<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

               [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended DECEMBER 31, 2002

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the transition period from _____ to _____

                           Commission File No. 0-18014

                              PAMRAPO BANCORP, INC.
             (Exact name of registrant as specified in its charter)

               NEW JERSEY                              22-2984813
    (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                Identification No.)

                     611 AVENUE C, BAYONNE, NEW JERSEY 07002
              (Address and zip code of principal executive offices)

       Registrant's telephone number, including area code: (201) 339-4600
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.01 per share
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes___ No X

The aggregate market value, based upon the last sales price as quoted on The
Nasdaq Stock Market for June 28, 2002, of the voting stock held by
non-affiliates of the registrant, i.e., persons other than directors and
executive officers of the registrant, is approximately $59,150,000. The
aggregate market value, based upon the last sales price as quoted on The Nasdaq
Stock Market for March 10, 2003, of the voting stock held by non-affiliates of
the registrant is $71,884,725. The Registrant had 5,145,986 shares of Common
Stock outstanding as of March 10, 2003.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Stockholders for the year ended December 31,
2002 are incorporated by reference into Parts I and II of this Form 10-K.

Portions of the Proxy Statement for the 2003 Annual Meeting of Stockholders are
incorporated by reference into Part III of this Form 10-K.

<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                             PAGE
                                                                                                             ----
<S>      <C>                                                                                                  <C>
PART I

         Item 1.           Business............................................................................1

         Item 2.           Properties.........................................................................36

         Item 3.           Legal Proceedings..................................................................37

         Item 4.           Submission of Matters to a Vote of Security Holders................................37

PART II

         Item 5.           Market for Registrant's Common Equity and
                           Related Stockholder Matters........................................................37

         Item 6.           Selected Financial Data............................................................37

         Item 7.           Management's Discussion and Analysis of Financial
                           Condition and Results of Operations................................................37

         Item 8.           Consolidated Financial Statements and Supplementary Data...........................37

         Item 9.           Changes in and Disagreements with Accountants on
                           Accounting and Financial Disclosure................................................37

PART III

         Item 10.          Directors and Executive Officers of the Registrant.................................38

         Item 11.          Executive Compensation.............................................................38

         Item 12.          Security Ownership of Certain Beneficial Owners....................................38

         Item 13.          Certain Relationships and Related Transactions.....................................38

         Item 14.          Controls and Procedures............................................................38

PART  IV

         Item 15.          Exhibits, Financial Statement Schedules,
                           and Reports on Form 8-K............................................................39

SIGNATURES....................................................................................................41
</TABLE>

<PAGE>


                                     PART I

ITEM 1.  BUSINESS.

Pamrapo Bancorp, Inc. (also referred to as the "Company" or the "Registrant")
was incorporated under Delaware law on June 26, 1989 and changed its state of
incorporation from Delaware to New Jersey on March 29, 2001. On November 10,
1989, the Registrant acquired Pamrapo Savings Bank, S.L.A. (the "Bank" or
"Pamrapo") as a part of the Bank's conversion from a New Jersey chartered
savings association in mutual form to a New Jersey chartered stock savings
association. The Registrant is a savings and loan holding company and is subject
to regulation by the Office of Thrift Supervision ("OTS"), the Federal Deposit
Insurance Corporation ("FDIC") and the Securities and Exchange Commission
("SEC"). Currently, the Registrant does not transact any material business other
than through its sole subsidiary, the Bank.

Pamrapo was organized in 1887 as Pamrapo Building and Loan Association. On
October 6, 1952, it changed its name to Pamrapo Savings and Loan Association, a
New Jersey chartered savings and loan association in mutual form, and in 1988 it
changed its name to Pamrapo Savings Bank, S.L.A. The Bank's principal office is
located in Bayonne, New Jersey. Its deposits are insured up to applicable limits
by the Savings Association Insurance Fund (the "SAIF") which is administered by
the FDIC. At December 31, 2002, the Bank had total assets of $588.4 million,
deposits of $452.3 million and stockholders' equity of $43.8 million before
elimination of intercompany accounts with the Company.

As a community-oriented institution, the Bank is principally engaged in
attracting retail deposits from the general public and investing those funds in
fixed-rate one- to four-family residential mortgage loans and, to a lesser
extent, in multi-family residential mortgage loans, commercial real estate
loans, home equity and second mortgage loans, consumer loans and mortgage-backed
securities. The Bank's revenues are derived principally from interest on loans
and mortgage-backed securities, interest and dividends on investment securities
and short-term investments, and other fees and service charges. The Bank's
primary sources of funds are deposits and, to a lesser extent, Federal Home Loan
Bank of New York ("FHLB-NY") advances and other borrowings.

MARKET AREA

The Bank, which is headquartered in Bayonne, New Jersey, conducts its business
through nine retail banking offices, six of which are located in Bayonne, New
Jersey, one in Hoboken, New Jersey, one in Fort Lee, New Jersey, and one in
Monroe, New Jersey. The Bank's deposit base is located primarily in Hudson
County, with a large concentration in Bayonne, an older, stable, residential
community of one-family and two-family residences and middle income families who
have lived in the area for many years. The communities in which the Bank's
branches are located are strategically located in the New York City metropolitan
area and many residents of these communities commute to Manhattan to work on a
daily basis. The Bank's lending activities have also been concentrated in Hudson
County and to a lesser extent in Bergen, Monmouth, Middlesex and Ocean Counties,
areas which have had a high level of new development in recent years.

                                        1

<PAGE>

LENDING ACTIVITIES

General. Pamrapo principally originates fixed-rate mortgage loans on one- to
four-family residential dwellings for retention in its own portfolio. The Bank
also originates acquisition, development and construction loans in addition to
multi-family and commercial real estate loans. At December 31, 2002 the Bank's
total gross loans outstanding amounted to $394.1 million, of which $295.8
million consisted of loans secured by one- to four-family residential
properties, $9.8 million consisted of construction and land loans, and $84.8
million consisted of loans secured by multi-family and commercial real estate.
Substantially all of the Bank's real estate loan portfolio consists of
conventional mortgage loans, of which $186,000 are either insured by the Federal
Housing Administration ("FHA") or partially guaranteed by the Veterans
Administration ("VA").

                                        2

<PAGE>

LOAN PORTFOLIO COMPOSITION

The following table sets forth the composition of the Bank's loan and
mortgage-backed securities portfolios in dollar amounts and in percentages at
the dates indicated:

<TABLE>
<CAPTION>
                                                                             AT DECEMBER 31,
                                         -----------------------------------------------------------------------------------------
                                                 1998                  1999                  2000                   2001
                                        ------------------------------------------------------------------------------------------
                                         AMOUNT      PERCENT     AMOUNT    PERCENT       AMOUNT   PERCENT     AMOUNT     PERCENT
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                     <C>            <C>        <C>         <C>        <C>        <C>        <C>           <C>
REAL ESTATE MORTGAGE LOANS:
  Permanent:
    Fixed-rate......................    $ 189,478      79.27%  $  212,435     79.19%   $ 242,327    78.40%  $  300,492       81.38%
    Adjustable rate.................        4,385       1.84        4,493      1.67        3,900     1.26        2,757         .75
  Construction(1)...................        7,258       3.04        8,869      3.31       10,594     3.43        8,471        2.29
  Guaranteed by VA or
   insured by FHA...................          761        .32          602       .22          442      .14          286         .08
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
Total mortgage loans................      201,882      84.47      226,399     84.39      257,263    83.23      312,006       84.50
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
COMMERCIAL LOANS                               -           -           61       .02          928      .30        1,263         .34
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
CONSUMER LOANS:
  Passbook or certificate...........          459        .19          511       .19          691      .22          689         .19
  Home improvement..................          508        .21          560       .21          561      .18          576         .16
  Equity and second mortgages.......       39,184      16.40       43,227     16.11       52,255    16.91       56,958       15.42
  Education.........................           54        .02           58       .02            -        -            -           -
  Automobile........................        1,273        .53        1,162       .44        1,545      .50        1,484         .40
  Personal..........................        2,033        .85        1,869       .70        1,785      .58        1,294         .35
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
Total consumer loans................       43,511      18.20       47,387     17.67       56,837    18.39       61,001       16.52
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
Total loans.........................      245,393     102.67      273,847    102.08      315,028   101.92      374,270      101.36
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
Less:
  Allowance for loan losses.........        2,300        .96        2,000       .83        1,950      .63        2,150         .58
  Loans in process..................        2,409       1.01        2,217       .75        2,925      .94        2,272         .62
  Deferred loan fees (costs) and
   discounts........................        1,674        .70        1,350       .50        1,071      .35          609         .16
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
Total...............................        6,383       2.67        5,567      2.08        5,946     1.92        5,031        1.36
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
Total net loans.....................    $ 239,010     100.00%  $  268,280    100.00%   $ 309,082   100.00%  $  369,239      100.00%
                                        =========   ========   ==========  ========    =========  =======   ==========   =========
MORTGAGE-BACKED
  SECURITIES:
  GNMA (2)..........................    $   5,169       4.08%  $    3,366      2.67%   $   2,768     2.25%  $    2,046        1.63%
  FHLMC (3)(6)......................       95,209      75.14       98,506     78.25       93,218    75.81       81,581       64.98
  FNMA (4)(6).......................       25,676      20.26       23,712     18.84       26,864    21.85       41,649       33.17
  CMO (5)...........................            -          -            -         -            -        -            -           -
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
Total mortgage-backed securities....      126,054      99.48      125,584     99.76      122,850    99.91      125,276       99.78
ADD/LESS:
  Premiums (discounts), net (6).....          746        .59          489       .39          205      .17          234         .18
  Unrealized (loss) gain on
   securities available for
   sale............................           (93)      (.07)        (184)     (.15)         (91)    (.08)          46         .04
                                        ---------   --------   ----------  --------    ---------  -------   ----------   ---------
Net mortgage-backed securities......    $ 126,707     100.00%  $  125,889    100.00%   $ 122,964   100.00%  $  125,556      100.00%
                                        =========   ========   ==========  ========    =========  =======   ==========   =========

<CAPTION>
                                                       AT DECEMBER 31,
                                                 --------------------------
                                                            2002
                                                 --------------------------
                                                    AMOUNT      PERCENT
                                                   (DOLLARS IN THOUSANDS)
<S>                                              <C>                <C>
REAL ESTATE MORTGAGE LOANS:
  Permanent:
    Fixed-rate......................             $   320,529        82.21%
    Adjustable rate.................                   2,137          .55
  Construction(1)...................                   7,893         2.02
  Guaranteed by VA or
   insured by FHA...................                     186          .05
                                                 -----------   ----------
Total mortgage loans................                 330,745        84.83
                                                 -----------   ----------
COMMERCIAL LOANS                                         658          .17
                                                 -----------   ----------
CONSUMER LOANS:
  Passbook or certificate...........                     552          .14
  Home improvement..................                     336          .09
  Equity and second mortgages.......                  59,234        15.19
  Education.........................                       -            -
  Automobile........................                   1,243          .32
  Personal..........................                   1,298          .33
                                                 -----------   ----------
Total consumer loans................                  62,663        16.07
                                                 -----------   ----------
Total loans.........................                 394,066       101.07
                                                 -----------   ----------
Less:
  Allowance for loan losses.........                   2,550          .65
  Loans in process..................                   1,882          .48
  Deferred loan fees (costs) and
   discounts........................                    (231)        (.06)
                                                 -----------   ----------
Total...............................                   4,201         1.07
                                                 -----------   ----------
Total net loans.....................             $   389,865       100.00%
                                                 ===========   ==========
MORTGAGE-BACKED
  SECURITIES:
  GNMA (2)..........................                   1,214          .82%
  FHLMC (3)(6)......................                  99,981        67.38
  FNMA (4)(6).......................                  38,846        26.18
  CMO (5)...........................                   7,670         5.17
                                                 -----------   ----------
Total mortgage-backed securities....                 147,711        99.55%
ADD/LESS:
  Premiums (discounts), net (6).....                     617          .41
  Unrealized (loss) gain on
   securities available for
   sale............................                       58          .04
                                                 -----------   ----------
Net mortgage-backed securities......             $   148,386       100.00%
                                                 ===========   ==========
</TABLE>

                                        3

<PAGE>

----------

(1)     Includes acquisition, development and land loans.

(2)     Government National Mortgage Association ("GNMA").

(3)     Federal Home Loan Mortgage Corporation ("FHLMC").

(4)     Federal National Mortgage Association ("FNMA").

(5)     Collateralized Mortgage Obligations.

(6)     Includes available for sale securities having a principal balance of
        $6,228,000 and a net premium of $172,000 for 1998, a principal balance
        of $5,115,000 and a net premium of $134,000 for 1999, a principal
        balance of $4,165,000 and a net premium of $98,000 for 2000, a principal
        balance of $3,084,000 and a net premium of $9,000 for 2001, and a
        principal balance of $2,188,000 and a net premium of $2,000 for 2002.

                                        4

<PAGE>

The following table sets forth the composition of the Bank's gross loan
portfolio by type of security at the dates indicated.

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                       ------------------------------------------------------------------------
                                                2000              2001                            2002
                                       ------------------------------------------------------------------------
                                                                 (DOLLARS IN THOUSANDS)
                                       ------------------------------------------------------------------------
                                         AMOUNT     PERCENT                  PERCENT                   PERCENT
                                                   OF TOTAL     AMOUNT      OF TOTAL       AMOUNT     OF TOTAL
                                       ---------   ---------   ----------   ---------    ----------   ---------
<S>                                    <C>            <C>      <C>             <C>       <C>             <C>
One-to four-family..................   $ 221,797       70.41%  $  275,056       73.49%   $  295,781       75.06%
Multi-family........................      47,769       15.16       51,498       13.76        46,224       11.73
Commercial real estate..............      29,306        9.30       33,863        9.05        38,526        9.78
Construction and land...............      11,208        3.56        9,123        2.44         9,782        2.48
Commercial..........................         928         .30        1,262         .34           658         .17
Consumer-secured and unsecured......       4,020        1.27        3,468         .92         3,095         .78
                                       ---------   ---------   ----------   ---------    ----------   ---------
   Total gross loans................   $ 315,028      100.00%  $  374,270      100.00%   $  394,066      100.00%
                                       =========   =========   ==========   =========    ==========   =========
</TABLE>

ORIGINATION, PURCHASE AND SALE OF LOANS AND MORTGAGE-BACKED SECURITIES. The
following table sets forth the Bank's loan originations, purchases, sales and
principal repayments for the periods indicated.

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                           -----------------------------------------------------------------
                                               2000                      2001                      2002
                                           -----------               ------------              -------------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                        <C>                       <C>                       <C>
Mortgage Loans (gross):
   At beginning of period...........       $   226,399               $    257,263              $     312,006
                                           -----------               ------------              -------------
   Mortgage loans originated:
     One- to four-family residential            39,439                    107,471                    113,096
     Multi-family residential.......            14,357                     13,210                     16,221
     Commercial.....................             3,886                      5,209                      5,368
     Construction(1)................             3,889                      4,757                      4,693
                                           -----------               ------------              -------------
       Total mortgage loans
        originated..................            61,571                    130,647                    139,378
                                           -----------               ------------              -------------
   Loans purchased..................             1,676                          -                          -
                                           -----------               ------------              -------------
   Transfer to REO..................               222                         33                          -
   Charge-offs......................               235                         65                        143
   Repayments.......................            31,926                     75,806                    120,496
                                           -----------               ------------              -------------
       Total mortgage repayments and
        other reductions.............           32,383                     75,904                    120,639
                                           -----------               ------------              -------------
   At end of period.................       $   257,263               $    312,006              $     330,745
                                           ===========               ============              =============
Commercial Loans (gross):
   At beginning of period...........       $        61               $        928              $       1,263
   Commercial loans originated......             1,035                      1,152                        275
   Charge-offs......................                 -                         25                          -
   Repayments.......................               168                        792                        880
                                           -----------               ------------              -------------
   At end of period                        $       928               $      1,263              $         658
                                           ===========               ============              =============
Consumer Loans (gross):
   At beginning of period...........       $    47,387               $     56,837              $      61,001
   Consumer loans originated........            25,196                     32,716                     32,962
   Consumer loans sold..............               117                          -                        148
   Charge-offs......................                33                        183                        101
   Repayments.......................            15,596                     28,369                     31,051
                                           -----------               ------------              -------------
   At end of period                        $    56,837               $     61,001              $      62,663
                                           ===========               ============              =============
Mortgage-backed securities (gross):
   At beginning of period...........       $   125,584               $    122,850              $     125,276
   Mortgage-backed securities
    purchased.......................            16,217                     34,156                     68,422
   Repayments.......................            18,951                     31,730                     45,987
                                           -----------               ------------              -------------
   At end of period.................         $ 122,850                  $ 125,276                  $ 147,711
                                           ===========               ============              =============
</TABLE>

----------
(1) Includes acquisition, development and land loans.

                                        5

<PAGE>

LOAN MATURITY. The following table sets forth the maturity of the Bank's gross
loan portfolio at December 31, 2002. The table does not include prepayments or
scheduled principal repayments. Prepayments and scheduled principal repayments
on loans totaled $47.7 million, $105.0 million, and $152.4 million for the years
ended December 31, 2000, 2001 and 2002 respectively.

<TABLE>
<CAPTION>
                                      ONE- TO FOUR-           MULTI-FAMILY
                                    FAMILY RESIDENTIAL       AND COMMERCIAL          CONSTRUCTION        CONSUMER-SECURED
                                    MORTGAGE LOANS(1)     REAL ESTATE LOANS(1)        LOANS (2)         AND UNSECURED LOANS
                                    ------------------    --------------------       ------------       -------------------
                                                                       (IN THOUSANDS)
<S>                                 <C>                   <C>                        <C>                <C>
Amounts due:
   Within 1 year.................   $            1,080    $                336       $      6,586       $               176
                                    ------------------    --------------------       ------------       -------------------

After 1 year:
   1 to 3 years..................                1,587                     910                330                     1,000
   3 to 5 years..................                5,093                   1,646                 12                       867
   5 to 10 years.................               23,400                  12,481                 45                       530
   10 to 20 years................              107,480                  66,411              1,505                       522
   Over 20 years.................              157,141                   2,966              1,304                         -
                                    ------------------    --------------------       ------------       -------------------
   Total due after 1 year........              294,701                  84,414              3,196                     2,919
                                    ------------------    --------------------       ------------       -------------------
Total amounts due................           $  295,781    $             84,750       $      9,782       $             3,095
                                    ==================    ====================       ============       ===================

Less:

   Allowance for loan losses.....
   Loans in process..............
   Deferred loan fees (costs)
    and discounts................

   Total.........................

<CAPTION>
                                     COMMERCIAL LOANS            TOTAL
                                    ------------------    --------------------
                                                  (IN THOUSANDS)
<S>                                 <C>                   <C>
Amounts due:
   Within 1 year.................   $              658    $              8,836
                                    ------------------    --------------------
After 1 year:
   1 to 3 years..................
   3 to 5 years..................                    -                   3,827
   5 to 10 years.................                    -                   7,618
   10 to 20 years................                    -                  36,456
   Over 20 years.................                    -                 175,918
                                                     -                 161,411
                                    ------------------    --------------------
   Total due after 1 year........                    -                 385,230
                                    ------------------    --------------------
Total amounts due................   $              658    $            394,066
                                    ==================
Less:
   Allowance for loan losses.....                                        2,550
   Loans in process..............                                        1,882
   Deferred loan fees (costs)
    and discounts...............                                          (231)
                                                          --------------------
   Total.........................                         $            389,865
                                                          ====================
</TABLE>

----------
(1)     Includes equity, second mortgage and home improvement loans.

(2)     Includes acquisition, development and land loans.

                                        6

<PAGE>

The following table sets forth at December 31, 2002, the dollar amount of all
mortgage, consumer and construction loans, due after December 31, 2003, which
have fixed interest rates or adjustable interest rates:

<TABLE>
<CAPTION>
                                                              DUE AFTER DECEMBER 31, 2003
                                            -----------------------------------------------------------------
                                              FIXED              FLOATING OR ADJUSTABLE          TOTAL DUE
                                              RATES                      RATES                 AFTER ONE YEAR
                                            ----------           ----------------------        --------------
                                                                    (IN THOUSANDS)
<S>                                         <C>                  <C>                           <C>
One- to four-family residential (1).        $  290,232           $                4,469        $      294,701
Construction loans..................             1,703                            1,493                 3,196
Multi-family and commercial real
 estate (1).........................            81,744                            2,670                84,414
Consumer-secured and unsecured
 loans..............................             2,406                              513                 2,919
                                            ----------           ----------------------        --------------
Totals                                      $  376,085           $                9,145        $      385,230
                                            ==========           ======================        ==============
</TABLE>

----------
(1)     Includes equity, second mortgage and home improvement loans.

Residential Mortgage Lending. Pamrapo presently originates first mortgage loans,
equity loans, second mortgage loans and improvement loans secured by one- to
four-family residences, multi-family residences and commercial real estate. As
of December 31, 2002, 97.7% of the gross loan portfolio were fixed-rate loans
and 2.3% were ARMs, and were originated for the Bank's portfolio. Residential
loan originations are generally obtained from existing or past customers and
members of the local community. As of December 31, 2002, $342.0 million or 86.8%
of the Bank's total gross loan portfolio consisted of one- to four-family and
multi-family residential mortgage loans. Of this amount $295.8 million were one-
to four-family and $46.2 million were multi-family.

The one- to four-family residential loans originated by the Bank are primarily
fixed-rate mortgages, generally with terms of 15 or 25 years. Typically, such
homes in the Bayonne area are one- or two-family owner-occupied dwellings. The
Bank generally makes one- to four-family residential mortgage loans in amounts
up to 80% of the appraised value of the secured property. The Bank will
originate loans with loan-to-value ratios up to 90% within the local community,
provided that private mortgage insurance on the amount in excess of such 80%
ratio is obtained. Mortgage loans in the Bank's portfolio generally include
due-on-sale clauses, which provide the Bank with the contractual right to demand
the loan immediately due and payable in the event that the borrower transfers
ownership of the property that is subject to the mortgage. It is the Bank's
policy to enforce due-on-sale provisions. As of December 31, 2002, the interest
rate for one- to four-family residential fixed-rate mortgages offered by the
Bank was 5.75% on 15-year loans and 6.00% on 25-year loans.

The Bank also originates loans on multi-family residences. Such residences
generally consist of 6 to 24 units. Such loans are generally fixed-rate loans
with interest rates ranging from 1.0% to 1.5% higher than those offered on one-
to four-family residences. The Bank generally makes multi family residential
loans in amounts up to 75% of the appraised value of the secured property. Such
appraisals are based primarily on the income producing ability of the property.
The terms of multi-family residential loans range from 10 to 15 years. As of
December 31, 2002, $46.2 million or 11.7% of the Bank's total gross loan
portfolio consisted of multi-family residential loans.

                                        7

<PAGE>

Upon receipt of an application for a mortgage loan from a prospective borrower,
a credit report is ordered to verify information relating to the applicant's
employment, income and credit standing. A preliminary inspection of the subject
premises is made by at least one member of the Executive Committee. The report
of that inspection is brought before the Executive Committee or the full Board
of Directors to approve the amount of the loan and the terms. Approval is given
subject to a report of value from an independent appraiser and credit approval.
Approval of credit is given by the Bank's president or loan officer. It is the
Bank's policy to obtain title insurance on all real estate loans. Borrowers also
must obtain hazard insurance and flood insurance, if required, prior to closing.
The Bank generally requires borrowers to advance funds on a monthly basis
together with each payment of principal and interest to a tax escrow account
from which the Bank can make disbursements for items such as real estate taxes
and certain insurance premiums, if any, as they become due.

Acquisition, Development, Construction and Land Lending. The Bank originates
loans to finance the construction of one- to four-family dwellings, multi-family
dwellings and, to a lesser extent, commercial real estate. It also originates
loans for the acquisition and development of unimproved property to be used
principally for residential purposes in cases where the Bank is to provide the
construction funds to improve the properties.

The interest rates and terms of the construction and land development loans
vary, depending upon market conditions, the size of the construction or
development project and negotiations with the borrower. Advances are generally
made to the borrower to cover actual construction costs incurred. On larger
constructions loans, the Bank requires the project to be built out in phases.
Advancement of funds is dependent upon completion of the project stages. The
Bank generally limits its exposure to 75% of the projected market value of the
completed project. The amount of the loans are generally determined as follows:
(i) land acquisition loans with no immediate plans for construction are limited
to 65% of the appraised value of the land; (ii) acquisition and development
loans are limited to 65% of appraised value of the improved lot not to exceed
150% of the original acquisition cost; (iii) in addition to the disbursement for
acquisition and development, in an acquisition, development and construction
loan, the Bank will not advance more than 90% of the construction costs; and
(iv) loans secured by previously owned vacant land are limited to 65%. Prior to
making any disbursements, the Bank requires that the projects securing the
construction and development loans be inspected. The Bank will finance the
construction of properties without a prospective buyer or without permanent
take-out financing in place at the time of origination.

The underwriting criteria used by the Bank are designed to evaluate and minimize
the risks of each construction loan. Among other things, the Bank generally
considers an appraisal of the project, the reputation of the borrower and the
contractor, the amount of the borrower's equity in the project, independent
valuations and review of cost estimates, plans and specifications,
preconstruction sale and leasing information, current and expected economic
conditions in the area of the project, cash flow projections of the borrower,
and, to the extent available, guarantees by the borrower and/or third parties.
All of the Bank's acquisition, development and construction loan portfolio is
secured by real estate properties located in northern and central New Jersey.

Acquisition, development and construction lending is generally considered to
involve a higher level of risk than one- to four-family permanent residential
lending due to the concentration of principal in a limited number of loans and
borrowers and the effects of general economic conditions on development
projects, real estate developers and managers. In addition, the nature of these
loans is

                                        8

<PAGE>

such that they are generally less predictable and more difficult to evaluate and
monitor. As of December 31, 2002, the Bank's acquisition, development,
construction and land loans varied in size from $12,000 to $675,000, net of
loans in process, and represented 2.5% of total gross loans.

Commercial Real Estate Lending. Loans secured by commercial real estate totaled
$38.5 million, or 9.8% of the Bank's total gross loan portfolio, at December 31,
2002. Commercial real estate loans are generally originated in amounts up to 70%
of the appraised value of the property. Such appraised value is determined by an
independent appraiser previously approved by the Bank. The Bank's commercial
real estate loans are secured by improved property such as office buildings,
retail stores, warehouses and other non-residential buildings. Once the loan has
been determined to be creditworthy and of sufficient property value, in the case
of corporate borrowers, the Bank obtains a personal guaranty from third party
principals of the corporate borrower as supplemental security on the loan. This
enables the Bank to proceed against the guarantor in the event of default
without first exhausting remedies against the borrower. Inquiry as to
collectibility pursuant to such third party guarantees may be made by means of
review of other properties secured by the Bank, personal interviews with the
applicants, review of the applicant's personal financial statements and income
tax returns and review of credit bureau reports. Borrowers must personally
guarantee loans made for commercial real estate. Commercial real estate loans
have terms ranging from 5 to 15 years and are generally fixed-rate loans.

Loans secured by commercial real estate properties are generally larger and
involve a greater degree of risk than residential mortgage loans. Because
payments on loans secured by commercial real estate properties are often
dependent on successful operation or management of the properties, repayment of
such loans may be subject to adverse conditions in the real estate market or the
economy. Emphasis is placed on the income producing capability of the collateral
rather than on management-intensive projects.

Consumer and Commercial Lending. The Bank offers various other secured and
unsecured consumer loan products such as automobile loans, personal loans and
passbook loans, as well as commercial loans. At December 31, 2002, the balance
of such loans was $3.8 million, or 1.0% of the Bank's total gross loan
portfolio.

Loan Review. The Bank has a formalized loan review program, providing for
detailed post-closing reviews for loans selected from all categories. After
review, reports are made to the mortgage and loan officers and the Board of
Directors. Classification determination is presently the responsibility of the
Asset Classification Committee. See "Classification of Assets." The purpose of
these procedures is to enhance the Bank's ability to properly document the loans
it originates and to improve the performance of such loans.

Lending Authority. The Bank's Executive Committee has the authority to approve
loans up to $750,000, with the stipulation that loans approved in excess of
$500,000 must be reported at the next Board of Directors meeting. The Bank's
Vice President and Loan Officer has the authority to approve consumer and equity
loans of up to $150,000.

Loan Servicing. The Bank originated all of the loans it has sold and services
those loans for other investors. Pamrapo receives fees for these servicing
activities, which include collecting and remitting loan payments, inspecting the
properties and making certain insurance and tax payments are made

                                        9

<PAGE>

on behalf of the borrowers. At December 31, 2002, the Bank was servicing $1.1
million of loans for others.

Loan Origination Fees and Other Fees. Loan origination fees and certain related
direct loan origination costs are deferred and the resulting net amount is
amortized over the life of the related loan as an adjustment to the yield of
such loans. In addition, commitment fees are required to be offset against
related direct costs and the resulting net amount generally is recognized over
the life of the related loans as an adjustment of yield or if the commitment
expires unexercised, recognized upon expiration of the commitment. The Bank had
$231,000 in net deferred origination costs at December 31, 2002.

NON-PERFORMING ASSETS

When a borrower fails to make a required payment by the fifteenth day of the
month in which the payment is due, the Bank sends a late notice advising the
borrower that the payment has not been received. In most cases delinquencies are
cured promptly; however, if a loan has been delinquent for more than 60 days,
the Bank reviews the loan status more closely and, where appropriate, appraises
the condition of the property and the financial circumstances of the borrower.
Based upon the results of any such investigation, the Bank (1) may accept a
repayment program for the arrearage from the borrower; (2) may seek evidence, in
the form of a listing contract, of efforts by the borrower to sell the property
if the borrower has stated that he is attempting to sell; (3) may request a deed
in lieu of foreclosure or (4) generally will initiate foreclosure proceedings
when a loan payment is delinquent for more than three monthly installments.

The following table sets forth information regarding non-accrual loans, loans
which are 90 days or more delinquent, but on which the Bank is accruing interest
and other real estate owned held by the Bank at the dates indicated:

<TABLE>
<CAPTION>
                                                                      AT DECEMBER 31,
                                               -------------------------------------------------------------
                                                 1998         1999         2000          2001         2002
                                               --------    ---------   ----------     ---------    ---------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                            <C>         <C>         <C>            <C>          <C>
One- to four-family residential real
 estate loans (1):
   Non-accrual loans........................   $  2,064    $   2,204   $    1,723     $   1,552    $     984
   Accruing loans 90 days overdue...........        764          736        1,217           641          633
                                               --------    ---------   ----------     ---------    ---------
     Total..................................      2,828        2,940        2,940         2,193        1,617
                                               --------    ---------   ----------     ---------    ---------

Multi-family residential and commercial real
 estate loans (1):
   Non-accrual loans........................        863          834          862           662          468
   Accruing loans 90 days overdue...........        335          321           28           362          440
                                               --------    ---------   ----------     ---------    ---------
     Total..................................      1,198        1,155          890         1,024          908
                                               --------    ---------   ----------     ---------    ---------

Construction loans (2):
   Non-accrual loans........................        185            -            -             -            -
   Accruing loans 90 days overdue...........          -            -          114             -            -
                                               --------    ---------   ----------     ---------    ---------
     Total..................................        185            -          114             -            -
                                               --------    ---------   ----------     ---------    ---------

Commercial loans:
   Non-accrual loans........................          -            -           25             -            -
   Accruing loans 90 days overdue...........          -            -            -             -          137
                                               --------    ---------   ----------     ---------    ---------
     Total..................................          -            -           25             -          137
                                               --------    ---------   ----------     ---------    ---------
</TABLE>

                                       10

<PAGE>

                                         (Table of non-accrual loans, continued)
<TABLE>
<CAPTION>
                                                                      AT DECEMBER 31,
                                               -------------------------------------------------------------
                                                 1998         1999         2000          2001         2002
                                               --------    ---------   ----------     ---------    ---------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                            <C>         <C>         <C>            <C>          <C>
Consumer loans:
   Non-accrual loans........................        334           92           93            42           33
   Accruing loans 90 days overdue...........          9            6           23             1            6
                                               --------    ---------   ----------     ---------    ---------
     Total..................................        343           98          116            43           39
                                               --------    ---------   ----------     ---------    ---------

Total non-performing loans:
   Non-accrual loans........................      3,446        3,130        2,703         2,256        1,485
   Accruing loans 90 days overdue...........      1,108        1,063        1,382         1,004        1,216
                                               --------    ---------   ----------     ---------    ---------
     Total..................................   $  4,554    $   4,193   $    4,085     $   3,260    $   2,701
                                               ========    =========   ==========     =========    =========

     Total foreclosed real estate, net of
      related reserves.....................    $  1,237    $     456   $      620     $     238    $     155
                                               ========    =========   ==========     =========    =========

     Total non-performing loans and
      foreclosed real estate to total assets       1.40%        1.03%        1.00%         0.65%        0.49%
                                               ========    =========   ==========     =========    =========
</TABLE>

----------
(1)     Includes equity and second mortgage loans.

(2)     Includes acquisition and development loans.

At December 31, 2000, 2001, and 2002 nonaccrual loans for which interest has
been discontinued totaled approximately $2.7 million, $2.3 million, and $1.5
million, respectively. During the years ended December 31, 2000, 2001, and 2002
the Bank recognized interest income of approximately $71,000, $88,000, and
$24,000, respectively, on these loans. Interest income that would have been
recorded, had the loans been on the accrual status, would have amounted to
approximately $270,000, $230,000, and $151,000 for the years ended December 31,
2000, 2001, and 2002, respectively. The Bank is not committed to lend additional
funds to the borrowers whose loans have been placed on nonaccrual status.

                                       11

<PAGE>

Delinquent Loans. At December 31, 2000, 2001, and 2002, respectively,
delinquencies in the Bank's portfolio were as follows:

<TABLE>
<CAPTION>
                                      AT DECEMBER 31, 2000                        AT DECEMBER 31, 2001
                           -------------------------------------------   ------------------------------------------
                               60 - 89 DAYS         90 DAYS OR MORE        60 - 89 DAYS         90 DAYS OR MORE
                           ---------------------   -------------------   -------------------   --------------------
                             NUMBER   PRINCIPAL    NUMBER   PRINCIPAL    NUMBER   PRINCIPAL    NUMBER   PRINCIPAL
                               OF     BALANCE OF     OF     BALANCE OF     OF     BALANCE OF     OF     BALANCE OF
                             LOANS      LOANS      LOANS      LOANS      LOANS      LOANS      LOANS      LOANS
                           --------   ----------   ------   ----------   ------   ----------   ------   -----------
                                                   (DOLLARS IN THOUSANDS)
<S>                              <C>  <C>              <C>  <C>              <C>  <C>              <C>  <C>
Delinquent loans...........      26   $    1,151       69   $    4,085       28   $    2,291       53   $     3,260
As a percent of total
 gross loans...............                 0.37%                 1.30%                 0.61%                  0.87%
</TABLE>

                                       AT DECEMBER 31, 2002
                             -----------------------------------------
                                60 - 89 DAYS        90 DAYS OR MORE
                             -------------------   -------------------
                              NUMBER   PRINCIPAL   NUMBER    PRINCIPAL
                                OF    BALANCE OF     OF     BALANCE OF
                              LOANS      LOANS      LOANS      LOANS
                             ------   ----------   ------   ----------
Delinquent loans...........      35   $    1,764       35   $    2,701
As a percent of total
 gross loans...............                 0.45%                 0.69%

                                       12

<PAGE>

As of December 31, 2002, the Bank had 35 loans which were 90 days or more past
due totaling $2.7 million. The average balance of such loans was approximately
$77,000. Management is of the opinion that the Bank will not incur any
additional substantial losses on such loans, giving consideration to existing
loan loss reserves. Most of the loans are of moderate size; 4 of the loans have
loan balances greater than $200,000, the largest of which is $241,000. All loans
are within the Bank's lending areas.

The Bank's level of non-performing loans 90 days or more delinquent decreased
from $3.3 million at December 31, 2001 to $2.7 million at December 31, 2002. The
total of such loans in the lower risk one- to four-family residential category
decreased to $1.6 million or 59.9% of non-performing loans 90 days or more
delinquent at December 31, 2001 when compared with $2.2 million or 67.3% of
non-performing loans 90 days or more delinquent at December 31, 2001.
Non-performing multi-family residential, commercial real estate and construction
loans, loans normally having greater elements of risk decreased from $1.0
million at December 31, 2001 to $900,000 at December 31, 2002.

Classified Assets. Federal regulations provide for the classification of loans
and other assets such as debt and equity securities considered to be of lesser
quality as "substandard," "doubtful" or "loss" assets. Assets which do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention" by management.

A classification of either substandard or doubtful requires the establishment of
general allowances for loan losses in an amount deemed prudent by management.
Assets classified as "loss" require either a specific allowance for losses equal
to 100% of the amount of the asset so classified or a charge off of such amount.

A savings institution's determination as to the classification of its assets and
the amount of its valuation allowances is subject to review by the OTS which can
order the establishment of additional general or specific loss allowances. The
OTS, in conjunction with the other federal banking agencies, has adopted an
interagency policy statement on the allowance for loan and lease losses. The
policy statement provides guidance for financial institutions on both the
responsibilities of management for the assessment and establishment of adequate
allowances and guidance for banking agency examiners to use in determining the
adequacy of general valuation allowances. Generally, the policy statement
requires that institutions have effective systems and controls to identify,
monitor and address asset quality problems; have analyzed all significant
factors that affect the collectibility of the portfolio in a reasonable manner;
and have established acceptable allowance evaluation processes that meet the
objectives set forth in the policy statement.

Management of the Bank has classified $2.9 million of its assets as substandard
and approximately $33,000 as loss based upon its review of the Bank's loan and
foreclosed real estate portfolios. Such review, among other things, takes into
consideration the appraised value of underlying collateral, economic conditions
and paying capacity of the borrowers. However, the Bank's Asset Classification
Committee carefully monitors all of the Bank's delinquent loans to determine
whether or not they should be classified. At a minimum, the Bank classifies all
foreclosed real estate and non-performing loans 90 days or more delinquent as
substandard assets. At December 31, 2002, the allowance for loan losses totaled
$2.55 million.

                                       13

<PAGE>

Allowance for Loan Losses. The allowance for loan losses is established through
a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity. Such evaluation, which includes a review of all loans of which full
collectibility may not be reasonably assured, considers among other matters, the
estimated net realizable value of the underlying collateral, economic
conditions, historical loan loss experience and other factors that warrant
recognition in providing for an adequate loan loss allowance.

During the years ended December 31, 2000, 2001, and 2002, gross charge-offs
totaled $268,000, $273,000, and $244,000, respectively.

The following table sets forth the activity of the Bank's allowance for loan
losses at the dates indicated:

<TABLE>
<CAPTION>
                                                                AT OR FOR THE YEAR ENDED DECEMBER 31,
                                         --------------------------------------------------------------------------------
                                            1998             1999              2000              2001             2002
                                         ----------       ----------        ----------        ----------       ----------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                      <C>              <C>               <C>               <C>              <C>
Balance at beginning of period......     $    2,475       $    2,300        $    2,000        $    1,950       $    2,150
                                         ----------       ----------        ----------        ----------       ----------
Provision for loan losses...........            292              299               208               459              634
                                         ----------       ----------        ----------        ----------       ----------
Net charge-offs:
   Real estate mortgage loans.......            327              212               235                65              143
   Consumer loans...................            157              392                33               183              101
   Commercial loans.................              -                -                 -                25                -
   Recoveries.......................             17                5                10                14               10
                                         ----------       ----------        ----------        ----------       ----------
Net charge-offs.....................            467              599               258               259              234
                                         ----------       ----------        ----------        ----------       ----------
Balance at end of period............     $    2,300       $    2,000        $    1,950        $    2,150       $    2,550
                                         ==========       ==========        ==========        ==========       ==========
Ratio of net charge offs during the
 period to average loans receivable
 during the period................              .21%             .23%              .09%              .08%             .06%
Ratio of allowance for loan losses to
 total outstanding loans (gross) at
 the end of period................              .94%             .73%              .62%              .57%             .65%
Ratio of allowance for loan losses
 to non-performing loans..........            50.50%           47.62%            47.74%            65.95%           94.41%
</TABLE>

                                       14

<PAGE>

The following table sets forth the breakdown of the allowance for loan losses by
loan category for the periods indicated. Management believes that the allowance
can be allocated by category only on an approximate basis. The allocation to the
allowance by category is not necessarily indicative of future losses and does
not restrict the use of the allowance to absorb losses in any category.

<TABLE>
<CAPTION>
                                                            AT DECEMBER 31,
                                       -------------------------------------------------------
                                        1998       1999        2000        2001         2002
                                       -------    -------    --------     --------    --------
                                       AMOUNT     AMOUNT      AMOUNT       AMOUNT      AMOUNT
                                       -------    -------    --------     --------    --------
                                                        (IN THOUSANDS)
<S>                                    <C>        <C>        <C>          <C>         <C>
Real estate mortgage loans (1)......   $ 1,900    $ 1,800    $  1,750     $  1,980    $  2,150
Consumer loans......................       400        200         200          150         300
Commercial loans....................         -          -           -           20         100
                                       -------    -------    --------     --------    --------
   Total allowance..................   $ 2,300    $ 2,000    $  1,950     $  2,150    $  2,550
                                       =======    =======    ========     ========    ========
</TABLE>

----------
(1)     Includes equity and second mortgages.

                                       15

<PAGE>

Mortgage-Backed Securities. The Bank has significant investments in
mortgage-backed securities and has, during periods when loan demand was low and
the interest yields on alternative investments was minimal, utilized such
investments as an alternative to mortgage lending. All of the securities in the
portfolio were insured or guaranteed by GNMA, FNMA or FHLMC and have coupon
rates as of December 31, 2002 ranging from 3.88% to 10.0%. At December 31, 2002,
the unamortized principal balance of mortgage-backed securities, both held to
maturity and available for sale, totaled $148.3 million or 25.2% of total
assets. The carrying value of such securities amounted to $123.0 million, $125.6
million, and $148.4 million at December 31, 2000, 2001, and 2002, respectively,
and the fair market value of such securities totaled approximately $123.5
million, $127.7 million, and $154.2 million at December 31, 2000, 2001, and
2002, respectively.

The following table sets forth the contractual maturities of the Bank's gross
mortgage-backed securities portfolio which includes available for sale and held
to maturity at December 31, 2002.

<TABLE>
<CAPTION>
                                                     CONTRACTUAL MATURITIES DUE IN YEAR(S) ENDED
                                                                     DECEMBER 31,
                                      ---------------------------------------------------------------------------
                                       2003-           2005-       2007-        2012-       2022 AND
                                       2004            2006        2011         2021       THEREAFTER     TOTAL
                                      -------         -------    ---------   -----------   ----------   ---------
                                                                    (IN THOUSANDS)
<S>                                   <C>             <C>        <C>         <C>           <C>          <C>
Mortgage-backed securities:
   Held to maturity.................  $   603         $   169    $  11,857   $   112,364   $   20,530   $ 145,523
   Available for sale...............        -               -            -         1,587          601       2,188
                                      -------         -------    ---------   -----------   ----------   ---------
     Total..........................  $   603         $   169    $  11,857   $   113,951   $   21,131   $ 147,711
                                      =======         =======    =========   ===========   ==========   =========
</TABLE>

Mortgage-backed securities are a low risk investment for the Bank. The Bank's
substantial investment in mortgage-backed securities will significantly enhance
the Bank's ability to meet risk based capital requirements as mortgage-backed
securities are assigned a risk rating, generally from 0% to 20%. Based on
historical experience, the Bank believes that the mortgage-backed securities
will be repaid significantly in advance of the stated maturities reflected in
the above table.

INVESTMENT ACTIVITIES

SAIF-insured savings institutions have the authority to invest in various types
of liquid assets, including United States Treasury obligations, securities of
various federal agencies, certain certificates of deposit of insured banks and
savings institutions, certain bankers' acceptances, repurchase agreements and
federal funds. Subject to various restrictions, SAIF-insured savings
institutions may also invest their assets in commercial paper, corporate debt
securities and mutual funds whose assets conform to the investments that a
SAIF-insured savings institution is otherwise authorized to make directly.

The Board of Directors sets the investment policy of the Bank. This policy
dictates that investments will be made based on the safety of the principal,
liquidity requirements of the Bank and the return on the investment and capital
appreciation. The Bank's Chief Executive Officer may make investments up to
$10.0 million, subject to ratification by the Bank's Board of Directors.

The Bank's conservative policy does not permit investment in junk bonds or
speculative strategies based upon the rise and fall of interest rates. Pamrapo's
goal, however, has always been to realize

                                       16

<PAGE>

the greatest possible return commensurate with its interest rate risk. Pamrapo
has emphasized shorter term securities for their liquidity to increase
sensitivity of its investment securities to changes in interest rates.

As a member of the FHLB-NY, the Bank is required to maintain liquid assets which
meet regulatory "safety and soundness" standards. See "Regulation Federal Home
Loan Bank System." The average liquidity for the month of December 2002 was
10.92%.

INVESTMENT PORTFOLIO

The following table sets forth certain information regarding the Bank's
investment portfolio, which includes available for sale securities carried at
fair value and held to maturity, at the dates indicated:

<TABLE>
<CAPTION>
                                                                    AT DECEMBER 31,
                                      ---------------------------------------------------------------------------
                                               2000                       2001                      2002
                                      ----------------------   ------------------------   -----------------------
                                      AMORTIZED      FAIR       AMORTIZED       FAIR       AMORTIZED      FAIR
                                        COST         VALUE         COST         VALUE        COST         VALUE
                                      ---------    ---------   -----------    ---------   ----------    ---------
                                                                    (IN THOUSANDS)
<S>                                   <C>          <C>         <C>            <C>         <C>           <C>
Investments:
   U.S. Government (including
    federal agencies) available
    for sale and held to maturity...  $   5,996    $   5,901   $     2,000    $   2,013   $        -    $       -
   Mutual Funds available for sale..      1,328        1,326         1,398        1,397        1,442        1,442
   Equity securities available for
    sale............................          7          214             7          265            7          327
   FHLB-NY stock....................      3,496        3,496         3,796        3,796        4,403        4,403
   Subordinated Notes...............      1,000          985         3,000        3,005        7,095        7,461
   Trust originated preferred
    security........................          -            -           500          503          500          525
   Net unrealized gain on
    available for sale securities...        205            -           260            -          346            -
                                      ---------    ---------   -----------    ---------   ----------    ---------
     Total investment securities....  $  12,032    $  11,922   $    10,961    $  10,979   $   13,793    $  14,158
                                      =========    =========   ===========    =========   ==========    =========
Other interest-earning assets:
   Interest bearing deposits........  $   1,700    $   1,700   $    17,872    $  17,872   $   17,685    $  17,685
                                      =========    =========   ===========    =========   ==========    =========
     Total investment portfolio.....  $  13,732    $  13,622   $    28,833    $  28,851   $   31,478    $  31,843
                                      =========    =========   ===========    =========   ==========    =========
</TABLE>

The Bank has no investments with any one issuer which exceed 10% of
stockholders' equity.

SOURCES OF FUNDS

General. Deposits are the primary source of the Bank's funds for use in lending
and for other general business purposes. In addition to deposits, the Bank
obtains funds from advances from the FHLB-NY and other borrowings.

Deposits. Pamrapo offers a variety of deposit accounts having a wide range of
interest rates and terms. The Bank's deposits consist of regular savings,
non-interest bearing demand, NOW and Super NOW, money market and certificate
accounts. Pamrapo's deposits are obtained primarily from the Hudson County area.
Pamrapo had acquired brokered deposits totaling $99,000 at December 31, 2002, as
compared to $184,000 at December 31, 2001. The Bank relies primarily on customer
service and long-standing relationships with customers to attract and retain
deposits.

                                       17

<PAGE>

Deposits increased by $28.9 million or 6.9% from $416.6 million at December 31,
2001 to $445.5 million at December 31, 2002.

During the month of September 2002, the Bank sold deposits of $21.8 million,
furniture, fixtures and leasehold improvements of $221,000 and account loans of
$148,000 at its two Brick, New Jersey, branch offices to another financial
institution. As a result of the sale, the Bank recognized a net gain of
$479,000.

The flow of deposits is influenced significantly by general economic conditions,
changes in the money market and prevailing interest rates and competition.

                                       18

<PAGE>

Deposit Portfolio. The following table sets forth the distribution and weighted
average nominal interest rate of the Bank's deposit accounts at the dates
indicated:

<TABLE>
<CAPTION>
                                                                         AT DECEMBER 31,
                                -------------------------------------------------------------------------------------------------
                                             2000                             2001                             2002
                                ------------------------------   ------------------------------   -------------------------------
                                                      WEIGHTED                         WEIGHTED                         WEIGHTED
                                             % OF      AVERAGE                % OF      AVERAGE                % OF      AVERAGE
                                            TOTAL      NOMINAL               TOTAL      NOMINAL               TOTAL      NOMINAL
                                 AMOUNT    DEPOSITS     RATE      AMOUNT    DEPOSITS     RATE      AMOUNT    DEPOSITS     RATE
                               ---------   --------   --------  ---------   --------   -------   ---------   --------   ---------
                                                                     (DOLLARS IN THOUSANDS)
<S>                             <C>         <C>         <C>      <C>         <C>         <C>      <C>         <C>         <C>
Passbook and club
  Accounts...................  $ 114,433     30.16%     2.54%   $ 137,113     32.92%     2.33%   $ 155,431     34.89%     2.34%
0.00% demand.................     23,808      6.28      0.00       26,248      6.30      0.00       26,314      5.91      0.00
NOW                               26,476      6.98      2.00       32,176      7.72      1.50       32,813      7.37      1.26
Super NOW....................        118       .03      2.00          158       .04      1.50          387       .09      1.26
Money market demand..........     25,682      6.77      3.00       28,293      6.79      2.22       32,594      7.31      2.11
                               ---------    ------              ---------    ------              ---------    ------
    Total passbook, club,
    NOW, and money
    market accounts..........    190,517     50.22      2.21      223,988     53.77      1.92      247,539     55.57      1.92
                               ---------    ------              ---------    ------              ---------    ------

Certificate accounts:
  91-day money market........      2,608       .69      5.43        1,582       .38      2.56        2,730       .61      2.14
  26-week money market.......     27,633      7.28      5.66       29,538      7.09      3.43       26,300      5.90      2.55
  12- to 30-month money
   market....................    121,516     32.03      6.03      120,569     28.94      4.35      124,535     27.95      3.07

  30- to 48-month money
   market....................      8,849      2.33      5.68       11,735      2.82      5.26       13,054      2.93      4.77
  IRA and KEOGH..............     27,606      7.27      5.21       28,991      6.96      4.63       31,250      7.02      3.55
  Negotiated rate............        681       .18      6.39          184       .04      3.80           99       .02      2.25
                               ---------    ------              ---------    ------              ---------    ------

    Total certificates.......    188,893     49.78      5.83      192,599     46.23      4.29      197,968     44.43      3.18
                               ---------    ------              ---------    ------              ---------    ------

    Total deposits...........  $ 379,410    100.00%     4.01%   $ 416,587    100.00%     3.02%   $ 445,507    100.00%     2.48%
                               =========    ======              ========    =======              =========    ======S
</TABLE>

                                       19

<PAGE>

The following table sets forth the deposit activity of the Bank for the periods
indicated:

                                           YEAR ENDED DECEMBER 31,
                                    ---------------------------------
                                         2000       2001       2002
                                    ---------------------------------
                                               (IN THOUSANDS)

Deposits net of withdrawals.........   $  3,724   $ 22,268   $ 17,438
Interest credited...................     13,761     14,909     11,483
                                       --------   --------   --------

Net increase in deposits............   $ 17,485   $ 37,177   $ 28,921
                                       ========   ========   ========

The following table sets forth, by various rate categories, the amount of
certificate accounts outstanding as of the dates indicated and the periods to
maturity of the certificate accounts outstanding at December 31, 2002.

<TABLE>
<CAPTION>
                                                                        AT DECEMBER 31, 2002,
                                     AT DECEMBER 31,                         MATURING IN
                          ---------------------------------   ---------------------------------------------
                                                               ONE YEAR     TWO       THREE    GREATER THAN
                             2000        2001        2002      OR LESS     YEARS      YEARS     THREE YEARS
                          ---------   ---------   ---------   ---------   --------   -------   ------------
                                                            (IN THOUSANDS)
   <S>                    <C>         <C>         <C>         <C>         <C>        <C>         <C>
   2.99% or less.......   $     100   $  12,798   $  74,055   $  66,172   $  7,873   $    10     $     -

   3.00% to 4.99%......      15,571     128,536     115,030      94,398     14,566     3,316       2,750

   5.00% to 5.99%......      88,157      39,479       6,049       2,480      1,578     1,144         847

   6.00% to 6.99%......      84,538      11,757       2,627         930      1,663         -          34

   7.00% to 7.99%......         527          29         207         207          -         -           -
                          ---------   ---------   ---------   ---------   --------   -------     -------

     Total.............   $ 188,893   $ 192,599   $ 197,968   $ 164,187   $ 25,680   $ 4,470     $ 3,631
                          =========   =========   =========   =========   ========   =======     =======
</TABLE>

At December 31, 2002, the Bank had outstanding $57.8 million in certificate
accounts in amounts of $100,000 or more maturing as follows:

                                                                AMOUNT
                                                                ------
                                                            (IN THOUSANDS)

Three months or less.....................................      $ 11,880
Over three through six months............................        12,107
Over six through twelve months...........................        24,510
Over twelve months.......................................         9,346
                                                               --------

     Total...............................................      $ 57,843
                                                               ========

Borrowings. Although deposits are the Bank's primary source of funds, the Bank
utilizes borrowings when they are a less costly source of funds or can be
invested at a positive rate of return.

Pamrapo obtains advances from the FHLB-NY upon the security of its capital stock
of the FHLB-NY and a blanket assignment of the Bank's unpledged qualifying
mortgage loans, mortgage-backed securities and investment securities. Such
advances are made pursuant to several different credit programs, each of which
has its own interest rate and range of maturities. As of December 31, 2002,
outstanding advances from the FHLB-NY amounted to $84.3 million.

                                       20

<PAGE>

The following table sets forth certain information regarding FHLB-NY advances,
all of which are at fixed rates, at the dates indicated:

<TABLE>
<CAPTION>
                                                                AT DECEMBER 31,
                                                        ------------------------------
                                                          2000       2001       2002
                                                        --------   --------   --------
                                                                (IN THOUSANDS)
     <S>                                                <C>        <C>        <C>
     Maturity
     --------------
     5.10% due 2001..................................   $    243   $      -   $      -
     6.51% due 2002..................................      5,000      5,000          -
     4.00% due 2002..................................          -      3,000          -
     5.36% due 2003..................................     15,340     15,340     15,340
     7.15% due 2003..................................      5,000      5,000      5,000
     4.65% due 2003..................................          -      7,000      7,000
     4.04% due 2004..................................          -      5,000      5,000
     3.10% due 2004..................................          -          -      7,000
     4.54% due 2005..................................          -      5,000      5,000
     3.64% due 2005..................................          -          -      8,000
     4.84% due 2006..................................          -      5,000      5,000
     4.20% due 2006..................................          -          -      7,000
     3.50% due 2007..................................          -          -      3,000
     4.85% due 2008..................................          -      7,000      7,000
     6.19% due 2010..................................     10,000     10,000     10,000
                                                        --------   --------   --------

         Total advances from the FHLB-NY.............   $ 35,583   $ 67,340   $ 84,340
                                                        ========   ========   ========
</TABLE>

The Bank has a mortgage loan of $325,000 in connection with the purchase of
premises. The mortgage loan carries an interest rate of 8% and is amortized over
a 12 year term. The unpaid mortgage loan balance at December 31, 2002 amounted
to $149,000.

COMPETITION

Pamrapo has substantial competition for both loans and deposits. The New York
City metropolitan area has a high density of financial institutions, many of
which are significantly larger and have substantially greater financial
resources than the Bank, and all of which are competitors of the Bank to varying
degrees. The Bank faces significant competition both in making mortgage loans
and in attracting deposits. The Bank's competition for loans comes principally
from savings and loan associations, savings banks, mortgage banking companies,
insurance companies, commercial banks and other institutional lenders. Its most
direct competition for deposits has historically come from savings and loan
associations, savings banks, commercial banks, credit unions and other financial
institutions. The Bank faces additional competition for deposits from short-term
money market funds and other corporate and government securities funds. The Bank
faces increased competition among financial institutions for deposits.
Competition also may increase as a result of the continuing reduction in the
effective restrictions on the interstate operations of financial institutions
and legislation authorizing the acquisition of thrifts by Banks.

The Bank competes for loans principally through the interest rates and loan fees
it charges and the efficiency and quality of services it provides borrowers and
real estate brokers. It competes for deposits through pricing, service and by
offering a variety of deposit accounts. New powers for thrift institutions
provided by New Jersey and federal legislation enacted in recent years have
resulted in increased competition between savings banks and other financial
institutions for both deposits and loans. Management believes that
implementation of new powers set forth in such recent legislation is expected to
intensify this competition.

                                       21

<PAGE>

SUBSIDIARIES

Pamrapo is generally permitted under New Jersey law and the regulations of the
Commissioner of the New Jersey Department of Banking and Insurance (the
"Commissioner") to invest an amount equal to 3% of its assets in subsidiary
service corporations. As of December 31, 2002, Pamrapo had $2.2 million, or 0.4%
of its assets invested in Pamrapo Service Corporation (the "Corporation"), a
wholly owned subsidiary of the Bank. In the past, the Corporation has entered
into real estate joint ventures for the principal purpose of land acquisition
and development. However, the Corporation has disposed of all such real estate
joint ventures. Currently, the Corporation's only investments are in bank
premises and real estate held for investment.

Under OTS regulation, investments in and loans to subsidiaries not engaged in
activities permissible to national banks, such as the real estate investment
activities previously entered into by the Bank, generally are required to be
deducted from capital. Although the Bank will continue to consider joint venture
opportunities, it will do so with the effects of the OTS regulations in mind.
The Bank currently has no plans to enter into any joint ventures.

YIELDS EARNED AND RATES PAID

The Bank's earnings depend primarily on its net interest income. Net interest
income is affected by (i) the volume of interest-earning assets and
interest-bearing liabilities, (ii) rates of interest earned on interest-earning
assets and rates paid on interest-bearing liabilities and (iii) the difference
("interest rate spread") between rates of interest earned on interest-earning
assets and rates paid on interest-bearing liabilities. When interest-earning
assets approximate or exceed interest-bearing liabilities, any positive interest
rate spread will generate net interest income.

A large portion of the Bank's real estate loans are long-term, fixed-rate loans.
Accordingly, the average yield recognized by the Bank on its total loan
portfolio changes slowly and generally does not keep pace with changes in
interest rates on deposit accounts and borrowings. At December 31, 2002,
approximately 97.7% of the Bank's gross mortgage loan portfolio, excluding
mortgage-backed securities, consisted of fixed-rate mortgage loans with original
terms consisting primarily of 15 to 30 years. Accordingly, when interest rates
rise, the Bank's yield on its loan portfolio increases at a slower pace than the
rate by which its cost of funds increases, which may adversely impact the Bank's
interest rate spread.

                                       22

<PAGE>

The following tables set forth for the periods indicated information regarding
the average balances of interest-earning assets and interest-bearing
liabilities, the dollar amount of interest income earned on such assets and the
resultant yields, the dollar amount of interest expense paid on such liabilities
and the resultant costs. The tables also reflect the interest rate spread for
such periods, the net yield on interest-earning assets (i.e., net interest
income as a percentage of average interest-earning assets) and the ratio of
average interest-earning assets to average interest-bearing liabilities. Average
balances are based on month-end amounts.

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------------------------------
                                                                        2000                             2001
                                                          ------------------------------   ------------------------------
                                                           AVERAGE                YIELD/    AVERAGE                YIELD/
                                                           BALANCE    INTEREST     COST     BALANCE    INTEREST     COST
                                                          ---------   ---------   ------   ---------   ---------   ------
                                                                              (DOLLARS IN THOUSANDS)
<S>                                                       <C>         <C>          <C>     <C>         <C>          <C>
Interest-earning assets:
  Loans (1)............................................   $ 284,591   $ 23,540     8.27%   $ 340,340   $ 27,480     8.07%
  Mortgage-backed securities...........................     125,750      8,114     6.45      121,596      7,925     6.52
  Investments..........................................       9,387        729     7.77        8,840        597     6.75
  Other interest-earning assets........................      13,190        780     5.91       11,841        623     5.26
                                                          ---------   --------             ---------   --------

    Total interest-earning assets......................     432,918     33,163     7.66      482,617     36,625     7.59
                                                          ---------   --------             ---------   --------

Non-interest-earning assets............................      21,279                           23,164
                                                          ---------                        ---------

    Total assets (1)...................................   $ 454,197                        $ 505,781
                                                          =========                        =========

Interest-bearing liabilities:
  Passbook and club account............................   $ 113,381      2,629     2.32    $ 128,648      3,281     2.55
  NOW and money market accounts........................      51,791      1,225     2.37       57,742      1,148     1.99
  Certificates of Deposits.............................     180,892      9,907     5.48      195,106     10,481     5.37
  Advances and other borrowings........................      29,578      1,737     5.87       45,548      2,635     5.79
                                                          ---------   --------             ---------   --------

    Total interest-bearing liabilities.................     375,642     15,498     4.13      427,044     17,545     4.11
                                                          ---------   --------             ---------   --------

Non-interest-bearing liabilities:
  Non-interest-bearing demand accounts.................      23,519                           21,604
  Other................................................       8,263                           10,376
                                                          ---------                        ---------

    Total non-interest-bearing
     liabilities.......................................      31,782                           31,980
                                                          ---------                        ---------

    Total liabilities..................................     407,424                          459,024
                                                                                           ---------

Stockholders' equity...................................      46,773                           46,757
                                                          ---------                        ---------
    Total liabilities and stockholders' equity.........
                                                          $ 454,197                        $ 505,781
                                                          =========                        =========

Net interest income/interest rate spread...............               $ 17,665     3.53%               $ 19,080     3.48%
                                                                      ========     ====                ========     ====

Net interest-earning assets/net yield on
  Interest- earning assets.............................   $  57,276                 4.08%   $  55,573                3.95%
                                                          =========                 ====    =========                ====

Ratio of average interest-earning assets to
  Average interest-bearing liabilities.................                   1.15x                            1.13x
                                                                          ====                             ====
</TABLE>

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                          ------------------------------
                                                                       2002
                                                          ------------------------------
                                                           AVERAGE                YIELD/
                                                           BALANCE    INTEREST     COST
                                                          ---------   ---------   ------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                       <C>         <C>          <C>
Interest-earning assets:
  Loans (1)............................................   $ 384,671   $ 29,267     7.61%
  Mortgage-backed securities...........................     127,674      7,765     6.08
  Investments..........................................       7,163        518     7.23
  Other interest-earning assets........................      25,534        508     1.99
                                                          ---------   --------

    Total interest-earning assets......................     545,042     38,058     6.98
                                                          ---------   --------

Non-interest-earning assets............................      18,397
                                                          ---------

    Total assets (1)...................................   $ 563,439
                                                          =========

Interest-bearing liabilities:
  Passbook and club account............................   $ 145,051      3,428     2.36
  NOW and money market accounts........................      62,683      1,081     1.72
  Certificates of Deposits.............................     193,654      6,974     3.60
  Advances and other borrowings........................      75,525      3,807     5.04
                                                          ---------   --------

    Total interest-bearing liabilities.................     476,913     15,290     3.21
                                                          ---------   --------

Non-interest-bearing liabilities:
  Non-interest-bearing demand accounts.................      27,363
  Other................................................      10,120
                                                          ---------

    Total non-interest-bearing
     liabilities.......................................      37,483
                                                          ---------

    Total liabilities..................................     514,396
                                                          ---------

Stockholders' equity...................................      49,043
                                                          ---------
    Total liabilities and stockholders' equity.........
                                                          $ 563,439
                                                          =========

Net interest income/interest rate spread...............               $ 22,768     3.77%
                                                                      ========     ====

Net interest-earning assets/net yield on
  Interest- earning assets.............................   $  68,129                4.18%
                                                          =========                ====

Ratio of average interest-earning assets to
  Average interest-bearing liabilities.................                   1.14x
                                                                          ====
</TABLE>

----------
(1) Non-accruing loans are part of the average balances of loans outstanding.

                                       23

<PAGE>

INTEREST RATE SENSITIVITY ANALYSIS

The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between the amount of interest-earning assets
maturing or repricing within a specific time period and the amount of
interest-bearing liabilities maturing or repricing within that time period. A
gap is considered positive when the amount of interest rate sensitive assets
exceeds the amount of interest rate sensitive liabilities. A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income while a
positive gap would tend to result in an increase in net interest income. During
a period of falling interest rates, a negative gap would tend to result in an
increase in net interest income while a positive gap would tend to adversely
affect net interest income.

The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at December 31, 2002, which are
expected to reprice or mature in each of the future time periods shown. Except
as stated below, the amount of assets and liabilities shown which reprice or
mature during a particular period were determined in accordance with the
contractual terms of the asset or liability. Loans and mortgage-backed
securities that have adjustable rates are shown as being due in the period
during which the interest rates are next subject to change. The Bank has assumed
that its passbook savings and club accounts which totaled $155.4 million at
December 31, 2002, are withdrawn at the following rates, 17.00%, 31.11%, 29.44%,
52.96%, 77.87% and 100.00% on the cumulative declining balance of such accounts
during the periods shown. The Bank has further assumed that its money market
accounts which totaled $32.6 million at December 31, 2002, are withdrawn at the
following rates, 79.00%, 52.39%, 52.39%, 84.36%, 97.62% and 100.00% on the
cumulative declining balance of such accounts during the periods shown.

Additionally, the Bank has assumed that its non-interest bearing demand, NOW and
Super NOW accounts which totaled $59.5 million at December 31, 2002, are
withdrawn at the following rates, 37.00%, 53.76%, 31.11%, 60.62%, 84.47% and
100.00% on the cumulative declining balance of such accounts during the periods
shown.

                                       24

<PAGE>

<TABLE>
<CAPTION>
                                                       MORE THAN    MORE THAN    MORE THAN    MORE THAN
                                           1 YEAR      1 YEAR TO   3 YEARS TO   5 YEARS TO   10 YEARS TO    MORE THAN
                                           OR LESS      3 YEARS      5 YEARS     10 YEARS      20 YEARS      20 YEARS     TOTAL
                                         ----------   ----------   ----------   ----------   -----------   ----------   ---------
                                                                              (IN THOUSANDS)
<S>                                      <C>          <C>          <C>          <C>          <C>           <C>          <C>
Interest-earning Assets:
  Loans...............................   $    8,836   $    3,827   $    7,618   $   36,456   $   175,918   $  161,411   $ 394,066
  Mortgage-backed securities (1)......          222          414          265       21,130       109,550       16,130     147,711
  Investments (1)(2)..................        1,449            -        1,000        6,095           500            -       9,044
  Other interest-earning assets (3)...        4,403            -            -            -             -            -       4,403
                                         ----------   ----------   ----------   ----------   -----------   ----------   ---------

    Total interest-earning assets.....       14,910        4,241        8,883       63,681       285,968      177,541     555,224
                                         ----------   ----------   ----------   ----------   -----------   ----------   ---------

Interest-bearing Liabilities:
  NOW and Super NOW
   accounts...........................       22,020       20,157        5,394        7,240         3,973          730      59,514
  Money market accounts...............       25,749        3,586        1,707        1,309           237            6      32,594
  Passbook and club accounts..........       26,423       40,134       26,164       33,211        22,970        6,528     155,430
  Certificate accounts................      164,187       30,150        3,631            -             -            -     197,968
  Advances and other borrowings.......       27,340       25,000       15,000       17,000           149            -      84,489
                                         ----------   ----------   ----------   ----------   -----------   ----------   ---------

  Total interest-bearing
   liabilities........................      265,719      119,027       51,896       58,760        27,329        7,264     529,995
                                         ----------   ----------   ----------   ----------   -----------   ----------   ---------

Interest sensitivity gap per period...   $ (250,809)  $ (114,786)  $  (43,013)  $    4,921   $   258,639   $  170,277   $  25,229
                                         ==========   ==========   ==========   ==========   ===========   ==========   =========

Cumulative interest sensitivity gap...   $ (250,809)  $ (365,595)  $ (408,608)  $ (403,687)  $  (145,048)  $   25,229
                                         ==========   ==========   ==========   ==========   ===========   ==========

Cumulative gap as a percent of
 total assets.........................       (42.61%)     (62.11%)     (69.41%)     (68.58%)      (24.64%)      (4.29%)
                                         ==========   ==========   ==========   ==========   ===========   ==========

Cumulative interest-sensitive assets
 as a percent of interest-sensitive
 liabilities..........................        (5.61%)      (4.98%)      (6.42%)     (18.51%)      (72.25%)     (104.76%)
                                         ==========   ==========   ==========   ==========   ===========   ==========
</TABLE>

----------

(1) Includes available for sale securities.

(2) Includes $95,000 premium.

(3) Includes FHLB-NY stock which has no stated maturity.

RATE/VOLUME ANALYSIS

Changes in net interest income are attributable to three factors: (i) a change
in volume or amount of an interest-earning asset or interest-bearing liability,
(ii) a change in interest rates or (iii) a change caused by a combination of
changes in volume and interest rate. The table below sets forth certain
information regarding changes in interest income and interest expense of the
Bank for the periods indicated, reflecting the extent to which such changes are
attributable to changes in volume and changes in rate. The amount attributable
to a change in volume or amount is calculated by multiplying the average
interest rate for the prior period by the increase (decrease) in the average
balance of the related asset or liability. The amount attributable to a change
in rate is calculated by multiplying the increase (decrease) in the average
interest rate from the prior period by the average balance of the related asset
or liability for the prior period. The rate/volume change represents a

                                       25

<PAGE>

change in rate multiplied by a change in volume and is allocated proportionately
to volume and rate changes.

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                          ---------------------------------------------------------
                                                 2001 V. 2000                  2002 V. 2001
                                          --------------------------   ----------------------------
                                              INCREASE (DECREASE)           INCREASE (DECREASE)
                                                    DUE TO                        DUE TO
                                          --------------------------   ----------------------------
                                           VOLUME    RATE      NET      VOLUME     RATE       NET
                                          -------   ------   -------   -------   --------   -------
                                                              (IN THOUSANDS)
<S>                                       <C>       <C>      <C>       <C>       <C>        <C>
Interest income:
  Loans................................   $ 4,621   $ (681)  $ 3,940   $ 3,557   $ (1,769)  $ 1,787
  Mortgaged-backed securities..........      (274)      85      (189)      401       (562)     (160)
  Investments..........................       (42)     (90)     (132)     (113)        34       (79)
  Other interest-earning assets........       (80)     (77)     (157)      720       (835)     (115)
                                          -------   ------   --------  -------   --------   -------

      Total interest income............     4,225     (763)    3,462     4,565     (3,132)    1,433
                                          -------   ------   -------   -------   --------   -------

Interest expense:
  Passbook and club accounts...........       356      296       652       422       (276)      147
  NOW and money market accounts........       142     (219)      (77)      102       (169)      (67)
  Certificates of deposit..............       789     (215)      574       (79)    (3,428)   (3,507)
  Advance and other borrowings.........       934      (36)      898     1,739       (566)    1,172
                                          -------   ------   -------   -------   --------   -------

      Total interest expense...........     2,221     (174)    2,047     2,184     (4,439)   (2,255)
                                          -------   ------   -------   -------   --------   -------

Net change in net interest..............  $ 2,004   $ (589)  $ 1,415   $ 2,381   $  1,307   $ 3,688
                                          =======   ======   =======   =======   ========   =======
</TABLE>

                           REGULATION AND SUPERVISION

GENERAL

The Company, as a savings and loan holding company, is required to file certain
reports with, and otherwise comply with the rules and regulations of the Office
of Thrift Supervision ("OTS") under the Home Owners' Loan Act, as amended (the
"HOLA"). In addition, the activities of savings institutions, such as the Bank,
are governed by the HOLA and the Federal Deposit Insurance Act ("FDI Act").

The Bank is subject to extensive regulation, examination and supervision by the
OTS, as its primary federal regulator, and the Federal Deposit Insurance
Corporation ("FDIC"), as the deposit insurer. The Bank is a member of the
Federal Home Loan Bank ("FHLB") System and its deposit accounts are insured up
to applicable limits by the Savings Association Insurance Fund ("SAIF") managed
by the FDIC. The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition in addition to obtaining regulatory approvals
prior to entering into certain transactions such as mergers with, or
acquisitions of, other savings institutions. The OTS and/or the FDIC conduct
periodic examinations to test the Bank's safety and soundness and compliance
with various regulatory requirements. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the insurance fund and
depositors. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such regulatory

                                       26

<PAGE>

requirements and policies, whether by the OTS, the FDIC or the Congress, could
have a material adverse impact on the Company, the Bank and their operations.
Certain of the regulatory requirements applicable to the Bank and to the Company
are referred to below or elsewhere herein. The description of statutory
provisions and regulations applicable to savings institutions and their holding
companies set forth in this Form 10-K does not purport to be a complete
description of such statutes and regulations and their effects on the Bank and
the Company.

HOLDING COMPANY REGULATION

The Company is a nondiversified unitary savings and loan holding company within
the meaning of the HOLA. As a unitary savings and loan holding company, the
Company generally is not restricted under existing laws as to the types of
business activities in which it may engage, provided that the Bank continues to
be a qualified thrift lender ("QTL"). Upon any non-supervisory acquisition by
the Company of another savings institution or savings bank that meets the QTL
test and is deemed to be a savings institution by the OTS, the Company would
become a multiple savings and loan holding company (if the acquired institution
is held as a separate subsidiary) and would be subject to extensive limitations
on the types of business activities in which it could engage. The HOLA limits
the activities of a multiple savings and loan holding company and its
non-insured institution subsidiaries primarily to activities permissible for
bank holding companies under Section 4(c)(8) of the Bank Holding Company Act
("BHC Act"), subject to the prior approval of the OTS, and certain activities
authorized by OTS regulation, and no multiple savings and loan holding company
may acquire more than 5% the voting stock of a company engaged in impermissible
activities.

The HOLA prohibits a savings and loan holding company, directly or indirectly,
or through one or more subsidiaries, from acquiring more than 5% of the voting
stock of another savings institution or holding company thereof, without prior
written approval of the OTS or acquiring or retaining control of a depository
institution that is not insured by the FDIC. In evaluating applications by
holding companies to acquire savings institutions, the OTS must consider the
financial and managerial resources and future prospects of the company and
institution involved, the effect of the acquisition on the risk to the insurance
funds, the convenience and needs of the community and competitive factors.

The OTS is prohibited from approving any acquisition that would result in a
multiple savings and loan holding company controlling savings institutions in
more than one state, subject to two exceptions: (i) the approval of interstate
supervisory acquisitions by savings and loan holding companies and (ii) the
acquisition of a savings institution in another state if the laws of the state
of the target savings institution specifically permit such acquisitions. The
states vary in the extent to which they permit interstate savings and loan
holding company acquisitions.

Although savings and loan holding companies are not subject to specific capital
requirements or specific restrictions on the payment of dividends or other
capital distributions, HOLA does prescribe such restrictions on subsidiary
savings institutions as described below. The Bank must notify the OTS within 30
days before declaring any dividend to the Company. In addition, the financial
impact of a holding company on its subsidiary institution is a matter that is
evaluated by the OTS, and the agency has authority to order cessation of
activities or divestiture of subsidiaries deemed to pose a threat to the safety
and soundness of the subsidiary institution.

                                       27

<PAGE>

FEDERAL SAVINGS INSTITUTION REGULATION

Capital Requirements. The OTS capital regulations require savings institutions
to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4%
leverage (core) capital ratio and an 8% risk-based capital ratio. Core capital
is defined as common stockholders' equity (including retained earnings), certain
noncumulative perpetual preferred stock and related surplus, minority interests
in equity accounts of consolidated subsidiaries less intangibles other than
certain mortgage servicing rights and credit card relationships. The OTS
regulations require that, in meeting the tangible, leverage (core) and
risk-based capital standards, institutions must generally deduct investments in
and loans to subsidiaries engaged in activities that are not permissible for a
national bank.

The risk-based capital standard for savings institutions requires the
maintenance of total capital (which is defined as core capital and supplementary
capital) to risk-weighted assets of 8%. In determining the amount of
risk-weighted assets, all assets, including certain off-balance sheet assets,
are multiplied by a risk-weight factor of 0% to 100%, as assigned by the OTS
capital regulation based on the risks the OTS believes are inherent in the type
of asset. The components of core capital are equivalent to those discussed
earlier under the 4% leverage standard. The components of supplementary capital
currently include cumulative preferred stock, long-term perpetual preferred
stock, mandatory convertible securities, subordinated debt and intermediate
preferred stock and, within specified limits, the allowance for loan and lease
losses. Overall, the amount of supplementary capital included as part of total
capital cannot exceed 100% of core capital.

The OTS regulatory capital requirements also incorporate an interest rate risk
component. Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating their
risk-based capital requirements. A savings institution's interest rate risk is
measured by the decline in the net portfolio value of its assets (i.e., the
difference between incoming and outgoing discounted cash flows from assets,
liabilities and off-balance sheet contracts) that would result from a
hypothetical 200 basis point increase or decrease in market interest rates
divided by the estimated economic value of the institution's assets, as
calculated in accordance with guidelines set forth by the OTS. A savings
institution whose measured interest rate risk exposure exceeds 2% must deduct an
amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
institution's total assets. That dollar amount is deducted from an institution's
total capital in calculating compliance with its risk-based capital requirement.
Under the rule, there is a two quarter lag between the reporting date of an
institution's financial data and the effective date for the new capital
requirement based on that data. A savings institution with assets of less than
$300 million and risk-based capital ratios in excess of 12% is not subject to
the interest rate risk component, unless the OTS determines otherwise. The
Director of the OTS may waive or defer a savings institution's interest rate
risk component on a case-by-case basis. For the present time, the OTS has
deferred implementation of the interest rate risk component. At December 31,
2002, the Bank met each of its capital requirements.

                                       28

<PAGE>

The following table presents the Bank's capital position at December 31, 2002.

<TABLE>
<CAPTION>
                    Actual Amount   Required Amount   Excess Amount   Actual Percent   Required Percent
                    -------------   ---------------   -------------   --------------   ----------------
                                                 (DOLLARS IN THOUSANDS)
<S>                 <C>             <C>               <C>                      <C>                 <C>
Tangible            $      41,474   $         8,790   $      32,684             7.08%              1.50%
Core (Leverage)            41,474            23,440          18,034             7.08%              4.00%
Risk-based                 43,991            24,518          19,473            14.35%              8.00%
</TABLE>

Prompt Corrective Regulatory Action. Under the OTS prompt corrective action
regulations, the OTS is required to take certain supervisory actions against
undercapitalized institutions, the severity of which depends upon the
institution's degree of undercapitalization. Generally, a savings institution
that has a total risk-based capital of less than 8% or a leverage ratio or a
Tier 1 capital ratio that is less than 4% is considered to be
"undercapitalized." A savings institution that has a total risk-based capital
ratio less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio
that is less than 3% is considered to be "significantly undercapitalized" and a
savings institution that has a tangible capital to assets ratio equal to or less
than 2% is deemed to be "critically undercapitalized." Subject to a narrow
exception, the banking regulator is required to appoint a receiver or
conservator for an institution that is "critically undercapitalized." The
regulation also provides that a capital restoration plan must be filed with the
OTS within 45 days of the date a savings institution receives notice that it is
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Compliance with the plan must be guaranteed by any parent
holding company. In addition, numerous mandatory supervisory actions become
immediately applicable to the institution depending upon its category,
including, but not limited to, increased monitoring by regulators and
restrictions on growth, capital distributions and expansion. The OTS could also
take any one of a number of discretionary supervisory actions, including the
issuance of a capital directive and the replacement of senior executive officers
and directors.

Insurance of Deposit Accounts. Deposits of the Bank are presently insured by
SAIF. The FDIC maintains a risk-based assessment system by which institutions
are assigned to one of three categories based on their capitalization and one of
three subcategories based on examination ratings and other supervisory
information. An institution's assessment rate depends upon the categories to
which it is assigned. Assessment rates for SAIF member institutions are
determined semiannually by the FDIC and currently range from zero basis points
for the healthiest institutions to 27 basis points for the riskiest.

In addition to the assessment for deposit insurance, institutions are required
to pay on bonds issued in the late 1980s by the Financing Corporation ("FICO")
to recapitalize the predecessor to the SAIF. During 2002, FICO payments for SAIF
members and Bank Insurance Fund ("BIF" - the deposit insurance fund that covers
most commercial bank deposits) members approximated 1 basis point. The BIF and
SAIF have equal sharing of FICO payments between the members of both insurance
funds.

The Bank's assessment rate for the year ended December 31, 2002 was 0 basis
points and no premiums were paid for this period. Payments on the FICO bonds
amounted to $73,000. A significant increase in SAIF insurance premiums would
likely have an adverse effect on the operating expenses and results of
operations of the Bank.

                                       29

<PAGE>

Insurance of deposits may be terminated by the FDIC upon a finding that the
institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC or the OTS. The
management of the Bank does not know of any practice, condition or violation
that might lead to termination of deposit insurance.

Thrift Rechartering Legislation. Various proposals to eliminate the federal
thrift charter, create a uniform financial institutions charter and abolish the
OTS have been introduced in past sessions of Congress. The Bank is unable to
predict whether such legislation would be enacted or the extent to which the
legislation would restrict or disrupt its operations.

Loans to One Borrower. Under the HOLA, savings institutions are generally
subject to the limits on loans to one borrower applicable to national banks.
Generally, savings institutions may not make a loan or extend credit to a single
or related group of borrowers in excess of 15% of its unimpaired capital and
surplus. An additional amount may be lent, equal to 10% of unimpaired capital
and surplus, if such loan is fully secured by readily-marketable collateral,
which is defined to include certain financial instruments and bullion. At
December 31, 2002, the Bank's limit on loans to one borrower was $6.6 million.
At December 31, 2002, the Bank's largest aggregate outstanding balance of loans
to one borrower was $4.2 million.

QTL Test. The HOLA requires savings institutions to meet a QTL test. Under the
QTL test, a savings association is required to maintain at least 65% of its
"portfolio assets" (total assets less: (i) specified liquid assets up to 20% of
total assets; (ii) intangibles, including goodwill; and (iii) the value of
property used to conduct business) in certain "qualified thrift investments"
(primarily residential mortgages and related investments, including certain
mortgage-backed and related securities) in at least 9 months out of each 12
month period. A savings association that fails the QTL test must either convert
to a bank charter or operate under certain restrictions. As of December 31,
2002, the Bank maintained 90.52% of its portfolio assets in qualified thrift
investments and, therefore, met the QTL test.

Limitation on Capital Distributions. OTS regulations impose limitations upon all
capital distributions by savings institutions, such as cash dividends, payments
to repurchase or otherwise acquire its shares, payments to shareholders of
another institution in a cash-out merger and other distributions charged against
capital. The rule establishes three tiers of institutions, which are based
primarily on an institution's capital level. An institution that exceeds all
fully phased-in capital requirements before and after a proposed capital
distribution ("Tier 1 Bank") and has not been advised by the OTS that it is in
need of more than normal supervision, could, after prior notice but without
obtaining approval of the OTS, make capital distributions during a calendar year
equal to the greater of (i) 100% of its net earnings to date during the calendar
year plus the amount that would reduce by one-half its "surplus capital ratio"
(the excess capital over its fully phased-in capital requirements) at the
beginning of the calendar year or (ii) 75% of its net earnings for the previous
four quarters. Any additional capital distributions would require prior
regulatory approval. In the event the Bank's capital fell below its regulatory
requirements or the OTS notified it that it was in need of more than normal
supervision, the Bank's ability to make capital distributions could be
restricted. In addition, the OTS could prohibit a proposed capital distribution
by any institution, which would otherwise be permitted by the regulation, if the
OTS determines that such distribution would constitute an unsafe or unsound
practice. At December 31, 2002, the Bank was classified as a Tier 1 Bank.

                                       30

<PAGE>

Under OTS capital distribution regulations, an application to and the prior
approval of the OTS is required before an institution makes a capital
distribution if (1) the institution does not meet certain criteria for
"expedited treatment" for applications under the regulations, (2) the total
capital distributions by the institution for the calendar year exceed net income
for that year plus the amount of retained net income for the preceding two
years, (3) the institution would be undercapitalized following the distribution
or (4) the distribution would otherwise be contrary to a statute, regulation or
agreement with the OTS. If an application is not required, the institution may
still need to give advance notice to the OTS of the capital distribution.

Liquidity. Until recently, the Bank is required to maintain an average daily
balance of specified liquid assets equal to a monthly average of not less than a
specified percentage of its net withdrawable deposit accounts plus short-term
borrowings. Effective March 15, 2001, the liquidity requirement to which the
Bank is held under HOLA was amended to eliminate the specific percentage
requirement, but retained the requirement that an institution "maintain
sufficient liquidity to ensure its safe and sound operation." The Bank's average
liquidity ratio for the month of December 2002 calculated using the ratio
calculation of HOLA prior to March 15, 2001 was 10.92%, and in the opinion of
management meets current requirements for Bank's safe and sound operation. The
Bank has never been subject to monetary penalties for failure to meet its
liquidity requirements.

Assessments. Savings institutions are required to pay assessments to the OTS to
fund the agency's operations. The general assessments, paid on a semi-annual
basis, are based upon the savings institution's total assets, including
consolidated subsidiaries, as reported in the Bank's latest quarterly thrift
financial report. The assessments paid by the Bank for the fiscal year ended
December 31, 2002 totaled $115,000.

Branching. OTS regulations permit nationwide branching by federally chartered
savings institutions to the extent allowed by federal statute. This permits
federal savings institutions to establish interstate networks and to
geographically diversify their loan portfolios and lines of business. The OTS
authority preempts any state law purporting to regulate branching by federal
savings institutions.

Transactions with Related Parties. The Bank's authority to engage in
transactions with related parties or "affiliates" (i.e., any company that
controls or is under common control with an institution, including the Company
and its non-savings institution subsidiaries) is limited by Sections 23A and 23B
of the Federal Reserve Act ("FRA"). Section 23A restricts the aggregate amount
of covered transactions with any individual affiliate to 10% of the capital and
surplus of the savings institution. The aggregate amount of covered transactions
with all affiliates is limited to 20% of the savings institution's capital and
surplus. Certain transactions with affiliates are required to be secured by
collateral in an amount and of a type described in Section 23A and the purchase
of low quality assets from affiliates is generally prohibited. Section 23B
generally requires that certain transactions with affiliates, including loans
and asset purchases, be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the
institution as those prevailing at the time for comparable transactions with
non-affiliated companies.

Enforcement. Under the FDI Act, the OTS has primary enforcement responsibility
over savings institutions and has the authority to bring actions against the
institution and all institution-affiliated parties, including stockholders, and
any attorneys, appraisers and accountants who knowingly or recklessly
participate in wrongful action likely to have an adverse effect on an insured
institution.

                                       31

<PAGE>

Formal enforcement action may range from the issuance of a capital directive or
cease and desist order to removal of officers and/or directors to institution of
receivership, conservatorship or termination of deposit insurance. Civil
penalties cover a wide range of violations and can amount to $25,000 per day, or
even $1 million per day in especially egregious cases. Under the FDI Act, the
FDIC has the authority to recommend to the Director of the OTS enforcement
action to be taken with respect to a particular savings institution. If action
is not taken by the Director, the FDIC has authority to take such action under
certain circumstances. Federal law also establishes criminal penalties for
certain violations.

Standards for Safety and Soundness. The FDI Act requires each federal banking
agency to prescribe for all insured depository institutions standards relating
to, among other things, internal controls, information systems and audit
systems, loan documentation, credit underwriting, interest rate risk exposure,
asset growth, and compensation, fees and benefits and such other operational and
managerial standards as the agency deems appropriate. The federal banking
agencies have adopted final regulations and Interagency Guidelines Prescribing
Standards for Safety and Soundness ("Guidelines") to implement these safety and
soundness standards. The Guidelines set forth the safety and soundness standards
that the federal banking agencies use to identify and address problems at
insured depository institutions before capital becomes impaired. If the
appropriate federal banking agency determines that an institution fails to meet
any standard prescribed by the Guidelines, the agency may require the
institution to submit to the agency an acceptable plan to achieve compliance
with the standard, as required by the FDI Act. The final rule establishes
deadlines for the submission and review of such safety and soundness compliance
plans.

Standards for Safeguarding Customer Information. In 1999, the President signed
the Gramm-Leach-Bliley Act was into law. Section 501 of the Act requires that
bank regulatory agencies establish appropriate standards for financial
institutions relating to the administrative, technical, and physical safeguards
for customer records and information. Accordingly, the OTS, the FDIC, the Office
of the Comptroller of the Currency and the Board of Governors of the Federal
Reserve System published Interagency Guidelines for Safeguarding Customer
Information in February of 2001. The Customer Information Guidelines require the
Bank to adopt a comprehensive written information security program that is
designed to protect against unauthorized access to or use of customers'
nonpublic personal information. All elements of the security program must be
coordinated among all parts of the bank. The Board of Directors of the Bank must
approve the written information security program and oversee its the
development, implementation and maintenance. The Bank must identify reasonably
foreseeable internal and external threats that could result in unauthorized
disclosure, misuse, alteration or destruction of customer information or
customer information systems, assess the likelihood and potential damage of
these threats (taking into consideration the sensitivity of customer
information), and assess the sufficiency of policies, procedures, customer
information systems, and other arrangements in place to control risks. In order
to manage and control any risk, the Bank should design its information security
program to control the identified risks, commensurate with the sensitivity of
the information as well as the complexity and scope of the bank's activities and
adopt such measures listed in the Guidelines regarding access, controls,
encryption and other procedures that the bank concludes are appropriate. In
addition, Banks are required to exercise due diligence in selecting service
providers having access to customer information, require such service providers
by contract to implement appropriate measures designed to meet the objectives of
the Guidelines, and monitor such service providers to confirm that they have
satisfied their obligations under the contract. The Bank must report to its
board at least

                                       32

<PAGE>

annually describing the overall status of the information security program and
the Bank's compliance with the Guidelines.

FEDERAL RESERVE SYSTEM

The Federal Reserve Board regulations require savings institutions to maintain
non-interest earning reserves against their transaction accounts. The Federal
Reserve Board regulations generally require that reserves be maintained against
aggregate transaction accounts as follows: for accounts aggregating $44.3
million or less (subject to adjustment by the Federal Reserve Board) the reserve
requirement was 3%; and for accounts aggregating greater than $44.3 million, the
reserve requirement was $1.395 million plus 10% (subject to adjustment by the
Federal Reserve Board) against that portion of total transaction accounts in
excess of $46.5 million. The first $4.9 million of otherwise reservable balances
(subject to adjustments by the Federal Reserve Board) were exempted from the
reserve requirements. The Bank maintained compliance with the foregoing
requirements. The balances maintained to meet the reserve requirements imposed
by the Federal Reserve Board may be used to satisfy liquidity requirements
imposed by the OTS.

NEW JERSEY LAW

The Commissioner regulates, among other things, the Bank's internal business
procedures as well as its deposits, lending and investment activities. The
Commissioner must approve changes to the Bank's Certificate of Incorporation,
establishment or relocation of branch offices, mergers and the issuance of
additional stock. In addition, the Commissioner conducts periodic examinations
of First Savings. Certain of the areas regulated by the Commissioner are not
subject to similar regulation by the FDIC.

Recent federal and state legislative developments have reduced distinctions
between commercial banks and SAIF-insured savings institutions in New Jersey
with respect to lending and investment authority, as well as interest rate
limitations. As federal law has expanded the authority of federally chartered
savings institutions to engage in activities previously reserved for commercial
banks, New Jersey legislation and regulations ("parity legislation") have given
New Jersey chartered savings institutions, such as the Bank, the powers of
federally chartered savings institutions.

New Jersey law provides that, upon satisfaction of certain triggering
conditions, as determined by the Commissioner, insured institutions or savings
and loan holding companies located in a state which has reciprocal legislation
in effect on substantially the same terms and conditions as stated under New
Jersey law may acquire, or be acquired by New Jersey insured institutions or
holding companies on either a regional or national basis. New Jersey law
explicitly prohibits interstate branching.

SARBANES-OXLEY ACT OF 2002

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002
(the "Act"). The Act represents a comprehensive revision of laws affecting
corporate governance, accounting obligations and corporate reporting. The Act is
applicable to all companies with equity or debt securities registered under the
Securities Exchange Act of 1934. Some provisions of the Act took effect upon
passage while the rest take effect over a period of 30 to 270 days after passage
and are

                                       33

<PAGE>

subject to rulemaking by the Securities and Exchange Commission and the self
regulatory organizations. Some of the changes included in the new, amended and
proposed regulations are:

        .   Require accelerated annual and quarterly reporting for certain
            filers and require the CEOs and CFOs to certify their company's
            financial reports, filings & control systems;
        .   Require increased disclosure and reporting obligations for the
            company, its officers and directors, and its affiliates;
        .   Require that the company comply with new audit committee
            independence and auditor independence requirements; and
        .   Implement new corporate responsibility requirements and provide
            additional corporate and criminal fraud accountability.

The Company is continuing to monitor the passage of the new and amended
regulations and is taking appropriate measures to comply with them. Although the
Company will incur additional expense in complying with the various provisions
of the Act and the new and amended regulations, management does not expect that
such compliance will have a material impact on the Company's results of
operations or financial condition.

                           FEDERAL AND STATE TAXATION

FEDERAL TAXATION

General. The Company and the Bank report their income on a consolidated basis
and the accrual method of accounting, and are subject to federal income taxation
in the same manner as other corporations with some exceptions, including
particularly the Bank's reserve for bad debts discussed below. The following
discussion of tax matters is intended only as a summary and does not purport to
be a comprehensive description of the tax rules applicable to the Bank or the
Company. The Bank has not been audited by the IRS in the past nine years. For
its 2002 taxable year, the Bank is subject to a maximum federal income tax rate
of 35%.

Bad Debt Reserves. For fiscal years beginning prior to December 31, 1995, thrift
institutions which qualified under certain definitional tests and other
conditions of the Internal Revenue Code of 1986 (the "Code") were permitted to
use certain favorable provisions to calculate their deductions from taxable
income for annual additions to their bad debt reserve. A reserve could be
established for bad debts on qualifying real property loans (generally secured
by interests in real property improved or to be improved) under (i) the
Percentage of Taxable Income Method (the "PTI Method") or (ii) the Experience
Method. The Bank's reserve for nonqualifying loans was computed using the
Experience Method.

The Small Business Job Protection Act of 1996 (the "1996 Act"), which was
enacted on August 20, 1996, requires savings institutions to recapture (i.e.,
take into income) certain portions of their accumulated bad debt reserves. The
1996 Act repeals the reserve method of accounting for bad debts effective for
tax years beginning after 1995. Thrift institutions that would be treated as
small banks are allowed to utilize the Experience Method applicable to such
institutions, while thrift institutions that are treated as large banks (those
generally exceeding $500 million in assets) are required to use only the
specific charge-off method. Thus, the PTI Method of accounting for bad debts is
no longer available for any financial institution.

                                       34

<PAGE>

A thrift institution required to change its method of computing reserves for bad
debts will treat such change as a change in method of accounting, initiated by
the taxpayer, and having been made with the consent of the IRS. Any Section
481(a) adjustment required to be taken into income with respect to such change
generally will be taken into income ratably over a six-taxable year period,
beginning with the first taxable year beginning after 1995, subject to the
residential loan requirement.

Under the 1996 Act, for its current and future taxable years, the Bank is not
permitted to make additions to its tax bad debt reserves. In addition, the Bank
is required to recapture (i.e., take into income) over a six year period the
excess of the balance of its tax bad debt reserves as of December 31, 1995,
other than its supplemental reserve for losses on loans, if any, over the
balance of such reserves as of December 31, 1987. As a result of such recapture,
the Bank incurred an additional tax payment of approximately $150,000 in 1996,
which was paid over a six year period ending with the final payment in 2001.

Distributions. Under the 1996 Act, if the Bank makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the Bank's unrecaptured tax bad debt reserves (including the
balance of its reserves as of December 31, 1987) to the extent thereof, and then
from the Bank's supplemental reserve for losses on loans, to the extent thereof,
and an amount based on the amount distributed (but not in excess of the amount
of such reserves) will be included in the Bank's income. Non-dividend
distributions include distributions in excess of the Bank's current and
accumulated earnings and profits, as calculated for federal income tax purposes,
distributions in redemption of stock, and distributions in partial or complete
liquidation. Dividends paid out of the Bank's current or accumulated earnings
and profits will not be so included in the Bank's income.

The amount of additional taxable income triggered by a non-dividend is an amount
that, when reduced by the tax attributable to the income, is equal to the amount
of the distribution. Thus, if the Bank makes a non-dividend distribution to the
Company, approximately one and one-half times the amount of such distribution
(but not in excess of the amount of such reserves) would be includable in income
for federal income tax purposes, assuming a 35% federal corporate income tax
rate. The Banks does not intend to pay dividends that would result in a
recapture of any portion of its bad debt reserves.

STATE AND LOCAL TAXATION

New Jersey Taxation. The Bank, its subsidiary, Pamrapo Service Corporation, and
the Company file separate New Jersey income tax returns. For New Jersey income
tax purposes, savings institutions are presently taxed at a rate equal to 9% of
taxable income. For this purpose, "taxable income" generally means federal
taxable income, subject to certain adjustments (including addition of interest
income on state and municipal obligations). For New Jersey tax purposes, regular
corporations are presently taxed at a rate equal to 9% of taxable income (7.5%
is the rate if taxable income is less than $100,000).

PERSONNEL

As of December 31, 2002, the Bank had 95 full-time employees and 25 part-time
employees. The employees are not represented by a collective bargaining unit and
the Bank considers its relationship with its employees to be good.

                                       35

<PAGE>

ITEM 2.  PROPERTIES.

The Bank conducts its business through nine branch offices and one
administrative office. Three offices have drive-up facilities. The Bank has
automatic teller machines at eight of its nine branch facilities and ten other
off-site locations. The following table sets forth information relating to each
of the Bank's offices as of December 31, 2002. The total net book value of the
Bank's premises and equipment at December 31, 2002 was $4.4 million.

<TABLE>
<CAPTION>
                                                                     YEAR                   NET
                           LOCATION                              OFFICE OPENED          BOOK VALUE
     ------------------------------------------------------    ------------------    ---------------
                                                                                      (IN THOUSANDS)
     <S>                                                                     <C>     <C>
     Executive Office
         591-597 Avenue C
         Bayonne, New Jersey...............................                  1985    $         1,751
     Branch Offices
         611 Avenue C
         Bayonne, New Jersey...............................                  1984                672
         155 Broadway
         Bayonne, New Jersey...............................                  1973                110
         175 Broadway
         Bayonne, New Jersey...............................                  1985                  -(1)
         861 Broadway
         Bayonne, New Jersey...............................                  1962                121
         987 Broadway
         Bayonne, New Jersey...............................                  1977                258
         1475 Bergen Boulevard
         Fort Lee, New Jersey..............................                  1990                  -(2)
         544 Broadway
         Bayonne, New Jersey...............................                  1995                 19(2)
         401 Washington Street
         Hoboken, New Jersey...............................                  1990                250(2)
         473 Spotswood-Englishtown Road
         Monroe, New Jersey................................                  1998                406(2)
                                                                                     ---------------
         Net book value of properties......................                                    3,587
         Furnishings and equipment (3).....................                                      830
                                                                                     ---------------
            Total premises and equipment...................                          $         4,417
                                                                                     ===============
</TABLE>

----------

         (1) The net book value of the property is included in investment in
             real estate.

         (2) Leased Property.

         (3) Includes off-site ATMs.

                                       36

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

The Company is from time to time a party to litigation which arises primarily in
the ordinary course of business. In the opinion of management, the ultimate
disposition of any such existing litigation should not have material effect on
the consolidated financial position of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Information relating to the market for Registrant's common stock and related
stockholder matters appears under Market for Common Stock and Related Matters in
the Registrant's 2002 Annual Report to Stockholders on page 43 and is
incorporated herein by reference.

ITEM 6.  SELECTED FINANCIAL DATA.

The selected financial data appears under Selected Consolidated Financial
Condition and Operating Data of the Company in the Registrant's 2002 Annual
Report to Stockholders on pages 41 and 42 and is incorporated herein by
reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The above-captioned information appears under Management's Discussion and
Analysis of Financial Condition and Results of Operations in the Registrant's
2002 Annual Report to Stockholders on pages 9 through 14 and is incorporated
herein by reference.

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Consolidated Statements of Financial Condition, and related notes thereto,
of Pamrapo Bancorp, Inc. and its subsidiaries, together with the report thereon
by Radics & Co., LLC appears in the Registrant's 2002 Annual Report to
Stockholders on pages 15 through 39 and are incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not Applicable.

                                       37

<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information relating to Directors and Executive Officers of the Registrant
is incorporated herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on April 30, 2003 at pages 5 through
7.

ITEM 11.  EXECUTIVE COMPENSATION.

The information relating to executive compensation is incorporated herein by
reference to the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on April 30, 2003 at pages 14 through 17.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.

The information relating to security ownership of certain beneficial owners is
incorporated herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on April 30, 2003 on pages 3 through
4.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information relating to certain relationships and related transactions is
incorporated herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on April 30, 2003 on page 17.

ITEM 14.  CONTROLS AND PROCEDURES.

As of a date within 90 days of the filing date of this report, based on an
evaluation of the Company's disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) each of
the chief executive officer and the chief financial officer of the Company has
concluded that the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in its Exchange
Act reports is recorded, processed, summarized and reported within the
applicable time periods specified by the SEC's rules and forms.

There were no significant changes in the Company's internal controls or in any
other factors that could significantly affect those controls subsequent to the
date of the most recent evaluation of the Company's internal controls by the
Company, including any corrective actions with regard to any significant
deficiencies or material weaknesses.

                                       38

<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

<TABLE>
<CAPTION>
                                                                               Page
                                                                               ----
<S>                                                                             <C>
(a) The following documents are filed as a part of this report:

    (1)  Consolidated Financial Statements of Pamrapo Bancorp, Inc.
            are incorporated by reference to the indicated pages of the
            2002 Annual Report to Stockholders.

         Consolidated Statements of Financial Condition as of
            December 31, 2001 and 2002.......................................   15

         Consolidated Statements of Income for the Years Ended
            December 31, 2000, 2001, and 2002................................   16

         Consolidated Statements of Comprehensive Income for
            the Years Ended December 31, 2000, 2001, and 2002................   17

         Consolidated Statements of Changes in Stockholders' Equity
            for the Years Ended December 31, 2000, 2001, and 2002............   18

         Consolidated Statements of Cash Flows for the Years
            Ended December 31, 2000, 2001, and 2002..........................   19

         Notes to Consolidated Financial Statements..........................   21

         Independent Auditors' Report........................................   39

         Management Responsibility Statement.................................   40
</TABLE>

The remaining information appearing in the 2002 Annual Report to Stockholders is
not deemed to be filed as part of this report, except as expressly provided
herein.

    (2)     All schedules are omitted because they are not required or
       applicable, or the required information is shown in the consolidated
       financial statements or the notes thereto.

                                       39

<PAGE>

    (3)     Exhibits.

    (a) The following exhibits are filed as part of this report.

        3.1     Certificate of Incorporation of Pamrapo Bancorp, Inc., as filed
                with the State of New Jersey on February 7, 2001.*
        3.2     Bylaws of Pamrapo Bancorp, Inc.*
        4       Stock Certificate of Pamrapo Bancorp, Inc.**
        10.1    Employment Agreement between the Bank and William J. Campbell.**
        10.2    Employment Agreement between the Company and William J.
                Campbell.**
        10.3    Special Termination Agreement (Hughes). ***
        10.5    Special Termination Agreement (Russo).**
        10.6    Change of Control Agreement (Walter).****
        10.7    Management Recognition and Retention Plan and Trust.**
        10.11   Board of Directors' Compensation and Trust Agreement.**
        11      Computation of earnings per share (filed herewith).
        13      Portions of the 2002 Annual Report to Stockholders
                (filed herewith).
        21      Subsidiary information is incorporated herein by reference to
                "Part I - Subsidiaries."
        23      Consent of Auditors (filed herewith).
        99.1    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 (filed herewith).
        99.2    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 (filed herewith).

        ----------
        *       Incorporated herein by reference to the Form 10-K Annual Report,
                filed on April 30, 2001, SEC file No. 000-18014.

        **      Incorporated herein by reference to the Form S-1, Registration
                Statement, as amended, filed on August 11, 1989, Registration
                No. 33-30370.

        ***     Incorporated herein by reference to the Form 10-Q, Quarterly
                Report, filed on May 6, 1997, Registration No. 000-18014.

        ****    Incorporated herein by reference to the Form 10-K Annual Report,
                filed on March 27, 2002, SEC file No. 000-18014.

    (b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
    during the fourth quarter of the 2002 fiscal year.

                                       40

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 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.

                                                         PAMRAPO BANCORP, INC.


                                                         /s/ William J. Campbell
                                                         -----------------------
                                                         William J. Campbell
                                                         President

DATED:  March 31, 2003

Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.

Name                          Title                           Date
---------------------------   -----------------------------   ------------------

/s/ William J. Campbell       President, Chief Executive      March 31, 2003
---------------------------   Officer and Director
William J. Campbell           (Principal Executive Officer)

/s/ Kenneth D. Walter         Treasurer/Chief Financial       March 31, 2003
---------------------------   Officer (Principal Financial
Kenneth D. Walter             and Accounting Officer)

/s/ Daniel J. Massarelli      Chairman of the Board and       March 31, 2003
---------------------------   Director
Daniel J. Massarelli

/s/ John A. Morecraft         Vice Chairman of the Board      March 31, 2003
---------------------------   and Director
John A. Morecraft

/s/ Patrick D. Conaghan       Director                        March 31, 2003
---------------------------
Patrick D. Conaghan

/s/ James J. Kennedy          Director                        March 31, 2003
---------------------------
James J. Kennedy

/s/ Dr. Jaime Portela         Director                        March 31, 2003
---------------------------
Dr. Jaime Portela

/s/ Francis J. O'Donnell      Director                        March 31, 2003
---------------------------
Francis J. O'Donnell

                                       41

<PAGE>

                                 CERTIFICATIONS

I, William J. Campbell, certify that:

1.  I have reviewed this annual report on Form 10-K of Pamrapo Bancorp, Inc.;

2.  Based on my knowledge, this annual 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 annual
report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the period presented in this annual report.

4.  The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a.     designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b.     evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c.     presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.  The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):

a.     all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b.     any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6.  The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:    March 31, 2003
                                                         /s/ William J. Campbell
                                                         -----------------------
                                                         William J. Campbell
                                                         Chief Executive Officer

<PAGE>

I, Kenneth D. Walter, certify that:

1.  I have reviewed this annual report on Form 10-K of Pamrapo Bancorp, Inc.;

2.  Based on my knowledge, this annual 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 annual
report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the period presented in this annual report.

4.  The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a.     designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b.     evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c.     presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.  The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):

a.     all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b.     any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6.  The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:    March 31, 2003
                                                         /s/ Kenneth D. Walter
                                                         -----------------------
                                                         Kenneth D. Walter
                                                         Chief Financial Officer