10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended March 31, 2004

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

For the transition period from              to             

Commission File Number 0-24935

SERVICE BANCORP, INC.

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

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

81 Main Street,

Medway, Massachusetts 02053

(Address of principal executive offices)

(508) 533-4343

(Issuer’s telephone number, including area code)

Not Applicable

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

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practical date: At April 30, 2004, there were 1,662,679 shares of common stock outstanding, par value $0.01 per share.

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

SERVICE BANCORP, INC. AND SUBSIDIARY

FORM 10-QSB

Index

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2004 and June 30, 2003	1
	Consolidated Statements of Income for the quarter and nine months ended March 31, 2004 and 2003	2
	Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended March 31, 2004 and 2003	3
	Consolidated Statements of Cash Flows for the nine months ended March 31, 2004 and 2003	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis or Plan of Operation	9
Item 3.	Controls and Procedures	14
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	15
Item 2.	Changes in Securities	15
Item 3.	Defaults upon Senior Securities	15
Item 4.	Submission of Matters to a Vote of Security Holders	15
Item 5.	Other Information	15
Item 6.	Exhibits and Reports on Form 8-K	15
	Signatures	16

PART I—FINANCIAL INFORMATION

ITEM 1. Financial Statements

SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (unaudited)

(Dollars in thousands, except share amounts)

	March 31, 2004			June 30, 2003
ASSETS
Cash and due from banks	$	6,428		$	8,728
Short-term investments		12,228			28,372
Total cash and cash equivalents		18,656			37,100
Securities available for sale, at fair value		45,432			53,601
Securities held to maturity, at amortized cost		10,798			17,557
Federal Home Loan Bank stock, at cost		2,936			1,948
Loans		224,679			181,667
Less allowance for loan losses		(2,088	)		(1,745	)
Loans, net		222,591			179,922
Banking premises and equipment, net		3,635			3,608
Accrued interest receivable		1,279			1,390
Bank-owned life insurance		4,452			4,316
Other assets		721			504
Total assets	$	310,500		$	299,946
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	230,529		$	239,929
Long-term borrowings		50,302			35,232
Subordinated debentures		3,009			—
Other liabilities		1,353			1,274
Total liabilities		285,193			276,435
Stockholders’ equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued		—			—
Common stock, $.01 par value; 12,000,000 shares authorized, 1,712,630 issued		17			17
Additional paid-in capital		7,703			7,502
Retained earnings		16,990			15,516
Accumulated other comprehensive income		1,381			1,475
Treasury stock, at cost – (54,251 and 67,346 shares, respectively)		(510	)		(631	)
Unearned ESOP shares – (19,515 and 24,345 shares, respectively)		(195	)		(243	)
Unearned RRP stock – (11,089 and 17,461 shares, respectively)		(79	)		(125	)
Total stockholders’ equity		25,307			23,511
Total liabilities and stockholders’ equity	$	310,500		$	299,946

See accompanying notes to consolidated financial statements.

-1-

SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Dollars in thousands, except per share amounts)

	Quarter Ended March 31,					Nine Months Ended March 31,
	2004			2003		2004		2003
Interest and dividend income:
Interest and fees on loans	$	3,119		$	2,712	$	8,986	$	8,169
Interest and dividends on securities, Federal Home Loan Bank stock and certificates of deposit		851			1,043		2,647		3,464
Interest on short-term investments		5			23		28		100
Total interest and dividend income		3,975			3,778		11,661		11,733
Interest expense:
Interest on deposits		673			887		2,038		3,232
Interest on borrowings		585			454		1,627		1,378
Total interest expense		1,258			1,341		3,665		4,610
Net interest income		2,717			2,437		7,996		7,123
Provision for loan losses		56			150		353		420
Net interest income, after provision for loan losses		2,661			2,287		7,643		6,703
Noninterest income:
Customer service fees		257			263		767		794
Gain on loan sales		226			—		226		—
(Loss) gain on securities, net		(50	)		6		56		(21	)
Other income		112			79		319		238
Total noninterest income		545			348		1,368		1,011
Noninterest expense:
Salaries and employee benefits		1,311			1,004		3,620		3,057
Occupancy		283			264		776		738
Equipment expenses		138			112		398		373
Data processing expenses		203			183		558		527
Professional fees		112			92		346		238
Advertising expenses		77			50		210		180
Other general and administrative expenses		319			296		950		880
Total noninterest expense		2,443			2,001		6,858		5,993
Income before income taxes		763			634		2,153		1,721
Provision for income taxes		234			211		679		568
Net income	$	529		$	423	$	1,474	$	1,153
Weighted average shares outstanding (basic)		1,616,758			1,606,410		1,611,180		1,602,662
Weighted average shares outstanding (diluted)		1,655,542			1,637,374		1,649,738		1,626,735
Earnings per share (basic)	$	0.33		$	0.26	$	0.91	$	0.72
Earnings per share (diluted)	$	0.32		$	0.26	$	0.89	$	0.71

See accompanying notes to consolidated financial statements.

-2-

SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

NINE MONTHS ENDED MARCH 31, 2004 AND 2003

(Dollars in thousands, except share amounts)

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

See accompanying notes to consolidated financial statements.

-3-

SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

NINE MONTHS ENDED MARCH 31, 2004 AND 2003 (concluded)

(Dollars in thousands, except share amounts)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock			Unearned ESOP Shares			Unearned RRP Stock			Total
Balance at June 30, 2002	$	17	$	7,430	$	13,889	$	5	$	(527	)	$	(308	)	$	(141	)	$	20,365
Comprehensive income:
Net income		—		—		1,153		—		—			—			—			1,153
Change in net unrealized gain on securities available for sale, net of tax and reclassification adjustment		—		—		—		1,042		—			—			—			1,042
Total comprehensive income																			2,195
Common stock held by ESOP released and committed to be released (4,830 shares)		—		30		—		—		—			48			—			78
Income tax benefit on stock option exercises		—		6		—		—		—			—			—			6
Amortization of RRP stock (210 shares)		—		25		—		—		—			—			2			27
Balance at March 31, 2003	$	17	$	7,491	$	15,042	$	1,047	$	(527	)	$	(260	)	$	(139	)	$	22,671

See accompanying notes to consolidated financial statements.

-4-

SERVICE BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Dollars in thousands)

	Nine Months Ended March 31,
	2004			2003
Cash flows from operating activities:
Net income	$	1,474		$	1,153
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		353			420
(Gain) loss on securities, net		(56	)		21
Gain on loan sales		(226	)		—
Net amortization of securities		162			262
Depreciation and amortization expense		389			378
Decrease in accrued interest receivable		111			359
Net amortization of deferred loan costs and premiums		255			320
Bank-owned life insurance income		(136	)		(109	)
Deferred tax provision (benefit)		110			(119	)
Other, net		398			(637	)
Net cash provided by operating activities		2,834			2,048
Cash flows from investing activities:
Activity in securities available for sale:
Sales		8,117			8,665
Maturities, prepayments and calls		11,237			15,848
Purchases		(11,423	)		(14,273	)
Activity in securities held to maturity:
Sales		512			—
Maturities, prepayments and calls		6,231			12,340
Net increase in loans, excluding loan purchases		(36,154	)		(17,529	)
Purchases of loans		(16,671	)		(12,307	)
Proceeds from sales of loans		9,774			—
Purchases of banking premises and equipment		(644	)		(169	)
Purchase of bank-owned life insurance		—			(700	)
Purchases of Federal Home Loan Bank stock		(988	)		—
Investment in unconsolidated trust subsidiary		(93	)		—
Net cash used by investing activities		(30,102	)		(8,125	)
Cash flows from financing activities:
Net (decrease) increase in deposits		(9,400	)		3,776
Proceeds from long-term borrowings		17,079			5,174
Repayment of long-term borrowings		(2,010	)		(4,563	)
Proceeds from subordinated debt		3,009			—
Stock option exercises		98			—
Repayment of ESOP loan		48			48
Net cash provided by financing activities		8,824			4,435
Net change in cash and cash equivalents		(18,444	)		(1,642	)
Cash and cash equivalents at beginning of period		37,100			23,725
Cash and cash equivalents at end of period	$	18,656		$	22,083
Supplementary information:
Interest paid on deposits	$	2,036		$	3,234
Interest paid on borrowings		1,562			1,373
Income taxes paid		642			581
Increase in net amounts due from broker on securities transactions		—			1,424

See accompanying notes to consolidated financial statements.

-5-

SERVICE BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements (unaudited)

(1) Basis of Presentation and Consolidation

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

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions for Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. Interim results are not necessarily indicative of the results that may be expected for the entire year. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been omitted. A summary of significant accounting policies followed by the Company is set forth in the Notes to Consolidated Financial Statements of the Company’s Annual Report on Form 10-KSB for the year ended June 30, 2003.

(2) Earnings per Share

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

(3) Commitments

At March 31, 2004, the Company had outstanding commitments to originate loans of $10.9 million. Unused lines of credit and open commitments available to customers at March 31, 2004 amounted to $32.7 million, of which $16.1 million were home equity lines of credit.

(4) Securities

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

	March 31, 2004				June 30, 2003
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Securities available for sale:
Federal agency securities	$	3,042	$	3,079	$	13,528	$	13,834
Federal agency mortgage-backed securities		15,655		15,889		12,292		12,468
Other debt securities		23,275		25,126		24,478		26,509
Total debt securities available for sale		41,972		44,094		50,298		52,811
Marketable equity securities		1,335		1,338		1,025		790
Total securities available for sale	$	43,307	$	45,432	$	51,323	$	53,601
Securities held to maturity:
Federal agency mortgage-backed securities	$	6,509	$	6,775	$	12,806	$	13,246
Other debt securities		4,289		4,546		4,751		5,184
Total securities held to maturity	$	10,798	$	11,321	$	17,557	$	18,430

-6-

SERVICE BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements (unaudited)(continued)

(5) Loans

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

	March 31, 2004					June 30, 2003
	Amount			Percent		Amount			Percent
	(Dollars in thousands)
Real estate loans:
Residential	$	119,593		53.46	%	$	96,830		53.54	%
Commercial and multi-family		51,886		23.19	%		41,522		22.96	%
Construction		12,940		5.78	%		12,059		6.67	%
Total real estate loans		184,419		82.43	%		150,411		83.17	%
Commercial loans		18,937		8.47	%		13,530		7.48	%
Consumer loans:
Home equity		12,490		5.58	%		10,271		5.68	%
Second mortgages		6,654		2.98	%		5,106		2.82	%
Passbook secured		391		0.17	%		494		0.27	%
Other		831		0.37	%		1,054		0.58	%
Total consumer loans		20,366		9.10	%		16,925		9.35	%
Total gross loans		223,722		100.00	%		180,866		100.00	%
Net deferred loan costs and premiums		957					801
Allowance for loan losses		(2,088	)				(1,745	)
Total loans, net	$	222,591				$	179,922

(6) Deposits

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

	March 31, 2004				June 30, 2003
	Amount		Percent		Amount		Percent
	(Dollars in thousands)
Demand	$	33,382	14.48	%	$	33,716	14.05	%
NOW		30,700	13.32	%		41,676	17.37	%
Money market deposits		30,254	13.12	%		28,341	11.81	%
Regular and other savings		46,472	20.16	%		45,394	18.92	%
Total non-certificate accounts		140,808	61.08	%		149,127	62.15	%
Term certificates of $100,000 or greater		28,043	12.16	%		27,230	11.35	%
Term certificates less than $100,000		61,678	26.76	%		63,572	26.50	%
Total certificate accounts		89,721	38.92	%		90,802	37.85	%
Total deposits	$	230,529	100.00	%	$	239,929	100.00	%

(7) Long-term Borrowings

Long-term borrowings were comprised of the following advances from the Federal Home Loan Bank of Boston (“FHLB”). The advances are presented by the earlier of the maturity date or the date callable by the FHLB.

	March 31, 2004				June 30, 2003
	Amount		Percent		Amount		Percent
	(Dollars in thousands)
Less than one year	$	30,500	60.63	%	$	30,500	86.57	%
One to three years		15,000	29.82	%		4,000	11.35	%
Greater than three years		4,802	9.55	%		732	2.08	%
Total borrowed funds	$	50,302	100.00	%	$	35,232	100.00	%

-7-

SERVICE BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements (unaudited)(concluded)

(8) Subordinated Debentures

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

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

(9) Stock Compensation Plan

At March 31, 2004, the Company had a stock option plan, which is described more fully in Note 11 of the Company’s annual report on Form 10-KSB for the year ended June 30, 2003. The Company measures compensation cost for its stock option plan using the intrinsic value based method of accounting, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Company’s stock option plan have no intrinsic value at the grant date and no compensation cost is recognized for them.

Had compensation cost for the Company’s stock option plan been determined using the fair value method based on the Black-Scholes option-pricing model, the Company’s net income and earnings per share for the quarter and nine months ended March 31, 2004 and 2003, would have been reduced to the following pro forma amounts:

	Quarter Ended March 31,				Nine Months Ended March 31,
	2004		2003		2004		2003
	(Dollars in thousands, except per share amounts)
Net income, as reported	$	529	$	423	$	1,474	$	1,153
Deduct: Total stock-based compensation expense determined under the fair value method, net of taxes		20		10		43		29
Pro forma net income	$	509	$	413	$	1,431	$	1,124
Earnings per share (basic):
As reported	$	0.33	$	0.26	$	0.91	$	0.72
Pro forma	$	0.32	$	0.26	$	0.89	$	0.70
Earnings per share (diluted):
As reported	$	0.32	$	0.26	$	0.89	$	0.71
Pro forma	$	0.31	$	0.25	$	0.87	$	0.69

-8-

ITEM 2. Management’s Discussion and Analysis or Plan of Operation

General

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

Comparison of Financial Condition at March 31, 2004 and June 30, 2003

Total assets were $310.5 million at March 31, 2004, an increase of $10.6 million, or 3.5% from the $299.9 million at June 30, 2003. Reductions in short-term investments of $16.1 million, or 56.9% and securities of $14.9 million, or 21.0%, were reinvested in loans, which increased $43.0 million, or 23.7%. Total deposits decreased $9.4 million, or 3.9%, while long-term borrowings from the Federal Home Loan Bank of Boston (“FHLB”) increased $15.1 million, or 42.8%. In addition, during the quarter ended March 31, 2004 the Company participated in a pooled offering of trust preferred securities. In connection with this offering, a trust subsidiary of the Company issued $3.0 million of trust preferred securities. The proceeds of the sale of the securities were in turn invested in a 30 year $3.0 million subordinate debenture issued by the Company. For a further discussion of the subordinated debenture refer to Note 8 of the Notes to Consolidated Financial Statements of this Form 10-QSB.

Short-term investments, which consisted primarily of overnight funds sold, were reduced by $16.1 million since June 30, 2003 to $12.2 million at March 31, 2004 to fund loan growth and due to the anticipated decrease in funding from NOW deposit accounts used by attorneys in connection with loan closings on residential mortgages. A decrease in the level of residential loan refinance activity reduced the volume of loan closings for attorneys, which consequently reduced the balance levels in attorney deposit accounts at the Bank.

Total investment securities were $56.2 million at March 31, 2004, a decrease of $14.9 million since June 30, 2003. The decrease in securities was due to amortization and prepayment on mortgage-backed securities, federal agency bond calls and maturity and due to a restructuring of a portion of the portfolio which considered future funding requirements for loans, opportunities in the marketplace for certain bonds and opportunity to strengthen the Bank’s future net interest margin and earnings. The restructuring included the sale of low yielding federal agency bonds, certain corporate bonds and several equity securities. These transactions resulted in a net gain from the sale of securities of $56,000 for the first nine months ending March 31, 2004. These reductions to securities were only partially offset by $11.4 million in securities purchases since June 30, 2003.

In September 2003, the Bank sold two corporate bonds from the same issuer, a $1.0 million bond designated as available for sale and a $500,000 bond designated as held to maturity. Bank management had considered the bond’s placement by the bond rating agencies to negative credit watch for possible downgrading to junk bond status and management reviewed the financial condition and operating performance of the issuer. As a result, management determined that there was “significant deterioration” in the credit worthiness of the bonds and subsequently sold both bonds for a gain of $34,000. Under Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” the determination of “significant deterioration” of the credit worthiness of the held to maturity bond and subsequent sale, does not call into question management’s intent to hold other debt securities to maturity in the future.

Residential real estate loans are originated through the residential mortgage division of the Bank, the Strata Mortgage Center. The Bank also had a contractual arrangement with Marathon Mortgage Company (“Marathon”), an independent mortgage loan origination company, which supplemented the Bank’s residential mortgage loan origination business. During the quarter ended December 31, 2003, however, the Bank added to its staffing level at Strata Mortgage Center to be able to service all of the Bank’s residential loan customers. As a result, the additional loan origination services provided by Marathon were no longer required and the contractual agreement with Marathon was terminated. The Bank may, as it has done in the past, continue to buy residential loans directly from Marathon.

For the nine-month period ended March 31, 2004, the Strata Mortgage Center originated $43.5 million in residential real estate loans. In addition, the Bank purchased $13.3 million of residential loans directly from Marathon and purchased $3.4 million in residential loans from another bank. The Bank also sold $9.5 million in residential loans during the most recent quarter, with servicing retained, for a net gain of $226,000. As a result, the Bank’s residential mortgage loans, net of principal payments, increased $22.8 million, or 23.5%, since June 30, 2003. The high level of originations reflects the success of Strata Mortgage Center in attracting new

-9-

residential loan customers as well as an increase in refinance and payoff activities in the Bank’s portfolio as a result of the historically low market interest rates for residential mortgage loans. Net deferred loan costs and premiums increased since June 30, 2003 by $156,000, largely due to costs associated with residential loan originations and purchases through Marathon.

Commercial lending continues to be an area of growth for the Bank. The Bank originated $39.1 million in commercial, commercial real estate and construction loans for the nine-month period ended March 31, 2004, $5.9 million, or 17.9% higher than the same period last year. The net increase in the total commercial loan portfolio was $16.7 million, or 24.8%, since June 30, 2003. In addition to these loan originations, the Bank emphasizes cross selling of commercial checking and money market deposits from new commercial customers. As of March 31, 2004, total commercial deposits totaled $34.7 million and represented 15.1% of total deposits. Home equity and second mortgage loans continue to experience growth and increased $3.8 million, or 24.5%, since June 30, 2003 to $19.1 million at March 31, 2004.

Total deposits decreased $9.4 million since June 30, 2003 to $230.5 million at March 31, 2004. The aforementioned decrease in certain NOW deposits totaled $11.2 million since June 30, 2003. Demand deposits decreased less than 1% to $33.4 million while certificates of deposit decreased $1.1 million, or 1.2%. Partially offsetting these decreases were higher money market deposits of $1.9 million, or 6.7% and higher savings deposits of $1.1 million, or 2.4%.

Borrowings from the FHLB increased $15.1 million since June 30, 2003 to $50.3 million at March 31, 2004, and provided the additional funding for this year’s loan growth and provided the Bank the opportunity to lock in long-term advances at historically low interest rates. In addition, the Company borrowed $3.0 million in subordinate debt in connection with a trust preferred securities offering. This transaction also increased the Company’s regulatory capital by $3.0 million consistent with bank and bank-holding company regulatory guidelines. The increased capital will be used to support further asset growth at Strata Bank and for general corporate purposes. For a further discussion on the subordinated debenture refer to Note 8 of the Notes to Consolidated Financial Statements of this Form 10-QSB.

Stockholders’ equity increased from $23.5 million, or 7.84% of total assets at June 30, 2003 to $25.3 million, or 8.15% of total assets at March 31, 2004. The increase in stockholders’ equity resulted primarily from the Company’s retained earnings since the beginning of the fiscal year.

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

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

	March 31, 2004			June 30, 2003
	(Dollars in thousands)
Non-accrual loans:
Residential real estate	$	—		$	—
Commercial and multi-family real estate		—			—
Consumer		6			12
Commercial		11			297
Total		17			309
Accruing loans more than 90 days past due		254			—
Foreclosed assets		—			—
Total non-performing assets	$	271		$	309
Total as a percentage of total assets		0.09	%		0.10	%

For the nine months ended March 31, 2004, the Bank’s provision for loan losses was $353,000 compared with $420,000 for the same period last year. This year’s provision was consistent with the growth in loans and lower level of non-accrual loans. The allowance for loan losses as a percentage of loans was .93% at March 31, 2004, compared with .96% at June 30, 2003. This percentage decrease reflects a decrease in the unallocated portion of the allowance for loan losses, which was based on management’s increased certainty in the loan loss estimation process due to several factors including the continued low level of non-performing loans and net charge-offs. For a further discussion of the allowance refer to the Company’s Annual Report on Form 10-KSB for the year ended June 30, 2003 under “Allowance for Loan Losses”. During the nine month period ended March 31, 2004, recoveries from previously charged-off loans of $53,000 were received and $63,000 in loans were charged-off.

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

-10-

Comparison of Operating Results for the Quarter and Nine Months Ended March 31, 2004 and 2003

General

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

Net income for the quarter ended March 31, 2004 was $529,000 compared with $423,000 for the quarter ended March 31, 2003, an increase of $106,000, or 25.1%. Net income for the nine-month period ended March 31, 2004 was $1.5 million compared with $1.2 million for the same period last year, an increase of $321,000, or 27.8%.

For the quarter ended March 31, 2004 net interest income increased $280,000, or 11.5%, noninterest income increased $197,000, or 56.6%, while the provision for loan losses was $94,000 lower compared to the same quarter a year ago. Partially offsetting these increases to income was higher noninterest expense of $442,000, or 22.1%. For the nine months ended March 31, 2004, net interest income increased $873,000, or 12.3%, noninterest income increased $357,000, or 35.3%, while the provision for loan losses was lower by $67,000 this year. Partially offsetting these increases to income was an increase in noninterest expense of $865,000, or 14.4%. Earnings per share for the quarter ended March 31, 2004 were $0.33 per share (basic) and $0.32 per share (diluted) compared with $0.26 per share (basic and diluted) for the quarter ended March 31, 2003. Earnings per share for the nine months ended March 31, 2004 were $0.91 per share (basic) and $0.89 per share (diluted) compared with $0.72 per share (basic) and $0.71 per share (diluted) for the nine months ended March 31, 2003.

Interest and Dividend Income

Total interest and dividend income for the quarter ended March 31, 2004 was $4.0 million, $197,000 more than the same quarter a year ago. The effect of a reduction in yield on earning assets of 28 basis points to 5.56% was more than offset by the effect of an increase in average earning assets of $26.6 million. Total interest and dividend income for the nine months ended March 31, 2004 was $11.7 million, $72,000 less than the same period a year ago. The effect of a reduction in yield on earning assets of 52 basis points to 5.52% was only partially offset by an increase in average earning assets of $22.5 million. Average net loans for the quarter increased $44.3 million, or 25.3%, while total loan yield decreased 53 basis points to 5.70%. Average net loans for the nine months ended March 31, 2004 increased $42.7 million, or 25.7%, while total loan yield decreased 82 basis points to 5.73%. This year’s lower interest rate environment reduced the index rates used to set interest rates for loan re-pricing and for new loans which resulted in a lower loan yield between periods. Contributing to the amount of new loan volume priced at this year’s lower rates was an increased level of residential loan refinance activity in the Bank’s existing portfolio.

Average short-term investments decreased $5.5 million and $5.3 million for the quarter and nine-month periods ended March 31, 2004 and experienced a reduction in yield of 20 basis points and 49 basis points, respectively, to 0.98% and 0.97%, respectively. Yield on the securities portfolio was also lower and declined by 24 basis points to 5.27% this quarter and declined by 39 basis points to 5.13% for the nine month period compared to the same periods last year. Certain investments within the Bank’s securities portfolio that matured, were sold or called, were reinvested in lower yielding investments. The average securities portfolio balance decreased $12.3 million this quarter and $14.9 million for the nine month period compared with the same periods last year, contributing to the lower interest income.

Interest Expense

Interest expense on deposits decreased $214,000, or 24.1%, from $887,000 for the quarter ended March 31, 2003 to $673,000 for the quarter ended March 31, 2004. The decrease was mostly attributable to a 46 basis point reduction in the cost of deposits for the quarter and to an increase of $7.3 million in average lower-cost non-certificate deposit balances when compared to last year while average higher-cost term certificate balances decreased by $4.8 million. For the nine months ended March 31, 2004, interest expense on deposits decreased $1.2 million, or 36.9%, from $3.2 million last year to $2.0 million for the nine-month period this year. The decrease was mostly attributable to an 85 basis point reduction in cost of deposits for the nine-month period and to an increase of $16.1 million in average lower-cost non-certificate deposit balances when compared to last year while average higher-cost term certificate balances decreased by $9.6 million.

Interest expense on borrowings increased $131,000, or 28.9%, for the quarter ended March 31, 2004 compared to the same quarter last year. The average balance of borrowings was $56.3 million during the quarter, an increase of $21.8 million, or 63.0% from the quarter ended March 31, 2003. The cost of average borrowings decreased from 5.26% a year ago to 4.11% this quarter due to this year’s lower rate for new borrowings. Interest expense on borrowings increased $249,000, or 18.1%, for the nine months ended March 31, 2004 compared to the same period last year. The average balance of borrowings was $48.4 million during the nine-month period an increase of $14.0 million, or 40.9% from nine months ended March 31, 2003. The cost of average borrowings decreased from 5.27% a year ago to 4.40% this year.

-11-

Net Interest Income

Net interest income for the quarter and nine months ended March 31, 2004 increased $280,000, or 11.5% and $873,000, or 12.3%, respectively, over the same periods last year. The increases in net interest income were due mostly to the combination of three factors: (i) total average earning assets increased $26.6 million and $22.5 million, respectively, for the quarter and nine months ended March 31, 2004 compared to the same periods last year; (ii) the change in mix of earning assets to more higher yielding loans; and (iii) the change in mix of liabilities to lower cost core deposits and borrowings. The Bank’s interest rate spread (the difference between yields earned on earning assets and rates paid on deposits and borrowings) increased 9 basis points to 3.51% and increased 18 basis points to 3.50% for the quarter and nine month periods, respectively, compared to last year. The Bank’s reductions in rates offered on new and maturing certificates of deposit and reduced rates on savings and money market products were successful in keeping pace with the decrease in yield on earning assets. The net interest margin (net interest income divided by average earning assets) increased from 3.76% to 3.81% for the quarter ended March 31, 2004 and from 3.68% to 3.80% for the nine-month period.

While core-based deposit growth will be emphasized, the Bank may have to rely more on higher-cost retail certificates rather than lower-cost core deposits, or rely on borrowings from the FHLB for future funding requirements. An increase in market interest rates and continued competition from other financial institutions together with the aforementioned growth in retail certificates could cause future tightening in the interest rate spread.

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

	Three Months Ended March 31,				Nine Months Ended March 31,
	2004		2003		2004		2003
Weighted average yield earned on:
Short-term investments	0.98	%	1.18	%	0.97	%	1.46	%
Securities	5.27	%	5.51	%	5.13	%	5.52	%
Total loans, net	5.70	%	6.23	%	5.73	%	6.55	%
All interest-earning assets	5.56	%	5.84	%	5.52	%	6.04	%
Weighted average rate paid on:
Deposits	1.44	%	1.90	%	1.41	%	2.26	%
Borrowed funds	4.11	%	5.26	%	4.40	%	5.27	%
All interest-bearing liabilities	2.05	%	2.42	%	2.02	%	2.72	%
Weighted average rate spread	3.51	%	3.42	%	3.50	%	3.32	%
Net interest margin	3.81	%	3.76	%	3.80	%	3.68	%

Noninterest Income

Total noninterest income increased $197,000, or 56.6% to $545,000 for the quarter ended March 31, 2004 and increased $357,000, or 35.3% to $1.4 million for the nine-month period ended March 31, 2004 compared to the same periods last year. The increases were largely the result of a gain on the sale of residential loans of $226,000. The nine-month period also included a net securities gain this year compared with a net securities loss last year. Also higher in both comparisons were financial service fees due to a higher level of sales in the Financial Services Center at Strata Bank and income on bank-owned life insurance increased due to additional policy purchases near the end of last year.

Noninterest Expense

Total noninterest expense increased $442,000, or 22.1% to $2.4 million for the quarter ended March 31, 2004 and increased $865,000, or 14.4% to $6.9 million for the nine months ended March 31, 2004 compared with the same periods last year. Salary and benefits increased $307,000 and $563,000 for the quarter and nine-month periods, respectively, due to several factors including: (i) the increased loan origination staffing at the Strata Mortgage Center as a result of strategic decision during this year to no longer outsource certain residential loan origination services; (ii) increased staffing in the commercial loan production and technology areas of the Bank; (iii) increased supplemental retirement plan expenses; and (iv) increase in certain benefit costs such as the Employee Stock Ownership Plan where the amount of expense recognized is effected by the rising price of the Company’s stock. In addition, the nine-month period included an $89,000 charge for supplemental retirement plan expense related to the early retirement of a Director of the Company during the first quarter. Supplemental retirement benefits are accrued over the participant’s anticipated service period. Accordingly, curtailment of the service period as a result of early retirement accelerates the expense recognition related to the present value of the estimated post retirement benefits. These supplemental retirement plans, and related bank-owned life

-12-

insurance policies, are structured so that the expense for any year is partially offset by the increase in cash surrender values of the related policies and recognized as noninterest income during such year and eventually recovered in full by the Company from the proceeds of the related insurance contracts.

Professional fees increased $108,000 for the nine months ended March 31, 2004 due to increased legal fees associated with the annual meeting, proxy filing and other matters, and due to higher fees paid to outsourced professional service providers such as internal audit and credit review. The smaller increases in most other areas of noninterest expense including occupancy, equipment, data processing, advertising and other general and administrative expense for the quarter and nine months ended March 31, 2004 were consistent with the Company’s growth in operations or contractual arrangements.

The operating efficiency ratio (total noninterest expense divided by the sum of net interest income plus total noninterest income excluding securities gains and losses) for the quarter ended March 31, 2004 was 73.8% compared with 72.0% for the same quarter a year ago. The operating efficiency ratio for the nine months ended March 31, 2004 was 73.7% compared with 73.5% for the same period a year ago.

Income Taxes

Income tax expense increased by $23,000 and $111,000 for quarter and nine months ended March 31, 2004 compared with the same periods last year due mostly to this year’s higher level of pre-tax income. The effective income tax rate was 30.7% and 31.5% for the quarter and nine months ended March 31, 2004, respectively, which was lower than the effective rates of 33.3% and 33.0% for the same periods last year. The effective tax rates are below the statutory combined state and federal income tax rates because the Bank’s two securities corporations take advantage of the lower state tax rate afforded to these types of entities. There are also items of income that are nontaxable. The decreases in effective income tax rates from last year reflect changes in the level and timing of nontaxable income.

Asset/Liability Management

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

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

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

Liquidity and Capital Resources

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

-13-

From time to time, the Bank utilizes advances from the FHLB primarily in connection with its management of the interest rate sensitivity of its assets and liabilities. Total advances outstanding at March 31, 2004 amounted to $50.3 million. The Bank’s ability to borrow from the FHLB is dependent upon the amount and type of collateral the Bank has to secure the loans. Such collateral consists of, but is not limited to, one-to-four family owner-occupied residential property. As of March 31, 2004, the Bank’s total borrowing capacity through the Federal Home Loan Bank was $86.4 million. The Bank has additional capacity to borrow federal funds from other banks and through such instruments as repurchase agreements utilizing federal agency obligations and mortgage-backed securities as collateral.

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

At March 31,2004, the Bank had $10.9 million of outstanding commitments to originate loans and unused lines of credit and open commitments available to customers totaling $32.7 million. The Bank anticipates that it will have sufficient funds available to meet these commitments. Certificates of deposit, which are scheduled to mature in one year or less, totaled $70.7 million at March 31, 2004. Based upon historical experience, management believes that a significant portion of such deposits will remain with the Bank.

At March 31, 2004, the Company and the Bank continued to exceed all regulatory capital requirements.

In February 2003, the Board of Directors of the Company approved a Stock Repurchase Plan under which the Company is authorized to acquire up to 4% of the outstanding common stock, or up to approximately 65,925 shares of the issued and outstanding shares of its common stock in the open market or in private transactions. Under the plan, shares may be repurchased from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations. The repurchased shares are expected to be used by the Company for general corporate purposes. As of March 31, 2004, 8,942 shares of the Company’s common stock had been repurchased under the plan at an average price of $18.14 per share.

ITEM 3. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

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

(b) Changes in internal controls over financial reporting.

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

-14-

PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

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

ITEM 2. Changes in Securities

Not applicable.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

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

Not applicable.

ITEM 5. Other Information

Not applicable.

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1(a)	Articles of Amendment to the Articles of Organization.
3.2	Complete copy of the Bylaws as amended.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

On January 28, 2004, the Company filed a report on Form 8-K under Item 12 “Results of Operations and Financial Condition” reporting that a press release was issued announcing the Company’s earnings for the quarter ended December 31, 2003 and filing as an exhibit under Item 7 thereby, the press release dated January 28, 2004.

-15-

SIGNATURES

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

	SERVICE BANCORP, INC.
Date: May 14, 2004	By:	/s/ PAMELA J. MONTPELIER
		Pamela J. Montpelier
		President and Chief Executive Officer
Date: May 14, 2004	By:	/s/ DANA S. PHILBROOK
		Dana S. Philbrook
		Chief Financial Officer

-16-

EX-3.1(A)

Exhibit 3.1(a)

________ Examiner ________ Name Approved C      ¨ P      ¨ M     ¨ R.A. ¨ ________ P.C. FEDERAL IDENTIFICATION NO. 04-3430806             The Commonwealth of Massachusetts William Francis Galvin Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF AMENDMENT (General Laws, Chapter 156B, Section 72) We, Pamela J. Montpelier                                                                                          , *President, and James W. Murphy                                                                                                  , *Clerk, of                                                      SERVICE BANCORP, INC.,                                              (Exact name of corporation) located at                         81 Main Street, Medway, MA 02053                                             , (Street address of corporation in Massachusetts) certify that these Articles of Amendment affecting articles numbered:                                                                      6                                                                                           (Number those articles 1, 2, 3, 4, 5 and/or 6 being amended) of the Articles of Organization were duly adopted at a meeting held on October 28, 2003, by vote of: 1,125,522 shares of             Common Stock                 of 1,647,284 shares outstanding,                             (type, class & series, if any)                      shares of                                                           of                      shares outstanding, (type, class & series, if any)                      shares of                                                           of                      shares outstanding, (type, class & series, if any) ^1**being at least a majority of each type, class or series outstanding and entitled to vote thereon: *Delete the inapplicable words.                             **Delete the inapplicable clause. ¹For amendments adopted pursuant to Chapter 156B, Section 70. ²For amendments adopted pursuant to Chapter 156B, Section 71. Note: If the space provided under any article or item on this form is insufficient, additions shall be set forth on one side only of separate 8 ¹/2 x 11 sheets of paper with a left margin of at least 1 inch. Additions to more than one article may be made on a single sheet so long as each article requiring each addition is clearly indicated.

To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following: Not applicable

The total presently authorized is:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:
Preferred:		Preferred:

Change the total authorized to:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:
Preferred:		Preferred:

See Attachment A

Attachment A

TEXT OF AMENDMENTS TO ARTICLES OF ORGANIZATION

The text of Section 6.6 to the Articles of Organization of the corporation is hereby deleted in its entirety and the following is inserted in lieu thereof:

6.6. Indemnification.

A. Definitions. For purposes of this Section 6.6:

(1) “Corporate Status” describes the status of a person who is serving or has served (i) as a Director of the Corporation, (ii) as an Officer of the Corporation, or (iii) as a director, partner, trustee, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Corporation. For purposes of this clause (1), an Officer or Director of the Corporation who is serving or has served as a director, partner, trustee, officer, employee or agent of a Subsidiary shall be deemed to be serving at the request of the Corporation. Notwithstanding the foregoing, “Corporate Status” shall not include the status of a person who is serving or has served as a director, officer, employee or agent of a constituent corporation absorbed in a merger or consolidation transaction with the Corporation with respect to such person’s activities prior to said transaction, unless specifically authorized by the board of directors or the stockholders of the Corporation;

(2) “Director” means any person who serves or has served the Corporation as a director on the board of directors of the Corporation;

(3) “Disinterested Director” means, with respect to each Proceeding (defined below) in respect of which indemnification is sought hereunder, a Director of the Corporation who is not and was not a party to such Proceeding;

(4) “Expenses” means all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of expert witnesses, private investigators and professional advisors (including, without limitation, accountants and investment bankers), travel expenses, duplicating costs, printing and binding costs, costs of preparation of demonstrative evidence and other courtroom presentation aids and devices, costs incurred in connection with document review, organization, imaging and computerization, telephone charges, postage, delivery service fees, and all other disbursements, costs or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settling or otherwise participating in, a Proceeding;

(5) “Non-Officer Employee” means any person who serves or has served as an employee or agent of the Corporation, but who is not or was not a Director or Officer;

(6) “Officer” means any person who serves or has served the Corporation as an officer appointed by the board of directors of the Corporation;

(7) “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, inquiry, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative, arbitrative or investigative; and

(8) “Subsidiary” shall mean any corporation, partnership, limited liability company, joint venture, trust or other entity of which the Corporation owns (either directly or through or together with another Subsidiary of the Corporation) either (i) a general partner, managing member or other similar interest or (ii) (a) 50% or more of the voting power of the voting capital equity interests of such corporation, partnership, limited liability company, joint venture or other entity, or (b) 50% or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company, joint venture or other entity.

B. Indemnification of Directors and Officers. Subject to the operation of Section 6.6(F), each Director and Officer shall be indemnified and held harmless by the Corporation to the fullest extent permitted by applicable law as the same exists or may hereafter be amended against any and all Expenses, judgments, penalties, fines and amounts reasonably paid in settlement that are incurred by such Director or Officer or on such Director’s or Officer’s behalf in connection with any threatened, pending or completed Proceeding or any claim, issue or matter therein, which such Director or Officer is, or is threatened to be made, a party to or participant in by reason of such Director’s or Officer’s Corporate Status, unless such Director or Officer shall be finally adjudicated in such action, suit, proceeding or investigation, not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Corporation. The rights of indemnification provided by this Section 6.6(B) shall continue as to a Director or Officer after he or she has ceased to be a Director or Officer and shall inure to the benefit of his or her heirs, executors, administrators and personal representatives. Notwithstanding the foregoing, the Corporation shall indemnify any Director or Officer seeking indemnification in connection with a Proceeding initiated by such Director or Officer only if such Proceeding was authorized by the board of directors of the Corporation, unless such Proceeding was brought to enforce an Officer or Director’s rights to indemnification or, in the case of Directors, advancement of Expenses under these by-laws in accordance with the provisions set forth herein.

C. Indemnification of Non-Officer Employees. Subject to the operation of Section 6.6(F), each Non-Officer Employee may, in the discretion of the board of directors of the Corporation, be indemnified by the Corporation to the fullest extent permitted by applicable law as the same exists or may hereafter be amended, against any or all Expenses, judgments, penalties, fines and amounts reasonably paid in settlement that are incurred by such Non-Officer Employee or on such Non-Officer Employee’s behalf in connection with any threatened, pending or completed Proceeding, or any claim, issue or matter therein, which such Non-Officer Employee is, or is threatened to be made, a party to or participant in by reason of such Non-Officer Employee’s Corporate Status, unless such Non-Officer Employee shall be finally adjudicated in such action, suit, proceeding or investigation, not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Corporation. The rights of indemnification provided by this Section 6.6(C) shall exist as to a Non-Officer Employee after he or she has ceased to be a Non-Officer Employee and shall inure to the benefit of his or her

2

heirs, personal representatives, executors and administrators. Notwithstanding the foregoing, the Corporation may indemnify any Non-Officer Employee seeking indemnification in connection with a Proceeding initiated by such Non-Officer Employee only if such Proceeding was authorized by the board of directors of the Corporation.

D. Advancement of Expenses to Directors Prior to Final Disposition.

(1) Subject to applicable law, the Corporation shall advance all Expenses incurred by or on behalf of any Director in connection with any Proceeding in which such Director is involved by reason of such Director’s Corporate Status within ten (10) days after the receipt by the Corporation of a written statement from such Director requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Director and shall be preceded or accompanied by an undertaking by or on behalf of such Director to repay any Expenses so advanced if it shall ultimately be determined that such Director is not entitled to be indemnified against such Expenses. Such undertaking may be accepted without reference to the financial ability of the Director to make such repayment. Notwithstanding the foregoing, the Corporation shall advance all Expenses incurred by or on behalf of any Director seeking advancement of expenses hereunder in connection with a Proceeding initiated by such Director only if such Proceeding was (i) authorized by the board of directors of the Corporation, or (ii) brought to enforce Director’s rights to indemnification or advancement of Expenses under these by-laws.

(2) If a claim for advancement of Expenses hereunder by a Director meeting the requirements of Section 6.6(D)(1) is not paid in full by the Corporation within 10 days after receipt by the Corporation of documentation of Expenses and the required undertaking, such Director may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and if successful in whole or in part, such Director shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its board of directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such advancement of Expenses under this Section 6.6 shall not be a defense to the action and shall not create a presumption that such advancement is not permissible. The burden of proving that a Director is not entitled to an advancement of expenses shall be on the Corporation.

(3) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final disposition of the Proceeding that the Director has not met any applicable standard for indemnification set forth under applicable law.

E. Advancement of Expenses to Officers and Non-Officer Employees Prior to Final Disposition.

(1) The Corporation may, at the discretion of the board of directors of the Corporation and on such terms and conditions as the board of directors shall determine in its discretion (which shall be consistent with applicable law), advance any or all Expenses incurred by or on behalf of any Officer and Non-Officer Employee in connection with any Proceeding in

3

which such is involved by reason of the Corporate Status of such Officer or Non-Officer Employee upon the receipt by the Corporation of a statement or statements from such Officer or Non-Officer Employee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Officer and Non-Officer Employee and shall be preceded or accompanied by an undertaking by or on behalf of such to repay any Expenses so advanced if it shall ultimately be determined that such Officer or Non-Officer Employee is not entitled to be indemnified against such Expenses. Such undertaking may be accepted without reference to the financial ability of the Officer or Non-Officer Employee to make such repayment.

(2) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Officer or Non-Officer Employee has not met any applicable standard for indemnification set forth under applicable law.

F. Procedure for Indemnification. In order to obtain indemnification or advancement of Expenses under this Section 6.6, a Director, Officer or Non-Officer Employee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to such Director, Officer or Non-Officer Employee and is reasonably necessary to determine whether and to what extent he or she is entitled to indemnification or advancement of Expenses, if applicable. Any indemnification under this Section 6.6 shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of the Director, Officer or Non-Officer Employee, unless a final disposition of a Proceeding finds that such Director, Officer or Non-Officer Employee did not meet the applicable standard of conduct set forth in Section 6.6(B) or Section 6.6(C), as applicable. Notwithstanding the foregoing, in the event that there is no final disposition of a Proceeding that such Director, Officer or Non-Officer Employee did or did not meet the applicable standard of conduct set forth in Section 6.6(B) or Section 6.6(C), as applicable, then indemnification shall be provided pursuant to this Section 6.6 unless the Corporation reasonably determines within such 60-day period that the Director, Officer or Non-Officer Employee did not meet the applicable standard of conduct set forth in Section 6.6(B) or Section 6.6(C), as applicable. Such determination by the Corporation shall be made in each instance by (1) a majority vote of the Disinterested Directors, even though less than a quorum of the board of directors, (2) a committee comprised of Disinterested Directors, such committee having been designated by a majority vote of the Disinterested Directors (even though less than a quorum), (3) if there are no such Disinterested Directors, or if a majority of Disinterested Directors so directs, by independent legal counsel in a written opinion, or (4) by the stockholders of the Corporation.

G. Contractual Nature of Rights.

(1) The foregoing provisions of this Section 6.6 shall be deemed to be a contract between the Corporation and each Director, Officer and Non-Officer Employee entitled to the benefits hereof at any time while this Section 6.6 is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any

4

state of facts then or theretofore existing or any Proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.

(2) If a claim for indemnification hereunder by a Director, Officer or Non-Officer Employee is not paid in full by the Corporation within 60 days after receipt by the Corporation of a written claim for indemnification (to the extent such Director, Officer or Non-Officer Employee is entitled thereto), such Director, Officer or Non-Officer Employee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, such Director, Officer or Non-Officer Employee shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its board of directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of such indemnification under this Section 6.6 shall not be a defense to the action and shall not create a presumption that such indemnification is not permissible. The burden of proving that a Director, Officer or Non-Officer Employee is not entitled to indemnification shall be on the Corporation.

(3) In any suit brought by a Director or Officer to enforce a right to indemnification hereunder, it shall be a defense that such Director or Officer has not met any applicable standard for indemnification set forth under applicable law.

H. Non-Exclusivity of Rights. The rights to indemnification and advancement of Expenses set forth in this Section 6.6 shall not be exclusive of any other right which any Director, Officer, or Non-Officer Employee may have or hereafter acquire under any statute, provision of the Corporation’s Articles or these by-laws, agreement, vote of stockholders or Disinterested Directors or otherwise.

I. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, Officer or Non-Officer Employee against any liability of any character asserted against or incurred by the Corporation or any such Director, Officer or Non-Officer Employee, or arising out of any such person’s Corporate Status, whether or not the Corporation would have the power to indemnify such person against such liability under applicable law or the provisions of this Section 6.6.

J. Other Indemnification. The Corporation’s obligation, if any, to indemnify any person under this Section 6.6 as a result of such person serving, at the request of the Corporation, as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, employee benefit plan or enterprise.

K. Merger or Consolidation. If the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, the surviving Corporation shall assume the obligations of the Corporation under this Section 6.6 with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring at or prior to the date of such merger or consolidation.

5

The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

Later effective date:                                                                              .

SIGNED UNDER THE PENALTIES OF PERJURY, this 11^th day of December, 2004,

/s/ Pamela J. Montpelier                                                                                                                                       , *President,
/s/ James W. Murphy                                                                                                                                           , *Clerk	.

*Delete the inapplicable words.

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within Articles of Amendment and, the filing fee in the amount of $             having been paid, said articles are deemed to have been filed with me this             day of             20    .

Effective date:                                                                                  

WILLIAM FRANCIS GALVIN

Secretary of the Commonwealth

TO BE FILLED IN BY CORPORATION

Photocopy of document to be sent to:

Mehrin Masud-Elias, Esq.

Goodwin Procter LLP

Exchange Place, Boston, MA 02109

Telephone: (617) 570-1919

EX-3.2

Exhibit 3.2

BYLAWS

SERVICE BANCORP, INC.

ARTICLE I - STOCKHOLDERS

Section 1. Annual Meeting. An annual meeting of the stockholders, for the election of Directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen (13) months subsequent to the later of the date of incorporation or the last annual meeting of stockholders.

Section 2. Special Meetings. Subject to the rights of the holders of any class or series of preferred stock of the Corporation, special meetings of stockholders of the Corporation may be called by the Board of Directors pursuant to a resolution adopted by a majority of the total number of Directors which the Corporation would have if there were no vacancies on the Board of Directors (hereinafter, the “Whole Board”).

Section 3. Notice of Meetings. Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Massachusetts General Laws or the Articles of Organization of the Corporation).

When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

Section 4. Quorum. At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy (after giving effect to the Article FOURTH of the Corporation’s Articles of Organization), shall constitute a quorum for all purposes, unless or except to the extent that the presence, of a larger number may be required by law. Where a separate vote by a class or classes is required, a majority of the shares of such class or classes present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter.

If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time.

If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting.

Section 5. Organization. Such person as the Board of Directors may have designated or, in the absence of such a person, the Chairman of the Board of the Corporation or, in his absence, the Chief Executive Officer or, in his absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the Corporation, the secretary of the meeting shall be such person as the chairman appoints.

Section 6. Conduct of Business.

(a) The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him in order. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.

(b) At any annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting: (i) by or at the direction of the Board of Directors; or (ii) by any stockholder of the Corporation who is entitled to vote with respect thereto and who complies with the notice procedures set forth in this Section 6(b). For business to be properly brought before an annual meeting by a stockholder, the business must relate to a proper subject matter for stockholder action and the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice must be delivered or mailed to and received at the principal executive offices of the Corporation not less than ninety (90) days prior to the date of the annual meeting; provided, however, that in the event that less than one hundred (100) days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder’s notice to the Secretary shall set forth as to each matter such stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business; (iii) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such stockholder; and (iv) any material interest of such stockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this Section 6(b). The Officer of the Corporation or other person presiding over the annual meeting shall, if the

2

facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 6(b) and, if he should so determine, he shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted.

At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors.

(c) Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders at which Directors are to be elected only: (i) by or at the direction of the Board of Directors; or (ii) by any stockholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 6(c). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered or mailed to and received at the principal executive offices of the Corporation not less than ninety (90) days prior to the date of the meeting; provided, however, that in the event that less than one hundred (100) days’ notice or prior disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder’s notice shall set forth: (i) as to each person whom such stockholder proposes to nominate for election or re-election as a Director, all information relating to such person that is required to be disclosed in solicitations of proxies for the election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (ii) as to the stockholder giving notice of (x) the name and address, as they appear on the Corporation’s books, of such stockholder and (y) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such stockholder. At the request of the Board of Directors any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the provisions of this Section 6(c). The Officer of the Corporation or other person presiding at the meeting shall, if the facts so warrant, determine that a nomination was not made in accordance with such provisions and, if he should so determine, he shall declare to the meeting and the defective nomination shall be disregarded.

Section 7. Proxies and Voting. At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

3

All voting, including on the election of Directors but excepting where otherwise required by law or by the governing documents of the Corporation, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or by his proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability.

All elections shall be determined by a plurality of the votes cast, and except as otherwise required by the Certificate of Incorporation or by law, all other matters shall be determined by a majority of the votes present and cast at a properly called meeting of stockholders.

Section 8. Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held.

The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

Section 9. Consent of Stockholders in Lieu of Meeting. Subject to the rights of the holders of any class or series of preferred stock of the Corporation, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

ARTICLE II - BOARD OF DIRECTORS

Section 1. General Powers, Number and Term of Office. The business and affairs of the Corporation shall be under the direction of its Board of Directors. The number of Directors who shall constitute the Whole Board shall be such number as the Board of Directors shall from time to time have designated, except that in the absence of any such designation, such number shall be sixteen (16). The Board of Directors may annually elect a Chairman of the Board from among its members who shall, when present, preside at its meetings. In the absence of a Chairman of the Board, meetings of the Board of Directors will be chaired by a Director selected by the Board of Directors from among its members.

4

The Directors, other than those who may be elected by the holders of any class or series of Preferred Stock, shall be divided, with respect to the time for which they severally hold office, into three classes, with the term of office of the first class to expire at the first annual meeting of stockholders, the term of office of the second class to expire at the annual meeting of stockholders one year thereafter and the term of office of the third class to expire at the annual meeting of stockholders two years thereafter, with each Director to hold office until his successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the first annual meeting, Directors elected to succeed those Directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each Director to hold office until his successor shall have been duly elected and qualified. No person shall be elected or appointed to serve or shall continue to serve as a Director if he or she has reached the age of seventy-two (72) years.

Section 2. Vacancies and Newly Created Directorships. Subject to the rights of the holders of any class or series of preferred stock, and unless the Board of Directors otherwise determines, newly created Directorships resulting from any increase in the authorized number of Directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the Directors then in office, though less than a quorum, and Directors so chosen shall hold office for a term specified by the Directors then in office or, if not so specified, for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires and until such Director’s successor shall have been duly elected and qualified. No decrease in the number of authorized Directors constituting the Board shall shorten the term of any incumbent Director.

Section 3. Regular Meetings. Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all Directors. A notice of each regular meeting shall not be required.

Section 4. Special Meetings. Special meetings of the Board of Directors may be called by one-third (1/3) of the Directors then in office (rounded up to the nearest whole number) or by the Chief Executive Officer and shall be held at such place, on such date, and at such time as they or he shall fix. Notice of the place, date, and time of each such special meeting shall be given to each Director by whom it is not waived by mailing written notice not less than five (5) days before the meeting or be telegraphing or telexing or by facsimile transmission of the same not less than twenty-four (24) hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.

Section 5. Quorum. At any meeting of the Board of Directors, a majority of the Whole Board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.

Section 6. Participation in Meetings By Conference Telephone. Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of

5

which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting but shall not constitute attendance for the purpose of compensation pursuant to Section 9 of this Article II, unless the Board of Directors by resolution so provides.

Section 7. Conduct of Business. At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the Directors present, except as otherwise provided herein or required by law. Action may be taken by the Board of Directors without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors.

Section 8. Powers. The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power:

(1) To declare dividends from time to time in accordance with law;

(2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;

(3) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith;

(4) To remove any Officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any Officer upon any other person for the time being;

(5) To confer upon any Officer of the Corporation the power to appoint, remove and suspend subordinate Officers, employees and agents;

(6) To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for Directors, Officers, employees and agents of the Corporation and its subsidiaries as it may determine;

(7) To adopt from time to time such insurance, retirement, and other benefit plans for Directors, Officers, employees and agents of the Corporation and its subsidiaries as it may determine; and

(8) To adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the Corporation’s business and affairs.

Section 9. Compensation of Directors. Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as Directors, including, without limitation, their services as members of committees of the Board of Directors.

6

Section 10. Removal. A director may be removed only for cause as provided in the Corporation’s Articles of Organization. Any Director may resign at any time giving written notice to Chairman of the Board or the Secretary. Any Director who is absent from three or more meetings of the Board of Directors in a twelve month period, or four or more meetings in a 24 month period, shall no longer be qualified to serve as a Director and shall be removed automatically from his or her position as a Director.

ARTICLE III - COMMITTEES

The Board of Directors, by a majority vote of the Board of Directors, may from time to time designate one or more committees of the Board, including, without limitation, an Executive Committee, a Nominating Committee, an Audit and Risk Management Committee, a Compensation and Stock Benefits Committee and a Business Development Committee. Members of the committees elected by the Board of Directors shall serve at the pleasure of the Board of Directors. The Board of Directors shall have the power to rescind any action of any committee but no such rescission shall have retroactive effect. Each committee may develop a form of charter governing its operations, which charter shall be approved by the Board of Directors.

ARTICLE IV - OFFICERS

Section 1. Generally.

(a) The Board of Directors as soon as may be practicable after the annual meeting of stockholders may choose a Chairman of the Board, and shall choose a President, a Chief Executive Officer, one or more Vice Presidents, and a Secretary and from time to time may choose such other Officers as it may deem proper. The Chairman of the Board, if any, shall be chosen from among the Directors. Any number of offices may be held by the same person.

(b) The term of office of all Officers shall be until the next annual election of Officers and until their respective successors are chosen, but any Officer may be removed from office at any time by the affirmative vote of a majority of the authorized number of Directors then constituting the Board of Directors.

(c) All Officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such Officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof.

Section 2. Chairman of the Board. The Chairman of the Board, if one is chosen, shall, subject to the provisions of these Bylaws and to the direction of the Board of Directors, serve in a general executive capacity and, when present, shall preside at all meetings of the Board of Directors or the stockholders of the Corporation. The Chairman of the Board shall perform all duties and have all powers which are commonly incident to the office of Chairman of the Board or which are delegated to him by the Board of Directors. He shall have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized.

7

Section 3. Chief Executive Officer. The Chief Executive Officer shall have general responsibility for the management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of Chief Executive Officer or which are delegated to him by the Board of Directors. Subject to the direction of the Board of Directors, and in the absence of a Chairman of the Board, the Chief Executive Officer shall have all of the powers and perform all of the duties of the Chairman of the Board (as designated in Section 2), and shall also have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision of all of the other Officers (other than the Chairman of the Board, if any), employees and agents of the Corporation.

Section 4. President. The President shall have such powers and shall perform such duties as are provided in these Bylaws or as may be assigned to him by the Board of Directors or the Chief Executive Officer.

Section 5. Vice Presidents. The Vice President or Vice Presidents shall perform the duties and exercise the powers usually incident to their respective offices and/or such other duties and powers as may be properly assigned to them by the Board of Directors or the Chief Executive Officer. A Vice President or Vice Presidents may be designated as Executive Vice President or Senior Vice President.

Section 6. Secretary. The Secretary or an Assistant Secretary shall issue notices of meetings, shall keep their minutes, shall have charge of the seal and the corporate books, shall perform such other duties and exercise such other powers as are usually incident to such offices and/or such other duties and powers as are properly assigned thereto by the Board of Directors or the Chief Executive Officer.

Section 7. Assistant Secretaries and Other Officers. The Board of Directors may appoint one or more Assistant Secretaries and such other Officers who shall have such powers and shall perform such duties as are provided in these Bylaws or as may be assigned to them by the Board of Directors or the Chief Executive Officer.

Section 8. Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the Chief Executive Officer or any Officer of the Corporation authorized by the Chief Executive Officer shall have power to vote and otherwise act on behalf of the Corporation, in person or in which the Corporation may hold securities and otherwise to exercise any and all rights and powers which the Corporation may possess by reason of its ownership of securities in such other corporation.

ARTICLE V - STOCK

Section 1. Certificates of Stock. Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the Chairman of the Board or the Chief Executive Officer, and by the Secretary or an Assistant Secretary, or any Treasurer or Assistant Treasurer, certifying the number of shares owned by him. Any or all of the signatures on the certificate may be by facsimile.

8

Section 2. Transfers of Stock. Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of Article V .of these Bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.

Section 3. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for such other action as hereinbefore described; provided, however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 4. Lost, Stolen or Destroyed Certificates. In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.

Section 5. Regulations. The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.

ARTICLE VI - NOTICES

Section 1. Notices. Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, Director, Officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or by sending such notice by prepaid telegram or mailgram or other courier. Any such notice shall be addressed to such stockholder, Director, Officer, employee or agent at his last known address as the same appears on the books of the Corporation. The time when such notice is received, if hand delivered, or

9

dispatched, if delivered through the mails or by telegram or mailgram or other courier, shall be the time of the giving of the notice.

Section 2. Waivers. A written waiver of any notice, signed by a stockholder, Director, Officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, Director, Officer, employee or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver.

ARTICLE VII - MISCELLANEOUS

Section 1. Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any Officer or Officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

Section 2. Corporate Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Comptroller or by an Assistant Secretary or an assistant to the Comptroller.

Section 3. Reliance upon Books, Reports and Records. Each Director, each member of any committee designated by the Board of Directors, and each Officer of the Corporation shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its Officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such Director or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

Section 4. Fiscal Year. The fiscal year of the Corporation shall be as fixed by the Board of Directors.

Section 5. Time Periods. In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

ARTICLE VIII - AMENDMENT

The Board of Directors may amend, alter or repeal these Bylaws at any meeting of the Board, provided notice of the proposed change is given not less than two days prior to the meeting. The stockholders shall also have power to amend, alter or repeal these Bylaws at any meeting of stockholders, provided notice of the proposed change was given in the Notice of the Meeting; provided, however, that, notwithstanding any other provisions of these Bylaws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock Designation

10

or these Bylaws, the affirmative votes of the holders of at least eighty percent (80%) of the voting power of all the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal any provisions of these Bylaws.

LIBC/1693588.2

11

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Pamela J. Montpelier, hereby certify that:

(1) I have reviewed this quarterly report on Form 10-QSB of Service Bancorp, Inc.;

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this quarterly report;

(4) The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

c) Disclosed in this quarterly report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

(5) The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons fulfilling the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal controls over financial reporting.

/s/ PAMELA J. MONTPELIER

Pamela J. Montpelier

Chief Executive Officer

May 14, 2004

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Dana S. Philbrook, hereby certify that:

(1) I have reviewed this quarterly report on Form 10-QSB of Service Bancorp, Inc.;

(2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

(3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this quarterly report;

(4) The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

c) Disclosed in this quarterly report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

(5) The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons fulfilling the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal controls over financial reporting.

/s/ DANA S. PHILBROOK

Dana S. Philbrook

Chief Financial Officer

May 14, 2004

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Service Bancorp, Inc. (the “Company”) on Form 10-QSB for the quarter ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Pamela J. Montpelier, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is provided solely pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

/s/ PAMELA J. MONTPELIER

Pamela J. Montpelier

Chief Executive Officer

May 14, 2004

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Service Bancorp, Inc. (the “Company”) on Form 10-QSB for the quarter ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dana S. Philbrook, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is provided solely pursuant to 18 U.S.C. Section 1350 and Item 601(b)(32) of Regulation S-K (“Item 601(b)(32)”) promulgated under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). In accordance with clause (ii) of Item 601(b)(32), this certification (A) shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and (B) shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

/s/ DANA S. PHILBROOK

Dana S. Philbrook

Chief Financial Officer

May 14, 2004