Pamrapo Systems, Inc (PBCI) - Description of business

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

Pamrapo was organized in 1887 as Pamrapo Building and Loan Association. On October 6, 1952, it changed its name to Pamrapo Savings and Loan Association, a New Jersey chartered savings and loan association in mutual form, and in 1988 it changed its name to Pamrapo Savings Bank, S.L.A. The Bank’s principal office is located in Bayonne, New Jersey. Its deposits are insured up to applicable limits by the Deposit Insurance Fund (the “DIF”) which is administered by the FDIC. At December 31, 2006, the Bank had total assets of $636.6 million, deposits of $475.4 million and stockholders’ equity of $53.0 million before elimination of intercompany accounts with the Company.

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

Market Area

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

Lending Activities

General . Pamrapo principally originates fixed-rate mortgage loans on one- to four-family residential dwellings for retention in its own portfolio. The Bank also originates acquisition, development and construction loans in addition to multi-family and commercial real estate loans. At December 31, 2006, the Bank’s total gross loans outstanding amounted to $460.3 million, of which $276.2 million consisted of loans secured by one- to four-family residential properties, $17.2 million consisted of construction and land loans, $155.4 million consisted of loans secured by multi-family and commercial real estate, and $9.0 million consisted of commercial loans. Substantially all of the Bank’s real estate loan portfolio consists of conventional mortgage loans.

LOAN PORTFOLIO COMPOSITION

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

<

		At December 31,
		2002							2003							2004							2005							2006
		Amount				Percent			Amount				Percent			Amount				Percent			Amount				Percent			Amount				Percent
		(Dollars in thousands)
Real Estate Mortgage Loans:
Permanent:
Fixed-rate		$	320,715			82.26	%		$	308,437			81.46	%		$	319,043			80.61	%		$	346,456			79.05	%		$	352,913			77.59	%
Adjustable rate			2,137			.55				1,804			.48				3,039			.77				6,316			1.44				8,188			1.80
Construction (1)			7,893			2.02				12,599			3.32				18,272			4.61				16,299			3.72				17,224			3.78
Total mortgage loans			330,745			84.83				322,840			85.26				340,354			85.99				369,071			84.21				378,325			83.17
Commercial Loans			658			.17				407			.11				659			.17				5,858			1.34				9,037			1.99
Consumer Loans:
Passbook or certificate			552			.14				586			.16				733			.19				763			.18				719			.16
Home improvement			336			.09				229			.06				133			.03				57			.01				36			.01
Equity and second mortgages			59,234			15.19				59,758			15.78				59,015			14.91				66,494			15.17				70,507			15.50
Automobile			1,243			.32				734			.19				637			.16				680			.16				536			.12
Personal			1,298			.33				1,144			.30				1,041			.26				1,052			.24				1,146			.25
Total consumer loans			62,663			16.07				62,451			16.49				61,559			15.55				69,046			15.76				72,944			16.04
Total loans			394,066			101.07				385,698			101.86				402,572			101.71				443,975			101.31				460,306			101.20
Less:
Allowance for loan losses			2,550			.65				2,515			.66				2,495			.63				2,755			.63				2,651			.58
Loans in process			1,882			.48				5,168			1.36