Exhibit 13

                                   Exhibit 13

                          Annual Report to Stockholders

                       2001 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..............................................14

Stockholder Information.......................................................15

Independent Auditors' Report..................................................16

Consolidated Balance Sheets..................................................F-1

Consolidated Statements of Income............................................F-2

Consolidated Statements of Changes in Stockholders' Equity...................F-3

Consolidated Statements of Cash Flows........................................F-4

Notes to Consolidated Financial Statements...................................F-6

<PAGE>

                              Service Bancorp, Inc.

Dear Stockholders:

      When I assumed the role of President of Strata Bank in June, 2000, my top
priority was to ensure that everyone at Strata Bank embraced the importance of
valuing customer relationships, from our front line tellers to our Board of
Directors. In October, 2000, when I was named Chief Executive Officer and
Chairman of Strata Bank and Director of its parent company, Service Bancorp,
Inc., that priority was reinforced. I believe our mission to deliver the
ultimate customer experience is what distinguishes us from the competition and
is the paramount reason for our success during fiscal 2001.

      During fiscal 2001, our energies were focused on delivering superior
customer service, providing trusted expertise, implementing new products,
developing new business, expanding our regional presence and, above all,
increasing stockholder value. I am delighted to report that Service Bancorp,
Inc. is stronger than ever. In 2001, our assets grew to $244.1 million - an
all-time record. Stockholders' equity also climbed to an impressive $18.4
million, or $11.63 per share, a 20 percent increase over last year. Factors
contributing to the higher level of earnings were the increases in the Bank's
net interest and fee income.

      In May, we forged a unique alliance with Marathon Mortgage Company,
resulting in the new Strata Mortgage Center. The Center, which is designed to
provide personalized expertise for first-time homebuyers and homeowners looking
to purchase or refinance, is fulfilling its objective of increasing loan
originations. We also opened the Financial Services Center at Strata Bank with
the goal of generating additional service fee income and further extending our
alternative investment options for our customers. During its first months of
operation, the Financial Services Center has received many referrals from our
retail branches that have resulted in a high rate of successful sales.

      We are in an exciting period of our Company's history. The dynamics of our
business are constantly changing. We are cognizant of the many challenges that
presently exist in areas such as asset quality, expense control and capital
management, to name a few. We believe Service Bancorp, Inc. and Strata Bank are
positioned to increase profitability, gain market share and capitalize on new
opportunities as they emerge. Our path in the 21st century is guided by our
commitment to increasing stockholder value by delivering the ultimate customer
experience and strengthening the market position we hold in the communities we
serve.

      I would like to extend my appreciation and thanks to our Board of
Directors for their commitment to our Company; our customers for their continued
confidence; and particularly, our employees, whose contributions and talents are
the reasons for our success. During 2001, our employees continued to embody the
Bank's strong sense of community by donating much of their time and resources to
charitable and civic groups. Their volunteerism and community involvement cannot
be measured in dollars and cents -- but in far-reaching dividends that benefit
us all. Finally, I want to extend a warm thanks to our stockholders for their
valued support and ongoing investment in our future.

Sincerely,


/s/ Pamela J. Montpelier
------------------------
Pamela J. Montpelier
President and CEO

                81 Main Street, Medway, Massachusetts 02053-1867
                 Telephone: 1-800-339-4346 - www.stratabank.com

<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, Strata Bank (the "Bank," and formerly Summit Bank). For
additional information about the Company and the Bank, 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,
                                                        ---------------------------------------------------------------------
                                                          2001           2000            1999            1998            1997
                                                        -------         -------         -------         ------         ------
                                                                                   (In Thousands)
<S>                                                    <C>             <C>             <C>            <C>            <C>
Total assets ....................................      $244,097        $219,433        $178,158       $138,952       $104,878
Loans, net ......................................       122,922         106,422          85,984         76,735         66,934
Short-term investments ..........................        21,052           6,112           5,451         11,931          6,305
Securities ......................................        79,371          86,367          69,912         40,171         24,696
Deposits ........................................       191,826         176,345         133,138        112,247         92,897
Total borrowings ................................        32,255          26,350          25,993         14,562          2,622
Stockholders' equity ............................        18,366          15,178          16,479         10,123          8,695
</TABLE>

Summary of Operations

<TABLE>
<CAPTION>
                                                                                  Years Ended June 30,
                                                        ---------------------------------------------------------------------
                                                          2001           2000            1999            1998            1997
                                                        -------         -------         -------         ------         ------
                                                                                    (In Thousands)
<S>                                                     <C>             <C>             <C>             <C>            <C>
Total interest and dividend income ..............       $15,646         $13,477         $10,419         $8,636         $7,037
Total interest expense ..........................         8,282           6,723           4,830          4,116          3,174
                                                        -------         -------         -------         ------         ------
   Net interest income ..........................         7,364           6,754           5,589          4,520          3,863
Provision for loan losses .......................           218             220             178            100             35
                                                        -------         -------         -------         ------         ------
   Net interest income, after provision
      for loan losses ...........................         7,146           6,534           5,411          4,420          3,828
                                                        -------         -------         -------         ------         ------
Non-interest income:
   Customer service fees ........................         1,014             803             600            430            406
   Gain on sales of loans and securities ........           367             336             723            833            493
   Gain on pension plan settlement ..............            97              --              --             --             --
   Other non-interest income ....................           205             109              41             58             60
                                                        -------         -------         -------         ------         ------
Total non-interest income .......................         1,683           1,248           1,364          1,321            959
                                                        -------         -------         -------         ------         ------
Total non-interest expense ......................         7,433           6,487           5,130          3,908          3,094
                                                        -------         -------         -------         ------         ------
Income before income taxes ......................         1,396           1,295           1,645          1,833          1,693
Income tax provision ............................           438             449             561            632            611
                                                        -------         -------         -------         ------         ------
Net Income ......................................       $   958         $   846         $ 1,084         $1,201         $1,082
                                                        =======         =======         =======         ======         ======
</TABLE>


                                     - 2 -
<PAGE>

Key Operating Ratios and Other Data

<TABLE>
<CAPTION>
                                                                                At or for the Years Ended June 30,
                                                               -------------------------------------------------------------------
                                                                2001            2000            1999          1998            1997
                                                               ------          ------          ------        ------         ------
<S>                                                            <C>             <C>             <C>           <C>            <C>
Performance Ratios:
Return on average assets .............................           0.43%           0.44%           0.72%         1.02%          1.13%
Return on average stockholders' equity ...............           5.69%           5.59%           7.23%        12.80%         13.58%
Average interest rate spread .........................           3.04%           3.41%           3.44%         3.60%          3.86%
Net interest margin(1) ...............................           3.57%           3.80%           3.95%         4.05%          4.29%
Ratio of operating expenses to average
   assets ............................................           3.34%           3.39%           3.41%         3.31%          3.24%
Ratio of average interest-earning assets to
   average interest-bearing liabilities ..............         113.24%         110.33%         115.07%       112.21%        112.38%
Efficiency ratio(2) ..................................          82.16%          81.07%          73.78%        66.91%         64.16%

Asset Quality Ratios:
Non-accrual loans to total assets ....................           0.06%           0.20%           0.22%         0.21%          0.22%
Allowance for loan losses as a percent
   of non-accrual loans ..............................         653.69%         185.65%         185.93%       199.65%        246.11%
Allowance for loan losses as a percent of
   loans, net ........................................           0.79%           0.75%           0.86%         0.75%          0.71%

Capital Ratios and Data:
Stockholders' equity to total assets .................           7.52%           6.92%           9.25%         7.29%          8.29%
Average stockholders' equity to
   average assets ....................................           7.57%           7.90%           9.96%         7.94%          8.33%
Net book value per share .............................         $11.63           $9.70           $9.97           N/A            N/A

Other Data:
Number of full-service offices .......................              8               8               7             5              4
Number of deposit accounts ...........................         22,538          21,656          17,764        16,488         15,598
Number of loans outstanding ..........................          2,395           2,177           1,757         1,695          1,557
</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 herein. 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, 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, 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


                                     - 4 -
<PAGE>

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 the Company's activities and
strategies, the effect of those strategies on the Company's operating results,
the Company's interest rate risk 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 both adjustable-rate
and fixed-rate loans, (2) originating shorter-term fixed-rate commercial real
estate loans, (3) investing in debt securities with maturities with shorter call
dates of 2 to 5 years, and (4) 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, 2001, 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 12.7%. 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, 2001, 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 the repricing term 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,
2001, 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%. 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, 2001
                                                       --------------------------------------------------
                                                       Less Than       3-6          6 Months         1-3
                                                       3 Months       Months        to 1 Year       Years
                                                       --------       ------        ---------       -----
                                                                         (Dollars in Thousands)
<S>                                                     <C>          <C>            <C>            <C>
Interest-earning assets:(1)
   Loans(2) .......................................     $24,157      $  9,897       $ 15,904       $ 46,198
   Securities, FHLB stock and Certificate of
   Deposit ........................................         968         1,334          3,446         10,966
   Short-term investments .........................      21,052            --             --             --
                                                        -------      --------       --------       --------
     Total interest-earning assets ................      46,177        11,231         19,350         57,164
                                                        -------      --------       --------       --------

Interest-bearing liabilities:
   Savings deposits(3), (4) .......................       4,359         4,359          4,359          4,359
   Money market deposits(4) .......................       2,008         2,008          2,008          2,008
   NOW deposits(5) ................................       5,449         5,449          5,449          5,449
   Certificate accounts ...........................      22,888        28,418         19,091         15,444
   FHLB advances ..................................          --            --          2,000          1,000
                                                        -------      --------       --------       --------
     Total interest-bearing liabilities ...........      34,704        40,234         32,907         28,260
                                                        -------      --------       --------       --------

Interest sensitivity gap(3) .......................     $11,473      ($29,003)      ($13,557)      $ 28,904
                                                        =======      ========       ========       ========

Cumulative interest sensitivity gap ...............     $11,473      ($17,530)      ($31,087)      ($ 2,183)
                                                        =======      ========       ========       ========

Cumulative interest sensitivity gap as a percentage
   of total assets ................................        4.70%        (7.18)%       (12.74)%        (0.89)%
Cumulative interest sensitivity gap
   as a percentage of total interest-
   earning assets .................................        5.06%        (7.73)%       (13.71)%        (0.96)%
Cumulative interest-earning assets
   as a percentage of cumulative
   interest-bearing liabilities ...................      133.06%        76.61%         71.17%         98.40%

<CAPTION>
                                                          Amounts maturing or repricing at June 30, 2001
                                                         ------------------------------------------------
                                                          3-5          5-10        Over 10
                                                         Years        Years         Years           Total
                                                         -----        -----         -----           -----
                                                               (Dollars in Thousands)
<S>                                                      <C>          <C>          <C>            <C>
Interest-earning assets:(1)
   Loans(2) .......................................      $13,016      $ 8,121      $  6,534       $123,827
   Securities, FHLB stock and Certificate of
   Deposit ........................................       16,712       39,250         9,163         81,839
   Short-term investments .........................           --           --            --         21,052
                                                         -------      -------      --------       --------
     Total interest-earning assets ................       29,728       47,371        15,697        226,718
                                                         -------      -------      --------       --------

Interest-bearing liabilities:
   Savings deposits(3), (4) .......................           --           --        17,433         34,869
   Money market deposits(4) .......................           --           --         8,032         16,064
   NOW deposits(5) ................................           --           --         7,270         29,066
   Certificate accounts ...........................           74           --            --         85,915
   FHLB advances ..................................        2,000       26,500           755         32,255
                                                         -------      -------      --------       --------
     Total interest-bearing liabilities ...........        2,074       26,500        33,490        198,169
                                                         -------      -------      --------       --------

Interest sensitivity gap(3) .......................      $27,654      $20,871      ($17,793)
                                                         =======      =======      ========

Cumulative interest sensitivity gap ...............      $25,471      $46,342      $ 28,549
                                                         =======      =======      ========

Cumulative interest sensitivity gap as a percentage
   of total assets ................................        10.43%       18.99%        11.70%
Cumulative interest sensitivity gap
   as a percentage of total interest-
   earning assets .................................        11.23%       20.44%        12.59%
Cumulative interest-earning assets
   as a percentage of cumulative
   interest-bearing liabilities ...................       118.43%      128.14%       114.41%
</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-performing loans have been
      excluded.
(3)   Interest sensitivity gap represents the difference between
      interest-earning assets and interest-bearing liabilities.
(4)   Regular savings and money market account balances have 50% included in the
      over 10 year timeframe; the rest is spread evenly within the four
      intervals up to and including the one-to-three year period.
(5)   NOW account balances have 25% included in the over 10 year timeframe; the
      rest is spread evenly within the four intervals up to and including the
      one-to-three year period.


                                     - 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,
                                              --------------------------------------------------------------------------------------
                                                         2001                         2000                          1999
                                              --------------------------   --------------------------    ---------------------------
                                                       Interest                      Interest                      Interest
                                              Average   Earned/   Yield/   Average   Earned/   Yield/    Average    Earned/   Yield/
                                              Balance    Paid      Rate    Balance    Paid      Rate     Balance     Paid      Rate
                                              -------    ----      ----    -------    ----      ----     -------     ----      ----
                                                                                (Dollars in Thousands)
<S>                                           <C>       <C>        <C>     <C>       <C>        <C>     <C>         <C>        <C>
Interest-earning assets:
   Loans(1)..............................     $111,500  $ 9,244    8.29%   $ 93,559  $ 7,644    8.17%   $ 75,724    $ 6,400    8.45%
   Securities(2).........................       85,564    5,908    6.90      80,386    5,637    7.01      56,869      3,637    6.40
   Short-term investments................        9,401      494    5.25       3,565      196    5.50       8,802        382    4.34
                                              --------  -------            --------  -------            --------    -------
     Total interest-earning assets.......      206,465   15,646    7.58     177,510   13,477    7.59     141,395     10,419    7.37
                                                        -------                      -------                        -------
Non-interest-earning assets..............       16,089                       14,079                        9,150
                                              --------                     --------                     --------
      Total assets.......................     $222,554                     $191,589                     $150,545
                                              ========                     ========                     ========

Interest-bearing liabilities:
   Savings deposits(3)...................     $ 30,841      642    2.08    $ 27,137      574    2.12    $ 24,022        556    2.31
   Money market deposits.................       15,191      492    3.24      11,310      321    2.84       9,699        262    2.70
   NOW accounts..........................       19,212      151    0.79      16,669      133    0.80      16,837        147    0.87
   Certificate accounts..................       89,958    5,404    6.01      78,348    4,187    5.34      56,294      3,033    5.39
   FHLB advances.........................       27,130    1,593    5.87      27,431    1,508    5.50      16,024        832    5.19
                                              --------  -------            --------  -------            --------    -------
      Total interest-bearing liabilities.      182,332    8,282    4.54     160,895    6,723    4.18     122,876      4,830    3.93
                                                        -------                      -------                        -------    ----
Demand deposits..........................       21,552                       14,173                       11,583
Other non-interest bearing liabilities...        1,823                        1,390                        1,097
Stockholders' equity.....................       16,847                       15,131                       14,989
                                              --------                     --------                     --------
      Total liabilities and stockholders'
      equity ............................     $222,554                     $191,589                     $150,545
                                              ========                     ========                     ========
Net interest income......................               $ 7,364                      $ 6,754                        $ 5,589
                                                        =======                      =======                        =======
Net interest rate spread.................                          3.04%                        3.41%                          3.44%
                                                                   ====                         ====                           ====
Net earning assets.......................      $24,133                      $16,615                     $ 18,519
                                               =======                      =======                     ========
Net yield on average interest-
   earning  assets.......................                          3.57%                        3.80%                          3.95%
                                                                   ====                         ====                           ====
Average interest-earning assets to
   average interest-bearing liabilities..                113.24%                      110.33%                        115.07%
                                                         ======                       ======                         ======
</TABLE>

----------
(1)   Calculated net of deferred loan fees, loan discounts, loans in process and
      allowance for loan losses.
(2)   Securities include securities available for sale and held to maturity,
      FHLB stock and 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,
                                                 2001 vs. 2000                          2000 vs. 1999
                                        ---------------------------------     --------------------------------
                                        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 ....................           $ 1,486       $ 114      $1,600       $ 1,463      $(219)     $ 1,244
   Securities ...............               358         (87)        271         1,592        408        2,000
   Short-term investments ...               342         (44)        298          (319)       133         (186)
                                        -------       -----      ------       -------      -----      -------
   Total ....................             2,186         (17)      2,169         2,736        322        3,058
                                        -------       -----      ------       -------      -----      -------
Interest expense:
   Savings deposits .........                79         (11)         68            66        (48)          18
   Money market deposits ....               119          52         171            45         14           59
   NOW accounts .............                20          (2)         18            (2)       (12)         (14)
   Certificate accounts .....               662         555       1,217         1,182        (28)       1,154
   FHLB borrowings ..........               (17)        102          85           624         52          676
                                        -------       -----      ------       -------      -----      -------
   Total ....................               863         696       1,559         1,915        (22)       1,893
                                        -------       -----      ------       -------      -----      -------

Net interest income .........           $ 1,323       ($713)     $  610       $   821      $ 344      $ 1,165
                                        =======       =====      ======       =======      =====      =======
</TABLE>


                                     - 9 -
<PAGE>

Comparison of Financial Condition at June 30, 2001 and June 30, 2000

      Assets increased by $24.7 million, or 11.2%, from $219.4 million at June
30, 2000 to $244.1 million at June 30, 2001. Funding for this increase was
attributable primarily to an increase in deposits of $15.5 million, or 8.8%,
from $176.3 million to $191.8 million. Additional funding was received from
Federal Home Loan Bank ("FHLB") borrowings which increased $5.9 million, or
22.4%, from $26.4 million to $32.3 million over the same timeframe.

      Net loans increased $16.5 million, or 15.5%, from June 30, 2000 to June
30, 2001. Most of this increase can be attributed to the $12.7 million, or
14.3%, growth in total real estate loans. Residential mortgages, commercial
mortgages, and construction loans increased, $4.7 million, or 7.6%, $6.1
million, or 24.3%, and $2.0 million, or 71.9%, respectively. In addition, other
loans increased $3.9 million, or 22.0%, primarily due to increases of $2.4
million, or 31.0%, and $1.4 million, or 56.1%, in commercial business and second
mortgage loans, respectively.

      Securities decreased $7.0 million, or 8.1%, from June 30, 2000 to June 30,
2001. Most of this decrease was attributable to a decrease of $24.5 million, or
56.1%, in federal agency obligations which either matured or were called due to
the lower interest rate environment which has existed since January 2001. This
decrease was partially offset by increases of $15.2 million, or 94.7%, and $2.9
million, or 12.2%, in mortgage-backed and other debt securities during this same
timeframe. Short-term investments increased $14.9 million, or 244.4%, from June
30, 2000 to June 30, 2001. Much of this increase was attributable to the
increase of non-certificate accounts between periods and the proceeds from the
callable federal agency obligations mentioned above. The short-term investments
which normally range between $8.0 million and $10.0 million at the end of the
month will be used to fund the anticipated loan originations through the
newly-formed Strata Mortgage Center and increased commercial business.

      Deposits increased $15.5 million, or 8.8%, from June 30, 2000 to June 30,
2001. Non-certificate accounts increased $21.7 million, or 25.8%, while term
certificates decreased $6.2 million, or 6.8% between periods. In addition,
borrowings increased $5.9 million, or 22.4%, over this same period.

      Stockholders' equity increased from $15.2 million, or 6.92% of total
assets at June 30, 2000 to $18.4 million, or 7.52% of total assets at June 30,
2001. The increase resulted primarily from the improvement of $2.1 million in
unrealized losses on securities available for sale, which are reported as
accumulated other comprehensive loss, and net income earned for the period.

      The Company's financial performance is principally attributable to the
performance of its wholly-owned subsidiary, Strata Bank, (the "Bank"). As a
result, the Bank is mentioned as the business entity within the operating
results section that follows.

Comparison of Operating Results for the Fiscal Years ended June 30, 2001 and
June 30, 2000

      General. Net income increased by $112,000, or 13.2%, to $958,000 for the
year ended June 30, 2001 from $846,000 for the comparable period in 2000. This
increase was primarily attributable to increases of $610,000, or 9.0%, and
$211,000, or 26.3%, in net interest income and customer service fees,
respectively, and a $97,000 gain on a pension plan settlement in fiscal 2001.
These increases were partially offset by an increase of $946,000, or 14.6%, in
total operating expenses.

      The Bank's interest rate spread (the difference between yields earned on
earning assets and rates paid on deposits and borrowings) declined from 3.41%
for the year ended June 30, 2000 to 3.04% for the year ended June 30, 2001. This
decline was primarily attributable to higher cost of funds for certificates and
FHLB advances, which increased the cost of interest-bearing liabilities by 36
basis points between


                                     - 10 -
<PAGE>

periods. The yield on all earning assets declined 1 basis point over the same
timeframe. During the same period, the interest rate margin (net interest income
divided by average earning assets) decreased from 3.80% to 3.57%.

      Interest and Dividend Income. Total interest and dividend income increased
by $2.2 million, or 16.1%, from $13.5 million for the year ended June 30, 2000
to $15.7 million for the comparable period in 2001. This increase was primarily
attributable to a $29.0 million, or 16.3%, increase in average earning assets
between the two periods, which was partially offset by a 1 basis point decrease
in the yield on earning assets. Average net loans increased $17.9 million, or
19.2%, while total loan yield increased by 12 basis points to 8.29%. This loan
yield increase was primarily attributable to the Bank's increased emphasis on
the commercial loan portfolio which generally has higher yields than the
residential mortgage and consumer loans.

      The average securities portfolio increased $11.0 million, or 13.1%, while
the combined yield decreased by 21 basis points. This decrease in yield was
directly attributable to the $25.9 million in mortgage-backed securities
prepayments and federal agency obligation calls, which were reinvested in lower
yielding securities purchased in the declining interest rate environment that
has existed since January, 2001.

      Interest Expense. Interest expense on deposits increased $1.5 million, or
28.3%, from $5.2 million for the fiscal year ended June 30, 2000, to $6.7
million for the same period for 2001. This increase was attributable to a $21.7
million, or 16.3%, increase in average interest-bearing deposit balances between
periods and an increase of 40 basis points in deposit rates over the same
period. The increase in deposit interest rates was primarily due the increase
$11.6 million increase in certificates between the two periods. These
certificates had an increase in cost of funds of 67 basis points.

      Interest expense on borrowings increased by $85,000, or 5.6%. The Bank
decreased its use of borrowings from the FHLB between June 30, 2000 and June 30,
2001 as average balances decreased $301,000, or 1.1%, while the cost of funds on
these borrowings increased from 5.50% to 5.87% between these periods. Borrowings
are generally used to manage liquidity and asset-liability management
performance of the Bank.

      Provision for Loan Losses. The provision for loan losses decreased by
$2,000, from $220,000 for the fiscal year ended June 30, 2000 to $218,000 for
the comparable period in 2001. Management keeps the allowance for loan losses at
a level to properly match loan credit risk, especially in the commercial loan
area. The ratio of non-accruing loans to total assets decreased to 0.06% at June
30, 2001, as compared to 0.20%, at June 30, 2000. The allowance for loan losses
was $974,000 at June 30, 2001 and $802,000 at June 30, 2000, or 79 basis points
and 75 basis points to loans receivable for each respective year-end. While
management believes that, based on information currently available, the Bank'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 Bank's
allowance will be sufficient to cover future loan losses incurred by the Bank or
that future adjustments to the allowance will not be necessary if economic
and/or other conditions differ substantially from the economic and other
conditions considered by management in evaluating the adequacy of the current
level of the allowance.

      Non-Interest Income. Total non-interest income increased $435,000, or
34.9%, from $1.3 million for the fiscal year ended June 30, 2000 to $1.7 million
for the same period in 2001. This increase was primarily attributable to
increases of $211,000, or 26.3%, and $31,000, or 9.2%, in customer service fees
and net gains on sale of securities, respectively, and a $97,000 gain on pension
plan settlement. In addition, miscellaneous income increased by $96,000
primarily due the increase in the cash surrender value of the Bank-owned life
insurance during the year.


                                     - 11 -
<PAGE>

      Non-Interest Expense. Total non-interest expense increased $946,000, or
14.6%, from $6.5 million for the fiscal year ended June 30, 2000 to $7.4 million
for the comparable period in 2001. Between the two periods, salaries and
benefits, occupancy and equipment, and data processing expenses increased
$531,000 or 16.4%, $174,000, or 12.1%, and $167,000, or 40.7%, respectively.
Much of this increase related to staffing and technology expenses for new
products and services offered by the Bank during 2001, which included business
internet banking. Despite the increase in non-interest expense, the ratio of
operating expenses to average assets decreased slightly from 3.39% for the year
ended June 30, 2000 to 3.34% for the same period in 2001.

      Income Taxes. The effective income tax rate was 31.4% and 34.7% for the
fiscal year ended June 30, 2001 and 2000, respectively. The effective tax rates
reflect the utilization by the Bank of certain tax preference items such as
officers' life insurance, dividend received deduction and security corporation
subsidiaries to reduce the statutory corporate 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.

      The Company's most liquid assets are cash and due from banks, short-term
investments, mortgage-backed securities, federal agency obligations, and other
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, 2001, cash and due from banks, short-term investments, and
securities maturing within one year amounted to $33.4 million, or 13.7%, of
total assets. Additional funds amounting to $52.9 million will be available
during the next year from the prepayment of loans and mortgage-backed
securities. The Bank also has the capacity to borrow an additional $47.7 million
from the FHLB.

      At June 30, 2001, the Company had commitments to originate loans, unused
outstanding lines of credit, and undisbursed proceeds of loans totaling $29.4
million. The Company anticipates that it will have sufficient funds available to
meet its current loan commitments. Certificates of deposit maturing within one
year from June 30, 2001 amounted to $70.4 million. The Company expects that
substantially all of the maturing certificate accounts will be retained by the
Company at maturity.

      At June 30, 2001, the Company exceeded all of its regulatory requirements
with a Tier 1 capital of $18.2 million, or 12.2% of risk-weighted assets, which
is above the required level of $6.0 million or 4.0%, and total capital of $19.1
million, or 12.8% of risk-weighted assets, which is above the required level of
$11.9 million, or 8.0%.

Impact of Inflation and Changing Prices

      The Consolidated Financial Statements and Notes thereto presented herein
have been prepared in accordance with accounting principles generally accepted
in the United States of America, 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.


                                     - 12 -
<PAGE>

Impact of New Accounting Standards

      In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Tangible Assets. These
Statements change the accounting for business combinations and goodwill and
intangible assets. SFAS No. 141 requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method is prohibited. SFAS No. 142 changes the accounting
for goodwill from an amortization method to an impairment-only approach. In
addition, this Statement requires that acquired intangible assets, as defined,
be amortized over their useful lives. This Statement would be effective for the
Company no later than July 1, 2002. Management does not anticipate that the
adoption of these Statements will have a material impact on the consolidated
financial statements.

      In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which, as amended by SFAS Nos. 137 and 138,
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. The Company
adopted this Statement on July 1, 2000, with no impact on the consolidated
financial statements.


                                     - 13 -
<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 September 7, 2001, the Company had eight
(8) registered market makers, 447 stockholders of record (excluding the number
of persons or entities holding stock in street name through various brokerage
firms), and 1,644,124 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
736,430 shares.

      The following table sets forth market price and dividend information for
the Common Stock for the past two (2) fiscal years. The Over-the-Counter Market
quotes reflect inter-dealer prices without retail markup, markdown or commission
and may not represent actual transactions.

            Fiscal Year Ended              High         Low       Cash Dividends
              June 30, 2002                                          Declared
      -------------------------------     -------      ------     --------------

      First Quarter (through
      September 7, 2001).............     $13.75       $11.00          None

            Fiscal Year Ended                                     Cash Dividends
              June 30, 2001                High         Low          Declared
      -------------------------------     -------      ------     --------------

      First Quarter..................      $6.88        $5.88          None
      Second Quarter.................      $6.88        $5.50          None
      Third Quarter..................      $7.63        $5.75          None
      Fourth Quarter.................     $11.20        $7.40          None

            Fiscal Year Ended                                     Cash Dividends
              June 30, 2000                High         Low          Declared
      -------------------------------     -------      ------     --------------

      First Quarter..................      $9.13        $8.00          None
      Second Quarter.................      $7.88        $6.50          None
      Third Quarter..................      $8.13        $6.31          None
      Fourth Quarter.................      $7.00        $5.94          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.


                                     - 14 -
<PAGE>

                             STOCKHOLDER INFORMATION

Annual Meeting                          Independent Auditors

The Annual Meeting of                   Wolf & Company, P.C.
Stockholders will be held at            One International Place
3:00 p.m. on October 23, 2001,          Boston, MA 02110
at the Courtyard by Marriott
Hotel, 10 Fortune Boulevard,
Milford, Massachusetts.

Stock Listing                           Transfer Agent and Registrar

Over-the-Counter Bulletin Board         Continental Stock Transfer and Trust Co.
Symbol: SERC                            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.

Special Counsel                         Annual Report on Form 10-KSB

Holland & Knight LLP                    A copy of the Company's Form 10-KSB for
10 St. James Avenue                     the fiscal year ended June 30, 2001,
Boston, MA 02116                        will be furnished without charge to
                                        stockholders as of September 7, 2001,
                                        upon written request to Warren W. Chase,
                                        Jr., Senior Vice President, Service
                                        Bancorp, Inc., 81 Main Street, Medway,
                                        Massachusetts 02053.


                                     - 15 -
<PAGE>

                          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 as of June 30, 2001 and 2000, 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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.


/s/ Wolf & Company, P.C.

Boston, Massachusetts
July 26, 2001

<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

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

                                     ASSETS

<TABLE>
<CAPTION>
                                                                              June 30,
                                                                      ------------------------
                                                                         2001          2000
                                                                      ---------      ---------
<S>                                                                   <C>            <C>
Cash and due from banks                                               $   9,599      $   8,133
Short-term investments                                                   21,052          6,112
                                                                      ---------      ---------
          Total cash and cash equivalents                                30,651         14,245
                                                                      ---------      ---------

Certificate of deposit                                                      100            100
Securities available for sale, at fair value                             43,135         81,596
Securities held to maturity, at amortized cost                           36,236          4,771
Federal Home Loan Bank stock, at cost                                     1,613          1,588
Loans                                                                   123,896        107,224
Less allowance for loan losses                                             (974)          (802)
                                                                      ---------      ---------
          Loans, net                                                    122,922        106,422
                                                                      ---------      ---------

Banking premises and equipment, net                                       4,080          4,223
Accrued interest receivable                                               1,734          2,007
Net deferred tax asset                                                      919          1,937
Bank-owned life insurance                                                 2,193          2,070
Other assets                                                                514            474
                                                                      ---------      ---------

                                                                      $ 244,097      $ 219,433
                                                                      =========      =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                              $ 191,826      $ 176,345
Federal Home Loan Bank advances                                          32,255         26,350
Other liabilities                                                         1,650          1,560
                                                                      ---------      ---------
               Total liabilities                                        225,731        204,255
                                                                      ---------      ---------

Commitments and contingencies (Note 12)

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             17
    Additional paid-in capital                                            7,409          7,426
    Retained earnings                                                    12,588         11,630
    Accumulated other comprehensive loss                                   (514)        (2,638)
    Treasury stock, at cost (68,506 shares)                                (560)          (560)
    Unearned ESOP shares (37,223 and 43,662 shares, respectively)          (372)          (436)
    Unearned RRP shares (28,284 and 36,482 shares, respectively)           (202)          (261)
                                                                      ---------      ---------
               Total stockholders' equity                                18,366         15,178
                                                                      ---------      ---------

                                                                      $ 244,097      $ 219,433
                                                                      =========      =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-1
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                (Dollars in Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                           Years Ended June 30,
                                                                        -------------------------
                                                                           2001           2000
                                                                        ----------     ----------
<S>                                                                     <C>            <C>
Interest and dividend income:
    Interest and fees on loans                                          $    9,244     $    7,644
    Interest and dividends on securities, Federal Home Loan
        Bank stock and certificates of deposit                               5,908          5,637
    Interest on short-term investments                                         494            196
                                                                        ----------     ----------
               Total interest and dividend income                           15,646         13,477
                                                                        ----------     ----------

Interest expense:
    Interest on deposits                                                     6,689          5,215
    Interest on Federal Home Loan Bank advances                              1,593          1,508
                                                                        ----------     ----------
               Total interest expense                                        8,282          6,723
                                                                        ----------     ----------

Net interest income                                                          7,364          6,754
Provision for loan losses                                                      218            220
                                                                        ----------     ----------
               Net interest income, after provision for loan losses          7,146          6,534
                                                                        ----------     ----------

Other income:
    Customer service fees                                                    1,014            803
    Gain on sales of securities available for sale, net                        367            336
    Gain on pension plan settlement                                             97             --
    Miscellaneous                                                              205            109
                                                                        ----------     ----------
               Total other income                                            1,683          1,248
                                                                        ----------     ----------

Operating expenses:
    Salaries and employee benefits                                           3,765          3,234
    Occupancy and equipment expenses                                         1,607          1,433
    Data processing expenses                                                   577            410
    Professional fees                                                          307            269
    Advertising expenses                                                       220            214
    Other general and administrative expenses                                  957            927
                                                                        ----------     ----------
               Total operating expenses                                      7,433          6,487
                                                                        ----------     ----------

Income before income taxes                                                   1,396          1,295

Provision for income taxes                                                     438            449
                                                                        ----------     ----------

Net income                                                              $      958     $      846
                                                                        ==========     ==========

Weighted average shares outstanding (basic and diluted)                  1,570,854      1,595,648
                                                                        ==========     ==========

Earnings per share (basic and diluted)                                  $     0.61     $     0.53
                                                                        ==========     ==========
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                       Years Ended June 30, 2001 and 2000
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                             Accumulated
                                                       Additional                Other                Unearned   Unearned
                                              Common    Paid-in    Retained  Comprehensive  Treasury    ESOP       RRP
                                               Stock    Capital    Earnings      Loss         Stock    Shares     Shares     Total
                                             -------  -----------  --------  -------------  --------  --------   --------  --------
<S>                                          <C>        <C>         <C>         <C>          <C>        <C>        <C>     <C>
Balance at June 30, 1999                     $    17    $ 7,444     $10,784     $(1,182)     $ (83)     $(501)     $  --   $ 16,479
                                                                                                                           --------

Comprehensive loss:
  Net income                                      --         --         846          --         --         --         --        846
  Change in net unrealized gain/loss on
    securities available for sale, net of
    taxes and reclassification adjustment         --         --          --      (1,456)        --         --         --     (1,456)
                                                                                                                           --------
          Total comprehensive loss                                                                                             (610)
                                                                                                                           --------
Common stock held by ESOP released and
    committed to be released (6,439 shares)       --        (18)         --          --         --         65         --         47
Purchase of RRP stock (40,247 shares)             --         --          --          --         --         --       (288)      (288)
Amortization of RRP stock (3,765 shares)          --         --          --          --         --         --         27         27
Purchase of treasury stock (58,506 shares)        --         --          --          --       (477)        --         --       (477)
                                             -------    -------     -------     -------      -----      -----      -----   --------

Balance at June 30, 2000                          17      7,426      11,630      (2,638)      (560)      (436)      (261)    15,178
                                                                                                                           --------

Comprehensive income:
  Net income                                      --         --         958          --         --         --         --        958
  Change in net unrealized gain/loss on
    securities available for sale, net of
    taxes and reclassification adjustment         --         --          --       2,124         --         --         --      2,124
                                                                                                                           --------
          Total comprehensive income                                                                                          3,082
                                                                                                                           --------
Common stock held by ESOP released and
    committed to be released (6,439 shares)       --        (17)         --          --         --         64         --         47
Amortization of RRP stock (8,198 shares)          --         --          --          --         --         --         59         59
                                             -------    -------     -------     -------      -----      -----      -----   --------

Balance at June 30, 2001                     $    17    $ 7,409     $12,588     $  (514)     $(560)     $(372)     $(202)  $ 18,366
                                             =======    =======     =======     =======      =====      =====      =====   ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                    Years Ended June 30,
                                                                  ----------------------
                                                                    2001          2000
                                                                  --------      --------
<S>                                                               <C>           <C>
Cash flows from operating activities:
    Net income                                                    $    958      $    846
    Adjustments to reconcile net income to net cash
        provided by operating activities:
          Provision for loan losses                                    218           220
          Gain on sales of securities available for sale, net         (367)         (336)
          Net accretion on securities                                 (166)         (140)
          Depreciation and amortization expense                        660           640
          (Increase) decrease in accrued interest receivable           273          (329)
          Bank-owned life insurance income                            (123)          (34)
          Deferred tax benefit                                        (105)          (86)
          Other, net                                                   130          (631)
                                                                  --------      --------
                  Net cash provided by operating activities          1,478           150
                                                                  --------      --------

Cash flows from investing activities:
    Purchase of certificates of deposit                                 --          (100)
    Proceeds from maturities of certificates of deposit                 --           500
    Activity in securities available for sale:
        Sales                                                       12,337         4,668
        Maturities, prepayments and calls                           25,882         3,240
        Purchases                                                  (11,430)      (21,873)
    Activity in securities held to maturity:
        Maturities, prepayments and calls                            1,301            --
        Purchases                                                  (17,314)       (4,761)
    Net increase in loans                                          (16,756)      (20,658)
    Purchase of banking premises and equipment                        (517)         (851)
    Purchase of Federal Home Loan Bank stock                           (25)         (288)
    Purchase of bank-owned life insurance                               --        (2,036)
                                                                  --------      --------
                  Net cash used by investing activities             (6,522)      (42,159)
                                                                  --------      --------
</TABLE>

                                   (continued)

See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

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

<TABLE>
<CAPTION>
                                                                           Years Ended June 30,
                                                                          ----------------------
                                                                            2001           2000
                                                                          --------      --------
<S>                                                                        <C>           <C>
Cash flows from financing activities:
    Net increase in deposits                                                 15,481        43,207
    Proceeds from Federal Home Loan Bank advances                            29,720        32,085
    Repayment of Federal Home Loan Bank advances                            (23,815)      (31,728)
    ESOP shares released                                                         64            65
    Purchase of RRP stock                                                        --          (288)
    Purchase of treasury stock                                                   --          (477)
                                                                           --------      --------
                  Net cash provided by financing activities                  21,450        42,864
                                                                           --------      --------

Net change in cash and cash equivalents                                      16,406           855

Cash and cash equivalents at beginning of year                               14,245        13,390
                                                                           --------      --------

Cash and cash equivalents at end of year                                   $ 30,651      $ 14,245
                                                                           ========      ========

Supplementary information:
    Interest paid on deposits                                              $  6,715      $  5,203
    Interest paid on Federal Home Loan Bank advances                          1,578         1,464
    Income taxes paid                                                           534           681
    Decrease in due to broker                                                    --           521
    Transfer of securities from available for sale to held to maturity       15,060            --
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       Years Ended June 30, 2001 and 2000
                (Dollars in Thousands, Except per Share Amounts)

1.    CORPORATE STRUCTURE

      Service Bancorp, Inc. (the "Company") is a Massachusetts corporation
      organized in August, 1998 for the purpose of owning all of the outstanding
      capital stock of Strata Bank (the "Bank"). The Company was organized as a
      wholly-owned subsidiary of Service Bancorp, MHC ("MHC"), which is a
      Massachusetts-chartered mutual holding company.

      On October 7, 1998, the Company completed a public offering of 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. Prior to that date, the Company had no assets or liabilities.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Basis of presentation and consolidation

      The consolidated financial statements include the accounts of the Company
      and its wholly-owned subsidiary, 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 securities. All
      significant intercompany balances and transactions have been eliminated in
      consolidation.

      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.

      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.


                                      F-6
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Use of estimates

      In preparing financial statements in conformity with accounting principles
      generally accepted in the United States of America, 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 in the 2000 consolidated financial statements have been
      reclassified to conform to the 2001 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.

      Securities

      Debt securities that management has the positive intent and ability to
      hold to maturity are classified as held to maturity and recorded at
      amortized cost. All other securities are classified as available for sale
      and are carried at fair value, with unrealized gains and losses excluded
      from earnings and reported in other comprehensive income/loss.

      Amortization of premiums and accretion of discounts on debt securities are
      computed using the interest method. Declines in the fair value of
      securities below their cost that are deemed to be other than temporary are
      reflected in earnings as realized losses. 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 the allowance for loan losses,
      net deferred loan fees/costs and deferred premium.


                                      F-7
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Loans (concluded)

      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.

      Deferred premium and net deferred loan costs are amortized over the
      contractual lives of the related loans using the interest method.

      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.

      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.


                                      F-8
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Allowance for loan losses (concluded)

      The allowance consists of allocated, general and unallocated components.
      The allocated component relates to loans that are classified as either
      doubtful, substandard or loss. For such loans that are also classified as
      impaired, an allowance is established when the collateral value of the
      impaired loans is lower than the carrying value of that loan. The general
      component covers non-classified loans and is based on historical loss
      experience adjusted for qualitative factors. An unallocated component is
      maintained to cover uncertainties that could affect management's estimate
      of probable losses. The unallocated component of the allowance reflects
      the margin of imprecision inherent in the underlying assumptions used in
      the methodologies for estimating losses in the portfolio.

      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 accounted 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 were funded in the
      year of accrual using the aggregate cost method. (Also see Note 10).

      Advertising

      Advertising costs are expensed as incurred.

      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.


                                      F-9
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Stock compensation plans

      The Company measures compensation cost for its Recognition and Retention
      Plan ("RRP") based on the market value of the stock at the grant date and
      such cost is recognized over the vesting period.

      The Company measures compensation cost for its Stock Option Plan using the
      intrinsic value based method of accounting, whereby compensation cost is
      the excess, if any, of the quoted market price of the stock at the grant
      date (or other measurement date) over the amount an employee must pay to
      acquire the stock. Stock options issued under the Company's Stock Option
      Plan have no intrinsic value at the grant date and no compensation cost is
      recognized for them. The Company is required to make pro forma disclosures
      of net income and earnings per share as if compensation cost had been
      measured at the grant date based on the fair value of the award and
      recognized over the service period, which is usually the vesting period.
      (See Note 11.)

      Employee Stock Ownership Plan ("ESOP")

      Compensation expense is recognized based on shares released or committed
      to be released to the ESOP. All shares held by the ESOP that are released
      and committed to be released 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.
      Potential common shares that may be issued by the Company relate to
      outstanding stock options and unvested stock granted under the RRP and are
      determined using the treasury stock method. Assumed conversion of the
      outstanding dilutive stock options and unvested RRP stock would increase
      the shares outstanding but would not require an adjustment to income as a
      result of the conversion. For the years ended June 30, 2001 and 2000,
      options applicable to 57,255 and 39,722 shares, respectively, and 29,712
      and 19,775 unvested shares of RRP stock, respectively, were anti-dilutive
      and excluded from the diluted earnings per share computation.


                                      F-10
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Comprehensive income/loss

      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 securities,
      are reported as a separate component of the equity section of the
      consolidated balance sheet, such items, along with net income, are
      components of comprehensive income/loss.

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

                                                          Years Ended June 30,
                                                          --------------------
                                                           2001          2000
                                                          -------      -------

      Unrealized holding gains (losses) on securities
         available for sale                               $ 3,642      $(1,890)
      Unrealized loss on securities transferred from
         available for sale to held to maturity               (28)          --
      Reclassification adjustment for net gains
          realized in income                                 (367)        (336)
                                                          -------      -------
      Net unrealized gains (losses)                         3,247       (2,226)
      Tax effect                                           (1,123)         770
                                                          -------      -------

      Net-of-tax amount                                   $ 2,124      $(1,456)
                                                          =======      =======

      Subsequent accounting changes

      In June 2001, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards ("SFAS") No. 141, Business
      Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
      These Statements change the accounting for business combinations and
      goodwill and intangible assets. SFAS No. 141 requires that the purchase
      method of accounting be used for all business combinations initiated after
      June 30, 2001. Use of the pooling-of-interests method is prohibited. SFAS
      No. 142 changes the accounting for goodwill from an amortization method to
      an impairment-only approach. In addition, this Statement requires that
      acquired intangible assets, as defined, be amortized over their useful
      lives. This Standard would be effective for the Company no later than July
      1, 2002. Management does not anticipate that the adoption of these
      Statements will have a material impact on the consolidated financial
      statements.


                                      F-11
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)

      Subsequent accounting changes (concluded)

      In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
      Instruments and Hedging Activities," which, as amended by SFAS Nos. 137
      and 138, 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. The Company adopted this Statement on July
      1, 2000 with no impact on the consolidated financial statements.

3.    SECURITIES

      A summary of securities follows:

<TABLE>
<CAPTION>
                                                        June 30, 2001
                                       -----------------------------------------------
                                                     Gross         Gross
                                       Amortized   Unrealized   Unrealized      Fair
                                          Cost       Gains        Losses        Value
                                       ---------   ----------   ----------     -------
<S>                                     <C>         <C>          <C>           <C>
      Securities Available for Sale

      Federal agency obligations        $19,241     $    87      $   (163)     $19,165
      Mortgage-backed securities            167          --            --          167
      Other debt securities              21,025         356          (327)      21,054
                                        -------     -------      --------      -------
          Total debt securities          40,433         443          (490)      40,386

      Marketable equity securities        3,457          86          (794)       2,749
                                        -------     -------      --------      -------

                                        $43,890     $   529      $ (1,284)     $43,135
                                        =======     =======      ========      =======

      Securities Held to Maturity
      Mortgage-backed securities        $31,046     $     4      $   (225)     $30,825
      Other debt securities               5,190         256            --        5,446
                                        -------     -------      --------      -------

                                        $36,236     $   260      $   (225)     $36,271
                                        =======     =======      ========      =======
</TABLE>


                                      F-12
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      SECURITIES (concluded)

<TABLE>
<CAPTION>
                                                          June 30, 2000
                                          -----------------------------------------------
                                                        Gross         Gross
                                          Amortized   Unrealized    Unrealized      Fair
                                             Cost       Gains         Losses       Value
                                          ---------   ----------    ----------    -------
<S>                                        <C>         <C>          <C>           <C>
      Securities Available for Sale

      Federal agency obligations           $45,667     $     7      $ (2,041)     $43,633
      Mortgage-backed securities            16,876           5          (853)      16,028
      Other debt securities                 19,359          47          (785)      18,621
                                           -------     -------      --------      -------
                 Total debt securities      81,902          59        (3,679)      78,282

      Marketable equity securities           3,724         145          (555)       3,314
                                           -------     -------      --------      -------

                                           $85,626     $   204      $ (4,234)     $81,596
                                           =======     =======      ========      =======
      Securities Held to Maturity

      Other debt securities                $ 4,771     $     6      $    (39)     $ 4,738
                                           =======     =======      ========      =======
</TABLE>

      The amortized cost and estimated fair value of debt securities by
      contractual maturity at June 30, 2001 follows. Expected maturities will
      differ from contractual maturities because the issuer may have the right
      to call or prepay obligations with or without call or prepayment
      penalties.

<TABLE>
<CAPTION>
                                   Securities Available for Sale       Securities Held to Maturity
                                   -----------------------------       ---------------------------
                                   Amortized             Fair          Amortized           Fair
                                      Cost               Value            Cost             Value
                                   ---------           ---------       ---------         ---------
<S>                                <C>                 <C>             <C>               <C>
      Within 1 year                $   2,274           $   2,233       $     492         $     500
      Over 1 year to 5 years          11,805              11,836           3,841             4,049
      Over 5 years to 10 years        22,094              22,068             857               897
      Over 10 years                    4,093               4,082              --                --
                                   ---------           ---------       ---------         ---------
                                      40,266              40,219           5,190             5,446
      Mortgage-backed
          securities                     167                 167          31,046            30,825
                                   ---------           ---------       ---------         ---------

                                   $  40,433           $  40,386       $  36,236         $  36,271
                                   =========           =========       =========         =========
</TABLE>

      Proceeds from the sale of securities available for sale during fiscal 2001
      and 2000 were $12,337 and $4,668, respectively. Gross gains of $582 and
      $352, and gross losses of $215 and $16, were realized during fiscal 2001
      and 2000, respectively.

      During fiscal 2001, securities available for sale with an amortized cost
      of $15,088 and a fair value of $15,060 were transferred to securities held
      to maturity. The net unrealized loss of $28 is included in accumulated
      other comprehensive income at June 30, 2001.


                                      F-13
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.    LOANS

      A summary of the balances of loans follows:

                                                               June 30,
                                                       ------------------------
                                                         2001            2000
                                                       ---------      ---------

      Real estate loans:
          Residential                                  $  66,392      $  61,689
          Commercial                                      31,109         25,035
          Construction                                     4,713          2,742
                                                       ---------      ---------
                                                         102,214         89,466
                                                       ---------      ---------

      Other loans:
          Home equity                                      5,356          5,266
          Second mortgages                                 3,776          2,419
          Installment                                      1,688          1,629
          Commercial                                      10,167          7,763
          Passbook secured                                   626            634
                                                       ---------      ---------
                                                          21,613         17,711
                                                       ---------      ---------

                    Total loans                          123,827        107,177

      Allowance for loan losses                             (974)          (802)
      Net deferred loan costs and premium                     69             47
                                                       ---------      ---------

                                                       $ 122,922      $ 106,422
                                                       =========      =========

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

                                                          Years Ended June 30,
                                                       ------------------------
                                                         2001            2000
                                                       ---------      ---------

      Balance at beginning of year                     $     802      $     740
      Provision for loan losses                              218            220
      Recoveries                                              31             19
      Charge-offs                                            (77)          (177)
                                                       ---------      ---------

      Balance at end of year                           $     974      $     802
                                                       =========      =========


                                      F-14
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      LOANS (concluded)

      Impaired loans at June 30, 2001 and 2000 amounted to $138 and $554,
      respectively, none of which required a corresponding valuation allowance.
      No additional funds are committed to be advanced in connection with
      impaired loans. Non-accrual loans at June 30, 2001 and 2000 amounted to
      $149 and $432, respectively.

      For the years ended June 30, 2001 and 2002, the average recorded
      investment in impaired loans amounted to $337 and $643, respectively, and
      interest income recognized on impaired loans amounted to $53 and $50,
      respectively, substantially all on a cash basis.

5.    BANKING PREMISES AND EQUIPMENT

      A summary of the cost and accumulated depreciation and amortization of
      banking premises and equipment follows:

                                                               June 30,
                                                       ------------------------
                                                         2001            2000
                                                       ---------      ---------
      Banking premises:
          Land                                         $   1,582      $   1,582
          Building and leasehold
              improvements                                 2,647          2,574
      Equipment                                            2,499          2,055
                                                       ---------      ---------
                                                           6,728          6,211
      Less accumulated depreciation and
          amortization                                    (2,648)        (1,988)
                                                       ---------      ---------

                                                       $   4,080      $   4,223
                                                       =========      =========

      Depreciation and amortization expense for the years ended June 30, 2001
      and 2000 amounted to $660 and $640, respectively.


                                      F-15
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.    DEPOSITS

      A summary of deposit balances by type is as follows:

                                                                  June 30,
                                                           ---------------------
                                                             2001         2000
                                                           --------     --------

      Demand                                               $ 25,912     $ 19,684
      NOW                                                    29,066       22,521
      Money market deposits                                  16,064       12,992
      Regular and other savings                              34,869       28,998
                                                           --------     --------
                     Total non-certificate accounts         105,911       84,195
                                                           --------     --------

      Term certificates of $100,000 or greater               19,094       23,993
      Term certificates less than $100,000                   66,821       68,157
                                                           --------     --------
                     Total certificate accounts              85,915       92,150
                                                           --------     --------

                     Total deposits                        $191,826     $176,345
                                                           ========     ========

      A summary of certificate accounts by maturity is as follows:

                                      June 30, 2001         June 30, 2000
                                   ------------------    -------------------
                                             Weighted               Weighted
                                              Average                Average
                                   Amount      Rate      Amount       Rate
                                   ------   ---------    ------    ---------

      Within 1 year               $70,397      5.46%     $80,926      5.84%
      Over 1 year to 3 years       15,444      5.50       11,170      5.90
      Over 3 years to 4 years          74      5.17           54      6.54
                                  -------                -------

                                  $85,915      5.47%     $92,150      5.85%
                                  =======                =======


                                      F-16
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.    FEDERAL HOME LOAN BANK ADVANCES

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

                                          June 30, 2001          June 30, 2000
                                       ------------------    -------------------
                                                 Weighted               Weighted
                                                  Average                Average
                                       Amount      Rate      Amount       Rate
                                       ------    --------    ------     --------

      Within 1 year                   $ 2,000      6.75%     $    85      7.52%
      Over 1 year to 3 years            1,000      3.94        2,000      6.75
      Over 3 years to 5 years           2,000      5.11        7,000      5.67
      Over 5 years to 10 years         26,500      5.56       16,500      5.76
      Over 10 years to 20 years           755      6.74          765      6.74
                                      -------                -------

                                      $32,255      5.59%     $26,350      5.84%
                                      =======                =======

      A summary of FHLB advances by the earlier of the maturity date or the date
      callable by the FHLB follows:

                                          June 30, 2001          June 30, 2000
                                        ------------------    ------------------
                                                  Weighted              Weighted
                                                   Average               Average
                                        Amount      Rate      Amount      Rate
                                        ------    --------    ------    --------

      Within 1 year                    $25,500      5.77%     $23,585     5.74%
      Over 1 year to 3 years             6,000      4.65        2,000     6.75
      Over 10 years to 20 years            755      6.74          765     6.74
                                       -------                -------

                                       $32,255      5.59%     $26,350     5.84%
                                       =======                =======

      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 $4,000
      at June 30, 2001 and 2000, of which $0 and $85, respectively, was advanced
      and is included in the table above.

      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.


                                      F-17
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    INCOME TAXES

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

                                                       Years Ended June 30,
                                                    -------------------------
                                                      2001              2000
                                                    -------           -------
      Current tax provision:
          Federal                                   $   492           $   474
          State                                          51                61
                                                    -------           -------
                                                        543               535
                                                    -------           -------
      Deferred tax benefit:
          Federal                                       (78)              (64)
          State                                         (27)              (22)
                                                    -------           -------
                                                       (105)              (86)
                                                    -------           -------

                                                    $   438           $   449
                                                    =======           =======

      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,
                                                     ----------------------
                                                     2001              2000
                                                     ----              ----

      Statutory rate                                 34.0%             34.0%
      Increase (decrease) resulting from:
          State taxes, net of federal tax benefit     1.1               2.0
          Officers' life insurance                   (2.9)             (0.7)
          Dividend received deduction                (1.2)             (1.1)
          Other                                       0.4               0.5
                                                     ----              ----

      Effective tax rates                            31.4%             34.7%
                                                     ====              ====


                                      F-18
<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,
                                                       ------------------------
                                                         2001             2000
                                                       -------          -------
      Deferred tax asset:
          Federal                                      $   789          $ 1,844
          State                                            185              201
                                                       -------          -------
                                                           974            2,045
                                                       -------          -------
      Deferred tax liability:
          Federal                                          (41)             (80)
          State                                            (14)             (28)
                                                       -------          -------
                                                           (55)            (108)
                                                       -------          -------

      Net deferred tax asset                           $   919          $ 1,937
                                                       =======          =======

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


                                                                 June 30,
                                                           --------------------
                                                            2001          2000
                                                           -----        -------

      Allowance for loan losses                            $ 373        $   277
      Net unrealized loss on securities                      269          1,392
      Employee benefit plans                                 100            164
      Net deferred loan costs                                (29)           (15)
      Depreciation                                           195            147
      Other                                                   11            (28)
                                                           -----        -------

      Net deferred tax asset                               $ 919        $ 1,937
                                                           =====        =======

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

                                                            Years Ended June 30,
                                                            --------------------
                                                              2001        2000
                                                            -------      -------

      Balance at beginning of year                          $ 1,937      $1,081
      Deferred tax benefit                                      105          86
      Change in deferred tax effect of net unrealized
          gain/loss on securities                            (1,123)        770
                                                            -------      ------

      Balance at end of year                                $   919      $1,937
                                                            =======      ======


      There was no valuation reserve required for the years ended June 30, 2001
      and 2000.


                                      F-19
<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
      $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 $467 has not been
      provided.

9.    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 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. Prompt corrective action provisions are not
      applicable to the Company.

      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, 2001, 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.


                                      F-20
<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>
      June 30, 2001:
      Total capital to risk weighted assets:
          Consolidated                            $19,146     12.8%     $11,949      8.0%    $    --       --%
          Bank                                     16,005     10.7       11,949      8.0      14,936     10.0

      Tier 1 capital to risk weighted assets:
          Consolidated                             18,172     12.2        5,975      4.0          --       --
          Bank                                     15,031     10.1        5,975      4.0       8,962      6.0

      Tier 1 capital to average assets:
          Consolidated                             18,172      7.8        9,289      4.0          --       --
          Bank                                     15,031      6.5        9,289      4.0      11,611      5.0

      June 30, 2000:
      Total capital to risk weighted assets:
          Consolidated                            $18,208     13.9%     $10,454      8.0%    $    --       --%
          Bank                                     15,168     11.6       10,454      8.0      13,067     10.0

      Tier 1 capital to risk weighted assets:
          Consolidated                             17,406     13.3        5,227      4.0          --       --
          Bank                                     14,366     11.0        5,227      4.0       7,840      6.0

      Tier 1 capital to average assets:
          Consolidated                             17,406      8.4        8,321      4.0          --       --
          Bank                                     14,366      6.9        8,321      4.0      10,401      5.0
</TABLE>


                                      F-21
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      STOCKHOLDERS' EQUITY (concluded)

      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.

      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, 2001, $11,949 of the
      Company's equity in the Bank was restricted and funds available for loans
      or advances amounted to $1,601.


                                      F-22
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.   PENSION AND COMPENSATION PLANS

      Defined benefit plan

      Prior to March 31, 2000, the Bank had a qualified defined benefit pension
      plan (the Plan) covering substantially all of its full time employees who
      have completed one year of service and worked at least 1,000 hours per
      year. On March 31, 2000, the Bank terminated the plan and amended the Plan
      to reallocate excess assets of the Plan to provide additional benefits to
      its participants. No curtailment gain or loss resulted from this
      termination. The termination of the Plan settled during fiscal 2001,
      resulting in a settlement gain of $97. Information pertaining to the
      activity in the Plan through the curtailment date is as follows:

<TABLE>
<CAPTION>
                                                              Five Months
                                                                 Ended       Year Ended
                                                               March 31,     October 31,
                                                                 2000           1999
                                                               ----------    -----------

<S>                                                            <C>            <C>
      Change in benefit obligation:
          Benefit obligation at beginning of period            $   978        $   775
          Service cost                                              55            106
          Interest cost                                             32             52
          Actuarial loss                                            --             56
          Benefits paid                                            (17)           (11)
                                                               -------        -------
          Benefit obligation at end of period                    1,048            978
                                                               -------        -------

      Change in plan assets:
          Fair value of plan assets at beginning of period       1,105            763
          Actual return on plan assets                             264            188
          Employer contribution                                     --            165
          Benefits paid                                            (17)           (11)
                                                               -------        -------
          Fair value of plan assets at end of period             1,352          1,105
                                                               -------        -------

      Funded status                                                304            127
      Unrecognized net actuarial gain                             (397)          (174)
      Transition asset                                             (25)           (26)
                                                               -------        -------

      Accrued pension cost                                     $  (118)       $   (73)
                                                               =======        =======
</TABLE>

      For the period from the curtailment date through the settlement date, the
      net assets earned income of $94, contributions from the Bank amounted to
      $4 and distributions from the plan amounted to $1,450.


                                      F-23
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      PENSION AND COMPENSATION PLANS (continued)

      Defined benefit plan (concluded)

      The components of net periodic pension cost are as follows:

                                                      Five Months
                                                         Ended       Year Ended
                                                       March 31,     October 31,
                                                         2000            1999
                                                       ---------     -----------

      Service cost                                     $    55        $    106
      Interest cost                                         32              52
      Expected return on plan assets                       (37)            (61)
      Transition asset                                      (1)             (3)
      Recognized net actuarial gain                         (3)             (5)
                                                       -------        --------

                                                       $    46        $     89
                                                       =======        ========

      Pension expense for the year ended June 30, 2000 amounted to $73.

      For the five months ended March 31, 2000 and the plan year ended October
      31, 1999, actuarial assumptions include an assumed discount rate on
      benefit obligations of 7.75% and 6.75%, respectively. An expected
      long-term rate of return on plan assets of 8% and annual salary increase
      of 5% was utilized for both periods.

      401(k) plan

      In addition to the defined benefit plan, 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. Prior to January 1, 2000, the Bank made matching
      contributions equal to 50% of each employee's voluntary contribution, up
      to 3% of the employee's compensation. Effective January 1, 2000, the Bank
      will match 100% of each employee's voluntary contribution, up to 4% of the
      employee's compensation. Total expense under the plan for the years ended
      June 30, 2001 and 2000 amounted to $72 and $52, respectively.


                                      F-24
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      PENSION AND COMPENSATION PLANS (concluded)

      Supplemental retirement agreements

      The Bank has a supplemental retirement agreement with a former 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 $203 and $288 at
      June 30, 2001 and 2000, respectively. Compensation expense applicable to
      the agreement for the years ended June 30, 2001 and 2000 amounted to $76
      and $81, respectively.

      During fiscal 2000, the Bank entered into supplemental retirement
      agreements with the directors of the Bank which provide for compensation
      payments upon retirement, subject to certain limitations as set forth in
      the agreements. Compensation expense applicable to these agreements
      amounted to $36 and $6 for the year ended June 30, 2001 and 2000,
      respectively.

11.   STOCK COMPENSATION PLANS AND ESOP

      Stock Option Plan

      On September 1, 1999, the Board of Directors approved the 1999 Stock
      Option Plan. Under the Plan, the Company may grant options to its
      directors, officers and employees for up to 80,484 shares of common stock.
      Both incentive stock options and non-qualified stock options may be
      granted under the Plan. The exercise price of each option equals the
      market price of the Company's stock on the date of grant and an option's
      maximum term is ten years. Shares awarded vest in five equal annual
      installments and became fully vested upon the recipient's retirement.

      The Plan also permits the inclusion of limited rights, reload options and
      dividend equivalent rights.

      Limited rights would permit the optionee to surrender an option, or
      portion thereof, for cancellation and to receive cash or common stock
      equal to the excess, if any, of the then fair market value of the common
      stock subject to such option or portion thereof over the option exercise
      price. Limited rights can only be exercised upon a change in control (as
      defined) and, if the related options are exercised or terminated, the
      related rights are terminated. Limited rights with respect to 1,000 and
      42,387 options were granted and 1,700 and 6,000 were forfeited during
      fiscal 2001 and 2000, respectively. Limited rights with respect to 35,687
      and 36,387 options were outstanding at June 30, 2001 and 2000,
      respectively.


                                      F-25
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      STOCK COMPENSATION PLANS AND ESOP (continued)

      Stock Option Plan (concluded)

      Reload options would permit the exchange of shares of stock in
      satisfaction of all or a portion of the exercise price of the original
      option grant. The exercise price of the stock subject to the reload option
      will be determined at the time the original option is exercised. Dividend
      equivalent rights would permit the optionee to receive a cash benefit per
      share underlying the related vested stock options outstanding in the
      amount of any extraordinary dividend (as defined) declared by the Company.
      Reload options and dividend equivalent rights were granted with respect to
      all options granted during fiscal 2001 and 2000.

      The Company measures compensation cost for the stock option plan using the
      intrinsic value based method of accounting. Had compensation cost for the
      Company's stock option plan been determined based on the fair value at the
      grant dates, the Company's net income and earnings per share (basic and
      diluted) would have been $904 and $0.58, respectively, for the year ended
      June 30, 2001 and $832 and $0.52, respectively, for the year ended June
      30, 2000.

      The fair value of each option grant is estimated on the date of grant
      using the Black-Scholes option-pricing model with the following
      weighted-average assumptions:

                                                      Years Ended June 30,
                                                   -------------------------
                                                     2001              2000
                                                   --------         --------

      Dividend yield                                  --%              --%
      Expected life                                10 years         10 years
      Expected volatility                             41%              26%
      Risk-free interest rate                        5.4%             6.5%

      Stock option activity under the plan for the years ended June 30, 2001 and
      2000 follows:

<TABLE>
<CAPTION>
                                                          2001                          2000
                                               --------------------------    ---------------------------
                                                             Weighted                         Weighted
                                                              Average                         Average
                                               Options     Exercise Price    Options      Exercise Price
                                               -------     --------------    -------      --------------
<S>                                            <C>             <C>           <C>              <C>
      Outstanding at beginning of year         58,387          $7.50              --          $  --
      Granted                                   1,000           9.75          64,387           7.50
      Forfeited                                (2,700)          7.50          (6,000)          7.50
                                              -------                        -------
      Outstanding at end of year               56,687           7.54          58,387           7.50
                                              =======                        =======

      Exercisable at end of year               24,015          $7.50              --          $  --
                                              =======                        =======

      Weighted average fair value of
          options granted during the year     $  6.05                          $4.08
                                              =======                        =======
</TABLE>

      The weighted average remaining contractual life of options outstanding and
      options exercisable at June 30, 2001 was 7.3 years and 5.8 years,
      respectively.


                                      F-26
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      STOCK COMPENSATION PLANS AND ESOP (concluded)

      Recognition and Retention Plan

      On September 1, 1999, the Board of Directors approved the 1999 Recognition
      and Retention Plan (the "RRP") for key employees and directors of the
      Company and the Bank and reserved 40,247 shares of common stock of the
      Company for issuance. During the year ended June 30, 2001 and 2000, 1,500
      and 31,567 shares were awarded and 500 and 2,500 shares were forfeited,
      respectively. Shares awarded vest in five equal annual installments and
      become fully vested upon the recipient's retirement. At June 30, 2001,
      5,713 shares were vested. Compensation expense relating to the RRP
      amounted to $59 and $27 for the years ended June 30, 2001 and 2000,
      respectively.

      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
      1,000 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 $47 for each of the years ended June 30, 2001 and
      2000.

      Shares held by the ESOP include the following:

                                                           June 30,
                                                     ---------------------
                                                      2001           2000
                                                     ------         ------

      Allocated                                      22,878         16,439
      Committed to be allocated                       4,293          4,293
      Unallocated                                    37,223         43,662
                                                     ------         ------

                                                     64,394         64,394
                                                     ======         ======

      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. The fair value of
      unearned ESOP shares at June 30, 2001 and 2000 is $409 and $259,
      respectively.


                                      F-27
<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,
                                                             -------------------
                                                               2001        2000
                                                             -------     -------

      Commitments to grant loans                             $ 9,812     $ 4,660
      Unadvanced funds on home equity lines-of-credit          6,999       8,876
      Unadvanced funds on commercial lines-of-credit           9,312       6,365
      Unadvanced funds on personal lines-of-credit               891         750
      Unadvanced funds on construction loans                   2,358       1,835

      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.


                                      F-28
<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, 2001 pertaining to banking premises and equipment, future minimum rent
      commitments are as follows:

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

                        2002                      $   410
                        2003                          377
                        2004                          322
                        2005                          246
                        2006                          212
                     Thereafter                       536
                                                  -------

                                                  $ 2,103
                                                  =======

      These leases contain options to extend for periods from five to ten years.
      The cost of such rentals is not included above. Total rent expense the
      years ended June 30, 2001 and 2000 amounted to $450 and $388,
      respectively.

13.   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.


                                      F-29
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

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

            Securities: Fair values for securities 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.

            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 commitments are based on fees currently charged to enter
            into similar agreements, taking into account the remaining terms of
            the agreements and the counterparties' credit standing and are not
            material.


                                      F-30
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      FAIR VALUE OF FINANCIAL INSTRUMENTS (concluded)

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

<TABLE>
<CAPTION>
                                                                       June 30,
                                                     -----------------------------------------------
                                                              2001                     2000
                                                     ---------------------     ---------------------
                                                     Carrying       Fair       Carrying      Fair
                                                      Amount        Value       Amount       Value
                                                     --------     --------     --------     --------
<S>                                                  <C>          <C>          <C>          <C>
      Financial assets:
          Cash and cash equivalents                  $ 30,651     $ 30,651     $ 14,245     $ 14,245
          Certificate of deposit                          100          100          100          100
          Securities available for sale                43,135       43,135       81,596       81,596
          Securities held to maturity                  36,236       36,271        4,771        4,738
          FHLB stock                                    1,613        1,613        1,588        1,588
          Loans, net                                  122,922      127,754      106,422      103,590
          Accrued interest receivable                   1,734        1,734        2,007        2,007

      Financial liabilities:
          Deposits                                    191,826      192,555      176,345      176,350
          Federal Home Loan Bank
              advances                                 32,255       30,915       26,350       26,002
</TABLE>


                                      F-31
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14.   CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

      Condensed financial information pertaining only to the Company is as
      follows:

                                 BALANCE SHEETS
                                                                  June 30,
                                                            -------------------
                                                             2001         2000
                                                            -------     -------
      Assets:
          Interest-bearing deposit in Strata Bank           $ 2,792     $ 2,600
          Investment in common stock of Strata Bank          15,224      12,138
          Loan receivable from Strata Bank ESOP                 415         479
          Other assets                                           19          22
                                                            -------     -------

              Total assets                                  $18,450     $15,239
                                                            =======     =======

      Other liabilities                                     $    84     $    61
      Stockholders' equity                                   18,366      15,178
                                                            -------     -------

                                                            $18,450     $15,239
                                                            =======     =======

                              STATEMENTS OF INCOME

                                                            Years Ended June 30,
                                                            --------------------
                                                              2001        2000
                                                            --------    -------

      Interest income                                       $   132     $   128
      Operating expenses                                        (59)        (27)
                                                            -------     -------
                    Income before income taxes                   73         101
      Provision for income taxes                                (30)        (42)
                                                            -------     -------
                                                                 43          59
      Equity in undistributed net income of Strata Bank         915         787
                                                            -------     -------

                    Net income                              $   958     $   846
                                                            =======     =======


                                      F-32
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

      CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY (concluded)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Years Ended June 30,
                                                                     --------------------
                                                                      2001         2000
                                                                     -------      -------
<S>                                                                  <C>          <C>
Cash flows from operating activities:
    Net income                                                       $   958      $   846
    Adjustments to reconcile net income
        to net cash provided by operating activities:
            Change in other assets and liabilities                        26           28
            Equity in undistributed net income of Strata Bank           (915)        (787)
                                                                     -------      -------
                Net cash provided by operating activities                 69           87
                                                                     -------      -------

Cash flows from investing activities:
    ESOP shares released                                                  64           65
                                                                     -------      -------

Cash flows from financing activities:
    Purchase of treasury stock                                            --         (477)
    Purchase of RRP stock                                                 --         (288)
    Amortization of RRP stock                                             59           27
                                                                     -------      -------
                Net cash provided (used) by financing activities          59         (738)
                                                                     -------      -------

Net change in cash and cash equivalents                                  192         (586)
Cash and cash equivalents at beginning of year                         2,600        3,186
                                                                     -------      -------

Cash and cash equivalents at end of year                             $ 2,792      $ 2,600
                                                                     =======      =======
</TABLE>


                                      F-33
<PAGE>

                      SERVICE BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)

15. QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      Years Ended June 30,
                                                            ------------------------------------------------------------------------
                                                                            2001                               2000
                                                            -----------------------------------  -----------------------------------
                                                            Fourth     Third   Second    First   Fourth    Third   Second     First
                                                            Quarter   Quarter  Quarter  Quarter  Quarter  Quarter  Quarter   Quarter
                                                            -------   -------  -------  -------  -------  -------  -------   -------
<S>                                                         <C>        <C>      <C>      <C>      <C>      <C>      <C>      <C>
Interest and dividend income                                $ 3,921    $3,933   $3,935   $3,857   $3,697   $3,417   $3,290   $3,073
Interest expense                                              2,007     2,081    2,120    2,074    1,941    1,737    1,575    1,470
                                                            -------    ------   ------   ------   ------   ------   ------   ------

Net interest income                                           1,914     1,852    1,815    1,783    1,756    1,680    1,715    1,603
Provision for loan losses                                        55        45       62       56       80       60       35       45
                                                            -------    ------   ------   ------   ------   ------   ------   ------

Net interest income, after provision for  loan losses         1,859     1,807    1,753    1,727    1,676    1,620    1,680    1,558
Net gain (loss) on sales of securities available for sale        (3)       80      214       76       70       33      214       19
Gain on pension plan settlement                                  97        --       --       --       --       --       --       --
Other income                                                    331       308      299      281      268      225      223      196
Other expenses                                                1,886     1,880    1,927    1,740    1,703    1,685    1,594    1,505
                                                            -------    ------   ------   ------   ------   ------   ------   ------

Income before income taxes                                      398       315      339      344      311      193      523      268

Provision for income taxes                                      117        90      112      119       98       62      189      100
                                                            -------    ------   ------   ------   ------   ------   ------   ------

Net income                                                  $   281    $  225   $  227   $  225   $  213   $  131   $  334   $  168
                                                            =======    ======   ======   ======   ======   ======   ======   ======

Earnings per share (basic and diluted)                      $  0.18    $ 0.14   $ 0.14   $ 0.14   $ 0.14   $ 0.08   $ 0.21   $ 0.10
                                                            =======    ======   ======   ======   ======   ======   ======   ======
</TABLE>


                                      F-34