in-Control" is defined herein to
               mean an event  where a person:  (i)  directly or  indirectly,  or
               acting through one or more other persons,  owns,  controls or has
               power to vote more than 50% of any class of the then  outstanding
               voting  securities  of the  Corporation;  or (ii) controls in any
               manner the  election of the  directors  of the  Corporation.  For
               purposes of this Agreement,  a Change-in-Control  shall be deemed
               not  to  have  occurred  in  connection  with  a  reorganization,
               consolidation,   or   merger   of  the   Corporation   where  the
               stockholders   of  the   Corporation,   immediately   before  the
               consummation of the  transaction,  will own over 50% of the total
               combined voting power of all classes of stock entitled to vote of
               the surviving entity immediately after the transaction.

               (f)      Severance Payment:

                        (i)  If the Employee shall terminate his employment for
                             Good  Reason as defined in Section 9(d) herein,  or
                             if the Employee is terminated by the Bank for other
                             than Cause pursuant to Section 9(c) herein, then in
                             lieu of any further salary payments to the Employee
                             for periods subsequent to the date of  termination,
                             the  Employee  shall be paid,  as severance, twelve
                             (12) months Base Salary;

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                        (ii) In the event  Employee's  employment is terminated
                             as a result of a Change-in-Control or a  Change-in-
                             Control of the Corporation  occurs within twelve
                             (12)  months  of   the   Employees'  involuntary
                             termination   or   termination  for  Good  Reason,
                             Employee  shall  be entitled to a severance payment
                             equal to his current Base Salary. Any payment under
                             Section  9(f)(i)  and 9(f)(ii) shall  be made in
                             substantially   equal  semi-monthly  installments
                             on the fifteenth and last days of each month until
                             paid in full.

                    (g) Additional  Severance  Benefits:  Unless the Employee is
                    terminated  for  Cause  pursuant  to  Section  9(b)  herein,
                    pursuant  to  Section  10(b)   herein,   or  pursuant  to  a
                    termination  of  employment  by the  Employee for other than
                    Good  Reason,  the Bank  shall  maintain  in full  force and
                    effect,  for the  continued  benefit of the Employee for the
                    remaining  term of this  Agreement,  or twelve  (12)  months
                    (whichever  is  longer),  all  Employee  benefit  plans  and
                    programs in which the Employee  was entitled to  participate
                    immediately  prior  to the  date of  termination;  provided,
                    however,  that the  Employee's  continued  participation  is
                    possible  under the  general  terms and  provisions  of such
                    plans and programs. Further, the Bank shall pay for the same
                    or similar  benefits if such  benefits are  available to the
                    Employee  on an  individual  or group  basis as a result  of
                    contractual or statutory  provisions requiring or permitting
                    such  availability  including,  but not limited  to,  health
                    insurance covered under COBRA.

                    (h)  Mitigation:  Employee shall not be required to mitigate
                    the amount of any payment  provided for in Sections 9(f) and
                    9(g)  of this  Agreement  by  seeking  other  employment  or
                    otherwise.

         10.      Required Provisions by Regulation.    The Parties acknowledge
that the laws and regulations governing the Bank require that certain provisions
be provided in each  employment  agreement  with  officers and  employees of the
Bank. The Parties agree to be bound by the following provisions:

                    (a)  Suspension/Temporary  Prohibition:  If the  Employee is
                    suspended and/or  temporarily  prohibited from participating
                    in the  conduct  of the Bank's  affairs  by a notice  served
                    under Section 655.037 Florida Statutes or under Section 8(e)
                    or (g)(1) of the Federal  Deposit  Insurance  Act [12 U.S.C.
                    ss.1818(e)(3) and (g)(1)] the Bank's  obligations under this
                    Agreement  shall be suspended as of the date of such service
                    unless stayed by appropriate proceedings. If the charges and
                    the notice are dismissed, the Bank may in its discretion:

                      (i)  pay the Employee  all or  part  of  his  compensation
                           withheld  while the  obligations under this Agreement
                           are suspended; and

                      (ii) reinstate (in  whole  or  part)  any  of  the  Bank's
                           obligations which were suspended.

                    (b) Permanent Prohibition: If the Employee is removed and/or
                    permanently  prohibited from participating in the conduct of
                    the Bank's affairs by an order issued under Section  655.037
                    Florida Statutes or Section 8(e)(4) or (g)(1) of the Federal
                    Deposit  Insurance Act [12  U.S.C.ss.1818(e)(4)  or (g)(1)],
                    all of the Bank's obligations under this Agreement shall

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                    terminate  as of the  effective  date of the order,  but the
                    Employee's vested rights, if any shall not be affected.

                    (c)  Default  Under  FDIA:  If the  Bank is in  default  [as
                    defined in Section 3(x)(1) of the Federal Deposit  Insurance
                    Act], all  obligations  under this Agreement shall terminate
                    as of the  date of  default,  but  this  subsection  of this
                    Agreement  shall not affect the Employee's  vested rights if
                    any.

                    (d)  Regulatory  Termination:  All  obligations  under  this
                    Agreement  shall be terminated,  except to the extent that a
                    determination  has  been  made  that  continuation  of  this
                    Agreement is necessary for continued operation of the Bank:

                           (i)      by the Director or his or her  designee,  at
                                    the  time  the  Federal  Deposit   Insurance
                                    Corporation    ("FDIC")   enters   into   an
                                    agreement  to  provide  assistance  to or on
                                    behalf  of  the  Bank  under  the  authority
                                    contained  in Section  13(c) of the  Federal
                                    Deposit Insurance Act; or

                           (ii)     by the  Department or the Director or his or
                                    her designee,  at the time the Department or
                                    the Director or his or her designee approves
                                    a  supervisory  merger to  resolve  problems
                                    related to operation of the Bank or when the
                                    Bank's  determined  by the Director to be in
                                    unsafe or unsound condition.

                           Any  of  the  Employee's  rights  that  have  already
                           vested,  however,  shall  not  be  affected  by  such
                           action.  For  purposes  of  this  subsection  of this
                           Agreement,   the  term  "Director"   shall  mean  the
                           Director of the FDIC.

         11.      Notice of Termination.

                    (a) Employee's  Notice:  Employee shall have the right, upon
                    prior written  notice of termination of not less than thirty
                    (30) days, to terminate his  employment  hereunder.  In such
                    event,  Employee  shall  have no  right  after  the  date of
                    termination to compensation or other benefits as provided in
                    this  Agreement,   unless  such  termination  is  for  "Good
                    Reason",  as defined in Section 9(d) herein. If the Employee
                    provides a notice of termination  for Good Reason,  the date
                    of  termination  shall be the date on which  the  notice  of
                    termination is given.

                    (b)   Specificity:   Any   termination   of  the  Employee's
                    employment by the Bank or by Employee shall be  communicated
                    by written  notice of termination to the other Party hereto.
                    For purposes of this  Agreement,  a "notice of  termination"
                    shall mean a dated  notice  which  shall:  (i)  indicate the
                    specific termination provision in the Agreement relied upon;
                    (ii)  set  forth  in   reasonable   detail   the  facts  and
                    circumstances  claimed to provide a basis for termination of
                    the Employee's  employment under the provision so indicated;
                    and (iii) set forth the date of termination,  which shall be
                    not less than thirty (30) days nor more than forty-five (45)
                    days after such notice of  termination  is given,  except in
                    the  case  of  the  Bank's  termination  of  the  Employee's
                    employment  for  Cause,  in which  case date of  termination
                    shall be the date such notice of termination is given.

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                    (c) Delivery of Notices: All notices given or required to be
                    given  herein  shall be in  writing,  sent by United  States
                    first-class  certified or registered mail,  postage prepaid,
                    by way of overnight  carrier or by hand delivery.  If to the
                    Employee  (or to the  Employee's  spouse or estate  upon the
                    Employee's   death)  notice  shall  be  sent  to  Employee's
                    last-known address,  and if to the Bank and the Corporation,
                    notice   shall  be  sent  to  their   respective   corporate
                    headquarters.  All  such  notices  shall be  effective  when
                    deposited in the mail if sent via first- class  certified or
                    registered  mail,  or upon  delivery if by hand  delivery or
                    sent via overnight carrier. Any Party, by notice in writing,
                    may change or  designate  the place for  receipt of all such
                    notices.

         12.      Post-Termination Obligations.  The Bank shall pay to Employee
such compensation as is required pursuant to this Agreement;  provided, however,
any such payment  shall be subject to Employee's  post-termination  cooperation.
Such cooperation shall include the following:

                           (i)      Employee shall furnish such  information and
                                    assistance as may be reasonably  required by
                                    the Bank or the  Corporation  in  connection
                                    with any  litigation  or  settlement  of any
                                    dispute   between   the  Bank   and/or   the
                                    Corporation  and a borrower and/or any other
                                    third parties  (including without limitation
                                    serving  as a  witness  in  court  or  other
                                    proceedings);

                           (ii)     Employee  shall provide such  information or
                                    assistance    to   the   Bank   and/or   the
                                    Corporation    in   connection    with   any
                                    regulatory   examination  by  any  state  or
                                    federal regulatory agency;

                           (iii)    Employee shall keep the Bank's trade secrets
                                    and  other   proprietary   or   confidential
                                    information  secret  to the  fullest  extent
                                    practicable,  subject to compliance with all
                                    applicable laws.

         Upon submission of proper receipts,  the Bank shall promptly  reimburse
Employee for any  reasonable  expenses in current by Employee in complying  with
the provisions of this Section.

         13.      Attorneys' Fees.   In the event that any claim or controversy
hereunder is the subject of any litigation or  arbitration  between or among the
Parties,  the  prevailing  party shall be entitled to an award of all reasonable
costs, including attorneys' fees.

         14.      Indebtedness.  If during the term of this Agreement,  Employee
becomes indebted to the Bank for any reason, the Bank may, at its election,  set
off and collect any sums due Employee out of any amounts  which the Bank may owe
Employee  from his Base  Salary  or other  compensation.  Furthermore,  upon the
termination  of  this  Agreement,   all  sums  owed  by  Employee  shall  become
immediately due and payable. Employee shall pay all expenses and attorneys' fees
actually or necessarily  incurred by the Bank in connection  with any collection
proceeding  for  Employee's  indebtedness  to  us.  Notwithstanding  any  of the
foregoing,  any indebtedness to us secured by a mortgage on Employee's residence
shall not be subject to the foregoing  provisions,  and shall be governed by the
loan documents evidencing such indebtedness.

                                        9


<PAGE>



         15.      Maintenance of Trade Secrets and Confidential Information.
Employee  shall use his best  efforts and utmost  diligence to guard and protect
all of the Bank's trade secrets and  confidential  information.  Employee  shall
not, either during the term or after termination of this Agreement, for whatever
reason,  use, in any  capacity,  or divulge or  disclose  in any manner,  to any
Person, the identity of the Bank's customers,  or its customer lists, methods of
operation,  marketing and promotional methods, processes,  techniques,  systems,
formulas,  programs or other trade secrets or confidential  information relating
to the  Bank's  business.  Upon  termination  of this  Agreement  or  Employee's
employment, for any reason, Employee shall immediately return and deliver to the
Bank all records and papers and all matters of whatever  nature which bear trade
secrets or confidential information relating to the Bank.

         16.      Competitive Activities.

               (a) Limitation on Outside Activities: Employee agrees that during
               the term of this  Agreement,  except with the express  consent of
               the Board,  Employee will not, directly or indirectly,  engage or
               participate in, become a director of, or render advisory or other
               services for, or in connection with, or become  interested in, or
               make any financial investment in any firm, corporation,  business
               entity or business enterprise competitive with or to any business
               of the  Bank;  provided,  however,  that  Employee  shall  not be
               precluded  or  prohibited   from  owning   passive   investments,
               including  investments  in  the  securities  of  other  financial
               institutions, so long as such ownership does not require Employee
               to  devote  substantial  time to  management  or  control  of the
               business or activities in which Employee has invested.

               (b)  Agreement  Not to  Compete:  Employee  acknowledges  that by
               virtue of his employment with the Bank,  Employee will acquire an
               intimate  knowledge  of the  activities  and affairs of the Bank,
               including trade secrets and other confidential matters. Employee,
               therefore, agrees that during the term of this Agreement, and for
               a period of eight (8)  months  (in the  event  Employee  does not
               receive  severance  compensation) or fourteen (14) months (in the
               event Employee does receive severance compensation) following the
               termination of Employee's  employment  hereunder,  Employee shall
               not  become  employed,  directly  or  indirectly,  whether  as an
               Employee, independent contractor,  consultant, or otherwise, with
               a federally-insured financial institution located in, or with any
               business enterprise, business entity or Person whose intent is to
               organize  another  financial  institution  in,  Columbia  County,
               Florida.

               Employee  further  agrees that for a period of twelve (12) months
               following the termination of Employee's  employment hereunder for
               any reason, Employee shall not directly or indirectly solicit the
               business of any then current customer of the Bank,  regardless of
               whether or not  Employee  was  responsible  for  generating  such
               customer's business for the Bank. This restriction shall apply to
               both loan customers and depositors of the Bank.

               Employee  hereby agrees that the duration of the  anticompetitive
               covenant set forth herein is reasonable, and its geographic scope
               is not unduly restrictive.

                                       10


<PAGE>



         17.      Remedies for Breach.

               (a) Arbitration:  The Parties agree that, except for the specific
               remedies for injunctive  relief as contained in Section 17(b) and
               other equitable  relief,  any controversy or claim arising out of
               or relating to this Agreement, or any breach thereof,  including,
               without limitation,  any claim that this Agreement or any portion
               thereof is  invalid,  illegal  or  otherwise  voidable,  shall be
               submitted to binding  arbitration  before and in accordance  with
               the Rules of the American  Arbitration  Association  and judgment
               upon the  determination  and/or award of such  arbitrator  may be
               entered  in any  court  having  jurisdiction  thereof;  provided,
               however,  that this clause  shall not be  construed to permit the
               award of punitive  damages to either Party.  The prevailing Party
               to said  arbitration  shall be entitled to an award of reasonable
               attorney's  fees. The venue for arbitration  shall be in Columbia
               County, Florida.

               (b) Injunctive Relief: The Parties acknowledge and agree that the
               services to be  performed  by Employee are special and unique and
               that money damages cannot fully  compensate the Bank in the event
               of Employee's  violation of the  provisions of Section 16 of this
               Agreement.  Thus,  in  the  event  of a  breach  of  any  of  the
               provisions of such Section,  Employee  agrees that the Bank, upon
               application  to a  court  of  competent  jurisdiction,  shall  be
               entitled to an injunction  restraining  Employee from any further
               breach of the terms and  provision  of such  Section.  Should the
               Bank  prevail  in an action  seeking  an  injunction  restraining
               Employee,  Employee shall pay all costs and reasonable attorneys'
               fees  incurred  by the Bank in and  relating  to  obtaining  such
               injunction.  Such injunctive  relief may be obtained without bond
               and  Employee's  sole  remedy,  in the event of the entry of such
               injunction, shall be the dissolution of such injunction. Employee
               hereby  waives any and all  claims  for  damages by reason of the
               wrongful issuance of any such injunction.

               (c) Cumulative  Remedies:  Notwithstanding any other provision of
               this Agreement,  the injunctive relief described in Section 17(b)
               herein  and all other  remedies  provided  for in this  Agreement
               which are available to the Bank as a result of Employee's  breach
               of this Agreement, are in addition to and shall not limit any and
               all remedies existing at or in equity which may also be available
               to the Bank.

         18.      Assignment.  This Agreement shall inure to the benefit of and
be binding upon the Employee, and to the extent applicable,  his heirs, assigns,
executors,  and personal  representatives,  and to the Bank and the Corporation,
and to the extent applicable,  their successors, and assigns, including, without
limitation,  any person,  partnership,  or corporation  which may acquire all or
substantially  all of the Bank's or the  Corporation's  assets and business,  or
with or into which the Bank or Corporation may be  consolidated  or merged,  and
this provision shall apply in the event of any subsequent merger, consolidation,
or  transfer,  unless  such  merger or  consolidation  or  subsequent  merger or
consolidation  is a  transaction  of the type which would result in  termination
under Sections 10(c) and 10(d) herein.

         19.      Miscellaneous.

               (a) Amendment of Agreement:  Unless as otherwise provided herein,
               this  Agreement may not be modified or amended  except in writing
               signed by the Parties.

                                       11


<PAGE>



               (b) Certain  Definitions:  For  purposes of this  Agreement,  the
               following  terms  whenever  capitalized  herein  shall  have  the
               following meanings:

                           (i)      "Person"  shall  mean  any  natural  person,
                                    corporation,    partnership    (general   or
                                    limited),  trust,  association  or any other
                                    business entity.

                           (ii)     "Attorneys'  Fees"  shall  include the legal
                                    fees and disbursements  charged by attorneys
                                    and their  related  expenses,  court  costs,
                                    paralegal fees, etc. incurred in settlement,
                                    trial, appeal or in bankruptcy proceedings.

               (c) Headings for Reference Only: The headings of the Sections and
               the  Subsections   herein  are  included  solely  for  convenient
               reference and shall not control the meaning of the interpretation
               of any of the provisions of this Agreement.

               (d) Governing Law/Jurisdiction: This Agreement shall be construed
               in  accordance  with and  governed  by the  laws of the  State of
               Florida.  Any  litigation  involving the Parties and their rights
               and  obligations  hereunder  shall be brought in the  appropriate
               court in Columbia County, Florida.

               (e)  Severability:  If any of the  provisions  of this  Agreement
               shall be held  invalid  for any  reason,  the  remainder  of this
               Agreement shall not be affected  thereby and shall remain in full
               force and effect in accordance with the remainder of its terms.

               (f) Entire  Agreement:  This  Agreement  and all other  documents
               incorporated or referred to herein,  contain the entire agreement
               of the Parties and there are no  representations,  inducements or
               other  provisions  other than those  expressed in writing herein.
               This Agreement amends, supplants and supersedes any and all prior
               agreements between the Parties.

               (g)  Waiver:  No course of conduct by the Parties and no delay or
               omission of any Party to exercise  any right or power given under
               this Agreement shall:  (i) impair the subsequent  exercise of any
               right  or  power,  or (ii) be  construed  to be a  waiver  of any
               default  or any  acquiescence  in or consent to the curing of any
               default while any other default  shall  continue to exist,  or be
               construed  to be a waiver of such  continuing  default  or of any
               other  right or power that shall  theretofore  have  arisen.  Any
               power and/or remedy  granted by law and by this  Agreement to any
               Party hereto may be exercised  from time to time, and as often as
               may be deemed  expedient.  All such  rights and  powers  shall be
               cumulative to the fullest extent permitted by law.

               (h) Pronouns:  As used herein,  words in the singular include the
               plural, and the masculine include the feminine and neuter gender,
               as appropriate.

               (i)  Recitals:  The Recitals  set forth at the  beginning of this
               Agreement shall be deemed to be incorporated  into this Agreement
               by  this  reference  as if  fully  set  forth  herein,  and  this
               Agreement shall be interpreted  with reference to and in light of
               such Recitals.

                                       12


<PAGE>


         IN WITNESS WHEREOF,  the Parties hereto have executed this Agreement as
of the day and year first written above.

EMPLOYEE                               PEOPLES STATE BANK



/s/ Wesley T. Small                    By:     /s/ A. C. Milton
-------------------------                      --------------------------
Wesley T. Small, Employee                       A.C. Milton,
                                                Chairman of the Board and
                                                Acting Chief Executive Officer
                                                 and President

/s/ Penny Cooper                               /s/ Jimmie Kirk
-------------------------                      ---------------------------
 Witness                                         Witness


                                       PSB BANCGROUP, INC.



                                       By:     /s/ Robert W. Woodard
                                               ---------------------------
                                                Robert W. Woodard,
                                                President and Chief Executive
                                                  Officer



                                               /s/ Jimmie Kirk
                                               ----------------------------
                                                Witness

                                       13