EXHIBIT 13

                          ANNUAL REPORT TO STOCKHOLDERS
<PAGE>

                       1999 ANNUAL REPORT TO STOCKHOLDERS
                              SERVICE BANCORP, INC.
<PAGE>

                                TABLE OF CONTENTS

                                                                          Page

Message to Our Stockholders.............................................     1
Selected Consolidated Financial and Other Data..........................     2
Management's Discussion and Analysis of
  Financial Condition and Results of Operations.........................     4
Common Stock and Related Matters........................................    15
Stockholder Information.................................................    16
Independent Auditors' Report............................................    17
Consolidated Balance Sheets.............................................    18
Consolidated Statements of Income.......................................    19
Consolidated Statements of Changes in Stockholders' Equity..............    20
Consolidated Statements of Cash Flows...................................    21
Notes to Consolidated Financial Statements..............................    23
<PAGE>

                      [LETTERHEAD OF SERVICE BANCORP, INC.]

To our Stockholders:

We at Service Bancorp, Inc. are proud to present you with the first annual
report of the Company. The structure of the organization is that of a two-tier
mutual holding company in which the Company owns 100% of the outstanding common
stock of Summit Bank. Service Bancorp, MHC owns 53.7% of the common stock of the
Company and 46.3% of the Company's common stock is owned by the public.

The additional capital acquired in the Company's public offering completed in
October 1998, has allowed Summit Bank to pursue an aggressive growth strategy.
Since the public offering, the Bank has opened a limited service office in a new
100-unit assisted living facility in Franklin, a full service free standing,
wholly-owned facility in Bellingham and a leased store front branch in
Hopkinton, and plans to move a store front shopping center branch to a leased
free standing full service facility in Franklin. Another component of the Bank's
growth strategy is to substantially increase the origination of commercial
mortgage loans. We will endeavor to achieve this growth through a focused
officer calling program to promote loan products.

During the year ended June 30, 1999 total assets increased from $139.0 million
to $178.2 million, an increase of $39.2 million, or 28.2%. Gross income net of
security gains for the year ended June 30, 1999 climbed 21% to $11.1 million
compared to the prior year. Net income after taxes showed a slight drop from
$1.2 million to $1.1 million compared to the prior year. This decrease was
attributable to an increase in non-interest expense of $1.2 million, or 31.3%,
resulting from the additional branch locations and to an increase in the loan
loss provision of $78,000. Please review "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for further details.

In April 1999, the Board of Directors approved a stock repurchase program of 4%,
or 68,505 shares of outstanding Company common stock to be purchased over the
following 12 months. As of June 30, 1999, 10,000 shares had been purchased at an
average price of $8.25. We believe that our stock is attractively priced and
plan to continue the program.

The Company and the Bank have taken prudent measures to ensure that our computer
systems are Year 2000 (Y2K) ready. Thorough testing of our hardware and software
has taken place. Additionally, we have developed a business resumption
contingency plan and are implementing a disaster recovery plan to be tested in
September of 1999.

The continued commitment and performance of our employees, management and Board
of Directors in addition to the support of our customers and stockholders have
permitted Summit Bank to continue the growth that has contributed to the success
of the Bank over the past several years.

On behalf of the Directors, Officers and employees, thank you for your
confidence and trust.

Sincerely,

/s/ Eugene G. Stone

Eugene G. Stone
President & Chief Executive Officer
<PAGE>

                SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

      The following information is derived from the audited consolidated
financial statements of Service Bancorp, Inc. (the "Company"), or prior to
October 7, 1998, Summit Bank (the "Bank"). For additional information about the
Company and the Bank's reorganization, reference is made to "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of the Company and related notes included
elsewhere herein.

Selected Consolidated Financial Data

<TABLE>
<CAPTION>
                                                                                        June 30,
                                                                       -----------------------------------------
                                                                         1999       1998       1997       1996
                                                                       ---------  --------   --------   --------
                                                                                     (In Thousands)
<S>                                                                    <C>        <C>        <C>        <C>
Total assets....................................................       $ 178,158  $138,952   $104,878   $ 90,354
Loans receivable, net ..........................................          85,984    76,735     66,934     59,667
Short-term investments..........................................           5,451    11,931      6,305      2,597
Mortgage-backed securities--available for sale..................          16,975     5,980      2,745      2,076
Investment securities--available for sale (1)...................          54,737    36,422     22,989     19,181
Deposits........................................................         133,138   112,247     92,897     81,189
Total borrowings................................................          25,993    14,562      2,622        369
Stockholders' equity............................................          16,479    10,123      8,695      7,421
</TABLE>

Summary of Operations

<TABLE>
<CAPTION>
                                                                                  Years Ended June 30,
                                                                       -----------------------------------------
                                                                         1999       1998       1997       1996
                                                                       ---------  --------   --------   --------
                                                                                     (In Thousands)
<S>                                                                    <C>        <C>        <C>        <C>
Total interest income...........................................       $  10,419  $  8,636   $  7,037   $  6,102
Total interest expense..........................................           4,830     4,116      3,174      2,746
                                                                       ---------  --------   --------   --------
   Net interest income..........................................           5,589     4,520      3,863      3,356
Provision for loan losses.......................................             178       100         35         93
                                                                       ---------  --------   --------   --------
Net interest income, after provision for loan losses............           5,411     4,420      3,828      3,263
                                                                       ---------  --------   --------   --------
Fees and service charges........................................             600       430        406        388
Gain on sales of loans and securities...........................             723       833        493        308
Other non-interest income.......................................              41        58         60         78
                                                                       ---------  --------   --------   --------
Total non-interest income.......................................           1,364     1,321        959        774
                                                                       ---------  --------   --------   --------
Total non-interest expense......................................           5,130     3,908      3,094      2,735
                                                                       ---------  --------   --------   --------
Income before income taxes......................................           1,645     1,833      1,693      1,302
Income tax provision............................................             561       632        611        501
                                                                       ---------  --------   --------   --------
Net income......................................................       $   1,084  $  1,201   $  1,082   $    801
                                                                       =========  ========   ========   ========
</TABLE>

-----------------------
(1)   Includes certificates of deposit and FHLB stock, which are not available
      for sale.


                                       2
<PAGE>

Key Operating Ratios and Other Data

<TABLE>
<CAPTION>
                                                                       At or for the Years Ended June 30,
                                                                -----------------------------------------------
                                                                  1999         1998         1997          1996
                                                                  ----         ----         ----          ----
<S>                                                              <C>          <C>          <C>          <C>
Performance Ratios:
Return on average assets....................................       0.72%        1.02%        1.13%        0.97%
Return on average stockholders' equity......................       7.23%       12.80%       13.58%       11.35%
Average interest rate spread................................       3.44%        3.60%        3.86%        3.99%
Net interest margin (1).....................................       3.95%        4.05%        4.29%        4.34%
Ratio of operating expense to average assets................       3.41%        3.31%        3.24%        3.31%
Ratio of average interest-earning assets to
   average interest-bearing liabilities.....................     115.07%      112.21%      112.38%      109.81%
Efficiency ratio (2)........................................      73.78%       66.91%       64.16%       66.22%

Asset Quality Ratios:
Non-accrual loans and other real estate owned
   to total assets..........................................       0.22%        0.21%        0.22%        0.99%
Allowance for loan losses as a percent of
   non-accrual loans........................................     185.93%      199.65%      246.11%       52.28%
Allowance for loan losses as a percent of
   loans receivable, net....................................       0.86%        0.75%        0.71%        0.79%

Capital Ratios and Data:
Stockholders' equity to total assets........................       9.25%        7.29%        8.29%        8.21%
Average stockholders' equity to average assets..............       9.96%        7.94%        8.33%        8.55%
Net book value per share....................................    $  9.97          N/A          N/A          N/A

Other Data:
Number of full-service offices..............................          7            5            4            4
Number of deposit accounts..................................     17,764       16,488       15,598       14,830
Number of loans outstanding.................................      1,757        1,695        1,557        1,410
</TABLE>

--------------------------
(1)   Net interest income divided by average interest-earning assets.
(2)   Non-interest expense divided by the sum of net interest income and
      non-interest income.


                                       3
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

      In addition to historical information, this document contains
forward-looking statements. The forward-looking statements contained in the
following sections are subject to certain risks and uncertainties that could
cause actual results to differ materially from those projected in the
forward-looking statements. Important factors that might cause such a difference
include, but are not limited to, those discussed. Readers should not place undue
reliance on these forward- looking statements, as they reflect management's
analysis as of the date of this report. The Company has no obligation to update
or revise these forward-looking statements to reflect events or circumstances
that occur after the date of this report. Readers should carefully review the
risk factors described in other documents the Company files from time to time
with the SEC, including quarterly reports on Form 10-QSB and current reports
filed on Form 8-K.

General

      The Company's results of operations depend primarily on its net interest
income, which is the difference between the income earned on the Company's loan
and securities portfolios and its cost of funds, consisting of the interest paid
on deposits and borrowings. Results of operations are also affected by the
Company's provision for loan losses, income and expenses pertaining to other
real estate owned, gains and losses from sales of securities, and non-interest
expenses. The Company's non-interest expenses consist principally of
compensation and employee benefits, occupancy, equipment and data processing,
and other operating expenses. Results of operations are also significantly
affected by general economic and competitive conditions, changes in interest
rates, as well as government policies and actions of regulatory authorities.
Future changes in applicable law, regulations or government policies may
materially affect the Company.

      In this document, the Company is being discussed on a consolidated basis
with its wholly-owned subsidiary, Summit Bank (the "Bank"). References to the
Company may signify the Bank, depending on the context of the reference.

Management of Credit Risk

      Management considers credit risk to be an important risk factor affecting
the financial condition and operating results of the Company. The potential for
loss associated with this risk factor is managed through a combination of
policies approved by the Company's Board of Directors, the monitoring of
compliance with these policies, and the periodic reporting and evaluation of
loans with problem characteristics. Policies relate to the maximum amount that
can be granted to a single borrower and such borrower's related interests, the
aggregate amount of loans outstanding by type in relation to total assets and
capital, loan concentrations, loan-to-collateral-value ratios, approval limits
and other underwriting criteria. Policies also exist with respect to performing
credit reviews by an officer not involved in loan origination, the rating of
loans, when loans should be placed in a non-performing status, and the factors
that should be considered in establishing the Company's allowance for loan
losses.

Management of Interest Rate Risk

      Another important risk factor affecting the financial condition and
operating results of the Company is interest rate risk. This risk is managed by
periodic evaluation of the interest rate risk inherent in certain balance sheet
accounts, determination of the level of risk considered appropriate given the
Company's capital and liquidity requirements, business strategy, performance
objectives and operating environment, and maintenance of such risks within
guidelines approved by the Board of Directors. Through such management, the
Company seeks to reduce the vulnerability of its operations to changes in
interest rates. The Company's Asset/Liability Committee, comprised of senior
management, is responsible for managing interest rate risk and reviewing with
the Board of Directors on a quarterly basis its activities and strategies, the
effect of those strategies on the Company's operating results, the Company's
interest rate risk


                                       4
<PAGE>

position, and the effect changes in interest rates would have on the Company's
net interest income. The extent of movement of interest rates is an uncertainty
that could have a negative impact on the earnings of the Company.

      The principal strategies used by the Company to manage interest rate risk
include (1) emphasizing the origination and retention of adjustable-rate and
fixed-rate loans, (2) originating fixed-rate commercial real estate loans, (3)
investing in debt securities with maturities with shorter call dates of 2 to 5
years, (4) classifying all of the Company's investment portfolio as available
for sale so as to provide sufficient flexibility in liquidity management, and
(5) maintaining a high concentration of less interest-rate-sensitive and
lower-costing "core deposits".

      Gap Analysis. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are "interest rate
sensitive" and by monitoring a bank's interest rate sensitivity "gap." An asset
or liability is deemed to be interest rate sensitive within a specific time
period if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest-earning assets maturing or repricing within a specific time period and
the amount of interest bearing-liabilities maturing or repricing within that
same time period. At June 30, 1999, the Company's cumulative one-year gap
position, the difference between the amount of interest-earning assets maturing
or repricing within one year and interest-bearing liabilities maturing or
repricing within one year, was a negative 18.4%. A gap is considered positive
when the amount of interest rate sensitive assets exceeds the amount of interest
rate sensitive liabilities. A gap is considered negative when the amount of
interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. Accordingly, during a period of rising interest rates, an
institution with a negative gap position generally would not be in as favorable
a position, compared to an institution with a positive gap, to invest in higher
yielding assets. The resulting yield on the institution's assets generally would
increase at a slower rate than the increase in its cost of interest-bearing
liabilities. Conversely, during a period of falling interest rates, an
institution with a negative gap would tend to experience a repricing of its
assets at a slower rate than its interest-bearing liabilities which,
consequently, would generally result in its net interest income growing at a
faster rate than an institution with a positive gap position.

      The following table sets forth the amortized cost of interest-earning
assets and interest-bearing liabilities outstanding at June 30, 1999, which are
anticipated by the Company, based upon certain assumptions, to reprice or mature
in each of the future time periods shown. Except as stated below, the amount of
assets and liabilities shown which reprice or mature during a particular period
were determined in accordance with the earlier of term to repricing or the
contractual maturity of the asset or liability. The table sets forth an
approximation of the projected repricing of assets and liabilities at June 30,
1999, on the basis of contractual maturities, anticipated prepayments and
scheduled rate adjustments within a three month period and subsequent selected
time intervals. The loan amounts in the table reflect principal balances
expected to be redeployed and/or repriced as a result of contractual
amortization and anticipated prepayments of adjustable-rate and fixed-rate
loans, and as a result of contractual rate adjustments on adjustable-rate loans.
The annual prepayment rate for loans (other than consumer loans) and
mortgage-backed securities is assumed to range between 8% and 12% depending upon
the type of loan, and the annual prepayment rate for consumer loans is assumed
to be 25%. Finally, the Company made a decision during fiscal 1999 to invest in
agency obligations and corporate debt with longer maturities to lock in higher
yields and enhance interest income performance. The agency and corporate debt
obligations have maturities ranging from 5 to 15 years, a principal portion of
which have call features of between 2 to 5 years. The GAP table generally
presents the full contractual maturity of these obligations, notwithstanding the
call features.


                                       5
<PAGE>

<TABLE>
<CAPTION>
                                                  Amounts maturing or repricing at June 30, 1999
                                                  ----------------------------------------------
                                                     Less
                                                  Than Three    3-6      6 Months to      1-3
                                                    Months     Months       1 Year       Years
                                                   -------    --------     --------     --------
                                                              (Dollars in Thousands)
<S>                                                <C>        <C>          <C>          <C>
Interest-earning assets (1):
  Loans receivable (2)...........................  $20,923    $  7,551     $ 16,110     $ 29,566
  Short-term investments.........................    5,451          --           --           --
  Mortgage-backed securities.....................      418         418          837        3,348
  Debt securities and certificates of deposit....       --          --          500        1,831
  Equity securities..............................       --          --           --           --
  FHLB stock.....................................       --          --           --           --
                                                   -------    --------     --------     --------
    Total interest-earning assets................   26,792       7,969       17,447       34,745
                                                   -------    --------     --------     --------

Interest-bearing liabilities:
  Savings deposits (3)(4)........................    3,187       3,188        3,188        3,188
  Money market deposits (3)......................    1,271       1,270        1,270        1,270
  NOW deposits (5)...............................    3,953       3,953        3,953        3,953
  Certificate accounts...........................   20,119      16,761       17,716        9,359
  FHLB advances..................................    5,132          90            5           18
                                                   -------    --------     --------     --------
    Total interest-bearing liabilities...........  $33,663    $ 25,262     $ 26,132     $ 17,788
                                                   -------    --------     --------     --------

Interest sensitivity gap (6).....................  $(6,870)   $(17,293)    $ (8,685)    $ 16,957
                                                   =======    ========     ========     ========
Cumulative interest sensitivity gap..............  $(6,870)   $(24,163)    $(32,848)    $(15,891)
                                                   =======    ========     ========     ========
Cumulative interest sensitivity gap as a
  percentage of total assets.....................    (3.86)%    (13.56)%     (18.44)%      (8.92)%
Cumulative interest sensitivity gap as a
  percentage of total interest-earning assets ...    (4.16)%    (14.61)%     (19.87)%      (9.61)%
Cumulative interest-earning assets as a
  percentage of cumulative interest-bearing
  liabilities....................................    79.59%      58.99%       61.38%       84.55%

<CAPTION>
                                                   Amounts maturing or repricing at June 30, 1999
                                                   ----------------------------------------------
                                                       3-5       5-10       Over 10
                                                      Years      Years       Years      Total
                                                     -------    -------    --------    --------
                                                               (Dollars in Thousands)
<S>                                                  <C>        <C>        <C>         <C>
Interest-earning assets (1):
  Loans receivable (2)...........................    $ 6,804    $ 3,140    $  2,271    $ 86,365
  Short-term investments.........................         --         --          --       5,451
  Mortgage-backed securities.....................      3,348      9,251          --      17,620
  Debt securities and certificates of deposit....      3,409     43,228       2,882      51,850
  Equity securities..............................         --         --       2,746       2,746
  FHLB stock.....................................         --         --       1,300       1,300
                                                     -------    -------    --------    --------
    Total interest-earning assets................     13,561     55,619       9,199     165,333
                                                     -------    -------    --------    --------

Interest-bearing liabilities:
  Savings deposits (3)(4)........................         --         --      12,751      25,502
  Money market deposits (3)......................         --         --       5,082      10,163
  NOW deposits (5)...............................         --         --       5,270      21,082
  Certificate accounts...........................         --         --          --      63,955
  FHLB advances..................................      2,018     16,049       2,681      25,993
                                                     -------    -------    --------    --------
    Total interest-bearing liabilities...........    $ 2,018    $16,049    $ 25,784     146,695
                                                     -------    -------    --------    --------

Interest sensitivity gap (6).....................    $11,543    $39,570    $(16,585)
                                                     =======    =======    ========
Cumulative interest sensitivity gap..............    $(4,348)   $35,222    $ 18,637
                                                     =======    =======    ========
Cumulative interest sensitivity gap as a
  percentage of total assets.....................      (2.44)%    19.77%      10.46%
Cumulative interest sensitivity gap as a
  percentage of total interest-earning assets ...      (2.63)%    21.30%      11.27%
Cumulative interest-earning assets as a
  percentage of cumulative interest-bearing
  liabilities....................................      95.85%    129.13%     112.70%
</TABLE>

-------------------------
(1)   Interest-earning assets are included in the period in which the balances
      are expected to be redeployed and/or repriced as a result of anticipated
      prepayments, scheduled rate adjustments and contractual maturities.
(2)   For the purposes of the gap analysis, the allowance for loan losses,
      deferred loan fees, unearned income, and non-accrual loans have been
      excluded.
(3)   50% of regular savings and money market account balances is included in
      the over 10 year period; the remaining 50% of such balances is spread
      evenly within the four intervals up to and including the one- to
      three-year period.
(4)   Includes mortgagors' escrow payments.
(5)   25% of NOW account balances are included in the over 10 year period; the
      remaining balances are spread evenly within the four intervals up to and
      including the one- to three-year period.
(6)   Interest sensitivity gap represents the difference between
      interest-earning assets and interest-bearing liabilities.


                                       6
<PAGE>

      Certain shortcomings are inherent in the method of analysis presented in
the GAP table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets such as adjustable-rate loans, have features
which restrict changes in interest rates both on a short-term basis and over the
life of the asset. Further, in the event of changes in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in calculating the table. Finally, the ability of many borrowers
to service their adjustable-rate loans may decrease in the event of an interest
rate increase.

Analysis of Net Interest Income

      Net interest income represents the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
Net interest income also depends on the relative amounts of interest-earning
assets and interest-bearing liabilities and the interest rates earned or paid on
them.


                                       7
<PAGE>

      Average Balance Sheet. The following table presents, for the periods
indicated, the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
rates. No tax equivalent adjustments were made. All average balances are monthly
average balances. Non-accruing loans have been included in the table as loans
carrying a zero yield.

<TABLE>
<CAPTION>
                                                                          Year Ended June 30,
                                                     ----------------------------------------------------------------
                                                                  1999                             1998
                                                     -------------------------------  -------------------------------
                                                                Interest                         Interest
                                                      Average    Earned/               Average    Earned/
                                                      Balance     Paid    Yield/Rate   Balance     Paid    Yield/Rate
                                                     ---------  --------- ----------  ---------  --------- ----------
                                                                          (Dollars in Thousands)
<S>                                                  <C>        <C>           <C>     <C>        <C>           <C>
Interest-earning assets:
   Loans receivable (1)..........................    $  75,724  $   6,400     8.45%   $  70,730  $   6,121     8.65%
   Mortgage-backed securities....................        9,207        559     6.07        4,315        252     5.84
   Debt securities (2)...........................       43,614      2,927     6.71       28,281      1,895     6.70
   Equity securities.............................        3,228         98     3.04        2,662         70     2.63
   FHLB stock....................................          820         53     6.46          612         40     6.54
   Short-term investments........................        8,802        382     4.34        4,952        258     5.21
                                                     ---------  ---------             ---------  ---------
     Total interest-earning assets...............      141,395     10,419     7.37      111,552      8,636     7.74
                                                                ---------                        ---------
Non-interest-earning assets......................        9,150                            6,628
                                                     ---------                        ---------
     Total assets................................    $ 150,545                        $ 118,180
                                                     =========                        =========

Interest-bearing liabilities:
   Savings deposits (3)..........................    $  24,022        556     2.31    $  21,711        550     2.53
   Money market deposits.........................        9,699        262     2.70        8,925        256     2.87
   NOW accounts..................................       16,837        147     0.87       12,949        169     1.31
   Certificate accounts..........................       56,294      3,033     5.39       48,266      2,721     5.64
   FHLB borrowings...............................       16,024        832     5.19        7,566        420     5.55
                                                     ---------  ---------             ---------  ---------
     Total interest-bearing liabilities..........      122,876      4,830     3.93       99,417      4,116     4.14
                                                                ---------                        ---------
Demand deposits..................................       11,583                            8,482
Other non-interest bearing liabilities...........        1,097                              897
Stockholders' equity.............................       14,989                            9,384
                                                     ---------                        ---------
   Total liabilities and stockholders' equity....    $ 150,545                        $ 118,180
                                                     =========                        =========
Net interest income..............................               $   5,589                        $   4,520
                                                                =========                        =========
Net interest spread..............................                             3.44%                            3.60%
                                                                           =======                          =======
Net earning assets...............................    $  18,519                        $  12,135
                                                     =========                        =========
Net yield on average interest-earning assets.....                             3.95%                            4.05%
                                                                           =======                          =======
Average interest-earning assets to average
    interest-bearing liabilities.................                  115.07%                          112.21%
                                                                =========                        =========

<CAPTION>
                                                            Year Ended June 30,
                                                      --------------------------------
                                                                    1997
                                                      --------------------------------
                                                                 Interest
                                                       Average    Earned/
                                                       Balance     Paid     Yield/Rate
                                                      ---------  ---------  ----------
                                                           (Dollars in Thousands)

<S>                                                   <C>        <C>           <C>
Interest-earning assets:
   Loans receivable (1)..........................     $  63,009  $   5,343     8.48%
   Mortgage-backed securities....................         2,151        145     6.74
   Debt securities (2)...........................        18,367      1,222     6.65
   Equity securities.............................         2,234         86     3.85
   FHLB stock....................................           489         31     6.34
   Short-term investments........................         3,792        210     5.54
                                                      ---------  ---------
     Total interest-earning assets...............        90,042      7,037     7.82
                                                                 ---------
Non-interest-earning assets......................         5,555
                                                      ---------
     Total assets................................     $  95,597
                                                      =========

Interest-bearing liabilities:
   Savings deposits (3)..........................     $  20,637        521     2.52
   Money market deposits.........................         7,854        225     2.86
   NOW accounts..................................        10,429        135     1.29
   Certificate accounts..........................        39,042      2,169     5.56
   FHLB borrowings...............................         2,161        124     5.74
                                                      ---------  ---------
     Total interest-bearing liabilities..........        80,123      3,174     3.96
                                                                 ---------
Demand deposits..................................         6,638
Other non-interest bearing liabilities...........           870
Stockholders' equity.............................         7,966
                                                      ---------
   Total liabilities and stockholders' equity....     $  95,597
                                                      =========
Net interest income..............................                $   3,863
                                                                 =========
Net interest spread..............................                              3,86%
                                                                            =======
Net earning assets...............................     $   9,919
                                                      =========
Net yield on average interest-earning assets.....                              4.29%
                                                                            =======
Average interest-earning assets to average
    interest-bearing liabilities.................                   112.38%
                                                                 =========
</TABLE>

-------------------------
(1)   Calculated net of deferred loan fees, loan discounts, loans in process and
      loss reserves.
(2)   Debt securities include certificates of deposit.
(3)   Savings deposits include mortgagors' escrow accounts.


                                       8
<PAGE>

      Rate/Volume Analysis. The following table presents the dollar amount of
changes in interest income and interest expense for major components of
interest-earning assets and interest-bearing liabilities. It distinguishes
between the changes related to outstanding balances and that due to the changes
in interest rates. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii)
changes in rate (i.e., changes in rate multiplied by old volume). For purposes
of this table, changes attributable to both rate and volume, which cannot be
segregated, have been allocated proportionately to the change due to volume and
the change due to rate.

<TABLE>
<CAPTION>
                                                      Years Ended June 30,              Years Ended June 30,
                                                -------------------------------   ------------------------------
                                                          1999 vs. 1998                    1998 vs. 1997
                                                -------------------------------   ------------------------------
                                                Increase (Decrease)               Increase (Decrease)
                                                       Due to          Total             Due to         Total
                                                -------------------   Increase    -------------------  Increase
                                                 Volume      Rate    (Decrease)     Volume    Rate    (Decrease)
                                                 ------      ----    ----------     ------    ----    ----------
                                                                         (In Thousands)
<S>                                              <C>        <C>        <C>          <C>      <C>        <C>
Interest and dividend income:
   Loans receivable..........................    $  423     $ (144)    $  279       $  672   $  106     $  778
   Mortgage-backed securities................       297         10        307          129      (22)       107
   Debt securities...........................     1,029          3      1,032          663       10        673
   Other.....................................        28         13         41           20      (27)        (7)
   Short-term investments....................       173        (49)       124           62      (14)        48
                                                 ------     ------     ------       ------   -------    ------

     Total...................................     1,950       (167)     1,783        1,546       53      1,599
                                                 ------     ------     ------       ------   ------     ------

Interest expense:
   Savings deposits..........................        56        (50)         6           25        4         29
   Money market deposits.....................        22        (16)         6           31       --         31
   NOW deposits .............................        43        (65)       (22)          33        1         34
   Certificate accounts......................       437       (125)       312          522       30        552
   FHLB borrowings...........................       441        (29)       412          300       (4)       296
                                                 ------     ------     ------       ------   ------     ------

     Total...................................       999       (285)       714          911       31        942
                                                 ------     ------     ------       ------   ------     ------

Net interest income..........................    $  951     $  118      1,069       $  635   $   22     $  657
                                                 ======     ======     ======       ======   ======     ======
</TABLE>


                                       9
<PAGE>

Comparison of Financial Condition at June 30, 1999 and June 30, 1998

      Total assets increased by $39.2 million, or 28.2%, from $139.0 million at
June 30, 1998 to $178.2 million at June 30, 1999. Funding for this increase was
attributable primarily to the completion of the Company's stock offering on
October 7, 1998, and growth in both deposits and borrowings. Net proceeds from
the offering, net of loan proceeds to the Bank's Employee Stock Ownership Plan,
amounted to $6.8 million, while deposits increased $20.9 million, or 18.6%, from
$112.2 million to $133.1 million. In addition, total borrowings increased $11.4
million, or 78.5%, from $14.6 million to $26.0 million over the same time-frame.

      Short-term investments (federal funds sold and overnight funds) decreased
by $6.5 million, or 54.3%, from $11.9 million at June 30, 1998 to $5.5 million
at June 30, 1999 as the Company began to deploy these lower-yielding liquid
funds into higher-yielding longer term investments. These short-term funds,
together with the proceeds from the stock offering, were invested in federal
agency obligations, mortgage-backed securities, and other debt securities, with
callable features or monthly payback amortization. Accordingly, federal agency
obligations, mortgage-backed securities, and other debt securities increased
$13.2 million, or 47.7%, $11.0 million, or 183.9%, and $7.0 million, or 309.2%,
respectively.

      Net loans increased $9.2 million, or 12.1% from June 30, 1998 to June 30,
1999. The loan composition within this portfolio shifted from residential to
commercial lending products. Commercial real estate and other commercial loans
increased from $12.9 million and $4.2 million, respectively, at June 30, 1998 to
$21.0 million and $6.5 million, respectively, at June 30, 1999 reflecting growth
of $8.1 million, or 63.2% and $2.3 million, or 53.7%, respectively. The Company
has increased its emphasis on the commercial loan portfolio. Conversely, despite
the increase in residential loan originations during fiscal 1998 and 1999, an
increase in the loan payoff amounts within the residential and construction loan
portfolios in fiscal 1999 over the previous period was the primary reason for
the lack of growth in these portfolios. A decline in mortgage lending rates
during fiscal 1998 and 1999 and increased lending competition within our lending
area primarily caused this increase in the loan payoff amounts. Residential
mortgage loans decreased $1.2 million, or 2.4% from $48.6 million at June 30,
1998 to $47.4 million at June 30, 1999, while net construction loan advances
increased slightly by $231,000, or 4.9%, from $4.7 million to $5.0 million.

      Deposits increased $20.9 million, or 18.6% from June 30, 1998 to June 30,
1999. Term certificates and non-certificate accounts increased $12.5 million, or
24.2%, and $8.4 million, or 13.9%, respectively, during this time-frame. In
addition, borrowings increased $11.4 million, or 78.5%, the proceeds of which
were used to fund the purchase of primarily mortgage-backed securities which
have similar or more favorable rates and terms than the current originations
within the Company's mortgage portfolio.

      Stockholders' equity increased from $10.1 million, or 7.29% of total
assets at June 30, 1998 to $16.5 million, or 9.25% of total assets at June 30,
1999. The increase resulted primarily from the net proceeds from the stock
offering and net income earned. Unrealized gains (losses) on securities
available for sale are reported as accumulated other comprehensive income (loss)
and between June 30, 1998 and June 30, 1999, the change amounted to a decrease
of $1.6 million.

Comparison of Operating Results for the Years Ended June 30, 1999 and June 30,
1998

      General. Net income decreased by $117,000, or 9.7%, to $1.1 million for
the year ended June 30, 1999 from $1.2 million for the comparable period in
1998. This decrease was primarily attributable to increases of $1.2 million and
$78,000, respectively, in total operating expenses and the provision for loan
losses and a decrease of $94,000 in the gain on sales of securities. These
decreases were partially offset by increases of $1.1 million and $170,000 in net
interest income and customer service fees, respectively.

      The Company's interest rate spread (the difference between yields earned
on earning assets and rates paid on deposits and borrowings) declined from 3.60%
for the year ended June 30, 1998 to 3.44% for the year ended June 30, 1999.
During the same period, the interest rate margin (net interest income divided by
average earning assets) decreased


                                       10
<PAGE>

from 4.05% to 3.95%. The interest rate margin indicates that in addition to
interest-bearing liabilities, demand deposits and capital serve as a source for
funding for earning assets. The decline was primarily attributable to lower
yields in all earning assets offset in part by lower rates on deposits and
borrowings.

      Interest and Dividend Income. Total interest and dividend income increased
by $1.8 million, or 20.6%, from $8.6 million for the year ended June 30, 1998 to
$10.4 million for the comparable period in 1999. This increase was primarily
attributable to a $29.8 million, or 26.8%, increase in average earning assets,
which was partially offset by a 37 basis point decline in the yield on earning
assets. The average balances in net loans increased $5.0 million, or 7.1%, while
total loan yield declined by 20 basis points to 8.45%. This loan yield decline
was primarily attributable to the fact that the residential loan portfolio has
experienced larger than normal principal payoffs as borrowers sought to
refinance their loans at lower rates. In addition, commercial loans were
impacted by current market conditions and the pricing for new commercial loan
originations were driven down by the loan pricing of the Company's competition.
If interest rates continue to decline, the yields on new loan originations and
existing loans with prime and index-based rates could be adversely affected.

      The average debt and mortgage-backed securities portfolio balances
increased $15.3 million, or 54.2%, and $4.9 million, or 113.4%, respectively,
and their portfolio yields improved by 1 and 23 basis points, respectively. The
Company decided to invest in federal agency, corporate obligations, and
government agency sponsored mortgage-backed securities with longer maturities
and higher yields in order to improve the interest rate margin while not
sacrificing the interest rate profile objectives of the Asset-Liability ("ALCO")
management process discussed above. The average balance in short-term
investments increased $3.9 million, or 77.7%, between periods while the
portfolio yield declined by 87 basis points as these investments were impacted
by the decline of short-term interest rates during the period.

      Interest Expense. Interest expense on deposits increased $302,000, or
8.2%, from $3.7 million for the year ended June 30, 1998, to $4.0 million for
the same period for 1999. This increase was attributable to a $15.0 million, or
15.1%, increase in average interest-bearing deposit balances between periods,
which was partially offset by a reduction in deposit rates over the same period
from 4.02% to 3.74%. The decrease in deposit interest rates was primarily due to
the declining interest rate environment between the two periods.

      The Company increased its use of borrowings from the FHLB as part of its
management of interest rate risk. Average balances in these advances were $16.0
million during the twelve months ended June 30, 1999, an increase of $8.5
million, or 111.8% from the comparable period ended June 30, 1998. Over this
same period, average borrowing rates declined from 5.55% to 5.19%. These
borrowings were used in many cases to fund the purchase of investment securities
where the yield and matching maturing terms favorably affected the net income
and ALCO management performance of the Company.

      Provision for Loan Losses. The provision for loan losses increased by
$78,000, from $100,000 for the year ended June 30, 1998 to $178,000 for the
comparable period in 1999. The increase reflected a desire by management to keep
the allowance for loan losses at a level to properly match inherent losses
related to loan growth, especially in the commercial loan area. The ratio of
non-accruing loans and other real estate owned to total assets was 0.22%, at
June 30, 1999. The allowance for loan losses was $577,000 at June 30, 1998 and
$740,000 at June 30, 1999, respectively. While management believes that, based
on information currently available, the Company's allowance for loan losses is
sufficient to cover losses inherent in its loan portfolio at this time, no
assurances can be given that the level of the Company's allowance will be
sufficient to cover future loan losses incurred by the Company 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
allowance.

      Non-Interest Income. Total non-interest income increased $43,000, or 3.3%,
from $1.3 million for the year ended June 30, 1998 to $1.4 million for the same
period in 1999. Customer service fees increased by $170,000, from $430,000 to
$600,000, primarily because of the increase in VISA debit card and ATM surcharge
fees between periods. This increase was partially offset by a decline in the
gain on sale of securities available for sale of $94,000, from


                                       11
<PAGE>

$764,000 to $670,000 between the periods. Marketable equity securities are held
by the Company primarily for capital appreciation and not for trading purposes.

      Non-Interest Expense. Total non-interest expense increased $1.2 million,
or 31.3%, from $3.9 million for the year ended June 30, 1998 to $5.1 million for
the comparable period in 1999. Between the two periods, salaries and benefits,
occupancy and equipment expenses, and advertising expenses increased $691,000,
or 35.5%, $175,000 or 20.8% and $64,000, or 54.2%, respectively. Much of the
increase in expense was attributed to the Company's asset growth as management
added staff and incurred costs for the new branches opened during the year and
to service the full range of retail and loan products added to the Company's
product lines. The ratio of operating expenses to average assets increased
slightly from 3.31% for the year ended June 30, 1998 to 3.41% for the same
period in 1999.

      Income Taxes. The effective income tax rate was 34.1% and 34.5% for the
year ended June 30, 1999 and 1998, respectively. The effective tax rates reflect
the utilization by the Company of securities investment subsidiaries to
substantially reduce state income tax rates.

Liquidity and Capital Resources

      The Company's primary sources of funds are deposits, principal and
interest payments on loans and debt securities and borrowings from the FHLB.
While maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by interest
rate trends, economic conditions and competition.

      Total assets increased by $39.2 million to $178.2 million at June 30, 1999
compared to $139.0 million at June 30, 1998. Total federal agency obligations,
mortgage-backed securities, and other debt securities increased $13.2 million,
$11.0 million, and $7.0 million, respectively, while short-term investments
decreased $6.5 million. In addition, net loans increased $9.2 million.

      Asset growth was funded primarily by growth in total deposits and
borrowings of $20.9 million and $11.4 million, respectively. In addition, $6.8
million of net proceeds from the Company's stock offering provided additional
funds for investment. The Company's ability to fund asset growth will continue
to come from deposits, specifically from the new branch openings and from
Federal Home Loan Bank borrowings. As of June 30, 1999, the Company has $26.0
million in outstanding borrowings and has the capacity to increase that total to
$59.3 million.

      The Company's most liquid assets are cash and due from banks, short-term
investments, and debt securities. The levels of these assets are dependent on
the Company's operating, financing, lending and investment activities during any
given period. At June 30, 1999, cash and due from banks, short-term investments,
and debt securities maturing within one year amounted to $13.9 million, or 7.8%
of total assets. Additional funds will be available during the next year from
the prepayment of loans and mortgage-backed securities.

      At June 30, 1999, the Company had commitments to originate loans, unused
outstanding lines of credit and undisbursed proceeds of loans totaling $15.5
million. The Company anticipates that it will have sufficient funds available to
meets its current loan commitments. Certificates of deposit maturing within one
year from June 30, 1999 amounted to $54.6 million. The Company expects that
substantially all of the maturing certificate accounts will be retained by the
Company at maturity.

      At June 30, 1999, the Company exceeded all of its regulatory requirements
with a Tier 1 capital of $17.7 million, or 18.0% of risk-weighted assets, which
is above the required level of $3.9 million or 4.0%, and total capital of $18.4
million, or 18.8% of risk-weighted assets, which is above the required level of
$7.8 million, or 8.0%.


                                       12
<PAGE>

Impact of Inflation and Changing Prices

      The Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with GAAP, which require the measurement of
financial position and operating results in terms of historical dollar amounts
without considering the changes in the relative purchasing power of money over
time due to inflation. The impact of inflation is reflected in the increased
cost of the Company's operations. Unlike industrial companies, nearly all of the
assets and liabilities of the Company are monetary in nature. As a result,
interest rates have a greater impact on the Company's performance than do the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or to the same extent as the price of goods and services.

Year 2000 Considerations

      Changing from the year 1999 to 2000 has the potential to cause problems in
data processing and other data- sensitive systems, a problem known as the Year
2000 or Y2K dilemma. The Company uses computer systems to perform financial
calculations, track deposits and loan payments, transfer funds and make direct
deposits. The processing of the Company's loan and deposit transactions is
outsourced to a third-party data processing vendor. The Company has followed a
comprehensive process to assure that such systems are ready for the year 2000
date change.

      To become Y2K compliant, the Company has followed a five-step process
mandated by the federal bank regulatory agencies. A description of each of the
steps and the status of the Company's efforts in completing the steps is as
follows:

      Step 1. Awareness and Understanding of the Problem. The Company formed a
Year 2000 team that has investigated the problem and its potential impact on the
Company's systems. An independent consulting firm has been engaged to assist the
Company's development of its approach to becoming Y2K compliant. This phase also
includes education of the Company's employees and customers about Y2K issues.
The awareness and understanding phase of this step has been completed. Training
and communication has taken place and will continue in 1999.

      Step 2. Identification of All Potentially Affected Systems. This step has
included a review of all major information technology ("IT") and non-information
technology ("non-IT") systems to determine how they are affected by Y2K issues.
An inventory has been prepared of all vendors who render IT and non-IT services
to the Company. This step has been completed.

      Step 3. Assessment and Planning. The Y2K team has completed its assessment
of which systems and equipment are most prone to placing the Company at risk if
they are not Y2K compliant. The project team has developed an inventory of
vendors, an inventory of actions to be taken, identification of the team members
responsible for completion of each action, a completion timetable, and project
tracking methodology. Significant vendors have been requested to advise the
Company in writing of their Y2K readiness, including actions to become compliant
if they are not already compliant. A plan was developed to repair or replace
systems and equipment not currently Y2K compliant. This step has been completed.
Responses from key mission-critical vendors have been received. Y2K team members
will continue to contact these vendors to receive updates regarding their Y2K
compliance.

      Step 4. Correction and Testing. The Company's third party data processing
servicer as well as vendors who provide significant technology-related services
have modified their systems to become Y2K compliant. The Company has developed
scripts involving typical transactions to test the proper functioning of the
modified systems. It has also arranged for repair or replacement of equipment
programs affected by Y2K issues. All of the required testing has been completed.

      Step 5. Implementation. This step includes the repair or replacement of
systems and computer equipment and the development of contingency plans. The
repair and replacement phase is substantially completed. Contingency plans on
how the Company would resume business if unanticipated problems arise from
non-performance by IT and non-IT vendors have been developed. The contingency
plan will be tested during September 1999.


                                       13
<PAGE>

      The Company's efforts to become Y2K compliant are being monitored by its
federal banking regulators. Failure to be Y2K compliant could subject the
Company to formal supervisory or enforcement actions.

      The Company incurred expenses for Y2K totaling $33,000 and $32,000
respectively, for the years ended June 30, 1999 and 1998. Additional costs may
be incurred during the remainder of 1999 to become Y2K compliant, but management
does not expect such costs to be material to the operating expenses of the
Company. Some of the costs are not expected to be incremental to the Company,
but rather represent new equipment and software that would otherwise be
purchased in the normal course of the Company's business.

      The Company is monitoring Y2K compliance for each of its large borrowers
and will adjust the loan loss allowance accordingly if any Y2K noncompliance
affects their ability to fulfill the terms and conditions of any loan agreement.
The Company presently believes the Y2K issue will not pose significant operating
problems for the Company. However, if other unforeseen problems arise from
circumstances beyond the control of the Company, such as with third party
vendors, no assurance can be given with respect to the cost or timing of such
efforts or any potential adverse effects on the Company's business, financial
condition, or results of operation.

Impact of New Accounting Standards

      Accounting for Derivative Instruments and Hedging Activities. In June
1998, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement requires that all
derivatives be recognized at fair value as either assets or liabilities on the
balance sheet. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of
the exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for- sale security or a
foreign-currency-denominated forecasted transaction. The accounting for changes
in fair value of a derivative depends on the intended use of the derivative and
the resulting designation. This Statement generally provides for matching the
timing of a gain or loss recognition on the hedging instrument with the
recognition of (a) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (b) the earnings effect of
the hedged forecasted transaction. This Statement, as amended by SFAS No. 137,
is effective for fiscal years beginning after June 15, 2000. The Company does
not generally use derivative instruments and therefore the adoption of the
Statement is not expected to have a material impact on the consolidated
financial statements of the Company.


                                       14
<PAGE>

                        COMMON STOCK AND RELATED MATTERS

      The Company's Common Stock is listed on the Over-the-Counter Bulletin
Board under the symbol "SERC." As of July 30, 1999, the Company had six
registered market makers, 511 stockholders of record (excluding the number of
persons or entities holding stock in street name through various brokerage
firms), and 1,702,630 shares outstanding. As of such date, Service Bancorp, MHC
(the "Mutual Company"), the Company's mutual holding company, held 907,694
shares of common stock and stockholders other than the Mutual Company held
794,936 shares.

      The following table sets forth market price and dividend information for
the Common Stock since the completion of the Company's reorganization into the
two-tier mutual holding company structure, which was completed on October 7,
1998.

Fiscal Year Ended                                                 Cash Dividends
  June 30, 1999          High                   Low                  Declared
-----------------       -------               -------             --------------

Third quarter            $9.59                 $8.00                   None
Fourth quarter           $8.63                 $7.00                   None

      Payment of dividends on the Company's common stock is subject to
determination and declaration by the Board of Directors and depends upon a
number of factors, including capital requirements, regulatory limitations on the
payment of dividends, the Company's results of operations and financial
condition, tax considerations and general economic conditions. No assurance can
be given that dividends will be declared or, if declared, what the amount of
dividends will be, or whether such dividends, once declared, will continue.


                                       15
<PAGE>

                            STOCKHOLDER INFORMATION

Annual Meeting

The Annual Meeting of Stockholders will be held at 3:00 P.M. on October 26,
1999, at the Courtyard by Marriot Hotel, 10 Fortune Boulevard, Milford,
Massachusetts.

Stock Listing

Over-the-Counter Bulletin Board Symbol: SERC

Special Counsel

Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C.  20015

Independent Auditors

Wolf & Company, P.C.
One International Place
Boston, MA 02110

Transfer Agent and Registrar

Continental Stock Transfer and Trust Co.
2 Broadway
New York, New York 10004
(212) 509-4000

Contact our transfer agent directly for assistance in changing your address,
elimination of duplicate mailings, transferring stock, or replacing lost, stolen
or destroyed stock certificates.

Annual Report on Form 10-KSB

A copy of the Company's Form 10-KSB for the fiscal year ended June 30, 1999,
will be furnished without charge to stockholders as of August 31, 1999, upon
written request to Warren W. Chase, Jr., Vice President, Service Bancorp, Inc.,
81 Main Street, Medway, Massachusetts 02053.


                                       16
<PAGE>

                       [Wolf & Company, P.C. Letterhead]

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of
Service Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of Service Bancorp,
Inc. and subsidiary (formerly "Summit Bank") as of June 30, 1999 and 1998, and
the related consolidated statements of income, changes in stockholders' equity
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Service Bancorp,
Inc. and subsidiary as of June 30, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.


/s/ Wolf & Company, P.C.

Boston, Massachusetts
July 29, 1999


                                       17
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                (Dollars in Thousands, Except per Share Amounts)

<TABLE>
<CAPTION>
                                     ASSETS

                                                                        June 30,
                                                                -------------------------
                                                                   1999            1998
                                                                ---------       ---------
<S>                                                             <C>             <C>
Cash and due from banks                                         $   7,939       $   4,452
Short-term investments                                              5,451          11,931
                                                                ---------       ---------
      Total cash and cash equivalents                              13,390          16,383
                                                                ---------       ---------

Certificates of deposit                                               500           1,500
Securities available for sale                                      69,912          40,171
Federal Home Loan Bank stock, at cost                               1,300             731

Loans                                                              86,724          77,312
Less allowance for loan losses                                       (740)           (577)
                                                                ---------       ---------
      Loans, net                                                   85,984          76,735
                                                                ---------       ---------

Banking premises and equipment, net                                 4,012           1,455
Accrued interest receivable                                         1,678           1,173
Net deferred tax asset                                              1,081             122
Other assets                                                          301             682
                                                                ---------       ---------
                                                                $ 178,158       $ 138,952
                                                                =========       =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                        $ 133,138       $ 112,247
Federal Home Loan Bank advances                                    25,993          14,562
Other liabilities                                                   2,548           2,020
                                                                ---------       ---------
      Total liabilities                                           161,679         128,829
                                                                ---------       ---------

Commitments and contingencies

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 shares issued                                17              --
  Additional paid-in capital                                        7,444              --
  Retained earnings                                                10,784           9,700
  Accumulated other comprehensive income (loss)                    (1,182)            423
  Treasury stock, at cost (10,000 shares)                             (83)             --
  Unearned ESOP shares (50,101 shares)                               (501)             --
                                                                ---------       ---------
      Total stockholders' equity                                   16,479          10,123
                                                                ---------       ---------
                                                                $ 178,158       $ 138,952
                                                                =========       =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       18
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                      Years Ended June 30,
                                                                      --------------------
                                                                       1999         1998
                                                                      -------      -------
<S>                                                                   <C>          <C>
Interest and dividend income:
  Interest and fees on loans                                          $ 6,400      $ 6,121
  Interest and dividends on securities available
    for sale and Federal Home Loan Bank stock                           3,573        2,198
  Interest on short-term investments and certificates of deposit          446          317
                                                                      -------      -------
      Total interest and dividend income                               10,419        8,636
                                                                      -------      -------

Interest expense:
  Interest on deposits                                                  3,998        3,696
  Interest on FHLB advances                                               832          420
                                                                      -------      -------
      Total interest expense                                            4,830        4,116
                                                                      -------      -------

Net interest income                                                     5,589        4,520
Provision for loan losses                                                 178          100
                                                                      -------      -------
      Net interest income, after provision for loan losses              5,411        4,420
                                                                      -------      -------

Other income:
  Customer service fees                                                   600          430
  Gain on sales of securities available for sale, net                     670          764
  Gain on sales of loans                                                   53           69
  Miscellaneous                                                            41           58
                                                                      -------      -------
      Total other income                                                1,364        1,321
                                                                      -------      -------

Operating expenses:
  Salaries and employee benefits                                        2,640        1,949
  Occupancy and equipment expenses                                      1,015          840
  Data processing expenses                                                363          325
  Professional fees                                                       238          206
  Advertising expenses                                                    182          118
  Other general and administrative expenses                               692          470
                                                                      -------      -------
      Total operating expenses                                          5,130        3,908
                                                                      -------      -------

Income before income taxes                                              1,645        1,833

Provision for income taxes                                                561          632
                                                                      -------      -------

Net income                                                            $ 1,084      $ 1,201
                                                                      =======      =======
</TABLE>

See accompanying notes to consolidated financial statements.


                                       19
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                   For the Years Ended June 30, 1999 and 1998
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                               Accumulated
                                                        Additional                Other                     Unearned
                                              Common    Paid-in    Retained    Comprehensive  Treasury        ESOP
                                              Stock     Capital    Earnings    Income (Loss)   Stock         Shares        Total
                                             ---------  --------   ---------   ------------  -----------   ------------   ----------
<S>                                               <C>       <C>     <C>              <C>            <C>            <C>      <C>
Balance at June 30, 1997                          $ -       $ -     $ 8,499          $ 196          $ -            $ -      $ 8,695
Comprehensive income:
    Net income                                      -         -       1,201              -            -              -        1,201
   Change in net unrealized gain on
      securities available for sale, net of
      taxes and reclassification adjustment         -         -           -            227            -              -          227
                                                                                                                          ----------
            Total comprehensive income                                                                                        1,428
                                             ---------  --------   ---------   ------------  -----------   ------------   ----------
Balance at June 30, 1998                            -         -       9,700            423            -              -       10,123
                                                                                                                          ----------

Comprehensive income:
    Net income                                      -         -       1,084              -            -              -        1,084
    Change in net unrealized gain (loss) on
      securities available for sale, net of
      taxes and reclassification adjustment         -         -           -         (1,605)           -              -       (1,605)
                                                                                                                          ----------
            Total comprehensive loss                                                                                           (521)
                                                                                                                          ----------
Net proceeds from sale of common stock
    (1,712,630 shares)                             17     7,464           -              -            -              -        7,481
Common stock acquired by ESOP (64,394 shares)       -         -           -              -            -           (644)        (644)
Common stock held by ESOP released and committed
    to be released (14,293 shares)                  -       (20)          -              -            -            143          123
Purchase of treasury stock (10,000 shares)          -         -           -              -          (83)             -          (83)
                                             ---------  --------   ---------   ------------  -----------   ------------   ----------

Balance at June 30, 1999                         $ 17   $ 7,444    $ 10,784       $ (1,182)       $ (83)        $ (501)    $ 16,479
                                             =========  ========   =========   ============  ===========   ============   ==========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       20
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                Years Ended June 30,
                                                               -----------------------
                                                                 1999           1998
                                                               --------       --------
<S>                                                            <C>            <C>
Cash flows from operating activities:
  Net income                                                   $  1,084       $  1,201
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Provision for loan losses                                     178            100
      Gain on sales of securities available for sale, net          (670)          (764)
      Net accretion of securities available for sale                 (9)           (36)
      Gain on other real estate owned                                --             (6)
      Depreciation and amortization expense                         409            349
      Increase in accrued interest receivable                      (505)          (352)
      Deferred tax benefit                                         (106)           (62)
      Loans originated for sale                                  (5,809)        (8,219)
      Principal balance of loans sold                             5,809          8,219
      Other, net                                                  1,464            (31)
                                                               --------       --------
        Net cash provided by operating
          activities                                              1,845            399
                                                               --------       --------

Cash flows from investing activities:
  Purchase of certificates of deposit                                --         (1,000)
  Proceeds from maturities of certificates of deposits            1,000             --
  Activity in securities available for sale:
    Sales                                                         3,333          3,942
    Maturities, prepayments and calls                            11,062         11,639
    Purchases                                                   (46,447)       (28,563)
  Net increase in loans                                          (9,427)       (10,075)
  Proceeds from other real estate owned                              --            217
  Purchase of banking premises and equipment                     (2,966)          (402)
  Purchase of Federal Home Loan Bank stock                         (569)          (193)
                                                               --------       --------
        Net cash used by investing activities                   (44,014)       (24,435)
                                                               --------       --------
</TABLE>

                                  (continued)

See accompanying notes to consolidated financial statements.


                                       21
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
                                 (In Thousands)

                                                          Years Ended June 30,
                                                        -----------------------
                                                          1999           1998
                                                        --------       --------

Cash flows from financing activities:
  Net increase in deposits                                20,891         19,350
  Proceeds from Federal Home Loan Bank advances           14,000         16,300
  Repayment of Federal Home Loan Bank advances            (2,569)        (4,360)
  Proceeds from sale of common stock                       7,481             --
  Common stock acquired by ESOP                             (644)            --
  ESOP shares released                                       100             --
  Purchase of treasury stock                                 (83)            --
                                                        --------       --------
      Net cash provided by financing activities           39,176         31,290
                                                        --------       --------

Net change in cash and cash equivalents                   (2,993)         7,254

Cash and cash equivalents at beginning of year            16,383          9,129
                                                        --------       --------

Cash and cash equivalents at end of year                $ 13,390       $ 16,383
                                                        ========       ========

Supplementary information:
  Interest paid on deposits                             $  3,999       $  3,694
  Interest paid on Federal Home Loan Bank advances           808            368
  Income taxes paid                                          559            686
  Increase in due to broker                                  532          1,053

See accompanying notes to consolidated financial statements.


                                       22
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       Years Ended June 30, 1999 and 1998
                (Dollars in Thousands, Except per Share Amounts)

1.    CORPORATE STRUCTURE

      On August 19, 1997, Summit Bank, a Massachusetts-chartered mutual savings
      bank, was reorganized into a Massachusetts-chartered mutual holding
      company, Service Bancorp, MHC, ("MHC") pursuant to Section 2 of Chapter
      167H of the Massachusetts General Laws. Concurrent with the
      reorganization, a Massachusetts-chartered stock savings bank was
      established as a subsidiary of the MHC, known as Summit Bank. MHC
      exchanged certain of its assets and liabilities, including all of its
      deposits, for 100% of the common stock of Summit Bank. The Bank has
      continued the operations of the predecessor mutual savings bank. The
      transaction has been accounted for as a pooling of interests and had no
      effect on the consolidated financial results of MHC and the Bank.

      Service Bancorp, Inc. (the "Company") is a Massachusetts corporation that
      was organized in August, 1998 at the direction of the Board of Directors
      of the Bank and the Board of Trustees of MHC, for the purpose of owning
      all of the outstanding capital stock of the Bank. The Company offered for
      sale 47% of the shares of its outstanding common stock in a public
      offering to eligible depositors, employees, and members of the general
      public (the "Offering"). The remaining 53% of the Company's shares of
      common stock were issued to MHC. The Offering was completed on October 7,
      1998. Prior to that date, the Company had no assets or liabilities.

      Completion of the Offering resulted in the issuance of 1,712,630 shares of
      common stock, 907,694 shares of which were issued to MHC and 804,936
      shares of which were sold to eligible depositors, employees, and the
      general public at $10.00 per share. Costs related to the Offering
      (primarily marketing fees paid to an underwriting firm, professional fees,
      registration fees, and printing and mailing costs) aggregated $569. These
      costs were deducted to arrive at net proceeds of $7,481.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Basis of presentation and consolidation

      The consolidated financial statements include the accounts of Service
      Bancorp, Inc. (the "Company") and its wholly-owned subsidiary, Summit Bank
      (the "Bank") which includes the Bank's wholly-owned subsidiaries, Medway
      Securities Corp. and Franklin Village Security Corp., which engage in the
      purchase and sale of investment securities. All significant intercompany
      balances and transactions have been eliminated in consolidation.


                                       23
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Business and operating segments

      The Company provides a variety of financial services to individuals and
      small businesses through its offices in Norfolk County. Its primary
      deposit products are savings, checking and term certificate accounts and
      its primary lending products are mortgage, consumer and commercial loans.

      In June 1997, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
      about Segments of an Enterprise and Related Information," effective for
      fiscal years beginning after December 15, 1997. SFAS No. 131 establishes
      standards for the way that public business enterprises report information
      about operating segments in annual and interim financial statements. It
      also establishes standards for related disclosures about products and
      services, geographic areas and major customers. Generally, financial
      information is required to be reported on the basis that it is used
      internally for evaluating segment performance and deciding how to allocate
      resources to segments. Management evaluates the Company's performance and
      allocates resources based on a single segment concept. Accordingly, there
      are no separately identified operating segments for which discrete
      financial information is available. The Company does not derive revenues
      from, or have assets located in, foreign countries, nor does it derive
      revenues from any single customer that represents 10% or more of the
      Company's total revenues.

      Use of estimates

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

      Reclassifications

      Certain amounts have been reclassified in the 1998 consolidated financial
      statements to conform to the 1999 presentation.

      Cash equivalents

      Cash equivalents include amounts due from banks and short-term
      investments. Short-term investments consist primarily of federal funds
      sold and other interest-bearing deposits which mature on a daily basis.


                                       24
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Securities available for sale

      Securities available for sale are carried at fair value, with unrealized
      gains and losses excluded from earnings and reported in other
      comprehensive income.

      Amortization of premiums and accretion of discounts on debt securities are
      computed using a method which approximates the interest method. Gains and
      losses on sales are recorded on the trade date and are computed using the
      specific identification method.

      Loans

      The Company grants mortgage, consumer and commercial loans to its
      customers. A substantial portion of the loan portfolio consists of
      mortgage loans in Norfolk County. The ability of the Company's debtors to
      honor their contracts is dependent upon the local economy and the local
      real estate market.

      Loans, as reported, have been adjusted by unadvanced construction loans,
      the allowance for loan losses, net deferred loan fees and deferred
      premium.

      Income on loans, including impaired loans, is recognized on the simple
      interest basis and is not accrued when in the judgment of management the
      collectibility of the loan principal or interest becomes doubtful. Loans
      delinquent 90 days or more remain on accrual status when the loan-to-value
      ratio is less than 80% and the collateral value is sufficient to cover all
      amounts due including principal, interest and related expenses.

      Net deferred loan fees are amortized over the contractual lives of the
      related loans using the interest method. Deferred premium is amortized
      using the interest method.

      Allowance for loan losses

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

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


                                       25
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Allowance for loan losses (concluded)

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

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

      Banking premises and equipment

      Land is carried at cost. Buildings, leasehold improvements and equipment
      are stated at cost less accumulated depreciation and amortization computed
      on the straight-line method over the estimated useful lives of the assets
      or the expected terms of the leases, if shorter.

      Retirement plan

      The Company accounts for defined benefit pension plan benefits on the net
      periodic pension cost method for financial reporting purposes. This method
      recognizes the compensation cost of an employee's pension benefit over the
      employee's approximate service period. Pension costs are funded in the
      year of accrual using the aggregate cost method.

      In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
      about Pensions and Other Postretirement Benefits," effective for fiscal
      years beginning after December 15, 1997. The Statement revises employers'
      disclosures about pension and other postretirement benefit plans. It does
      not change the measurement or recognition of those plans. The Statement
      standardizes the disclosure requirements for pensions and other
      postretirement benefits to the extent practical, requires additional
      information on changes in the benefit obligations and fair values of plan
      assets that will facilitate financial analysis, and eliminates certain
      disclosures that were previously required by generally accepted accounting
      principles. The Company has adopted these disclosure requirements for all
      years presented herein.


                                       26
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Income taxes

      Deferred tax assets and liabilities are reflected at currently enacted
      income tax rates applicable to the period in which the deferred tax assets
      or liabilities are expected to be realized or settled. As changes in tax
      laws or rates are enacted, deferred tax assets and liabilities are
      adjusted accordingly through the provision for income taxes. The Bank's
      base amount of its federal income tax reserve for loan losses is a
      permanent difference for which there is no recognition of a deferred tax
      liability. However, the loan loss allowance maintained for financial
      reporting purposes is a temporary difference with allowable recognition of
      a related deferred tax asset, if it is deemed realizable.

      Employee Stock Ownership Plan ("ESOP")

      Compensation expense is recognized based on cash contributions paid or
      committed to be paid to the ESOP. All shares held by the ESOP that are
      allocated and committed to be allocated are deemed outstanding for
      purposes of earnings per share calculations. Dividends declared, if any,
      on all shares held by the ESOP are charged to retained earnings. The value
      of unearned shares to be allocated to ESOP participants for future
      services not yet performed is reflected as a reduction of stockholders'
      equity.

      Earnings per share

      Basic earnings per share represents income available to common
      stockholders divided by the weighted-average number of common shares
      outstanding during the period. Diluted earnings per share reflects
      additional common shares (common stock equivalents) that would have been
      outstanding if dilutive potential common shares had been issued, as well
      as any adjustment to income that would result from the assumed issuance.
      The Company has no common stock equivalents. Earnings per share is not
      presented for periods beginning prior to January 1, 1999 since the Company
      completed its offering on October 7, 1998 and, accordingly, such data
      would not be meaningful.

      Comprehensive income

      The Company adopted SFAS No. 130, "Reporting Comprehensive Income," as of
      July 1, 1998. Accounting principles generally require that recognized
      revenue, expenses, gains and losses be included in net income. Although
      certain changes in assets and liabilities, such as unrealized gains and
      losses on available-for-sale securities, are reported as a separate
      component of the equity section of the balance sheet, such items, along
      with net income, are components of comprehensive income. The adoption of
      SFAS No. 130 had no effect on the Company's net income or stockholders'
      equity.


                                       27
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)

      Comprehensive income (concluded)

      The components of other comprehensive income (loss) and related tax
      effects are as follows:

                                                        Years Ended June 30,
                                                       ---------------------
                                                         1999          1998
                                                       -------       -------

      Unrealized holding gains (losses) on
        securities available for sale                  $(1,788)      $ 1,132
      Reclassification adjustment for gains
        realized in income                                (670)         (764)
                                                       -------       -------
      Net unrealized gains (losses)                     (2,458)          368
      Tax effect                                           853          (141)
                                                       -------       -------

      Net-of-tax amount                                $(1,605)      $   227
                                                       =======       =======

      Recent accounting pronouncement

      In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
      Instruments and Hedging Activities," which is effective for fiscal years
      beginning after June 15, 2000. This Statement establishes accounting and
      reporting standards for derivative instruments and hedging activities,
      including certain derivative instruments embedded in other contracts, and
      requires that an entity recognize all derivatives as assets or liabilities
      in the balance sheet and measure them at fair value. Management is
      currently evaluating the impact of adopting this Statement on the
      consolidated financial statements, but does not anticipate that it will
      have a material impact.

3.    CERTIFICATES OF DEPOSIT

      A summary of certificates of deposit follows:

                                              June 30,
                                         ------------------
      Maturity Date         Rate          1999       1998
                           -------       -------    -------

      January 8, 1999       5.65%        $    --    $ 1,000
      June 5, 2000          6.40             500        500
                                         -------    -------

                                         $   500    $ 1,500
                                         =======    =======


                                       28
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.    SECURITIES AVAILABLE FOR SALE

      A summary of securities available for sale follows:

<TABLE>
<CAPTION>
                                                           June 30, 1999
                                        --------------------------------------------------
                                                      Gross         Gross
                                        Amortized   Unrealized    Unrealized        Fair
                                          Cost        Gains         Losses         Value
                                        ---------   ----------    ----------      --------
<S>                                     <C>          <C>           <C>            <C>
      Federal agency obligations        $ 41,909     $      7      $ (1,046)      $ 40,870
      Mortgage-backed securities          17,620            9          (654)        16,975
      Other debt securities                9,441           67          (292)         9,216
                                        --------     --------      --------       --------
            Total debt securities         68,970           83        (1,992)        67,061

      Marketable equity securities         2,746          285          (180)         2,851
                                        --------     --------      --------       --------

                                        $ 71,716     $    368      $ (2,172)      $ 69,912
                                        ========     ========      ========       ========

<CAPTION>
                                                           June 30, 1998
                                        --------------------------------------------------
                                                      Gross         Gross
                                        Amortized   Unrealized    Unrealized        Fair
                                          Cost        Gains         Losses         Value
                                        ---------   ----------    ----------      --------
<S>                                     <C>          <C>           <C>            <C>
      Federal agency obligations        $ 27,502     $    242      $    (76)      $ 27,668
      Mortgage-backed securities           5,977           40           (37)         5,980
      Other debt securities                2,253            3            (4)         2,252
                                        --------     --------      --------       --------
            Total debt securities         35,732          285          (117)        35,900

      Marketable equity securities         3,785          585           (99)         4,271
                                        --------     --------      --------       --------

                                        $ 39,517     $    870      $   (216)      $ 40,171
                                        ========     ========      ========       ========
</TABLE>


                                       29
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      SECURITIES AVAILABLE FOR SALE (concluded)

      The amortized cost and estimated fair value of debt securities by
      contractual maturity at June 30, 1999 and 1998 follows:

<TABLE>
<CAPTION>
                                       June 30, 1999             June 30, 1998
                                   ---------------------     ---------------------
                                   Amortized       Fair      Amortized       Fair
                                      Cost        Value         Cost        Value
                                   ---------     -------     ---------     -------
<S>                                 <C>          <C>          <C>          <C>
      Within 1 year                 $    --      $    --      $   500      $   500
      Over 1 year to 5 years          5,240        5,167        3,000        3,015
      Over 5 years to 10 years       43,228       42,061       25,255       25,409
      Over 10 years                   2,882        2,858        1,000          996
                                    -------      -------      -------      -------
                                     51,350       50,086       29,755       29,920
      Mortgage-backed
          securities                 17,620       16,975        5,977        5,980
                                    -------      -------      -------      -------

                                    $68,970      $67,061      $35,732      $35,900
                                    =======      =======      =======      =======
</TABLE>

      Proceeds from the sale of securities available for sale during fiscal 1999
      and 1998 were $3,333 and $3,670, respectively. Gross gains of $684 and
      $769, and gross losses of $14 and $5, were realized during fiscal 1999 and
      1998, respectively.


                                       30
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5.    LOANS

      A summary of the balances of loans follows:

                                                                June 30,
                                                       ------------------------
                                                         1999            1998
                                                       --------        --------

      Real estate loans:
          Residential                                  $ 47,394        $ 48,574
          Commercial                                     20,981          12,856
          Construction                                    7,506           7,648
                                                       --------        --------
                                                         75,881          69,078
          Less unadvanced construction loans             (2,532)         (2,905)
                                                       --------        --------
                                                         73,349          66,173
                                                       --------        --------

      Other loans:
          Home equity                                     4,591           4,514
          Installment                                     1,829           1,704
          Commercial                                      6,481           4,217
          Passbook secured                                  513             786
                                                       --------        --------
                                                         13,414          11,221
                                                       --------        --------

                    Total loans                          86,763          77,394

      Allowance for loan losses                            (740)           (577)
      Net deferred loan fees                                (51)           (102)
      Deferred premium                                       12              20
                                                       --------        --------

                                                       $ 85,984        $ 76,735
                                                       ========        ========

      An analysis of the allowance for loan losses is as follows:

                                                         Years Ended June 30,
                                                       ------------------------
                                                         1999            1998
                                                       --------        --------

      Balance at beginning of year                     $    577        $    475
      Provision for loan losses                             178             100
      Recoveries                                              7              28
      Charge-offs                                           (22)            (26)
                                                       --------        --------

      Balance at end of year                           $    740        $    577
                                                       ========        ========


                                       31
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      LOANS (concluded)

      The following is a summary of impaired and non-accrual loans:

                                                                  June 30,
                                                            -------------------
                                                             1999         1998
                                                            ------       ------

      Loans with no valuation allowance                     $  836       $  342
      Loans with a corresponding valuation allowance            93           83
                                                            ------       ------

      Total impaired loans                                  $  929       $  425
                                                            ======       ======

      Corresponding valuation allowance on impaired loans   $   18       $   12
                                                            ======       ======

      Non-accrual loans                                     $  398       $  289
                                                            ======       ======

                                                            Years Ended June 30,
                                                            --------------------
                                                             1999         1998
                                                            ------       ------

      Average recorded investment in  impaired loans        $  401       $  298
                                                            ======       ======

      Interest income recognized on impaired loans          $   25       $   20
                                                            ======       ======

      Interest income recognized on a cash basis on
        impaired loans                                      $   24       $   12
                                                            ======       ======

      No additional funds are committed to be advanced in connection with
      impaired loans.


                                       32
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.    BANKING PREMISES AND EQUIPMENT

      A summary of the cost and accumulated depreciation and amortization of
      banking premises and equipment and their estimated useful lives follows:

                                                   June 30,
                                              -----------------      Estimated
                                               1999      1998       Useful Lives
                                              -------   -------     ------------

      Banking premises:
          Land                                $ 1,580   $   113
          Building and leasehold
            improvements                        2,727     1,761     1 - 40 years
      Equipment                                 2,492     1,958     3 - 10 years
                                              -------   -------
                                                6,799     3,832
      Less accumulated depreciation and
          amortization                         (2,787)   (2,377)
                                              -------   -------

                                              $ 4,012   $ 1,455
                                              =======   =======

      Depreciation and amortization expense for the years ended June 30, 1999
      and 1998 amounted to $409 and $349, respectively.

7.    DEPOSITS

      A summary of deposit balances by type is as follows:

                                                                 June 30,
                                                           -------------------
                                                             1999       1998
                                                           --------   --------

      Demand                                               $ 12,524   $ 10,597
      NOW                                                    21,082     17,891
      Money market deposits                                  10,163      9,162
      Regular and other savings                              25,414     23,112
                                                           --------   --------
                Total non-certificate accounts               69,183     60,762
                                                           --------   --------

      Term certificates $100,000 or greater                  12,175      8,521
      Term certificates less than $100,000                   51,780     42,964
                                                           --------   --------
                Total certificate accounts                   63,955     51,485
                                                           --------   --------

                Total deposits                             $133,138   $112,247
                                                           ========   ========


                                       33
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      DEPOSITS (concluded)

      A summary of certificate accounts by maturity is as follows:

                                           June 30, 1999        June 30, 1998
                                       --------------------  -------------------
                                                  Weighted              Weighted
                                                  Average               Average
                                        Amount      Rate      Amount      Rate
                                       -------    --------   --------   --------

      Within 1 year                    $54,594      5.17%    $43,625      5.65%
      Over 1 year to 3 years             9,361      5.12       7,860      5.58
                                       -------               -------

                                       $63,955      5.16%    $51,485      5.64%
                                       =======               =======

8.    FEDERAL HOME LOAN BANK ADVANCES

      A summary of Federal Home Loan Bank (FHLB) advances by maturity follows:

                                           June 30, 1999        June 30, 1998
                                       --------------------  -------------------
                                                  Weighted              Weighted
                                                  Average               Average
                                        Amount      Rate      Amount      Rate
                                       -------    --------   --------   --------

      Within 1 year                    $ 5,218      5.21%    $ 2,058      5.81%
      Over 1 year to 2 years                --        --         720      5.93
      Over 3 years to 4 years (a)        2,000      4.99          --        --
      Over 5 years to 10 years (b)      16,000      5.02      11,000      5.06
      Over 10 years to 20 years (c)      2,775      4.90         784      6.74
                                       -------               -------

                                       $25,993      5.04%    $14,562      5.30%
                                       =======               =======

      (a)   Advance is callable by the FHLB in fiscal 2000.

      (b)   At June 30, 1999, advances amounting to $14,000 and $2,000 are
            callable by the FHLB in fiscal 2000 and 2001, respectively. At June
            30, 1998, advances amounting to $11,000 are callable by the FHLB in
            fiscal 2000.

      (c)   At June 30, 1999, an advance amounting to $2,000 is callable by the
            FHLB in fiscal 2000.


                                       34
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      FEDERAL HOME LOAN BANK ADVANCES (concluded)

      The Bank also has an available line of credit with the FHLB at an interest
      rate that adjusts daily. Borrowings under the line are limited to $2,626
      at June 30, 1999.

      All borrowings from the FHLB are secured by a blanket lien primarily on
      U.S. Government and federal agency obligations and real estate loans in
      accordance with the FHLB agreement.

9.    INCOME TAXES

      Allocation of federal and state income taxes between current and deferred
      portions is as follows:

                                                     Years Ended June 30,
                                                     --------------------
                                                      1999           1998
                                                     -----          -----

      Current tax provision:
          Federal                                    $ 617          $ 667
          State                                         50             27
                                                     -----          -----
                                                       667            694
                                                     -----          -----
      Deferred tax benefit:
          Federal                                      (79)           (46)
          State                                        (27)           (16)
                                                     -----          -----
                                                      (106)           (62)
                                                     -----          -----

                                                     $ 561          $ 632
                                                     =====          =====

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

                                                     Years Ended June 30,
                                                     --------------------
                                                      1999           1998
                                                     -----          -----

      Statutory rate                                  34.0%          34.0%
      Increase (decrease) resulting from:
          State taxes, net of federal tax benefit      0.9            0.4
          Dividend received deduction                 (1.3)          (0.9)
          Other                                        0.5            1.0
                                                    ------         ------

      Effective tax rates                             34.1%          34.5%
                                                    ======         ======


                                       35
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      INCOME TAXES (continued)

      The components of the net deferred tax asset are as follows:

                                                           June 30,
                                                   ----------------------
                                                    1999           1998
                                                   -------        -------

      Deferred tax asset:
        Federal                                    $ 1,034        $   361
        State                                          160            125
                                                   -------        -------
                                                     1,194            486
                                                   -------        -------
      Deferred tax liability:
        Federal                                        (84)          (317)
        State                                          (29)           (47)
                                                   -------        -------
                                                      (113)          (364)
                                                   -------        -------

      Net deferred tax asset                       $ 1,081        $   122
                                                   =======        =======

      The tax effects of each type of income and expense item that give rise to
      deferred taxes are as follows:

                                                           June 30,
                                                   ----------------------
                                                    1999           1998
                                                   -------        -------
      Allowance for loan losses                    $   226        $   133
      Net unrealized (gain) loss on securities
        available for sale                             622           (231)
      Employee benefit plans                           103             97
      Net deferred loan fees                            25             51
      Depreciation                                     124             85
      Other                                            (19)           (13)
                                                   -------        -------

      Net deferred tax asset                       $ 1,081        $   122
                                                   =======        =======

      A summary of the change in the net deferred tax asset is as follows:

                                                    Years Ended June 30,
                                                   ----------------------
                                                    1999           1998
                                                   -------        -------

      Balance at beginning of year                 $   122        $   201
      Deferred tax benefit                             106             62
      Change in deferred tax effect of net
        unrealized gain/loss on securities
        available for sale                             853           (141)
                                                   -------        -------

      Balance at end of year                       $ 1,081        $   122
                                                   =======        =======

      There was no valuation reserve required for the years presented.


                                       36
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      INCOME TAXES (concluded)

      The federal income tax reserve for loan losses at the Bank's base year is
      approximately $1,142. If any portion of the reserve is used for purposes
      other than to absorb loan losses, approximately 150% of the amount
      actually used, limited to the amount of the reserve, would be subject to
      taxation in the fiscal year in which used. As the Bank intends to use the
      reserve solely to absorb loan losses, a deferred tax liability of
      approximately $467 has not been provided.

10.   STOCKHOLDERS' EQUITY

      Minimum regulatory capital requirements

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

      Quantitative measures established by regulation to ensure capital adequacy
      require the Bank to maintain minimum amounts and ratios of total and Tier
      1 capital (as defined) to risk-weighted assets (as defined) and of Tier 1
      capital (as defined) to average assets (as defined). Management believes
      that the Company and the Bank meet all capital adequacy requirements to
      which they are subject.

      As of June 30, 1999 and 1998, the most recent notification from the
      Federal Deposit Insurance Corporation categorized the Bank as well
      capitalized under the regulatory framework for prompt corrective action.
      To be categorized as well capitalized, the Bank must maintain minimum
      total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set
      forth in the following table. There are no conditions or events since that
      notification that management believes have changed the Bank's category.
      The Company's and the Bank's actual capital amounts and ratios are also
      presented in the table.


                                       37
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      STOCKHOLDERS' EQUITY (continued)

      Minimum regulatory capital requirements (concluded)

<TABLE>
<CAPTION>
                                                                                            Minimum
                                                                                          To Be Well
                                                                        Minimum       Capitalized Under
                                                                        Capital       Prompt Corrective
                                                     Actual           Requirement     Action Provisions
                                                ----------------   ----------------   -----------------
                                                Amount    Ratio    Amount    Ratio    Amount     Ratio
                                                -------   ------   -------   ------   -------    ------
      <S>                                       <C>       <C>      <C>         <C>    <C>        <C>
      June 30, 1999:
      Total capital to risk weighted assets:
          Consolidated                          $18,401   18.76%   $ 7,847     8.0%   $    --      --%
          Summit Bank                            14,682   14.97      7,845     8.0      9,807    10.0

      Tier 1 capital to risk weighted assets:
          Consolidated                           17,661   18.01      3,923     4.0         --      --
          Summit Bank                            13,942   14.22      3,923     4.0      5,884     6.0

      Tier 1 capital to average assets:
          Consolidated                           17,661   10.83      4,891     3.0         --      --
          Summit Bank                            13,942    8.55      4,891     3.0      8,151     5.0

      June 30, 1998:
      Total capital to risk weighted assets     $10,277    13.3%   $ 6,206     8.0%   $ 7,757    10.0%
      Tier 1 capital to risk weighted assets      9,700    12.5      3,103     4.0      4,654     6.0
      Tier 1 capital to average assets            9,700     7.5      3,900     3.0      6,500     5.0
</TABLE>

      Liquidation account

      At the time of the Offering, the Company established a liquidation account
      in the amount of $4,648. In accordance with Massachusetts statute, the
      liquidation account will be maintained for the benefit of eligible account
      holders who continue to maintain their accounts in the Bank after the
      Offering. The liquidation account will be reduced annually to the extent
      that eligible account holders have reduced their qualifying deposits.
      Subsequent increases will not restore an eligible account holder's
      interest in the liquidation account. In the event of a complete
      liquidation, each eligible account holder will be entitled to receive a
      distribution in an amount equal to their current adjusted liquidation
      account balance, to the extent that funds are available. According to the
      Company's transfer agent, the balance in the liquidation account at June
      30, 1999 amounted to $2,992.


                                       38
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      STOCKHOLDERS' EQUITY (concluded)

      Other capital restrictions

      Federal and state banking regulations place certain restrictions on
      dividends paid and loans or advances made by the Bank to the Company. The
      total amount of dividends which may be paid at any date is generally
      limited to the retained earnings of the Bank, and loans or advances are
      limited to 10% of the Bank's capital stock and surplus on a secured basis.
      In addition, dividends paid by the Bank to the Company would be prohibited
      if the effect thereof would cause the Bank's capital to be reduced below
      applicable minimum capital requirements. At June 30, 1999, $7,845 of the
      Company's equity in the Bank was restricted and funds available for loans
      or advances amounted to $1,468.


                                       39
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.   PENSION AND COMPENSATION PLANS

      Defined benefit plan

      The Bank provides basic and supplemental pension benefits for eligible
      employees through the Savings Banks Employees Retirement Association
      ("SBERA") Pension Plan. Each employee reaching the age of 21 and having
      completed at least 1,000 hours of service in one consecutive twelve-month
      period, beginning with such employee's date of employment, automatically
      becomes a participant in the retirement plan. All participants are fully
      vested after three years of service. Information pertaining to the
      activity in the plan is as follows:

                                                        Years Ended October 31,
                                                        -----------------------
                                                        1998              1997
                                                        -----             -----

      Change in benefit obligation:
         Benefit obligation at beginning of year        $ 655             $ 477
         Service cost                                     100                70
         Interest cost                                     48                36
         Actuarial loss                                     8                74
         Benefits paid                                    (36)               (2)
                                                        -----             -----
         Benefit obligation at end of year                775               655
                                                        -----             -----

      Change in plan assets:
         Fair value of plan assets at beginning of year   620               473
         Actual return on plan assets                      53                90
         Employer contribution                            126                59
         Benefits paid                                    (36)               (2)
                                                        -----             -----
         Fair value of plan assets at end of year         763               620
                                                        -----             -----

      Funded status                                       (12)              (35)
      Unrecognized net actuarial loss                    (107)             (117)
      Transition asset                                    (29)              (32)
                                                        -----             -----

      Accrued pension cost                              $(148)            $(184)
                                                        =====             =====

      The accumulated benefit obligation (substantially all vested) at October
      31, 1998 amounted to $529, which was less than the plan assets at fair
      value.


                                       40
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      PENSION AND COMPENSATION PLANS (continued)

      Defined benefit plan (concluded)

                                                         Years Ended October 31,
                                                         -----------------------
                                                          1998             1997
                                                         -----            -----

      Service cost                                       $ 100            $  70
      Interest cost                                         48               36
      Expected return on plan assets                       (50)             (38)
      Transition asset                                      (3)              (3)
      Recognized net actuarial gain                         (5)              (7)
                                                         -----            -----

                                                         $  90            $  58
                                                         =====            =====

      Pension expense for the years ended June 30, 1999 and 1998 amounted to
      $102 and $80, respectively.

      For the plan years ended October 31, 1998 and 1997, actuarial assumptions
      include an assumed discount rate on benefit obligations of 7.25% and 7.50%
      respectively, and an expected long-term rate of return on plan assets of
      8.00% and 8.00% respectively. An annual salary increase of 5% was utilized
      for all years.

      401(k) plan

      In addition to the defined benefit plans, the Bank provides a savings plan
      which qualifies under Section 401(k) of the Internal Revenue Code and
      provides for voluntary contributions by participating employees ranging
      from one percent to fifteen percent of their compensation, subject to
      certain limitations. The Bank will make matching contributions equal to
      50% of each employee's voluntary contribution, up to 3% of the employee's
      compensation. Total expense under the plan for each of the years ended
      June 30, 1999 and 1998 amounted to $30.

      Supplemental executive retirement plan

      The Bank has a supplemental retirement agreement with an officer of the
      Bank which provides for supplemental compensation payments upon
      retirement, subject to certain limitations as set forth in the agreement.
      The present value of these future payments amounted to $207 and $123 at
      June 30, 1999 and 1998, respectively. Compensation expense applicable to
      the agreement for the years ended June 30, 1999 and 1998 amounted to $84
      and $48, respectively.


                                       41
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      PENSION AND COMPENSATION PLANS (concluded)

      Employment agreement

      The Bank has entered into a three-year employment agreement with its
      President which expires in October 2001, unless extended, that generally
      provides for a specified minimum annual compensation and the continuation
      of benefits currently received. However, such employment may be terminated
      for cause, as defined, without incurring any continuing obligations. The
      agreement also provides for a lump sum severance payment upon occurrence
      of an "event of termination," as defined in the agreement, during the
      President's employment under the agreement.

      Employee Stock Ownership Plan

      Effective November 1, 1998, in connection with the Offering, the Bank
      established an Employee Stock Ownership Plan (the "ESOP") for the benefit
      of each employee that has reached the age of 21 and has completed at least
      1000 hours of service in the previous twelve-month period. The ESOP is
      funded by the Bank's contributions of cash (which generally will be
      invested in common stock) or common stock. Benefits may be paid in shares
      of common stock or in cash, subject to the employees' right to demand
      shares.

      The ESOP has a loan agreement with the Company whereby $644 was borrowed
      for the purpose of purchasing shares of the Company's common stock. The
      loan provides for ten annual principal payments of $64 commencing on the
      last business day of September 1999. The Bank made a $100 principal
      pre-payment on October 31, 1998.

      The Bank has committed to make contributions to the ESOP sufficient to
      support the debt service of the loan. The loan is secured by the shares
      purchased which are held in a suspense account for allocation among the
      members as the loans are paid. Total compensation expense applicable to
      the ESOP amounted to $123 for the year ended June 30, 1999.

      Shares held by the ESOP at June 30, 1999 include 10,000 allocated, 4,293
      committed to be allocated and 50,101 unallocated.

      Any cash dividends received on allocated shares would be allocated to
      members and cash dividends received on shares held in suspense would be
      applied to repay the outstanding debt of the ESOP.


                                       42
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12.   OTHER COMMITMENTS AND CONTINGENCIES

      General

      In the ordinary course of business, various legal claims arise from time
      to time and, in the opinion of management, these claims will have no
      material effect on the Company's consolidated financial statements.

      Loan commitments

      The Bank is a party to financial instruments with off-balance-sheet risk
      in the normal course of business to meet the financing needs of its
      customers. These financial instruments include commitments to extend
      credit, which involve elements of credit and interest rate risk in excess
      of the amount recognized in the accompanying consolidated balance sheets.
      The Bank's exposure to credit loss is represented by the contractual
      amount of the instruments. The Bank uses the same credit policies in
      making commitments as it does for on-balance-sheet instruments.

      Financial instruments whose contract amount represents credit risk consist
      of:

                                                                  June 30,
                                                             -------------------
                                                              1999         1998
                                                             ------       ------

      Commitments to grant loans                             $2,046       $3,171
      Unadvanced funds on home equity lines-of-credit         6,546        5,441
      Unadvanced funds on commercial lines-of-credit          3,895        1,846
      Unadvanced funds on personal lines-of-credit              515          333

      Commitments to extend credit are agreements to lend to a customer as long
      as there is no violation of any condition established in the contract.
      Commitments generally have fixed expiration dates or other termination
      clauses and may require payment of a fee. The commitments for
      lines-of-credit may expire without being drawn upon, therefore, the total
      commitment amounts do not necessarily represent future cash requirements.
      The Bank evaluates each customer's credit worthiness on a case-by-case
      basis. Commitments to grant loans and lines-of-credit are secured by real
      estate or other collateral, if deemed necessary.


                                       43
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      OTHER COMMITMENTS AND CONTINGENCIES (concluded)

      Operating lease commitments

      Pursuant to the terms of noncancelable lease agreements in effect at June
      30, 1999 pertaining to banking premises, future minimum rent commitments
      are as follows:

                  Year Ending
                    June 30,                              Amount
                  -----------                             ------

                    2000                                  $  274
                    2001                                     278
                    2002                                     280
                    2003                                     254
                    2004                                     225
                  Thereafter                                 702
                                                          ------

                                                          $2,013
                                                          ======

      These leases contain options to extend for periods from five to fifteen
      years. The cost of such rentals is not included above. Total rent expense
      the years ended June 30, 1999 and 1998 amounted to $278 and $199,
      respectively.

13.   RELATED PARTY TRANSACTIONS

      Certain of the Bank's trustees and officers and their affiliates are also
      customers of the Bank. At June 30, 1999 and 1998, total loans to such
      persons amounted to $543 and $670, respectively. During the year ended
      June 30, 1999, total principal additions and principal payments amounted
      to $162 and $289, respectively. The loans were made in the ordinary course
      of business at the Bank's normal credit terms, including interest rate and
      collateral requirements and do not represent more than a normal risk of
      collection.


                                       44
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.   FAIR VALUE OF FINANCIAL INSTRUMENTS

      Statement of Financial Accounting Standards No. 107, "Disclosures about
      Fair Value of Financial Instruments" requires disclosure of estimated fair
      values of all financial instruments where it is practicable to estimate
      such values. In cases where quoted market prices are not available, fair
      values are based on estimates using present value or other valuation
      techniques. Those techniques are significantly affected by the assumptions
      used, including the discount rate and estimates of future cash flows.
      Accordingly, the derived fair value estimates cannot be substantiated by
      comparison to independent markets and, in many cases, could not be
      realized in immediate settlement of the instrument. Statement No. 107
      excludes certain financial instruments and all nonfinancial instruments
      from its disclosure requirements. Accordingly, the aggregate fair value
      amounts presented do not represent the underlying value of the Company.

      The following methods and assumptions were used by the Company in
      estimating fair value disclosures for financial instruments:

            Cash and cash equivalents: The carrying amounts of cash and
            short-term investments approximate fair values.

            Certificates of deposit: The carrying amount of certificates of
            deposit approximates fair value.

            Securities available for sale: Fair values for securities available
            for sale are based on quoted market prices.

            FHLB stock: The carrying value of FHLB stock is deemed to
            approximate fair value, based on the redemption provisions of the
            FHLB.

            Loans: For variable-rate loans that reprice frequently and with no
            significant change in credit risk, fair values are based on carrying
            values. Fair values for other loans are estimated using discounted
            cash flow analyses, using interest rates currently being offered for
            loans with similar terms and adjusted for credit risk. Fair values
            for non-performing loans are estimated using discounted cash flow
            analyses or underlying collateral values, where applicable.


                                       45
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      FAIR VALUE OF FINANCIAL INSTRUMENTS (concluded)

            Deposits: The fair values disclosed for non-certificate accounts
            are, by definition, equal to the amount payable on demand at the
            reporting date (i.e., their carrying amounts). Fair values for
            fixed-rate certificates of deposit are estimated using a discounted
            cash flow calculation that applies interest rates currently being
            offered on certificates to a schedule of aggregated expected monthly
            maturities on time deposits.

            Federal Home Loan Bank advances: The fair values for the FHLB
            advances are estimated using discounted cash flow analyses based on
            rates currently in effect for similar types of borrowing
            arrangements.

            Accrued interest: The carrying amounts of accrued interest
            approximate fair value.

            Off-balance-sheet instruments: Fair values for off-balance-sheet
            lending com-mitments are based on fees currently charged to enter
            into similar agreements, taking into account the remaining terms of
            the agreements and the counterparties' credit standing and are not
            material.

      The estimated fair values and related carrying amounts of the Company's
      financial instruments are as follows:

                                                     June 30,
                                     -----------------------------------------
                                            1999                  1998
                                     -------------------   -------------------
                                      Carrying    Fair      Carrying   Fair
                                      Amount     Value      Amount     Value
                                     ---------  --------   --------  ---------

Financial assets:
    Cash and cash equivalents        $ 13,390   $ 13,390   $ 16,383  $  16,383
    Certificates of deposit               500        500      1,500      1,500
    Securities available for sale      69,912     69,912     40,171     40,171
    FHLB stock                          1,300      1,300        731        731
    Loans, net                         85,984     86,746     76,735     78,078
    Accrued interest receivable         1,678      1,678      1,173      1,173

Financial liabilities:
    Deposits                          133,138    133,238    112,247    112,273
    Federal Home Loan Bank
        advances                       25,993     25,869     14,562     13,892


                                       46
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15.   CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

      Financial information pertaining only to the Company is as follows:

                                  BALANCE SHEET
                                                                   June 30,
                                                                     1999
                                                                   --------
      Assets:
          Interest bearing deposit in Summit Bank                  $  3,186
          Investment in common stock of Summit Bank                  12,760
          Loan receivable from Summit Bank ESOP                         544
          Other assets                                                   19
                                                                   --------

              Total assets                                         $ 16,509
                                                                   ========

      Other liabilities                                            $     30
      Stockholders' equity                                           16,479
                                                                   --------

                                                                   $ 16,509
                                                                   ========

                               STATEMENT OF INCOME
                                                                   For the
                                                                  Period from
                                                                   Inception
                                                                  to June 30,
                                                                     1999
                                                                  -----------

      Interest income                                              $     99
      Provision for income taxes                                        (41)
                                                                   --------
                                                                         58
      Equity in undistributed net income of Summit Bank                 802
                                                                   --------

                    Net income                                     $    860
                                                                   ========


                                       47
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY (concluded)

                             STATEMENT OF CASH FLOWS

                                                                      For the
                                                                    Period from
                                                                     Inception
                                                                     to June 30,
                                                                        1999
                                                                    ------------

      Cash flows from operating activities:
          Net income                                                 $     860
          Adjustments to reconcile net income
              to net cash provided by operating activities:
                  Change in other assets and liabilities                    17
                  Equity in undistributed net income of Summit Bank       (802)
                                                                     ---------
                      Net cash provided by operating activities             75
                                                                     ---------

      Cash flows from investing activities:
          Common stock acquired by ESOP                                   (644)
          ESOP shares released                                             100
          Capital contribution to Summit Bank                           (3,743)
                                                                     ---------
                      Net cash used by investing activities             (4,287)
                                                                     ---------

      Cash flows from financing activities:
          Proceeds from sale of common stock                             7,481
          Purchase of treasury stock                                       (83)
                                                                     ---------
                      Net cash provided by financing activities          7,398
                                                                     ---------

      Net change in cash and cash equivalents                            3,186
      Cash and cash equivalents, beginning of year                          --
                                                                     ---------

      Cash and cash equivalents, end of year                         $   3,186
                                                                     =========


                                       48
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)


16.  QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                       Years Ended June 30,
                                       -----------------------------------------------------
                                                               1999
                                       -----------------------------------------------------
                                         Fourth        Third         Second         First
                                        Quarter       Quarter        Quarter       Quarter
                                       ----------    ----------    -----------   -----------
<S>                                      <C>           <C>            <C>           <C>
Interest and dividend income             $ 2,846       $ 2,588        $ 2,552       $ 2,433
Interest expense                           1,278         1,140          1,203         1,209
                                       ----------    ----------    -----------   -----------

Net interest income                        1,568         1,448          1,349         1,224
Provision for loan losses                     98            30             25            25
                                       ----------    ----------    -----------   -----------

Net interest income, after provision
for loan losses                            1,470         1,418          1,324         1,199
Other income                                 405           310            427           222
Other expenses                             1,414         1,310          1,327         1,079
                                       ----------    ----------    -----------   -----------

Income before income taxes                   461           418            424           342

Provision for income taxes                   151           141            151           118
                                       ----------    ----------    -----------   -----------

Net income                                $  310        $  277          $ 273         $ 224
                                       ==========    ==========    ===========   ===========

Earnings per share:
   Basic                                  $ 0.19        $ 0.17         n/a           n/a
                                       ==========    ==========    ===========   ===========
   Diluted                                $ 0.19        $ 0.17         n/a           n/a
                                       ==========    ==========    ===========   ===========

<CAPTION>
                                       -----------------------------------------------------
                                                               1998
                                       -----------------------------------------------------
                                         Fourth        Third         Second         First
                                        Quarter       Quarter        Quarter       Quarter
                                       ----------    ----------    -----------    ----------
<S>                                      <C>           <C>            <C>           <C>
Interest and dividend income             $ 2,327       $ 2,208        $ 2,081       $ 2,020
Interest expense                           1,144         1,060            984           928
                                       ----------    ----------    -----------    ----------

Net interest income                        1,183         1,148          1,097         1,092
Provision for loan losses                     25            75              -             -
                                       ----------    ----------    -----------    ----------

Net interest income, after provision
for loan losses                            1,158         1,073          1,097         1,092
Other income                                 246           277            402           396
Other expenses                             1,047         1,056            972           833
                                       ----------    ----------    -----------    ----------

Income before income taxes                   357           294            527           655

Provision for income taxes                   111           107            189           225
                                       ----------    ----------    -----------    ----------

Net income                                 $ 246         $ 187          $ 338         $ 430
                                       ==========    ==========    ===========    ==========

Earnings per share:
   Basic                                  n/a           n/a            n/a           n/a
                                       ==========    ==========    ===========    ==========
   Diluted                                n/a           n/a            n/a           n/a
                                       ==========    ==========    ===========    ==========
</TABLE>

n/a - not applicable since the conversion to stock form was completed on October
7, 1998.


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