##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



For the quarterly period ended March 31, 2005



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------



For the transition period from  to



Commission File Number 0-24935



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SERVICE BANCORP, INC.

(Exact name of small business issuer as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Massachusetts                                                  |  | 04-3430806                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



81 Main Street,

Medway, Massachusetts 02053

(Address of principal executive offices)



(508) 533-4343

(Issuers telephone number, including area code)



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



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Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.    YES  x    NO ̈



State the number of shares outstanding of each of
the issuers classes of common equity, as of the latest practical date: At April 30, 2005, there were 1,661,085 shares of common stock outstanding, par value $0.01 per share.



Transitional Small Business Disclosure Format (Check one):    YES ̈NO  x



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##### Table of Contents

SERVICE BANCORP, INC. AND SUBSIDIARY

FORM 10-QSB



Index



|        |  |                                                                                                              |  |     
|------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|        |  |                                                                                                              |  | Page
|PART I  |  | FINANCIAL INFORMATION                                                                                        |  |     
|        |  |                                                                                                             
|Item 1. |  | Financial Statements                                                                                         |  |     
|        |  |                                                                                                             
|        |  | Consolidated Balance Sheets as of March 31, 2005 and June 30, 2004                                           |  | 1   
|        |  |                                                                                                             
|        |  | Consolidated Statements of Income for the quarter and nine months ended March 31, 2005 and 2004              |  | 2   
|        |  |                                                                                                             
|        |  | Consolidated Statements of Changes in Stockholders Equity for the nine months ended March 31, 2005 and 2004 |  | 3   
|        |  |                                                                                                             
|        |  | Consolidated Statements of Cash Flows for the nine months ended March 31, 2005 and 2004                      |  | 5   
|        |  |                                                                                                             
|        |  | Notes to Consolidated Financial Statements                                                                   |  | 6   
|        |  |                                                                                                             
|Item 2. |  | Managements Discussion and Analysis                                                                         |  | 10  
|        |  |                                                                                                             
|Item 3. |  | Controls and Procedures                                                                                      |  | 16  
|        |  |                                                                                                             
|PART II |  | OTHER INFORMATION                                                                                            |  |     
|        |  |                                                                                                             
|Item 1. |  | Legal Proceedings                                                                                            |  | 17  
|        |  |                                                                                                             
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                  |  | 17  
|        |  |                                                                                                             
|Item 3. |  | Defaults upon Senior Securities                                                                              |  | 17  
|        |  |                                                                                                             
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                          |  | 17  
|        |  |                                                                                                             
|Item 5. |  | Other Information                                                                                            |  | 17  
|        |  |                                                                                                             
|Item 6. |  | Exhibits                                                                                                     |  | 17  
|        |  |                                                                                                             
|        |  | Signatures                                                                                                   |  | 18  







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##### Table of Contents

PART IFINANCIAL INFORMATION



|ITEM | 1. Financial Statements
|---- | -----------------------



SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (unaudited)

(Dollars in thousands, except share amounts)



|                                                                             |  |                |         |   |               |   |         |  
|---------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------- | - | ------- | -
|                                                                             |  | March 31, 2005 |         |   | June 30, 2004 |  
|ASSETS                                                                       |  |                |         |   |               |   |         |  
|Cash and due from banks                                                      |  | $              | 9,626   |   |               | $ | 9,299   |  
|Short-term investments                                                       |  |                | 3,228   |   |               |   | 3,903   |  
|                                                                             |  |                |         |   |               |   |         |  
|Total cash and cash equivalents                                              |  |                | 12,854  |   |               |   | 13,202  |  
|                                                                             |  |                |         |   |               |   |         |  
|Securities available for sale, at fair value                                 |  |                | 45,378  |   |               |   | 47,181  |  
|Securities held to maturity, at amortized cost                               |  |                | 4,525   |   |               |   | 9,249   |  
|Federal Home Loan Bank stock, at cost                                        |  |                | 3,478   |   |               |   | 2,936   |  
|                                                                             |  |               
|Loans                                                                        |  |                | 265,528 |   |               |   | 237,469 |  
|Less allowance for loan losses                                               |  |                | (2,377  | ) |               |   | (2,133  | )
|                                                                             |  |                |         |   |               |   |         |  
|Loans, net                                                                   |  |                | 263,151 |   |               |   | 235,336 |  
|                                                                             |  |                |         |   |               |   |         |  
|Banking premises and equipment, net                                          |  |                | 3,845   |   |               |   | 3,632   |  
|Accrued interest receivable                                                  |  |                | 1,409   |   |               |   | 1,332   |  
|Bank-owned life insurance                                                    |  |                | 4,640   |   |               |   | 4,498   |  
|Net deferred tax asset                                                       |  |                | 930     |   |               |   | 604     |  
|Other assets                                                                 |  |                | 958     |   |               |   | 703     |  
|                                                                             |  |                |         |   |               |   |         |  
|Total assets                                                                 |  | $              | 341,168 |   |               | $ | 318,673 |  
|                                                                             |  |                |         |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                         |  |                |         |   |               |   |         |  
|Deposits                                                                     |  | $              | 248,456 |   |               | $ | 239,148 |  
|Borrowings                                                                   |  |                | 61,580  |   |               |   | 50,299  |  
|Subordinated debentures                                                      |  |                | 3,035   |   |               |   | 3,033   |  
|Other liabilities                                                            |  |                | 1,826   |   |               |   | 1,271   |  
|                                                                             |  |                |         |   |               |   |         |  
|Total liabilities                                                            |  |                | 314,897 |   |               |   | 293,751 |  
|                                                                             |  |                |         |   |               |   |         |  
|Stockholders equity:                                                        |  |                |         |   |               |   |         |  
|Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued    |  |                |        |   |               |   |        |  
|Common stock, $.01 par value; 12,000,000 shares authorized, 1,712,630 issued |  |                | 17      |   |               |   | 17      |  
|Additional paid-in capital                                                   |  |                | 7,875   |   |               |   | 7,760   |  
|Retained earnings                                                            |  |                | 18,898  |   |               |   | 17,363  |  
|Accumulated other comprehensive income                                       |  |                | 212     |   |               |   | 553     |  
|Treasury stock, at cost  (50,645 and 52,251 shares, respectively)           |  |                | (568    | ) |               |   | (527    | )
|Unearned ESOP shares  (13,076 and 17,905 shares, respectively)              |  |                | (131    | ) |               |   | (179    | )
|Unearned RRP stock  (5,418 and 10,025 shares, respectively)                 |  |                | (32     | ) |               |   | (65     | )
|                                                                             |  |                |         |   |               |   |         |  
|Total stockholders equity                                                   |  |                | 26,271  |   |               |   | 24,922  |  
|                                                                             |  |                |         |   |               |   |         |  
|Total liabilities and stockholders equity                                   |  | $              | 341,168 |   |               | $ | 318,673 |  
|                                                                             |  |                |         |   |               |   |         |  



See accompanying notes
to consolidated financial statements.



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##### Table of Contents

SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Dollars in thousands, except per share amounts)



|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|--------------------------------------------------------------------- |  | ----------------------- | --------- | ---- | --------------------------- | --------- | ---- |  | ---- | --------- |  | - | ---------
|                                                                      |  | Quarter Ended March 31, |           |      | Nine Months Ended March 31,
|                                                                      |  | 2005                    |           | 2004 |                             |           | 2005 |  | 2004
|Interest and dividend income:                                         |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Interest and fees on loans                                            |  | $                       | 3,706     |      | $                           | 3,119     |      |  | $    | 10,565    |  | $ | 8,986    
|Interest and dividends on securities and Federal Home Loan Bank stock |  |                         | 682       |      |                             | 851       |      |  |      | 2,067     |  |   | 2,647    
|Interest on short-term investments                                    |  |                         | 4         |      |                             | 5         |      |  |      | 26        |  |   | 28       
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Total interest and dividend income                                    |  |                         | 4,392     |      |                             | 3,975     |      |  |      | 12,658    |  |   | 11,661   
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Interest expense:                                                     |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Interest on deposits                                                  |  |                         | 796       |      |                             | 673       |      |  |      | 2,273     |  |   | 2,038    
|Interest on borrowings                                                |  |                         | 714       |      |                             | 585       |      |  |      | 2,019     |  |   | 1,627    
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Total interest expense                                                |  |                         | 1,510     |      |                             | 1,258     |      |  |      | 4,292     |  |   | 3,665    
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Net interest income                                                   |  |                         | 2,882     |      |                             | 2,717     |      |  |      | 8,366     |  |   | 7,996    
|Provision for loan losses                                             |  |                         | 89        |      |                             | 56        |      |  |      | 300       |  |   | 353      
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Net interest income, after provision for loan losses                  |  |                         | 2,793     |      |                             | 2,661     |      |  |      | 8,066     |  |   | 7,643    
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Noninterest income:                                                   |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Customer service fees                                                 |  |                         | 260       |      |                             | 257       |      |  |      | 780       |  |   | 767      
|Gain on loan sales, net                                               |  |                         |          |      |                             | 226       |      |  |      | 32        |  |   | 226      
|Gain (loss) on securities, net                                        |  |                         | 37        |      |                             | (50       | )    |  |      | 88        |  |   | 56       
|Other income                                                          |  |                         | 105       |      |                             | 112       |      |  |      | 364       |  |   | 319      
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Total noninterest income                                              |  |                         | 402       |      |                             | 545       |      |  |      | 1,264     |  |   | 1,368    
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Noninterest expense:                                                  |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Salaries and employee benefits                                        |  |                         | 1,319     |      |                             | 1,311     |      |  |      | 3,919     |  |   | 3,620    
|Occupancy                                                             |  |                         | 271       |      |                             | 283       |      |  |      | 753       |  |   | 776      
|Equipment                                                             |  |                         | 106       |      |                             | 119       |      |  |      | 323       |  |   | 339      
|Data processing                                                       |  |                         | 201       |      |                             | 203       |      |  |      | 591       |  |   | 558      
|Professional fees                                                     |  |                         | 98        |      |                             | 112       |      |  |      | 302       |  |   | 346      
|Advertising                                                           |  |                         | 75        |      |                             | 77        |      |  |      | 225       |  |   | 210      
|Other general and administrative expense                              |  |                         | 315       |      |                             | 338       |      |  |      | 942       |  |   | 1,009    
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Total noninterest expense                                             |  |                         | 2,385     |      |                             | 2,443     |      |  |      | 7,055     |  |   | 6,858    
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Income before income taxes                                            |  |                         | 810       |      |                             | 763       |      |  |      | 2,275     |  |   | 2,153    
|Provision for income taxes                                            |  |                         | 270       |      |                             | 234       |      |  |      | 740       |  |   | 679      
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Net income                                                            |  | $                       | 540       |      | $                           | 529       |      |  | $    | 1,535     |  | $ | 1,474    
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Weighted average shares outstanding (basic)                           |  |                         | 1,643,332 |      |                             | 1,616,758 |      |  |      | 1,640,548 |  |   | 1,611,180
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Weighted average shares outstanding (diluted)                         |  |                         | 1,666,301 |      |                             | 1,655,542 |      |  |      | 1,664,770 |  |   | 1,649,738
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Earnings per share (basic)                                            |  | $                       | 0.33      |      | $                           | 0.33      |      |  | $    | 0.94      |  | $ | 0.91     
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          
|Earnings per share (diluted)                                          |  | $                       | 0.32      |      | $                           | 0.32      |      |  | $    | 0.92      |  | $ | 0.89     
|                                                                      |  |                         |           |      |                             |           |      |  |      |           |  |   |          



See accompanying notes
to consolidated financial statements.



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##### Table of Contents

SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(unaudited)

NINE MONTHS ENDED MARCH 31, 2005 AND 2004

(Dollars in thousands, except share amounts)



|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |      |   |                      |   |      |                    |  |   |       |   |  |   |     |   |  |   |        |  
|------------------------------------------------------------------------------------------------ |  | ------------ | -- | -------------------------- | - | ----- | ----------------- |  | -------------------------------------- | ------ |  | -------------- | ---- | - | -------------------- | - | ---- | ------------------ |  | - | ----- | - |  | - | --- | - |  | - | ------ | -
|                                                                                                 |  | Common Stock |    | Additional Paid-in Capital |   |       | Retained Earnings |  | Accumulated Other Comprehensive Income |        |  | Treasury Stock |      |   | Unearned ESOP Shares |   |      | Unearned RRP Stock |  |   | Total |  
|Balance at June 30, 2004                                                                         |  | $            | 17 |                            | $ | 7,760 |                   |  | $                                      | 17,363 |  | $              | 553  |   |                      | $ | (527 | )                  |  | $ | (179  | ) |  | $ | (65 | ) |  | $ | 24,922 |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |      |   |                      |   |      |                    |  |   |       |   |  |   |     |   |  |   |        |  
|Comprehensive income:                                                                            |  |              |    |                            |   |       |                   |  |                                        |        |  |                |      |   |                      |   |      |                    |  |   |       |   |  |   |     |   |  |   |        |  
|Net income                                                                                       |  |              |   |                            |   |      |                   |  |                                        | 1,535  |  |                |     |   |                      |   |     |                    |  |   |      |   |  |   |    |   |  |   | 1,535  |  
|Net unrealized gain on securities available for sale, net of tax and reclassification adjustment |  |              |   |                            |   |      |                   |  |                                        |       |  |                | (341 | ) |                      |   |     |                    |  |   |      |   |  |   |    |   |  |   | (341   | )
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |      |   |                      |   |      |                    |  |   |       |   |  |   |     |   |  |   |        |  
|Total comprehensive income                                                                       |  |              |    |                            |   |       |                   |  |                                        |        |  |                |      |   |                      |   |      |                    |  |   |       |   |  |   |     |   |  |   | 1,194  |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |      |   |                      |   |      |                    |  |   |       |   |  |   |     |   |  |   |        |  
|Common stock held by ESOP released and committed to be released (4,829 shares)                   |  |              |   |                            |   | 84    |                   |  |                                        |       |  |                |     |   |                      |   |     |                    |  |   | 48    |   |  |   |    |   |  |   | 132    |  
|Stock option exercises (5,000 shares)                                                            |  |              |    |                            |   | (13   | )                 |  |                                        |        |  |                |      |   |                      |   | 50   |                    |  |   |       |   |  |   |     |   |  |   | 37     |  
|Purchase of treasury stock (3,394 shares)                                                        |  |              |   |                            |   |      |                   |  |                                        |       |  |                |     |   |                      |   | (91  | )                  |  |   |      |   |  |   |    |   |  |   | (91    | )
|Income tax benefit on stock option exercises                                                     |  |              |   |                            |   | 31    |                   |  |                                        |       |  |                |     |   |                      |   |     |                    |  |   |      |   |  |   |    |   |  |   | 31     |  
|Amortization of RRP stock (4,607 shares)                                                         |  |              |   |                            |   | 13    |                   |  |                                        |       |  |                |     |   |                      |   |     |                    |  |   |      |   |  |   | 33  |   |  |   | 46     |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |      |   |                      |   |      |                    |  |   |       |   |  |   |     |   |  |   |        |  
|Balance at March 31, 2005                                                                        |  | $            | 17 |                            | $ | 7,875 |                   |  | $                                      | 18,898 |  | $              | 212  |   |                      | $ | (568 | )                  |  | $ | (131  | ) |  | $ | (32 | ) |  | $ | 26,271 |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |      |   |                      |   |      |                    |  |   |       |   |  |   |     |   |  |   |        |  



See accompanying notes
to consolidated financial statements.



-3-



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##### Table of Contents

SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)

NINE MONTHS ENDED MARCH 31, 2005 AND 2004 (concluded)

(Dollars in thousands, except share amounts)



|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |       |   |                      |   |      |                    |  |   |       |   |  |   |      |   |  |   |        |  
|------------------------------------------------------------------------------------------------ |  | ------------ | -- | -------------------------- | - | ----- | ----------------- |  | -------------------------------------- | ------ |  | -------------- | ----- | - | -------------------- | - | ---- | ------------------ |  | - | ----- | - |  | - | ---- | - |  | - | ------ | -
|                                                                                                 |  | Common Stock |    | Additional Paid-in Capital |   |       | Retained Earnings |  | Accumulated Other Comprehensive Income |        |  | Treasury Stock |       |   | Unearned ESOP Shares |   |      | Unearned RRP Stock |  |   | Total |  
|Balance at June 30, 2003                                                                         |  | $            | 17 |                            | $ | 7,502 |                   |  | $                                      | 15,516 |  | $              | 1,475 |   |                      | $ | (631 | )                  |  | $ | (243  | ) |  | $ | (125 | ) |  | $ | 23,511 |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |       |   |                      |   |      |                    |  |   |       |   |  |   |      |   |  |   |        |  
|Comprehensive income:                                                                            |  |              |    |                            |   |       |                   |  |                                        |        |  |                |       |   |                      |   |      |                    |  |   |       |   |  |   |      |   |  |   |        |  
|Net income                                                                                       |  |              |   |                            |   |      |                   |  |                                        | 1,474  |  |                |      |   |                      |   |     |                    |  |   |      |   |  |   |     |   |  |   | 1,474  |  
|Net unrealized gain on securities available for sale, net of tax and reclassification adjustment |  |              |   |                            |   |      |                   |  |                                        |       |  |                | (94   | ) |                      |   |     |                    |  |   |      |   |  |   |     |   |  |   | (94    | )
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |       |   |                      |   |      |                    |  |   |       |   |  |   |      |   |  |   |        |  
|Total comprehensive income                                                                       |  |              |    |                            |   |       |                   |  |                                        |        |  |                |       |   |                      |   |      |                    |  |   |       |   |  |   |      |   |  |   | 1,380  |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |       |   |                      |   |      |                    |  |   |       |   |  |   |      |   |  |   |        |  
|Common stock held by ESOP released and committed to be released (4,830 shares)                   |  |              |   |                            |   | 79    |                   |  |                                        |       |  |                |      |   |                      |   |     |                    |  |   | 48    |   |  |   |     |   |  |   | 127    |  
|Stock option exercises (13,197 shares)                                                           |  |              |   |                            |   | (25   | )                 |  |                                        |       |  |                |      |   |                      |   | 123  |                    |  |   |      |   |  |   |     |   |  |   | 98     |  
|Purchase of treasury stock (102 shares)                                                          |  |              |   |                            |   |      |                   |  |                                        |       |  |                |      |   |                      |   | (2   | )                  |  |   |      |   |  |   |     |   |  |   | (2     | )
|Income tax benefit on stock option exercises                                                     |  |              |   |                            |   | 127   |                   |  |                                        |       |  |                |      |   |                      |   |     |                    |  |   |      |   |  |   |     |   |  |   | 127    |  
|Amortization of RRP stock (6,372 shares)                                                         |  |              |   |                            |   | 20    |                   |  |                                        |       |  |                |      |   |                      |   |     |                    |  |   |      |   |  |   | 46   |   |  |   | 66     |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |       |   |                      |   |      |                    |  |   |       |   |  |   |      |   |  |   |        |  
|Balance at March 31, 2004                                                                        |  | $            | 17 |                            | $ | 7,703 |                   |  | $                                      | 16,990 |  | $              | 1,381 |   |                      | $ | (510 | )                  |  | $ | (195  | ) |  | $ | (79  | ) |  | $ | 25,307 |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |  |                |       |   |                      |   |      |                    |  |   |       |   |  |   |      |   |  |   |        |  



See accompanying notes
to consolidated financial statements.



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##### Table of Contents

SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Dollars in thousands)



|                                                                                  |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Nine Months Ended March 31, |        
|                                                                                  |  | 2005                        |         |   | 2004 |  
|Cash flows from operating activities:                                             |  |                             |         |   |      |   |         |  
|Net income                                                                        |  | $                           | 1,535   |   |      | $ | 1,474   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |         |   |      |   |         |  
|Provision for loan losses                                                         |  |                             | 300     |   |      |   | 353     |  
|Gain on securities, net                                                           |  |                             | (88     | ) |      |   | (56     | )
|Gain on loan sales, net                                                           |  |                             | (32     | ) |      |   | (226    | )
|Net amortization of securities                                                    |  |                             | 93      |   |      |   | 162     |  
|Depreciation and amortization expense                                             |  |                             | 323     |   |      |   | 389     |  
|(Increase) decrease in accrued interest receivable                                |  |                             | (77     | ) |      |   | 111     |  
|Net amortization of deferred loan costs and premiums                              |  |                             | 203     |   |      |   | 255     |  
|Bank-owned life insurance income                                                  |  |                             | (142    | ) |      |   | (136    | )
|Deferred tax (benefit) provision                                                  |  |                             | (144    | ) |      |   | 110     |  
|Other, net                                                                        |  |                             | 493     |   |      |   | 398     |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                             | 2,464   |   |      |   | 2,834   |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Cash flows from investing activities:                                             |  |                             |         |   |      |   |         |  
|Activity in securities available for sale:                                        |  |                             |         |   |      |   |         |  
|Sales                                                                             |  |                             | 4,543   |   |      |   | 8,117   |  
|Maturities, prepayments and calls                                                 |  |                             | 6,161   |   |      |   | 11,237  |  
|Purchases                                                                         |  |                             | (9,420  | ) |      |   | (11,423 | )
|Activity in securities held to maturity:                                          |  |                             |         |   |      |   |         |  
|Sales                                                                             |  |                             |        |   |      |   | 512     |  
|Maturities, prepayments and calls                                                 |  |                             | 4,715   |   |      |   | 6,231   |  
|Net increase in loans, excluding loan purchases and sales                         |  |                             | (30,416 | ) |      |   | (36,154 | )
|Purchases of loans                                                                |  |                             | (200    | ) |      |   | (16,671 | )
|Sale of loans                                                                     |  |                             | 2,308   |   |      |   | 9,774   |  
|Purchases of banking premises and equipment                                       |  |                             | (544    | ) |      |   | (644    | )
|Purchases of Federal Home Loan Bank stock                                         |  |                             | (542    | ) |      |   | (988    | )
|Investment in unconsolidated trust subsidiary                                     |  |                             |        |   |      |   | (93     | )
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash used by investing activities                                             |  |                             | (23,395 | ) |      |   | (30,102 | )
|                                                                                  |  |                             |         |   |      |   |         |  
|Cash flows from financing activities:                                             |  |                             |         |   |      |   |         |  
|Net increase (decrease) in deposits                                               |  |                             | 9,308   |   |      |   | (9,400  | )
|Proceeds from long-term borrowings                                                |  |                             | 13,300  |   |      |   | 17,079  |  
|Repayment of long-term borrowings                                                 |  |                             | (2,019  | ) |      |   | (2,010  | )
|Proceeds from subordinated debt                                                   |  |                             |        |   |      |   | 3,009   |  
|Purchase of treasury stock                                                        |  |                             | (91     | ) |      |   |        |  
|Stock option exercises                                                            |  |                             | 37      |   |      |   | 98      |  
|Repayment of ESOP loan                                                            |  |                             | 48      |   |      |   | 48      |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                             | 20,583  |   |      |   | 8,824   |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net change in cash and cash equivalents                                           |  |                             | (348    | ) |      |   | (18,444 | )
|Cash and cash equivalents at beginning of period                                  |  |                             | 13,202  |   |      |   | 37,100  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                           | 12,854  |   |      | $ | 18,656  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Supplementary information:                                                        |  |                             |         |   |      |   |         |  
|Interest paid on deposits                                                         |  | $                           | 2,289   |   |      | $ | 2,036   |  
|Interest paid on borrowings                                                       |  |                             | 1,975   |   |      |   | 1,562   |  
|Income taxes paid                                                                 |  |                             | 727     |   |      |   | 642     |  



See accompanying notes
to consolidated financial statements.



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##### Table of Contents

SERVICE BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements (unaudited)



|(1) | Basis of Presentation and Consolidation
|--- | ---------------------------------------



The accompanying unaudited consolidated financial statements include the accounts of Service Bancorp, Inc. (the Company) and its wholly-owned
subsidiary, Strata Bank (the Bank), a Massachusetts chartered savings bank, and the Banks wholly-owned subsidiaries, Medway Security Corporation and Franklin Village Security Corporation, both of which engage solely in the purchase
and sale of securities. All significant intercompany balances and transactions have been eliminated in consolidation.



These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(GAAP) for interim financial information and the instructions for Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for the entire year.
Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been omitted. A summary of significant accounting policies followed by the Company is set forth in the Notes to
Consolidated Financial Statements of the Companys Annual Report on Form 10-KSB for the year ended June 30, 2004.



|(2) | Earnings per Share
|--- | ------------------



Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects additional common shares (common stock equivalents) that would have been outstanding if dilutive potential shares had been issued, as well as any adjustment to income that would result from the assumed
issuance. Potential common shares that may be issued by the Company relate to outstanding stock options and unvested stock granted under the Companys Recognition and Retention Plan (RRP) and are determined using the treasury stock
method. Assumed conversion of the outstanding dilutive stock options and unvested RRP stock would increase the shares outstanding, but would not require an adjustment to income as a result of the conversion.



|(3) | Commitments
|--- | -----------



At March 31, 2005, the Company had outstanding commitments to originate loans of $15.2 million. Unused lines of credit and open commitments available to customers at March 31, 2005 amounted to $50.0 million, of which
$25.8 million were home equity lines of credit.



|(4) | Securities
|--- | ----------



The following table sets forth the Companys securities at the dates indicated.



|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|----------------------------------------- |  | ---------------------- | ------ | ------------- | - | -------------- |  | ---------- | ------ |  | - | ------
|                                          |  | March 31, 2005         |        | June 30, 2004
|                                          |  | Amortized Cost         |        | Fair Value    |   | Amortized Cost |  | Fair Value
|                                          |  | (Dollars in thousands)
|Securities available for sale:            |  |                        |        |               |   |                |  |            |        |  |   |       
|Federal agency securities                 |  | $                      | 8,923  |               | $ | 8,856          |  | $          | 7,953  |  | $ | 7,935 
|Federal agency mortgage-backed securities |  |                        | 13,495 |               |   | 13,351         |  |            | 14,217 |  |   | 14,064
|Other debt securities                     |  |                        | 20,712 |               |   | 21,130         |  |            | 22,748 |  |   | 23,765
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|Total debt securities available for sale  |  |                        | 43,130 |               |   | 43,337         |  |            | 44,918 |  |   | 45,764
|Marketable equity securities              |  |                        | 1,920  |               |   | 2,041          |  |            | 1,409  |  |   | 1,417 
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|Total securities available for sale       |  | $                      | 45,050 |               | $ | 45,378         |  | $          | 46,327 |  | $ | 47,181
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|Securities held to maturity:              |  |                        |        |               |   |                |  |            |        |  |   |       
|Federal agency mortgage-backed securities |  | $                      | 3,625  |               | $ | 3,738          |  | $          | 5,355  |  | $ | 5,538 
|Other debt securities                     |  |                        | 900    |               |   | 933            |  |            | 3,894  |  |   | 4,041 
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|Total securities held to maturity         |  | $                      | 4,525  |               | $ | 4,671          |  | $          | 9,249  |  | $ | 9,579 
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       



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##### Table of Contents

SERVICE BANCORP, INC. AND SUBSIDIARY



Notes to Consolidated Financial Statements (unaudited)(continued)



|(5) | Loans
|--- | -----



The following table presents data relating to the composition of the Companys loan portfolio by type of loan at the dates indicated.



|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|------------------------------------ |  | ---------------------- | ------- | - | ------------- | ------ | - | ------ | - | ------- | ------- |  | ------ | -
|                                     |  | March 31, 2005         |         |   | June 30, 2004 |       
|                                     |  | Amount                 |         |   | Percent       |        |   | Amount |   |         | Percent | 
|                                     |  | (Dollars in thousands) |        
|Real estate loans:                   |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Residential                          |  | $                      | 139,203 |   |               | 52.62  | % |        | $ | 130,278 |         |  | 55.10  | %
|Residential construction             |  |                        | 3,633   |   |               | 1.37   | % |        |   | 1,453   |         |  | 0.61   | %
|Commercial and multi-family          |  |                        | 65,544  |   |               | 24.78  | % |        |   | 53,051  |         |  | 22.44  | %
|Commercial construction              |  |                        | 10,466  |   |               | 3.96   | % |        |   | 10,141  |         |  | 4.29   | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Total real estate loans              |  |                        | 218,846 |   |               | 82.73  | % |        |   | 194,923 |         |  | 82.44  | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Commercial loans                     |  |                        | 24,121  |   |               | 9.12   | % |        |   | 20,968  |         |  | 8.87   | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Consumer loans:                      |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Home equity                          |  |                        | 13,524  |   |               | 5.11   | % |        |   | 12,505  |         |  | 5.29   | %
|Second mortgages                     |  |                        | 7,019   |   |               | 2.65   | % |        |   | 6,847   |         |  | 2.90   | %
|Passbook secured                     |  |                        | 378     |   |               | 0.14   | % |        |   | 372     |         |  | 0.16   | %
|Other                                |  |                        | 663     |   |               | 0.25   | % |        |   | 795     |         |  | 0.34   | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Total consumer loans                 |  |                        | 21,584  |   |               | 8.15   | % |        |   | 20,519  |         |  | 8.69   | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Total gross loans                    |  |                        | 264,551 |   |               | 100.00 | % |        |   | 236,410 |         |  | 100.00 | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Net deferred loan costs and premiums |  |                        | 977     |   |               |        |   |        |   | 1,059   |         |  |        |  
|Allowance for loan losses            |  |                        | (2,377  | ) |               |        |   |        |   | (2,133  | )       |  |        |  
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Total loans, net                     |  | $                      | 263,151 |   |               |        |   |        | $ | 235,336 |         |  |        |  
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  



|(6) | Deposits
|--- | --------



The following tables indicate types and balances in deposit accounts at the dates indicated.



|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|---------------------------------------- |  | ---------------------- | ------- | ------- | ------------- | - | ------ | - | ------- |  | ------ | -
|                                         |  | March 31, 2005         |         |         | June 30, 2004 |  
|                                         |  | Amount                 |         | Percent |               |   | Amount |   | Percent | 
|                                         |  | (Dollars in thousands) |        
|Demand                                   |  | $                      | 35,887  |         | 14.44         | % |        | $ | 35,920  |  | 15.02  | %
|NOW                                      |  |                        | 33,048  |         | 13.30         | % |        |   | 32,279  |  | 13.50  | %
|Money market deposits                    |  |                        | 34,578  |         | 13.92         | % |        |   | 34,177  |  | 14.29  | %
|Regular and other savings                |  |                        | 46,121  |         | 18.57         | % |        |   | 46,271  |  | 19.34  | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|Total non-certificate accounts           |  |                        | 149,634 |         | 60.23         | % |        |   | 148,647 |  | 62.15  | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|Term certificates of $100,000 or greater |  |                        | 29,919  |         | 12.04         | % |        |   | 28,405  |  | 11.88  | %
|Term certificates less than $100,000     |  |                        | 68,903  |         | 27.73         | % |        |   | 62,096  |  | 25.97  | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|Total certificate accounts               |  |                        | 98,822  |         | 39.77         | % |        |   | 90,501  |  | 37.85  | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|Total deposits                           |  | $                      | 248,456 |         | 100.00        | % |        | $ | 239,148 |  | 100.00 | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  



|(7) | Borrowings
|--- | ----------



Borrowings were comprised of the following advances from the Federal Home Loan Bank of Boston (FHLB). The advances are presented by the earlier of the maturity date or the date callable by the FHLB.



|                         |  |                        |        |         |               |   |        |   |         |  |        |  
|------------------------ |  | ---------------------- | ------ | ------- | ------------- | - | ------ | - | ------- |  | ------ | -
|                         |  | March 31, 2005         |        |         | June 30, 2004 |  
|                         |  | Amount                 |        | Percent |               |   | Amount |   | Percent | 
|                         |  | (Dollars in thousands) |       
|Less than one year       |  | $                      | 38,500 |         | 62.52         | % |        | $ | 32,500  |  | 64.61  | %
|One to three years       |  |                        | 10,000 |         | 16.24         | % |        |   | 13,000  |  | 25.85  | %
|Greater than three years |  |                        | 13,080 |         | 21.24         | % |        |   | 4,799   |  | 9.54   | %
|                         |  |                        |        |         |               |   |        |   |         |  |        |  
|Total borrowings         |  | $                      | 61,580 |         | 100.00        | % |        | $ | 50,299  |  | 100.00 | %
|                         |  |                        |        |         |               |   |        |   |         |  |        |  





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##### Table of Contents

SERVICE BANCORP, INC. AND SUBSIDIARY



Notes to Consolidated Financial Statements (unaudited)(continued)



|(8) | Subordinated Debentures
|--- | -----------------------



On March 16, 2004, Service Capital Trust I (Trust I), a newly formed trust sponsored by the Company, participated in a pooled offering of
trust preferred securities. In connection with this offering, Trust I issued $3.0 million of trust preferred securities and reinvested the proceeds in a 30-year $3.0 million junior subordinated debenture issued by the Company. Interest is calculated
on the subordinated debenture and trust preferred securities at a rate equal to the three-month London Interbank Offering Rate plus 285 basis points. The junior subordinated debenture represents the sole asset of Trust I. The Company has guaranteed,
on a subordinated basis, distribution and other payments due on the trust preferred securities (the Guarantee). The Guarantee, when taken together with the Companys obligations under (i) the junior subordinated debenture; (ii) the
indenture pursuant to which the junior subordinated debentures was issued; and (iii) the Amended and Restated Declaration of Trust governing Trust I, constitutes a full and unconditional guarantee of Trust Is obligations under the trust
preferred securities.



Under regulatory capital guidelines,
trust preferred securities, within certain limitations, qualify as regulatory capital. Trust I, consistent with the Financial Accounting Standards Board Interpretation No. 46, Variable Interest Entities, is not consolidated in the
consolidated financial statements of the Company. Therefore, the Company presents in its consolidated financial statements junior subordinated debt as a liability and its investment in Trust I as a component of other assets.



|(9) | Stock Compensation Plan
|--- | -----------------------



The Company has a stock option plan, which is described more fully in Note 12 of the Companys annual report on Form 10-KSB for the year ended June
30, 2004. The Company measures compensation cost for its stock option plan using the intrinsic value based method of accounting, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other
measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Companys stock option plan have no intrinsic value at the grant date and no compensation cost is recognized for them.



Had compensation cost for the Companys stock option plan been
determined using the fair value method based on the Black-Scholes option-pricing model, the Companys net income and earnings per share for the quarter and nine months ended March 31, 2005 and 2004, would have been reduced to the following pro
forma amounts:



|                                                                                                    |  |                                                  |      |                             |   |      |  |      |       |  |   |      
|--------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | ---- | --------------------------- | - | ---- |  | ---- | ----- |  | - | -----
|                                                                                                    |  | Quarter Ended March 31,                          |      | Nine Months Ended March 31,
|                                                                                                    |  | 2005                                             |      | 2004                        |   | 2005 |  | 2004
|                                                                                                    |  | (Dollars in thousands, except per share amounts)
|Net income, as reported                                                                             |  | $                                                | 540  |                             | $ | 529  |  | $    | 1,535 |  | $ | 1,474
|Deduct: Total stock-based compensation expense determined under the fair value method, net of taxes |  |                                                  | 7    |                             |   | 20   |  |      | 31    |  |   | 43   
|                                                                                                    |  |                                                  |      |                             |   |      |  |      |       |  |   |      
|Pro forma net income                                                                                |  | $                                                | 533  |                             | $ | 509  |  | $    | 1,504 |  | $ | 1,431
|                                                                                                    |  |                                                  |      |                             |   |      |  |      |       |  |   |      
|Earnings per share (basic):                                                                         |  |                                                  |      |                             |   |      |  |      |       |  |   |      
|As reported                                                                                         |  | $                                                | 0.33 |                             | $ | 0.33 |  | $    | 0.94  |  | $ | 0.91 
|                                                                                                    |  |                                                  |      |                             |   |      |  |      |       |  |   |      
|Pro forma                                                                                           |  | $                                                | 0.33 |                             | $ | 0.32 |  | $    | 0.92  |  | $ | 0.89 
|                                                                                                    |  |                                                  |      |                             |   |      |  |      |       |  |   |      
|Earnings per share (diluted):                                                                       |  |                                                  |      |                             |   |      |  |      |       |  |   |      
|As reported                                                                                         |  | $                                                | 0.32 |                             | $ | 0.32 |  | $    | 0.92  |  | $ | 0.89 
|                                                                                                    |  |                                                  |      |                             |   |      |  |      |       |  |   |      
|Pro forma                                                                                           |  | $                                                | 0.32 |                             | $ | 0.31 |  | $    | 0.90  |  | $ | 0.87 
|                                                                                                    |  |                                                  |      |                             |   |      |  |      |       |  |   |      



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SERVICE BANCORP, INC. AND SUBSIDIARY



Notes to Consolidated Financial Statements (unaudited)(concluded)



|(10) | Stock Repurchase Plan
|---- | ---------------------



In February 2003, the Board of Directors of the Company approved a Stock Repurchase Plan under which the Company is authorized to acquire up to 4% of the
outstanding common stock, or up to approximately 65,925 shares of the issued and outstanding shares of its common stock in the open market or in private transactions. Under the Stock Repurchase Plan, shares may be repurchased from time to time and
in such amounts as market conditions warrant, and subject to regulatory considerations. The following table provides information on the purchases of common stock under the Stock Repurchase Plan for the quarter ended March 31, 2005.



|                                     |  |                                  |  |                              |       |                                                                    |       |                                                                   |       
|------------------------------------ |  | -------------------------------- |  | ---------------------------- | ----- | ------------------------------------------------------------------ | ----- | ----------------------------------------------------------------- | ------
|                                     |  | Repurchase Plan Information     
|Period                               |  | Total number of shares purchased |  | Average price paid per share |       | Total number of shares purchased as part of publiclyannounced plan |       | Maximum number of shares that may yet be purchased under the plan
|January 1, 2005  January 31, 2005   |  | 2,414                            |  | $                            | 26.87 |                                                                    | 2,414 |                                                                   | 52,269
|February 1, 2005  February 28, 2005 |  | 980                              |  | $                            | 26.78 |                                                                    | 980   |                                                                   | 51,289
|March 1, 2005  March 31, 2005       |  |                                 |  |                              |      |                                                                    |      |                                                                   | 51,289
|                                     |  |                                  |  |                              |       |                                                                    |       |                                                                   |       
|Total                                |  | 3,394                            |  | $                            | 26.85 |                                                                    | 3,394 |                                                                   | 51,289
|                                     |  |                                  |  |                              |       |                                                                    |       |                                                                   |       



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##### Table of Contents

ITEM 2. Managements Discussion and Analysis



General



This quarterly
report on Form 10-QSB contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words
believe, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the Companys actual
results to differ materially from those contemplated by such forward-looking statements. These important factors include, without limitation, competitive conditions in the Banks marketplace generally, the Banks continued ability to
originate quality loans, fluctuation in interest rates including fluctuations which may affect the Banks interest rate spread, real estate conditions in the Banks lending areas, changes in the securities or financial markets, changes in
loan defaults and charge-off rates, general and local economic conditions, the Banks continued ability to attract and retain deposits, the Companys and the Banks ability to control costs, new accounting pronouncements, and changing
regulatory requirements. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.



Comparison of Financial
Condition at March 31, 2005 and June 30, 2004



Total
assets were $341.2 million at March 31, 2005, an increase of $22.5 million, or 7.1%, from the $318.7 million at June 30, 2004. Net loans increased $27.8 million, or 11.8%, to $263.2 million. Investment securities were reduced $6.5 million, or 11.6%,
and the proceeds reinvested in the loan portfolio. In addition, the Company increased borrowings from the Federal Home Loan Bank of Boston (FHLB) by $11.3 million, or 22.4%, during the first nine months of the fiscal year, which provided
further funding for loan growth. Total deposits increased $9.3 million, or 3.9%, since June 30, 2004.



Total investment securities were $49.9 million at March 31, 2005, a decrease of $6.5 million since June 30, 2004. The decrease in securities was due to
amortization and prepayment on mortgage-backed securities, federal agency bond calls and corporate bond sales and maturities. These reductions to investment securities were only partially offset by purchases of $2.0 million in federal agency
mortgage-backed securities, $3.0 million in federal agency securities, $3.1 million in corporate bonds and net purchases of $419,000 in equity securities.



Residential real estate loans are originated through the residential mortgage division of the Bank, the Strata Mortgage Center. The Bank also had a
contractual arrangement with Marathon Mortgage Company (Marathon), an independent mortgage loan origination company, which supplemented the Banks residential mortgage loan origination business. In December 2003, however, the Bank
added to its staffing level at Strata Mortgage Center to be able to service all of the Banks residential loan customers. As a result, the additional loan origination services provided by Marathon were no longer required and the contractual
agreement with Marathon was terminated. The Bank may, as it has done in the past, continue to buy residential loans directly from Marathon.



During the nine months ended March 31, 2005, the Strata Mortgage Center originated $32.4 million in residential real estate loans and the Bank purchased
$200,000 in loans from other institutions. In December 2004, the Bank also sold $2.3 million in residential loans, servicing retained, for a gain of $32,000. As a result, the Banks residential mortgage loans, net of principal payments,
increased $11.1 million, or 8.4%, since June 30, 2004. This years originations were lower than last year due to a slower residential loan refinance marketplace. Home equity and second mortgage loans increased $1.2 million, or 6.2%, since June
30, 2004 to $20.5 million at March 31, 2005.



Commercial
lending continues to be an area of opportunity and strong growth for the Bank. The Bank originated $37.6 million in commercial, commercial real estate and construction loans and lines of credit since June 30, 2004, slightly below last years
originations of $39.1 million. The net increase in the total commercial loan portfolio since June 30, 2004 was $16.0 million, or 19.0%. In addition to these loan originations, the Bank emphasizes cross-selling of commercial checking and money market
deposits from new commercial customers. As of March 31, 2005, total commercial deposits totaled $35.8 million and represented 14.8% of total deposits.



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Total deposits increased $9.3 million, or 3.9%, since June 30, 2004 to $248.5 million at March 31, 2005.
NOW deposits increased $769,000, or 2.4%, to $33.0 million, money market deposits increased $401,000, or 1.2%, while demand deposits and regular savings decreased slightly from June 30, 2004 levels. Certificates of deposit increased $8.3 million, or
9.2%, to $98.8 million due primarily to special promotions this year such as the five-year rising rate CD and 12-month CD sales this spring and last fall. Borrowings from the FHLB increased $11.3 million, or 22.4%, since June 30, 2004 to $61.6
million at March 31, 2005, and provided the additional funding for this years loan growth. The Company anticipates further borrowings from the FHLB and aggressive promotional campaigns for both core deposits and certificates of deposit to fund
future loan growth.



Stockholders equity increased from
$24.9 million, or 7.82% of total assets at June 30, 2004, to $26.3 million, or 7.70% of total assets at March 31, 2005. The increase in stockholders equity resulted primarily from the Companys retained earnings since the beginning of the
fiscal year. The decrease in equity to asset ratio was the result of asset growth since June 30, 2004.



Non-Performing Assets and Allowance for Loan Losses  Critical Accounting Estimate



The following table sets forth the Companys non-performing assets at
the dates indicated.



|                                          |  |                        |      |   |               |   |      |  
|----------------------------------------- |  | ---------------------- | ---- | - | ------------- | - | ---- | -
|                                          |  | March 31, 2005         |      |   | June 30, 2004 |  
|                                          |  | (Dollars in thousands) |     
|Non-accrual loans:                        |  |                        |      |   |               |   |      |  
|Residential real estate                   |  | $                      |     |   |               | $ |     |  
|Commercial and multi-family real estate   |  |                        |     |   |               |   |     |  
|Consumer                                  |  |                        |     |   |               |   |     |  
|Commercial                                |  |                        | 90   |   |               |   |     |  
|                                          |  |                        |      |   |               |   |      |  
|Total                                     |  | $                      | 90   |   |               |   |     |  
|                                          |  |                        |      |   |               |   |      |  
|Accruing loans more than 90 days past due |  |                        |     |   |               |   |     |  
|Foreclosed assets                         |  |                        |     |   |               |   |     |  
|                                          |  |                        |      |   |               |   |      |  
|Total non-performing assets               |  | $                      | 90   |   |               | $ |     |  
|                                          |  |                        |      |   |               |   |      |  
|Total as a percentage of total assets     |  |                        | 0.03 | % |               |   | 0.00 | %



For the nine months
ended March 31, 2005, the Banks provision for loan losses was $300,000 compared with $353,000 for the same period last year. The decrease in the provision was due to lower net loan growth this year compared to a peak loan growth and active
loan refinance period last year. Nonperforming assets at March 31, 2005 were $90,000, or 0.03% of total assets, while there were no nonperforming assets at June 30, 2004. The allowance for loan losses as a percentage of loans was 0.90% at March 31,
2005, consistent with the recent fiscal year-end June 30, 2004. For a further discussion of the allowance refer to the Companys Annual Report on Form 10-KSB for the year ended June 30, 2004 under Allowance for Loan Losses. During
the nine months ended March 31, 2005, recoveries from previously charged-off loans of $10,000 were received and $66,000 of loans were charged-off.



While management believes that, based on information currently available, the allowance for loan losses is sufficient to cover losses in the Banks
loan portfolio at this time, no assurances can be given that the level of the allowance will be sufficient to cover loan losses or that future adjustments to the allowance will not be necessary if economic and/or other conditions differ
substantially from the economic and other conditions considered by management in evaluating the adequacy of the current level of the allowance.



Comparison of Operating Results for the Quarter and Nine Months Ended March 31, 2005 and 2004



Overview



Operating results are primarily dependent on the Banks net interest
income, which is the difference between the interest earned on the Banks earning assets (short-term investments, loans, and securities) and the interest paid on deposits and borrowings. Operating results are also affected by provisions for
loan losses, the level of income from noninterest sources such as fees and sales of securities and other assets, operating expenses and income taxes. Operating results are also significantly affected by general economic conditions, particularly
changes in interest rates, as well as government policies and actions of regulatory authorities.



Net income for the quarter ended March 31, 2005 was $540,000 compared with $529,000 for the quarter ended March 31, 2004, an increase of $11,000, or 2.1%.
Higher net interest income of $165,000, or 6.1%, and lower operating expense of $58,000, or 2.4%, was only partially offset by a higher loan loss provision by $33,000, and lower other operating income of $143,000. Net income for the nine months
ended March 31, 2005 was $1.5 million, an increase of $61,000, or 4.1%, compared with the same period last year. An increase in net interest income of $370,000, or 4.6%, and a lower loan loss provision of $53,000, were only partially offset by lower
other operating income of $104,000, or 7.6%, and higher operating expenses of $197,000, or 2.9%.



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Earnings per share were $0.33 per share (basic) and $0.32 per share (diluted) for both the quarter ended
March 31, 2005 and March 31, 2004. Earnings per share for the nine months ended March 31, 2005 were $0.94 per share (basic) and $0.92 per share (diluted) compared with $0.91 per share (basic) and $0.89 per share (diluted) for the nine months ended
March 31, 2004.



The earnings results in both the quarter and
nine-month comparisons included gains/losses from the sale of loans and securities. For the quarter ended March 31, 2005, securities gains were $37,000 compared with securities losses of $50,000 for the same quarter a year ago. There were no gains
from the sale of loans for the quarter ended March 31, 2005, while loan sale gains totaled $226,000 during the same quarter last year. Excluding these gains/losses, net of tax, net income for the quarter ended March 31, 2005 would have been
$515,000, or $0.31 per share, compared with $407,000, or $0.25 per share, for the same quarter a year ago, an increase of $108,000, or 26.5%. For the nine-month periods ended March 31, 2005 and 2004, securities gains totaled $88,000 and $56,000,
respectively, and gains on sale of loans totaled $32,000 and $226,000, respectively. Excluding these gains, net of tax, net income for the nine months ended March 31, 2005 would have been $1.5 million, or $0.87 per share, compared with $1.3 million,
or $0.78 per share, for the same period a year ago, an increase of $172,000, or 13.4%.



Interest and Dividend Income



Total interest and dividend income for the quarter ended March 31, 2005 was $4.4 million, $417,000, or 10.5%, higher than the same quarter a year ago. Total interest and dividend income for the nine months ended March
31, 2005 was $12.7 million, $997,000, or 8.5%, higher than the same period a year ago. Increases in average earning-assets of $30.8 million and $26.1 million to $317.2 million and $307.5 million for the quarter and nine-month periods, respectively,
were major contributors to the higher interest and dividend income. The yield on earning assets for the quarter ended March 31, 2005 was 5.57%, 1 basis point higher than the same quarter last year, while the yield on assets for the nine month period
was 3 basis points lower at 5.49%.



Interest and fees on loans
increased $587,000, or 18.8%, for the quarter ended March 31, 2005, compared to the same quarter last year. Average net loans for the quarter increased $41.7 million, or 19.0%, to $261.2 million while yield on loans increased 2 basis points to
5.72%. The increase in yield on loans this quarter reflects the recent increase in index rates used to set interest rates for new loans and for loan re-pricing, particularly home equity and certain commercial loans which are tied to prime and
re-price daily or monthly. This quarters loan yield was also influenced by an increase in pre-payment penalties collected on paid commercial loans. Interest and fees on loans increased $1.6 million, or 17.6%, for the nine months ended March
31, 2005 compared to the same period last year. Average net loans for the nine-month period increased $41.2 million, or 19.7%, while yield on loans decreased 10 basis points to 5.63%. While market interest rates have recently increased, the lower
interest rate environment this year reduced the index rates used to set interest rates for new loans and loan re-pricing, which resulted in the lower loan yields for the first nine months of this year compared with the same period last year.



Interest and dividends on securities decreased $169,000, or
19.9%, for the quarter ended March 31, 2005, and decreased $580,000, or 21.9%, for the nine months ended March 31, 2005, compared to the same periods last year. Average investment securities for the quarter decreased $9.0 million, or 14.0%, to $55.5
million while yield on investment securities decreased 38 basis points to 4.92%. Average investment securities for the nine-month period decreased $13.3 million, or 19.3%, while yield on investment securities decreased 16 basis points to 4.96%. This
years low interest rate environment also reduced yield on investment portfolio as certain securities that matured, were sold or called were reinvested in lower yielding investments.



Interest Expense



Total interest expense increased $252,000, or 20.0%, for the quarter ended March 31, 2005 to $1.5 million compared to the same quarter last year due to an
increase in average interest-bearing liabilities of $26.4 million, or 10.8% to $270.7 million and an increase in the cost of interest-bearing liabilities of 20 basis points to 2.25%. Total interest expense increased $627,000, or 17.1%, for the nine
months ended March 31, 2005 to $4.3 million compared to the same period last year due to an increase in average interest-bearing liabilities of $21.2 million, or 8.8%, to $261.4 million and an increase in the cost of interest-bearing liabilities of
15 basis points to 2.17%.



Interest expense on deposits
increased $123,000, or 18.3%, to $796,000 for the quarter ended March 31, 2005 and increased $235,000, or 11.5%, to $2.3 million for the nine months ended March 31, 2005, compared to the same periods last year due to higher average deposits and cost
of deposits. Average interest-bearing deposits increased $16.8 million and $8.9 million for the quarter and nine months ended March 31, 2005, respectively, compared to the same periods last year. The average cost of deposits increased 14 basis
points to 1.58% and 10 basis points to 1.51% for the quarter and nine-month periods, respectively. The higher cost of deposits reflects the competitive market that the Bank operates in for certain deposits.



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Interest expense on borrowings increased $129,000, or 22.1%, to $714,000 for the quarter ended March 31,
2005 and increased $392,000, or 24.1%, to $2.0 million for the nine months ended March 31, 2005, compared to the same periods last year due mainly to an increased level of borrowings in support of funding for loan growth. Average borrowings
increased $9.6 million and $12.3 million for the quarter and nine months ended March 31, 2005, respectively, compared to last year. The average cost of borrowings increased 23 basis points to 4.34% for the quarter and decreased 3 basis points to
4.37% for the nine-month period compared to last year.



Net Interest Income



Net interest
income for the quarter and nine months ended March 31, 2005 increased $165,000, or 6.1%, and $370,000, or 4.6%, respectively, compared with the same period last year. The increases in net interest income were due mainly to increases in total average
earning assets and a change in the mix of earning assets to higher yielding loans, exceeding the effect of an increase in average interest-bearing liabilities and a change in the mix of liabilities to more higher cost long-term borrowings and
certificates of deposit. The Banks interest rate spread (the difference between yields earned on earning assets and rates paid on deposits and borrowings) decreased 19 basis points to 3.32% for the quarter and decreased 18 basis points to
3.32% for the nine month period ended March 31, 2005 compared to the same periods last year. The net interest margin (net interest income divided by average earning assets) decreased 16 basis points to 3.65% and decreased 16 basis points to 3.64%,
for the quarter and nine months ended March 31, 2005, respectively. The decrease in the interest rate spread and margin reflects the increase in cost of funds for both periods, and for the nine-month period, the decrease in yield on interest-earning
assets.



The Bank intends to continue to emphasize core-based
deposit growth for future funding requirements. Based on managements expectations for future loan growth, however, the Bank is expected to rely more on higher-cost retail certificates and borrowings from the FHLB to meet its future funding
requirements. An increase in market interest rates and continued competition from other financial institutions together with the aforementioned growth in retail certificates and borrowings could cause further tightening in the Banks interest
rate spread. Management anticipates, however, that the effect on net interest income from future loan growth would be sufficient to offset the effect on net interest income from a decline in the Banks interest rate spread.



The interest rate spread and margin for the periods indicated are as follows:



|                                  |  |                         |   |  |                             |   |  |      |   |  |      |  
|--------------------------------- |  | ----------------------- | - |  | --------------------------- | - |  | ---- | - |  | ---- | -
|                                  |  | Quarter Ended March 31, |   |  | Nine Months Ended March 31, |  
|                                  |  | 2005                    |   |  | 2004                        |   |  | 2005 |   |  | 2004 |  
|Weighted average yield earned on: |  |                         |   |  |                             |   |  |      |   |  |      |  
|Short-term investments            |  | 2.79                    | % |  | 0.98                        | % |  | 1.73 | % |  | 0.97 | %
|Securities                        |  | 4.92                    | % |  | 5.30                        | % |  | 4.96 | % |  | 5.12 | %
|Total loans, net                  |  | 5.72                    | % |  | 5.70                        | % |  | 5.63 | % |  | 5.73 | %
|                                  |  |                         |   |  |                             |   |  |      |   |  |      |  
|All interest-earning assets       |  | 5.57                    | % |  | 5.56                        | % |  | 5.49 | % |  | 5.52 | %
|                                  |  |                         |   |  |                             |   |  |      |   |  |      |  
|Weighted average rate paid on:    |  |                         |   |  |                             |   |  |      |   |  |      |  
|Deposits                          |  | 1.58                    | % |  | 1.44                        | % |  | 1.51 | % |  | 1.41 | %
|Borrowed funds                    |  | 4.34                    | % |  | 4.11                        | % |  | 4.37 | % |  | 4.40 | %
|                                  |  |                         |   |  |                             |   |  |      |   |  |      |  
|All interest-bearing liabilities  |  | 2.25                    | % |  | 2.05                        | % |  | 2.17 | % |  | 2.02 | %
|                                  |  |                         |   |  |                             |   |  |      |   |  |      |  
|Weighted average rate spread      |  | 3.32                    | % |  | 3.51                        | % |  | 3.32 | % |  | 3.50 | %
|                                  |  |                         |   |  |                             |   |  |      |   |  |      |  
|Net interest margin               |  | 3.65                    | % |  | 3.81                        | % |  | 3.64 | % |  | 3.80 | %
|                                  |  |                         |   |  |                             |   |  |      |   |  |      |  



Noninterest
Income



Total noninterest income was $402,000 for the
quarter ended March 31, 2005, $143,000, or 26.2%, lower than the $545,000 for the same quarter a year ago. However, last year included $226,000 in loan sale gains, servicing retained, while there were none this quarter. Partially offsetting the
lower loan sale gains were gains on sales of securities of $37,000 for the quarter ended March 31, 2005 compared with a loss of $50,000 for the same quarter last year. Other income decreased $7,000, or 6.3%, for the quarter ending March 31, 2005
compared to the same quarter last year due mostly to lower financial service fees. Total noninterest income for the nine months ended March 31, 2005 decreased $104,000, or 7.6%, to $1.3 million. The nine months ended March 31, 2005 included a
$32,000 gain on the sale of residential loans, servicing retained, compared with $226,000 for the same period last year. Gains on securities totaled $88,000 and $56,000 for the nine months ended March 31, 2005 and 2004, respectively. Other income
increased $45,000, or 14.1%, for the nine months ended March 31, 2005 compared to the same period last year due mostly to increased financial service fees due to a higher level of sales in the Financial Services Center at Strata Bank and increased
fee income from merchant credit card services. Customer service fees increased in both the quarterly and nine-month comparisons due mostly to higher debit card income.



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##### Table of Contents

Noninterest Expense



Total noninterest expense decreased $58,000, or 2.4%, to $2.4 million for the quarter ended March 31, 2005 compared with the
same period last year. The decrease in many expense categories reflects the results of cost control efforts and efficiency improvement initiatives. In addition, certain occupancy and equipment expense decreased compared to the same quarter last year
due mostly to lower depreciation expense as older capital assets reached their depreciation lives.



Total noninterest expense increased $197,000, or 2.9%, for the nine months ended March 31, 2005 compared with the same period last year. Salary and
benefits increased $299,000 due mostly to increased loan origination staffing at the Strata Mortgage Center as a result of the strategic decision in December 2003 to no longer outsource certain residential loan origination services, increased
staffing in the commercial lending division and increased staffing in other functional areas of the Bank consistent with the growth in operations. Occupancy expense and equipment expense decreased due mostly to lower depreciation expense as older
capital assets reached their depreciation lives. Data processing increased due to higher processing volumes and enhancements in the Banks customer oriented systems and software. Professional fees were lower due to lower legal expenses compared
to last year, which included higher legal fees associated with the 2003 annual meeting of stockholders, proxy filing and other matters. Most other categories of noninterest expense were similar to or running below expense levels during the same
nine-month period last year.



The operating efficiency ratio
(total noninterest expense divided by the sum of net interest income plus total noninterest income excluding securities gains and losses and loan sale gains) for the quarter ended March 31, 2005 was 73.5% compared with 79.2% for the same quarter a
year ago. The operating efficiency ratio for the nine months ended March 31, 2005 was 74.2% compared with 75.5% for the same nine-month period a year ago.



Income Taxes



Income tax expense increased by $36,000 to $270,000 for the quarter ended March 31, 2005 compared with the same quarter last year and increased by $61,000
to $740,000 for the nine months ended March 31, 2005 compared to the same period last year due mostly to this years higher level of pre-tax income. The effective income tax rate was 33.3% and 32.5% for the quarter and nine months ended March
31, 2005, respectively, slightly higher than the 30.7% and the 31.5% for the same periods last year. The effective tax rates reflect the utilization by the Company of certain tax preference items such as bank-owned life insurance, dividends received
deductions and security corporation subsidiaries to reduce the statutory corporate tax rates. The increase in effective tax rates for both the quarter and nine-month periods reflect the reduction in investment securities held by the security
corporations and resulting decrease in interest income at the security corporations. The increase in effective tax rates also reflects the increase in loans held by the Bank and resulting increase in interest income at the Bank. Since the Bank and
the security corporations file separate state tax returns and the Banks statutory state tax rate is 10.50% compared to 1.32% for the security corporations, the result of the shift in income to the Bank was an overall increase in the effective
tax rate for the Company.



Asset/Liability Management



A principal operating objective of the Bank is to produce
stable earnings by achieving a favorable interest rate spread that can be sustained during fluctuations in prevailing interest rates. Since the Banks principal interest-earning assets generally have longer terms to maturity than its primary
source of funds, i.e., deposit liabilities and, increases in general interest rates will generally result in an increase in the Banks cost of funds before the yield on its asset portfolio adjusts upward. Financial institutions have generally
sought to reduce their exposure to adverse changes in interest rates by attempting to achieve a closer match between the repricing periods of interest rate sensitive assets and liabilities. Such matching, however, is carefully monitored so as not to
sacrifice net interest margin performance for the perfect matching of these interest rate sensitive instruments. The Bank has established an Asset/Liability Management Committee (ALCO) made up of the chief executive officer, the chief
financial officer, the senior loan officer, and others to assess the asset/liability mix and recommend strategies that will enhance income while managing the Banks vulnerability to changes in interest rate. This committee meets regularly to
discuss interest rate conditions and potential product lines that would enhance the Banks income performance.



Certain strategies have been implemented to improve the match between interest rate sensitive assets and liabilities. These strategies include, but are
not limited to: daily monitoring of the Banks cash requirements, originating adjustable and fixed rate mortgage loans, both residential and commercial, for the Banks own portfolio, selling loans, managing the cost and structure of
deposits, short and long-term borrowings and using matched borrowings to fund specific purchases of loan packages and large loan originations. Occasionally, management may choose to deviate from specific matching of maturities of assets and
liabilities if an attractive opportunity to enhance yield becomes available.



ALCO modeling is performed quarterly with the assistance of an outside advisor which projects the Banks financial performance over the next twenty four months using loan and deposit projections, projections of
changes in interest rates, and anticipated changes in other income and operating expenses to reveal the full impact of the Banks operating strategies on financial performance. The results of the ALCO process are reported to the Board of
Directors at least on a quarterly basis.



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##### Table of Contents

Liquidity and Capital Resources



The Banks primary sources of funds consist of deposits, borrowings,
repayment and prepayment of loans, sales of loans and securities, maturities and early calls of securities, and funds provided from operations. While scheduled repayments of loans and maturities of securities are predictable sources of funds,
deposit flows and loan prepayments are greatly influenced by the general level of interest rates, economic conditions, and competition. The Bank primarily uses its liquidity resources to fund existing and future loan commitments, to fund net deposit
outflows, to invest in other interest-earning assets, to maintain liquidity, and to pay operating expenses.



From time to time, the Bank utilizes advances from the FHLB primarily in connection with its management of the interest rate sensitivity of its assets and
liabilities. Total advances outstanding at March 31, 2005 amounted to $61.6 million. The Banks ability to borrow from the FHLB is dependent upon the amount and type of collateral the Bank has to secure the loans. Such collateral consists of,
but is not limited to, one-to-four family owner-occupied residential property. As of March 31, 2005, the Bank had a borrowing capacity with the FHLB to borrow an additional $42.3 million, for a total of $103.9 million. The Bank also has additional
capacity to borrow federal funds from other banks and through such instruments as repurchase agreements utilizing federal agency obligations and mortgage-backed securities as collateral.



A major portion of the Banks liquidity consists of cash and cash equivalents, short-term investments, U.S. Government
and federal agency obligations, mortgage-backed securities, and other debt securities. The level of these assets is dependent upon the Banks operating, lending, and financing activities during any given period.



At March 31, 2005, the Bank had $15.2 million of outstanding commitments to
originate loans and unused lines of credit and open commitments available to customers totaling $50.0 million. The Bank anticipates that it will have sufficient funds available to meet these commitments. Certificates of deposit, which are scheduled
to mature in one year or less, totaled $77.0 million at March 31, 2005. Based upon historical experience, management believes that a significant portion of such deposits will remain with the Bank.



At March 31, 2005, the Company and the Bank continued to exceed all
regulatory capital requirements.



In February 2003, the Board
of Directors of the Company approved a Stock Repurchase Plan under which the Company is authorized to acquire up to 4% of the outstanding common stock, or up to approximately 65,925 shares of the issued and outstanding shares of its common stock in
the open market or in private transactions. Under the Stock Purchase Plan, shares may be repurchased from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations. The repurchased shares are expected to
be used by the Company for general corporate purposes. As of March 31, 2005, 14,636 shares of the Companys common stock had been repurchased under the Stock Purchase Plan at an average price of $21.27 per share.



Recent Accounting Pronouncements



On December 16, 2004, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment, which is an Amendment of FASB Statement Nos. 123 and 95. SFAS No. 123R changes, among other things, the manner in
which share-based compensation, such as stock options, will be accounted for by public companies. SFAS 123R will be effective for public companies that file as small business issuers as of the beginning of the annual reporting period that begins
after December 15, 2005. For public companies, the cost of employee services received in exchange for equity instruments including options and similar awards generally will be measured at fair value at the grant date. The grant date fair value will
be estimated using option-pricing models adjusted for the unique characteristics of those options and instruments, unless observable market prices for the same or similar options are available. The cost will be recognized over the requisite service
period, often the vesting period. The change in accounting will replace existing requirements under SFAS No. 123, Accounting for Stock-Based Compensation, and will eliminate the ability to account for share-based compensation
transactions using APB Opinion No. 25, Accounting for Stock Issued to Employees, which does not require companies to expense options if the exercise price is equal to the trading price at the date of grant. This Statement is not expected
to have a material impact on the Companys consolidated financial statements.



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##### Table of Contents

ITEM 3. Controls and Procedures



|(a) | Evaluation of disclosure controls and procedures.
|--- | -------------------------------------------------



As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the Exchange Act), the Companys
management conducted an evaluation with the participation of the Companys Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the Companys disclosure controls and procedures, as of the end of the last
fiscal quarter. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that they believe the Companys disclosure controls and procedures were effective as of March 31, 2005 to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. We
intend to continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and we may from time to time make changes to the disclosure controls and procedures to enhance
their effectiveness and to ensure that our systems evolve with our business. In designing and evaluating the Companys disclosure controls and procedures, the Company and its management recognize that any controls and procedures, no matter how
well designed and operated, can provide only a reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures.



|(b) | Changes in internal controls over financial reporting.
|--- | ------------------------------------------------------



There were no changes in the Companys internal controls over financial reporting identified in connection with the Companys
evaluation of its disclosure controls and procedures that occurred during the Companys last fiscal quarter that have materially affected, or are reasonably likely to materially affect the Companys internal control over financial
reporting.



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##### Table of Contents

PART II  OTHER INFORMATION



ITEM 1. Legal Proceedings



The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, involve amounts believed by management to be immaterial to the financial
condition and operations of the Company.



ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds



| | (a) | Not applicable.
| | --- | ---------------



| | (b) | Not applicable.
| | --- | ---------------



| | (c) | A description of the Companys Stock Repurchase Plan is incorporated herein by reference to Note 10 of the Consolidated Financial Statements, included in Part I, Item 1 of this
report.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



ITEM 3. Defaults Upon Senior Securities



Not applicable.



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



Not applicable.



ITEM 5. Other Information



Not applicable.



ITEM 6. Exhibits



Exhibits



|     |  |                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.                                       
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.                                       
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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##### Table of Contents

SIGNATURES



In accordance with
the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                   |  |                       |  |                                      
|------------------ |  | --------------------- |  | -------------------------------------
|                   |  | SERVICE BANCORP, INC.
|                   |  |                      
|Date: May 12, 2005 |  | By:                   |  | /s/ PAMELA J. MONTPELIER             
|                   |  |                       |  | Pamela J. Montpelier                 
|                   |  |                       |  | President and Chief Executive Officer
|                   |  |                      
|Date: May 12, 2005 |  | By:                   |  | /s/ DANA S. PHILBROOK                
|                   |  |                       |  | Dana S. Philbrook                    
|                   |  |                       |  | Chief Financial Officer              





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