##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB



(Mark One)



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



For the quarterly period ended December 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



SERVICE BANCORP, INC.

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



|                                                              |  |                                       
|------------------------------------------------------------- |  | --------------------------------------
|Massachusetts                                                 |  | 04-3430806                            
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification 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)



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 ̈



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)



YES ̈NO x



State the number of shares
outstanding of each of the issuers classes of common equity, as of the latest practical date: At January 31, 2006, there were 1,655,285 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 December 31, 2005 and June 30, 2005                                          |  | 1   
|        |  |                                                                                                               
|        |  | Consolidated Statements of Income for the quarter and six months ended December 31, 2005 and 2004              |  | 2   
|        |  |                                                                                                               
|        |  | Consolidated Statements of Changes in Stockholders Equity for the six months ended December 31, 2005 and 2004 |  | 3   
|        |  |                                                                                                               
|        |  | Consolidated Statements of Cash Flows for the six months ended December 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                                                                                                       |  | 18  
|        |  |                                                                                                               
|        |  | Signatures                                                                                                     |  | 19  



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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)



|                                                                             |  |                   |         |   |               |   |         |  
|---------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------- | - | ------- | -
|                                                                             |  | December 31, 2005 |         |   | June 30, 2005 |  
|ASSETS                                                                       |  |                   |         |   |               |   |         |  
|Cash and due from banks                                                      |  | $                 | 9,634   |   |               | $ | 7,307   |  
|Short-term investments                                                       |  |                   | 4       |   |               |   | 2,454   |  
|                                                                             |  |                   |         |   |               |   |         |  
|Total cash and cash equivalents                                              |  |                   | 9,638   |   |               |   | 9,761   |  
|                                                                             |  |                   |         |   |               |   |         |  
|Securities available for sale, at fair value                                 |  |                   | 46,906  |   |               |   | 46,500  |  
|Securities held to maturity, at amortized cost                               |  |                   | 3,207   |   |               |   | 4,155   |  
|Federal Home Loan Bank stock, at cost                                        |  |                   | 4,809   |   |               |   | 3,908   |  
|Loans                                                                        |  |                   | 296,360 |   |               |   | 277,104 |  
|Less allowance for loan losses                                               |  |                   | (2,683  | ) |               |   | (2,506  | )
|                                                                             |  |                   |         |   |               |   |         |  
|Loans, net                                                                   |  |                   | 293,677 |   |               |   | 274,598 |  
|                                                                             |  |                   |         |   |               |   |         |  
|Banking premises and equipment, net                                          |  |                   | 3,712   |   |               |   | 3,794   |  
|Accrued interest receivable                                                  |  |                   | 1,604   |   |               |   | 1,465   |  
|Bank-owned life insurance                                                    |  |                   | 4,764   |   |               |   | 4,683   |  
|Net deferred tax asset                                                       |  |                   | 1,384   |   |               |   | 836     |  
|Other assets                                                                 |  |                   | 1,192   |   |               |   | 902     |  
|                                                                             |  |                   |         |   |               |   |         |  
|Total assets                                                                 |  | $                 | 370,893 |   |               | $ | 350,602 |  
|                                                                             |  |                   |         |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                         |  |                   |         |   |               |   |         |  
|Deposits                                                                     |  | $                 | 245,902 |   |               | $ | 254,805 |  
|Borrowings                                                                   |  |                   | 93,112  |   |               |   | 64,557  |  
|Subordinated debentures                                                      |  |                   | 3,093   |   |               |   | 3,093   |  
|Other liabilities                                                            |  |                   | 1,710   |   |               |   | 1,632   |  
|                                                                             |  |                   |         |   |               |   |         |  
|Total liabilities                                                            |  |                   | 343,817 |   |               |   | 324,087 |  
|                                                                             |  |                   |         |   |               |   |         |  
|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                                                   |  |                   | 8,220   |   |               |   | 7,930   |  
|Retained earnings                                                            |  |                   | 20,488  |   |               |   | 19,480  |  
|Accumulated other comprehensive income (loss)                                |  |                   | (370    | ) |               |   | 480     |  
|Treasury stock, at cost  (57,345 and 77,345 shares, respectively)           |  |                   | (936    | ) |               |   | (1,250  | )
|Unearned ESOP shares  (8,246 and 11,466 shares, respectively)               |  |                   | (83     | ) |               |   | (115    | )
|Unearned restricted stock  (12,015 and 4,744 shares, respectively)          |  |                   | (260    | ) |               |   | (27     | )
|                                                                             |  |                   |         |   |               |   |         |  
|Total stockholders equity                                                   |  |                   | 27,076  |   |               |   | 26,515  |  
|                                                                             |  |                   |         |   |               |   |         |  
|Total liabilities and stockholders equity                                   |  | $                 | 370,893 |   |               | $ | 350,602 |  
|                                                                             |  |                   |         |   |               |   |         |  



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 December 31, |           | Six Months Ended December 31,
|                                                                      |  | 2005                       |           | 2004                          |   | 2005      |  | 2004
|Interest and dividend income:                                         |  |                            |           |                               |   |           |  |      |           |  |   |          
|Interest and fees on loans                                            |  | $                          | 4,426     |                               | $ | 3,542     |  | $    | 8,533     |  | $ | 6,859    
|Interest and dividends on securities and Federal Home Loan Bank stock |  |                            | 671       |                               |   | 684       |  |      | 1,356     |  |   | 1,385    
|Interest on short-term investments                                    |  |                            |          |                               |   | 14        |  |      | 2         |  |   | 22       
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Total interest and dividend income                                    |  |                            | 5,097     |                               |   | 4,240     |  |      | 9,891     |  |   | 8,266    
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Interest expense:                                                     |  |                            |           |                               |   |           |  |      |           |  |   |          
|Interest on deposits                                                  |  |                            | 1,067     |                               |   | 758       |  |      | 2,011     |  |   | 1,477    
|Interest on borrowings                                                |  |                            | 991       |                               |   | 657       |  |      | 1,809     |  |   | 1,230    
|Interest on subordinated debentures                                   |  |                            | 56        |                               |   | 35        |  |      | 107       |  |   | 75       
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Total interest expense                                                |  |                            | 2,114     |                               |   | 1,450     |  |      | 3,927     |  |   | 2,782    
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Net interest income                                                   |  |                            | 2,983     |                               |   | 2,790     |  |      | 5,964     |  |   | 5,484    
|Provision for loan losses                                             |  |                            | 68        |                               |   | 109       |  |      | 200       |  |   | 211      
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Net interest income, after provision for loan losses                  |  |                            | 2,915     |                               |   | 2,681     |  |      | 5,764     |  |   | 5,273    
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Non-interest income:                                                  |  |                            |           |                               |   |           |  |      |           |  |   |          
|Customer service fees                                                 |  |                            | 264       |                               |   | 264       |  |      | 533       |  |   | 520      
|Gain on loan sales, net                                               |  |                            | 21        |                               |   | 32        |  |      | 30        |  |   | 32       
|Gain on securities sales, net                                         |  |                            | 5         |                               |   | 12        |  |      | 247       |  |   | 51       
|Other income                                                          |  |                            | 127       |                               |   | 123       |  |      | 232       |  |   | 259      
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Total non-interest income                                             |  |                            | 417       |                               |   | 431       |  |      | 1,042     |  |   | 862      
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Non-interest expense:                                                 |  |                            |           |                               |   |           |  |      |           |  |   |          
|Salaries and employee benefits                                        |  |                            | 1,705     |                               |   | 1,287     |  |      | 3,062     |  |   | 2,599    
|Occupancy                                                             |  |                            | 265       |                               |   | 239       |  |      | 525       |  |   | 482      
|Equipment                                                             |  |                            | 95        |                               |   | 105       |  |      | 183       |  |   | 217      
|Data processing                                                       |  |                            | 205       |                               |   | 198       |  |      | 411       |  |   | 391      
|Professional fees                                                     |  |                            | 109       |                               |   | 102       |  |      | 220       |  |   | 204      
|Advertising                                                           |  |                            | 89        |                               |   | 75        |  |      | 178       |  |   | 150      
|Other general and administrative expense                              |  |                            | 345       |                               |   | 315       |  |      | 671       |  |   | 627      
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Total non-interest expense                                            |  |                            | 2,813     |                               |   | 2,321     |  |      | 5,250     |  |   | 4,670    
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Income before income taxes                                            |  |                            | 519       |                               |   | 791       |  |      | 1,556     |  |   | 1,465    
|Provision for income taxes                                            |  |                            | 191       |                               |   | 255       |  |      | 548       |  |   | 470      
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Net income                                                            |  | $                          | 328       |                               | $ | 536       |  | $    | 1,008     |  | $ | 995      
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Weighted average shares outstanding (basic)                           |  |                            | 1,622,266 |                               |   | 1,643,159 |  |      | 1,621,059 |  |   | 1,640,086
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Weighted average shares outstanding (diluted)                         |  |                            | 1,643,890 |                               |   | 1,666,942 |  |      | 1,643,092 |  |   | 1,664,633
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Earnings per share (basic)                                            |  | $                          | 0.20      |                               | $ | 0.33      |  | $    | 0.62      |  | $ | 0.61     
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          
|Earnings per share (diluted)                                          |  | $                          | 0.20      |                               | $ | 0.32      |  | $    | 0.61      |  | $ | 0.60     
|                                                                      |  |                            |           |                               |   |           |  |      |           |  |   |          



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)

SIX MONTHS ENDED DECEMBER 31, 2005 AND 2004

(Dollars in thousands, except share amounts)



|                                                                                                 |  |              |    |                            |   |       |                   |  |                                               |        |  |                |      |   |                      |   |        |                           |  |   |       |   |  |   |      |   |  |   |        |  
|------------------------------------------------------------------------------------------------ |  | ------------ | -- | -------------------------- | - | ----- | ----------------- |  | --------------------------------------------- | ------ |  | -------------- | ---- | - | -------------------- | - | ------ | ------------------------- |  | - | ----- | - |  | - | ---- | - |  | - | ------ | -
|                                                                                                 |  | Common Stock |    | Additional Paid-in Capital |   |       | Retained Earnings |  | Accumulated Other Comprehensive Income (Loss) |        |  | Treasury Stock |      |   | Unearned ESOP Shares |   |        | Unearned Restricted Stock |  |   | Total |  
|Balance at June 30, 2005                                                                         |  | $            | 17 |                            | $ | 7,930 |                   |  | $                                             | 19,480 |  | $              | 480  |   |                      | $ | (1,250 | )                         |  | $ | (115  | ) |  | $ | (27  | ) |  | $ | 26,515 |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                               |        |  |                |      |   |                      |   |        |                           |  |   |       |   |  |   |      |   |  |   |        |  
|Comprehensive income:                                                                            |  |              |    |                            |   |       |                   |  |                                               |        |  |                |      |   |                      |   |        |                           |  |   |       |   |  |   |      |   |  |   |        |  
|Net income                                                                                       |  |              |   |                            |   |      |                   |  |                                               | 1,008  |  |                |     |   |                      |   |       |                           |  |   |      |   |  |   |     |   |  |   | 1,008  |  
|Net unrealized loss on securities available for sale, net of tax and reclassification adjustment |  |              |   |                            |   |      |                   |  |                                               |       |  |                | (850 | ) |                      |   |       |                           |  |   |      |   |  |   |     |   |  |   | (850   | )
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                               |        |  |                |      |   |                      |   |        |                           |  |   |       |   |  |   |      |   |  |   |        |  
|Total comprehensive income                                                                       |  |              |    |                            |   |       |                   |  |                                               |        |  |                |      |   |                      |   |        |                           |  |   |       |   |  |   |      |   |  |   | 158    |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                               |        |  |                |      |   |                      |   |        |                           |  |   |       |   |  |   |      |   |  |   |        |  
|Common stock held by ESOP released and committed to be released (3,220 shares)                   |  |              |   |                            |   | 56    |                   |  |                                               |       |  |                |     |   |                      |   |       |                           |  |   | 32    |   |  |   |     |   |  |   | 88     |  
|Purchase of treasury stock (900 shares)                                                          |  |              |   |                            |   |      |                   |  |                                               |       |  |                |     |   |                      |   | (27    | )                         |  |   |      |   |  |   |     |   |  |   | (27    | )
|Stock option exercises (900 shares)                                                              |  |              |   |                            |   | (5    | )                 |  |                                               |       |  |                |     |   |                      |   | 15     |                           |  |   |      |   |  |   |     |   |  |   | 10     |  
|Income tax benefit on options exercised                                                          |  |              |   |                            |   | 6     |                   |  |                                               |       |  |                |     |   |                      |   |       |                           |  |   |      |   |  |   |     |   |  |   | 6      |  
|Amortization of restricted stock (12,729 shares)                                                 |  |              |   |                            |   | 19    |                   |  |                                               |       |  |                |     |   |                      |   |       |                           |  |   |      |   |  |   | 307  |   |  |   | 326    |  
|Restricted stock grants (20,000 shares)                                                          |  |              |   |                            |   | 214   |                   |  |                                               |       |  |                |     |   |                      |   | 326    |                           |  |   |      |   |  |   | (540 | ) |  |   |       |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                               |        |  |                |      |   |                      |   |        |                           |  |   |       |   |  |   |      |   |  |   |        |  
|Balance at December 31, 2005                                                                     |  | $            | 17 |                            | $ | 8,220 |                   |  | $                                             | 20,488 |  | $              | (370 | ) |                      | $ | (936   | )                         |  | $ | (83   | ) |  | $ | (260 | ) |  | $ | 27,076 |  
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                               |        |  |                |      |   |                      |   |        |                           |  |   |       |   |  |   |      |   |  |   |        |  



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)

SIX MONTHS ENDED DECEMBER 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 Restricted Stock |  |   | Total
|Balance at June 30, 2004                                                                         |  | $            | 17 |                            | $ | 7,760 |                   |  | $                                      | 17,363 |                | $ | 553 |                      | $ | (527 | )                         |  | $ | (179  | ) |  | $ | (65 | ) |  | $ | 24,922
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |                |   |     |                      |   |      |                           |  |   |       |   |  |   |     |   |  |   |       
|Comprehensive income:                                                                            |  |              |    |                            |   |       |                   |  |                                        |        |                |   |     |                      |   |      |                           |  |   |       |   |  |   |     |   |  |   |       
|Net income                                                                                       |  |              |   |                            |   |      |                   |  |                                        | 995    |                |   |    |                      |   |     |                           |  |   |      |   |  |   |    |   |  |   | 995   
|Net unrealized gain on securities available for sale, net of tax and reclassification adjustment |  |              |   |                            |   |      |                   |  |                                        |       |                |   | 227 |                      |   |     |                           |  |   |      |   |  |   |    |   |  |   | 227   
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |                |   |     |                      |   |      |                           |  |   |       |   |  |   |     |   |  |   |       
|Total comprehensive income                                                                       |  |              |    |                            |   |       |                   |  |                                        |        |                |   |     |                      |   |      |                           |  |   |       |   |  |   |     |   |  |   | 1,222 
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |                |   |     |                      |   |      |                           |  |   |       |   |  |   |     |   |  |   |       
|Common stock held by ESOP released and committed to be released (3,220 shares)                   |  |              |   |                            |   | 56    |                   |  |                                        |       |                |   |    |                      |   |     |                           |  |   | 32    |   |  |   |    |   |  |   | 88    
|Stock option exercises (5,000 shares)                                                            |  |              |   |                            |   | (13   | )                 |  |                                        |       |                |   |    |                      |   | 50   |                           |  |   |      |   |  |   |    |   |  |   | 37    
|Income tax benefit on stock option exercises                                                     |  |              |   |                            |   | 31    |                   |  |                                        |       |                |   |    |                      |   |     |                           |  |   |      |   |  |   |    |   |  |   | 31    
|Amortization of restricted stock (3,941 shares)                                                  |  |              |   |                            |   | 9     |                   |  |                                        |       |                |   |    |                      |   |     |                           |  |   |      |   |  |   | 28  |   |  |   | 37    
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |                |   |     |                      |   |      |                           |  |   |       |   |  |   |     |   |  |   |       
|Balance at December 31, 2004                                                                     |  | $            | 17 |                            | $ | 7,843 |                   |  | $                                      | 18,358 |                | $ | 780 |                      | $ | (477 | )                         |  | $ | (147  | ) |  | $ | (37 | ) |  | $ | 26,337
|                                                                                                 |  |              |    |                            |   |       |                   |  |                                        |        |                |   |     |                      |   |      |                           |  |   |       |   |  |   |     |   |  |   |       



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)



|                                                                                  |  |                               |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Six Months Ended December 31, |        
|                                                                                  |  | 2005                          |         |   | 2004 |  
|Cash flows from operating activities:                                             |  |                               |         |   |      |   |         |  
|Net income                                                                        |  | $                             | 1,008   |   |      | $ | 995     |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                               |         |   |      |   |         |  
|Provision for loan losses                                                         |  |                               | 200     |   |      |   | 211     |  
|Gain on securities sales, net                                                     |  |                               | (247    | ) |      |   | (51     | )
|Gain on loan sales, net                                                           |  |                               | (30     | ) |      |   | (32     | )
|Net amortization of securities                                                    |  |                               | 19      |   |      |   | 63      |  
|Depreciation and amortization expense                                             |  |                               | 185     |   |      |   | 219     |  
|Increase in accrued interest receivable                                           |  |                               | (139    | ) |      |   | (9      | )
|Net amortization of deferred loan costs and premiums                              |  |                               | 124     |   |      |   | 138     |  
|Bank-owned life insurance income                                                  |  |                               | (81     | ) |      |   | (96     | )
|Deferred tax benefit                                                              |  |                               | (92     | ) |      |   | (102    | )
|Other, net                                                                        |  |                               | 176     |   |      |   | 226     |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                               | 1,123   |   |      |   | 1,562   |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Cash flows from investing activities:                                             |  |                               |         |   |      |   |         |  
|Activity in securities available for sale:                                        |  |                               |         |   |      |   |         |  
|Sales                                                                             |  |                               | 4,549   |   |      |   | 2,929   |  
|Maturities, prepayments and calls                                                 |  |                               | 2,281   |   |      |   | 5,390   |  
|Purchases                                                                         |  |                               | (8,307  | ) |      |   | (6,629  | )
|Activity in securities held to maturity:                                          |  |                               |         |   |      |   |         |  
|Maturities, prepayments and calls                                                 |  |                               | 941     |   |      |   | 2,225   |  
|Net increase in loans, excluding loan purchases and sales                         |  |                               | (23,597 | ) |      |   | (22,293 | )
|Sale of loans                                                                     |  |                               | 4,224   |   |      |   | 2,308   |  
|Purchase of loans                                                                 |  |                               |        |   |      |   | (200    | )
|Purchase of banking premises and equipment                                        |  |                               | (103    | ) |      |   | (507    | )
|Purchase of Federal Home Loan Bank stock                                          |  |                               | (901    | ) |      |   | (394    | )
|                                                                                  |  |                               |         |   |      |   |         |  
|Net cash used by investing activities                                             |  |                               | (20,913 | ) |      |   | (17,171 | )
|                                                                                  |  |                               |         |   |      |   |         |  
|Cash flows from financing activities:                                             |  |                               |         |   |      |   |         |  
|Net (decrease) increase in deposits                                               |  |                               | (8,903  | ) |      |   | 3,409   |  
|Proceeds from term borrowings                                                     |  |                               | 33,000  |   |      |   | 9,000   |  
|Repayment of term borrowings                                                      |  |                               | (14,045 | ) |      |   | (8      | )
|Net increase in overnight borrowings                                              |  |                               | 9,600   |   |      |   |        |  
|Purchase of treasury stock                                                        |  |                               | (27     | ) |      |   |        |  
|Stock option exercises                                                            |  |                               | 10      |   |      |   | 37      |  
|Repayment of ESOP loan                                                            |  |                               | 32      |   |      |   | 32      |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Net cash provided by financing activities                                         |  |                               | 19,667  |   |      |   | 12,470  |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Net change in cash and cash equivalents                                           |  |                               | (123    | ) |      |   | (3,139  | )
|Cash and cash equivalents at beginning of period                                  |  |                               | 9,761   |   |      |   | 13,202  |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                             | 9,638   |   |      | $ | 10,063  |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Supplementary information:                                                        |  |                               |         |   |      |   |         |  
|Interest paid on deposits                                                         |  | $                             | 2,010   |   |      | $ | 1,476   |  
|Interest paid on borrowings and subordinated debentures                           |  |                               | 1,824   |   |      |   | 1,269   |  
|Income taxes paid                                                                 |  |                               | 520     |   |      |   | 371     |  



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, 2005.



|(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 restricted stock and are determined using the treasury stock method. Assumed conversion of the outstanding dilutive stock options
and unvested restricted stock would increase the shares outstanding, but would not require an adjustment to income as a result of the conversion.



Weighted average diluted shares outstanding have been calculated based on the following:



|                                              |  |                            |  |                               |  |           |  |          
|--------------------------------------------- |  | -------------------------- |  | ----------------------------- |  | --------- |  | ---------
|                                              |  | Quarter Ended December 31, |  | Six Months Ended December 31,
|                                              |  | 2005                       |  | 2004                          |  | 2005      |  | 2004     
|Weighted average shares outstanding           |  | 1,622,266                  |  | 1,643,159                     |  | 1,621,059 |  | 1,640,086
|Effect of dilutive stock options              |  | 20,726                     |  | 21,707                        |  | 21,007    |  | 22,116   
|Effect of unvested shares of restricted stock |  | 898                        |  | 2,076                         |  | 1,026     |  | 2,431    
|                                              |  |                            |  |                               |  |           |  |          
|Weighted average diluted shares outstanding   |  | 1,643,890                  |  | 1,666,942                     |  | 1,643,092 |  | 1,664,633
|                                              |  |                            |  |                               |  |           |  |          



For the quarter and
six months ended December 31, 2005 and 2004, an average of 1,000 stock options and no unvested shares of restricted stock were anti-dilutive and therefore excluded from the earnings per share calculations.



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



At December 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 December 31, 2005 amounted to $71.5
million, of which $36.1 million were home equity lines of credit.



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##### Table of Contents

SERVICE BANCORP, INC. AND SUBSIDIARY



Notes to Consolidated Financial Statements (unaudited)(continued)



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



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



|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|----------------------------------------- |  | ---------------------- | ------ | ------------- | - | -------------- |  | ---------- | ------ |  | - | ------
|                                          |  | December 31, 2005      |        | June 30, 2005
|                                          |  | Amortized Cost         |        | Fair Value    |   | Amortized Cost |  | Fair Value
|                                          |  | (Dollars in thousands)
|Securitiesavailable for sale:             |  |                        |        |               |   |                |  |            |        |  |   |       
|Federal agency securities                 |  | $                      | 14,927 |               | $ | 14,724         |  | $          | 11,934 |  | $ | 11,966
|Federal agency mortgage-backed securities |  |                        | 11,627 |               |   | 11,476         |  |            | 12,637 |  |   | 12,633
|Other debt securities                     |  |                        | 17,242 |               |   | 16,940         |  |            | 19,219 |  |   | 19,815
|Municipal securities                      |  |                        | 1,797  |               |   | 1,747          |  |            |       |  |   |      
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|Total debt securities available for sale  |  |                        | 45,593 |               |   | 44,887         |  |            | 43,790 |  |   | 44,414
|Marketable equity securities              |  |                        | 1,879  |               |   | 2,019          |  |            | 1,969  |  |   | 2,086 
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|Total securities available for sale       |  | $                      | 47,472 |               | $ | 46,906         |  | $          | 45,759 |  | $ | 46,500
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|Securities held to maturity:              |  |                        |        |               |   |                |  |            |        |  |   |       
|Federal agency mortgage-backed securities |  | $                      | 2,301  |               | $ | 2,354          |  | $          | 3,253  |  | $ | 3,349 
|Other debt securities                     |  |                        | 906    |               |   | 914            |  |            | 902    |  |   | 927   
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       
|Total securities held to maturity         |  | $                      | 3,207  |               | $ | 3,268          |  | $          | 4,155  |  | $ | 4,276 
|                                          |  |                        |        |               |   |                |  |            |        |  |   |       



|(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.



|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|------------------------------------ |  | ---------------------- | ------- | - | ------------- | ------ | - | ------ | - | ------- | ------- |  | ------ | -
|                                     |  | December 31, 2005      |         |   | June 30, 2005 |       
|                                     |  | Amount                 |         |   | Percent       |        |   | Amount |   |         | Percent | 
|                                     |  | (Dollars in thousands) |        
|Real estate loans:                   |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|One-to four-family residential       |  | $                      | 149,897 |   |               | 50.73  | % |        | $ | 143,045 |         |  | 51.82  | %
|Residential construction             |  |                        | 2,853   |   |               | 0.97   | % |        |   | 4,029   |         |  | 1.46   | %
|Commercial and multi-family          |  |                        | 75,742  |   |               | 25.63  | % |        |   | 68,182  |         |  | 24.69  | %
|Commercial construction              |  |                        | 16,059  |   |               | 5.43   | % |        |   | 12,249  |         |  | 4.44   | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Total real estate loans              |  |                        | 244,551 |   |               | 82.76  | % |        |   | 227,505 |         |  | 82.41  | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Commercial loans                     |  |                        | 27,578  |   |               | 9.33   | % |        |   | 25,631  |         |  | 9.28   | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Consumer loans:                      |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Home equity                          |  |                        | 16,130  |   |               | 5.46   | % |        |   | 14,786  |         |  | 5.35   | %
|Second mortgages                     |  |                        | 6,141   |   |               | 2.08   | % |        |   | 7,020   |         |  | 2.54   | %
|Passbook secured                     |  |                        | 291     |   |               | 0.10   | % |        |   | 363     |         |  | 0.13   | %
|Other                                |  |                        | 796     |   |               | 0.27   | % |        |   | 814     |         |  | 0.29   | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Total consumer loans                 |  |                        | 23,358  |   |               | 7.91   | % |        |   | 22,983  |         |  | 8.31   | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Total gross loans                    |  |                        | 295,487 |   |               | 100.00 | % |        |   | 276,119 |         |  | 100.00 | %
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Net deferred loan costs and premiums |  |                        | 873     |   |               |        |   |        |   | 985     |         |  |        |  
|Allowance for loan losses            |  |                        | (2,683  | ) |               |        |   |        |   | (2,506  | )       |  |        |  
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  
|Total loans, net                     |  | $                      | 293,677 |   |               |        |   |        | $ | 274,598 |         |  |        |  
|                                     |  |                        |         |   |               |        |   |        |   |         |         |  |        |  



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SERVICE BANCORP, INC. AND SUBSIDIARY



Notes to Consolidated Financial Statements (unaudited)(continued)



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



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



|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|---------------------------------------- |  | ---------------------- | ------- | ------- | ------------- | - | ------ | - | ------- |  | ------ | -
|                                         |  | December 31, 2005      |         |         | June 30, 2005 |  
|                                         |  | Amount                 |         | Percent |               |   | Amount |   | Percent | 
|                                         |  | (Dollars in thousands) |        
|Demand                                   |  | $                      | 40,587  |         | 16.51         | % |        | $ | 39,547  |  | 15.52  | %
|NOW                                      |  |                        | 27,255  |         | 11.08         | % |        |   | 35,222  |  | 13.82  | %
|Money market deposits                    |  |                        | 29,270  |         | 11.90         | % |        |   | 33,478  |  | 13.14  | %
|Regular and other savings                |  |                        | 40,401  |         | 16.43         | % |        |   | 44,083  |  | 17.30  | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|Total non-certificate accounts           |  |                        | 137,513 |         | 55.92         | % |        |   | 152,330 |  | 59.78  | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|Term certificates of $100,000 or greater |  |                        | 34,642  |         | 14.09         | % |        |   | 31,871  |  | 12.51  | %
|Term certificates less than $100,000     |  |                        | 73,747  |         | 29.99         | % |        |   | 70,604  |  | 27.71  | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|Total certificate accounts               |  |                        | 108,389 |         | 44.08         | % |        |   | 102,475 |  | 40.22  | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  
|Total deposits                           |  | $                      | 245,902 |         | 100.00        | % |        | $ | 254,805 |  | 100.00 | %
|                                         |  |                        |         |         |               |   |        |   |         |  |        |  



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



Borrowings included overnight borrowings with the Federal Home Loan Bank of Boston (FHLB) of $9.6 million as of December 31, 2005, while there were no overnight borrowings as of June 30, 2005. In
addition, borrowings included the following advances from the FHLB. The advances are presented by the earlier of the maturity date or the date callable by the FHLB.



|                         |  |                        |        |         |               |   |        |   |         |  |        |  
|------------------------ |  | ---------------------- | ------ | ------- | ------------- | - | ------ | - | ------- |  | ------ | -
|                         |  | December 31, 2005      |        |         | June 30, 2005 |  
|                         |  | Amount                 |        | Percent |               |   | Amount |   | Percent | 
|                         |  | (Dollars in thousands) |       
|Less than one year       |  | $                      | 39,500 |         | 47.30         | % |        | $ | 35,500  |  | 54.99  | %
|One to three years       |  |                        | 24,000 |         | 28.74         | % |        |   | 13,000  |  | 20.14  | %
|Greater than three years |  |                        | 20,012 |         | 23.96         | % |        |   | 16,057  |  | 24.87  | %
|                         |  |                        |        |         |               |   |        |   |         |  |        |  
|Total borrowings         |  | $                      | 83,512 |         | 100.00        | % |        | $ | 64,557  |  | 100.00 | %
|                         |  |                        |        |         |               |   |        |   |         |  |        |  



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



In March 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.



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SERVICE BANCORP, INC. AND SUBSIDIARY



Notes to Consolidated Financial Statements (unaudited)(concluded)



|(9) | Stock Option 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, 2005. 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 six months ended December 31, 2005 and 2004, would have been reduced to the
following pro forma amounts:



|                                                                                                    |  |                                                 |      |                              |   |      |  |      |       |  |   |     
|--------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ---- | ---------------------------- | - | ---- |  | ---- | ----- |  | - | ----
|                                                                                                    |  | Quarter EndedDecember 31,                       |      | Six Months EndedDecember 31,
|                                                                                                    |  | 2005                                            |      | 2004                         |   | 2005 |  | 2004
|                                                                                                    |  | (Dollars in thousands,except per share amounts)
|Net income, as reported                                                                             |  | $                                               | 328  |                              | $ | 536  |  | $    | 1,008 |  | $ | 995 
|Deduct: Total stock-based compensation expense determined under the fair value method, net of taxes |  |                                                 | 8    |                              |   | 12   |  |      | 15    |  |   | 24  
|                                                                                                    |  |                                                 |      |                              |   |      |  |      |       |  |   |     
|Pro forma net income                                                                                |  | $                                               | 320  |                              | $ | 524  |  | $    | 993   |  | $ | 971 
|                                                                                                    |  |                                                 |      |                              |   |      |  |      |       |  |   |     
|Earnings per share (basic):                                                                         |  |                                                 |      |                              |   |      |  |      |       |  |   |     
|As reported                                                                                         |  | $                                               | 0.20 |                              | $ | 0.33 |  | $    | 0.62  |  | $ | 0.61
|                                                                                                    |  |                                                 |      |                              |   |      |  |      |       |  |   |     
|Pro forma                                                                                           |  | $                                               | 0.20 |                              | $ | 0.32 |  | $    | 0.61  |  | $ | 0.59
|                                                                                                    |  |                                                 |      |                              |   |      |  |      |       |  |   |     
|Earnings per share (diluted):                                                                       |  |                                                 |      |                              |   |      |  |      |       |  |   |     
|As reported                                                                                         |  | $                                               | 0.20 |                              | $ | 0.32 |  | $    | 0.61  |  | $ | 0.60
|                                                                                                    |  |                                                 |      |                              |   |      |  |      |       |  |   |     
|Pro forma                                                                                           |  | $                                               | 0.19 |                              | $ | 0.31 |  | $    | 0.60  |  | $ | 0.58
|                                                                                                    |  |                                                 |      |                              |   |      |  |      |       |  |   |     



|(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, subject to regulatory considerations. The following table provides information on the purchases of common stock under the Stock Repurchase Plan for the quarter ended December 31, 2005.



|                                     |  |                                 |  |                             |       |                                                                 |     |                                                               |       
|------------------------------------ |  | ------------------------------- |  | --------------------------- | ----- | --------------------------------------------------------------- | --- | ------------------------------------------------------------- | ------
|                                     |  | Repurchase Plan Information    
|Period                               |  | Total number ofshares purchased |  | Average pricepaid per share |       | Total number ofshares purchasedas part ofpubliclyannounced plan |     | Maximumnumber of sharesthat may yet bepurchased underthe plan
|October 1, 2005  October 31, 2005   |  | 900                             |  | $                           | 29.50 |                                                                 | 900 |                                                               | 23,689
|November 1, 2005  November 30, 2005 |  |                                |  |                             |      |                                                                 |    |                                                               | 23,689
|December 1, 2005  December 31, 2005 |  |                                |  |                             |      |                                                                 |    |                                                               | 23,689
|                                     |  |                                 |  |                             |       |                                                                 |     |                                                               |       
|Total                                |  | 900                             |  | $                           | 29.50 |                                                                 | 900 |                                                               | 23,689
|                                     |  |                                 |  |                             |       |                                                                 |     |                                                               |       



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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 December 31, 2005 and June 30, 2005



Total assets were $370.9 million at December 31, 2005, an increase of $20.3 million, or 5.8%, from the $350.6 million
at June 30, 2005. Net loans increased $19.1 million, or 6.9%, to $293.7 million. The investment securities portfolio was maintained at the June 30, 2005 level and totaled $54.9 million as of December 31, 2005. Total deposits decreased
$8.9 million, or 3.5%, since June 30, 2005 to $245.9 million at December 31, 2005. The Company increased borrowings from the Federal Home Loan Bank of Boston (FHLB) by $28.6 million, or 44.2%, since June 30, 2005, which
provided further funding for loan growth.



Total investment
securities, excluding FHLB stock, were $50.1 million at December 31, 2005, a slight decrease of $542,000 since June 30, 2005. Reductions in investment securities due to amortization and prepayment on mortgage-backed securities, sales of
mortgage-backed securities, and a corporate bond sale and maturity were almost entirely offset with purchases of federal agency bonds totaling $3.0 million, mortgage-backed securities of $3.1 million and $1.8 million in municipal securities. The
Companys investment in FHLB stock increased $901,000 to $4.8 million at December 31, 2005 consistent with the requirement of additional borrowings from the FHLB.



Residential real estate loans are originated through the residential mortgage division of the Bank, the Strata Mortgage
Center. During the six months ended December 31, 2005, the Strata Mortgage Center originated $25.9 million in residential real estate loans, which was $1.5 million, or 6.2%, higher than the same period last year. Also during the six months
ended December 31, 2005, the Bank sold $4.2 million in residential loans compared with residential loan sales of $2.3 million during the same period last year. As a result of this years originations and sales, the Banks total
residential mortgage loans, net of principal payments, increased $5.7 million, or 3.9%, since June 30, 2005 to $152.8 million at December 31, 2005. The Company expects that the combination of a slower residential loan market and continued
residential loan sales to result in lower net residential loan growth during the second six months of fiscal year 2006. Home equity and second mortgage loans increased $465,000, or 2.1%, since June 30, 2005 to $22.3 million at December 31,
2005.



Commercial lending continues to be an area of
opportunity and leading growth area for the Bank. The Bank originated $37.5 million in commercial, commercial real estate and construction loans and lines of credit since June 30, 2005, which was $9.7 million, or 35.0%, higher than the $27.7
million originated during the same period last year. The net increase in the total commercial loan portfolio since June 30, 2005 was $13.3 million, or 12.6%. In addition to commercial loan originations, the Bank emphasizes cross-selling of
commercial checking and money market deposits from new commercial customers. As of December 31, 2005, commercial deposits totaled $36.2 million and represented 14.7% of total deposits.



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Total deposits decreased $8.9 million, or 3.5%, since June 30, 2005 to $245.9 million at
December 31, 2005. The largest decrease was in NOW deposits, which decreased $8.0 million, or 22.6%, due to lower balances in certain NOW accounts used by attorneys in connection with residential loan closings. These deposits typically
fluctuate with the seasonality of the residential loan market. Money market deposits and regular savings decreased $4.2 million, or 12.6%, and $3.7 million, or 8.4%, respectively, since June 30, 2005 due in part to customer transfers from these
products to the Banks special rate certificates of deposit offered this period. Partially offsetting these decreases to deposits was an increase in certificates of deposit of $5.9 million, or 5.8%, due primarily to the special rate promotions
of the Bank during this period. Also, demand deposits increased $1.0 million, or 2.6%. Borrowings from the FHLB increased $28.6 million, or 44.2%, since June 30, 2005 to $93.1 million at December 31, 2005, and provided the additional
funding for this years loan growth. The Company expects to utilize several sources of funds to support loan growth, including, but not limited to, running aggressive promotional campaigns for both core deposits and certificates of deposit,
which may be supplemented by borrowings from correspondent banks and the FHLB as well as brokered certificates of deposit.



Stockholders equity increased from $26.5 million, or 7.56% of total assets at June 30, 2005, to $27.1 million, or 7.30% of total assets at
December 31, 2005. The increase in stockholders equity was due to the Companys retained earnings since the beginning of the fiscal year, partially offset by a decrease in accumulated other comprehensive income. Accumulated other
comprehensive income, which consists almost entirely of unrealized gain or loss on securities available for sale, decreased $850,000 during the six months ended December 31, 2005 due to an increase in market interest rates and resulting decrease in
the market value of debt securities and due to the sale of securities and recognition of securities gains through the income statement. The decrease in the equity to assets ratio was the result of asset growth since June 30, 2005.



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.



|                                          |  |                        |      |   |              |   |      |  
|----------------------------------------- |  | ---------------------- | ---- | - | ------------ | - | ---- | -
|                                          |  | December 31,2005       |      |   | June 30,2005 |  
|                                          |  | (Dollars in thousands) |     
|Non-accrual loans:                        |  |                        |      |   |              |   |      |  
|Residential real estate                   |  | $                      |     |   |              | $ |     |  
|Commercial and multi-family real estate   |  |                        |     |   |              |   |     |  
|Consumer                                  |  |                        |     |   |              |   |     |  
|Commercial                                |  |                        | 191  |   |              |   | 90   |  
|                                          |  |                        |      |   |              |   |      |  
|Total                                     |  |                        | 191  |   |              |   | 90   |  
|Accruing loans more than 90 days past due |  |                        |     |   |              |   |     |  
|Foreclosed assets                         |  |                        |     |   |              |   |     |  
|                                          |  |                        |      |   |              |   |      |  
|Total non-performing assets               |  | $                      | 191  |   |              | $ | 90   |  
|                                          |  |                        |      |   |              |   |      |  
|Total as a percentage of total assets     |  |                        | 0.05 | % |              |   | 0.03 | %



For the six months
ended December 31, 2005, the Banks provision for loan losses was $200,000, which was similar to the $211,000 recorded for the same period last year. Nonperforming assets at December 31, 2005 were $191,000, or 0.05% of total assets,
compared to $90,000 or 0.03% at June 30, 2005. The allowance for loan losses as a percentage of loans was 0.91% at December 31, 2005, slightly higher than the 0.90% at June 30, 2005. For a further discussion of the allowance refer to
the Companys Annual Report on Form 10-KSB for the year ended June 30, 2005 under Allowance for Loan Losses. During the six months ended December 31, 2005, recoveries from previously charged-off loans of $4,000 were
received and $27,000 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 Six Months Ended December 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 non-interest 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.



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Net income for the quarter ended December 31, 2005 was $328,000 compared with $536,000 for the
quarter ended December 31 2004, a decrease of $208,000, or 38.8%. The decrease in net income was largely due to an increase in non-interest expense of $492,000, or 21.2%, during the quarter, which included an additional $307,000 in equity
compensation charges. Non-interest income decreased $14,000, or 3.2%, compared to the same quarter a year ago. Partially offsetting these reductions to income was higher net interest income of $193,000, or 6.9%, and a lower loan loss provision by
$41,000. Net income for the six months ended December 31, 2005 was $1.0 million compared with $995,000 for the six months ended December 31, 2004, an increase of $13,000, or 1.3%. Net interest income increased $480,000, or 8.8%, and
non-interest income increased $180,000, or 20.9%, while the provision for loan losses was $11,000 lower compared to the same period a year ago. Partially offsetting these increases to income was higher non-interest expense of $580,000, or 12.4%.



Earnings per share for the quarter ended December 31,
2005 were $0.20 per share (basic and diluted) compared with $0.33 per share (basic) and $0.32 per share (diluted) for the quarter ended December 31, 2004. Earnings per share for the six months ended December 31, 2005 were $0.62 per share
(basic) and $0.61 per share (diluted) compared with $0.61 per share (basic) and $0.60 per share (diluted) for the six months ended December 31, 2004.



Interest and Dividend Income



Total interest and dividend income for the quarter ended December 31, 2005 was $5.1 million, which was $857,000, or 20.2%, higher than the same
quarter a year ago. Total interest and dividend income for the six months ended December 31, 2005 was $9.9 million, which was $1.6 million, or 19.7%, higher than the same period a year ago. Increases in average earning-assets of $37.8 million
and $38.3 million to $347.0 million and $341.1 million for the quarter and six-month periods, respectively, were major contributors to the higher interest and dividend income. The yields on earning assets for the quarter and six months ended
December 31, 2005 were 5.85% and 5.78%, 39 and 34 basis points higher, respectively, than the same periods last year.



Interest and fees on loans increased $884,000, or 25.0%, and $1.7 million, or 24.4%, for the quarter and six months ended December 31, 2005,
respectively, compared to the same periods last year. Average net loans for the quarter increased $40.9 million, or 16.3%, to $292.1 million, while yield on loans increased 42 basis points to 6.03%. Average net loans for the six-month period
increased $41.5 million, or 17.0%, while yield on loans increased 35 basis points to 5.94%. The increase in yield on loans this quarter and the six-month period reflects the increase over the past year 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.



The average securities portfolio balance decreased $293,000 this quarter, and the yield on the securities portfolio decreased 6 basis points to 4.89%,
which resulted in a decrease in interest income on securities of $13,000, or 1.9%. Average securities for the six-month period decreased $592,000, or 1.1%, and the yield on investment securities decreased 5 basis points to 4.94%, which resulted in a
decrease in interest income on securities of $29,000, or 2.1%. The decrease in yield on securities reflects the replacement of matured or sold securities over the past year with slightly lower yielding securities.



Interest Expense



Total interest expense increased $664,000, or 45.8%, for the quarter ended
December 31, 2005 to $2.1 million compared to the same quarter last year due to an increase in average interest-bearing liabilities of $35.7 million, or 13.6%, to $298.5 million and an increase in the cost of interest-bearing liabilities of 61
basis points to 2.79%. Total interest expense increased $1.1 million, or 41.2%, for the six-months ended December 31, 2005 to $3.9 million compared to the same period last year due to an increase in average interest-bearing liabilities of $36.0
million, or 14.0%, to $292.8 million and an increase in the cost of interest-bearing liabilities of 50 basis points to 2.64%.



Interest expense on deposits increased $309,000, or 40.8%, to $1.1 million for the quarter ended December 31, 2005 and increased $534,000, or 36.2%,
to $2.0 million for the six months ended December 31, 2005 compared to the same periods last year due to higher average deposits and cost of deposits. Average interest-bearing deposits increased $6.5 million and $10.0 million for the quarter
and six months ended December 31, 2005, respectively, compared to the same periods last year. The average cost of deposits increased 54 basis points to 2.04% and 44 basis points to 1.91% for the quarter and six-month periods, respectively. The
higher cost of deposits reflects the competitive market that the Bank operates in for certain deposits.



Interest expense on borrowings and subordinated debt increased $355,000, or 51.3%, to $1.0 million for the quarter ended December 31, 2005 and
increased $611,000, or 46.8%, to $1.9 million for the six months ended December 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
$29.1 million and $26.0 million for the quarter and six months ended December 31, 2005, respectively, compared to the same periods last year. The average cost of borrowings increased 13 basis points to 4.50% and 7 basis points to 4.45% for the
quarter and six months ended December 31, 2005, respectively, compared to last year.



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Net Interest Income



Net interest income for the quarter and six months ended December 31, 2005 increased $193,000, or 6.9%, and $480,000,
or 8.8%, respectively, over the same periods last year. The increases in net interest income were due mainly to an increase in total average earning assets and higher yield on earning assets exceeding the effect of an increase in average
interest-bearing liabilities and a change in the mix of liabilities to more higher-cost 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 22 basis points to 3.06% and decreased 16 basis points to 3.14% for the quarter and the six month period ended December 31, 2005, respectively, compared to the same periods last year. The net interest margin (net
interest income divided by average earning assets) decreased 17 basis points to 3.45% and decreased 12 basis points to 3.51%, for the quarter and six months ended December 31, 2005, respectively. The decrease in the interest rate spread and
margin reflects the increase in cost of funds exceeding the increase 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 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 EndedDecember 31, |   |  | Six Months EndedDecember 31, |  
|                                  |  | 2005                      |   |  | 2004                         |   |  | 2005 |   |  | 2004 |  
|Weighted average yield earned on: |  |                           |   |  |                              |   |  |      |   |  |      |  
|Short-term investments            |  |                          | % |  | 2.00                         | % |  | 3.05 | % |  | 1.61 | %
|Securities                        |  | 4.89                      | % |  | 4.95                         | % |  | 4.94 | % |  | 4.99 | %
|Total loans, net                  |  | 6.03                      | % |  | 5.61                         | % |  | 5.94 | % |  | 5.59 | %
|                                  |  |                           |   |  |                              |   |  |      |   |  |      |  
|All interest-earning assets       |  | 5.85                      | % |  | 5.46                         | % |  | 5.78 | % |  | 5.44 | %
|                                  |  |                           |   |  |                              |   |  |      |   |  |      |  
|Weighted average rate paid on:    |  |                           |   |  |                              |   |  |      |   |  |      |  
|Deposits                          |  | 2.04                      | % |  | 1.50                         | % |  | 1.91 | % |  | 1.47 | %
|Borrowed funds                    |  | 4.50                      | % |  | 4.37                         | % |  | 4.45 | % |  | 4.38 | %
|                                  |  |                           |   |  |                              |   |  |      |   |  |      |  
|All interest-bearing liabilities  |  | 2.79                      | % |  | 2.18                         | % |  | 2.64 | % |  | 2.14 | %
|                                  |  |                           |   |  |                              |   |  |      |   |  |      |  
|Weighted average rate spread      |  | 3.06                      | % |  | 3.28                         | % |  | 3.14 | % |  | 3.30 | %
|                                  |  |                           |   |  |                              |   |  |      |   |  |      |  
|Net interest margin               |  | 3.45                      | % |  | 3.62                         | % |  | 3.51 | % |  | 3.63 | %
|                                  |  |                           |   |  |                              |   |  |      |   |  |      |  



Non-interest
Income



Total non-interest income decreased $14,000,
or 3.2%, for the quarter ended December 31, 2005 compared with the quarter ended December 31, 2004. This quarters gains from the sale of residential loans were $21,000, which was $11,000 lower than the same quarter a year ago. Net
gains from the sale of securities were $5,000, which was $7,000 lower than last year. Total non-interest income for the six months ended December 31, 2005 increased $180,000, or 20.9%, compared to the same period last year due mostly to higher
net gains on the sale of securities of $196,000 this year as the Company took advantage of favorable market prices for certain securities.



Non-interest Expense



Total non-interest expense increased $492,000, or 21.2%, to $2.8 million for the quarter ended December 31, 2005 and increased $580,000, or 12.4%,
for the six months ended December 31, 2005 compared with the same periods last year. Salary and benefits expense increased $418,000 and $463,000 for the quarter and six-month periods, respectively. Included in non-interest expense for the
quarter and six months ended December 31, 2005 was a charge of $307,000 related to restricted stock awards of the Companys common stock granted as of December 1, 2005 to executive officers and members of the Board of Directors of the
Company. The expense associated with the awards is recognized over the vesting periods of the awards. These awards are more fully described in the Companys Form 8-K report filed with the Securities and Exchange Commission on October 25,
2005. The Company will include a charge for equity compensation expense related to the December 1, 2005 awards of $16,000 per quarter beginning in the



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quarter ended March 31, 2006 and concluding in the quarter ended December 31, 2009. Salaries and benefit expense were also higher in both periods
due to increased benefit expenses and higher compensation levels due to annual merit increases. Occupancy expense increased $26,000, or 10.9%, and $43,000, or 8.9%, for the quarter and six months ended December 31, 2005, respectively, compared
to the same periods last year, due to increases in contractual rent obligations, higher real estate taxes and utilities expenses. Equipment expense was lower by $10,000, or 9.5%, and $34,000, or 15.7%, compared to the same periods last year due
mostly to lower depreciation expense as older capital assets reached their depreciation lives. Increases in the other operating expense categories including data processing, professional fees and advertising were consistent with the expanded
operations of the Company since last year.



The operating
efficiency ratio (total noninterest expense divided by the sum of net interest income plus total noninterest income) for the quarter ended December 31, 2005 was 82.7% compared with 72.1% for the same quarter a year ago. The operating efficiency
ratio for the six months ended December 31, 2005 was 74.9% compared with 74.6% for the same six-month period a year ago. The increase in the operating efficiency ratios, particularly in the quarter-to-quarter comparison, was attributed to the
aforementioned equity compensation charge.



Income Taxes



Income tax expense decreased by $64,000 to $191,000
for the quarter ended December 31, 2005 compared with the same quarter last year due mostly to this quarters lower level of pre-tax income. Income tax expense increased by $78,000 to $548,000 for the six months ended December 31,
2005 compared with the same period last year due mostly to this years higher level of pre-tax income. The effective income tax rates were 36.8% and 35.2% for the quarter and six months ended December 31, 2005, respectively, compared with
32.2% and 32.1%, respectively, 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 reflects the increase in loans held by the Bank and resulting increase in interest income at the Bank, while a reduction in investment securities held by
the security corporations has decreased interest income at the security corporations. 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 increase in the overall 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, 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.



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



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##### Table of Contents

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 December 31, 2005 amounted to $93.1 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 December 31, 2005, the Bank had a borrowing capacity with the FHLB to borrow an additional $18.7 million, for a total of $111.8 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 December 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 $71.5 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 $85.9 million at December 31, 2005. Based upon historical experience, management believes that a significant portion of such deposits will remain
with the Bank.



At December 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 December 31, 2005, 42,236 shares of the Companys common stock had been repurchased under the Stock Purchase Plan at an
average price of $24.15 per share.



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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 December 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 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
|------- | ---------------------------------------------------



On October 25, 2005, the Company held its annual meeting of stockholders for the purposes of (i) electing four Directors for three-year terms
and (ii) ratifying Wolf & Company, P.C. as the Companys independent auditors for the fiscal year ending June 30, 2006.



The number of votes cast at the meeting as to each matter acted upon was as follows:



|   |  |                        |  |                  |  |                      
|-- |  | ---------------------- |  | ---------------- |  | ---------------------
|   |  |                        |  | NO. OF VOTES FOR |  | NO. OF VOTES WITHHELD
|1. |  | Election of Directors: |  |                  |  |                      
|   |  | Richard Giusti         |  | 1,323,099        |  | 900                  
|   |  | Thomas R. Howie        |  | 1,322,499        |  | 1,500                
|   |  | Eugene R. Liscombe     |  | 1,322,399        |  | 1,600                
|   |  | Pamela J. Montpelier   |  | 1,323,099        |  | 900                  



|   |  |                                                                                               |  |                  |  |                      |  |                        
|-- |  | --------------------------------------------------------------------------------------------- |  | ---------------- |  | -------------------- |  | -----------------------
|   |  |                                                                                               |  | NO. OF VOTES FOR |  | NO. OF VOTES AGAINST |  | NO. OF VOTES ABSTAINING
|2. |  | Ratification of the Appointment of Wolf & Company, P.C. as the Companys Independent Auditors |  | 1,320,849        |  | 400                  |  | 2,750                  



|ITEM 5. | Other Information
|------- | -----------------



Not applicable.



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##### Table of Contents

|ITEM 6. | Exhibits
|------- | --------



Exhibits



|     |  |                                                                                                                                                                                      
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Amended and Restated Supplemental Retirement Agreement dated as of December 13, 2005 by and among Pamela J. Montpelier, Strata Bank, Service Bancorp, Inc., and Service Bancorp,
MHC.
|     | 
|10.2 |  | First Amendment to Employment Agreement dated December 13, 2005 by and among Pamela J. Montpelier and Strata Bank.                                                                   
|     | 
|10.3 |  | Form of Restricted Stock Award for Officers dated December 1, 2005.                                                                                                                  
|     | 
|10.4 |  | Form of Restricted Stock Award for Non-Employee Directors dated December 1, 2005.                                                                                                    
|     | 
|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: February 10, 2006 |  |  |  | By:                   |  | /s/    PAMELA J.
MONTPELIER
|                        |  |  |  |                       |  |                             |  | Pamela J. Montpelier                 
|                        |  |  |  |                       |  |                             |  | President and Chief Executive Officer
|                        |  |  | 
|Date: February 10, 2006 |  |  |  | By:                   |  | /s/    DANA S. PHILBROOK   
|                        |  |  |  |                       |  |                             |  | Dana S. Philbrook                    
|                        |  |  |  |                       |  |                             |  | Chief Financial Officer              



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