SECOND AMENDMENT OF AGREEMENT AND PLAN OF MERGER

EXHIBIT 2.1

SECOND AMENDMENT OF AGREEMENT AND PLAN OF MERGER

     This SECOND AMENDMENT OF AGREEMENT AND PLAN OF MERGER, dated as of March 25, 2007, amends the AGREEMENT AND PLAN OF MERGER dated August 30, 2006, as amended September 21, 2006, entered into by and among Conestoga Bancorp, Inc., a Pennsylvania corporation (“ Conestoga ”), Conestoga Bank, a Pennsylvania bank and a wholly-owned subsidiary of Conestoga (“ Conestoga Bank ”), FP Acquisition Corp., a Pennsylvania corporation and a direct wholly-owned subsidiary of Conestoga (“ Merger Sub ”), and PSB Bancorp, Inc., a Pennsylvania corporation (“ PSB ”) (as amended as of the date hereof and as hereinafter amended, supplemented or otherwise modified from time to time, the “ Agreement ”). All capitalized terms used herein and not defined shall have the meaning set forth in the Agreement.

BACKGROUND

     The respective Boards of Directors of each of Conestoga, Merger Sub and PSB have determined that it is in the best interests of their respective companies to amend the Agreement to: (i) provide for a fixed Merger Consideration equal to the Merger Consideration provided for in the Agreement as it has been adjusted through the date hereof based on the provisions of the Agreement; (ii) provide for the amendment of certain PSB Disclosure Schedules; (iii) provide for the modification of certain representations and warranties made by PSB; and (iv) provide for the modification of certain other terms of the Agreement in connection with the foregoing. The Boards of Directors of PSB and Conestoga have approved this amendment to the Agreement.

     1. Section 1.4 of the Agreement is hereby amended to read in its entirety as follows:

           Closing of the Merger . Subject to the terms and conditions of this Agreement, the closing of the Merger (the “ Closing ”) will take place at 9:00 a.m. Eastern Time on April 2, 2006 at such place as shall be agreed to by the parties, provided that the conditions set forth in Article VIII hereof have been satisfied or waived (subject to applicable law), other than conditions which by their terms are to be satisfied at Closing, but subject to satisfaction or waiver of such conditions. The actual date of the Closing is hereinafter referred to as the “ Closing Date ”.

     2. Section 1.10 of the Agreement is hereby amended to read in its entirety as follows:

     1.10 Parent/Sub Merger; Bank Merger . Conestoga and PSB shall use their reasonable best efforts to cause PSB to merge with and into Conestoga, with Conestoga surviving such merger, and Conestoga Bank to merge with and into First Penn Bank, with First Penn Bank surviving such merger, as soon as practicable after the Effective Time.

Notwithstanding the foregoing, the parties acknowledge that the closing of the Bank Merger will occur approximately 45 days after the closing of the Merger.

     3. Section 2.1(a) of the Agreement is hereby amended to read in its entirety as follows:

     2.1 Conversion of PSB Common Stock . At the Effective Time, by virtue of the Merger:

          (a) Each share of common stock, no par value per share, of PSB (“ PSB Common Stock ”) issued and outstanding immediately prior to the Effective Time (other than shares to be canceled as provided in Section 2.1(d)), shall, by virtue of the Merger, be converted into the right to receive $16.72 in cash (the “ Merger Consideration ”), payable to the holder thereof in accordance with Article III hereof, less any required withholding of Taxes (as hereinafter defined).

     4. Section 2.1(b) of the Agreement is hereby amended to read in its entirety as follows:

     (b) “Intentionally Deleted”

     5. The first paragraph of Section 4.1 of the Agreement is hereby amended to read in its entirety as follows:

     4.1 Disclosure Schedule; Disclosure Standard . On August 30, 2006, PSB delivered to Conestoga a disclosure schedule. As of the date hereof, PSB has delivered to Conestoga a supplemental disclosure schedule (as supplemented, the “ PSB Disclosure Schedule ”) setting forth, among other things, certain items, the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Article IV or to one or more covenants contained in Article VI. No representation or warranty of PSB contained in this Article IV shall be deemed untrue or incorrect, and PSB shall not be deemed to have breached a representation or warranty, or to have failed to satisfy a related condition, as a consequence of the existence or absence of any fact, circumstance or event unless such fact, circumstance or event, individually or taken together with all other facts, circumstances or events inconsistent with that or any other representation or warranty, has had or is reasonably likely to have a Material Adverse Effect (as hereinafter defined). Each section of the PSB Disclosure Schedule qualifies the correspondingly numbered representation or warranty and any other representation or warranty contained in this Article IV if it is reasonably apparent that the disclosure set forth in the PSB Disclosure Schedule is applicable to such other representation or warranty.

     6. The second paragraph of Section 4.1 of the Agreement is hereby amended to read in its entirety as follows:

     As used in this Agreement, the term “ Material Adverse Effect ” means a material adverse effect on the business, operations, results of operations in the current or any future fiscal year, or financial condition of PSB and its Subsidiaries taken as a whole or a material adverse

effect on PSB’s ability to consummate the transactions contemplated hereby on or before April 30, 2007, in each case as determined from the perspective of a reasonable person in Conestoga’s position. For purposes of the preceding sentence, the fact that any costs, damages or other liabilities or reasonably expected costs, damages or other liabilities arising from or related to any representation or warranty of PSB being untrue or incorrect may be non-recurring or result in only a one-time charge to earnings shall not affect the assessment of their materiality to the results of operations of PSB and its Subsidiaries taken as a whole; provided , that any increase in PSB’s provision for loan losses shall not be considered to cause a Material Adverse Effect solely by reason of the effect such increases have on PSB’s consolidated results of operations for any single fiscal year. In determining whether a Material Adverse Effect has occurred, there shall be excluded any effect resulting from or attributable to: (i) any change after the date of this Agreement in laws, rules or regulations or published interpretations thereof by courts or governmental authorities or in generally accepted accounting principles (“ GAAP ”) or regulatory accounting requirements, in any such case applicable to banks, savings banks, mortgage banks, mortgage brokers, savings associations or their holding companies generally, except for any such change that has a disproportionate impact on PSB and its Subsidiaries, taken as a whole, relative to the other participants in their industry, (ii) the announcement of this Agreement or the transactions contemplated hereby, any action of Conestoga or its Subsidiaries or any action or omission of PSB or its Subsidiaries taken or omitted to be taken, pursuant to the terms of this Agreement or with the consent or at the direction of Conestoga, or (iii) changes after the date of this Agreement in general economic conditions or interest rates affecting banks, savings banks, mortgage banks, mortgage brokers, savings associations or their holding companies generally, except for any such change that has a disproportionate impact on PSB and its Subsidiaries, taken as a whole, relative to the other participants in their industry and provided , further , that a decrease in the trading or market price of the PSB Common