Exhibit 13

PAMRAPO BANCORP, INC. & SUBSIDIARIES

Managements Discussion
and Analysis of Financial Conditions and Results of Operations

GENERAL

Pamrapo Bancorp, Inc. (the Company) owns 100% of the issued and outstanding stock of Pamrapo Savings Bank, S.L.A. (the Bank), which is the primary
asset of the Company. The Companys business is conducted principally through the Bank.

BUSINESS OF
THE COMPANY

The Banks principal business has been and continues to be attracting retail deposits from the general
public and investing those deposits, together with funds generated from operations, primarily in one-to-four family, owner occupied residential mortgage loans. In addition, in times of low loan demand, the Bank will invest in mortgage-backed
securities to supplement its lending portfolio. The Bank also invests, to a lesser extent, in multi-family residential mortgage loans, commercial real estate loans, home equity and second mortgage loans, consumer loans and commercial loans.

The earnings of the Bank depend primarily upon the level of net interest income, which is the difference between the interest earned on assets such as
loans, mortgage-backed securities, investments and other interest-earning assets, and the interest paid on liabilities such as deposits and borrowings. Net interest income is affected by many factors, including regulatory, economic and competitive
factors that influence interest rates, loan demand and deposit flow. Net interest income is also affected by the amount, composition and relative interest rates of the Banks assets and liabilities and by the repricing of such assets and
liabilities. The Bank is vulnerable to interest rate fluctuations to the extent that its interest-bearing liabilities mature or reprice more rapidly than its interest-earning assets. Such asset/liability structure may result in lower net interest
income during periods of rising interest rates and may be beneficial in times of declining interest rates. The Banks net income is also affected by provisions for loan losses, non-interest income, non-interest expenses and income taxes.

CRITICAL ACCOUNTING ESTIMATES

Allowance for Loan Losses

We consider accounting policies involving significant judgments and assumptions by
management that have, or could have, a material impact on the carrying value of certain assets or on income, to be critical accounting policies. Material estimates that are particularly susceptible to significant changes relate to the determination
of the allowance for loan losses. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Management reviews the level of the allowance on a quarterly basis, at a minimum, and establishes the provision
for loan losses based on the composition of the loan portfolio, delinquency levels, loss experience, economic conditions, and other factors related to the collectibility of the loan portfolio. Since there has been no material shift in the loan
portfolio, the level of the allowance for loan losses has changed primarily due to changes in the size of the loan portfolio and the level of nonperforming loans. We have allocated the allowance among categories of loan types as well as
classification status at each period-end date. Assumptions and allocation percentages are based on loan types and classification status. Management regularly evaluates various risk factors related to the loan portfolio, such as type of loan,
underlying collateral and payment status, and the corresponding allowance allocation percentages. Although we believe that we use the best information available to establish the allowance for loan losses, future additions to the allowance may be
necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. In addition, the regulatory authorities, as an integral part of their examination process, periodically review our allowance
for loan losses. Such agencies may require us to recognize adjustments to the allowance based on their judgment about information available to them at the time of their examinations.

Pension Plan Assumptions

Our pension plan costs are calculated using actuarial concepts, as discussed within the
requirements of Statement of Financial Accounting Standards (SFAS) No. 87, Employers Accounting for Pensions SFAS No. 132 (R) and as amended by SFAS No. 158, Employers Accounting for Deferred Benefit Pension and Other Post
Retirement Plans. Pension expense and the determination of our projected pension liability are based upon two critical assumptions: the discount rate and the expected return on plan assets. We evaluate each of these critical assumptions
annually. Other assumptions impact the determination of pension expense and the projected liability, including the primary employee demographics such as retirement patterns, employee turnover, mortality rates, and estimated employer compensation
increases. These factors, along with the critical assumptions, are carefully reviewed by management each year in consultation with our pension plan consultants and actuaries. Further information about our pension plan assumptions, the plans
funded status, and other plan information is included in Note 11 to the Consolidated Financial Statements.

Other Than Temporary Impairment
of Investment Securities

Investment securities are written down to their net realizable value when there is impairment in value that is considered to
be other than temporary. The determination of whether or not other than temporary impairment exists is a matter of judgment.



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Management reviews its investment securities portfolio regularly for possible impairment that is other than
temporary by analyzing the facts and circumstances of each investment and the expectations for that investments performance.

FINANCIAL CONDITION

The Companys consolidated assets at December 31, 2008 totaled $598.0 million,
which represents a decrease of $59.4 million or 9.04% when compared to $657.4 million at December 31, 2007, primarily due to decreases in interest-bearing deposits in other banks, loans receivable and mortgage-backed securities, which more than
offset increases in investment securities held to maturity and deferred tax assets.

Securities available for sale decreased $146,000 or 15.92% to $771,000
at December 31, 2008 when compared to $917,000 at December 31, 2007. The decrease during the year ended December 31, 2008 resulted primarily from principal repayments of $98,000 on securities available for sale along with an increase
of $48,000 in unrealized losses. Investment securities held to maturity increased $973,000 or 9.38% to $11.4 million at December 31, 2008 when compared to $10.4 million at December 31, 2007. The increase during the year ended December 31, 2008
resulted primarily from purchases of investment securities held to maturity amounting to $1.0 million.

Mortgage-backed securities held to maturity
decreased $6.5 million or 5.25% to $117.4 million at December 31, 2008 from $123.9 million at December 31, 2007. The decrease during the year ended December 31, 2008 resulted primarily from principal repayments of $21.2 million on
mortgage-backed securities, which more than offset purchases of mortgage-backed securities totaling $15.0 million.

Net loans amounted to $437.6 million
and $439.1 million at December 31, 2008 and 2007, respectively, which represents a decrease of $1.5 million or 0.34%, primarily due to loan repayments exceeding loan originations.

Foreclosed real estate amounted to $426,000 and $486,000 at December 31, 2008 and 2007, respectively, which represents a decrease of $60,000 or 12.35%, primarily due to provision for losses of $70,000 on the
foreclosed real estate, offset by capital improvements of $10,000.

Total deposits at December 31, 2008 decreased $64.0 million or 12.60% to $444.0
million compared to $508.0 million at December 31, 2007. Included in the December 31, 2007 total is an interest-bearing demand account with a balance of $40.3 million which was reduced during the year 2008 to $2.6 million.

Advances from the Federal Home Loan Bank of New York (FHLB-NY) totaled $89.5 million and $84.0 million at December 31, 2008 and 2007, respectively. The net
increase of $5.5 million or 6.55% during the year ended December 31, 2008 resulted from an increase in FHLB-NY overnight borrowings of $20.5 million, offset by repayments of $15.0 million on advances from the FHLB-NY.

Stockholders equity amounted to $54.7 million and $58.6 million at December 31, 2008 and 2007, respectively. During the years ended December 31, 2008 and 2007, net
income of $2.5 million and $4.4 million, respectively, was recorded and cash dividends of $4.2 million and $4.6 million, respectively, were paid on the Companys common stock. Accumulated other comprehensive loss increased $1.8 million or
138.46% to $3.1 million at December 31, 2008 from $1.3 million at December 31, 2007, primarily due to FAS 158 adjustments pertaining to the Banks defined benefit plans. During the year ended December 31, 2008, the Company repurchased 40,000
shares of its common stock for $361,000 under a stock repurchase program.

Results of Operations For The Years Ended December 31, 2008 and 2007

NET INCOME

Net
income decreased by $1.9 million or 43.18% to $2.5 million during the year ended December 31, 2008 when compared to $4.4 million for the year ended December 31, 2007. The decrease in net income during the 2008 period was primarily due to an increase
in total non-interest expenses of $2.6 million and a provision for loan losses of $960,000, along with decreases in total interest income of $1.9 million, which more than offset an increase in total non-interest income of $76,000 and decreases in
total interest expense of $2.7 million and income taxes of $779,000.

INTEREST INCOME

Interest income on loans during the year ended December 31, 2008 decreased by $1.1 million or 3.82% to $27.7 million when compared to $28.8 million during 2007. During
the years ended December 31, 2008 and 2007, the yield earned on the loan portfolio was 6.40% and 6.49%, respectively. The average balance of loans outstanding during the years ended December 31, 2008 and 2007, totaled $433.7 million and $444.4
million, respectively.

Interest on mortgage-backed securities decreased $356,000 or 5.93% during the year ended December 31, 2008 to $5.6 million compared
to $6.0 million for 2007. During the years ended December 31, 2008 and 2007, the average balance of mortgage-backed securities totaled $124.0 million and $133.1 million, respectively, resulting in a net decrease of $9.1 million or 6.84%. The yield
earned on the mortgage-backed securities portfolio was 4.55% and 4.51% during 2008 and 2007, respectively. Interest earned on



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Managements Discussion and Analysis of Financial Conditions and Results of Operations



investment securities increased by $156,000 or 22.45% to $851,000 for the year ended December 31, 2008, when compared to $695,000 for 2007. The increase
during the year ended December 31, 2008 resulted from an increase of $1.1 million, or 10.89%, in the average balance of the investment securities portfolio, along with an increase of sixty-seven basis points in the yield earned on the
investment securities portfolio from 6.90% in 2007 to 7.57% in 2008. Interest on other interest-earning assets decreased by $596,000 or 38.06% to $970,000 for the year ended December 31, 2008, when compared to $1.6 million for 2007. The decrease
during the year ended December 31, 2008, resulted from a decrease of two-hundred eleven basis points in the yield earned on the other interest-earning assets portfolio from 4.89% in 2007 to 2.78% in 2008, which more than offset an increase of
$2.9 million in the average balance of the other interest-earning assets portfolio.

INTEREST EXPENSE

Interest on deposits decreased $2.2 million or 16.06% to $11.5 million during the year ended December 31, 2008 compared to $13.7 million for 2007. The decrease during
2008 was attributable to a decrease of forty-nine basis points in the Banks average cost of interest-bearing deposits to 2.65% for 2008 from 3.14% for 2007, along with a decrease of $1.7 million or 0.39% in the average balance of
interest-bearing deposits outstanding. Interest on advances and other borrowed money decreased $491,000 or 11.20% to $3.9 million during the year ended December 31, 2008 compared to $4.4 million for 2007. The decrease during 2008 was attributable to
a decrease of $13.2 million or 14.46% in the average balance of advances and other borrowed money, which more than offset an increase of nineteen basis points in the Banks cost of borrowings from 4.80% for 2007 to 4.99% for 2008.

NET INTEREST INCOME

Net interest income for the year ended December 31, 2008 increased $790,000 or 4.15% to $19.8 million for 2008 as compared to $19.0 million for 2007. The Banks net interest rate spread increased from 2.56% in 2007 to 2.83% in 2008 and
its interest rate margin increased from 3.07% in 2007 to 3.28% in 2008. The increase in net interest rate spread primarily resulted from a forty-two basis point decrease in the cost of interest-bearing liabilities from 3.43% in 2007 to 3.01% in
2008, sufficient to offset a sixteen basis point decrease in the yield of average interest-earning assets from 5.99% in 2007 to 5.83% in 2008. The average balance of interest-earning assets amounted to $603.8 million in 2008 and $619.6 million in
2007 and the average balance of interest-bearing liabilities amounted to $512.5 million in 2008 and $527.5 million in 2007.

PROVISION
FOR LOAN LOSSES

During the years ended December 31, 2008 and 2007, the Bank provided $1.6 million and
$670,000, respectively, for loan losses. At December 31, 2008 and 2007, the Banks loan portfolio included loans totaling $10.8 million and $5.5 million, respectively, which were delinquent ninety days or more. Included in the December 31, 2008
and 2007 total delinquent loans is the Banks largest non-accruing commercial loan of $1.9 million to a local hospital. The loan was originally for $3.0 million with a maturity date of November 15, 2006, which was extended to June 1, 2007. In
October 2006, $1.0 million of the loan was paid and the remaining balance of approximately $1.9 million was secured by a mortgage on real estate. As of December 31, 2008, the $1.9 million loan balance had not been paid. The repayment of the loan is
subject to bankruptcy proceedings. In September 2008, the creditors committee for the hospital filed a complaint against the Bank seeking to recover the $1.0 million previously paid on the loan and to set aside the mortgage securing the $1.9
million still owed to the Bank. The methodology used to determine the collectability of this loan was based on the fair value of the collateral. The fair value of the physical collateral was valued on December 15, 2006 at $2.04 million, which is
greater than the loan balance at December 31, 2008. While management believes that the mortgage on the property is valid, the unsecured creditors in the bankruptcy proceedings have brought suit against the Bank, charging that the mortgage is a
voidable preference. Litigation is in the discovery phase. At this point, management believes, based on discussions with its litigation counsel, that the Bank will likely prevail in its defense. However, due to the normal uncertainties
of any litigation, the loan ($1.9 million) has been deemed impaired and is included in the impaired loans of $2.6 million and $1.9 million at December 31, 2008 and 2007, respectively, as reflected in Note 5 to the Notes to Consolidated Financial
Statements. The hospital property is in close proximity to the Bank and is routinely observed by management. Given the proximity of the property, managements knowledge of the real estate market and the fact that the appraisal of the property
is higher than the carrying value of the loan, the management does not believe that a new appraisal is needed at this time. The Company has not charged off this loan against the allowance for loan losses based on the fact that the loan is
collateralized by properties that have a greater value than the carrying amount of the loan. However, due to the uncertainty of any litigation, the Bank will continue to monitor this loan and evaluate its collectability as necessary. The Bank
maintains an allowance for loan losses based on managements evaluation of the risk inherent in its loan portfolio, which gives due consideration to changes in general market conditions and in the nature and volume of the Banks loan
activity. The allowance for loan losses amounted to $4.66 million at December 31,



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2008, representing 1.05% of total loans and 43.15% of loans delinquent ninety days or more, compared to an allowance of $3.15 million at December 31,
2007, representing 0.71% of total loans and 57.54% of loans delinquent ninety days or more. During the years ended December 31, 2008 and 2007, the Bank charged off loans aggregating $124,000 and $270,000, respectively, and recoveries totaled $0
and $104,000, respectively. The Bank monitors its loan portfolio and intends to continue to provide for loan losses based on its ongoing periodic review of the loan portfolio and general market conditions.

NON-INTEREST INCOME

Non-interest income increased by $76,000 or 3.30% to $2.4 million during the year ended December 31, 2008 as compared to $2.3 million for 2007. The increase in non-interest income during 2008 resulted primarily from increases in other
income of $131,000, sufficient to offset decreases in fees and service charges of $10,000 and commissions from sale of financial products of $45,000.

Commissions from sale of financial products includes commissions received by Pamrapo Service Corporation (Corporation), a wholly-owned subsidiary of the Bank, due to the sale of products such as securities, life insurance, and
annuities. Commissions received related to securities are received from a third-party broker dealer. Pursuant to the Corporations policies, such commissions are to be paid directly to the Corporation, which, in conjunction with the Bank, then
determines the amount of commission payments to be made to the Corporations employees and agents.

As of March 12, 2009, the Company and the Bank
were aware of the following information relating to certain commission payments made to the manager of the Corporation (the Manager). The information presented below is based upon the knowledge and understanding of the individuals who
conducted internal inquiries into this matter. The Bank has hired an independent auditor to conduct a forensic audit of the Corporations business records, the outcome of which cannot be determined at this time. Subsequent to March 12, 2009,
additional information may be discovered, or may come to light, that could affect the accuracy of the following information relating to the commissions.

In August 2008, the Bank discovered that 100% of certain commissions from a third-party broker were paid directly to the Manager. These direct payments constituted a change in commission structure, which was made without the approval of the
Board of Directors of the Corporation, as required by its policies and procedures. Based upon the Corporations policies in effect at the time, 100% of these commissions were to be paid directly to the Corporation and then 50% were to be
distributed by the Corporation to the Manager. Following such internal inquiries, the Bank determined that $270,357 was owed by the Manager to the Corporation for commissions paid directly to the Manager for the period from August 2007 to December
2008.

The $270,357 was paid to the Corporation as follows. On December 3, 2008, the Manager paid $160,000 of the amount owed to the Corporation. On
December 10, 2008, the Manager paid $50,000 of the amount owed to the Corporation. On February 4, 2009, the Manager paid the remaining $60,357 of the amount owed to the Corporation. The Company and the Bank determined to record the amount of
$270,357 in the fourth quarter of 2008. For further information, please see Note 22 to the Consolidated Financial Statements in this 2008 Annual Report.

NON-INTEREST EXPENSES

Non-interest expenses increased $2.6 million or 18.84% to $16.4 million
during the year ended December 31, 2008 compared to $13.8 million for 2007. During the year ended December 31, 2008, salaries and employee benefits, net occupancy expense of premises, equipment, professional fees, loss on foreclosed real estate and
other expenses increased $314,000, $92,000, $37,000, $2,028,000, $92,000 and $27,000 respectively, which more than offset a decrease in advertising expense of $12,000. The increase in professional fees was predominately due to fees paid to
consultants that the Bank engaged as a result of the cease and desist order issued by the Office of Thrift Supervision (OTS), effective September 26, 2008. For further information on the OTS cease and desist order, please see Note 19 to
the Notes to Consolidated Financial Statements.

INCOME TAXES

Income tax expense totaled $1.7 million and $2.5 million during the years ended December 31, 2008 and 2007, respectively. The decrease in 2008 resulted from a decrease in
pre-tax income of $2.7 million.



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PAMRAPO BANCOP, INC. & SUBSIDIARIES

Managements Discussion and Analysis of Financial Conditions and Results of Operations



Results of Operations For The Years Ended December 31, 2007 and 2006

NET INCOME

Net income decreased by $2.1 million or 32.31% to $4.4 million during the
year ended December 31, 2007 when compared to $6.5 million for the year ended December 31, 2006. The decrease in net income during the 2007 period was primarily due to an increase in total interest expense of $2.1 million and provision for loan
losses of $670,000, along with decreases in total interest income of $435,000 and total non-interest income of $451,000, which more than offset decreases in total non-interest expenses of $44,000 and income taxes of $1.4 million.

INTEREST INCOME

Interest income on
loans during the year ended December 31, 2007 decreased by $98,000 or 0.34% to $28.8 million when compared to $28.9 million during 2006. During the years ended December 31, 2007 and 2006, the yield earned on the loan portfolio was 6.49% and 6.45%,
respectively. The average balance of loans outstanding during the years ended December 31, 2007 and 2006, totaled $444.4 million and $448.9 million, respectively.

Interest on mortgage-backed securities decreased $1.2 million or 16.67% during the year ended December 31, 2007 to $6.0 million compared to $7.2 million for 2006. During the years ended December 31, 2007 and 2006, the average balance of
mortgage-backed securities totaled $133.1 million and $154.5 million, respectively, resulting in a net decrease of $21.4 million or 13.85%. The yield earned on the mortgage-backed securities portfolio was 4.51% and 4.68% during 2007 and 2006,
respectively. Interest earned on investment securities decreased by $78,000 or 10.09% to $695,000 for the year ended December 31, 2007, when compared to $773,000 for 2006. The decrease during the year ended December 31, 2007, resulted from a
decrease of $1.4 million in the average balance of the investment securities portfolio, which more than offset an increase of sixteen basis points in the yield earned on the investment securities portfolio from 6.74% in 2006 to 6.90% in 2007.
Interest on other interest-earning assets increased by $960,000 or 158.60% to $1.6 million for the year ended December 31, 2007, when compared to $606,000 for 2006. The increase during the year ended December 31, 2007, resulted from an increase of
$18.7 million in the average balance of the other interest-earning assets portfolio along with an increase of thirty-five basis points in the yield earned on the other interest-earning assets portfolio from 4.54% in 2006 to 4.89% in 2007.

INTEREST EXPENSE

Interest on deposits increased $2.4 million or 21.24% to $13.7 million during the year ended December 31, 2007 compared to $11.3 million for 2006. The increase during 2007 was attributable to an increase of fifty-two basis points in the
Banks average cost of interest-bearing deposits to 3.14% for 2007 from 2.62% for 2006, along with an increase of $3.8 million or 0.89% in the average balance of interest-bearing deposits outstanding. Interest on advances and other borrowed
money decreased $283,000 or 6.06% to $4.4 million during the year ended December 31, 2007 compared to $4.7 million for 2006. The decrease during 2007 was attributable to a decrease of $12.7 million or 12.20% in the average balance of advances and
other borrowed money, which more than offset an increase of thirty-one basis points in the Banks cost of borrowings from 4.49% for 2006 to 4.80% for 2007.

NET INTEREST INCOME

Net interest income for the year ended December 31, 2007, decreased $2.6
million or 12.04% to $19.0 million for 2007 as compared to $21.6 million for 2006. The Banks net interest rate spread decreased from 3.00% in 2006 to 2.56% in 2007 and its interest rate margin decreased from 3.43% in 2006 to 3.07% in 2007. The
decrease in net interest rate spread primarily resulted from a forty-five basis point increase in the cost of interest-bearing liabilities from 2.98% in 2006 to 3.43% in 2007, sufficient to offset a one basis point increase in the yield of average
interest-earning assets from 5.98% in 2006 to 5.99% in 2007. The average balance of interest-earning assets amounted to $619.6 million in 2007 and $628.2 million in 2006 and the average balance of interest-bearing liabilities amounted to $527.5
million in 2007 and $536.3 million in 2006.

PROVISION FOR LOAN LOSSES

During the years ended December 31, 2007 and 2006, the Bank provided $670,000 and $0, respectively, for loan losses. At December 31, 2007 and 2006, the Banks loan
portfolio included loans totaling $5.5 million and $2.3 million, respectively, which were delinquent ninety days or more. Included in the December 31, 2007 total is the Banks largest non-accruing commercial loan of $1.9 million to a local
hospital. The loan matured on June 1, 2007 and was not paid. The repayment of this loan is subject to bankruptcy proceedings. For further details on this loan, see Note 13 to the Consolidated Financial Statements in the 2008 Annual Report. The Bank
maintains an allowance for loan losses based on managements evaluation of the risk inherent in its loan portfolio, which gives due consideration to changes in general market conditions and in the nature and volume of the Banks loan
activity. The



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allowance for loan losses amounted to $3.15 million at December 31, 2007, representing 0.71% of total loans and 57.54% of loans delinquent ninety days or
more compared to an allowance of $2.65 million at December 31, 2006, representing 0.58% of total loans and 116.32% of loans delinquent ninety days or more. During the years ended December 31, 2007 and 2006, the Bank charged off loans aggregating
$270,000 and $113,000, respectively. Recoveries totaled $104,000 and $9,000, respectively. The Bank monitors its loan portfolio and intends to continue to provide for loan losses based on its ongoing periodic review of the loan portfolio and general
market conditions.

NON-INTEREST INCOME

Non-interest income decreased by $451,000 or 16.11% to $2.3 million during the year ended December 31, 2007 as compared to $2.8 million for 2006. The decrease in non-interest income during 2007 resulted primarily from
decreases in the gain on sale of securities available for sale of $430,000, commissions from sale of financial products of $73,000 and other income of $15,000, sufficient to offset an increase in fees and service charges of $67,000. For further
information on commissions from sale of financial products, see Note 22 to the Consolidated Financial Statements in this 2008 Annual Report.

NON-INTEREST EXPENSES

Non-interest expenses decreased $44,000 or 0.31% to $13.8 million during
the year ended December 31, 2007 compared to $13.9 million for 2006. During the year ended December 31, 2007, salary and employee benefits, advertising and other expenses decreased $41,000, $52,000 and $169,000 respectively, which more than offset
increases in occupancy costs, equipment and professional fees of $17,000, $25,000, and $176,000, respectively.

INCOME
TAXES

Income tax expense totaled $2.5 million and $3.9 million during the years ended December 31, 2007 and 2006, respectively. The
decrease in 2007 resulted from a decrease in pre-tax income of $3.6 million.

Liquidity and Capital Resources

The Banks primary sources of funds are deposits, amortization and prepayments of loan and mortgage-backed securities principal, FHLB-NY advances, maturities of
investment securities and funds provided from operations. While scheduled loan and mortgage-backed securities amortization and maturities of investment securities are a relatively predictable source of funds, deposit flows and loan and
mortgage-backed securities prepayments are greatly influenced by market interest rates, economic conditions and competition.

The Bank is required to
maintain sufficient liquidity to ensure its safe and sound operation by the OTS regulations. The Bank adjusts its liquidity levels in order to meet funding needs for deposit outflows, payments of real estate taxes from escrow accounts on mortgage
loans, repayment of borrowings, when applicable, and loan funding commitments. The Bank also adjusts its liquidity level as appropriate to meet its asset/liability objectives. In addition, the Bank invests its excess funds in federal funds and
interest-bearing deposits with the FHLB-NY, which provides liquidity to meet lending requirements.

The Banks liquidity, represented by cash and cash
equivalents, is a product of its operating, investing and financing activities. Cash was generated by operating activities in each of the above periods. The primary source of cash from operating activities during each period was net income.

The primary sources of investing activities of the Bank are lending and investment in mortgage-backed securities. In addition to funding new loan
production and the purchase of mortgage-backed securities through operations and financing activities, new loan production and purchases of mortgage-backed securities were also funded by principal repayments on existing loans and
mortgage-backed securities.

Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in
short-term investments, such as federal funds and interest-bearing deposits. If the Bank requires funds beyond its ability to generate them internally, borrowing agreements exist with the FHLB-NY, which provide an additional source of funds. At
December 31, 2008 and 2007, advances from the FHLB-NY amounted to $89.5 million and $84.0 million, respectively.

The Bank anticipates that it will have
sufficient funds available to meet its current loan commitments. At December 31, 2008, the Bank had outstanding commitments to originate loans and fund unused credit lines of $17.0 million. Certificates of deposit scheduled to mature in one year or
less, at December 31, 2008, totaled $207.2 million. Management believes that, based upon historical experience, a significant portion of such deposits will remain with the Bank.

At December 31, 2008, the Bank exceeded each of the three OTS capital requirements. The Banks tangible, core and total risk-based capital ratios were 9.14%, 9.14% and 15.25%, respectively. The Bank was
categorized as well-capitalized under the prompt corrective action regulations of the OTS.



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Managements Discussion and Analysis of Financial Conditions and Results of Operations



CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET
ARRANGEMENTS

The following table sets forth our contractual obligations and commercial commitments at December 31, 2008. This does
not include interest expense on the FHLB-NY advances and the certificates of deposit which the Bank expects to pay at weighted average rates of 4.02% and 3.47%, respectively. In addition, the Bank expects to make a pension plan contribution of
approximately $800,000 in 2009.



|                                                                                                                                                                                                                                                                                                                                                                                            |  |                       |             |                   |   |                                     |  |                                       |            |                     |   |           |  |   |           
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ----------- | ----------------- | - | ----------------------------------- |  | ------------------------------------- | ---------- | ------------------- | - | --------- |  | - | ----------
|                                                                                                                                                                                                                                                                                                                                                                                            |  | Payment Due By Period
|Contractual Obligations                                                                                                                                                                                                                                                                                                                                                                     |  | Total                 |             | Less ThanOne Year |   | More ThanOne YearThroughThree Years |  | More ThanThree YearsThroughFive Years |            | More ThanFive Years
|FHLB-NY Advances                                                                                                                                                                                                                                                                                                                                                                            |  | $                     | 89,500,000  |                   | $ | 38,500,000                          |  | $                                     | 33,000,000 |                     | $ |          |  | $ | 18,000,000
|Certificates of deposit                                                                                                                                                                                                                                                                                                                                                                     |  |                       | 225,731,000 |                   |   | 207,167,000                         |  |                                       | 16,385,000 |                     |   | 2,080,000 |  |   | 99,000    
|Lease Obligations                                                                                                                                                                                                                                                                                                                                                                           |  |                       | 2,788,121   |                   |   | 492,191                             |  |                                       | 949,425    |                     |   | 811,854   |  |   | 534,651   
|Benefit plans                                                                                                                                                                                                                                                                                                                                                                               |  |                       | 7,231,761   |                   |   | 693,093                             |  |                                       | 1,398,261  |                     |   | 1,355,555 |  |   | 3,784,852 
|                                                                                                                                                                                                                                                                                                                                                                                            |  |                       |             |                   |   |                                     |  |                                       |            |                     |   |           |  |   |           
|Total                                                                                                                                                                                                                                                                                                                                                                                       |  | $                     | 325,250,882 |                   | $ | 246,852,284                         |  | $                                     | 51,732,686 |                     | $ | 4,247,409 |  | $ | 22,418,503
|                                                                                                                                                                                                                                                                                                                                                                                            |  |                       |             |                   |   |                                     |  |                                       |            |                     |   |           |  |   |           
|In the normal course of business, the Bank enters into off-balance
sheet arrangements consisting of commitments to fund mortgage loans and lines of credit secured by real estate. The following table presents these off-balance sheet arrangements at December 31, 2008. For more information regarding these
commitments, see Note 13 of the Notes to Consolidated Financial Statements.
|                                                                                                                                                                                                                                                                                                                                                                                            | 
|                                                                                                                                                                                                                                                                                                                                                                                            |  | Payment Due By Period
|Off-Balance Sheet Arrangements                                                                                                                                                                                                                                                                                                                                                              |  | Total                 |             | Less Than OneYear |   | More ThanOne YearThroughThree Years |  | More ThanThree YearsThroughFive Years |            | More ThanFive Years
|To originate loans                                                                                                                                                                                                                                                                                                                                                                          |  | $                     | 5,353,000   |                   | $ | 5,353,000                           |  | $                                     |           |                     | $ |          |  | $ |          
|Unused lines of credit                                                                                                                                                                                                                                                                                                                                                                      |  |                       | 11,599,000  |                   |   | 11,599,000                          |  |                                       |           |                     |   |          |  |   |          
|Letters of credit                                                                                                                                                                                                                                                                                                                                                                           |  |                       | 1,796,000   |                   |   | 1,786,000                           |  |                                       | 10,000     |                     |   |          |  |   |          
|                                                                                                                                                                                                                                                                                                                                                                                            |  |                       |             |                   |   |                                     |  |                                       |            |                     |   |           |  |   |           
|Total                                                                                                                                                                                                                                                                                                                                                                                       |  | $                     | 18,748,000  |                   | $ | 18,738,000                          |  | $                                     | 10,000     |                     | $ |          |  | $ |          
|                                                                                                                                                                                                                                                                                                                                                                                            |  |                       |             |                   |   |                                     |  |                                       |            |                     |   |           |  |   |           

MANAGEMENT OF INTEREST RATE RISK

The Bank, like other financial institutions, is subject to market risk. Market risk is the type of risk that occurs when an institution suffers
economic loss due to changes in the market value of various types of assets or liabilities. As a financial institution, the Bank makes a profit by accepting and managing various risks such as credit risk and interest rate risk. Interest rate risk is
the Banks primary market risk.

The ability to maximize net interest income is largely dependent upon the achievement of a positive interest rate
spread that can be sustained during fluctuations in prevailing interest rates. Interest rate sensitivity is a measure of the difference between amounts of interest-earning assets and interest-bearing liabilities which either reprice or mature within
a given period of time. The difference, or the interest rate repricing gap, provides an indication of the extent to which an institutions interest rate spread will be affected by changes in interest rates. A gap is considered
positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities, and is considered negative when the amount of interest-rate sensitive liabilities exceeds the amount of interest-rate sensitive
assets. Generally, during a period of rising interest rates, a negative gap within shorter maturities would adversely affect net interest income, while a positive gap within shorter maturities would result in an increase in net interest income.
During a period of falling interest rates, a negative gap within shorter maturities would result in an increase in net interest income while a positive gap within shorter maturities would result in a decrease in net interest income.

Because the Banks interest-bearing liabilities, which mature or reprice within short periods, exceed its interest-earning assets with similar characteristics,
material and prolonged increases in interest rates generally would adversely affect net interest income,



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while material and prolonged decreases in interest rates generally would have a positive effect on net interest income.

The Banks current investment strategy is to maintain an overall securities portfolio that provides a source of liquidity and that contributes to the Banks
overall profitability and asset mix within given quality and maturity considerations. Securities classified as available for sale provide management with the flexibility to make adjustments to the portfolio given changes in the economic or interest
rate environment, to fulfill unanticipated liquidity needs, or to take advantage of alternative investment opportunities.

NET
PORTFOLIO VALUE

The Banks interest rate sensitivity is monitored by management through the use of the OTS model
which estimates the change in the Banks net portfolio value (NPV) over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities, and off-balance sheet contracts. The NPV ratio,
under any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The OTS produces its analysis based upon data submitted on the Banks quarterly Thrift Financial Reports. The
following table, which sets forth the Banks NPV as of December 31, 2008, was calculated by the OTS:



|                                                      |  |                        |        |                                 |   |               |                       |     |                                            |  |       |   |  |       
|----------------------------------------------------- |  | ---------------------- | ------ | ------------------------------- | - | ------------- | --------------------- | --- | ------------------------------------------ |  | ----- | - |  | ------
|Change in Interest Rates In Basis Points (Rate Shock) |  | Amount                 |        | Net Portfolio ValueDollarChange |   | PercentChange |                       |     | NPV as Percent ofPortfolio Value of Assets
|                                                      |  |                        |        | NPVRatio                        |   |               | Change InBasis Points
|                                                      |  | (Dollars in Thousands) |        |                                 |   |               |                       |     |                                            | 
|+300bp                                                |  | $                      | 39,487 |                                 | $ | -37,135       |                       | -48 | %                                          |  | 6.70  | % |  | -540bp
|+200bp                                                |  | $                      | 54,127 |                                 | $ | -22,495       |                       | -29 | %                                          |  | 8.93  | % |  | -317bp
|+100bp                                                |  | $                      | 66,952 |                                 | $ | -9,670        |                       | -13 | %                                          |  | 10.78 | % |  | -132bp
|+50bp                                                 |  | $                      | 72,010 |                                 | $ | -4,611        |                       | -6  | %                                          |  | 11.47 | % |  | -62bp 
|0                                                     |  | $                      | 76,621 |                                 | $ |              |                       |    |                                            |  | 12.10 | % |  |      
|-50bp                                                 |  | $                      | 79,819 |                                 | $ | 3,197         |                       | +4  | %                                          |  | 12.51 | % |  | +42bp 
|-100bp                                                |  | $                      | 82,538 |                                 | $ | 5,916         |                       | +8  | %                                          |  | 12.86 | % |  | +77bp 

Certain shortcomings are inherent in the methodology used in interest rate risk measurements. Modeling changes in
NPV require the making of certain assumptions which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the NPV model presented assumes that the composition of the
Banks interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve
regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the NPV measurements and net interest income models provide an indication of the Banks interest rate risk exposure at a particular
point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on the Banks net interest income and will differ from actual results.

IMPACT OF INFLATION AND CHANGING PRICES

The consolidated financial statements and the related data presented herein have been prepared in accordance with accounting principles generally accepted in the United
States of America, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Unlike most industrial companies, virtually all of the assets and liabilities of the Bank are monetary in nature. As a result, interest rates have a more significant
impact on the Banks performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services because such prices are affected by
inflation to a larger extent than interest rates.



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Report of Independent Registered Public Accounting Firm

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS

PAMRAPO BANCORP, INC.

We have audited the accompanying consolidated statements of financial condition of
Pamrapo Bancorp, Inc. and subsidiaries (the Company) as of December 31, 2008 and 2007, and the related statements of income, changes in stockholders equity and cash flows for each of the years in the three-year period ended
December 31, 2008. The Companys management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pamrapo
Bancorp, Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2008 in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting
for Defined Benefit Plans and Other Post-retirement Plans in 2006.

As further discussed in Note 19 to the consolidated financial statements, the Company
stipulated and consented to a Cease and Desist Order issued by the Office of Thrift Supervision on September 26, 2008.

We also have audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), Pamrapo Bancorp, Inc. and subsidiaries internal control over financial reporting as of December 31, 2008, based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 12, 2009 expressed an adverse opinion.

LOGO

Beard Miller Company LLP

Clark, New Jersey

March 12, 2009



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Consolidated Statements of Financial Condition



|                                                                                                                                                      |  |              |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                      |  | December 31, |            
|                                                                                                                                                      |  | 2008         |             |   | 2007 |  
|ASSETS                                                                                                                                                |  |              |             |   |      |   |             |  
|Cash and amounts due from depository institutions                                                                                                     |  | $            | 4,116,871   |   |      | $ | 3,919,627   |  
|Interest-bearing deposits in other banks                                                                                                              |  |              | 9,470,431   |   |      |   | 62,976,392  |  
|                                                                                                                                                      |  |              |             |   |      |   |             |  
|Cash and Cash Equivalents                                                                                                                             |  |              | 13,587,302  |   |      |   | 66,896,019  |  
|Securities available for sale                                                                                                                         |  |              | 770,752     |   |      |   | 917,047     |  
|Investment securities held to maturity (estimated fair value of $10,831,410 and $10,650,452, respectively)                                            |  |              | 11,350,165  |   |      |   | 10,376,920  |  
|Mortgage-backed securities held to maturity (estimated fair value of $119,920,146 and $121,422,424, respectively)                                     |  |              | 117,427,652 |   |      |   | 123,906,632 |  
|Loans receivable (net of allowance for loan losses of $4,660,705 and $3,154,977, respectively)                                                        |  |              | 437,554,169 |   |      |   | 439,053,090 |  
|Foreclosed real estate                                                                                                                                |  |              | 426,353     |   |      |   | 486,000     |  
|Premises and equipment                                                                                                                                |  |              | 2,929,035   |   |      |   | 3,339,898   |  
|Federal Home Loan Bank of New York stock                                                                                                              |  |              | 5,160,100   |   |      |   | 4,996,000   |  
|Interest receivable                                                                                                                                   |  |              | 2,884,431   |   |      |   | 2,738,425   |  
|Deferred tax asset                                                                                                                                    |  |              | 4,380,878   |   |      |   | 2,503,680   |  
|Other assets                                                                                                                                          |  |              | 1,541,027   |   |      |   | 2,214,550   |  
|                                                                                                                                                      |  |              |             |   |      |   |             |  
|Total Assets                                                                                                                                          |  | $            | 598,011,864 |   |      | $ | 657,428,261 |  
|                                                                                                                                                      |  |              |             |   |      |   |             |  
|                                                                                                                                                      |  |             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                  |  |              |             |   |      |   |             |  
|Liabilities                                                                                                                                           |  |              |             |   |      |   |             |  
|Deposits                                                                                                                                              |  | $            | 443,998,757 |   |      | $ | 507,961,177 |  
|Advances from Federal Home Loan Bank of New York                                                                                                      |  |              | 89,500,000  |   |      |   | 84,000,000  |  
|Advance payments by borrowers for taxes and insurance                                                                                                 |  |              | 3,281,968   |   |      |   | 3,557,745   |  
|Other liabilities                                                                                                                                     |  |              | 6,552,889   |   |      |   | 3,269,865   |  
|                                                                                                                                                      |  |              |             |   |      |   |             |  
|Total Liabilities                                                                                                                                     |  |              | 543,333,614 |   |      |   | 598,788,787 |  
|                                                                                                                                                      |  |              |             |   |      |   |             |  
|Commitments and Contingencies                                                                                                                         |  |              |             |   |      |   |             |  
|Stockholders Equity                                                                                                                                  |  |              |             |   |      |   |             |  
|Preferred stock; 3,000,000 shares authorized; none issued and outstanding                                                                             |  |              |            |   |      |   |            |  
|Common stock; $0.01 par value; 25,000,000 shares authorized; 6,900,000 shares issued; 4,935,542 shares (2008) and 4,975,542 shares
(2007) outstanding |  |              | 69,000      |   |      |   | 69,000      |  
|Paid-in capital                                                                                                                                       |  |              | 19,339,615  |   |      |   | 19,339,615  |  
|Retained earnings                                                                                                                                     |  |              | 61,928,289  |   |      |   | 63,711,451  |  
|Accumulated other comprehensive loss                                                                                                                  |  |              | (3,118,849  | ) |      |   | (1,301,888  | )
|Treasury stock, at cost, 1,964,458 shares (2008) and 1,924,458 shares (2007)                                                                          |  |              | (23,539,805 | ) |      |   | (23,178,704 | )
|                                                                                                                                                      |  |              |             |   |      |   |             |  
|Total Stockholders Equity                                                                                                                            |  |              | 54,678,250  |   |      |   | 58,639,474  |  
|                                                                                                                                                      |  |              |             |   |      |   |             |  
|Total Liabilities and Stockholders Equity                                                                                                            |  | $            | 598,011,864 |   |      | $ | 657,428,261 |  
|                                                                                                                                                      |  |              |             |   |      |   |             |  

See Notes to Consolidated Financial Statements



www.pamrapo.com    11



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Consolidated Statements of Income



|                                                     |  |                          |            |      |   |            |  |   |           
|---------------------------------------------------- |  | ------------------------ | ---------- | ---- | - | ---------- |  | - | ----------
|                                                     |  | Years Ended December 31,
|                                                     |  | 2008                     |            | 2007 |   | 2006      
|Interest Income                                      |  |                          |            |      |   |            |  |   |           
|Loans                                                |  | $                        | 27,746,334 |      | $ | 28,838,443 |  | $ | 28,936,780
|Mortgage-backed securities                           |  |                          | 5,646,999  |      |   | 6,003,167  |  |   | 7,222,162 
|Investments, taxable                                 |  |                          | 795,710    |      |   | 674,212    |  |   | 772,736   
|Investments, non-taxable                             |  |                          | 55,562     |      |   | 20,513     |  |   |          
|Other interest-earning assets                        |  |                          | 970,477    |      |   | 1,566,054  |  |   | 605,583   
|                                                     |  |                          |            |      |   |            |  |   |           
|Total Interest Income                                |  |                          | 35,215,082 |      |   | 37,102,389 |  |   | 37,537,261
|                                                     |  |                          |            |      |   |            |  |   |           
|Interest Expense                                     |  |                          |            |      |   |            |  |   |           
|Deposits                                             |  |                          | 11,512,007 |      |   | 13,698,770 |  |   | 11,313,907
|Advances and other borrowed money:                   |  |                          | 3,893,107  |      |   | 4,383,916  |  |   | 4,666,907 
|Overnight borrowings                                 |  |                          | 44,726     |      |   | 1,551      |  |   | 436,254   
|Term advances                                        |  |                          | 3,848,381  |      |   | 4,382,365  |  |   | 4,230,653 
|                                                     |  |                          |            |      |   |            |  |   |           
|Total Interest Expense                               |  |                          | 15,405,114 |      |   | 18,082,686 |  |   | 15,980,814
|                                                     |  |                          |            |      |   |            |  |   |           
|Net Interest Income                                  |  |                          | 19,809,968 |      |   | 19,019,703 |  |   | 21,556,447
|Provision for Loan Losses                            |  |                          | 1,630,000  |      |   | 670,000    |  |   |          
|                                                     |  |                          |            |      |   |            |  |   |           
|Net Interest Income after Provision for Loan Losses  |  |                          | 18,179,968 |      |   | 18,349,703 |  |   | 21,556,447
|                                                     |  |                          |            |      |   |            |  |   |           
|Non-Interest Income                                  |  |                          |            |      |   |            |  |   |           
|Fees and service charges                             |  |                          | 1,239,937  |      |   | 1,249,896  |  |   | 1,183,073 
|Gain on sale of securities available for sale        |  |                          |           |      |   |           |  |   | 430,089   
|Commissions from sale of financial products          |  |                          | 858,630    |      |   | 903,675    |  |   | 976,194   
|Other                                                |  |                          | 324,698    |      |   | 193,672    |  |   | 208,655   
|                                                     |  |                          |            |      |   |            |  |   |           
|Total Non-Interest Income                            |  |                          | 2,423,265  |      |   | 2,347,243  |  |   | 2,798,011 
|                                                     |  |                          |            |      |   |            |  |   |           
|Non-Interest Expenses                                |  |                          |            |      |   |            |  |   |           
|Salaries and employee benefits                       |  |                          | 7,910,365  |      |   | 7,596,422  |  |   | 7,637,767 
|Net occupancy expense of premises                    |  |                          | 1,292,270  |      |   | 1,199,928  |  |   | 1,183,348 
|Equipment                                            |  |                          | 1,357,782  |      |   | 1,320,370  |  |   | 1,294,678 
|Advertising                                          |  |                          | 243,212    |      |   | 255,225    |  |   | 306,779   
|Professional fees                                    |  |                          | 2,798,347  |      |   | 770,734    |  |   | 594,923   
|Loss on foreclosed real estate                       |  |                          | 91,647     |      |   |           |  |   |          
|Other                                                |  |                          | 2,726,048  |      |   | 2,698,593  |  |   | 2,867,354 
|                                                     |  |                          |            |      |   |            |  |   |           
|Total Non-Interest Expenses                          |  |                          | 16,419,671 |      |   | 13,841,272 |  |   | 13,884,849
|                                                     |  |                          |            |      |   |            |  |   |           
|Income before Income Taxes                           |  |                          | 4,183,562  |      |   | 6,855,674  |  |   | 10,469,609
|Income Taxes                                         |  |                          | 1,724,244  |      |   | 2,503,426  |  |   | 3,927,742 
|                                                     |  |                          |            |      |   |            |  |   |           
|Net Income                                           |  | $                        | 2,459,318  |      | $ | 4,352,248  |  | $ | 6,541,867 
|                                                     |  |                          |            |      |   |            |  |   |           
|Net Income per Common Share                          |  |                          |            |      |   |            |  |   |           
|Basic                                                |  | $                        | 0.49       |      | $ | .87        |  | $ | 1.31      
|                                                     |  |                          |            |      |   |            |  |   |           
|Diluted                                              |  | $                        | 0.49       |      | $ | .87        |  | $ | 1.31      
|                                                     |  |                          |            |      |   |            |  |   |           
|Weighted Average Number of Common Shares Outstanding |  |                          |            |      |   |            |  |   |           
|Basic                                                |  |                          | 4,970,788  |      |   | 4,975,542  |  |   | 4,975,542 
|                                                     |  |                          |            |      |   |            |  |   |           
|Diluted                                              |  |                          | 4,970,788  |      |   | 4,978,652  |  |   | 4,980,708 
|                                                     |  |                          |            |      |   |            |  |   |           
|Dividends per Common Share                           |  | $                        | 0.84       |      | $ | 0.92       |  | $ | 0.92      
|                                                     |  |                          |            |      |   |            |  |   |           

See Notes to Consolidated Financial Statements



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Consolidated Statements of Changes in Stockholders Equity



|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|--------------------------------------------------------------------------------------------- |  | ----------- | ------ | -------------- | - | ---------------- |  | - | ------------------------------------------- | - |  | -------------- | ---------- | - | ----- | - | ----------- | - |  | - | ---------- | -
|                                                                                              |  | CommonStock |        | Paid-InCapital |   | RetainedEarnings |  |   | Accumulated OtherComprehensiveIncome (Loss) |   |  | Treasury Stock |            |   | Total |  
|Balance - January 1, 2006                                                                     |  | $           | 69,000 |                | $ | 19,158,343       |  | $ | 61,972,334                                  |   |  | $              | 284,603    |   |       | $ | (22,868,292 | ) |  | $ | 58,615,988 |  
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Comprehensive income:                                                                         |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Net income                                                                                    |  |             |       |                |   |                 |  |   | 6,541,867                                   |   |  |                |           |   |       |   |            |   |  |   | 6,541,867  |  
|Unrealized loss on securities available for sale, net of income taxes of $14,214              |  |             |       |                |   |                 |  |   |                                            |   |  |                | (21,977    | ) |       |   |            |   |  |   | (21,977    | )
|Realized gain on securities available for sale, net of income taxes of $171,778               |  |             |       |                |   |                 |  |   |                                            |   |  |                | (258,311   | ) |       |   |            |   |  |   | (258,311   | )
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Total Comprehensive Income                                                                    |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   | 6,261,579  |  
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Adjustment to initially apply FASB Statement No. 158, net of income taxes of $1,068,789       |  |             |       |                |   |                 |  |   |                                            |   |  |                | (1,603,182 | ) |       |   |            |   |  |   | (1,603,182 | )
|Purchase of treasury stock                                                                    |  |             |       |                |   |                 |  |   |                                            |   |  |                |           |   |       |   | (644,620    | ) |  |   | (644,620   | )
|Sale of treasury stock                                                                        |  |             |       |                |   | 181,272          |  |   |                                            |   |  |                |           |   |       |   | 334,208     |   |  |   | 515,480    |  
|Cash dividends                                                                                |  |             |       |                |   |                 |  |   | (4,577,499                                  | ) |  |                |           |   |       |   |            |   |  |   | (4,577,499 | )
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Balance - December 31, 2006                                                                   |  |             | 69,000 |                |   | 19,339,615       |  |   | 63,936,702                                  |   |  |                | (1,598,867 | ) |       |   | (23,178,704 | ) |  |   | 58,567,746 |  
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Comprehensive income:                                                                         |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Net income                                                                                    |  |             |       |                |   |                 |  |   | 4,352,248                                   |   |  |                |           |   |       |   |            |   |  |   | 4,352,248  |  
|Unrealized loss on securities available for sale, net of income taxes of $2,700               |  |             |       |                |   |                 |  |   |                                            |   |  |                | (4,029     | ) |       |   |            |   |  |   | (4,029     | )
|Benefit plans, net of income taxes of $200,675                                                |  |             |       |                |   |                 |  |   |                                            |   |  |                | 301,008    |   |       |   |            |   |  |   | 301,008    |  
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Total Comprehensive Income                                                                    |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   | 4,649,227  |  
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Cash dividends                                                                                |  |             |       |                |   |                 |  |   | (4,577,499                                  | ) |  |                |           |   |       |   |            |   |  |   | (4,577,499 | )
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Balance - December 31, 2007                                                                   |  |             | 69,000 |                |   | 19,339,615       |  |   | 63,711,451                                  |   |  |                | (1,301,888 | ) |       |   | (23,178,704 | ) |  |   | 58,639,474 |  
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Comprehensive income:                                                                         |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Net income                                                                                    |  |             |       |                |   |                 |  |   | 2,459,318                                   |   |  |                |           |   |       |   |            |   |  |   | 2,459,318  |  
|Unrealized loss on securities available for sale, net of income taxes of $19,500              |  |             |       |                |   |                 |  |   |                                            |   |  |                | (29,171    | ) |       |   |            |   |  |   | (29,171    | )
|Benefit plans, net of income taxes of $1,191,861                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                | (1,787,790 | ) |       |   |            |   |  |   | (1,787,790 | )
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Total Comprehensive Income                                                                    |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   | 642,357    |  
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Implementation of change in measurement date of benefit plans, net of income taxes of $46,017 |  |             |       |                |   |                 |  |   | (69,025                                     | ) |  |                |           |   |       |   |            |   |  |   | (69,025    | )
|Purchase of treasury stock                                                                    |  |             |       |                |   |                 |  |   |                                            |   |  |                |           |   |       |   | (361,101    | ) |  |   | (361,101   | )
|Cash dividends                                                                                |  |             |       |                |   |                 |  |   | (4,173,455                                  | ) |  |                |           |   |       |   |            |   |  |   | (4,173,455 | )
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  
|Balance - December 31, 2008                                                                   |  | $           | 69,000 |                | $ | 19,339,615       |  | $ | 61,928,289                                  |   |  | $              | (3,118,849 | ) |       | $ | (23,539,805 | ) |  | $ | 54,678,250 |  
|                                                                                              |  |             |        |                |   |                  |  |   |                                             |   |  |                |            |   |       |   |             |   |  |   |            |  

See Notes to Consolidated Financial Statements



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Consolidated Statements of Cash Flows



|                                                                                  |  |                          |             |   |      |   |            |      |  |   |             |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | ---- | - | ---------- | ---- |  | - | ----------- | -
|                                                                                  |  | Years Ended December 31, |            
|                                                                                  |  | 2008                     |             |   | 2007 |   |            | 2006 | 
|Cash Flows from Operating Activities                                              |  |                          |             |   |      |   |            |      |  |   |             |  
|Net income                                                                        |  | $                        | 2,459,318   |   |      | $ | 4,352,248  |      |  | $ | 6,541,867   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |             |   |      |   |            |      |  |   |             |  
|Depreciation of premises and equipment                                            |  |                          | 486,951     |   |      |   | 588,233    |      |  |   | 568,252     |  
|Amortization of deferred fees, premiums and discounts, net                        |  |                          | 426,108     |   |      |   | 526,971    |      |  |   | 256,692     |  
|Provision for loan losses                                                         |  |                          | 1,630,000   |   |      |   | 670,000    |      |  |   |            |  
|Provision for loss on foreclosed real estate                                      |  |                          | 69,873      |   |      |   |           |      |  |   |            |  
|Originations of loans held for sale                                               |  |                          |            |   |      |   | (1,487,884 | )    |  |   |            |  
|Proceeds from loan sales                                                          |  |                          |            |   |      |   | 1,500,376  |      |  |   |            |  
|Gain on sale of loans sold                                                        |  |                          |            |   |      |   | (12,492    | )    |  |   |            |  
|Gain on sale of securities available for sale                                     |  |                          |            |   |      |   |           |      |  |   | (430,089    | )
|Deferred income tax (benefit) expense                                             |  |                          | (619,821    | ) |      |   | (473,894   | )    |  |   | 37,470      |  
|(Increase) decrease in interest receivable                                        |  |                          | (146,006    | ) |      |   | 155,664    |      |  |   | (84,752     | )
|Decrease (increase) in other assets                                               |  |                          | 673,523     |   |      |   | 174,996    |      |  |   | (42,176     | )
|Increase in other liabilities                                                     |  |                          | 188,332     |   |      |   | 374,326    |      |  |   | 65,908      |  
|                                                                                  |  |                          |             |   |      |   |            |      |  |   |             |  
|Net Cash Provided by Operating Activities                                         |  |                          | 5,168,278   |   |      |   | 6,368,544  |      |  |   | 6,913,172   |  
|                                                                                  |  |                          |             |   |      |   |            |      |  |   |             |  
|Cash Flows from Investing Activities                                              |  |                          |             |   |      |   |            |      |  |   |             |  
|Principal repayments on securities available for sale                             |  |                          | 97,624      |   |      |   | 245,844    |      |  |   | 109,817     |  
|Purchases of securities available for sale                                        |  |                          |            |   |      |   |           |      |  |   | (27,483     | )
|Proceeds from sale of securities available for sale                               |  |                          |            |   |      |   |           |      |  |   | 2,025,221   |  
|Purchases of investment securities held to maturity                               |  |                          | (1,020,759  | ) |      |   | (1,333,662 | )    |  |   |            |  
|Proceeds from maturity of investment securities held to maturity                  |  |                          |            |   |      |   |           |      |  |   | 1,000,000   |  
|Principal repayments on mortgage-backed securities held to maturity               |  |                          | 21,242,677  |   |      |   | 20,781,037 |      |  |   | 25,888,579  |  
|Purchases of mortgage-backed securities held to maturity                          |  |                          | (14,994,187 | ) |      |   | (3,909,245 | )    |  |   |            |  
|Net change in loans receivable                                                    |  |                          | (279,183    | ) |      |   | 14,522,764 |      |  |   | (16,679,941 | )
|Capital improvement to foreclosed real estate                                     |  |                          | (10,226     | ) |      |   |           |      |  |   |            |  
|Additions to premises and equipment                                               |  |                          | (76,088     | ) |      |   | (197,495   | )    |  |   | (442,981    | )
|(Purchase) redemption of Federal Home Loan Bank of New York stock                 |  |                          | (164,100    | ) |      |   | 725,100    |      |  |   | 233,100     |  
|                                                                                  |  |                          |             |   |      |   |            |      |  |   |             |  
|Net Cash Provided by Investing Activities                                         |  |                          | 4,795,758   |   |      |   | 30,834,343 |      |  |   | 12,106,312  |  
|                                                                                  |  |                          |             |   |      |   |            |      |  |   |             |  



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Consolidated Statements of Cash Flows



|                                                                   |  |                          |             |   |      |   |             |      |  |   |             |  
|------------------------------------------------------------------ |  | ------------------------ | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                   |  | Years Ended December 31, |            
|                                                                   |  | 2008                     |             |   | 2007 |   |             | 2006 | 
|Cash Flows from Financing Activities                               |  |                          |             |   |      |   |             |      |  |   |             |  
|Net (decrease) increase in deposits                                |  |                          | (63,962,420 | ) |      |   | 38,020,111  |      |  |   | (4,062,214  | )
|Advances from Federal Home Loan Bank of New York                   |  |                          |            |   |      |   |            |      |  |   | 40,000,000  |  
|Repayment of advances from Federal Home Loan Bank of New York      |  |                          | (15,000,000 | ) |      |   | (17,000,000 | )    |  |   | (37,000,000 | )
|Advances (repayment) in Federal Home Loan Bank overnight borrowing |  |                          | 20,500,000  |   |      |   |            |      |  |   | (8,400,000  | )
|Net decrease in other borrowed money                               |  |                          |            |   |      |   |            |      |  |   | (39,908     | )
|Net decrease in payments by borrowers for taxes and insurance      |  |                          | (275,777    | ) |      |   | (96,419     | )    |  |   | (33,865     | )
|Cash dividends paid                                                |  |                          | (4,173,455  | ) |      |   | (4,577,499  | )    |  |   | (4,577,499  | )
|Sale of treasury stock                                             |  |                          |            |   |      |   |            |      |  |   | 515,480     |  
|Purchase of treasury stock                                         |  |                          | (361,101    | ) |      |   |            |      |  |   | (644,620    | )
|                                                                   |  |                          |             |   |      |   |             |      |  |   |             |  
|Net Cash (Used in) Provided by Financing Activities                |  |                          | (63,272,753 | ) |      |   | 16,346,193  |      |  |   | (14,242,626 | )
|                                                                   |  |                          |             |   |      |   |             |      |  |   |             |  
|Net (Decrease) Increase in Cash and Cash Equivalents               |  |                          | (53,308,717 | ) |      |   | 53,549,080  |      |  |   | 4,776,858   |  
|Cash and Cash Equivalents - Beginning                              |  |                          | 66,896,019  |   |      |   | 13,346,939  |      |  |   | 8,570,081   |  
|                                                                   |  |                          |             |   |      |   |             |      |  |   |             |  
|Cash and Cash Equivalents - Ending                                 |  | $                        | 13,587,302  |   |      | $ | 66,896,019  |      |  | $ | 13,346,939  |  
|                                                                   |  |                          |             |   |      |   |             |      |  |   |             |  
|Supplementary Information                                          |  |                          |             |   |      |   |             |      |  |   |             |  
|Income taxes paid, net of refunds                                  |  | $                        | 2,150,084   |   |      | $ | 2,492,212   |      |  | $ | 3,523,899   |  
|                                                                   |  |                          |             |   |      |   |             |      |  |   |             |  
|Interest paid                                                      |  | $                        | 15,470,528  |   |      | $ | 18,125,636  |      |  | $ | 15,990,049  |  
|                                                                   |  |                          |             |   |      |   |             |      |  |   |             |  
|Loans transferred to foreclosed real estate                        |  | $                        |            |   |      | $ | 486,000     |      |  | $ |            |  
|                                                                   |  |                          |             |   |      |   |             |      |  |   |             |  
|Implementation of change in measurement date of benefit plans      |  | $                        | 69,025      |   |      | $ |            |      |  | $ |            |  
|                                                                   |  |                          |             |   |      |   |             |      |  |   |             |  



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1. Summary of
Significant Accounting Policies

BASIS OF CONSOLIDATED FINANCIAL STATEMENT
PRESENTATION

The consolidated financial statements include the accounts of Pamrapo Bancorp, Inc. (the Company), its wholly
owned subsidiary, Pamrapo Savings Bank, S.L.A. (the Bank) and the Banks wholly-owned subsidiaries, Pamrapo Service Corp., Inc. (the Service Corp.) and Pamrapo Investment Company (the Investment Company). The
Companys business is conducted principally through the Bank. All significant inter-company accounts and transactions have been eliminated in consolidation.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the period then ended. Actual results could
differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for loan losses, the assessment of prepayment risks associated with mortgage-backed
securities and the determination of the amount of deferred tax assets which are more likely than not to be realized. Management believes that the allowance for loan losses is adequate, prepayment risks associated with mortgage-backed securities are
properly recognized and all deferred tax assets are more likely than not to be recognized. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes
in economic conditions in the market area. Additionally, assessments of prepayment risks related to mortgage-backed securities are based upon current market conditions, which are subject to frequent change. Finally, the determination of the amount
of deferred tax assets more likely than not to be realized is dependent on projections of future earnings, which are subject to frequent change.

In
addition, various regulatory agencies, as an integral part of their examination process, periodically review the Banks allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance for loan losses based
on their judgments about information available to them at the time of their examination.

CASH AND CASH
EQUIVALENTS

Cash and cash equivalents include cash and amounts due from depository institutions and interest-bearing deposits in other
banks having original maturities of three months or less.

INVESTMENT AND MORTGAGE-BACKED
SECURITIES

Investments in debt securities that the Bank has the positive intent and ability to hold to maturity are classified as held
to maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized
holding gains and losses included in earnings. Debt and equity securities not classified as trading securities nor as held to maturity securities are classified as available for sale securities and reported at fair value, with unrealized holding
gains or losses, net of deferred income taxes, reported in a separate component of stockholders equity.

On a quarterly basis, management makes an
assessment to determine whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis. Management considers many factors including the
severity and duration of the impairment; the intent and ability of the Bank to hold the security for a period of time sufficient for a recovery in value; recent events specific to the issuer or industry; and for debt securities, external credit
ratings and recent downgrades. Securities on which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value with the write-down recorded as a realized loss.

Premiums and discounts on all securities are amortized/ accreted using the interest method. Interest and dividend income on securities, which includes amortization of
premiums and accretion of discounts, is recognized in the consolidated financial statements when earned. The adjusted cost basis of an identified security sold or called is used for determining security gains and losses recognized in the
consolidated statements of income.

LOANS RECEIVABLE

Loans receivable are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan origination fees and discounts.

The Bank defers loan origination fees and certain direct loan origination costs and amortizes/accretes



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such amounts as an adjustment of yield over the contractual lives of the related loans.

The accrual of interest on loans is discontinued at the time of the loan being 120 days past due unless the credit is well secured and in the process of collection. Uncollectible interest on loans is charged off, or
an allowance is established based on managements evaluation. An allowance is established by a charge to interest income equal to all interest previously accrued, and income is subsequently recognized only to the extent that cash payments are
received until, in managements judgment, the borrowers ability to make periodic interest and principal payments is probable, in which case the loan is returned to an accrual status.

ALLOWANCE FOR LOAN LOSSES

An allowance for loan losses is maintained at a level considered adequate to absorb loan losses. Management of the Bank, in determining the allowance for loan losses, considers the risks inherent in its loan portfolio
and changes in the nature and volume of its loan activities, along with the general economic and real estate market conditions.

The Bank utilizes a two
tier approach: (1) identification of impaired loans and the establishment of specific loss allowances, if necessary, on such loans; and (2) establishment of general valuation allowances on the remainder of its loan portfolio. The Bank maintains a
loan review system which allows for a periodic review of its loan portfolio and the early identification of potential impaired loans. Such system takes into consideration, among other things, delinquency status, size of loans, type of collateral and
financial condition of the borrowers. Specific loan loss allowances are established for identified loans based on a review of such information and/or appraisals of the underlying collateral. General loan loss allowances are based upon a combination
of factors including, but not limited to, actual loan loss experience, composition of loan portfolio, current economic conditions and managements judgment.

Although management believes that adequate specific and general loan loss allowances are established, actual losses are dependent upon future events and, as such, further additions to the allowance for loan losses may be necessary.

An impaired loan is evaluated based on the present value of expected future cash flows discounted at the loans effective interest rate, or as a
practical expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral dependent. A loan evaluated for impairment is deemed to be impaired when, based on current information and events, it is
probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. An insignificant payment delay, which is defined as up to ninety days by the Bank, will not cause a loan to be classified as
impaired. A loan is not impaired during a period of delay in payment if the Bank expects to collect all amounts due, including interest accrued at the contractual interest rate for the period of delay. Thus, a demand loan or other loan with no
stated maturity is not impaired if the Bank expects to collect all amounts due, including interest accrued at the contractual interest rate, during the period the loan is outstanding. All loans identified as impaired are evaluated independently. The
Bank does not aggregate such loans for evaluation purposes. Payments received on impaired loans are applied first to accrued interest receivable and then to principal.

FORECLOSED REAL ESTATE

Real estate acquired by foreclosure or deed in
lieu of foreclosure is initially recorded at estimated fair value at date of acquisition, establishing a new cost basis and subsequently carried at the lower of such initially recorded amount or estimated fair value less estimated costs to sell.
Costs incurred in developing or preparing properties for sale are capitalized. Expenses of holding properties and income from operating properties are recorded in operations as incurred or earned. Gains and losses from sales of such properties are
recognized as incurred.

ADVERTISING

Advertising expense is recorded when occurred.

BENEFIT PLANS

The Company has a non-contributory defined benefit pension plan covering all eligible employees. The benefits are based on years of service and employees
compensation. The defined benefit plan is funded in conformity with funding requirements of applicable government regulations. Prior service costs for the defined benefit plan generally are amortized over the estimated remaining service periods of
employees.

Certain employees are covered under a Supplemental Executive Retirement Plan (SERP). The SERP is an unfunded non-qualified deferred
retirement plan for certain employees. A participant who retires at the age of 65 (the Normal Retirement Age), is entitled to an annual retirement benefit equal to 75% of his compensation reduced by his retirement plan annual benefits.
Participants retiring before the Normal Retirement Age receive the same benefits reduced by a percentage based on years of service to the Company and the number of years prior to the Normal Retirement Age that participants retire.



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



The Company uses the corridor approach in the valuation of the defined benefit plan and SERP. The corridor approach defers all actuarial gains and losses resulting from
variances between actual results and economic estimates or actuarial assumptions. For a defined benefit plan, these unrecognized gains and losses are amortized when the net gains and losses exceed 10% of the greater of the market-related value of
plan assets or the projected benefit obligation at the beginning of the year. For SERP, amortization occurs when the net gains or losses exceed 10% of the accumulated SERP benefit obligation at the beginning of the year. The amount in excess of the
corridor is amortized over the average remaining service period to retirement date of active plan participants or, for retired participants, the average remaining life expectancy.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 158, Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans  an Amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires two major changes to accounting for defined benefit and postretirement plans, with two different effective dates. The
first requirement of SFAS No. 158, which the Company adopted as of December 31, 2006, requires the recognition of the over-funded and under-funded status of a defined benefit postretirement plan as an asset or liability in the consolidated
statement of financial condition, with changes in the funded status recorded through other comprehensive income in the year in which those changes occur. The effect of implementations of SFAS No. 158, was to increase Accumulated Other
Comprehensive Loss by $1,603,182 (net of related deferred tax benefit of $1,068,789).

The second requirement of SFAS No. 158, which is effective for
the Company as of January 1, 2008, requires that the funded status be measured as of the entitys fiscal year-end rather than as of an earlier date currently permitted. As a result of changing the measurement date from October 1 to
December 31 for its benefit plans, the Company recorded an adjustment of $69,025 (net of related deferred tax benefit of $46,017) to retained earnings.

PREMISES AND EQUIPMENT

Premises and equipment are comprised of land, at cost, and buildings,
building improvements, leaseholds and furnishings and equipment, at cost, less accumulated depreciation and amortization. Significant renewals and betterments are charged to the property and equipment account. Maintenance and repairs are expensed in
the year incurred. Rental income is netted against occupancy expense in the consolidated statements of income.

INCOME
TAXES

The Company, Bank, Service Corp. and Investment Company file a consolidated federal income tax return. Income taxes are allocated
to the Company, Bank, Service Corp. and Investment Company based on their respective income or loss included in the consolidated income tax return. Separate state income tax returns are filed by the Company, Bank, Service Corp. and Investment
Company.

Federal and state income taxes have been provided on the basis of reported income. The amounts reflected on the Companys and
subsidiaries tax returns differ from these provisions due principally to temporary differences in the reporting of certain items for financial reporting and income tax reporting purposes.

Deferred income tax expense or benefit is determined by recognizing deferred tax assets and liabilities for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. The realization of
deferred tax assets is assessed and a valuation allowance provided, when necessary, for that portion of the asset which is not likely to be realized. Management believes, based upon current facts, that it is more likely than not that there will be
sufficient taxable income in future years to realize the deferred tax assets.

Effective January 1, 2007, the Company adopted the provisions of FASB
Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes. The Interpretation provides clarification on accounting for uncertainty in income taxes recognized in an enterprises financial statements in
accordance with SFAS No. 109, Accounting for Income Taxes. The Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Companys evaluation of the implementation of FIN 48,
no significant income tax uncertainties were identified. Therefore, the Company recognized no adjustment for unrecognized tax benefits for the year ended December 31, 2007. The Companys policy is to recognize interest and penalties on
unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. The amount of interest and penalties for the year ended December



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31, 2007 was immaterial. The tax years subject to examination by the taxing authorities are the years ended December 31, 2007, 2006, 2005, 2004 and
2003.

In May 2007, the FASB issued FASB Staff Position (FSP) FIN 48-1, Definition of Settlement in FASB Interpretation No. 48
(FSP FIN 48-1). FSP FIN 48-1 provides guidance on how to determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. FSP FIN 48-1 is effective retroactively to January 1, 2007. The
implementation of this standard did not have a material impact on our consolidated financial position or results of operations.

FEDERAL
HOME LOAN

BANK OF NEW YORK STOCK

Federal Home Loan Bank of New York (FHLB) Stock, which represents required investment in the common stock of a correspondent bank, is
carried at cost and as of December 31, 2008 and 2007, consists of the common stock of FHLB.

Management evaluates the restricted stock for impairment
in accordance with Statement of Position (SOP) 01-6, Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others. Managements determination of whether these
investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is
influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted; (2) commitments by the FHLB to make payments
required by law or regulation and the level of such payments in relation to the operating performance of the FHLB; and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge is necessary related to the FHLB Stock as of December 31, 2008.

INTEREST RATE RISK

The
Bank is principally engaged in the business of attracting deposits from the general public and using these deposits, together with borrowings and other funds, to invest in securities, to make loans secured by real estate and, to a lesser extent,
make consumer loans. The potential for interest-rate risk exists as a result of the generally shorter duration of the Banks interest-sensitive liabilities compared to the generally longer duration of its interest-sensitive assets. In a rising
interest rate environment, liabilities will reprice faster than assets, thereby reducing net interest income. For this reason, management regularly monitors the maturity structure of the Banks assets and liabilities in order to measure its
level of interest-rate risk and to plan for future volatility.

STOCK-BASED COMPENSATION

The Company, under a plan approved by its stockholders in 2003, has granted stock options to certain employees. Prior to 2006, the Company accounted for options granted
using the intrinsic value method, in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No compensation expense had been reflected in net income for the
options granted as all such grants have an exercise price equal to the market price of the underlying stock at the date of grant.

The Company adopted SFAS
No. 123(R) on January 1, 2006 under the modified prospective method. Since all of the Companys stock options were vested prior to 2006, the adoption of SFAS No. 123(R) had no impact on the consolidated financial statements.

NET INCOME PER COMMON SHARE

Basic net income per common share is based on the weighted average number of common shares actually outstanding. Diluted net income per share is calculated by adjusting
the weighted average number of shares of common stock outstanding to include the effect of outstanding stock options, if dilutive, using the treasury stock method.

RECLASSIFICATION

Certain amounts for prior periods have been reclassified to conform to the current periods
presentation.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2008, the FASB issued FSP SFAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in
Variable Interest Entities (FSP SFAS 140-4 and FIN 46(R)-8). FSP SFAS 140-4 and FIN 46(R)-8 amends FASB SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to require public
entities to provide additional disclosures about transfers of financial assets. It also amends FIN 46(R), Consolidation of Variable Interest Entities, to require public enterprises, including sponsors that have a variable interest in a
variable interest entity, to provide additional disclosures about their involvement with variable interest entities. Additionally, this FSP requires certain disclosures to be provided by a public enterprise that is: (a) a sponsor of a
qualifying special purpose entity (SPE) that holds a variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



SPE; and (b) a servicer of a qualifying SPE that holds a significant variable interest in the qualifying SPE but was not the transferor of financial assets to the
qualifying SPE. The disclosures required by FSP SFAS 140-4 and FIN 46(R)-8 are intended to provide greater transparency to financial statement users about a transferors continuing involvement with transferred financial assets and an
enterprises involvement with variable interest entities and qualifying SPEs. FSP SFAS 140-4 and FIN 46(R) is effective for reporting periods (annual or interim) ending after December 15, 2008. The Company is currently reviewing the effect
this new pronouncement will have on its consolidated financial statements.

In January 2009, the FASB issued FSP Emerging Issues Task Force
(EITF) 99-20-1, Amendments to the Impairment of Guidance of EITF Issue No. 99-20 (FSP EITF 99-20-1). FSP EITF 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, Recognition of Interest Income and
Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, to achieve more consistent determination of whether an other-than-temporary impairment has
occurred. FSP EITF 99-20-1 also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, and other related guidance. FSP EITF 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual
reporting period is not permitted. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS is a comprehensive series of
accounting standards published by the International Accounting Standards Board (IASB). Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a
determination in 2011 regarding the mandatory adoption of IFRS. The Company is currently assessing the impact that this potential change would have on its consolidated financial statements, and it will continue to monitor the development of the
potential implementation of IFRS.

In December 2008, the FASB issued FSP FAS 132(R)-1, Employers Disclosures about Postretirement Benefit Plan
Assets. This FSP amends SFAS 132(R), Employers Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employers disclosures about plan assets of a defined benefit pension or other
postretirement plan. The disclosures about plan assets required by this FSP shall be provided for fiscal years ending after December 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated
financial statements.

In November 2008, the FASB ratified EITF Issue No. 08-6, Equity Method Investment Accounting Considerations. EITF
08-6 clarifies the accounting for certain transactions and impairment considerations involving equity method investments. EITF 08-6 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company is
currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

In September 2008, the FASB issued FSP 133-1 and
FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 (FSP 133-1 and FIN
45-4). FSP 133-1 and FIN 45-4 amends and enhances disclosure requirements for sellers of credit derivatives and financial guarantees. It also clarifies that the disclosure requirements of SFAS No. 161 are effective for quarterly periods
beginning after November 15, 2008, and fiscal years that include those periods. FSP 133-1 and FIN 45-4 is effective for reporting periods (annual or interim) ending after November 15, 2008. The implementation of this standard will not have
a material impact on our consolidated financial position and results of operations.

In September 2008, the FASB ratified EITF Issue No. 08-5,
Issuers Accounting for Liabilities Measured at Fair Value With a Third-Party Credit Enhancement (EITF 08-5). EITF 08-5 provides guidance for measuring liabilities issued with an attached third-party credit enhancement (such as a
guarantee). It clarifies that the issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. EITF 08-5 is effective for the first reporting
period beginning after December 15, 2008. The Company is currently assessing the impact of EITF 08-5 on its consolidated financial position and results of operations.

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and



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Hedging Activitiesan amendment of FASB Statement No. 133 (Statement 161). Statement 161 requires
entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives.
Statement 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS 133 have been applied, and the impact that hedges have on an
entitys financial position, financial performance, and cash flows. Statement 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently evaluating the
potential impact the new pronouncement will have on its consolidated financial statements.

In February 2008, the FASB issued a FASB Staff Position (FSP)
FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions. This FSP addresses the issue of whether or not these transactions should be viewed as two

separate transactions or as one linked transaction. The FSP includes a rebuttable presumption that presumes linkage of the two transactions unless
the presumption can be overcome by meeting certain criteria. The FSP will be effective for fiscal years beginning after November 15, 2008 and will apply only to original transfers made after that date; early adoption will not be allowed. The
Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In May 2008, the FASB
issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial
statements. This Statement is effective 60 days following the Securities and Exchange Commissions approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity
with Generally Accepted Accounting Principles. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



Note 2. Securities Available for Sale



|                                                                 |  |               |         |                       |   |                        |  |           |        |  |   |        
|---------------------------------------------------------------- |  | ------------- | ------- | --------------------- | - | ---------------------- |  | --------- | ------ |  | - | -------
|                                                                 |  | AmortizedCost |         | Gross UnrealizedGains |   | Gross UnrealizedLosses |  | FairValue
|December 31, 2008:                                               |  |               |         |                       |   |                        |  |           |        |  |   |        
|Mortgage-backed securities                                       |  | $             | 418,937 |                       | $ | 792                    |  | $         | 977    |  | $ | 418,752
|Trust originated preferred security, maturing after twenty years |  |               | 400,000 |                       |   |                       |  |           | 48,000 |  |   | 352,000
|                                                                 |  |               |         |                       |   |                        |  |           |        |  |   |        
|                                                                 |  | $             | 818,937 |                       | $ | 792                    |  | $         | 48,977 |  | $ | 770,752
|                                                                 |  |               |         |                       |   |                        |  |           |        |  |   |        
|                                                                 |  |               |         |                      
|December 31, 2007:                                               |  |               |         |                       |   |                        |  |           |        |  |   |        
|Mortgage-backed securities                                       |  | $             | 516,561 |                       | $ | 4,486                  |  | $         |       |  | $ | 521,047
|Trust originated preferred security, maturing after twenty years |  |               | 400,000 |                       |   |                       |  |           | 4,000  |  |   | 396,000
|                                                                 |  |               |         |                       |   |                        |  |           |        |  |   |        
|                                                                 |  | $             | 916,561 |                       | $ | 4,486                  |  | $         | 4,000  |  | $ | 917,047
|                                                                 |  |               |         |                       |   |                        |  |           |        |  |   |        

The unrealized loss, categorized by the length of time of continuous loss position, and the fair value of the
related security available for sale is as follows:



|                                                                 |  |                     |         |                     |   |           |  |                  |         |           |   |                  |  |   |         |  |   |       
|---------------------------------------------------------------- |  | ------------------- | ------- | ------------------- | - | --------- |  | ---------------- | ------- | --------- | - | ---------------- |  | - | ------- |  | - | ------
|                                                                 |  | Less than 12 Months |         | More than 12 Months |   | Total    
|                                                                 |  | FairValue           |         | UnrealizedLosses    |   | FairValue |  | UnrealizedLosses |         | FairValue |   | UnrealizedLosses
|December 31, 2008:                                               |  |                     |         |                     |   |           |  |                  |         |           |   |                  |  |   |         |  |   |       
|Mortgage-backed securities                                       |  | $                   | 207,724 |                     | $ | 977       |  | $                |        |           | $ |                 |  | $ | 207,724 |  | $ | 977   
|Trust originated preferred security, maturing after twenty years |  |                     |        |                     |   |          |  |                  | 352,000 |           |   | 48,000           |  |   | 352,000 |  |   | 48,000
|                                                                 |  |                     |         |                     |   |           |  |                  |         |           |   |                  |  |   |         |  |   |       
|                                                                 |  | $                   | 207,724 |                     | $ | 977       |  | $                | 352,000 |           | $ | 48,000           |  | $ | 559,724 |  | $ | 48,977
|                                                                 |  |                     |         |                     |   |           |  |                  |         |           |   |                  |  |   |         |  |   |       
|                                                                 |  |                     |         |                     |   |          
|December 31, 2007:                                               |  |                     |         |                     |   |           |  |                  |         |           |   |                  |  |   |         |  |   |       
|                                                                 |  |                     |         |                     |   |          
|Trust originated preferred security, maturing after twenty years |  | $                   | 396,000 |                     | $ | 4,000     |  | $                |        |           | $ |                 |  | $ | 396,000 |  | $ | 4,000 
|                                                                 |  |                     |         |                     |   |           |  |                  |         |           |   |                  |  |   |         |  |   |       

During the year ended December 31, 2007, trust originated preferred securities with a face value of $100,000
were called at par.

During the year ended December 31, 2006, a mutual fund with a book value of $1,588,112 was redeemed and a loss of $43,825 was
realized and an equity security with a book value of $7,020 was sold and a profit of $473,914 was realized. There were no sales of securities available for sale during the years ended December 31, 2008 and 2007.

Management does not believe that any of the unrealized losses at December 31, 3008 represent an other-than-temporary impairment. The unrealized losses are on
subordinated notes and mortgage-backed securities that earn interest at a fixed rate. Such losses are due to changes in market interest rates while the above investments are at a fixed rate. The Bank has the intent and ability to hold these
investments for a time necessary to recover the amortized cost. At December 31, 2008 unrealized losses were on three mortgage-backed securities and one trust-originated preferred security.



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Note 3. Investment Securities Held to Maturity



|                                          |  |               |            |                       |   |                        |  |                     |         |  |   |           
|----------------------------------------- |  | ------------- | ---------- | --------------------- | - | ---------------------- |  | ------------------- | ------- |  | - | ----------
|                                          |  | AmortizedCost |            | Gross UnrealizedGains |   | Gross UnrealizedLosses |  | EstimatedFair Value
|December 31, 2008:                        |  |               |            |                       |   |                        |  |                     |         |  |   |           
|Subordinated notes:                       |  |               |            |                       |   |                        |  |                     |         |  |   |           
|Due after one within five years           |  | $             | 10,016,420 |                       | $ |                       |  | $                   | 516,420 |  | $ | 9,500,000 
|Municipal Obligations:                    |  |               |            |                       |   |                        |  |                     |         |  |   |           
|Due after ten years through fifteen years |  |               | 1,333,745  |                       |   | 17,330                 |  |                     | 19,665  |  |   | 1,331,410 
|                                          |  |               |            |                       |   |                        |  |                     |         |  |   |           
|                                          |  | $             | 11,350,165 |                       | $ | 17,330                 |  | $                   | 536,085 |  | $ | 10,831,410
|                                          |  |               |            |                       |   |                        |  |                     |         |  |   |           
|December 31, 2007:                        |  |               |            |                       |   |                        |  |                     |         |  |   |           
|Subordinated notes:                       |  |               |            |                       |   |                        |  |                     |         |  |   |           
|Due after one within five years           |  | $             | 9,043,236  |                       | $ | 262,464                |  | $                   |        |  | $ | 9,305,700 
|Municipal Obligations:                    |  |               |            |                       |   |                        |  |                     |         |  |   |           
|Due after ten years through fifteen years |  |               | 374,786    |                       |   | 4,189                  |  |                     |        |  |   | 378,975   
|Due after fifteen years                   |  |               | 958,898    |                       |   | 6,879                  |  |                     |        |  |   | 965,777   
|                                          |  |               |            |                       |   |                        |  |                     |         |  |   |           
|                                          |  | $             | 10,376,920 |                       | $ | 273,532                |  | $                   |        |  | $ | 10,650,452
|                                          |  |               |            |                       |   |                        |  |                     |         |  |   |           

The unrealized losses, categorized by the length of time of continuous loss position, and fair value of related
investment securities held to maturity are as follows:



|                                          |  |                     |            |                     |   |           |  |                  |   |           |   |                  |  |   |            |  |   |        
|----------------------------------------- |  | ------------------- | ---------- | ------------------- | - | --------- |  | ---------------- | - | --------- | - | ---------------- |  | - | ---------- |  | - | -------
|                                          |  | Less than 12 Months |            | More than 12 Months |   | Total    
|                                          |  | FairValue           |            | UnrealizedLosses    |   | FairValue |  | UnrealizedLosses |   | FairValue |   | UnrealizedLosses
|December 31, 2008:                        |  |                     |            |                     |   |           |  |                  |   |           |   |                  |  |   |            |  |   |        
|Subordinated notes:                       |  |                     |            |                     |   |           |  |                  |   |           |   |                  |  |   |            |  |   |        
|Due after one within five years           |  | $                   | 9,500,000  |                     | $ | 516,420   |  | $                |  |           | $ |                 |  | $ | 9,500,000  |  | $ | 516,420
|Municipal obligations:                    |  |                     |            |                     |   |           |  |                  |   |           |   |                  |  |   |            |  |   |        
|Due after ten years through fifteen years |  |                     | 575,000    |                     |   | 19,665    |  |                  |  |           |   |                 |  |   | 575,000    |  |   | 19,665 
|                                          |  |                     |            |                     |   |           |  |                  |   |           |   |                  |  |   |            |  |   |        
|                                          |  | $                   | 10,075,000 |                     | $ | 536,085   |  | $                |  |           | $ |                 |  | $ | 10,075,000 |  | $ | 536,085
|                                          |  |                     |            |                     |   |           |  |                  |   |           |   |                  |  |   |            |  |   |        

Management does not believe that any of the unrealized losses at December 31, 2008 represent an
other-than-temporary impairment. The unrealized losses are on subordinated notes and municipal securities that earn interest at a fixed rate. Such unrealized losses are due to changes in market interest rates while the above investments are at a
fixed rate. The Bank has the intent and ability to hold these investments for a time necessary to recover the amortized cost. At December 31, 2008 the unrealized losses included seven subordinated notes and one municipal obligation.

There were no sales of investment securities held to maturity during the years ended December 31, 2008, 2007 and 2006.



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



Note 4 - Mortgage-Backed Securities Held to Maturity



|                                         |  |               |             |                       |   |                        |  |                     |           |  |   |            
|---------------------------------------- |  | ------------- | ----------- | --------------------- | - | ---------------------- |  | ------------------- | --------- |  | - | -----------
|                                         |  | AmortizedCost |             | Gross UnrealizedGains |   | Gross UnrealizedLosses |  | Estimated FairValue
|December 31, 2008:                       |  |               |             |                       |   |                        |  |                     |           |  |   |            
|Federal Home Loan Mortgage Corporation   |  | $             | 81,256,914  |                       | $ | 2,086,447              |  | $                   | 794       |  | $ | 83,342,567 
|Federal National Mortgage Association    |  |               | 20,776,291  |                       |   | 413,077                |  |                     | 24,456    |  |   | 21,164,912 
|Government National Mortgage Association |  |               | 103,057     |                       |   | 6,538                  |  |                     |          |  |   | 109,595    
|Collateralized mortgage obligations      |  |               | 15,291,390  |                       |   | 61,461                 |  |                     | 49,779    |  |   | 15,303,072 
|                                         |  |               |             |                       |   |                        |  |                     |           |  |   |            
|                                         |  | $             | 117,427,652 |                       | $ | 2,567,523              |  | $                   | 75,029    |  | $ | 119,920,146
|                                         |  |               |             |                       |   |                        |  |                     |           |  |   |            
|December 31, 2007:                       |  |               |             |                       |   |                        |  |                     |           |  |   |            
|Federal Home Loan Mortgage Corporation   |  | $             | 86,886,817  |                       | $ | 171,847                |  | $                   | 1,433,276 |  | $ | 85,625,388 
|Federal National Mortgage Association    |  |               | 24,893,450  |                       |   | 111,579                |  |                     | 745,823   |  |   | 24,259,206 
|Government National Mortgage Association |  |               | 126,593     |                       |   | 9,223                  |  |                     |          |  |   | 135,816    
|Collateralized mortgage obligations      |  |               | 11,999,772  |                       |   | 2                      |  |                     | 597,760   |  |   | 11,402,014 
|                                         |  |               |             |                       |   |                        |  |                     |           |  |   |            
|                                         |  | $             | 123,906,632 |                       | $ | 292,651                |  | $                   | 2,776,859 |  | $ | 121,422,424
|                                         |  |               |             |                       |   |                        |  |                     |           |  |   |            

The unrealized losses, categorized by the length of time of continuous loss position, and the fair value of
related mortgage-backed securities held to maturity are as follows:



|                                       |  |                     |         |                     |   |           |  |                  |             |           |   |                  |  |   |             |  |   |          
|-------------------------------------- |  | ------------------- | ------- | ------------------- | - | --------- |  | ---------------- | ----------- | --------- | - | ---------------- |  | - | ----------- |  | - | ---------
|                                       |  | Less than 12 Months |         | More than 12 Months |   | Total    
|                                       |  | Fair Value          |         | UnrealizedLosses    |   | FairValue |  | UnrealizedLosses |             | FairValue |   | UnrealizedLosses
|December 31, 2008:                     |  |                     |         |                     |   |           |  |                  |             |           |   |                  |  |   |             |  |   |          
|Federal Home Loan Mortgage Corporation |  | $                   | 108,226 |                     | $ | 794       |  | $                |            |           | $ |                 |  | $ | 108,226     |  | $ | 794      
|Federal National Mortgage Corporation  |  |                     | 28,955  |                     |   | 231       |  |                  | 5,334,274   |           |   | 24,225           |  |   | 5,363,229   |  |   | 24,456   
|Collateralized mortgage obligations    |  |                     |        |                     |   |          |  |                  | 8,088,817   |           |   | 49,779           |  |   | 8,088,817   |  |   | 49,779   
|                                       |  |                     |         |                     |   |           |  |                  |             |           |   |                  |  |   |             |  |   |          
|                                       |  | $                   | 137,181 |                     | $ | 1,025     |  | $                | 13,423,091  |           | $ | 74,004           |  | $ | 13,560,272  |  | $ | 75,029   
|                                       |  |                     |         |                     |   |           |  |                  |             |           |   |                  |  |   |             |  |   |          
|                                       |  |                     |         |                     |   |          
|December 31, 2007:                     |  |                     |         |                     |   |           |  |                  |             |           |   |                  |  |   |             |  |   |          
|Federal Home Loan Mortgage Corporation |  | $                   |        |                     | $ |          |  | $                | 68,827,391  |           | $ | 1,433,276        |  | $ | 68,827,391  |  | $ | 1,433,276
|Federal National Mortgage Corporation  |  |                     |        |                     |   |          |  |                  | 20,207,295  |           |   | 745,823          |  |   | 20,207,295  |  |   | 745,823  
|Collateralized mortgage obligations    |  |                     |        |                     |   |          |  |                  | 11,401,045  |           |   | 597,760          |  |   | 11,401,045  |  |   | 597,760  
|                                       |  |                     |         |                     |   |           |  |                  |             |           |   |                  |  |   |             |  |   |          
|                                       |  | $                   |        |                     | $ |          |  | $                | 100,435,731 |           | $ | 2,776,859        |  | $ | 100,435,731 |  | $ | 2,776,859
|                                       |  |                     |         |                     |   |           |  |                  |             |           |   |                  |  |   |             |  |   |          

Management does not believe that any of the unrealized losses at December 31, 2008 and 2007, represent an
other-than-temporary

impairment. The unrealized losses on the mortgage-backed securities portfolio are due primarily to increases in market interest rates.

The securities with unrealized losses are primarily at fixed interest rates. The Bank has the intent and ability to hold these securities for a time
necessary to recover the amortized cost. At December 31, 2008 the unrealized losses included three Federal Home Loan Mortgage Corporation securities, five Federal National Mortgage Corporation securities and three collateralized mortgage
obligations.

There were no sales of mortgage-backed securities held to maturity during the years ended December 31, 2008, 2007 and 2006.



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Note 5. Loans Receivable



|                           |  |              |             |   |      |   |             |  
|-------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                           |  | December 31, |            
|                           |  | 2008         |             |   | 2007 |  
|Real estate mortgage:      |  |              |             |   |      |   |             |  
|One-to-four family         |  | $            | 229,276,592 |   |      | $ | 220,466,440 |  
|Multi-family               |  |              | 53,770,881  |   |      |   | 53,340,123  |  
|Commercial                 |  |              | 65,724,255  |   |      |   | 69,911,297  |  
|                           |  |              |             |   |      |   |             |  
|                           |  |              | 348,771,728 |   |      |   | 343,717,860 |  
|                           |  |              |             |   |      |   |             |  
|Real estate construction   |  |              | 12,123,434  |   |      |   | 15,457,598  |  
|                           |  |              |             |   |      |   |             |  
|Land                       |  |              | 75,500      |   |      |   | 75,500      |  
|                           |  |              |             |   |      |   |             |  
|Commercial                 |  |              | 13,569,042  |   |      |   | 10,317,987  |  
|                           |  |              |             |   |      |   |             |  
|Consumer:                  |  |              |             |   |      |   |             |  
|Passbook or certificate    |  |              | 776,907     |   |      |   | 719,858     |  
|Home improvement           |  |              | 1,141       |   |      |   | 24,520      |  
|Equity and second mortgage |  |              | 66,278,338  |   |      |   | 71,901,556  |  
|Automobile                 |  |              | 425,547     |   |      |   | 561,433     |  
|Personal                   |  |              | 776,081     |   |      |   | 938,236     |  
|                           |  |              |             |   |      |   |             |  
|                           |  |              | 68,258,014  |   |      |   | 74,145,603  |  
|                           |  |              |             |   |      |   |             |  
|Total Loans                |  |              | 442,797,718 |   |      |   | 443,714,548 |  
|                           |  |              |             |   |      |   |             |  
|Loans in process           |  |              | 1,821,194   |   |      |   | 2,718,470   |  
|Allowance for loan losses  |  |              | 4,660,705   |   |      |   | 3,154,977   |  
|Deferred loan fees         |  |              | (1,238,350  | ) |      |   | (1,211,989  | )
|                           |  |              |             |   |      |   |             |  
|                           |  |              | 5,243,549   |   |      |   | 4,661,458   |  
|                           |  |              |             |   |      |   |             |  
|                           |  | $            | 437,554,169 |   |      | $ | 439,053,090 |  
|                           |  |              |             |   |      |   |             |  

At December 31, 2008, 2007 and 2006, loans serviced by the Bank for the benefit of others totaled
approximately $1,301,000, $1,708,000, and $281,000, respectively.

The following is an analysis of the allowance for loan losses:



|                                 |  |                          |           |   |      |   |           |      |  |   |           |  
|-------------------------------- |  | ------------------------ | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                 |  | Years Ended December 31, |          
|                                 |  | 2008                     |           |   | 2007 |   |           | 2006 | 
|Balance, beginning               |  | $                        | 3,154,977 |   |      | $ | 2,650,679 |      |  | $ | 2,755,000 |  
|Provisions charged to operations |  |                          | 1,630,000 |   |      |   | 670,000   |      |  |   |          |  
|Recoveries credited to allowance |  |                          |          |   |      |   | 103,938   |      |  |   | 8,570     |  
|Loan losses charged to allowance |  |                          | (124,272  | ) |      |   | (269,640  | )    |  |   | (112,891  | )
|                                 |  |                          |           |   |      |   |           |      |  |   |           |  
|Balance, ending                  |  | $                        | 4,660,705 |   |      | $ | 3,154,977 |      |  | $ | 2,650,679 |  
|                                 |  |                          |           |   |      |   |           |      |  |   |           |  

Impaired loans and related amounts recorded in the allowance for loan losses are summarized as follows:



|                                        |  |              |           |      |   |          
|--------------------------------------- |  | ------------ | --------- | ---- | - | ---------
|                                        |  | December 31,
|                                        |  | 2008         |           | 2007
|Recorded investment in impaired loans:  |  |              |           |      |   |          
|With recorded allowances                |  | $            | 2,586,580 |      | $ | 1,925,693
|Related allowance for loan losses       |  |              | 1,085,937 |      |   | 702,857  
|                                        |  |              |           |      |   |          
|Net Impaired Loans                      |  | $            | 1,500,643 |      | $ | 1,222,836
|                                        |  |              |           |      |   |          
|Average balance of total impaired loans |  | $            | 2,056,082 |      | $ | 448,910  
|                                        |  |              |           |      |   |          

At December 31, 2008, 2007 and 2006, non-accrual loans for which interest has been discontinued totaled
approximately $5,553,000, $3,410,000, and $896,000, respectively. During the years ended December 31, 2008, 2007 and 2006, the Bank recognized interest income of approximately $103,000, $86,000, and $10,000, respectively, on these loans.
Interest income that would have been recorded, had the loans been on the accrual status, would have amounted to approximately $363,000, $261,000, and $67,000 for the years ended December 31, 2008, 2007 and 2006, respectively. The Bank is not
committed to lend additional funds to the borrowers whose loans have been placed on non-accrual status. The activity with respect to loans to directors, officers and associates of such persons, is as follows:



|                             |  |              |           |   |      |   |           |  
|---------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                             |  | December 31, |          
|                             |  | 2008         |           |   | 2007 |  
|Balance, beginning           |  | $            | 6,865,732 |   |      | $ | 6,519,573 |  
|Loans originated(1)          |  |              | 1,378,923 |   |      |   | 636,756   |  
|Persons no longer associated |  |              | (133,925  | ) |      |   |          |  
|Collection of principal      |  |              | (296,138  | ) |      |   | (290,597  | )
|                             |  |              |           |   |      |   |           |  
|Balance, ending              |  | $            | 7,814,592 |   |      | $ | 6,865,732 |  
|                             |  |              |           |   |      |   |           |  



|(1) | Includes net change in line of credit loans.
|--- | --------------------------------------------



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



Note 6. Premises and Equipment



|                           |  |              |            |   |      |   |            |  
|-------------------------- |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                           |  | December 31, |           
|                           |  | 2008         |            |   | 2007 |  
|Land                       |  | $            | 701,625    |   |      | $ | 701,625    |  
|                           |  |              |            |   |      |   |            |  
|Buildings and improvements |  |              | 4,086,680  |   |      |   | 4,086,680  |  
|Accumulated depreciation   |  |              | (2,574,036 | ) |      |   | (2,455,124 | )
|                           |  |              |            |   |      |   |            |  
|                           |  |              | 1,512,644  |   |      |   | 1,631,556  |  
|                           |  |              |            |   |      |   |            |  
|Leasehold improvements     |  |              | 1,571,552  |   |      |   | 1,571,552  |  
|Accumulated amortization   |  |              | (1,339,192 | ) |      |   | (1,221,311 | )
|                           |  |              |            |   |      |   |            |  
|                           |  |              | 232,360    |   |      |   | 350,241    |  
|                           |  |              |            |   |      |   |            |  
|Furnishings and equipment  |  |              | 6,973,929  |   |      |   | 6,897,840  |  
|Accumulated depreciation   |  |              | (6,491,523 | ) |      |   | (6,241,364 | )
|                           |  |              |            |   |      |   |            |  
|                           |  |              | 482,406    |   |      |   | 656,476    |  
|                           |  |              |            |   |      |   |            |  
|                           |  | $            | 2,929,035  |   |      | $ | 3,339,898  |  
|                           |  |              |            |   |      |   |            |  

Depreciation expense for the years ended December 31, 2008, 2007, and 2006 totaled $486,951, $588,233, and
$568,252, respectively. Depreciation charges are computed on the straight-line method over the following estimated useful lives:



|                           |  |                                        
|-------------------------- |  | ---------------------------------------
|                           |  | Years                                  
|Buildings and improvements |  | 10 - 50                                
|Leasehold improvements     |  | Shorter of 5-10 years or terms of lease
|Furnishings and equipment  |  | 3 - 10                                 

Note 7. Interest Receivable



|                           |  |              |           |      |   |          
|-------------------------- |  | ------------ | --------- | ---- | - | ---------
|                           |  | December 31,
|                           |  | 2008         |           | 2007
|Loans                      |  | $            | 2,204,634 |      | $ | 2,047,801
|Mortgage-backed securities |  |              | 472,548   |      |   | 499,071  
|Investment securities      |  |              | 207,249   |      |   | 191,553  
|                           |  |              |           |      |   |          
|                           |  | $            | 2,884,431 |      | $ | 2,738,425
|                           |  |              |           |      |   |          

Note 8. Deposits



|                        |  |                     |   |  |        |             |         |        |   |                     |      |   |        |   |             |  |        |  
|----------------------- |  | ------------------- | - |  | ------ | ----------- | ------- | ------ | - | ------------------- | ---- | - | ------ | - | ----------- |  | ------ | -
|                        |  | December 31,        |  
|                        |  | 2008                |   |  | 2007   |            
|                        |  | WeightedAverageRate |   |  | Amount |             | Percent |        |   | WeightedAverageRate |      |   | Amount |   | Percent     | 
|Demand:                 |  |                     |   |  |        |             |         |        |   |                     |      |   |        |   |             |  |        |  
|Non-interest bearing    |  | 0.00                | % |  | $      | 40,681,753  |         | 9.16   | % |                     | 0.00 | % |        | $ | 38,225,640  |  | 7.53   | %
|NOW                     |  | 0.92                | % |  |        | 36,045,882  |         | 8.12   | % |                     | 1.52 | % |        |   | 82,322,395  |  | 16.21  | %
|                        |  |                     |   |  |        |             |         |        |   |                     |      |   |        |   |             |  |        |  
|                        |  | 0.41                | % |  |        | 76,727,635  |         | 17.28  | % |                     | 1.04 | % |        |   | 120,548,035 |  | 23.74  | %
|Money market            |  | 2.26                | % |  |        | 25,821,557  |         | 5.82   | % |                     | 2.87 | % |        |   | 26,305,317  |  | 5.18   | %
|Savings and club        |  | 1.12                | % |  |        | 115,718,832 |         | 26.06  | % |                     | 1.13 | % |        |   | 122,923,204 |  | 24.19  | %
|Certificates of deposit |  | 3.47                | % |  |        | 225,730,733 |         | 50.84  | % |                     | 4.57 | % |        |   | 238,184,621 |  | 46.89  | %
|                        |  |                     |   |  |        |             |         |        |   |                     |      |   |        |   |             |  |        |  
|                        |  | 2.24                | % |  | $      | 443,998,757 |         | 100.00 | % |                     | 2.81 | % |        | $ | 507,961,177 |  | 100.00 | %
|                        |  |                     |   |  |        |             |         |        |   |                     |      |   |        |   |             |  |        |  



26    www.pamrapo.com



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The scheduled maturities of certificates of deposit are as follows:



|                          |  |                |         |      |   |        
|------------------------- |  | -------------- | ------- | ---- | - | -------
|                          |  | December 31,  
|                          |  | 2008           |         | 2007
|                          |  | (In Thousands)
|Maturing in:              |  |                |         |      |   |        
|One year or less          |  | $              | 207,167 |      | $ | 219,829
|After one to two years    |  |                | 14,600  |      |   | 13,288 
|After two to three years  |  |                | 1,785   |      |   | 3,788  
|After three to four years |  |                | 555     |      |   | 626    
|After four to five years  |  |                | 1,525   |      |   | 396    
|After five years          |  |                | 99      |      |   | 258    
|                          |  |                |         |      |   |        
|                          |  | $              | 225,731 |      | $ | 238,185
|                          |  |                |         |      |   |        

Certificates of deposit of $100,000 or more by the time remaining until maturity are as follows:



|                                       |  |                |         |      |   |        
|-------------------------------------- |  | -------------- | ------- | ---- | - | -------
|                                       |  | December 31,  
|                                       |  | 2008           |         | 2007
|                                       |  | (In Thousands)
|Three months or less                   |  | $              | 32,780  |      | $ | 37,747 
|After three months through six months  |  |                | 38,336  |      |   | 34,997 
|After six months through twelve months |  |                | 28,307  |      |   | 30,982 
|After twelve months                    |  |                | 7,619   |      |   | 7,605  
|                                       |  |                |         |      |   |        
|                                       |  | $              | 107,042 |      | $ | 111,331
|                                       |  |                |         |      |   |        

A summary of interest on deposits follows:



|                               |  |                          |            |      |   |            |  |   |           
|------------------------------ |  | ------------------------ | ---------- | ---- | - | ---------- |  | - | ----------
|                               |  | Years Ended December 31,
|                               |  | 2008                     |            | 2007 |   | 2006      
|                               |  | (In Thousands)          
|Demand                         |  | $                        | 1,196,743  |      | $ | 1,005,979  |  | $ | 779,597   
|Savings, club and money market |  |                          | 1,358,323  |      |   | 1,622,096  |  |   | 2,017,648 
|Certificates of deposit        |  |                          | 8,956,941  |      |   | 11,070,695 |  |   | 8,516,662 
|                               |  |                          |            |      |   |            |  |   |           
|                               |  | $                        | 11,512,007 |      | $ | 13,698,770 |  | $ | 11,313,907
|                               |  |                          |            |      |   |            |  |   |           

Note 9. Advances from Federal Home Loan Bank of New York



|                         |  |                     |   |      |        |            |                     |      |   |        |   |           
|------------------------ |  | ------------------- | - | ---- | ------ | ---------- | ------------------- | ---- | - | ------ | - | ----------
|                         |  | December 31,       
|                         |  | 2008                |   | 2007
|                         |  | WeightedAverageRate |   |      | Amount |            | WeightedAverageRate |      |   | Amount
|Overnight Borrowings:    |  | 0.44                | % |      | $      | 20,500,000 |                     |     | % |        | $ |          
|Maturing by December 31, |  |                     |   |      |        |            |                     |      |   |        |   |           
|2008                     |  |                    | % |      | $      |           |                     | 4.24 | % |        | $ | 15,000,000
|2009                     |  | 5.25                | % |      |        | 18,000,000 |                     | 5.25 | % |        |   | 18,000,000
|2010                     |  | 5.59                | % |      |        | 23,000,000 |                     | 5.59 | % |        |   | 23,000,000
|2011                     |  | 5.24                | % |      |        | 10,000,000 |                     | 5.24 | % |        |   | 10,000,000
|2015                     |  | 4.80                | % |      |        | 3,000,000  |                     | 4.80 | % |        |   | 3,000,000 
|2016                     |  | 4.05                | % |      |        | 15,000,000 |                     | 4.05 | % |        |   | 15,000,000
|                         |  |                     |   |      |        |            |                     |      |   |        |   |           
|                         |  | 4.02                | % |      | $      | 89,500,000 |                     | 4.93 | % |        | $ | 84,000,000
|                         |  |                     |   |      |        |            |                     |      |   |        |   |           

At December 31, 2008 and 2007, all the advances were fixed interest rate advances.

At December 31, 2008 and 2007, the advances were secured by pledges of the Banks investment in the capital stock of the Federal Home Loan Bank of New York
(the FHLB) totaling $5,160,100 and $4,996,000, respectively, and a blanket assignment of the Banks unpledged qualifying mortgage loans, mortgage-backed securities and investment securities portfolios.

At December 31, 2008, the Company also had available to it $65,350,000 under a revolving overnight line of credit, expiring July 31, 2009, with the FHLB. The
line of credit is secured by a specific pledge of mortgage-backed securities with carrying values and fair values of approximately $36,341,000 and $37,332,000, respectively. Borrowings are at the lenders cost of funds plus 0.25%. There was
$20,500,000 outstanding under the overnight line of credit at December 31, 2008 and no outstanding borrowings under the line of credit at December 31, 2007. At December 31, 2008, the Company also had a companion (DRA) commitment with
the Federal

Home Loan Bank of New York for $65,350,000 expiring July 31, 2009. There were no outstanding borrowings at December 31, 2008 and
December 31, 2007 under the companion (DRA) commitment.

Note 10 - Regulatory Matters

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

Quantitative measures established by
regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to adjusted total assets (as
defined). The following tables present a reconciliation of capital per GAAP and regulatory capital and information as to the Banks capital levels at the dates presented:



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements





|                                                 |  |                |        |      |   |       
|------------------------------------------------ |  | -------------- | ------ | ---- | - | ------
|                                                 |  | December 31,  
|                                                 |  | 2008           |        | 2007
|                                                 |  | (In Thousands)
|GAAP capital                                     |  | $              | 51,459 |      | $ | 54,147
|Unrealized loss on securities available for sale |  |                | 29     |      |   |      
|Benefit plans adjustment                         |  |                | 3,090  |      |   | 1,302 
|                                                 |  |                |        |      |   |       
|Core and tangible capital                        |  |                | 54,578 |      |   | 55,449
|General valuation allowance                      |  |                | 3,576  |      |   | 2,453 
|                                                 |  |                |        |      |   |       
|Total Regulatory Capital                         |  | $              | 58,154 |      | $ | 57,902
|                                                 |  |                |        |      |   |       

As of March 31, 2008, the most recent notification from the Office of Thrift Supervision (OTS),
the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions existing or events which have

occurred since notification that management believes have changed the institutions category.



|                                                 |  |                        |        |       |                              |   |        |                                                                 |          |  |   |        |   |       |   |         |  |         |  
|------------------------------------------------ |  | ---------------------- | ------ | ----- | ---------------------------- | - | ------ | --------------------------------------------------------------- | -------- |  | - | ------ | - | ----- | - | ------- |  | ------- | -
|                                                 |  | Actual                 |        |       | For CapitalAdequacy Purposes |   |        | To be Well Capitalized under PromptCorrective Action Provisions |         
|                                                 |  | Amount                 |        | Ratio |                              |   | Amount |                                                                 | Ratio    |  |   | Amount |   | Ratio |  
|                                                 |  | (Dollars in Thousands) |       
|December 31, 2008:                               |  |                        |        |       |                              |   |        |                                                                 |          |  |   |        |   |       |   |         |  |         |  
|Total capital (to risk-weighted assets)          |  | $                      | 58,154 |       | 15.25                        | % |        | $                                                               | 330,515  |  | 3 | 8.00   | % |       | $ | 338,144 |  | 310.00  | %
|Tier 1 capital (to risk-weighted assets)         |  |                        | 54,578 |       | 14.31                        | % |        |                                                                 | 3       |  | 3 |       |   |       |   | 322,886 |  | 3  6.00 | %
|Core (Tier 1) capital (to adjusted total assets) |  |                        | 54,578 |       | 9.14                         | % |        |                                                                 | 323,894  |  | 3 | 4.00   | % |       |   | 329,868 |  | 3  5.00 | %
|Tangible capital (to adjusted total assets)      |  |                        | 54,578 |       | 9.14                         | % |        |                                                                 | 3  8,960 |  | 3 | 1.50   | % |       |   | 3      |  | 3      |  
|                                                 |  |                        |        |       |                              |  
|December 31, 2007:                               |  |                        |        |       |                              |   |        |                                                                 |          |  |   |        |   |       |   |         |  |         |  
|Total capital (to risk-weighted assets)          |  | $                      | 57,902 |       | 15.82                        | % |        | $                                                               | 329,279  |  | 3 | 8.00   | % |       | $ | 336,599 |  | 310.00  | %
|Tier 1 capital (to risk-weighted assets)         |  |                        | 55,449 |       | 15.15                        | % |        |                                                                 | 3       |  | 3 |       |   |       |   | 321,959 |  | 3  6.00 | %
|Core (Tier 1) capital (to adjusted total assets) |  |                        | 55,449 |       | 8.43                         | % |        |                                                                 | 326,295  |  | 3 | 4.00   | % |       |   | 332,869 |  | 3  5.00 | %
|Tangible capital (to adjusted total assets)      |  |                        | 55,449 |       | 8.43                         | % |        |                                                                 | 3  9,861 |  | 3 | 1.50   | % |       |   | 3      |  | 3      |  



28    www.pamrapo.com



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Note 11. Benefits Plans

PENSION PLAN (PLAN)

The following tables set forth the Plans funded status
and components of net periodic pension cost:



|                                       |  |                |            |   |                |   |            |  
|-------------------------------------- |  | -------------- | ---------- | - | -------------- | - | ---------- | -
|                                       |  | December 31,   |           
|                                       |  | 2008           |            |   | 2007           |  
|Measurement Date                       |  | October 1,2008 |            |   | October 1,2007 |  
|Change in Benefit Obligation           |  |                |            |   |                |   |            |  
|Benefit obligation, beginning          |  | $              | 7,933,374  |   |                | $ | 7,902,564  |  
|Adjustment for measurement date change |  |                | 192,958    |   |                |   |           |  
|Service cost                           |  |                | 236,848    |   |                |   | 256,756    |  
|Interest cost                          |  |                | 534,984    |   |                |   | 488,604    |  
|Actuarial loss                         |  |                | 748,138    |   |                |   | 393,773    |  
|Benefits paid                          |  |                | (844,559   | ) |                |   | (1,108,323 | )
|                                       |  |                |            |   |                |   |            |  
|Benefit obligation, ending             |  | $              | 8,801,743  |   |                | $ | 7,933,374  |  
|                                       |  |                |            |   |                |   |            |  
|                                       |  |               
|Change in Plan Assets                  |  |                |            |   |                |   |            |  
|Fair value of assets, beginning        |  | $              | 7,357,406  |   |                | $ | 7,424,663  |  
|Actual return on plan assets           |  |                | (2,014,810 | ) |                |   | 697,986    |  
|Employer contributions                 |  |                | 517,089    |   |                |   | 343,080    |  
|Benefits paid                          |  |                | (844,559   | ) |                |   | (1,108,323 | )
|                                       |  |                |            |   |                |   |            |  
|Fair value of assets, ending           |  | $              | 5,015,126  |   |                | $ | 7,357,406  |  
|                                       |  |                |            |   |                |   |            |  
|                                       |  |               
|Reconciliation of Funded Status        |  |                |            |   |                |   |            |  
|Accumulated benefit obligation         |  | $              | 7,735,627  |   |                | $ | 6,905,310  |  
|                                       |  |                |            |   |                |   |            |  
|Projected benefit obligation           |  | $              | 8,801,743  |   |                | $ | 7,933,374  |  
|Fair value of assets                   |  |                | (5,015,126 | ) |                |   | (7,357,406 | )
|                                       |  |                |            |   |                |   |            |  
|Funded status at end of year           |  | $              | (3,786,617 | ) |                | $ | (575,968   | )
|                                       |  |                |            |   |                |   |            |  
|Assumptions Used Discount rate         |  |                | 6.125      | % |                |   | 6.625      | %
|Rate of increase in compensation       |  |                | 3.50       | % |                |   | 4.00       | %



|                                        |  |                          |          |   |      |   |          |      |  |   |          |  
|--------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                        |  | Years Ended December 31, |         
|                                        |  | 2008                     |          |   | 2007 |   |          | 2006 | 
|Net Periodic Pension Expense            |  |                          |          |   |      |   |          |      |  |   |          |  
|Service cost                            |  | $                        | 236,848  |   |      | $ | 256,756  |      |  | $ | 257,724  |  
|Interest cost                           |  |                          | 534,984  |   |      |   | 488,604  |      |  |   | 431,744  |  
|Expected return on assets               |  |                          | (585,136 | ) |      |   | (593,844 | )    |  |   | (549,860 | )
|Amortization of unrecognized loss       |  |                          | 192,212  |   |      |   | 188,992  |      |  |   | 214,968  |  
|Settlement Charge                       |  |                          |         |   |      |   | 280,309  |      |  |   |         |  
|Unrecognized past service liability     |  |                          | 17,772   |   |      |   | 17,772   |      |  |   | 17,772   |  
|                                        |  |                          |          |   |      |   |          |      |  |   |          |  
|Net Periodic Pension Expense            |  | $                        | 396,680  |   |      | $ | 638,589  |      |  | $ | 372,348  |  
|                                        |  |                          |          |   |      |   |          |      |  |   |          |  
|Assumptions Used                        |  |                          |          |   |      |   |          |      |  |   |          |  
|Discount rate                           |  |                          | 6.625    | % |      |   | 6.25     | %    |  |   | 5.88     | %
|Rate of increase in compensation        |  |                          | 4.00     | % |      |   | 3.50     | %    |  |   | 3.00     | %
|Long-term rate of return on plan assets |  |                          | 8.00     | % |      |   | 8.00     | %    |  |   | 8.00     | %

At December 31, 2008 and 2007, unrecognized net loss of $5,663,895 and $2,409,792, respectively, and
unrecognized prior service cost of $50,475 and $72,690 respectively, were included in accumulated other comprehensive loss in accordance with SFAS No. 158. For the year ended December 31, 2009, $471,768 of net loss and $17,772 of prior
service cost are expected to be recognized in pension expense.

PLAN ASSETS

For 2008 and 2007, the Plans assets realized an annual return (loss) of (26.3%) and 2.3%, respectively. The weighted-average allocations by asset category are
as follows:



|                           |  |              |   |  |      |  
|-------------------------- |  | ------------ | - |  | ---- | -
|                           |  | December 31, |  
|                           |  | 2008         |   |  | 2007 |  
|Certificates of deposit    |  | 46           | % |  | 36   | %
|Mutual fund                |  | 7            | % |  | 29   | %
|Mortgage-backed securities |  | 5            | % |  |     | %
|Equity securities          |  | 42           | % |  | 35   | %
|                           |  |              |   |  |      |  
|                           |  | 100          | % |  | 100% |  
|                           |  |              |   |  |      |  

For 2009, the Company intends to maintain the current asset mix and seeks to achieve an optimal risk/reward
profile by limiting market exposure to present levels. Based on an analysis of the current market environment, we project a 3% return from cash, a 5% return from fixed income and a 6% return from equities, for an overall expected return of
approximately 5%.

The long-term rate of return on assets assumption is set based on historical returns earned by equities and fixed income securities,
adjusted to reflect expectations of future returns as applied to the Plans actual target allocation of asset classes. Equities and fixed income securities are assumed to earn real rates of return in the ranges of 5.0% to 8.0% and 1.0% to 5.0%,
respectively. Additionally, the long-term inflation rate is projected to be 3%. When these overall return expectations are applied to a typical plans target allocation, the result is an expected return of 5% to 8%.

Equity securities include Pamrapo Bancorp, Inc. common stock in the amounts of $369,000 (7.36% of total plan assets) and $828,000 (11.25% of total plan assets) at
December 31, 2008 and 2007, respectively.



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



CONTRIBUTIONS

The Company expects to contribute, based
upon actuarial estimates, approximately $800,000 to the pension plan in 2009.

ESTIMATED FUTURE BENEFIT
PAYMENTS

Benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the years ended
December 31 as follows:



|          |  |   |          
|--------- |  | - | ---------
|2009      |  | $ | 482,674  
|2010      |  |   | 486,551  
|2011      |  |   | 492,503  
|2012      |  |   | 518,737  
|2013      |  |   | 549,098  
|2014-2018 |  |   | 3,125,552
|          |  |   |          
|          |  | $ | 5,655,115
|          |  |   |          

SAVINGS AND INVESTMENT PLAN (SIP)

The Bank sponsors a SIP pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended, for all eligible employees. Employees may elect
to save up to 25% of their compensation of which the Bank will match 25% of the first 10% of the employees contribution up to a maximum of 2.5% of compensation. The SIP expense amounted to approximately $52,000, $52,000, and $72,000 for the
years ended December 31, 2008, 2007 and 2006, respectively.

SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN (SERP)

The following tables set forth the SERPs funded status and components of net periodic SERP cost:



|                                                      |  |                  |           |   |                |   |           |  
|----------------------------------------------------- |  | ---------------- | --------- | - | -------------- | - | --------- | -
|                                                      |  | December 31,     |          
|                                                      |  | 2008             |           |   | 2007           |  
|Measurement Date                                      |  | December 31,2008 |           |   | October 1,2007 |  
|Projected benefit obligation, beginning               |  | $                | 1,763,652 |   |                | $ | 2,022,107 |  
|Adjustment for measurement date change                |  |                  | 23,651    |   |                |   |          |  
|Interest cost                                         |  |                  | 94,604    |   |                |   | 118,188   |  
|Actuarial gain                                        |  |                  | (291,133  | ) |                |   | (253,565  | )
|Benefit payments                                      |  |                  | (131,708  | ) |                |   | (123,078  | )
|                                                      |  |                  |           |   |                |   |           |  
|Projected benefit obligation, ending                  |  |                  | 1,459,066 |   |                |   | 1,763,652 |  
|Plan assets at fair value                             |  |                  |          |   |                |   |          |  
|                                                      |  |                  |           |   |                |   |           |  
|Projected benefit obligation in excess of plan assets |  | $                | 1,459,066 |   |                | $ | 1,763,652 |  
|                                                      |  |                  |           |   |                |   |           |  
|Assumptions:                                          |  |                  |           |   |                |   |           |  
|Discount rate                                         |  |                  | 6.125     | % |                |   | 6.625     | %
|Rate of increase in compensation                      |  |                  | 3.50      | % |                |   | 4.00      | %

At December 31, 2008 and 2007, unrecognized net gain of $662,401 and $470,318, respectively and unrecognized
prior service cost of $97,969 and $158,124, respectively, were included in accumulated other comprehensive loss in accordance with SFAS No. 158. For the year ended December 31, 2009, $71,736 of net gain and $48,124 of prior service cost
are expected to be recognized in SERP expense.

Net periodic SERP cost includes the following components:



|                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|----------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                    |  | Years Ended December 31, |        
|                                    |  | 2008                     |         |   | 2007 |   |         | 2006 | 
|Service cost                        |  | $                        |        |   |      | $ |        |      |  | $ |        |  
|Interest cost                       |  |                          | 94,604  |   |      |   | 118,188 |      |  |   | 130,116 |  
|Amortization of prior service cost  |  |                          | 48,124  |   |      |   | 52,868  |      |  |   | 92,052  |  
|Amortization of unrecognized (gain) |  |                          | (79,240 | ) |      |   | (2,192  | )    |  |   |        |  
|                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|Net periodic SERP cost              |  | $                        | 63,488  |   |      | $ | 168,864 |      |  | $ | 222,168 |  
|                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|Benefit payments                    |  | $                        | 131,708 |   |      | $ | 123,078 |      |  | $ | 140,384 |  
|                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|Contributions made                  |  | $                        | 131,708 |   |      | $ | 123,078 |      |  | $ | 140,384 |  
|                                    |  |                          |         |   |      |   |         |      |  |   |         |  
|Assumptions Used                    |  |                          |         |   |      |   |         |      |  |   |         |  
|Discount rate                       |  |                          | 6.125   | % |      |   | 6.625   | %    |  |   | 5.875   | %
|Rate of increase in compensation    |  |                          | 3.50    | % |      |   | 4.00    | %    |  |   | 3.00    | %
|Amortization period (in years)      |  |                          | 7.20    |   |      |   | 6.83    |      |  |   | 6.88    |  



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CONTRIBUTIONS

The Company expects to contribute, based upon actuarial estimates, approximately $210,000 to the SERP plan in 2009.

ESTIMATED
FUTURE BENEFIT PAYMENTS

Benefit payments, which reflect expected future service as appropriate, are
expected to be paid for the years ended December 31 as follows:



|          |  |   |          
|--------- |  | - | ---------
|2009      |  | $ | 210,419  
|2010      |  |   | 210,419  
|2011      |  |   | 208,788  
|2012      |  |   | 143,860  
|2013      |  |   | 143,860  
|2014-2018 |  |   | 659,300  
|          |  |   |          
|          |  | $ | 1,576,646
|          |  |   |          

STOCK OPTIONS

Stock options granted under a stockholder approved stock option plan may be either options that qualify as incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
non-statutory options. Options vest in accordance with the plan and may be exercised up to ten years from the date of grant or within one year after retirement. All options granted will be exercisable in the event the optionee terminates his
employment, or due to death or disability. A summary of stock option activities, all of which are vested, follows:



|                  |  |                         |  |                        |             |                                |   |      
|----------------- |  | ----------------------- |  | ---------------------- | ----------- | ------------------------------ | - | -----
|                  |  | Number ofOptions Shares |  | Range ofExercise Price |             | Weighted AverageExercise Price
|January 1, 2006   |  | 101,000                 |  | $                      | 18.41-29.25 |                                | $ | 23.24
|Forfeitures       |  | (6,000)                 |  |                        | 29.25       |                                |   | 29.25
|Exercised         |  | (28,000)                |  |                        | 18.41       |                                |   | 18.41
|                  |  |                         |  |                        |             |                                |   |      
|December 31, 2006 |  | 67,000                  |  |                        | 18.41-29.25 |                                |   | 24.72
|Forfeitures       |  | (3,000)                 |  |                        | 29.25       |                                |   | 29.25
|Exercised         |  |                        |  |                        |             |                                |   |      
|                  |  |                         |  |                        |             |                                |   |      
|December 31, 2007 |  | 64,000                  |  |                        | 18.41-29.25 |                                |   | 24.51
|Forfeitures       |  | (18,000)                |  |                        | 18.41-29.25 |                                |   | 23.83
|Exercised         |  |                        |  |                        |             |                                |   |      
|                  |  |                         |  |                        |             |                                |   |      
|December 31, 2008 |  | 46,000                  |  | $                      | 18.41-29.25 |                                | $ | 24.77
|                  |  |                         |  |                        |             |                                |   |      

As of December 31, 2008, the intrinsic value of options outstanding was $0.

At December 31, 2008 and 2007, the weighted average remaining contractual life of the stock options granted was approximately 4.9 years and 5.1 years, respectively,
and stock options for up to 22,380 additional shares of common stock were available for future grants.



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



Note 12. Income Taxes

The Bank qualifies as a savings institution
under the provisions of the Internal Revenue Code and was therefore, prior to January 1, 1996, permitted to deduct from taxable income an allowance for bad debts based upon eight percent of taxable income before such deduction, less certain
adjustments. Retained earnings at December 31, 2008 and 2007, include approximately $6.9 million of such bad debt, which, in accordance with SFAS No. 109, Accounting for Income Taxes, is considered a permanent difference
between the book and income tax basis of loans receivable, and for which income taxes have not been provided. If such amount is used for purposes other than for bad debt losses, including distributions in liquidation, it will be subject to income
tax at the then current rate.

The tax effects of existing temporary differences which give rise to significant portions of deferred tax assets and
deferred tax liabilities are as follows:



|                                                 |  |              |           |      |   |          
|------------------------------------------------ |  | ------------ | --------- | ---- | - | ---------
|                                                 |  | December 31,
|                                                 |  | 2008         |           | 2007
|Deferred tax assets:                             |  |              |           |      |   |          
|Allowance for loan losses                        |  | $            | 1,856,359 |      | $ | 1,285,208
|Benefit plans                                    |  |              | 2,122,386 |      |   | 868,829  
|Deferred loan fees                               |  |              | 11,863    |      |   | 15,149   
|Depreciation                                     |  |              | 316,330   |      |   | 280,051  
|Reserve for uncollected interest                 |  |              | 54,640    |      |   | 54,643   
|Unrealized loss on securities available for sale |  |              | 19,300    |      |   |         
|                                                 |  |              |           |      |   |          
|                                                 |  |              | 4,380,878 |      |   | 2,503,880
|                                                 |  |              |           |      |   |          
|Deferred tax liabilities:                        |  |              |           |      |   |          
|Unrealized gain on securities available for sale |  |              |          |      |   | 200      
|                                                 |  |              |           |      |   |          
|Net Deferred Tax Assets                          |  | $            | 4,380,878 |      | $ | 2,503,680
|                                                 |  |              |           |      |   |          

The components of income taxes are summarized as follows:



|                                |  |                          |           |   |      |   |           |      |  |   |          
|------------------------------- |  | ------------------------ | --------- | - | ---- | - | --------- | ---- |  | - | ---------
|                                |  | Years Ended December 31,
|                                |  | 2008                     |           |   | 2007 |   |           | 2006
|Current expense:                |  |                          |           |   |      |   |           |      |  |   |          
|Federal                         |  | $                        | 2,052,644 |   |      | $ | 2,627,268 |      |  | $ | 3,372,510
|State                           |  |                          | 291,421   |   |      |   | 350,052   |      |  |   | 517,762  
|                                |  |                          |           |   |      |   |           |      |  |   |          
|                                |  |                          | 2,344,065 |   |      |   | 2,977,320 |      |  |   | 3,890,272
|                                |  |                          |           |   |      |   |           |      |  |   |          
|Deferred tax expense (benefit): |  |                          |           |   |      |   |           |      |  |   |          
|Federal                         |  |                          | (470,526  | ) |      |   | (366,029  | )    |  |   | 27,756   
|State                           |  |                          | (149,295  | ) |      |   | (107,865  | )    |  |   | 9,714    
|                                |  |                          |           |   |      |   |           |      |  |   |          
|                                |  |                          | (619,821  | ) |      |   | (473,894  | )    |  |   | 37,470   
|                                |  |                          |           |   |      |   |           |      |  |   |          
|                                |  | $                        | 1,724,244 |   |      | $ | 2,503,426 |      |  | $ | 3,927,742
|                                |  |                          |           |   |      |   |           |      |  |   |          

The following table presents a reconciliation between the reported income taxes and the income taxes which would
be computed by applying the normal federal income tax rate of 34% to income before income taxes:



|                                                        |  |                          |           |   |      |   |           |      |  |   |           |  
|------------------------------------------------------- |  | ------------------------ | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                        |  | Years Ended December 31, |          
|                                                        |  | 2008                     |           |   | 2007 |   |           | 2006 | 
|Federal income tax                                      |  | $                        | 1,422,411 |   |      | $ | 2,330,929 |      |  | $ | 3,559,667 |  
|Increases in income taxes resulting from                |  |                          |           |   |      |   |           |      |  |   |           |  
|New Jersey income tax, net of federal income tax effect |  |                          | 93,803    |   |      |   | 159,843   |      |  |   | 348,134   |  
|Other items, net                                        |  |                          | 208,030   |   |      |   | 12,654    |      |  |   | 19,941    |  
|                                                        |  |                          |           |   |      |   |           |      |  |   |           |  
|Effective Income Tax                                    |  | $                        | 1,724,244 |   |      | $ | 2,503,426 |      |  | $ | 3,927,742 |  
|                                                        |  |                          |           |   |      |   |           |      |  |   |           |  
|Effective Income Tax Rate                               |  |                          | 41.21     | % |      |   | 36.52     | %    |  |   | 37.52     | %
|                                                        |  |                          |           |   |      |   |           |      |  |   |           |  



32    www.pamrapo.com



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Note 13. Commitments and Contingencies

The Bank is party to financial instruments with off-balance sheet risk in the normal course of business primarily to meet the financing needs of its customers. These financial instruments include commitments to
originate loans and fund lines of credit secured by real estate. The commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statement of financial condition. The
Banks exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit
policies in making commitments as it does for on-balance sheet instruments.

Commitments to originate loans are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since commitments may expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank, upon extension of credit
is based on managements credit evaluation of the counterparty. Collateral held varies but primarily includes residential real estate and income-producing commercial properties.

The Bank had the following off-balance sheet arrangements at December 31, 2008 and 2007:



|                               |  |              |            |      |   |           
|------------------------------ |  | ------------ | ---------- | ---- | - | ----------
|                               |  | December 31,
|                               |  | 2008         |            | 2007
|Commitments to originate loans |  | $            | 5,353,000  |      | $ | 8,477,000 
|                               |  |              |            |      |   |           
|Unused lines of credit         |  | $            | 11,599,000 |      | $ | 10,617,000
|                               |  |              |            |      |   |           
|Letters of credit              |  | $            | 1,796,000  |      | $ | 559,000   
|                               |  |              |            |      |   |           

At December 31, 2008, the outstanding commitments to originate fixed rate loans were $5,168,000 with interest
rates ranging from 6.00% to 13.00%. The outstanding commitments to originate adjustable rate loans were $185,000 with interest rates ranging from 3.25% to 4.00%. All commitments are due to expire within ninety days.

At December 31, 2008, undisbursed funds from approved lines of credit under a homeowners equity and a commercial equity lending program amounted to
approximately $9,601,000 and $1,998,000, respectively. Unless they are specifically cancelled by notice from the Bank, these funds represent firm commitments available to the respective borrowers on demand. The interest rates charged for any month
on funds disbursed under these programs range from 0% to 3.00% above the prime rate.

Rental expenses related to the occupancy of premises totaled
$585,000, $468,000, and $457,000 for the years ended December 31, 2008, 2007 and 2006, respectively. At December 31, 2008, minimum noncancelable obligations under lease agreements with original terms of more than one year are as follows:



|             |  |   |          
|------------ |  | - | ---------
|December 31,
|2009         |  |   | 492,000  
|2010         |  |   | 470,000  
|2011         |  |   | 479,000  
|2012         |  |   | 488,000  
|2013         |  |   | 324,000  
|Thereafter   |  |   | 535,000  
|             |  |   |          
|             |  | $ | 2,788,000
|             |  |   |          

At December 31, 2008 and 2007, the Banks loan portfolio included loans totaling $10.8 million and $5.5
million, respectively, which were delinquent ninety days or more. Included in the December 31, 2008 and 2007 total delinquent loans, is the Banks largest non-accruing commercial loan of $1.9 million to a local hospital. The loan was
originally for $3.0 million with a maturity date of November 15, 2006, which was extended to June 1, 2007. In October, 2006, $1.0 million of the loan was paid and the remaining balance of approximately $1.9 million was secured by a mortgage on real
estate. As of December 31, 2008, the $1.9 million loan balance had not been paid. The repayment of the loan is subject to bankruptcy proceedings. In September 2008, the creditors committee for the hospital filed a complaint against the
Bank seeking to recover the $1.0 million previously paid on the loan and to set aside the mortgage securing the $1.9 million still owed to the Bank. The methodology used to determine the collectability of the hospital loan was based on the fair
value of the collateral of the loan. The fair value of the physical collateral was valued on December 15, 2006 at $2.04 million, which was greater than the hospital loan. While management believes that the mortgage on the property is valid, the
unsecured creditors in the bankruptcy proceedings



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



have brought suit against the Bank charging that the mortgage is a voidable preference. Litigation is in the discovery phase. At this point,
management believes, based on discussions with its litigation counsel, that the Bank will likely prevail in its defense. However, due to the normal uncertainties of any litigation, the loan $1.9 million has been deemed impaired and is included in
the recorded investments in impaired loans with recorded allowances total of $2.6 million and $1.9 million at December 31, 2008 and 2007, respectively, as reflected in Note 5 to the Notes to Consolidated Financial Statements. The hospital
property is in close proximity to the Bank and is routinely observed by management. Given the proximity of the property, managements knowledge of the real estate, and the fact that the appraisal of the property is higher than the carrying
value of the loan, the management does not believe that a new appraisal is needed at this time. The Company has not charged off this loan against the allowance for loan losses based on the fact that the loan is collateralized by properties that have
a greater value than the carrying amount of the loan. However, due to the uncertainty of any litigation, the Bank decided to establish an allowance for the hospital loan and will continue to monitor this loan and evaluate its collectibility as
necessary.

The Company, Bank, Service Corp., and Investment Company are also parties to litigation which arises primarily in the ordinary course of
business. In the opinion of management, the ultimate disposition of such litigation should not have a material effect on the consolidated financial position of the Company.

Note 14. Comprehensive Income (Loss)

The components of accumulated other comprehensive (loss) included in
stockholders equity are as follows:



|                                                            |  |                 |            |   |      |   |            |  
|----------------------------------------------------------- |  | --------------- | ---------- | - | ---- | - | ---------- | -
|                                                            |  | At December 31, |           
|                                                            |  | 2008            |            |   | 2007 |  
|Net unrealized gain (loss) on securities available for sale |  | $               | (48,185    | ) |      | $ | 486        |  
|Tax effect                                                  |  |                 | 19,300     |   |      |   | (200       | )
|                                                            |  |                 |            |   |      |   |            |  
|Net of tax amount                                           |  |                 | (28,885    | ) |      |   | 286        |  
|                                                            |  |                 |            |   |      |   |            |  
|Benefit plans adjustments                                   |  |                 | (5,149,938 | ) |      |   | (2,170,288 | )
|Tax effect                                                  |  |                 | 2,059,974  |   |      |   | 868,114    |  
|                                                            |  |                 |            |   |      |   |            |  
|Net of tax amount                                           |  |                 | (3,089,964 | ) |      |   | (1,302,174 | )
|                                                            |  |                 |            |   |      |   |            |  
|Accumulated other comprehensive (loss)                      |  | $               | (3,118,849 | ) |      | $ | (1,301,888 | )
|                                                            |  |                 |            |   |      |   |            |  

The components of other comprehensive income (loss) and related tax effects are presented in the following table:



|                                                             |  |                          |            |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------ |  | ------------------------ | ---------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                             |  | Years Ended December 31, |           
|                                                             |  | 2008                     |            |   | 2007 |   |          | 2006 | 
|Unrealized holding losses on securities available for sale:  |  |                          |            |   |      |   |          |      |  |   |          |  
|Unrealized holding losses arising during the year            |  | $                        | (48,671    | ) |      | $ | (6,729   | )    |  | $ | (36,191  | )
|Reclassification adjustment for gains included in net income |  |                          |           |   |      |   |         |      |  |   | (430,089 | )
|                                                             |  |                          |            |   |      |   |          |      |  |   |          |  
|Net unrealized losses on securities available for sale       |  |                          | (48,671    | ) |      |   | (6,729   | )    |  |   | (466,280 | )
|                                                             |  |                          |            |   |      |   |          |      |  |   |          |  
|Defined benefit pension plan:                                |  |                          |            |   |      |   |          |      |  |   |          |  
|Pension losses                                               |  |                          | 2,913,754  |   |      |   | 292,014  |      |  |   |         |  
|Prior service cost                                           |  |                          | (65,896    | ) |      |   | 70,640   |      |  |   |         |  
|Settlement accounting                                        |  |                          |           |   |      |   | 280,309  |      |  |   |         |  
|                                                             |  |                          |            |   |      |   |          |      |  |   |          |  
|Net change in defined benefit pension plan accrued expense   |  |                          | 2,979,650  |   |      |   | 501,683  |      |  |   |         |  
|                                                             |  |                          |            |   |      |   |          |      |  |   |          |  
|Other comprehensive income (loss) before taxes               |  |                          | (3,028,321 | ) |      |   | 494,954  |      |  |   | (466,280 | )
|Tax effect                                                   |  |                          | 1,211,360  |   |      |   | (197,975 | )    |  |   | 185,992  |  
|                                                             |  |                          |            |   |      |   |          |      |  |   |          |  
|Other comprehensive income (loss)                            |  | $                        | (1,816,961 | ) |      | $ | 296,979  |      |  | $ | (280,288 | )
|                                                             |  |                          |            |   |      |   |          |      |  |   |          |  



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Note 15. Earnings Per Common Share

The following is a summary of the calculation of earnings per share (EPS):



|                                                                        |  |                          |           |      |   |           |  |   |          
|----------------------------------------------------------------------- |  | ------------------------ | --------- | ---- | - | --------- |  | - | ---------
|                                                                        |  | Years Ended December 31,
|                                                                        |  | 2008                     |           | 2007 |   | 2006     
|Net income                                                              |  | $                        | 2,459,318 |      | $ | 4,352,248 |  | $ | 6,541,867
|                                                                        |  |                          |           |      |   |           |  |   |          
|Weighted average common shares outstanding for computation of basic EPS |  |                          | 4,970,788 |      |   | 4,975,542 |  |   | 4,975,542
|Dilutive common-equivalent shares                                       |  |                          |          |      |   | 3,110     |  |   | 5,163    
|                                                                        |  |                          |           |      |   |           |  |   |          
|Weighted average common shares for computation of diluted EPS           |  |                          | 4,970,788 |      |   | 4,978,652 |  |   | 4,980,708
|                                                                        |  |                          |           |      |   |           |  |   |          
|Earnings per common share:                                              |  |                          |           |      |   |           |  |   |          
|Basic                                                                   |  | $                        | 0.49      |      | $ | 0.87      |  | $ | 1.31     
|                                                                        |  |                          |           |      |   |           |  |   |          
|Diluted                                                                 |  | $                        | 0.49      |      | $ | 0.87      |  | $ | 1.31     
|                                                                        |  |                          |           |      |   |           |  |   |          

Note 16. Fair Values of Financial Instruments

The carrying amounts and fair value of the financial instruments are as follows:



|                                            |  |                |         |                     |   |               |  |                     |         |  |   |        
|------------------------------------------- |  | -------------- | ------- | ------------------- | - | ------------- |  | ------------------- | ------- |  | - | -------
|                                            |  | December 31,  
|                                            |  | 2008           |         | 2007               
|                                            |  | CarryingValue  |         | EstimatedFair Value |   | CarryingValue |  | EstimatedFair Value
|                                            |  | (In Thousands)
|Financial assets:                           |  |                |         |                     |   |               |  |                     |         |  |   |        
|Cash and cash equivalents                   |  | $              | 13,587  |                     | $ | 13,587        |  | $                   | 66,896  |  | $ | 66,896 
|Securities available for sale               |  |                | 771     |                     |   | 771           |  |                     | 917     |  |   | 917    
|Investment securities held to maturity      |  |                | 11,350  |                     |   | 10,831        |  |                     | 10,377  |  |   | 10,650 
|Mortgage-backed securities held to maturity |  |                | 117,428 |                     |   | 119,920       |  |                     | 123,907 |  |   | 121,422
|FHLB stock                                  |  |                | 5,160   |                     |   | 5,160         |  |                     | 4,996   |  |   | 4,996  
|Loans receivable                            |  |                | 437,554 |                     |   | 454,149       |  |                     | 439,053 |  |   | 447,980
|Interest receivable                         |  |                | 2,884   |                     |   | 2,884         |  |                     | 2,738   |  |   | 2,738  
|                                            |  |                |         |                    
|Financial liabilities:                      |  |                |         |                     |   |               |  |                     |         |  |   |        
|Deposits                                    |  |                | 443,999 |                     |   | 447,734       |  |                     | 507,961 |  |   | 509,052
|Advances                                    |  |                | 89,500  |                     |   | 94,830        |  |                     | 84,000  |  |   | 86,111 
|Interest payable                            |  |                | 359     |                     |   | 359           |  |                     | 424     |  |   | 424    



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



For financial instruments with off-balance sheet risk (primarily loan commitments), the carrying value (deferred loan fees and costs) and the fair value are not deemed
material.

The fair value estimates are made at a discrete point in time based on relevant market information and information about the financial
instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Further, the foregoing estimates may not reflect the actual amount that
could be realized if all or substantially all of the financial instruments were offered for sale.

In addition, the fair value estimates were based on
existing on-and-off balance sheet financial instruments without attempting to value anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are
not considered financial assets and liabilities include mortgage servicing rights, premises and equipment and advances from borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Finally, reasonable comparability
between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of
uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.

DISCLOSURE
ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following
methods and assumptions were used in estimating the fair value of financial instruments:

Cash and cash equivalents and interest receivable and payable: The
carrying amounts reported in the consolidated financial statements for cash and cash equivalents and interest receivable and payable approximate their fair values.

Securities: The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1),
or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities
relationship to other benchmark quoted prices. For certain securities which are not traded in active markets are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are
generally based on available market evidence (Level 3). In the absence of such evidence, managements best estimate is used. Managements best estimate consists of both internal and external support on certain Level 3 investments. Internal
cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) were used to support fair values of certain Level 3 investments.

FHLB stock: The estimated fair value of the Banks investment in FHLB stock is deemed equal to its carrying value, which represents the price at
which it may be redeemed.

Loans receivable (carried at cost): The fair values of loans are estimated using discounted cash flow analyses, using market
rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.
Generally, for variable rate loans that reprice frequently and with no significant change to credit risk, fair values are based on carrying values.

Deposit liabilities (carried at cost): The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule
of aggregated expected monthly maturities on time deposits.

Advances from Federal Home Loan Bank of New York: Fair value is estimated using rates
currently offered for liabilities of similar remaining maturities, or when available, quoted market prices.

Commitments to extend credit: The fair value
of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair
value also considers the difference between current levels of interest rates and the committed rates.

In September 2006, the FASB issued SFAS Statement
No. 157, Fair Value Measurements, which defines



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fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. SFAS 157 applies to other
accounting pronouncements that require or permit fair value measurements. The primary effect of SFAS 157 on the Company was to expand the required disclosures pertaining to the methods used to determine fair values upon adoption on January 1,
2008.

In December 2007, the FASB issued FASB Staff Position 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2). FSP 157-2
delays the effective date of SFAS 157 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008 and
interim periods within those fiscal years. As such, the Corporation only partially adopted the provisions of SFAS 157, and will begin to account and report for non-financial assets and liabilities in 2009. In October 2008, the FASB issued FASB Staff
Position 157-3, Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active (FSP 157-3), to clarify the application of the provisions of SFAS 157 in an inactive market and how an entity would
determine fair value in an inactive market. FSP 157-3 is effective immediately and applies to the Corporations December 31, 2008 consolidated financial statements. The adoption of SFAS 157 and FSP 157-3 had no impact on the amounts
reported in the consolidated financial statements.

SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to
measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three
levels of the fair value hierarchy under SFAS 157 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are
observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that
require inputs that are both significant to the fair value measurement and unobservable (i.e. supported with little or no market activity).

An asset or
liabilitys level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For assets
measured at fair value on a recurring and non-recurring basis, the Companys fair value measurements by level within the fair value hierarchy used at December 31, 2008 are as follows:



|                              |  |                   |       |                                                             |   |                                             |  |                                         |     |  |   |      
|----------------------------- |  | ----------------- | ----- | ----------------------------------------------------------- | - | ------------------------------------------- |  | --------------------------------------- | --- |  | - | -----
|Description                   |  | December 31, 2008 |       | (Level 1)Quoted Pricesin Active Marketsfor Identical Assets |   | (Level 2)Significant OtherObservable Inputs |  | (Level 3)SignificantUnobservable Inputs
|                              |  | (In Thousands)   
|Recurring:                    |  |                   |       |                                                             |   |                                             |  |                                         |     |  |   |      
|Securities available for sale |  | $                 | 771   |                                                             | $ |                                            |  | $                                       | 771 |  | $ |     
|Non-recurring:                |  |                   |       |                                                             |   |                                             |  |                                         |     |  |   |      
|Impaired loans                |  |                   | 1,501 |                                                             |   |                                            |  |                                         |    |  |   | 1,501
|Foreclosed assets             |  |                   | 426   |                                                             |   |                                            |  |                                         |    |  |   | 426  
|                              |  |                   |       |                                                             |   |                                             |  |                                         |     |  |   |      
|Total                         |  | $                 | 2,698 |                                                             | $ |                                            |  | $                                       | 771 |  | $ | 1,927
|                              |  |                   |       |                                                             |   |                                             |  |                                         |     |  |   |      



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



The following valuation techniques were used to measure fair value of assets in the table above not previously disclosed.

Impaired loans  Loans included in the above table are those that are accounted for under SFAS 114, Accounting by Creditors for Impairment of a
Loan, in which the Company has measured impairment generally based on the fair value of the loans collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows
based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances less valuation allowance as
determined under SFAS 114. The fair value consists of loan balances of $1,501,00, net of valuation allowances of $1,086,000. During the year ending December 31, 2008, additional provision for loan losses of $405,000 were recorded.

Foreclosed assets  Fair value of foreclosed assets was based on independent third party appraisals of the properties. These values were identified
based on the sales prices of similar properties in the proximate vicinity. Foreclosed assets were written down by $70,000 and cost capitalized were $10,000 during the year ended December 31, 2008.

Note 17. Parent Company Financial Information

STATEMENTS OF FINANCIAL CONDITION



|                                           |  |              |             |   |      |   |             |  
|------------------------------------------ |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                           |  | December 31, |            
|                                           |  | 2008         |             |   | 2007 |  
|Assets                                     |  |              |             |   |      |   |             |  
|Cash and cash equivalents                  |  | $            | 3,029,075   |   |      | $ | 4,413,918   |  
|Investment in subsidiary                   |  |              | 51,459,657  |   |      |   | 54,146,766  |  
|Refundable income taxes                    |  |              | 277,955     |   |      |   | 140,595     |  
|Other assets                               |  |              | 5,963       |   |      |   |            |  
|                                           |  |              |             |   |      |   |             |  
|Total Assets                               |  | $            | 54,772,650  |   |      | $ | 58,701,279  |  
|                                           |  |              |             |   |      |   |             |  
|                                           |  |             
|Liabilities and Stockholders Equity       |  |              |             |   |      |   |             |  
|                                           |  |              |             |   |      |   |             |  
|Liabilities, other                         |  | $            | 94,400      |   |      | $ | 61,805      |  
|                                           |  |              |             |   |      |   |             |  
|Stockholders equity                       |  |              |             |   |      |   |             |  
|Common stock                               |  |              | 69,000      |   |      |   | 69,000      |  
|Paid-in capital                            |  |              | 19,339,615  |   |      |   | 19,339,615  |  
|Retained earnings                          |  |              | 61,928,289  |   |      |   | 63,711,451  |  
|Accumulated other comprehensive loss       |  |              | (3,118,849  | ) |      |   | (1,301,888  | )
|Treasury stock, at cost                    |  |              | (23,539,805 | ) |      |   | (23,178,704 | )
|                                           |  |              |             |   |      |   |             |  
|Total Stockholders Equity                 |  |              | 54,678,250  |   |      |   | 58,639,474  |  
|                                           |  |              |             |   |      |   |             |  
|Total Liabilities and Stockholders Equity |  | $            | 54,772,650  |   |      | $ | 58,701,279  |  
|                                           |  |              |             |   |      |   |             |  



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STATEMENTS OF INCOME



|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|----------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                    |  | Years Ended December 31, |           
|                                                                                    |  | 2008                     |            |   | 2007 |   |            | 2006 | 
|Dividends from subsidiary                                                           |  | $                        | 3,800,000  |   |      | $ | 3,800,000  |      |  | $ | 5,000,000  |  
|Interest income                                                                     |  |                          | 2,592      |   |      |   | 2,823      |      |  |   | 3,160      |  
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Income before Expenses                                                              |  |                          | 3,802,592  |   |      |   | 3,802,823  |      |  |   | 5,003,160  |  
|Non-interest expenses                                                               |  |                          | 818,026    |   |      |   | 414,257    |      |  |   | 344,580    |  
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Income before Equity in Undistributed Earnings of Subsidiary and Income Tax Benefit |  |                          | 2,984,566  |   |      |   | 3,388,566  |      |  |   | 4,658,580  |  
|Equity in undistributed earnings of subsidiary                                      |  |                          | (801,123   | ) |      |   | 825,167    |      |  |   | 1,768,604  |  
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Income before Income Tax Benefit                                                    |  |                          | 2,183,443  |   |      |   | 4,213,733  |      |  |   | 6,427,184  |  
|Income Tax Benefit                                                                  |  |                          | (275,875   | ) |      |   | (138,515   | )    |  |   | (114,683   | )
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Net Income                                                                          |  | $                        | 2,459,318  |   |      | $ | 4,352,248  |      |  | $ | 6,541,867  |  
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|                                                                                    |  |                          |           
|STATEMENTS OF CASH FLOWS                                                            |  |                          |            |   |      |   |            |      |  |   |            |  
|                                                                                    |  | Years Ended December 31, |           
|                                                                                    |  | 2008                     |            |   | 2007 |   |            | 2006 | 
|Cash Flows from Operating Activities                                                |  |                          |            |   |      |   |            |      |  |   |            |  
|Net income                                                                          |  | $                        | 2,459,318  |   |      | $ | 4,352,248  |      |  | $ | 6,541,867  |  
|Adjustments to reconcile net income to net cash provided by operating activities:   |  |                          |            |   |      |   |            |      |  |   |            |  
|Equity in undistributed earnings (loss) of subsidiary                               |  |                          | 801,123    |   |      |   | (825,167   | )    |  |   | (1,768,604 | )
|(Increase) in other assets                                                          |  |                          | (5,963     | ) |      |   |           |      |  |   |           |  
|(Increase) decrease in refundable income taxes                                      |  |                          | (137,360   | ) |      |   | (23,832    | )    |  |   | (30,347    | )
|Increase (decrease) in other liabilities                                            |  |                          | 32,595     |   |      |   | 2,125      |      |  |   | (730       | )
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Net Cash Provided by Operating Activities                                           |  |                          | 3,149,713  |   |      |   | 3,505,374  |      |  |   | 4,742,186  |  
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Cash Flows from Financing Activities                                                |  |                          |            |   |      |   |            |      |  |   |            |  
|Cash dividends paid                                                                 |  |                          | (4,173,455 | ) |      |   | (4,577,499 | )    |  |   | (4,577,499 | )
|Sale of treasury stock                                                              |  |                          |           |   |      |   |           |      |  |   | 515,480    |  
|Purchase of treasury stock                                                          |  |                          | (361,101   | ) |      |   |           |      |  |   | (644,620   | )
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Net Cash Used in Financing Activities                                               |  |                          | (4,534,556 | ) |      |   | (4,577,499 | )    |  |   | (4,706,639 | )
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Net (Decrease) Increase in Cash and Cash Equivalents                                |  |                          | (1,384,843 | ) |      |   | (1,072,125 | )    |  |   | 35,547     |  
|Cash and Cash Equivalents  Beginning                                               |  |                          | 4,413,918  |   |      |   | 5,486,043  |      |  |   | 5,450,496  |  
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  
|Cash and Cash Equivalents  Ending                                                  |  | $                        | 3,029,075  |   |      | $ | 4,413,918  |      |  | $ | 5,486,043  |  
|                                                                                    |  |                          |            |   |      |   |            |      |  |   |            |  



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



Note 18. Quarterly Financial Data (Unaudited)



|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|--------------------------------------------------- |  | ---------------------------------------- | ----- | -------------- | - | ------------- |  | -------------- | ----- |  | - | ----- | -
|                                                    |  | Year Ended December 31, 2008             |      
|                                                    |  | First Quarter                            |       | Second Quarter |   | Third Quarter |  | Fourth Quarter |      
|                                                    |  | (In Thousands, Except Per Share Amounts) |      
|Interest income                                     |  | $                                        | 9,121 |                | $ | 8,764         |  | $              | 8,661 |  | $ | 8,669 |  
|Interest expense                                    |  |                                          | 4,436 |                |   | 4,016         |  |                | 3,514 |  |   | 3,439 |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Net Interest Income                                 |  |                                          | 4,685 |                |   | 4,748         |  |                | 5,147 |  |   | 5,230 |  
|Provision for loan losses                           |  |                                          | 78    |                |   | 151           |  |                | 352   |  |   | 1,049 |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Net Interest Income after Provision for loan losses |  |                                          | 4,607 |                |   | 4,597         |  |                | 4,795 |  |   | 4,181 |  
|Non-interest income                                 |  |                                          | 538   |                |   | 555           |  |                | 640   |  |   | 690   |  
|Non-interest expenses                               |  |                                          | 3,544 |                |   | 3,625         |  |                | 4,426 |  |   | 4,825 |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Income before Income Taxes                          |  |                                          | 1,601 |                |   | 1,527         |  |                | 1,009 |  |   | 46    |  
|Income taxes                                        |  |                                          | 591   |                |   | 564           |  |                | 398   |  |   | 171   |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Net Income (Loss)                                   |  | $                                        | 1,010 |                | $ | 963           |  | $              | 611   |  | $ | (125  | )
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Net income per common share:                        |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Basic                                               |  | $                                        | 0.20  |                | $ | 0.20          |  | $              | 0.12  |  | $ | (0.03 | )
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Diluted                                             |  | $                                        | 0.20  |                | $ | 0.20          |  | $              | 0.12  |  | $ | (0.03 | )
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Dividends per common share                          |  | $                                        | 0.23  |                | $ | 0.23          |  | $              | 0.23  |  | $ | 0.15  |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|                                                    | 
|                                                    |  | Year Ended December 31, 2007             |      
|                                                    |  | First Quarter                            |       | Second Quarter |   | Third Quarter |  | Fourth Quarter |      
|                                                    |  | (In Thousands, Except Per Share Amounts) |      
|Interest income                                     |  | $                                        | 9,330 |                | $ | 9,276         |  | $              | 9,298 |  | $ | 9,198 |  
|Interest expense                                    |  |                                          | 4,409 |                |   | 4,540         |  |                | 4,580 |  |   | 4,553 |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Net Interest Income                                 |  |                                          | 4,921 |                |   | 4,736         |  |                | 4,718 |  |   | 4,645 |  
|Provision for loan losses                           |  |                                          | 195   |                |   | 175           |  |                | 150   |  |   | 150   |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Net Interest Income after Provision for loan losses |  |                                          | 4,726 |                |   | 4,561         |  |                | 4,568 |  |   | 4,495 |  
|Non-interest income                                 |  |                                          | 664   |                |   | 643           |  |                | 505   |  |   | 534   |  
|Non-interest expenses                               |  |                                          | 3,441 |                |   | 3,388         |  |                | 3,257 |  |   | 3,755 |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Income before Income Taxes                          |  |                                          | 1,949 |                |   | 1,816         |  |                | 1,816 |  |   | 1,274 |  
|Income taxes                                        |  |                                          | 723   |                |   | 663           |  |                | 671   |  |   | 446   |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Net Income                                          |  | $                                        | 1,226 |                | $ | 1,153         |  | $              | 1,145 |  | $ | 828   |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Net income per common share:                        |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Basic                                               |  | $                                        | 0.25  |                | $ | 0.23          |  | $              | 0.23  |  | $ | 0.17  |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Diluted                                             |  | $                                        | 0.25  |                | $ | 0.23          |  | $              | 0.23  |  | $ | 0.17  |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  
|Dividends per common share                          |  | $                                        | 0.23  |                | $ | 0.23          |  | $              | 0.23  |  | $ | 0.23  |  
|                                                    |  |                                          |       |                |   |               |  |                |       |  |   |       |  

See also Note 22 to Consolidated Financial Statements for discussion on non-interest income.



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Note 19  Regulatory Update

The Bank is subject to a range of bank regulatory compliance obligations. In connection with a routine compliance examination by the Office of Thrift Supervision (OTS), certain deficiencies were
identified. The Bank has and continues to take steps to remediate these deficiencies and to strengthen the Banks overall compliance programs. The Bank agreed to a cease and desist order (the Order) issued by the OTS on
September 26, 2008 as a result of issues relating to the Banks compliance with certain laws and regulations, including the Bank Secrecy Act and Anti-Money Laundering (BSA/AML). The Order did not identify or relate to any
issues regarding the safety and soundness of the Bank.

The Order requires the Bank to strengthen its BSA/AML Program, to strengthen its Compliance
Maintenance Program and internal controls related to those matters, and to take certain other actions identified by the OTS in the Order. The Bank has implemented initiatives to enhance, among other things, its BSA/AML Program and its Compliance
Management Program in accordance with the requirements of the Order.

Note 20  Sale of Branch Office

On March 6, 2009, the Bank completed its transaction for the sale of assets and transfer of liabilities of the Banks Fort Lee, New Jersey banking office, as
well as assignment of the lease for that office, to NewBank, a New York chartered commercial bank located in Flushing, New York. As of that date, the deposits of the Banks Fort Lee branch were approximately $14.5 million. The purchase price
for the assets of the branch, which was offset against the amount owed to NewBank for assuming the branchs deposits, was $500,000 and a cash payment for the loans being purchased, which had a net book value of $13,000 at the time of sale. The
Bank recorded a gain of approximately $492,000 as a result of the sale.

Note 21  Stock Repurchase Program

In the fourth quarter of 2008, Pamrapo Bancorp, Inc. repurchased 40,000 shares under its previous share repurchase program that was announced on August 22, 2000, at
an average price of $9.00, leaving only 1,465 shares remaining that may be repurchased under that program as of December 31, 2008. Pamrapo Bancorp, Inc. announced on February 3, 2009 that its Board of Directors has authorized the
repurchase of up to 5% of its outstanding common stock, or approximately 246,700 shares.



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Notes to Consolidated Financial Statements



Note 22: Commissions from Sale of Financial Products

Commissions from
sale of financial products includes commissions received by Pamrapo Service Corporation (Corporation), a wholly-owned subsidiary of the Bank, due to the sale of products such as securities, life insurance, and annuities. Commissions
received related to securities are received from a third-party broker dealer. Pursuant to the Corporations policies, such commissions are to be paid directly to the Corporation, which, in conjunction with the Bank, then determines the amount
of commission payments to be made to the Corporations employees and agents.

As of March 12, 2009, the Company and the Bank were aware of the
following information relating to certain commission payments made to the manager of the Corporation (the Manager). The information presented below is based upon the knowledge and understanding of the individuals who conducted internal
inquiries into this matter. The Bank has hired an independent auditor to conduct a forensic audit of the Corporations business records, the outcome of which cannot be determined at this time. Subsequent to March 12, 2009, additional
information may be discovered, or may come to light, that could affect the accuracy of the following information relating to the commissions.

In August
2008, the Bank discovered that 100% of certain commissions from a third-party broker were paid directly to the Manager. These direct payments constituted a change in commission structure, which was made without the approval of the board of directors
of the Corporation, as required by its policies and procedures. Based upon the Corporations policies in effect at the time, 100% of these commissions were to be paid directly to the Corporation and then 50% were to be distributed by the
Corporation to the Manager. Following such internal inquiries, the Bank determined that $270,357 was owed by the Manager to the Corporation for commissions paid directly to the Manager for the period from August 2007 to December 2008.

The $270,357 was calculated as follows. For the period from August 2007 to August 2008, the Bank determined that the Manager owed $168,016. This amount is the
Corporations 50% share of the commissions had the Corporation directly received the payment from the third-party broker and then provided the Manager his 50% share of the commissions. For the period from September 2008 to December 2008, the
Bank determined that the Manager owed $102,341. This amount represented 100% of the commissions the Manager received from the third-party broker for this period. The Bank sought repayment of the entire amount for the following reason. During the
internal inquiry, the Bank discovered that the Manager received commissions from September 2008 to December 2008 directly from the third-party broker. Additionally, on December 10, 2008, the Manager received $91,667 as a salary payment for the
period from September 2008 to December 2008, based upon an annual salary of $275,000 pursuant to an arrangement established in November 2008.

The $270,357
was paid to the Corporation as follows. On December 3, 2008, the Manager paid $160,000 of the amount owed to the Corporation. On December 10, 2008, the Manager paid $50,000 of the amount owed to the Corporation. On February 4, 2009, the Manager paid
the remaining $60,357 of the amount owed to the Corporation.

The Company and the Bank have determined that a restatement of previously issued financial
statements is not necessary with respect to this matter because the income statement effect was not deemed to be material to any given period. Specifically, the income before income taxes, related income tax expense, net income, and earnings per
common share were deemed not material to any of the quarters ended September 30, 2007, December 31, 2007, March 31, 2008, June 30, 2008, September 30, 2008 and December 31, 2008. The Company and the Bank determined to record the amount of $270,357
in the fourth quarter of 2008. Depending upon the result of the forensic audit, the Company and the Bank may need to record additional amounts and reevaluate whether a restatement of certain financial statements is necessary.

During February 2009, the Corporation discovered additional commissions in the amount of $52,647 that may be owed to the Corporation. The commissions related to the
periods from August 2007 to October 2007 and November 2008. This additional amount was not recorded in the 2008 Consolidated Financial Statements.



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Selected Consolidated Financial Condition and Operating Data of the Company



|                                  |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|--------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                  |  | At December 31,         |        
|Financial condition data:         |  | 2004                    |         |   | 2005 |   |         | 2006 |  |   | 2007    |   |  | 2008 |        
|                                  |  | (In Thousands)          |        
|Total amount of:                  |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Assets                            |  | $                       | 639,899 |   |      | $ | 646,086 |      |  | $ | 636,560 |   |  | $    | 657,428 |   |  | $ | 598,012 |  
|Loans receivable                  |  |                         | 395,800 |   |      |   | 438,250 |      |  |   | 454,859 |   |  |      | 439,053 |   |  |   | 437,554 |  
|Securities available for sale     |  |                         | 3,639   |   |      |   | 3,321   |      |  |   | 1,170   |   |  |      | 917     |   |  |   | 771     |  
|Mortgage-backed securities        |  |                         | 200,077 |   |      |   | 167,009 |      |  |   | 141,053 |   |  |      | 123,907 |   |  |   | 117,428 |  
|Investment securities             |  |                         | 9,309   |   |      |   | 10,287  |      |  |   | 9,168   |   |  |      | 10,377  |   |  |   | 11,350  |  
|Deposits                          |  |                         | 489,350 |   |      |   | 474,003 |      |  |   | 469,941 |   |  |      | 507,961 |   |  |   | 443,999 |  
|Advances and other borrowed money |  |                         | 89,000  |   |      |   | 106,400 |      |  |   | 101,000 |   |  |      | 84,000  |   |  |   | 89,500  |  
|Stockholders equity              |  |                         | 55,114  |   |      |   | 58,616  |      |  |   | 58,568  |   |  |      | 58,639  |   |  |   | 54,678  |  
|                                  | 
|                                  |  | Year Ended December 31, |        
|Operating data:                   |  | 2004                    |         |   | 2005 |   |         | 2006 |  |   | 2007    |   |  | 2008 |        
|                                  |  | (In Thousands)          |        
|Interest income                   |  | $                       | 35,983  |   |      | $ | 36,517  |      |  | $ | 37,537  |   |  | $    | 37,102  |   |  | $ | 35,215  |  
|Interest expense                  |  |                         | 11,391  |   |      |   | 12,430  |      |  |   | 15,981  |   |  |      | 18,082  |   |  |   | 15,405  |  
|                                  |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net interest income               |  |                         | 24,592  |   |      |   | 24,087  |      |  |   | 21,556  |   |  |      | 19,020  |   |  |   | 19,810  |  
|Provision for loan losses         |  |                         | 82      |   |      |   | 110     |      |  |   |        |   |  |      | 670     |   |  |   | 1,630   |  
|Non-interest income               |  |                         | 2,599   |   |      |   | 2,541   |      |  |   | 2,798   |   |  |      | 2,347   |   |  |   | 2,423   |  
|Non-interest expenses             |  |                         | 13,792  |   |      |   | 13,543  |      |  |   | 13,884  |   |  |      | 13,841  |   |  |   | 16,420  |  
|Income taxes                      |  |                         | 5,373   |   |      |   | 5,011   |      |  |   | 3,928   |   |  |      | 2,504   |   |  |   | 1,724   |  
|                                  |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                  |  |                         |         |   |     
|Net income                        |  | $                       | 7,944   |   |      | $ | 7,964   |      |  | $ | 6,542   |   |  | $    | 4,352   |   |  | $ | 2,459   |  
|                                  |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income per share              |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Basic                             |  | $                       | 1.60    |   |      | $ | 1.60    |      |  | $ | 1.31    |   |  | $    | 0.87    |   |  | $ | 0.49    |  
|Diluted                           |  |                         | 1.59    |   |      |   | 1.60    |      |  |   | 1.31    |   |  |      | 0.87    |   |  |   | 0.49    |  
|                                  |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Dividends per share               |  | $                       | 0.84    |   |      | $ | 0.88    |      |  | $ | 0.92    |   |  | $    | 0.92    |   |  | $ | 0.84    |  
|                                  |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Dividend payout ratio             |  |                         | 52.60   | % |      |   | 54.97   | %    |  |   | 69.97   | % |  |      | 105.18  | % |  |   | 169.70  | %
|                                  |  |                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Selected Consolidated Financial Condition and Operating Data of the Company





|                                                                             |  |                                      |   |  |        |   |  |        |   |  |       |   |  |       |  
|---------------------------------------------------------------------------- |  | ------------------------------------ | - |  | ------ | - |  | ------ | - |  | ----- | - |  | ----- | -
|                                                                             |  | As of or For Year Ended December 31, |  
|Selected Financial Ratios:                                                   |  | 2004                                 |   |  | 2005   |   |  | 2006   |   |  | 2007  |   |  | 2008  |  
|Return on average assets                                                     |  | 1.24                                 | % |  | 1.24   | % |  | 1.02   | % |  | 0.69  | % |  | 0.40  | %
|Return on average equity                                                     |  | 15.00                                | % |  | 14.06  | % |  | 10.95  | % |  | 7.35  | % |  | 4.22  | %
|Average equity/average assets                                                |  | 8.26                                 | % |  | 8.82   | % |  | 9.29   | % |  | 9.37  | % |  | 9.44  | %
|Interest rate spread                                                         |  | 3.66                                 | % |  | 3.52   | % |  | 3.00   | % |  | 2.56  | % |  | 2.83  | %
|Net yield on average interest-earning assets                                 |  | 3.92                                 | % |  | 3.84   | % |  | 3.43   | % |  | 3.07  | % |  | 3.28  | %
|Non-interest expenses to average assets                                      |  | 2.15                                 | % |  | 2.11   | % |  | 2.16   | % |  | 2.19  | % |  | 2.66  | %
|Equity/total assets                                                          |  | 8.61                                 | % |  | 9.07   | % |  | 9.20   | % |  | 8.92  | % |  | 9.14  | %
|Capital ratios:                                                              |  |                                      |   |  |        |   |  |        |   |  |       |   |  |       |  
|Tangible                                                                     |  | 7.92                                 | % |  | 8.18   | % |  | 8.59   | % |  | 8.43  | % |  | 9.14  | %
|Core                                                                         |  | 7.92                                 | % |  | 8.18   | % |  | 8.59   | % |  | 8.43  | % |  | 9.14  | %
|Risk-based                                                                   |  | 15.89                                | % |  | 15.25  | % |  | 15.68  | % |  | 15.82 | % |  | 15.25 | %
|Non-performing loans to total assets                                         |  | 0.41                                 | % |  | 0.30   | % |  | 0.36   | % |  | 0.83  | % |  | 1.81  | %
|Non-performing loans to loans receivable                                     |  | 0.67                                 | % |  | 0.44   | % |  | 0.50   | % |  | 1.25  | % |  | 2.44  | %
|Non-performing assets to total assets                                        |  | 0.41                                 | % |  | 0.30   | % |  | 0.36   | % |  | 0.91  | % |  | 1.88  | %
|Allowance for loan losses to non-performing loans                            |  | 96.44                                | % |  | 139.93 | % |  | 116.32 | % |  | 57.54 | % |  | 43.12 | %
|Average interest-earning assets/average interest-bearing liabilities         |  | 1.14x                                |   |  | 1.16x  |   |  | 1.17x  |   |  | 1.17x |   |  | 1.18  | %
|Net interest income after provision for loan losses to non-interest expenses |  | 1.79x                                |   |  | 1.77x  |   |  | 1.55x  |   |  | 1.33x |   |  | 1.11  | %



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Stockholder Information

MARKET FOR COMMON STOCK AND RELATED MATTERS

Pamrapo Bancorp, Inc.s common stock is presently quoted on The NASDAQ GM under the symbol PBCI. At March 9, 2009, the Companys 4,935,542 outstanding shares of common stock were held by approximately 1,600
persons or entities.

The following table sets forth the high and low closing sales price per common share for the periods indicated.



|                                |  |                |       |     |   |      
|------------------------------- |  | -------------- | ----- | --- | - | -----
|                                |  | Closing Prices
|Quarter Ended                   |  | High           |       | Low
|March 31, 2007                  |  | $              | 24.87 |     | $ | 22.00
|June 30, 2007                   |  |                | 22.72 |     |   | 19.66
|September 30, 2007              |  |                | 19.74 |     |   | 17.26
|December 31, 2007               |  |                | 22.25 |     |   | 18.00
|March 31, 2008                  |  |                | 20.43 |     |   | 14.36
|June 30, 2008                   |  |                | 16.62 |     |   | 14.27
|September 30, 2008              |  |                | 15.50 |     |   | 10.20
|December 31, 2008               |  |                | 10.92 |     |   | 7.36 
|                                |  |               
|Dividends were paid as follows: |  |                |       |    
|March, 2007                     |  | $              | .23   |     |   |      
|June, 2007                      |  |                | .23   |     |   |      
|September, 2007                 |  |                | .23   |     |   |      
|December, 2007                  |  |                | .23   |     |   |      
|March, 2008                     |  |                | .23   |     |   |      
|June, 2008                      |  |                | .23   |     |   |      
|September, 2008                 |  |                | .23   |     |   |      
|December, 2008                  |  |                | .15   |     |   |      

Future dividend policy will be determined by the Board of Directors after giving consideration to the
Companys financial condition, results of operations, tax status, industry standards, economic conditions and other factors. Dividends will also depend upon dividend payments by the Bank to the Company, which is its primary source of income.
The Board may also consider the payment of stock dividends from time to time, in addition to, or in lieu of cash dividends.

Under federal regulations, the
Bank may not declare or pay a cash dividend on any of its common stock if the effect thereof would cause the Banks regulatory capital to be reduced below the amount required for the liquidation account or the regulatory capital requirements
imposed by the Office of Thrift Supervision (OTS). The Bank must provide at least 60 days advance notice to the OTS before declaring a dividend.



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PAMRAPO BANCORP, INC. & SUBSIDIARIES

Stock Performance Chart

The following graph shows a five year
comparison of shareholder return on the Companys Common Stock with the cumulative total returns of companies on the Russell 2000 Index and the SNL NASDAQ Thrift Index. Total return assumes the reinvestment of all dividends. The graph assumes
$100 was invested on December 31, 2003.

COMPARATIVE FIVE-YEAR TOTAL
RETURNS

Pamrapo Bancorp, Inc., Russell 2000 Index, SNL NASDAQ Thrift Index

(Performance Results Through 12/31/08)

LOGO



|                      |  |               |  |          |  |          |  |          |  |          |  |         
|--------------------- |  | ------------- |  | -------- |  | -------- |  | -------- |  | -------- |  | --------
|                      |  | Period Ending
|Index                 |  | 12/31/03      |  | 12/31/04 |  | 12/31/05 |  | 12/31/06 |  | 12/31/07 |  | 12/31/08
|Pamrapo Bancorp, Inc. |  | 100.00        |  | 100.92   |  | 91.05    |  | 104.38   |  | 93.59    |  | 37.28   
|Russell 2000          |  | 100.00        |  | 118.33   |  | 123.72   |  | 146.44   |  | 144.15   |  | 95.44   
|SNL Thrift NASDAQ     |  | 100.00        |  | 112.60   |  | 112.12   |  | 133.74   |  | 116.31   |  | 112.57  

Source: SNL Financial LC, Charlottesville, VA
(434) 977-1600 © 2009 www.snl.com



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