EXHIBIT 22.1

                            PSB's 2000 Annual Meeting
                                 Proxy Statement























<PAGE>


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

                               PSB BANCGROUP, INC.
     -----------------------------------------------------------------------






                                 March 17, 2000




Dear Fellow Shareholders:

         We  cordially   invite  you  to  attend  the  2000  Annual  Meeting  of
Shareholders  of PSB BancGroup,  Inc.  ("PSB"),  the parent holding  company for
Peoples State Bank.  Our Annual Meeting will be held at the First Baptist Church
located at 206 East Orange Steet, Lake City, Florida 32055, on April 18, 2000 at
2:00 p.m., Eastern Standard Time.

         The Notice of the Annual Meeting and Proxy  Statement  attached to this
letter  describe the formal  business to be transacted at the Annual Meeting and
provide material information concerning that business. Directors and officers of
PSB, as well as a representative of the accounting firm Hacker, Johnson, Cohen &
Grieb, P.A., will be present at the Annual Meeting to respond to your questions.

         YOUR VOTE IS IMPORTANT.  Please sign,  date and mail the enclosed Proxy
Card in the  postage-paid  envelope which has been provided for your use. If you
attend the Annual  Meeting and prefer to vote in person,  you will be able to do
so.

         On behalf of the Board of  Directors  and all the  employees of PSB, we
look forward to seeing you at the Annual Meeting.

                                         Sincerely,

                                         /s/ Robert W. Woodard

                                         Robert W. Woodard
                                         President and Chief Executive Officer


<PAGE>

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

                               PSB BANCGROUP, INC.
     -----------------------------------------------------------------------



                  NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
                          TO BE HELD ON APRIL 18, 2000


         NOTICE IS HEREBY  GIVEN that the 2000  Annual  Meeting of  Shareholders
("Annual  Meeting") of PSB BancGroup,  Inc.  ("PSB"),  will be held at the First
Baptist Church located at 206 East Orange  Street,  Lake City,  Florida 32055 on
April 18, 2000 at 2:00 p.m., Eastern Standard Time, for the following purposes:

         Proposal I        To  elect  two  Class I  members  of the  Board  of
                           Directors;

         Proposal II       To  approve  PSB's  Amended  1998  Employee  Stock
                           Option and Limited Rights Plan;

         Proposal III      To appoint the firm of Hacker,  Johnson,  Cohen &
                           Grieb  as the  independent  auditors  for PSB for the
                           fiscal year ending December 31, 2000; and

         Proposal IV       To  adjourn   the   Annual   Meeting  to  solicit
                           additional   proxies  in  the  event  there  are  not
                           sufficient votes to approve Proposals I, II or III.

         The Board of Directors  has fixed the close of business on February 18,
2000,  as the record  date for the  determination  of  shareholders  entitled to
notice of and to vote at this Annual  Meeting.  Only  holders of common stock of
record at the close of  business  on that date will be  entitled to vote at this
Annual  Meeting,  or at  any  adjournments  thereof.  In  the  event  there  are
insufficient  votes  for a quorum to  approve  any  proposal  at the time of the
Annual  Meeting,  the Annual Meeting may be adjourned in order to permit further
solicitation of proxies by PSB.

                                      By Order of the Board of Directors

                                      /s/ Jimmie A. Kirk
                                      Jimmie A. Kirk
                                      Corporate Secretary

Lake City, Florida
March 17, 2000

<PAGE>
     -----------------------------------------------------------------------

                               PSB BANCGROUP, INC.
     -----------------------------------------------------------------------


                          500 South 1st Street, Suite 1
                            Lake City, Florida 32025


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


                                 PROXY STATEMENT

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



Solicitation and Voting of Proxies

         This  Proxy  Statement  and  the  accompanying  Proxy  Card  are  being
furnished to  shareholders of record as of February 18, 2000, in connection with
the  solicitation  of proxies by the Board of Directors of PSB BancGroup,  Inc.,
Lake City,  Florida  ("PSB"),  the parent holding company for Peoples State Bank
("Bank")  to be  voted at the  2000  Annual  Meeting  of  Shareholders  ("Annual
Meeting"). Please note that PSB and the Bank are collectively referred to herein
as the "Company." The Annual Meeting is being held at the First Baptist  Church,
206 East Orange  Street,  Lake City,  Florida  32055,  on April 18, 2000 at 2:00
p.m.,  Eastern  Standard Time.  The 1999 Annual Report,  including the financial
statements for the fiscal year ended December 31, 1999,  accompanies  this Proxy
Statement,  which is first being  mailed to  shareholders  on or about March 17,
2000.

         Regardless of the number of shares of common stock that you may own, it
is important that your shares be represented by proxy or be present in person at
the  Annual  Meeting.  Shareholders  are  requested  to vote by  completing  the
enclosed  Proxy  Card and  returning  it,  signed  and  dated,  in the  enclosed
postage-paid  envelope. We urge you to indicate your vote in the spaces provided
on the  Proxy  Card.  Proxies  solicited  by the  Board  of PSB will be voted in
accordance  with  the  directions  given  therein.  Where  no  instructions  are
indicated,  proxies  will be voted  "FOR" the  election of two Class I directors
each for three-year terms; "FOR" the approval of the Amended 1998 Employee Stock
Option and Limited Rights Plan; "FOR" the appointment of Hacker,  Johnson, Cohen
& Grieb, P.A. as the Company's  independent  auditors for the fiscal year ending
December 31, 2000;  and "FOR" the  adjournment  of the Annual Meeting to solicit
additional  proxies in the event that there are not sufficient  votes to approve
any one or more of the foregoing Proposals.

         The  Board  of  Directors  does not have  knowledge  of any  additional
business  that  will be  presented  for  consideration  at the  Annual  Meeting.
Execution  of  a  proxy,  however,  confers  on  the  designated  proxy  holders
discretionary  authority  to vote the  shares  in  accordance  with  their  best
judgment on other  business,  if any,  that may properly come before this Annual
Meeting, or any adjournment thereof.


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


                       PSB BANCGROUP, INC. PROXY STATEMENT
             500 South 1st Street, Suite 1, Lake City, Florida 32025
                                        1

<PAGE>



         It is important that proxies be returned promptly.  Whether you plan to
be present in person at the Annual  Meeting or not,  please vote,  sign and date
the enclosed  Proxy Card and return it in the enclosed  envelope  which does not
require postage if mailed in the United States.

Revocation of Proxy

         Your presence at the Annual Meeting will not automatically  revoke your
proxy.  You may,  however,  revoke a proxy at any time prior to its  exercise by
filing  with  the  Corporate  Secretary  a  written  notice  of  revocation,  by
delivering  to the Company a duly  executed  proxy  bearing a later date,  or by
attending the Annual Meeting and voting in person.

Voting Procedures

         Under the Florida  Business  Corporation  Act  ("Act"),  directors  are
elected  by a  plurality  of the votes  cast at a  meeting  at which a quorum is
present.  Our Bylaws  provide  that a majority  of shares  entitled  to vote and
represented in person or by proxy at a meeting of the shareholders constitutes a
quorum.  Other matters are approved if affirmative  votes cast by the holders of
shares  represented  at a meeting at which a quorum is present  and  entitled to
vote on the subject  matter exceed votes  opposing the action,  unless a greater
number of  affirmative  votes or voting by classes is required by the Act or our
Articles or Incorporation. Abstentions and broker non-votes have no effect under
Florida law.

         The close of business on February 18, 2000, has been fixed by the Board
of Directors as the "Record Date" for determination of shareholders  entitled to
notice of and to vote at this Annual Meeting and any adjournments  thereof.  The
total  number of  shares of common  stock  outstanding  on the  Record  Date was
515,034 shares.

         Each shareholder of record on the Record Date has the right to vote, in
person or by proxy, the number of shares owned by him or her for as many persons
as there are directors to be elected.  Our Bylaws do not provide for  cumulative
voting;  rather,  shareholders  have a right to one vote per share  owned on any
matters presented for shareholder vote. Thus, for example, if a shareholder owns
five  shares,  that  shareholder  may vote a  maximum  of five  shares  for each
director to be elected.

Security Ownership of Certain Beneficial Owners

         The following  table  contains  information  concerning the only person
known by management to be the  beneficial  owners of more than five percent (5%)
of the outstanding shares of PSB common stock as of the Record Date.



                            [Table Follows This Page]


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


                       PSB BANCGROUP, INC. PROXY STATEMENT
            500 South 1st Street, Suite 1, Lake City, Florida 32025
                                        2

<PAGE>




               Name/Address of                     Number of          Percent of
              Beneficial Owner                     Shares(1)             Class
--------------------------------------------------------------------------------

ABC Bancorp                                          49,000              9.08%
310 First Street, SE
Moultrie, Georgia 31768

Samuel F. Brewer                                     56,840             10.46
512 West Montgomery Street
Lake City, Florida 32025-5118

Frank A. Broome, III                                 43,000              8.01
2902 224th Street
Lake City, Florida 32024

John W. Burns, III                                   32,600              6.14
RR 13 Box 319
Lake City, Florida 32055

Jasper and Marthalene Davis                          31,200              5.88
Family Partnership, LLP
936 Gordon Avenue
Thomasville, Georgia 32792

Renny B. Eadie, III                                  39,000              7.30
Rt. 22, Box 2913
Lake City, Florida 32024

Robert M. Eadie                                      39,000              7.30
Rt. 13, Box 559
Lake City, Florida 32055

George or James Fletcher                             36,000              6.75
P.O. Box 578
Branford, Florida 32008

Lois and Laurie Kirby(2)                             43,468              8.10
P.O. Box 567
Lake City, Florida 32056

Shilpa U. Mhatre                                     39,068              7.31
Rt. 18, Box 600
Lake City, Florida 32025

Alton C. Milton, Sr.                                 27,800              5.26
2732 S. First Street
Lake City, Florida 32025

Alton C. Milton, Jr.                                 27,800              5.26
2732 S. First Street
Lake City, Florida 32025

Andrew T. Moore                                      33,512              6.30
104 Fairway Drive
Lake City, Florida 32055

Roger W. Ratliff                                     50,000              9.26
14860 S.E. CR 137
Jasper, Florida 32052


                          [Footnotes Follow This Page]

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


                       PSB BANCGROUP, INC. PROXY STATEMENT
             500 South 1st Street, Suite 1, Lake City, Florida 32025
                                        3
<PAGE>

(1)  Includes  warrants to purchase common stock. Also includes shares for which
     the named person:

o    has sole voting and investment power,
o    has shared voting and investment power with a spouse, or
o    holds  in an  IRA  or  other  retirement  plan  program,  unless  otherwise
     indicated in these footnotes, but
o    does not includes shares that may be acquired by exercising stock options.

(2)  21,734 shares held in the Laurie G. Kirby Revocable Trust and
     21,734 shares held in the Lois F. Kirby Revocable Trust.

                       PROPOSAL I -- ELECTION OF DIRECTORS

         The Board of Directors of PSB is presently  comprised of seven members,
two of whom also serve as directors of the Bank.  Our Articles of  Incorporation
provide for three classes of directors  with  staggered  three year terms.  This
year,  Class I directors are standing for election.  At the 2001 Annual Meeting,
Class II directors will stand for election and at the 2002 Annual Meeting, Class
III directors will stand for election.  No person being  nominated as a director
is being proposed for election pursuant to any agreement.

         The two nominees for Class I directors  named below have both indicated
that they are  willing  to stand  for  election  and will  serve if  elected  as
directors.  Should  either of the two  nominees  become  unable or  unwilling to
serve, proxies will be voted for the election of such other person or persons as
the Board may choose to nominate.

         The  following  table  sets  forth  the  business  experience,  age and
beneficial ownership of PSB common stock for each director and director nominee,
as well as the  beneficial  ownership of PSB common stock for each  non-director
officer.

                          CLASS I DIRECTOR NOMINEES --
                             TERMS EXPIRING IN 2003


John W. Burns,  III, age 39, is a State Farm Insurance  Agent in Lake City,
Florida.  Mr. Burns was born and raised in Lake City. He graduated  from Stetson
University  in  DeLand,  Florida,  in 1981 with a BA.  He has been a State  Farm
Insurance Agent since 1989 and was named one of the top 50 agents in the country
in 1990.  He has served as  President,  Treasurer  and Campaign  Chairman of the
United Way of Suwannee Valley.  Mr. Burns is currently a member of the Lake City
Elks Lodge and the Lake City Rotary Club.

32,600  shares of common stock*
6.14% of common stock  outstanding

Robert M. Eadie, age 48, a native of Lake City, Florida, graduated from Columbia
High School and received an AA from Lake City Community  College.  After serving
in the U.S.  Army,  Mr. Eadie joined his father in the family  business in 1975.
Since then,  he has managed  Lake City  Industries,  Inc., a lumber and building
supply  business.  He presently serves as the company's  President,  and as Vice
President of Columbia  Ready Mix,  Inc.  Mr. Eadie is a member of First  Baptist
Church,  the  Masonic  Lodge,  the  Shrine  Club and the Lake  City  York  Rite.

39,000 shares of common stock*
7.30% of common  stock  outstanding
                     ------------------------------------


                       PSB BANCGROUP, INC. PROXY STATEMENT
            500 South 1st Street, Suite 1, Lake City, Florida 32025
                                        4
<PAGE>

                              CONTINUING DIRECTORS


                  CLASS II DIRECTORS -- TERMS EXPIRING IN 2001


Shilpa U. Mhatre,  age 46, received a BS in Microbiology  from the University of
Bombay in 1974.  For the past 21 years,  Ms.  Mhatre has  operated  the business
office for  Psychiatric  Associates  of Lake City,  P.A., a  successful  medical
practice owned by her husband.  In addition,  she has owned and managed  several
residential and commercial  properties in Lake City for the past 15 years and is
part owner of The Plantations, a 48-bed adult living facility in Lake City.

39,068 shares of common  stock*
7.31% of common stock  outstanding

Alton C. Milton,  Jr., age 30, is a 1988 graduate of Columbia High School,  Lake
City, Florida.  Upon graduation he and his father became joint partners of M & M
Farms,  a venture that includes  tree and cattle  farming.  In 1991,  Mr. Milton
joined  his father in the  Sunshine  True Value  Hardware  Store,  in Lake City,
Florida,  and now serves as its Vice President and as Vice President of Sunshine
Electrical & Plumbing Supply, Inc., a wholesaler and distributor of plumbing and
electrical supplies.  Mr. Milton's father is Alton C. Milton, Sr., who is also a
director of PSB.

27,800 shares of common stock*
5.26% of common stock outstanding


                  CLASS III DIRECTORS -- TERMS EXPIRING IN 2002


Alton C.  Milton,  Sr.,  age 65,  is a native of  Columbia  County.  Mr.  Milton
received his GED from Columbia High School in 1957. In 1975, he opened  Sunshine
True Value  Hardware,  wholly owned by him and his son. He served as director of
Lake City Federal  Savings & Loan,  which later  became Sun  Federal,  which was
merged  with  Anchor  Savings  & Loan in 1986.  He is a member  of the Lake City
Chamber of Commerce and a member of the Deep Creek Advent Christian Church.  Mr.
Milton also serves as a director of the Bank.

27,800 shares of common stock*
5.26% of common stock outstanding

Andrew T. Moore, age 48, attended The Bolles School, Jacksonville, Florida, from
1966-70  and  graduated  from  Jacksonville  University  in  1974  with  a BS in
Business. Mr. Moore joined the family business,  Rountree-Moore  Ford/Toyota, in
May of 1974 and is presently  its Vice  President  and General  Manager.  He has
served as President and Treasurer of the Lake City Kiwanis Club, five years as a
Board  Member of the Lake  City/Columbia  County  Chamber of Commerce  and three
years as a Columbia County Boys Club Board Member.

33,512 shares of common stock*
6.30% of common stock outstanding

Robert W. Woodard,  age 50, is the President and Chief Executive Officer of PSB,
and the  Executive  Vice  President of the Bank.  Mr.  Woodard began his banking
career in 1969. He moved to Lake City,  Florida, in 1987 where he joined Barnett
Bank of North Central  Florida as Vice President,  Commercial  Loans. In August,
1992,  he joined CNB  National  Bank (Lake City) as Vice  President,  Commercial
Loans.  Mr.  Woodard left CNB in 1997 to organize PSB and the Bank. He serves as
Florida  Bankers  Association  Group III  Chairman  and on the City of Lake City
Planning and Zoning Board. He is an active member of First Baptist Church,  Lake
City, Florida. Mr. Woodard also serves as a director of the Bank.

22,200 shares of common stock*
4.22% of common stock outstanding

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


                       PSB BANCGROUP, INC. PROXY STATEMENT
             500 South 1st Street, Suite 1, Lake City, Florida 32025
                                        5


<PAGE>

                              NON-DIRECTOR OFFICER


Jimmie A. Kirk.  Mr. Kirk is the Vice  President and Corporate  Secretary of PSB
and Cashier and Corporate Secretary of the Bank.

0 shares of common stock
0.00% of common stock outstanding

All PSB Directors and Officers as a Group (8 persons)

221,980 shares of common stock
35.46% of common stock outstanding

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

*    Includes  Warrants to purchase common stock.  Includes shares for which the
     named person:

o    has sole voting and investment power,
o    has shared voting and investment power with a spouse, or
o    holds  in an  IRA  or  other  retirement  plan  program,  unless  otherwise
     indicated in these footnotes, but
o    does not includes shares that may be acquired by exercising stock options.


--------------------------------------------------------------------------------
         The Board of Directors Recommends That Shareholders Vote "For"
                   the Two Board Nominated Class I Directors.
--------------------------------------------------------------------------------

                        REPORT OF THE BOARD OF DIRECTORS

Meetings and Compensation of Directors

         The Board of Directors of PSB conducts its business through meetings of
the full Board.  At this time the Company does not  compensate its directors for
their  service on the Board or their  attendance at Board  meetings.  During the
fiscal year ended December 31, 1999, the Board of Directors met 20 times. Except
for Ms. Shilpa U. Mhatre and Mr. Andrew T. Moore, none of the directors attended
fewer than 75% of the total meetings held. Ms. Mhatre  attended 60% of the Board
meetings and Mr. Moore attended 70% of the Board meetings.


                             EXECUTIVE COMPENSATION

Summary Compensation Table

         The following table sets forth, for the fiscal years ended December 31,
1999,  1998 and 1997,  the total  compensation  paid to or  accrued by the Chief
Executive Officer and President of the Company.

<TABLE>
<CAPTION>

                               Annual Compensation
--------------------------------------------------------------------------------------------------------------------------------

                                                                                                       Restricted
Name and Principal                                               Directors'        Other Annual           Stock
Position                       Year       Salary      Bonus         Fees          Compensation(1)        Awards        Options
--------------------------------------------------------------------------------------------------------------------------------

<S>                            <C>      <C>             <C>           <C>            <C>                    <C>           <C>
Robert W. Woodard              1999     $    67,500     -             -              $ 4,279                -             -
   President/CEO of the        1998          67,500     -             -                4,279                -             -
   Company and                 1997          36,616     -             -                2,321                -             -
   Executive Vice
   President of the Bank

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

<FN>
(1)      Family  health  insurance  coverage.  The value of all  other  personal
         benefits  received by Mr. Woodard was less than the required  reporting
         threshold.
</FN>
</TABLE>
                     ------------------------------------


                       PSB BANCGROUP, INC. PROXY STATEMENT
             500 South 1st Street, Suite 1, Lake City, Florida 32025
                                        6
<PAGE>

Executive Compensation Policies and Program

         The compensation of the Company's  executive  officers is determined by
the  respective  Boards of  Directors,  excluding  any  director  who is also an
executive  officer.  Only Mr. Woodard,  President and Chief Executive Officer of
PSB, and Mr. Small,  Chief Executive Officer and President of the Bank, serve as
both  directors  and as executive  officers.  Initially,  the  respective  Chief
Executive Officers determine the salary range recommendations for all employees,
including  executives other than themselves.  The Chief Executive  Officers then
present  their  recommendations  to their  Boards  which  review and analyze all
information that has been submitted. Thereafter, the respective Boards determine
the  compensation of all executive  officers,  including the compensation of the
Chief  Executive  Officers.  The  Company's  executive  compensation  program is
designed to:

o    Attract and retain qualified management;
o    Enhance short-term financial goals; and
o    Enhance long-term shareholder value.

         The Company strives to pay each executive  officer the base salary that
would be paid on the open market for a fully qualified officer of that position.
The level of base salaries for the Chief Executive  Officers for the Company and
other executive officers are determined by the respective Board of Directors are
based upon competitive  norms,  derived from annual surveys published by several
independent  banking  institutes or private companies  specializing in financial
analysis of financial  institutions.  Such surveys provide information regarding
compensation of financial  institution  officers and employees based on size and
geographic  location of the financial  institution  and serve as a benchmark for
determining executive salaries. The Company sets their compensation ranges at or
near the median for executives at similar financial institutions.  Actual salary
changes are based upon an evaluation of each individual's performance based upon
established objectives and specific job description  objectives,  as well as the
overall  performance of the Company.  Through and including 1999,  there were no
bonuses paid to any of the Company's employees.

Board Interlocks and Insider Participation in Compensation Decisions

         Robert W.  Woodard,  President and Chief  Executive  Officer of PSB and
Executive  Vice President of the Bank, is a member of PSB's and the Bank's Board
of Directors.  Mr. Woodard participated in the Boards'  deliberations  regarding
executive  compensation,  but did not participate in any deliberations regarding
his own compensation or transactions. Wesley T. Small is the President and Chief
Executive  Officer  of the Bank and a member  of the  Bank's  Board.  Mr.  Small
participated  in   deliberations   of  the  Bank's  Board  regarding   executive
compensation,  but did not  participate in any  deliberations  regarding his own
compensation or transactions.

Employment Contracts

         The PSB and the Bank have jointly  entered into  employment  agreements
with two of their  executive  officers,  Robert W. Woodard,  President and Chief
Executive Officer of PSB and Executive Vice President of the Bank, and Wesley T.
Small,  President and Chief  Executive  Officer of the Bank.  The following is a
summary of their employment agreements:

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


                       PSB BANCGROUP, INC. PROXY STATEMENT
             500 South 1st Street, Suite 1, Lake City, Florida 32025
                                        7

<PAGE>

         Robert W. Woodard's employment agreement was significantly  amended and
re-executed on July 28, 1997. Pursuant to its terms, Mr. Woodard is to receive a
base salary, plus reimbursement of reasonable business expenses.

         The original term of Mr. Woodard's  employment agreement was two years,
with the Company  having the annual right to renew the agreement for  successive
one year terms,  so the agreement  may always have a two-year  term. On July 20,
1999,  the  Board  again  decided  to extend  Mr.  Woodard's  agreement  for one
additional  year,  so that it now  expires  on June  16,  2001.  Any  party  may
terminate  the  agreement  by  delivering  to the  other  parties  a  notice  of
termination.  The date of termination may be no less than 30 days after delivery
of the notice.

         Mr.  Woodard's  employment  agreement  provides for  termination by the
Company for reasons  other than for "just  cause," and by Mr.  Woodard for "good
reason," as those terms are defined in the  employment  agreement.  In the event
the employment agreement is terminated by the Company for reasons other than for
"just  cause" or by Mr.  Woodard  for "good  reason,"  he shall be entitled to a
severance  payment.  The severance  payment will be a sum equal to Mr. Woodard's
total  compensation  for the remainder of the term of the employment  agreement,
payable in semi-monthly sums, plus any accrued incentive compensation.

         If Mr. Woodard  becomes  disabled,  he would be entitled to receive his
monthly  base salary until the earlier of three  months,  the date he returns to
work, the date he begins work, at another financial  institution,  or his death.
In the event of Mr.  Woodard's  death,  his  estate  shall be  entitled  to that
portion of his compensation that would have been payable up to the first working
day of the first month after his death.

         The  employment  agreement  also permits Mr.  Woodard to terminate  his
employment  voluntarily.   In  the  event  of  a  voluntary  termination,  or  a
termination  for just cause,  all rights and benefits  under the contract  shall
immediately terminate.

         Wesley T. Small's employment agreement became effective on November 15,
1999, and has a term of one year.  Upon mutual  agreement of the Company and Mr.
Small, his employment agreement may be extended for two six-month periods. Under
the employment  agreement,  Mr. Small is entitled to receive a base salary, plus
reimbursement  of  reasonable  business  expenses.  A specific  condition of Mr.
Small's employment agreement is that he works closely with Robert W.
Woodard in the area of bank operations.

         In the event Mr.  Small's  employment is  terminated  for reasons other
than for "just cause," or if he terminates  his employment for "good reason," as
those  terms are  defined in his  employment  agreement,  he shall  receive as a
severance  payment,  one  year  of his  base  salary,  payable  in  semi-monthly
installments. Should Mr. Small become disabled during the term of his employment
agreement,  he would be entitled to receive  his monthly  base salary  until the
earlier of three months, the date he returns to work, the date he begins work at
another financial  institutions or his death. In the event of Mr. Small's death,
his estate shall be entitled to that portion of Mr.  Small's  compensation  that
would have been payable up to the first working day of the first month after his
death.

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


                       PSB BANCGROUP, INC. PROXY STATEMENT
            500 South 1st Street, Suite 1, Lake City, Florida 32025
                                        8
<PAGE>

         The employment  agreement permits Mr. Small to terminate his employment
voluntarily.  In the event of a voluntary termination, or a termination for just
cause, all rights and benefits under the contract shall immediately terminate.

                              RELATED TRANSACTIONS

         During 1999, four members of either PSB's Board or the Bank's Board, or
their  related  business  interests,  had loans or lines of credit from the Bank
that total more than  $50,000.  These loans and lines of credit were made on the
same  terms  as  extensions  of  credit  are  made  to the  Bank's  unaffiliated
customers. Their terms are summarized in the following table.

<TABLE>
<CAPTION>

                                      Highest
                                    Outstanding
            Name                  Balance in 1999           Type of Credit             Interest Rate
-------------------------------------------------------------------------------------------------------

<S>                                 <C>                  <C>                           <C>
Frank A. Broome, III                $ 122,000            Residential Mortgage              7.00%

Robert M. Eadie                       200,000*              Commercial Line            Prime + 0.25%
                                       19,706*              Commercial Loan                7.00%
                                       10,000               Executive Line             Prime + 0.25%

Renny B. Eadie, III                   200,000*              Commercial Line            Prime + 0.25%
                                       19,706*              Commercial Loan                7.00%

Alton C. Milton, Sr.                   50,000               Executive Line             Prime + 0.25%
                                       33,909               Commercial Loan                7.20%
         ------------------
<FN>
*        Extensions of credit to Lake Cities  Industries,  Inc. The two $200,000
         Commercial  Line  items  represent  the same  line and the two  $19,706
         Commercial  Loan items  represent  the same  loan.  Robert M. Eadie and
         Renny B.  Eadie,  III are  shareholders  and  officers  of Lake  Cities
         Industries, Inc.
</FN>
</TABLE>

                   PROPOSAL II -- APPROVAL OF THE AMENDED 1998
                      KEY EMPLOYEE STOCK OPTION AND LIMITED
                                   RIGHTS PLAN

         The Board of  Directors  has adopted the Amended  1998  Employee  Stock
Option and Limited  Rights Plan  ("Plan")  for the benefit of officers and other
key employees of the Company.  A copy of the Plan is attached hereto as Appendix
A.

         The Plan provides for a maximum of 10% of the outstanding shares of PSB
common  stock to be issued  pursuant  to the  exercise  of either  incentive  or
non-statutory  stock options ("Options") granted under the Plan, unless adjusted
as provided in Section 14 of the Plan.  The Plan also  provides for the granting
of "Limited Rights" (stock appreciation rights) simultaneously with the grant of
any Option.

         Under the Plan,  participants,  at the  discretion of the  Compensation
Committee (presently the Board), may be granted Options to purchase common stock
at a price  not less  than  100% of its  "Fair  Market  Value"  (as that term is
defined in the Plan) on the date the option is granted,  or $9.00,  whichever is
greater.

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


                       PSB BANCGROUP, INC. PROXY STATEMENT
             500 South 1st Street, Suite 1, Lake City, Florida 32025
                                        9

<PAGE>

         No  Options  may be  exercised  less than  three nor more than 10 years
after the date of their grant.  Limited  Rights may only be exercised  after six
months from the date of their grant and only in the following circumstances: (i)
a change  in  control  of the  Company  occurs;  (ii) the  underlying  Option is
exercisable;  and (iii) the Fair Market  Value of the  underlying  shares on the
date of exercise is greater than the Option's exercise price.

         Options and Limited Rights are not transferable,  except in the case of
death.  Furthermore,  if a participant's employment is terminated for any reason
other than for cause,  their Options and Limited Rights may be exercised by them
or their estate for varying  periods of time,  up to one year,  depending on the
Limited  Right  or  type of  Option  held  and the  reason  for  termination  of
employment.  In the case of a  termination  for cause,  all  Options and Limited
Rights will terminate immediately.

         The Plan is subject to  approval  of the holders of a majority of PSB's
outstanding  common stock at this Annual  Meeting.  All Options  granted  before
shareholder  approval of the Plan are contingent  upon receipt of such approval.
As of the date of this Proxy  Statement,  Robert W. Woodard is the only employee
to have been granted  Options.  Mr.  Woodard was granted an incentive  Option to
purchase 10,000 shares of stock on July 28, 1997.

         The terms of the  Program  may be  amended  by the  Board of  Directors
except that no amendment may increase the maximum  number of shares  included in
the Plan,  reduce the exercise  price of the Options,  extend the period  during
which Options may be granted or  exercised,  or permit any grant to a person who
is not a full-time employee of PSB or its subsidiaries.

--------------------------------------------------------------------------------
         The Board of Directors Recommends That Shareholders Vote "For"
           the Approval of the Amended 1998 Employee Stock Option and
                              Limited Rights Plan.
--------------------------------------------------------------------------------

                   PROPOSAL III -- APPOINTMENT OF AUDITORS FOR
                      FISCAL YEAR ENDING DECEMBER 31, 2000

         The Board of Directors intends to retain the accounting firm of Hacker,
Johnson,  Cohen & Grieb,  P.A.,  as the Company's  independent  auditors for the
fiscal year ending December 31, 2000. A representative  from the firm of Hacker,
Johnson, Cohen & Grieb, P.A., is expected to be present at the Annual Meeting to
respond to shareholder questions.


--------------------------------------------------------------------------------
         The Board of Directors Recommends That Shareholders Vote "For"
         the Appointment of Hacker, Johnson, Cohen & Grieb, P.A., as the
       Independent Auditors for the Fiscal Year Ending December 31, 2000.
--------------------------------------------------------------------------------

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


                       PSB BANCGROUP, INC. PROXY STATEMENT
             500 South 1st Street, Suite 1, Lake City, Florida 32025
                                       10

<PAGE>

                  PROPOSAL IV -- ADJOURNMENT OF ANNUAL MEETING

         PSB seeks your approval to adjourn the Annual Meeting in the event that
the  number of proxies  sufficient  to  approve  Proposals  I, II or III are not
received by April 18, 2000.  In order to permit  proxies that have been received
at the time of the Annual  Meeting to be voted for  adjournment,  the Company is
submitting  the  question  of   adjournment  as  a  separate   matter  for  your
consideration.  If it becomes  necessary to adjourn the Annual Meeting,  and the
adjournment  is for a period  of less  than 30 days,  no  notice of the time and
place of the  adjourned  meeting need be given the  shareholders,  other than an
announcement made at the Annual Meeting.

--------------------------------------------------------------------------------
         The Board of Directors Recommends That Shareholders Vote "For"
                     the Adjournment of the Annual Meeting.
--------------------------------------------------------------------------------

Shareholder Proposals

         In order to be eligible for inclusion in PSB's proxy materials for next
year's Annual Meeting of Shareholders, any shareholder's proposal to take action
at such meeting must be received at the Company's  corporate office at 500 South
1st Street,  Suite 1, Lake City, Florida 32025, no later than November 19, 2000.
Any such  proposals  shall be subject  to the  requirements  of the proxy  rules
(Regulation 14A) adopted under the Securities Exchange Act of 1934.

Notice of Business to be Conducted at
an Annual Meeting and Shareholder Nominations

         Our Bylaws  provide an advance notice  procedure for certain  business,
including nominations for directors,  to be brought before an annual meeting. In
order for a shareholder to properly bring business before an annual meeting, the
shareholder  must give written notice to the Corporate  Secretary of the Company
not less than ten days before the time originally fixed for such meeting.

Solicitation

         The cost of soliciting  proxies on behalf of the Board of Directors for
the Annual Meeting will be borne by PSB.  Proxies may be solicited by directors,
officers  or  regular  employees  of the  Company  in  person  or by  telephone,
telegraph or mail. We are requesting  persons,  firms and  corporations  holding
shares in their  names,  or in the names of their  nominees  for the  benefit of
others,  to send proxy  materials  to and obtain  proxies  from such  beneficial
owners. PSB will reimburse the proxy holders for their reasonable  out-of-pocket
expenses.

Availability of Additional Information

         A copy of the 1999 Annual Report for the fiscal year ended December 31,
1999,  accompanies  this Proxy Statement.  The Annual Report includes  Financial
Statements  for the Company.  Additional  copies of the 1999 Annual Report maybe
obtained by contacting Robert W. Woodard, President and Chief Executive Officer,
PSB BancGroup,  Inc., 500 South 1st Street,  Suite 1, Lake City,  Florida 32025,
telephone  number (904)  754-0002.

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


                       PSB BANCGROUP, INC. PROXY STATEMENT
             500 South 1st Street, Suite 1, Lake City, Florida 32025
                                       11
<PAGE>

Other Matters Which May Properly Come Before the Meeting

         The  Board  of  Directors  knows  of no other  business  which  will be
presented  for  consideration  at the Annual  Meeting  other than those  matters
described above in this Amended Proxy Statement.  However,  if any other matters
should properly come before the Annual Meeting,  it is intended that the proxies
solicited  hereby  will be voted  in  respect  thereof  in  accordance  with the
judgment of the person or persons voting the proxies.


PSB BancGroup, Inc.
Dated: March 17, 2000


















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


                       PSB BANCGROUP, INC. PROXY STATEMENT
             500 South 1st Street, Suite 1, Lake City, Florida 32025
                                       12
<PAGE>
                                   APPENDIX A
                               ------------------


                             THE PSB BANCGROUP, INC.

           AMENDED 1998 EMPLOYEE STOCK OPTION AND LIMITED RIGHTS PLAN


1.       PURPOSE

         The purpose of The PSB BancGroup,  Inc. ("Company") 1998 Employee Stock
Option and Limited  Rights Plan  ("Plan")  is to advance  the  interests  of the
Company,  its wholly owned subsidiary Peoples State Bank and its shareholders by
providing key employees of the Company and its affiliates,  upon whose judgment,
initiative and efforts the successful conduct of the business of the Company and
its affiliates  largely  depends,  with an additional  incentive to perform in a
superior manner, as well as, to attract people of experience and ability.

2.       DEFINITIONS

         (a)      "Board  of  Directors"  means the  Board of  Directors  of the
                  Company.

         (b)      "Affiliate"  means  (i) a  member  of a  controlled  group  of
                  corporations  of which  the  Company  is a  member  or (ii) an
                  unincorporated trade or business which is under common control
                  with the Company as  determined  in  accordance  with  Section
                  414(c) of the Internal  Revenue Code 1986, as amended ("Code")
                  and the regulations issued thereunder.  For purposes hereof, a
                  "controlled  group of  corporations"  shall mean a  controlled
                  group of  corporations  as defined  in Section  1563(a) of the
                  Code  determined  without  regard to Sections  1563(a)(4)  and
                  (e)(3)(C).

         (c)      "Award"  means  an  Award  of  Non-Statutory   Stock  Options,
                  Incentive  Stock Options,  and/or Limited Rights granted under
                  the provisions of the Plan.

         (d)      "Committee" means the Compensation Committee of the Board of
                  Directors.

         (e)      "Plan Year or Years" means a calendar year or years commencing
                  on or after January 1, 1998.

         (f)      "Date of  Grant"  means the  actual  date on which an Award is
                  granted by the Committee.

         (g)      "Common  Stock"  means the common  stock of the  Company,  par
                  value, $0.01 per share.

         (h)      "Fair Market  Value" means,  when used in connection  with the
                  Common Stock on a certain date, the reported  closing price of
                  the Common  Stock as reported by the National  Association  of
                  Securities Dealers Automated Quotation System (as published by
                  the Wall Street  Journal,  if  published)  on the day prior to
                  such date or if the Common  Stock was not traded on such date,
                  on the next preceding day on which the Common Stock was traded
                  thereon.  If the  Common  Stock is not  traded  on a  national
                  market  reported by the  National  Association  of  Securities

                                        1

<PAGE>


                                   APPENDIX A
                               ------------------


                  Dealers  Automated  Quotation  System,  the Fair Market  Value
                  means the  average of the  closing  bid and ask sale prices on
                  the  last  previous  date on  which a sale is  reported  in an
                  over-the-counter   transaction.   In   the   absence   of  any
                  over-the-counter transactions, the Fair Market Value means the
                  highest  price at which the  stock has sold in an arms  length
                  transaction during the 90 days immediately following the grant
                  date. In the absence of an arms length transaction during such
                  90 days,  Fair Market Value means the book value of the common
                  stock or the issue  price of $9.00  per  share,  whichever  is
                  higher.

         (i)      "Limited  Right"  means the right to receive an amount of cash
                  based upon the terms set forth in Section 9 herein.

         (j)      "Disability" means the permanent and total inability by reason
                  of mental or physical  infirmity,  or both,  of an employee to
                  perform the work customarily assigned to him. Additionally,  a
                  medical doctor  selected or approved by the Board of Directors
                  must advise the  Committee  that it is either not  possible to
                  determine  when  such  Disability  will  terminate  or that it
                  appears probable that such Disability will be permanent during
                  the remainder of said participant's lifetime.

         (k)      "Termination   for  Cause"  means  the  termination   upon  an
                  intentional  failure to  perform  stated  duties,  breach of a
                  fiduciary duty involving personal dishonesty, which results in
                  material  loss  to the  Company  or one of its  affiliates  or
                  willful  violation of any law, rule or regulation  (other than
                  traffic    violations   or   similar    offenses)   or   final
                  cease-and-desist  order  issued to the  Company  or one of its
                  affiliates.

         (l)      "Participant"   means  an  employee  of  the  Company  or  its
                  affiliates chosen by the Committee to participate in the Plan.

         (m)      "Change in Control"  of the Company  means a change in control
                  that would be required to be reported in response to Item 6(e)
                  of  Schedule  14A of  Regulation  14A  promulgated  under  the
                  Securities  Exchange Act of 1934, as amended  ("Exchange Act")
                  or any  successor  disclosure  item;  provided  that,  without
                  limitation,  such a  Change  in  Control  (as set  forth in 12
                  U.S.C.  Section  1841[a][2] of the Bank Holding Company Act of
                  1956,  as  amended)  shall be deemed to have  occurred  if any
                  person  (as such term is used in  Sections  13[d] and 14[d] of
                  the Exchange Act in effect on the date first  written  above),
                  other than any person who on the date  hereof is a director or
                  officer of the Company, (i) directly or indirectly,  or acting
                  through one or more other persons, owns, controls or has power
                  to vote  25% or  more of any  class  of the  then  outstanding
                  voting  securities  of the  Company;  or (ii)  controls in any
                  manner the  election  of the  directors  of the  Company.  For
                  purposes of this  Agreement,  a "Change in  Control"  shall be
                  deemed not to have occurred in connection with a

                                        2

<PAGE>


                                   APPENDIX A
                               ------------------


                  reorganization,  e.g.  consolidation  or merger of the Company
                  where the stockholders of the Company,  immediately before the
                  consummation of the transaction,  will own at least 50% of the
                  total  combined  voting power of all classes of stock entitled
                  to  vote  of  the  surviving  entity   immediately  after  the
                  transaction.

         (n)      "Normal  Retirement"  means  retirement at the normal or early
                  retirement  date as set forth in any tax qualified plan of the
                  Company or its Affiliates.

         (o)      "Vesting"  means the number of annual  installments in which a
                  participant will be permitted to exercise an option,  which in
                  no event shall be fewer than three (3) installments.


3.       ADMINISTRATION

         The Plan shall be  administered  by the  Compensation  Committee of the
Board of Directors.  The Committee is  authorized,  subject to the provisions of
the Plan, to establish such rules and  regulations as it deems necessary for the
proper  administration  of the  Plan  and to make  whatever  determinations  and
interpretations  in connection with the Plan it deems as necessary or advisable.
All  determinations and  interpretations  made by the Committee shall be binding
and   conclusive   on  all   Participants   in  the  Plan  and  on  their  legal
representatives and beneficiaries.

4.       TYPES OF AWARDS

         Awards under the Plan may be granted in any one or a combination of the
following, as defined below in Sections 7 through 9 of the Plan:

         (a)  Incentive Stock Options;
         (b)  Non-Statutory Stock Options; and
         (c)  Limited Rights.

5.       STOCK SUBJECT TO THE PLAN

         Subject to  adjustment  as provided  in Section 13 herein,  the maximum
number of shares  reserved for  issuance  under the Plan is 10% of the number of
shares of Common Stock  outstanding  as of the date the Company  terminates  its
1998 stock offering. To the extent that options or rights granted under the Plan
are exercised,  the shares  covered will be unavailable  for future grants under
the Plan; to the extent that options  together with any related  rights  granted
under the Plan terminate,  expire or are canceled  without having been exercised
or, in the case of Limited  Rights  exercised  for cash,  new Awards may be made
with respect to these shares.

6.       ELIGIBILITY

         Officers and other employees of the Company or its affiliates  shall be
eligible to receive Incentive Stock Options,  Non-Statutory Stock Options and/or
Limited  Rights under the Plan.  Directors  who are not employees or officers of
the Company or its affiliates  shall not be eligible to receive Awards under the
Plan.


                                        3

<PAGE>


                                   APPENDIX A
                               ------------------


7.       NON-STATUTORY STOCK OPTIONS

         7.1 Grant of Non-Statutory Stock Options.  The Committee may, from time
         to time,  grant  Non-Statutory  Stock  Options to  eligible  employees.
         Non-Statutory  Stock Options granted under this Plan are subject to the
         following terms and conditions:

                  (a)  Price.  The  purchase  price per  share of  Common  Stock
                  deliverable  upon the  exercise  of each  Non-Statutory  Stock
                  Option shall not be less than 100% of the Fair Market Value of
                  the  Common  Stock on the date the  option is granted or $9.00
                  per share  whichever is higher.  Shares may be purchased  only
                  upon  full  payment  of the  purchase  price.  Payment  of the
                  purchase  price may be made, in whole or in part,  through the
                  surrender  of shares of the Common Stock of the Company at the
                  Fair  Market  Value of such  shares  determined  in the manner
                  described in Section 2(h).

                  (b) Terms of Options. The term during which each Non-Statutory
                  Stock  Option  may be  exercised  shall be  determined  by the
                  Committee,  but in no event shall a Non-Statutory Stock Option
                  be  exercisable  in whole  or in part in less  than 3 nor more
                  than 10 years and one day from the Date of Grant.

         The  Committee  shall  determine  the date on which each  Non-Statutory
         Stock Option  shall  become  exercisable  in  installments.  The shares
         comprising each installment may be purchased in whole or in part at any
         time after such installment becomes purchasable.  The Committee, in its
         sole  discretion,  or the  Participant  if so  provided  in his written
         agreement  executed  pursuant to Section 11, may accelerate the time at
         which any  Non-Statutory  Stock  Option may be exercised in whole or in
         part. Notwithstanding the above, in the event of a Change in Control of
         the Company,  all Non-Statutory  Stock Options shall become immediately
         exercisable and consistent  with the time period for exercise  provided
         in Section 7.1(c).

                  (c)  Termination  of  Employment.  Upon the  termination of an
                  employee's  service  for any  reason  other  than  Disability,
                  Normal  Retirement,   death  or  Termination  for  Cause,  his
                  Non-Statutory  Stock Options shall be  exercisable  only as to
                  those shares which were immediately  purchasable by him at the
                  date of  termination,  but only for a period of six (6) months
                  following  termination,  provided  that in no event  shall the
                  period extend beyond the expiration of the Non-Statutory Stock
                  Option term. In the event of Termination for Cause, all rights
                  of the  terminated  employee  under  his  Non-Statutory  Stock
                  Options  shall  expire upon  termination.  In the event of the
                  death,  Disability or Normal  Retirement of any employee,  all
                  Non-Statutory  Stock Options held by the employee,  whether or
                  not  exercisable  at such time,  shall be  exercisable  by the
                  employee or his legal representatives or beneficiaries for one
                  year  following  the date of his death,  Normal  Retirement or
                  cessation of employment due to Disability, provided that in no
                  event shall the period  extend  beyond the  expiration  of the
                  Non-Statutory Stock Option term.


                                        4

<PAGE>


                                   APPENDIX A
                               ------------------


8.       INCENTIVE STOCK OPTIONS

         8.1 Grant of Incentive  Stock Options.  The Committee may, from time to
         time,  grant Incentive Stock Options to eligible  employees.  Incentive
         Stock  Options  granted  pursuant  to the Plan  shall be subject to the
         following terms and conditions:

                  (a)  Price.  The  purchase  price per  share of  Common  Stock
                  deliverable  upon the exercise of each Incentive  Stock Option
                  shall be not less  than 100% of the Fair  Market  Value of the
                  Common Stock on the date the Incentive Stock Option is granted
                  or  $9.00  per  share  whichever  is  higher.  However,  if an
                  employee  owns  stock  equal  to more  than  10% of the  total
                  combined  voting  power of all classes of Common  Stock of the
                  Company (or,  under  Section  424(d) of the Code, is deemed to
                  own  Common  Stock  representing  more  than 10% of the  total
                  combined  voting power of all such  classes of Common  Stock),
                  the purchase price per share of Common Stock  deliverable upon
                  the exercise of each Incentive  Stock Option shall not be less
                  than 110% of the Fair Market  Value of the Common Stock on the
                  date the  Incentive  Stock  Option is  granted.  Shares may be
                  purchased  only  upon  payment  of the  full  purchase  price.
                  Payment  of the  purchase  price  may be made,  in whole or in
                  part,  through the  surrender of shares of the Common Stock of
                  the Company at the Fair Market Value of such shares determined
                  in the manner described in Section 2(h) herein.

                  (b) Amounts of Options. Incentive Stock Options may be granted
                  to any eligible  employee in such amounts as determined by the
                  Committee; provided that the amount granted is consistent with
                  the terms of Section 422 of the Code. In the case of an option
                  intended  to  qualify  as  an  Incentive  Stock  Option,   the
                  aggregate  Fair Market  Value  (determined  as of the time the
                  option is granted) of the Common  Stock with  respect to which
                  Incentive  Stock Options granted are exercisable for the first
                  time by the  Participant  during any calendar  year (under all
                  plans of the Participant's employer corporation and its parent
                  and subsidiary  corporations)  shall not exceed $100,000.  The
                  provisions  of this  Section  8.1(b)  shall be  construed  and
                  applied in accordance  with Section 422(d) of the Code and the
                  regulations, if any, promulgated thereunder.

                  (c) Terms of  Options.  The term during  which each  Incentive
                  Stock  Option  may be  exercised  shall be  determined  by the
                  Committee,  but in no event shall an Incentive Stock Option be
                  exercisable  in whole or in part in less  than 3 nor more than
                  10 years from the Date of Grant. If any employee,  at the time
                  an Incentive Stock Option is granted to him, owns Common Stock
                  representing  more than 10% of the total combined voting power
                  of the  Company  (or,  under  Section  424(d) of the Code,  is
                  deemed to own Common Stock  representing  more than 10% of the
                  total  combined  voting  power of all such  classes  of Common
                  Stock,  by reason of the  ownership  of such classes of Common
                  Stock, directly or indirectly,  by or for any brother, sister,
                  spouse,  ancestor or lineal descendent of such employee, or by
                  or for any corporation,  partnership, estate or trust of which
                  such employee is a shareholder,  partner or beneficiary),  the
                  Incentive Stock Option granted to him shall not be exercisable
                  after the expiration of five years from the Date of Grant.  No
                  Incentive Stock Option granted under this Plan is transferable
                  except by will or the laws of descent and

                                        5

<PAGE>


                                   APPENDIX A
                               ------------------


                  distribution  and is  exercisable  in his lifetime only by the
                  employee to which it is granted.

         The Committee  shall  determine the date on which each Incentive  Stock
         Option shall become exercisable and may provide that an Incentive Stock
         Option shall become exercisable in installments.  The shares comprising
         each installment may be purchased in whole or in part at any time after
         such installment becomes purchasable;  provided,  however, that, in the
         case of an  Incentive  Stock  Option  intended  to qualify  for the tax
         treatment  available pursuant to Section 422 of the Code upon exercise,
         the amount  able to be first  exercised  in a given year is  consistent
         with the terms of Section 422 of the Code. The  Committee,  in its sole
         discretion,  or the Participant if so provided in his written agreement
         executed  pursuant to Section 11, may  accelerate the time at which any
         Incentive  Stock Option may be exercised in whole or in part.  However,
         in the case of an Incentive  Stock  Option  intended to qualify for the
         tax  treatment  available  pursuant  to  Section  422 of the Code  upon
         exercise,  such  acceleration  must be  consistent  with  the  terms of
         Section  422 of the Code.  Notwithstanding  the above in the event of a
         Change in Control of the  Company all  Incentive  Stock  Options  shall
         become  immediately  exercisable  consistent  with the time  period for
         exercise provided in Section 8.1(d).

                  (d)  Termination  of  Employment.  Upon the  termination of an
                  employee's  service  for any  reason  other  than  Disability,
                  Normal  Retirement,   death  or  Termination  for  Cause,  his
                  Incentive Stock Options shall be exercisable  only as to those
                  shares which were  immediately  purchasable by him at the date
                  of  termination,  but only for:  (i) a period of three  months
                  following termination in the case of an Incentive Stock Option
                  intended to qualify for the tax treatment  available  pursuant
                  to Section 422 of the Code upon exercise, and (ii) a period of
                  one year  following  termination  in the case of an  Incentive
                  Stock Option not intended to be eligible for the tax treatment
                  available  pursuant to Section 422 of the Code upon  exercise.
                  In the  event of  Termination  for  Cause,  all  rights of the
                  terminated  employee  under his Incentive  Stock Options shall
                  expire upon  termination.  In no event shall the period extend
                  beyond the expiration of the Incentive Stock Option term.

         In the event of death or  Disability  of any  employee,  all  Incentive
         Stock Options held by such employee, whether or not exercisable at such
         time, shall be exercisable by the employee or his legal representatives
         or  beneficiaries  for one  year  following  the  date of his  death or
         cessation of  employment  due to  Disability.  Upon  termination  of an
         employee's  service  due to  Normal  Retirement,  all  Incentive  Stock
         Options held by such employee, whether or not exercisable at such time,
         shall be exercisable for a period of one year following the date of his
         Normal  Retirement;  provided,  however,  that such option shall not be
         eligible for  treatment as an Incentive  Stock Option in the event such
         option is exercised  more than three months  following  the date of his
         Normal  Retirement.  In no event  shall the  period  extend  beyond the
         expiration of the Incentive Stock Option term.

9.       LIMITED RIGHTS

         9.1 Grant of Limited  Rights.  The  Committee may grant a Limited Right
         simultaneously  with the grant of any  option,  with  respect to all or

                                        6

<PAGE>


                                   APPENDIX A
                               ------------------


         some of the shares covered by such option. Limited Rights granted under
         this Plan are subject to the following terms and conditions:

                  (a) Terms of  Rights.  In no event  shall a  Limited  Right be
                  exercisable  in whole or in part before the  expiration of six
                  months from the date of grant of the Limited  Right. A Limited
                  Right may be exercised  only upon the occurrence of all of the
                  following conditions:  (i) a Change in Control of the Company;
                  (ii) the  underlying  option is eligible to be exercised;  and
                  (iii) the Fair Market  Value of the  underlying  shares on the
                  day of  exercise  is greater  than the  exercise  price of the
                  related option.

         Upon exercise of a Limited Right,  the related option shall cease to be
         exercisable.  Upon exercise or  termination  of an option,  any related
         Limited Rights shall  terminate.  The Limited Rights may be for no more
         than 100% of the  difference  between the  exercise  price and the Fair
         Market Value of the Common Stock subject to the underlying  option. The
         Limited  Right is  transferable  only  when the  underlying  option  is
         transferable and under the same conditions.

                  (b)  Payment.  Upon  exercise of a Limited  Right,  the holder
                  shall  promptly  receive  from the  Company  an amount of cash
                  equal to the  difference  between the Fair Market Value on the
                  Date of Grant of the related  option and the Fair Market Value
                  of the  underlying  shares  on the date the  Limited  Right is
                  exercised,  multiplied by the number of shares with respect to
                  which such Limited Right is being exercised.

                  (c)  Termination  of  Employment.  Upon the  termination of an
                  employee's  service  for any  reason  other  than  Disability,
                  Normal Retirement, death or Termination for Cause, any Limited
                  Rights  held by him  shall  be  exercisable  only as to  those
                  shares  of  the   related   option   which  were   immediately
                  purchasable  at the date of  termination  and for a period  of
                  three   months   following   termination.   In  the  event  of
                  Termination  for Cause,  all Limited  Rights held by him shall
                  expire immediately.

         Upon  termination of an employee's  employment for reason of death,  or
         Disability,   all  Limited  Rights  held  by  such  employee  shall  be
         exercisable   by  the   employee   or  his  legal   representative   or
         beneficiaries  for  a  period  of  one  year  from  the  date  of  such
         termination  with respect to Limited Rights related to Incentive  Stock
         Options,  as well  as,  with  respect  to  Limited  Rights  related  to
         Non-Statutory   Stock  Options.   Upon  termination  of  an  employee's
         employment for reason of Normal Retirement,  all Limited Rights held by
         such  employee  shall  be  exercisable  by the  employee  or his  legal
         representative or beneficiary for one year with respect to both Limited
         Rights granted with respect to Incentive Stock Options and with respect
         to Limited Rights granted with respect to Non-Statutory  Stock Options.
         In no event shall the period extend  beyond the  expiration of the term
         of the related option.

10.      RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY

         An optionee  shall have no rights as a shareholder  with respect to any
shares covered by a Non-Statutory  and/or  Incentive Stock Option until the date
of issuance of a stock  certificate for such shares.  Nothing in this Plan or in
any Award  granted  confers on any person any right to continue in the employ of
the Company or its affiliates or to continue to perform services for the Company


                                        7

<PAGE>


                                   APPENDIX A
                               ------------------


or its  affiliates or interferes in any way with the right of the Company or its
affiliates  to  terminate  his  services as an officer or other  employee at any
time.

         No Award under the Plan shall be  transferable  by the  optionee  other
than by will or the laws of descent and  distribution  and may only be exercised
during his lifetime by the optionee,  or by a guardian or legal  representative.
No such transfer of the Award by the  Participant by will or the laws of descent
and distribution shall be effective to bind the Company unless the Company shall
have been  furnished  with written notice thereof and such other evidence as the
Committee  administering  the Plan may deem  necessary or desirable to establish
the  validity of the  transfer.  The Award  shall not be pledged,  hypothecated,
sold,  assigned,  transferred  or otherwise  encumbered or disposed of except as
provided herein. Any purported pledge, hypothecation, sale, assignment, transfer
or other  encumbrance  or  disposition  of the Award  contrary to the provisions
hereof  shall be null and void and without  effect.  The levy of any  execution,
attachment, or similar process upon the Award shall be null and void and without
effect.

11.      CALL PROVISION

         In the event the  capital of the  Company or its wholly  owned  banking
subsidiaries  falls below  minimum  requirements,  as  determined by its primary
state or federal  regulator,  then the Board of Directors may call any or all of
the  options  granted  and  outstanding  under this Plan.  Such call shall be in
writing  ("Notice")  and shall provide that the option holder shall have 45 days
to exercise the option or forfeit all rights thereunder.  Any options called but
not  exercised  shall  expire 45 days from the date of such  Notice  and  rights
thereunder shall terminate.

12.      AGREEMENT WITH GRANTEES

         Each Award of options,  and/or  Limited  Rights will be  evidenced by a
written  agreement,  executed by the Participant and the Company which describes
the  conditions  for  receiving  the  Awards  including  the date of Award,  the
purchase price if any, applicable periods, and any other terms and conditions as
may be required by the Board of Directors or applicable securities law.

13.      DESIGNATION OF BENEFICIARY

         A  Participant  may,  with the  consent of the  Committee,  designate a
person or persons to receive, in the event of death, any stock option or Limited
Rights Award to which he would then be entitled.  Such  designation will be made
upon  forms  supplied  by and  delivered  to the  Company  and may be revoked in
writing. If a Participant fails effectively to designate a beneficiary, then his
estate will be deemed to be the beneficiary.

14.      DILUTION AND OTHER ADJUSTMENTS

         In the event of any change in the outstanding shares of Common Stock of
the Company by reason of any stock dividend or split, recapitalization,  merger,
consolidation,  spin-off, reorganization,  combination or exchange of shares, or
other similar  corporate  change,  the Committee  will make such  adjustments to
previously  granted Awards,  to prevent dilution or enlargement of the rights of
the Participant, including any or all of the following:


                                        8

<PAGE>


                                   APPENDIX A
                               ------------------


         (a)      adjustments  in the  aggregate  number  or kind of  shares  of
                  Common Stock which may be awarded under the Plan;

         (b)      adjustments  in the  aggregate  number  or kind of  shares  of
                  Common Stock covered by Awards already made under the Plan;

         (c)      adjustments  in the purchase  price of  outstanding  Incentive
                  and/or  Non-Statutory  Stock  Options,  or any Limited  Rights
                  attached to such options.

         No such  adjustments  may,  however,  materially  change  the  value of
benefits available to a Participant under a previously granted Award.

15.      WITHHOLDING

         There will be deducted  from each  distribution  of cash and/or  Common
Stock  under  the  Plan  the  amount  of  tax  required  to be  withheld  by any
governmental authority, if any.

16.      AMENDMENT OF THE PLAN

         The Board of Directors may at any time,  and from time to time,  modify
or  amend  the Plan in any  respect;  provided  however,  that if  necessary  to
continue to qualify the Plan under the Securities and Exchange  Commission  Rule
16(b)-3,  shareholder  approval would be required for any such  modification  or
amendments which:

         (a)      increases  the maximum  number of shares for which options may
                  be granted under the Plan (subject, however, to the provisions
                  of Section 13 hereof);

         (b)      reduces the exercise price at which Awards may be granted;

         (c)      extends  the period  during  which  options  may be granted or
                  exercised beyond the times originally prescribed; or

         (d)      changes the persons eligible to participate in the Plan.

         Failure to ratify or approve amendments or modifications to Subsections
(a) through (d) of this Section by  shareholders  shall be effective  only as to
the specific  amendment  or  modification  requiring  such  ratification.  Other
provisions, sections, and subsections of this Plan will remain in full force and
effect.

         No such termination, modification or amendment may affect the rights of
a Participant under an outstanding Award.

17.      EFFECTIVE DATE OF PLAN

         The Plan shall be adopted by the Board of  Directors  and shall  become
effective upon such date of adoption,  or other date as determined by the Board.
Following  the  Effective  Date of the  Plan,  the Plan  shall be  submitted  to
shareholders for approval. If the Plan shall not be approved by shareholders the
Plan and any Awards granted thereunder shall be null and void.


                                        9

<PAGE>


                                   APPENDIX A
                               ------------------

18.      TERMINATION OF THE PLAN

         The  right to grant  Awards  under  the Plan  will  terminate  upon the
earlier of ten (10) years after the  Effective  Date of the Plan or the issuance
of Common  Stock or the  exercise  of  options or related  rights  equaling  the
maximum number of shares  reserved under the Plan as set forth in Section 5. The
Board of Directors  has the right to suspend or terminate  the Plan at any time,
provided  that no such  action  will,  without  the  consent  of a  Participant,
adversely affect his rights under a previously granted Award.

19.      APPLICABLE LAW

         The Plan will be  administered in accordance with the laws of the State
of Florida.


         Adopted  this  25th  day of  March,  1998  by the  Company's  Board  of
Directors.

                                            /s/ Robert W. Woodard
                                                Robert W. Woodard, President

         Adopted  on the _____ day of  ________________,  1998 by the  Company's
Shareholders.


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

                                       10



<PAGE>






                                  EXHIBIT 22.2

                              Audited Consolidated
                              Financial Statements
                               for the year ended
                                December 31, 1999















<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY
                               Lake City, Florida

                    Audited Consolidated Financial Statements
           At December 31, 1999 and 1998 and For the Years Then Ended

                  (Together with Independent Auditors' Report)














<PAGE>





                          Independent Auditors' Report

Board of Directors
PSB BancGroup, Inc.
Lake City, Florida:

         We have audited the  accompanying  consolidated  balance  sheets of PSB
BancGroup,  Inc. and Subsidiary  (the  "Company") at December 31, 1999 and 1998,
and the related consolidated statements of operations,  changes in stockholders'
equity  (deficit),  and cash flows for the years  then  ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects,  the financial position of the Company
at December 31, 1999 and 1998,  and the results of its  operations  and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.

/s/ Hacker, Johnson, Cohen & Grieb, PA

HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
February 8, 2000


<PAGE>

<TABLE>


                                           PSB BANCGROUP, INC. AND SUBSIDIARY

                                               Consolidated Balance Sheets

                                                                                              At December 31,
                                                                                          ----------------------------
                                                                                          1999                   1998
                                                                                          ----                   ----
    Assets

<S>                                                                                   <C>                       <C>
Cash and due from banks                                                               $     929,837             17,520
Interest-bearing deposits with banks                                                        145,833             27,048
Federal funds sold                                                                        2,182,000                  -
                                                                                         ----------            -------
              Total cash and cash equivalents                                             3,257,670             44,568

Securities available for sale                                                             1,475,027                  -
Securities held to maturity                                                               1,000,000                  -
Loans receivable, net of allowance for loan losses of $42,382                             4,235,120                  -
Premises and equipment, net                                                                 366,500            232,687
Accrued interest receivable                                                                  79,439                  -
Federal Home Loan Bank stock, at cost                                                         9,400                  -
Deferred income taxes                                                                       250,095            119,285
Other assets                                                                                122,990             47,043
                                                                                         ----------            -------
              Total assets                                                             $ 10,796,241            443,583
                                                                                         ==========            =======
    Liabilities and Stockholders' Equity (Deficit)

Liabilities:
    Noninterest-bearing demand deposits                                                     907,021                  -
    Savings, NOW and money-market deposits                                                2,267,127                  -
    Time deposits                                                                         3,386,261                  -
                                                                                         ----------            -------

              Total deposits                                                              6,560,409                  -

    Other borrowings                                                                              -            465,000
    Accrued interest payable and other liabilities                                           58,562                  -
                                                                                         ----------            -------

              Total liabilities                                                           6,618,971            465,000
                                                                                         ----------            -------
Commitments and contingencies (Notes 4, 7, 14 and 15)

Stockholders' equity (deficit):
    Preferred stock, $.01 par value, 2,000,000 shares authorized,
         none issued and outstanding                                                              -                  -
    Common stock, $.01 par value; 8,000,000 shares authorized,
         514,478 and 3,942 shares issued and outstanding in
         1999 and 1998                                                                        5,145                 40
    Additional paid-in capital                                                            4,587,657            177,350
    Accumulated deficit                                                                    (404,244)          (198,807)
    Accumulated other comprehensive income (loss)                                           (11,288)                 -
                                                                                         ----------            -------

              Total stockholders' equity (deficit)                                        4,177,270            (21,417)
                                                                                         ----------            -------
              Total liabilities and stockholders' equity (deficit)                     $ 10,796,241            443,583
                                                                                         ==========            =======

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


                                       2
<PAGE>
<TABLE>

                                           PSB BANCGROUP, INC. AND SUBSIDIARY

                                          Consolidated Statements of Operations

                                                                          Year Ended December 31,
                                                                          -----------------------
                                                                          1999              1998
                                                                          ----              ----
Interest income:
<S>                                                                    <C>
    Loans receivable                                                   $ 130,804              -
    Securities                                                            57,608              -
    Other interest-earning assets                                        178,580            27,504
                                                                         -------           -------
              Total interest income                                      366,992            27,504
                                                                         -------           -------
Interest expense:
    Deposits                                                              79,226              -
    Borrowings                                                            12,071             9,034
                                                                         -------           -------
              Total interest expense                                      91,297             9,034
                                                                         -------           -------
Net interest income                                                      275,695            18,470

              Provision for loan losses                                   42,382              -
                                                                         -------           -------
Net interest income after provision for loan losses                      233,313            18,470
                                                                         -------           -------
Noninterest income-
    Service charges on deposit accounts and other fees                    12,064              -
                                                                         -------           -------
Noninterest expenses:
    Salaries and employee benefits                                       324,670           144,870
    Occupancy expense                                                     67,602            56,366
    Professional fees                                                     43,939            36,148
    Data processing                                                       55,795              -
    Telephone expense                                                     10,385             7,158
    Printing and office supplies                                          20,138             8,381
    Other                                                                 52,285            26,626
                                                                         -------           -------
              Total noninterest expenses                                 574,814           279,549
                                                                         -------           -------
              Loss before income tax benefit                            (329,437)         (261,079)

Income tax benefit                                                      (124,000)          (97,904)
                                                                         -------           -------
              Net loss                                                 $(205,437)         (163,175)
                                                                         =======           =======
Loss per share, basic and diluted                                      $    (.49)           (41.39)
                                                                         =======           =======
Weighted-average number of shares outstanding, basic and diluted         420,156             3,942
                                                                         =======           =======

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


                                       3
<PAGE>
<TABLE>


                                                 PSB BANCGROUP, INC. AND SUBSIDIARY

                                Consolidated Statements of Changes in Stockholders' Equity (Deficit)


                                                                                                     Accumulated
                                                                                                     Other
                                                                                                     Compre-         Total
                                                                    Additional                       hensive         Stockholders'
                                              Common Stock           Paid-In         Accumulated     Income          Equity
                                           Shares       Amount       Capital           Deficit       (Loss)          (Deficit)
                                           ------       ------      ----------       ------------    -------------   -------------

<S>                 <C> <C>                 <C>      <C>              <C>               <C>                              <C>
Balance at December 31, 1997                3,942    $      40        177,350           (35,632)         -               141,758

Comprehensive income (loss)-
         Net loss                            -              -            -             (163,175)         -              (163,175)
                                           ------        -----      ----------           -------       ------           ---------
Balance at December 31, 1998                3,942           40        177,350          (198,807)         -               (21,417)
                                                                                                                       ---------
Comprehensive income (loss):

         Net loss                            -              -            -             (205,437)         -              (205,437)

         Net unrealized loss on
             securities available
             for sale, net of tax
             of $6,810                       -              -            -                 -          (11,288)           (11,288)
                                                                                                                       ---------
         Comprehensive income
             (loss)                                                                                                     (216,725)
                                                                                                                       ---------
Conversion of common stock of
         organizers (see Note 11)          15,768          157           (157)             -             -                 -

Common stock issued, net of
         stock  issuance costs of
         $37,500                          493,768        4,938      4,401,474              -             -             4,406,412

Proceeds from issuance of
         common stock, exercise
         of warrants                        1,000           10          8,990              -             -                 9,000
                                          -------        -----      ---------           -------        ------          ---------
Balance at December 31, 1999              514,478      $ 5,145      4,587,657          (404,244)      (11,288)         4,177,270


See Accompanying Notes to Consolidated Financial Statements.

</TABLE>



                                       4
<PAGE>
<TABLE>

                                           PSB BANCGROUP, INC. AND SUBSIDIARY

                                          Consolidated Statements of Cash Flows

                                                                                            Year Ended December 31,
                                                                                           1999                1998
                                                                                        -----------          ----------
Cash flows from operating activities:

<S>                                                                                    <C>                   <C>
    Net loss                                                                           $   (205,437)         163,175)
    Adjustments to reconcile net loss to net cash (used in)
      provided by operating activities:
         Depreciation and amortization                                                       12,085               -
         Provision for loan losses                                                           42,382               -
         Deferred income tax benefit                                                       (124,000)          97,904)
         Net amortization of deferred loan fees                                               6,834               -
         Increase in accrued interest receivable                                            (79,439)              -
         Increase in other assets                                                           (75,947)          (4,508)
         Increase in accrued interest payable and other liabilities                          58,562                -
                                                                                         ----------           ------

                  Net cash used in operating activities                                    (364,960)         (265,587)
                                                                                         ----------           -------
Cash flows from investing activities:

    Purchase of securities available for sale                                            (1,493,125)               -

    Purchase of securities held to maturity                                              (1,000,000)               -
    Net increase in loans                                                                (4,284,336)               -
    Purchase of Federal Home Loan Bank stock                                                 (9,400)               -
    Purchase of premises and equipment                                                     (145,898)         (232,687)
                                                                                         ----------           -------

                  Net cash used in investing activities                                  (6,932,759)         (232,687)
                                                                                         ----------           -------
Cash flows from financing activities:

    Net increase in deposits                                                              6,560,409                -
    Net (decrease) increase in borrowings                                                  (465,000)          465,000
    Net proceeds from issuance of common stock                                            4,415,412                -
                                                                                         ----------           -------
                  Net cash provided by financing activities                              10,510,821           465,000

Net increase (decrease) in cash and cash equivalents                                      3,213,102           (33,274)


Cash and cash equivalents at beginning of year                                               44,568            77,842
                                                                                         ----------           -------
Cash and cash equivalents at end of year                                               $  3,257,670            44,568
                                                                                         ==========           =======
Supplemental disclosure of cash flow information: Cash paid during the year for:

         Interest                                                                     $      47,383            18,470
                                                                                         ==========           =======
         Income taxes                                                                 $          -                 -
                                                                                         ==========           =======
    Noncash transaction-
         Accumulated other comprehensive income (loss),
              unrealized loss on securities available for sale, net of tax            $     (11,288)               -
                                                                                         ==========           =======

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


                                       5
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

           At December 31, 1999 and 1998 and for the Years Then Ended


(1)  Summary of Significant Accounting Policies
     General. PSB BancGroup, Inc. ("PSB") was incorporated on June 30, 1997. PSB
          owns 100% of the  outstanding  common stock of Peoples State Bank (the
          "Bank") (collectively the "Company"). PSB was organized simultaneously
          with the Bank and its only  business is the ownership and operation of
          the Bank. The Bank is a (Florida) state-chartered  commercial bank and
          its deposits are insured by the Federal Deposit Insurance Corporation.
          The Bank opened for business on April 28, 1999 and offers a variety of
          community  banking services to businesses and individuals  through its
          banking office located in Lake City, Florida.

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

     Use  of  Estimates.  In  preparing  consolidated  financial  statements  in
          conformity with generally accepted accounting  principles,  management
          is required to make estimates and assumptions that affect the reported
          amounts of assets and  liabilities as of the date of the balance sheet
          and reported  amounts of revenues and  expenses  during the  reporting
          period.  Actual  results could differ from those  estimates.  Material
          estimates that are particularly  susceptible to significant  change in
          the near term relate to the  determination  of the  allowance for loan
          losses and deferred tax assets.

     Cash and Cash Equivalents.  For purposes of the consolidated  statements of
          cash flows,  cash and cash  equivalents  include cash and balances due
          from banks,  interest-bearing  deposits  with banks and federal  funds
          sold.

     Securities.  Securities  may be  classified  as  either  trading,  held  to
          maturity  or  available  for  sale.   Trading   securities   are  held
          principally  for resale and recorded at their fair values.  Unrealized
          gains and losses on trading  securities  are included  immediately  in
          earnings.  Held-to-maturity securities are those which the Company has
          the  positive  intent and ability to hold to maturity and are reported
          at amortized cost. Available-for-sale securities consist of securities
          not  classified  as  trading   securities   nor  as   held-to-maturity
          securities.  Unrealized  holding  gains  and  losses,  net of tax,  on
          available-for-sale  securities are excluded from earnings and reported
          in  other  comprehensive  income.  Gains  and  losses  on the  sale of
          available-for-sale  securities  are recorded on the trade date and are
          determined  using the  specific-identification  method.  Premiums  and
          discounts on securities  are  recognized in interest  income using the
          interest method over the period to maturity.

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

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

                                                                (continued)

                                       6
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

             Notes to Consolidated Financial Statements, Continued

(1)  Summary of Significant Accounting Policies, Continued
     Loans Receivable,  Continued.   The   accrual  of   interest  on  loans  is
          discontinued  at the time the loan is 90 days  delinquent  unless  the
          credit is  well-secured  and in process of  collection.  In all cases,
          loans are placed on  nonaccrual or  charged-off  at an earlier date if
          collection of principal or interest is considered doubtful.

          All interest  accrued but not  collected  for loans that are placed on
          nonaccrual or charged-off is reversed  against  interest  income.  The
          interest  on  these  loans  is  accounted  for  on the  cash-basis  or
          cost-recovery  method,  until qualifying for return to accrual.  Loans
          are  returned to accrual  status when all the  principal  and interest
          amounts  contractually due are brought current and future payments are
          reasonably assured.

     Allowance for Loan Losses.  The allowance for loan losses is established as
          losses are  estimated to have  occurred  through a provision  for loan
          losses  charged to  earnings.  Loan  losses are  charged  against  the
          allowance  when  management  believes the  uncollectibility  of a loan
          balance is confirmed.  Subsequent recoveries,  if any, are credited to
          the allowance.

          The  allowance  for loan  losses is  evaluated  on a regular  basis by
          management  and is based  upon  management's  periodic  review  of the
          collectibility  of the loans in light of  historical  experience,  the
          nature and volume of the loan portfolio,  adverse  situations that may
          affect  the  borrower's  ability  to  repay,  estimated  value  of any
          underlying   collateral  and  prevailing  economic  conditions.   This
          evaluation is inherently  subjective as it requires estimates that are
          susceptible  to  significant  revision  as  more  information  becomes
          available.

          A loan is considered  impaired when, based on current  information and
          events,  it is probable that the Company will be unable to collect the
          scheduled  payments of principal or interest when due according to the
          contractual  terms  of  the  loan  agreement.  Factors  considered  by
          management  in  determining   impairment   include   payment   status,
          collateral   value,  and  the  probability  of  collecting   scheduled
          principal  and  interest  payments  when due.  Loans  that  experience
          insignificant  payment delays and payment shortfalls generally are not
          classified as impaired.  Management  determines  the  significance  of
          payment delays and payment shortfalls on a case-by- case basis, taking
          into  consideration all of the circumstances  surrounding the loan and
          the borrower,  including the length of the delay,  the reasons for the
          delay,  the  borrower's  prior payment  record,  and the amount of the
          shortfall in relation to the principal and interest  owed.  Impairment
          is measured on a loan by loan basis for commercial and commercial real
          estate loans by either the present value of expected future cash flows
          discounted  at  the  loan's   effective   interest  rate,  the  loan's
          obtainable  market price,  or the fair value of the  collateral if the
          loan is collateral dependent.

          Large groups of smaller  balance  homogeneous  loans are  collectively
          evaluated for impairment. Accordingly, the Company does not separately
          identify  individual  consumer and  residential  real estate loans for
          impairment disclosures.

     Premises and Equipment.  Land is carried at cost. Premise and equipment are
          stated  at  cost  less  accumulated   depreciation  and  amortization.
          Depreciation  expense is computed using the straight-line  method over
          the estimated useful life of each type of asset.


                                                                (continued)

                                       7
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(1)  Summary of Significant Accounting Policies, Continued
     Transfer of Financial  Assets.  Transfers of financial assets are accounted
          for as sales,  when  control  over the  assets  has been  surrendered.
          Control over  transferred  assets is deemed to be surrendered when (1)
          the assets have been  isolated  from the Company,  (2) the  transferee
          obtains the right (free of  conditions  that  constrain it from taking
          advantage of that right) to pledge or exchange the transferred assets,
          and (3) the  Company  does not  maintain  effective  control  over the
          transferred  assets  through an  agreement to  repurchase  them before
          their maturity.

     Income Taxes.  Deferred tax assets and liabilities are determined using the
          liability  (or  balance  sheet)  method.  Under this  method,  the net
          deferred tax asset or liability is determined based on the tax effects
          of the  temporary  differences  between  the book and tax bases of the
          various  balance  sheet  assets  and  liabilities  and  gives  current
          recognition to changes in tax rates and laws.

     Organizational Costs. Net preopening and  organizational  costs, which were
          incurred prior to commencement of banking operations, totaled $227,202
          and were charged to expense as  incurred.  In addition to common stock
          purchased by the organizers (See Note 10), the Company obtained a line
          of credit from a financial  institution to fund organizational  costs.
          This line of credit was paid-off  with  proceeds from the common stock
          offering.

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

     Fair Values  of  Financial  Instruments.  The  fair  value  of a  financial
          instrument  is the  current  amount  that would be  exchanged  between
          willing  parties,  other than in a forced  liquidation.  Fair value is
          best  determined  based upon quoted market  prices.  However,  in many
          instances, there are no quoted market prices for the Company's various
          financial  instruments.  In cases where quoted  market  prices are not
          available,  fair values are based on estimates  using present value or
          other  valuation   techniques.   Those  techniques  are  significantly
          affected by the  assumptions  used,  including  the discount  rate and
          estimates of future cash flows. Accordingly,  the fair value estimates
          may not be realized in an immediate settlement of the instrument. SFAS
          107  excludes  certain  financial  instruments  and  all  nonfinancial
          instruments  from  its  disclosure  requirements.   Accordingly,   the
          aggregate fair value amounts  presented may not necessarily  represent
          the underlying  fair value of the Company.  The following  methods and
          assumptions  were used by the  Company in  estimating  fair  values of
          financial instruments:

          Cash and  Cash  Equivalents.  The  carrying  amounts  of cash and cash
          equivalents approximate their fair value.

          Securities.  Fair values for securities held to maturity and available
          for sale are based on quoted market prices, where available. If quoted
          market  prices  are not  available,  fair  values  are based on quoted
          market  prices  of  comparable  instruments.  The  carrying  amount of
          Federal Home Loan Bank stock approximates fair value.

          Loans.  For  variable-rate  loans that reprice  frequently and have no
          significant  change in credit risk,  fair values are based on carrying
          values.  Fair values for fixed-rate mortgage (e.g. one-to- four family
          residential),   commercial  real  estate  and  commercial   loans  are
          estimated using  discounted  cash flow analyses,  using interest rates
          currently  being  offered for loans with similar terms to borrowers of
          similar  credit  quality.  Fair  values  for  nonperforming  loans are
          estimated using discounted cash flow analysis or underlying collateral
          values, where applicable.

                                                                (continued)


                                       8
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(1)  Summary of Significant Accounting Policies, Continued
     Fair Values  of  Financial   Instruments,   Continued.   Accrued   Interest
          Receivable. Book value approximates fair value.

          Deposit  Liabilities.  The fair  values  disclosed  for  demand,  NOW,
          money-market  and savings  deposits are, by  definition,  equal to the
          amount  payable  on  demand at the  reporting  date  (that  is,  their
          carrying amounts).  Fair values for fixed-rate certificates of deposit
          are estimated  using a discounted cash flow  calculation  that applies
          interest rates  currently  being offered on certificates to a schedule
          of aggregated expected monthly maturities of time deposits.

          Borrowed Funds. The carrying  amounts of other borrowings  approximate
          their fair values.

          Off-Balance-Sheet   Instruments.  Fair  values  for  off-balance-sheet
          lending  commitments are based on fees currently charged to enter into
          similar  agreements,  taking into account the  remaining  terms of the
          agreements and the counterparties' credit standing.

     Loss Per Share.  Basic and diluted  loss per share have bee computed on the
          basis of the weighted-  average  number of common  shares  outstanding
          during the periods.

     Advertising. The Company expenses all media advertising as incurred.

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

(2)  Securities

     Securities have been  classified  according  to  management's  intent.  The
          carrying  amount of securities  and their  approximate  fair values at
          December 31, 1999 are as follows:

                                  Amortized   Unrealized   Unrealized   Fair
                                     Cost        Gains        Losses    Value
                                  ---------   ----------   ----------  -------

  Available for sale-
        U.S. Government
            Agency securities   $1,493,125          -       (18,098)   1,475,027
                                 =========    ==========     ======    =========

                                                                     (continued)


                                       9
<PAGE>

<TABLE>



                                           PSB BANCGROUP, INC. AND SUBSIDIARY

                                  Notes to Consolidated Financial Statements, Continued

(2)  Securities, Continued

                                                     Amortized         Unrealized        Unrealized          Fair
                                                       Cost              Gains            Losses             Value
                                                     ----------        ----------        ----------          -------
         Held to maturity-
              <S>                                   <C>                  <C>                <C>               <C>
              U.S. Government
                  Agency securities                 $ 1,000,000           -                (11,719)           988,281

    There were no sales of securities in 1999.

    The scheduled maturities of securities at December 31, 1999 are as follows:



                                                               Available for Sale                 Held to Maturity
                                                             -----------------------           ----------------------
                                                               Amortized       Fair            Amortized      Fair
                                                               Cost            Value             Cost         Value
                                                             -----------      ------           ---------      -----
<S>                                                         <C>                                 <C>          <C>
              Due in less than one year                     $          -             -          500,000      497,500
              Due from one to five years                       1,493,125     1,475,027          500,000      490,781
                                                               ---------     ---------        ---------      -------
                                                             $ 1,493,125     1,475,027        1,000,000      988,281

                                                               =========     =========        =========      =======
</TABLE>

(3)  Loans Receivable

    The components of loans receivable are as follows:

                                                       At December 31,
                                                            1999
                                                       --------------

              Commercial                               $    769,829
              Commercial real estate                      2,311,677
              Residential real estate                       557,704
              Consumer and other                            645,126
                                                          ---------

                                                          4,284,336

              Deduct:
                  Net deferred loan fees                     (6,834)
                  Allowance for loan losses                 (42,382)
                                                          ---------
              Loans, net                                $ 4,235,120
                                                          =========

                                                           (continued)


                                       10
<PAGE>



                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(3)  Loans Receivable, Continued
    An analysis of the change in the allowance for loan losses follows:

                                                              Year Ended
                                                             December 31,
                                                                 1999
                                                             -----------
              Beginning balance                            $      -
              Provision for loan losses                        42,382
                                                               ------

              Ending balance                               $   42,382
                                                               ======

    The Bank had no impaired loans at or for the year ending December 31, 1999.

(4)  Premises and Equipment

    A summary of premises and equipment follows:

                                                             At December 31,
                                                            ----------------
                                                            1999        1998
                                                            ----        ----
    Land                                                $ 176,744      176,744
    Leasehold improvements                                 19,873        -
    Furniture and equipment                                84,812       55,943
    Construction in process                                97,156        -
                                                          -------      -------

        Total, at cost                                    378,585      232,687

        Less accumulated depreciation and amortization    (12,085)       -
                                                          -------      -------
        Premises and equipment, net                     $ 366,500      232,687
                                                          =======      =======

     The  Company  currently  leases its  office  facilities  under a  operating
          lease.  This lease expires in the second quarter of the year 2000 when
          the Company expects to move into their permanent  banking office.  The
          permanent  banking  office  will be owned by the  Company and is under
          construction   at  December  31,   1999.   The  Company  has  purchase
          commitments of  approximately  $1.2 million to complete this facility.
          Rent expense under  operating  leases during the years ended  December
          31,  1999 and 1998  was  $13,200  and  $11,700,  respectively.  Future
          minimum rental  payments under this  noncancelable  lease for the year
          ending December 31, 2000 is $8,162.

                                                         (continued)

                                       11
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(5)  Deposits

     The  aggregate  amount  of time  deposits  with a minimum  denomination  of
          $100,000, was approximately $1.2 million at December 31, 1999.

     A schedule of maturities of time deposit follows:

              Year Ending
              December 31,                            Amount
              ------------                         -----------
                  2000                            $  2,793,250
                  2001                                 485,289
                  2002                                   7,500
                  2003                                 100,222
                                                     ---------
                                                  $  3,386,261
                                                     =========
(6)  Credit Risk

     The  Company  grants the majority of its loans to borrowers  throughout the
          Lake City,  Florida area.  Although the Company has a diversified loan
          portfolio,  a significant  portion of its borrowers'  ability to honor
          their contracts is dependent upon the economy in Lake City, Florida.

(7) Financial Instruments

     The  Company is a party to  financial  instruments  with  off-balance-sheet
          risk in the normal course of business to meet the  financing  needs of
          its customers.  These financial  instruments are commitments to extend
          credit and unused lines of credit and may involve, to varying degrees,
          elements  of credit  and  interest-rate  risk in excess of the  amount
          recognized in the consolidated  balance sheet. The contract amounts of
          these instruments reflect the extent of involvement the Company has in
          these financial instruments.

     The  Company's  exposure to credit loss in the event of  nonperformance  by
          the other party to the financial  instrument for commitments to extend
          credit and unused lines of credit is  represented  by the  contractual
          amount of those instruments. The Company uses the same credit policies
          in making commitments as it does for on-balance-sheet instruments.

     Commitments to extend  credit are  agreements to lend to a customer as long
          as there is no violation of any condition established in the contract.
          Commitments generally have fixed expiration dates or other termination
          clauses  and  may  require  payment  of  a  fee.  Since  some  of  the
          commitments are expected to expire without being drawn upon, the total
          commitment   amounts  do  not   necessarily   represent   future  cash
          requirements.  The Company evaluates each customer's credit worthiness
          on a case-by-case  basis. The amount of collateral  obtained if deemed
          necessary  by the  Company  upon  extension  of  credit  is  based  on
          management's credit evaluation of the counterparty.

                                                                    (continued)


                                       12
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(7) Financial Instruments, Continued
     The estimated fair values of the Company's  financial  instruments  were as
follows (in thousands):

                                                  At December 31,
                                               1999                   1998
                                       -------------------    -----------------
                                       Carrying      Fair     Carrying     Fair
                                         Amount      Value     Amount      Value
                                       --------    -------    --------   -------
  Financial assets:
       Cash and cash equivalents        $ 3,258      3,258        45        45
       Securities available for sale      1,475      1,475        -         -
       Securities held to maturity        1,000        988        -         -
       Loans receivable, net              4,235      4,225        -         -
       Accrued interest receivable           79         79        -         -
       Federal Home Loan Bank stock           9          9        -         -

  Financial liabilities:
       Deposit liabilities                6,560      6,683        -         -
       Other borrowings                       -          -       465       465

A  summary  of the  amounts  of the  Company's  financial  instruments,  which
   approximate  fair value,  with off balance  sheet risk at December 31, 1999
   follows (in thousands):

           Unfunded loan commitments                             $ 748
                                                                  ====
           Unused lines of credit                                $ 221
                                                                  ====
(8)  Income Taxes
     The income tax benefit consisted of the following:

                                                       Year Ended December 31,
                                                    1999              1998
              Deferred:
                  Federal                         $(105,876)           (83,594)
                  State                             (18,124)           (14,310)
                                                   --------             ------
                    Total deferred benefit        $(124,000)           (97,904)
                                                   ========             ======

                                                                     (continued)



                                       13
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(8)  Income Taxes, Continued

The  reasons for the differences  between the statutory  Federal income tax rate
     and the effective tax rate are summarized as follows:

<TABLE>

                                                                       Year Ended December 31,
                                                                    1999                       1998
                                                             -------------------          ---------------
                                                                           % of                      % of
                                                                          Pretax                    Pretax
                                                              Amount        Loss           Amount    Loss
                                                              ------      ------           ------   ------
<S>                                                         <C>          <C>             <C>       <C>
      Income tax benefit at statutory rate                  $(112,008)   (34.0)%         $(88,767) (34.0)%
      Increase (decrease) resulting from:
          State taxes, net of federal tax benefit             (11,962)    (3.6)            (9,445)  (3.6)
          Other                                                   (30)       -                308     .1
                                                              -------     -----            -------  ----

                                                            $(124,000)   (37.6)%         $(97,904) (37.5)%
                                                              =======     =====            =======  ====
</TABLE>

The  tax effects of temporary differences that give rise to significant portions
     of the  deferred  tax assets and deferred  tax  liabilities  are  presented
     below.

<TABLE>

                                                                      At December 31,
                                                                   1999            1998
                                                                  ------          ------
  Deferred tax assets:
<S>                                                             <C>              <C>
      Organizational and preopening costs                       $ 140,796        114,780
      Net operating loss carryforwards                            130,185          4,505
      Charitable contributions                                        412           -
      Unrealized loss on securities available for sale              6,810           -
                                                                  -------        -------
               Deferred tax assets                                278,203        119,285
                                                                  -------        -------
  Deferred tax liabilities:
      Accrual to cash conversion                                   25,963           -
      Allowance for loan losses                                     1,807           -
      Accumulated depreciation                                        338           -
                                                                  -------        -------
               Deferred tax liabilities                            28,108           -
                                                                  -------        -------
               Net deferred tax asset                           $ 250,095        119,285
                                                                  =======        =======
</TABLE>

At   December  31,  1999,  the  Company  has  approximately  the  following  net
     operating loss carryforwards available to offset future taxable income:

              Expiration

                  2012                           $    2,600
                  2018                                9,400
                  2019                              334,000
                                                    -------
                                                 $  346,000
                                                    =======

                                                                     (continued)


                                       14
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(9)  Related Party Transactions

     At   December 31, 1999,  officers and  directors of the Compan and entities
          in which they hold a financial interest had approximately  $272,000 of
          loans with the Company.

(10) Stock Option Plan

     The  Company  has  adopted a stock  option  plan,  subject  to  shareholder
          approval,  for  employees  of the Company.  Under the plan,  the total
          number of options  which may be granted is 51,347.  As of December 31,
          1999, no options had been formally granted.

(11) Stockholders' Equity

     The  Bank is  subject to certain  restrictions  on the amount of  dividends
          that it may declare without prior regulatory approval. At December 31,
          1999, the Bank has no amounts available for dividends.

     As   of December  31, 1999,  the Company has sold 514,478  shares of common
          stock,  which includes the exercise of 1,000 warrants (see below), for
          an aggregate of $4.4 million. The Company incurred $37,500 in offering
          expenses  relating to their public  offering of the  Company's  common
          stock and warrants.  Offering expenses were deducted from the proceeds
          received from the sale of common stock and warrants.

     During the initial offering period shares were offered in units with a unit
          consisting of one share of common stock and one warrant.  Each warrant
          entitles the holder thereof to purchase one additional share of common
          stock for $9 per share during the 48 month period ending June 8, 2002.
          There were 512,478 warrants outstanding as of December 31, 1999.

     As   of December  31,  1998,  the  Company had sold 3,942  shares of common
          stock to its organizers for an aggregate of $177,390. Such shares were
          converted  on a five  shares for one share basis at the closing of the
          common  stock  offering.  In addition  the  organizers  received  five
          warrants for each share converted. Each warrant entitles the holder to
          purchase  one  share of  common  stock  at $9 per  share.  The  shares
          converted and warrants  outstanding  are included in the totals in the
          previous paragraphs.

(12)  Regulatory Matters

     The  Bank  is   subject   to  various   regulatory   capital   requirements
          administered  by the  regulatory  agencies.  Failure  to meet  minimum
          capital  requirements  can  initiate  certain  mandatory  and possibly
          additional  discretionary  actions by regulators  that, if undertaken,
          could  have  a  direct  material  effect  on the  Company's  financial
          statements.  Under  capital  adequacy  guidelines  and the  regulatory
          framework for prompt  corrective  action,  the Bank must meet specific
          capital guidelines that involve quantitative measures of their assets,
          liabilities,  and certain  off-balance-sheet items as calculated under
          regulatory   accounting    practices.    The   capital   amounts   and
          classification  are also  subject  to  qualitative  judgements  by the
          regulators about components, risk weightings, and other factors.

                                                                     (continued)



                                       15
<PAGE>

                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(12) Regulatory Matters, Continued

     Quantitative measures  established by regulation to ensure capital adequacy
          require the Bank to maintain  minimum  amounts  and  percentages  (set
          forth in the following  table) of total and Tier 1 capital (as defined
          in the regulations) to risk-weighted assets (as defined) and of Tier 1
          capital  (as  defined)  to  average  assets (as  defined).  Management
          believes,  as of  December  31,  1999,  that the Bank met all  capital
          adequacy requirements to which they are subject.

     As   of December 31, 1999, the most recent notification from the regulatory
          authorities  categorized  the  Bank  as  well  capitalized  under  the
          regulatory  framework for prompt corrective  action. To be categorized
          as well  capitalized,  an  institution  must  maintain  minimum  total
          risk-based,  Tier I risk-based, and Tier I leverage percentages as set
          forth in the following tables. There are no conditions or events since
          that  notification  that  management  believes have changed the Bank's
          category.  The Bank's actual  capital  amounts and  percentages  as of
          December  31,  1999  are  also  presented  in the  table  (dollars  in
          thousands).

<TABLE>

                                                                                                  Minimum
                                                                                                 To Be Well
                                                                                                Capitalized Under
                                                                        Minimum Capital         Prompt Corrective
                                              Actual                      Requirement           Action Provisions:
                                       -----------------------      --------------------        -----------------------
                                       Amount             %          Amount           %          Amount            %
                                       ------           ------      -------         -----       -------          ------
     As of December 31, 1999:
         <S>                          <C>               <C>          <C>            <C>           <C>            <C>
         Total capital to Risk-
           Weighted assets            $ 3,748           61.60%       $ 487          8.00%         $ 608          10.00%
         Tier I Capital to Risk-
           Weighted Assets              3,696           60.75          243          4.00            365           6.00
         Tier I Capital
           to Average Assets            3,696           39.91          370          4.00            463           5.00
</TABLE>

                                                                    (continued)


                                       16
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(13)  Parent Company Only Financial Information

     The  Holding Company's unconsolidated financial information is as follows:

                            Condensed Balance Sheets

                                                       At December 31,
                                                      1999         1998
                                                      ----         ----
        Assets

     Cash and   interest-bearing   deposits     $  131,970       44,568
     Investment  in subsidiary                   3,935,500         -
     Other assets                                  109,800      399,015
                                                 ---------      -------

     Total assets                              $ 4,177,270      443,583
                                                 =========      =======


     Liabilities and Stockholders' Equity (Deficit)

     Borrowings                                          -      465,000
     Stockholders equity (deficit)               4,177,270      (21,417)
                                                 ---------      -------
        Total liabilities and stockholders'
             equity (deficit)                  $ 4,177,270      443,583
                                                 =========      =======

                       Condensed Statements of Operations



                                                              Year Ended
                                                              December 31,
                                                            1999        1998
                                                            ----        ----

        Revenues                                         $  72,284      27,504
        Expenses                                          (107,461)   (190,679)
                                                           -------     -------


            Loss before loss of subsidiary                 (35,177)   (163,175)
            Loss of subsidiary                            (170,260)       -
                                                           -------     -------

            Net loss                                     $(205,437)   (163,175)
                                                           =======     =======

                                                                   (continued)


                                       17
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued



(13)  Parent Company Only Financial Information, Continued

                       Condensed Statements of Cash Flows



                                                            Year Ended
                                                            December 31,
                                                       -----------------------
                                                       1999               1998
                                                       ----               ----

Cash flows from operating activities:
     Net  loss                                      $ (205,437)        (163,175)
     Adjustments to reconcile net loss to net
      cash provided by operating activities:
        Equity in undistributed loss of subsidiaries   170,260                -
        Net decrease (increase) in other assets        289,215         (335,099)
                                                     ---------          -------

        Net  cash provided by operatin activities      254,038         (498,274)

Cash flows  from   investing   activities  -
        Net  investment  in  subsidiary             (4,117,048)               -
                                                     ---------          -------

 Cash flows from financing activities:
        Proceeds from issuance of common stock, net  4,415,412                -
        Net (decrease)   increase  in  borrowings     (465,000)         465,000
                                                     ---------          -------
           Net cash provided by financing activities 3,950,412          465,000
                                                     ---------          -------

Net increase (decrease) in cash and cash equivalents    87,402          (33,274)

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

Cash and cash equivalents at end of year             $ 131,970           44,568
                                                     =========          =======

Noncash transaction - change in investment in
  subsidiary due to change in accumulated other
  comprehensive income (loss), net of tax           $ (11,288)               -
                                                     =========           =======
(14) Contingency
     The  former president and chief executive  officer has filed a civil action
          against the Company and certain of its  officers  and  directors.  The
          action  concerns his  employment  contract  and he is seeking  certain
          monetary damages.  Management believes,  based on the opinion of legal
          counsel,  that the Company will not incur any  liability in connection
          with this civil action.

(15) Year 2000 Issues
     The  Company's  operating  and  financial  systems  have  been  found to be
          compliant;  the "Y2K Problem" has not adversely affected the Company's
          operations nor does management expect that it will.

                                                                    (continued)


                                       18
<PAGE>


                       PSB BANCGROUP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued

(16) Selected  Quarterly  Results  (Unaudited)

     The following  table  presents  summarized  quarterly  data (in  thousands,
        except per share amounts):


                                          Year Ended December 31, 1999
                                 ----------------------------------------------
                                  First     Second     Third     Fourth
                                 Quarter   Quarter    Quarter   Quarter    Total
                                 -------   -------    -------   --------  ------

Interest income                  $    53        53        108        152     366
Interest expense                       8        10         24         49     91
                                    ----      ----       ----       ----   ----
Net interest income                   45        43         84        103    275

Provision for loan losses              -         5         11         26     42
                                    ----      ----       ----       ----   ----
    Net interest income after
        provision for loan
        losses                        45        38         73         77    233
                                    ----      ----       ----       ----   ----
Noninterest income                     -         1          5          6     12
Noninterest expense                   67       170        155        182    574
                                    ----      ----       ----       ----   ----
Loss before income tax benefit       (22)     (131)       (77)       (99)  (329)

Income tax benefit                    (8)      (49)       (29)       (38)  (124)
                                    ----      ----       ----       ----   ----
Net loss                           $ (14)      (82)       (48)       (61)  (205)
                                    ====      ====       ====       ====   ====
Basic and diluted loss per common
share                               (.14)     (.16)      (.09)      (.10)  (.49)
                                    ====      ====       ====       ====   ====



                                       19