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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1996
REGISTRATION NO. 33-91038
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-2
WITH EXHIBITS
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
RARITAN BANCORP INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 6120 22-2792402
(State or other jurisdiction (Primary standard (I.R.S. Employer identification
of incorporation or organization) industrial classfication) number code number)
</TABLE>
9 WEST SOMERSET STREET
RARITAN, NEW JERSEY 08869
(908) 725-0080
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ARLYN D. RUS
CHAIRMAN OF THE BOARD, PRESIDENT, AND CHIEF EXECUTIVE OFFICER
9 WEST SOMERSET STREET
RARITAN, NEW JERSEY 08869
(908) 725-0080
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
JOHN J. GORMAN, ESQ.
KENNETH R. LEHMAN, ESQ.
LUSE LEHMAN GORMAN POMERENK & SCHICK
5335 WISCONSIN AVENUE, N.W.,
SUITE 400
WASHINGTON, D.C. 20015
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, check the following box: [X]
If the Registrant elects to deliver its annual report to security holders,
or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this
Form, check the following box: [X]
===============================================================================
<PAGE>
PROSPECTUS
RARITAN BANCORP INC.
164,285 SHARES OF COMMON STOCK (ANTICIPATED MAXIMUM)
Raritan Bancorp Inc. ("Raritan Bancorp" or the "Company"), a bank holding
company headquartered in Raritan, New Jersey, is offering shares of its common
stock, par value $.01 per share (the "Common Stock"), pursuant to an Acquisition
Agreement Among Raritan Bancorp Inc., The Raritan Savings Bank ("Raritan
Savings") and Manville Savings Bank (the "Acquisition Agreement"), whereby
Manville Savings Bank ("Manville Savings") will convert from the mutual to stock
form of organization by merging into Raritan Savings, the wholly owned
subsidiary of Raritan Bancorp (the "Conversion" or the "Conversion and Merger").
In accordance with the Plan of Merger Conversion from Mutual to Stock Form of
Organization of Manville Savings Bank into The Raritan Savings Bank (the "Plan
of Conversion"), Raritan Bancorp is offering shares of its common stock (the
"Conversion Stock") to certain of Manville Savings' depositors in a subscription
offering (the "Subscription Offering") and to certain other persons in a
community offering (the "Community Offering," and together with the Subscription
Offering, the "Offering").
In accordance with the Plan of Conversion, and subject to certain maximum
and minimum purchase limitations, subscription rights to purchase Raritan
Bancorp Common Stock have been granted to (i) Manville Savings' account holders
who had deposit accounts totalling $50 or more as of the close of business on
June 30, 1993 (the "Eligibility Record Date") (such depositors are referred to
as "Eligible Account Holders"), (ii) Manville Savings' account holders who had
deposit accounts totalling $50 or more as of the close of business on December
31, 1995 (the "Supplemental Eligibility Record Date,") (such depositors are
referred to as "Supplemental Eligible Account Holders"), and (iii) depositors of
Manville Savings as of the April 19, 1996 voting record date for the Special
Meeting of depositors being held to approve the Plan of Conversion ("Voting
Depositors"). Any shares of Conversion Stock not purchased in the Subscription
Offering will be offered for sale in the Community Offering, with a preference
given first to Raritan Bancorp's shareholders and then to natural persons
residing in Somerset County, New Jersey. The Community Offering, if any, will be
conducted by officers and directors of the Company.
The number of shares of Common Stock of Raritan Bancorp to be issued and
sold in the Offering will be equal to the quotient obtained by dividing (i) the
Independent Valuation as updated at the conclusion of the Offering by (ii) the
average closing bid price per share of Raritan Bancorp's Common Stock as
reported on the Nasdaq Stock Market during the twenty trading days ending on the
day prior to the date of the closing of the Conversion, which will be the price
per share of Conversion Stock paid by subscribers other than Eligible Account
Holders (the "Actual Purchase Price"). The price per share of Conversion Stock
paid by Eligible Account Holders (the "EAH Actual Purchase Price") will be equal
to 90% of the Actual Purchase Price. The Independent Valuation has been
performed by Professional Bank Services, Inc. ("PBS"), a firm experienced in the
valuation and appraisal of savings institutions. PBS determined the appraised
value of Manville Savings to be $3,000,000 and the estimated valuation range to
be between $2,550,000 and $3,450,000 as of December 6, 1995 (the "Valuation
Range"). The Independent Valuation will be updated and the aggregate purchase
price of the Conversion Stock to be sold in the Conversion will be determined
after the completion of the Offering. If the updated appraised value of
Manville Savings is outside the Valuation Range, the Offering may be terminated,
or a new valuation range may be established, in which event subscribers will be
resolicited and given the opportunity to modify or rescind their order. See "The
Conversion and Merger; The Offering -- The Independent Valuation."
Raritan Bancorp has established the estimated subscription price of the
shares of Conversion Stock at $21.00 per share (the "Estimated Subscription
Price"), and an estimated subscription price of the shares of Conversion Stock
to be purchased by Eligible Account Holders at 90% of the Estimated Subscription
Price, or $18.90 per share (the "EAH Estimated Subscription Price"). The
Estimated Subscription Price was established at an amount that Raritan Bancorp
estimated would equal or exceed the Actual Purchase Price. In order to purchase
Conversion Stock each purchaser must complete and submit an Order Form
indicating the estimated number of shares (the "Estimated Subscription Shares")
for which he is subscribing at the Estimated Subscription Price, or the EAH
Estimated Subscription Price, as applicable. Payment for all subscriptions must
accompany the Order Form and may be made by (i) check or money order made
payable to Raritan Bancorp Inc., or (ii) authorization of withdrawal from a
deposit account maintained at Manville Savings. The actual number of shares
purchased by any individual subscriber (the "Actual Shares Purchased") will be
equal to the total dollar amount of such subscriber's
<PAGE>
order divided by the Actual Purchase Price, or in the case of Eligible Account
Holders, divided by the EAH Actual Purchase Price, subject to the applicable
purchase limitations. Manville Savings and Raritan Bancorp reserve the right to
refund subscription funds in lieu of issuing fractional shares, or permit
subscribers to elect to receive additional whole shares in this process. The
Actual Shares Purchased may be reduced in the event of an oversubscription.
There can be no assurance that the actual price per share paid by subscribers
will not exceed the Estimated Subscription Price, or that subscribers will not
receive fewer shares than the number for which they subscribed, or that the EAH
Actual Purchase Price will represent a discount to the bid price of the Common
Stock at the time of Closing or upon the receipt of the certificates for shares
purchased. See "Special Considerations -- No Guaranteed Discount."
The minimum number of shares of Conversion Stock for which any person may
subscribe in the Subscription Offering or in the Community Offering,
respectively, is that number of shares having an aggregate Actual Purchase Price
or EAH Actual Purchase Price of $500, as applicable. No person, directly or
indirectly or with an associate or a group acting in concert, may subscribe for
or purchase in the aggregate more than 5% of the total number of shares of
Conversion Stock offered in the Offering, or 8,214 shares based on an offering
of 164,285.
All subscription rights will expire at 3:00 p.m., New Jersey time, on
June 3, 1996 (the "Expiration Date") unless extended by Raritan Bancorp, with
the approval of the Commissioner if necessary, for up to an additional 45 days.
Any shares not sold in the Subscription Offering will be sold in the Community
Offering, which also is expected to terminate on June 3, 1996, but which may
terminate as late as July 18, 1996. Subscriptions paid by cash, check, or money
order will be placed in a segregated account at Manville Savings and will earn
interest at Raritan Saving's regular passbook rate of interest from the date of
receipt until completion or termination of the Conversion. Payments authorized
by withdrawal from deposit accounts at Manville Savings will continue to earn
interest at the contractual rate until the Conversion is completed or
terminated; these funds will be otherwise unavailable to the depositor until
such time. Orders submitted are irrevocable until the completion of the
Conversion; provided that all subscribers will have their funds returned
promptly, with interest, and all withdrawal authorizations will be cancelled if
the Conversion is not completed by July 18, 1996, unless such period has been
extended with the approval of the Commissioner, if necessary. If an extension of
time has been granted, all subscribers will be notified of such extension, and
of any rights to confirm, modify or rescind their subscriptions and have their
funds returned promptly with interest, and of the time period within which each
subscriber must notify Manville Savings or Raritan Bancorp of his intention to
confirm, modify or rescind his subscription. If an affirmative response to any
resolicitation is not received by Manville Savings or Raritan Bancorp from a
subscriber, the subscriber's order will be rescinded and all funds will be
returned promptly with interest. Such extensions may not go beyond June 3,
1998.
Consummation of the Conversion is subject to the approval of the Plan of
Conversion by Manville Savings' depositors at a special meeting called for such
purpose, the satisfaction of conditions contained in certain regulatory
approvals and letters of non-objection, and the satisfaction or waiver of
certain conditions contained in the Acquisition Agreement.
Raritan Bancorp Common Stock is listed for quotation on the Nasdaq
National Market System under the symbol "RARB." On May ___, 1996, the last
reported sale price of Raritan Bancorp Common Stock, as reported on the Nasdaq
National Market System, was $_____. RARITAN BANCORP IS SUBJECT TO THE
INFORMATIONAL REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AND IN ACCORDANCE THEREWITH FILES REPORTS, PROXY STATEMENTS AND OTHER
INFORMATION WITH THE SECURITIES AND EXCHANGE COMMISSION.
2
<PAGE>
_______________________________
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "SPECIAL CONSIDERATIONS."
_______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE NEW JERSEY
COMMISSIONER OF BANKING, OR ANY OTHER FEDERAL OR STATE AGENCY OR ANY STATE
SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, CORPORATION, COMMISSIONER OR
OTHER AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================
ESTIMATED
ESTIMATED ESTIMATED FEES NET
SUBSCRIPTION PRICE (1) AND EXPENSES (2) PROCEEDS (3)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share........... $18.90 $2.88 $16.02
- -----------------------------------------------------------------------------------------------------------
Midpoint Per Share.......... $18.90 $2.45 $16.45
- -----------------------------------------------------------------------------------------------------------
Maximum Per Share........... $18.90 $2.13 $16.77
- -----------------------------------------------------------------------------------------------------------
Minimum Total............... $2,295,000 $350,000 $1,945,000
- -----------------------------------------------------------------------------------------------------------
Midpoint Total.............. $2,700,000 $350,000 $2,350,000
- -----------------------------------------------------------------------------------------------------------
Maximum Total............... $3,105,000 $350,000 $2,755,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Estimated Subscription Price was established at an amount that
Raritan Bancorp estimated would equal or exceed the Actual Purchase
Price. The number of shares of Common Stock of Raritan Bancorp to be
issued and sold by in the Offering will be equal to the quotient obtained
by dividing (i) the Independent Valuation as updated at the conclusion of
the Offering by (ii) the average closing bid price per share of Raritan
Bancorp's Common Stock as reported on the Nasdaq Stock Market during the
twenty trading days ending on the day prior to the date of the closing of
the Conversion, which will be the price per share of Conversion Stock
paid by subscribers other than Eligible Account Holders (the "Actual
Purchase Price"). The price per share of Conversion Stock paid by
Eligible Account Holders (the "EAH Actual Purchase Price") will be equal
to 90% of the Actual Purchase Price. The Independent Valuation has been
performed by Professional Bank Services, Inc. ("PBS"), a firm experienced
in the valuation and appraisal of savings institutions. PBS determined
the appraised value of Manville Savings to be $3,000,000 and the
estimated valuation range to be between $2,550,000 and $3,450,000 as of
December 6, 1995 (the "Valuation Range"). It is assumed that all of the
Conversion Stock is purchased by Eligible Account Holders at a purchase
price equal to 90% of the Estimated Purchase Price.
(2) Includes estimated legal, accounting, appraisal, printing, conversion
agent and other miscellaneous expenses incurred by Raritan Bancorp and
Manville Savings in connection with the Conversion and Merger of Manville
Savings and the registration and issuance of the Conversion Stock. See
"The Conversion and Merger Transaction; Terms of the Offering." Assumes
that all of the Conversion Stock is purchased by Eligible Account Holders
at a purchase price equal to 90% of the Estimated Purchase Price.
(3) Assumes that all of the Conversion Stock is purchased by Eligible Account
Holders at a purchase price equal to 90% of the Estimated Purchase Price.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE
BANK INSURANCE FUND ("BIF"), THE SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") OR
ANY OTHER GOVERNMENT AGENCY.
THE DATE OF THIS PROSPECTUS IS MAY ____, 1996.
3
<PAGE>
[Map]
4
<PAGE>
AVAILABLE INFORMATION
Raritan Bancorp is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Such reports, proxy statements
and other information may be inspected and copied at the public reference
facility maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, or at the following Regional Offices of the Commission: Northwestern
Atrium Center, 500 West Madison Avenue, Suite 1400, Chicago, Illinois 60611-
2511, and 14th Floor, 75 Park Place, New York, New York 10007. Copies of such
material can also be obtained from the SEC at prescribed rates. Written
requests for such material should be addressed to the Public Reference Section,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549.
Raritan Bancorp has filed with the SEC a Registration Statement (the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933 (the "1933 Act"), with respect to the Common Stock to be
issued by Raritan Bancorp in the Offering. The Registration Statement includes
additional information which has been omitted from the Prospectus pursuant to
the rules and regulations of the SEC. The information so omitted from the
Prospectus may be obtained from the SEC as described above.
In addition, the Acquisition Agreement, Plan of Conversion and Independent
Appraisal may be inspected at Manville Saving's office at 313 South Main Street,
Manville, New Jersey.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated in this
Prospectus by reference:
1. Raritan Bancorp Inc. Annual Report on Form 10-K for the year ended
December 31, 1995.
2. Raritan Bancorp Inc. 1995 Annual Report to Shareholders.
3. Raritan Bancorp Inc. Quarterly Report on Form 10-Q for the Quarter
Ended March 31, 1996.
4. All documents filed by Raritan Bancorp Inc. subsequent to the date
hereof pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934
Act.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Raritan Bancorp Inc. will provide without charge to any person to whom
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all documents incorporated herein by reference (except exhibits
thereto). Such requests, in writing or by telephone, should be directed to:
Lucille H. Daniel, Secretary, Raritan Bancorp Inc., 9 West Somerset Street,
Raritan, New Jersey, 08869, (908) 725-0080.
DOCUMENTS PROVIDED HEREWITH
This Prospectus is accompanied by a copy of Raritan Bancorp's Annual
Report to Shareholders for the year ended December 31, 1995 (the "1995 Annual
Report").
5
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SUMMARY
The following summary does not purport to be complete, and is qualified
in its entirety by the more detailed information contained elsewhere in the
Prospectus or in the documents incorporated by reference, including the
Financial Statements and Notes thereto of Raritan Bancorp appearing in the 1995
Annual Report to Shareholders that accompanies this Prospectus.
RARITAN BANCORP INC.
Raritan Bancorp, a Delaware Corporation, is a bank holding company whose
only subsidiary is Raritan Savings, a New Jersey chartered stock savings bank
the deposits in which are insured by the Federal Deposit Insurance Corporation
(the "FDIC") primarily through the Bank Insurance Fund (the "BIF"). Raritan
Bancorp was formed in 1987 at the direction of Raritan Savings in connection
with Raritan Savings' conversion from a mutual to stock form of organization.
The sole activity of Raritan Bancorp is its ownership of all of the issued and
outstanding Common Stock of Raritan Savings. Raritan Savings was originally
chartered in 1869.
Raritan Savings is engaged primarily in the business of attracting
deposits from the general public and originating residential mortgage,
construction and consumer loans, and small business loans. In addition, a
significant portion of its assets is invested in mortgage-backed and other
securities. Raritan Savings conducts it business from its main office in Raritan
and four additional retail banking offices located in Martinsville, Somerville,
Warren and Whitehouse Station, New Jersey. At December 31, 1995, the Company had
consolidated assets, deposits, and shareholders' equity of $354.8 million,
$315.0 million, and $26.3 million, respectively.
The Company's executive office is located at 9 West Somerset Street,
Raritan, New Jersey 08869, and its telephone number is (908) 725-0080.
MANVILLE SAVINGS BANK
Manville Savings is a New Jersey chartered mutual savings bank located in
Manville, New Jersey . The primary business of Manville Savings consists of
attracting deposits from the general public and originating residential mortgage
and consumer loans. Manville Savings conducts its business from one office
located at 313 South Main Street, Manville, New Jersey. Manville Savings'
deposits are insured by the FDIC through the Savings Association Insurance Fund
("SAIF"), and Manville Savings is a member of the Federal Home Loan Bank
("FHLB") of New York. As of December 31 1995, Manville Savings had assets of
$15.3 million, deposits of $13.7 million and retained earnings of approximately
$1.4 million.
SPECIAL CONSIDERATIONS
Attention should be given to the matters discussed under "Special
Considerations," which include a discussion of certain federal income tax
consequences of the transaction to Eligible Account Holders; the potential
adverse impact on Raritan Bancorp of changes in interest rates; extensive
governmental regulation of the financial institution industry; no guaranteed
discount; the possible decline in the market price for Raritan Bancorp Common
Stock after the Conversion; the inability to sell Raritan Bancorp Common Stock
until issuance and receipt of the certificates; the highly competitive
environment in which the Company operates; and certain anti-takeover provisions
with respect to Raritan Bancorp.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Offering is completed, it is presently anticipated that
the net proceeds will be between $1,945,000 and $2,755,000, assuming that all
shares of Conversion Stock are purchased by Eligible Account Holders at the EAH
Actual Purchase Price. The net proceeds of the Offering will be invested by the
Company in Raritan Savings and will be used by Raritan Savings for general
corporate purposes, including the origination of mortgage, consumer, and
business loans, and initially will be invested primarily in federal funds and
investment grade, short-term marketable securities. In addition, Raritan
Savings intends to establish a Residential Lending Program and a Small
Business
6
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Lending Program, for an aggregate of $4.0 million, to increase Raritan Savings'
lending in the Manville community. The Residential Lending Program will be a
$2.0 million loan fund from which loans priced at .5% below Raritan Savings'
normal lending rates will be originated. Loans under the Residential Lending
Program will be targeted toward low and moderate income individuals and families
in Manville who normally would not qualify for a loan according to Raritan
Savings' standard underwriting guidelines. Low and moderate income households
are defined as those whose aggregate income is 80% or less of the area's median
income. The loan must be for the purchase, construction, or rehabilitation of a
property that is located in Manville. The Small Business Lending Program will
be a $2.0 million loan fund from which loans priced at .5% below Raritan Savings
normal lending rates will be originated. Loans under the Small Business Lending
Program will be targeted toward small business revitalization in Manville, and
will be available for small business owners to improve and rehabilitate their
property. Raritan Savings will not originate loans under either program,
however, unless Raritan Savings believes that the borrower has demonstrated a
reasonable probability of repayment.
DIVIDEND POLICY
It is the current policy of the Company to pay a quarterly cash dividend
of $.15 per share of common stock. Raritan Bancorp is subject to the
requirements of Delaware law, which generally limit dividends to an amount equal
to the excess of the net assets of Raritan Bancorp (the amount by which total
assets exceed total liabilities) over its statutory capital, or if there is no
such excess, to its net profits for the current and/or immediately preceding
fiscal year. During the years ended December 31, 1995 and 1994, Raritan Bancorp
declared and paid cash dividends totalling $.52 and $.46, respectively, per
common share.
MARKET FOR RARITAN BANCORP COMMON STOCK
Raritan Bancorp's Common Stock is quoted on the Nasdaq National Market
under the symbol "RARB." As of May 10, 1996, Raritan Bancorp had approximately
550 shareholders of record, including brokerage firms, banks and registered
clearing agencies acting as nominees for an indeterminate number of beneficial
owners.
THE CONVERSION AND MERGER OF MANVILLE SAVINGS; THE OFFERING
GENERAL. On March 23, 1994, Raritan Bancorp, Raritan Savings, and
Manville Savings initially entered into the Acquisition Agreement, pursuant to
which Manville Savings is to convert from a New Jersey-chartered mutual savings
bank to a New Jersey-chartered stock savings bank by merging into Raritan
Savings, and Raritan Bancorp is to issue shares of Conversion Stock in the
Offering to the depositors of Manville Savings. The Conversion and Merger are
being conducted pursuant to the Plan of Conversion. The Plan of Conversion and
the merger of Manville Savings into Raritan Savings (the "Merger") have been
approved by the Commissioner of Banking of the State of New Jersey (the
"Commissioner"), and the FDIC has stated in writing that it intends to issue a
letter of non-objection to the Conversion, and to approve the Merger, subject
to, among other things, approval of the Plan of Conversion by Manville Savings'
depositors. A special meeting of depositors for this purpose is to be held on
June 3, 1996.
In connection with, and prior to the completion of the Conversion and
Merger, Manville Savings will pay a special cash bonus distribution to its
depositors in an aggregate amount of $377,000, will distribute $125,000 as
pension equivalency benefits to its employees, and will make charitable
contributions in the aggregate amount of $25,000 for the benefit of non-profit,
public service entities operating in, and dedicated to, the Manville community.
These distributions were proposed by Manville Savings and Raritan Savings to
address FDIC concerns regarding the proper distribution of value in a merger-
conversion transaction, where a mutual institution mergers with an existing
stock company rather than converting to stock form itself. See "The Conversion
and Merger; The Offering -- Distribution to Depositors and Others."
OFFERING PRIORITIES. The Plan of Conversion provides that, subject to
certain maximum and minimum purchase limitations, subscription rights to
purchase shares of Raritan Bancorp Common Stock in the Subscription Offering
have been granted to (i) Manville Savings' account holders who had deposit
accounts totalling $50 or more as of the close of business on June 30, 1993 (the
"Eligibility Record Date," and such depositors "Eligible Account Holders"), (ii)
Manville Savings' account holders who had deposit accounts totalling $50 or more
as of the close
7
<PAGE>
of business on December 31, 1995 (the "Supplemental Eligibility Record Date,"
and such depositors "Supplemental Eligible Account Holders"), and (iii)
depositors of Manville Savings as of the April 19, 1996 voting record date for
the Special Meeting of depositors being held to approve the Plan of Conversion
("Voting Depositors"). Any shares of Conversion Stock not purchased in the
Subscription Offering will be offered for sale in the Community Offering, with a
preference first given to Raritan Bancorp's shareholders and then to natural
persons residing in Somerset County, New Jersey, or under such other terms and
conditions that may be established at any time prior to the closing of the
Community Offering by the Board of Directors of Manville Savings and Raritan
Bancorp.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED. The total number of
shares of Common Stock of Raritan Bancorp to be issued and sold in the Offering
will be determined jointly by the Boards of Directors of Raritan Bancorp and
Manville Savings and will be equal to the quotient obtained by dividing (i) the
Independent Valuation as updated at the conclusion of the Offering by (ii) the
average closing bid price per share of Raritan Bancorp's Common Stock as
reported on the Nasdaq Stock Market during the twenty trading days ending on the
day prior to the date of the closing of the Conversion, which will be the price
per share of Conversion Stock paid by subscribers other than Eligible Account
Holders (the "Actual Purchase Price"). THE PRICE PER SHARE OF CONVERSION STOCK
PAID BY ELIGIBLE ACCOUNT HOLDERS (THE "EAH ACTUAL PURCHASE PRICE") WILL BE EQUAL
TO 90% OF THE ACTUAL PURCHASE PRICE.
ESTIMATED SUBSCRIPTION PRICE. Raritan Bancorp considered the average
closing bid price of Raritan Bancorp's Common Stock as reported on the Nasdaq
Stock market for the twenty trading days ending on the date the Registration
Statement was declared effective and, after consultation with its financial
advisors, such market and financial conditions that Raritan Bancorp deemed
relevant in establishing the Estimated Subscription Price. The Estimated
Subscription Price was established at an amount that Raritan Bancorp estimated
would equal or exceed the Actual Purchase Price. In order to purchase
Conversion Stock each purchaser must complete and submit an Order Form
indicating the estimated number of shares (the "Estimated Subscription Shares")
for which he is subscribing at the Estimated Subscription Price or EAH Estimated
Subscription Price, as applicable. The actual number of shares purchased by
subscribers (the "Actual Shares Purchased") will be equal to the total dollar
amount of such subscriber's order divided by the Actual Purchase Price, or in
the case of Eligible Account Holders, divided by the EAH Actual Purchase Price.
Manville Savings and Raritan Bancorp reserve the right to refund subscription
funds in lieu of issuing fractional shares, or permit subscribers to elect to
receive additional whole shares in such process. The Actual Shares Purchased
may be reduced in the event of an oversubscription. There can be no assurance
that the actual price per share paid by subscribers will not exceed the
Estimated Subscription Price, or that subscribers will not receive fewer shares
than the number for which they subscribed. As of May ___, 1996, the average
closing bid price for Raritan Bancorp Common Stock during the twenty trading day
period ending on May __, 1996 was $__.__, which would have resulted in an Actual
Purchase Price of $__.__ and an EAH Actual Purchase Price of $__.__.
THE INDEPENDENT VALUATION. The estimate of the pro forma market value of
Manville Savings as an entity merged with and into Raritan Savings (the
"Independent Valuation") was performed by Professional Bank Services, Inc.
("PBS"), an independent appraisal firm experienced in the valuation and
appraisal of savings institutions. On the basis of the review described herein,
PBS determined the appraised value of Manville Savings as an entity merged with
and into Raritan Savings to be $3,000,000 and the estimated valuation range to
be between $2,550,000 and $3,450,000 as of December 6, 1995 (the "Valuation
Range"). The Independent Valuation will be updated after the completion of the
Offering. Such valuation, however, is not intended, and must not be construed,
as a recommendation of any kind as to the advisability of purchasing Conversion
Stock. PBS VALUED MANVILLE SAVINGS, BUT DID NOT VALUE THE SHARES OF RARITAN
BANCORP COMMON STOCK OFFERED IN THE OFFERING. PBS did not independently verify
the financial statements and other information provided by Manville Savings or
Raritan Bancorp, nor did PBS value independently the assets or liabilities of
Manville Savings, Raritan Bancorp, or Raritan Savings. Moreover, because such
valuation is necessarily based upon estimates and projections of a number of
matters, all of which are subject to change from time to time, no assurance can
be given that persons purchasing shares in the Conversion will thereafter be
able to sell such shares at prices at or above the price at which they purchased
such shares.
PURCHASE LIMITATIONS. The minimum number of shares of Conversion Stock
for which any person may subscribe in the Subscription Offering or in the
Community Offering, respectively, is that number of shares having
8
<PAGE>
an aggregate Actual Purchase Price or EAH Actual Purchase Price of $500, as
applicable. No person, directly or indirectly or with an associate or a group
acting in concert, may subscribe for or purchase in the aggregate more than 5%
of the total number of shares of Conversion Stock offered in the Offering.
Based on an issuance of 164,285 shares, the maximum purchase limitation will be
8,214 shares. However, the maximum purchase limitation may be decreased or
increased.
EXPIRATION DATE FOR THE SUBSCRIPTION OFFERING. The Subscription Offering
will expire on June 3, 1996, unless extended for up to 45 days or such
additional periods by Raritan Savings with the approval of the Department (the
"Subscription Expiration Date"). Subscription rights which have not been
exercised prior to the Subscription Expiration Date will become void. Raritan
Bancorp will not execute orders until all shares of Common Stock have been
subscribed for or otherwise sold. If all shares have not been subscribed for or
sold by July 18, 1996, unless such period is extended with the consent of the
Commissioner, all funds will be returned promptly to the subscribers with
interest and all withdrawal authorizations will be cancelled. If an extension
is granted, Raritan Bancorp will notify subscribers of the extension of time and
of any rights of subscribers to modify or rescind their subscriptions. Such
extensions may not go beyond June 3, 1998.
COMMUNITY OFFERING. To the extent that shares remain available for
purchase after satisfaction of all subscriptions of the Eligible Account
Holders, Supplemental Eligible Account Holders and Voting Depositors, Raritan
Bancorp will offer shares pursuant to the Plan of Conversion to certain members
of the general public and in a direct community offering with preference given
to Raritan Bancorp Shareholders and then to natural persons residing in Somerset
County, New Jersey. THE OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON STOCK IN
THE COMMUNITY OFFERING CATEGORY IS SUBJECT TO THE RIGHT OF RARITAN BANCORP, IN
ITS SOLE DISCRETION, TO ACCEPT OR REJECT ANY SUCH ORDERS IN WHOLE OR IN PART
EITHER AT THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING
THE EXPIRATION DATE. The Community Offering may commence concurrently with, or
as soon as practicable after the completion of, the Subscription Offering and
must be completed by July 18, 1996, unless extended by Manville Savings and
Raritan Bancorp with the approval of the Commissioner. The shares may be made
available in the Community Offering through a direct community marketing program
which may provide for utilization of a broker, dealer, consultant or investment
banking firm, experienced and expert in the sale of savings institutions
securities. Such entities may be compensated on a fixed fee basis or on a
commission basis, or a combination thereof.
PROCEDURE FOR PURCHASING SHARES IN SUBSCRIPTION AND COMMUNITY OFFERING.
To purchase shares in the Subscription and Community Offering, an executed order
form with the required payment for each share subscribed for, or with
appropriate authorization for withdrawal from Manville Savings' deposit account
(which may be given by completing the appropriate blanks in the order form),
must be received by Manville Savings or Raritan Savings at any of its offices by
3:00 p.m., New Jersey time on the Expiration Date. Order forms which are not
received by such time or are executed defectively or are received without full
payment (or appropriate withdrawal instructions) are not required to be
accepted. In addition, Raritan Bancorp will not accept an order submitted on
photocopied or facsimile order forms. Raritan Bancorp has the right to waive or
permit the correction of incomplete or improperly executed forms, but does not
represent it will do so. Once received, an executed order form may not be
modified, amended or rescinded without the consent of Raritan Bancorp unless the
Conversion has not been completed by July 18, 1996, unless such period has been
extended. IN ORDER TO ENSURE THAT ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL
ELIGIBLE ACCOUNT HOLDERS AND VOTING DEPOSITORS ARE PROPERLY IDENTIFIED AS TO
THEIR STOCK PURCHASE PRIORITIES, DEPOSITORS AS OF THE ELIGIBILITY RECORD DATE,
SUPPLEMENTAL ELIGIBILITY RECORD DATE AND/OR THE VOTING RECORD DATE MUST LIST ALL
ACCOUNTS ON THE STOCK ORDER FORM GIVING ALL NAMES IN EACH ACCOUNT AND THE
ACCOUNT NUMBER.
Payment for subscriptions may be made (i) in cash if delivered in person
at any branch office of Raritan Savings or Manville Savings, (ii) by check or
money order, or (iii) by authorization of withdrawal from deposit accounts,
other than checking accounts, maintained with Manville Savings. Interest will be
paid on payments made by a check, or money order at Manville Savings' passbook
rate of interest from the date payment is received until the completion or
termination of the Conversion. If payment is made by authorization of withdrawal
from deposit accounts (other than checking accounts), the funds authorized to be
withdrawn from a deposit account will continue to accrue interest at the
contractual rates until completion or termination of the Conversion, but a hold
will be placed on such funds, thereby making them unavailable to the depositor
until completion or termination of the Conversion.
9
<PAGE>
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES. Prior to the
completion of the Conversion, persons receiving subscription rights may not
transfer them or enter into any agreement or understanding to transfer the legal
or beneficial ownership of the subscription rights issued under the Plan of
Conversion or the shares of Common Stock to be issued upon their exercise. Such
rights may be exercised only by the person to whom they are granted and only for
his account. Each person exercising such subscription rights will be required
to certify that he is purchasing shares solely for his own account and that he
has no agreement or understanding regarding the sale or transfer of such shares.
In addition, persons may not offer or make an announcement of an offer or intent
to make an offer to purchase such subscription rights or shares of Common Stock
prior to the completion of the Conversion. Raritan Bancorp and Manville Savings
will pursue any and all legal and equitable remedies in the event they become
aware of the transfer of subscription rights and will not honor orders known by
them to involve the transfer of such rights.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE CONVERSION
It is a condition to the completion of the Conversion and Merger that
Manville Savings and Raritan Bancorp receive a tax opinion (the "Tax Opinion")
from Luse Lehman Gorman Pomerenk & Schick, P.C. (which Tax Opinion has been
received, and is summarized hereby), to the effect that the Conversion and
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code") and that,
accordingly, no gain or loss will be recognized by:
(a) Manville Savings, Raritan Bancorp and Raritan Savings as a result of
the Conversion and Merger;
(b) Raritan Bancorp as a result of the issuance of subscription rights
to eligible account holders and other depositors ("Subscription
Rights"), the lapse of any Subscription Rights or the receipt of
money in exchange for the issuance of Raritan Bancorp Common Stock
pursuant to the Offering.
The Tax Opinion will not express an opinion as to the expected tax
effects to Eligible Account Holders as a result of the Conversion and their
ability to purchase Raritan Bancorp Common Stock at 90% of the Actual Purchase
Price. These tax effects may include, among other things, the recognition of
gain upon receipt or exercise of the Subscription Rights to the extent of their
fair market value, which value may be substantial because the EAH Actual
Purchase Price is likely to be substantially less than the fair market value of
the Raritan Bancorp Common Stock purchased pursuant to the exercise of the
Subscription Rights. Participants will probably not, however, recognize gain or
loss as a result of obtaining savings accounts in Raritan Savings after the
Conversion and their interests in the Liquidation Account in exchange for their
savings accounts in Manville Savings as a mutual savings bank. See "Special
Considerations--Certain Federal Income Tax Consequences of the Conversion" and
"The Conversion and Merger; The Offering--Certain Federal Income Tax
Consequences" for a more complete description of all anticipated material
federal income tax consequences of the Conversion and the Offering.
REQUIRED REGULATORY APPROVALS AND CONSIDERATIONS
The Commissioner has approved the Conversion and Merger and the Plan of
Conversion, and the FDIC has issued a letter stating that it does not intend to
object to the Conversion and Merger (the "Preliminary Non-objection Letter").
Such approvals and non-objections do not constitute a recommendation or
endorsement by the Commissioner or FDIC of any of the transactions contemplated
by the Plan of Conversion. The FDIC also indicated that it intends to approve
the application filed by the parties as to the Merger. Consummation of the
Conversion is subject to the approval of the Plan of Conversion by Manville
Savings' Voting Depositors, the satisfaction of certain conditions contained in
the approval of the Commissioner and the Preliminary Non-objection Letter of the
FDIC and the satisfaction or waiver of certain conditions contained in the
Acquisition Agreement.
10
<PAGE>
SPECIAL CONSIDERATIONS
The following special considerations, in addition to the information
presented in this Prospectus, should be considered by prospective investors in
deciding whether to purchase the Common Stock offered hereby.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Raritan Bancorp, Raritan Savings and Manville Savings have received a Tax
Opinion to the effect that: (i) the Merger Conversion qualifies as a
reorganization within the meaning of Section 368(a) of the Code, and that no
gain or loss will be recognized by Manville Savings or Raritan Savings as a
result of such Merger Conversion; and (ii) no gain or loss will be recognized by
Raritan Bancorp as a result of (a) the issuance of Subscription Rights to
Eligible Account Holders, Supplemental Eligible Account Holders and Voting
Depositors of Manville Savings (collectively, the "Depositors"), (b) the lapse
of such Subscription Rights, or (c) the receipt of money or other property, if
any, in exchange for the issuance of Raritan Bancorp Common Stock pursuant to
the Offering. The foregoing is a summary of the Tax Opinion.
The Subscription Rights issued to Eligible Account Holders will provide
such persons the opportunity to purchase Conversion Stock at a price per share
equal to 90% of the Actual Purchase Price (i.e., the price per share paid by
subscribers other than Eligible Account Holders based on the average closing bid
price per share of Raritan Bancorp's common stock as reported on the Nasdaq
Stock Market during the twenty trading days ending on the day prior to the date
of the closing of the Conversion). The federal income tax consequences of the
receipt, exercise and lapse of Subscription Rights which are exercisable at a
discount are uncertain, but they may be significant and could include the
recognition of gain equal to the fair market value of such Subscription Rights.
Those consequences present novel issues of tax law which are not addressed by
any direct authorities and, to the extent related authorities do exist, they
appear to be conflicting and inconclusive. Accordingly, the Tax Opinion will not
express an opinion on those issues. Eligible Account Holders, however, should be
aware of the following:
(a) Eligible Account Holders who receive and exercise Subscription
Rights may be required to recognize gain in an amount equal to the sum of: (i)
the product of (a) the number of shares of Raritan Bancorp Common Stock received
by the Eligible Account Holder pursuant to the exercise of Subscription Rights,
multiplied by (b) the excess of the fair market value of a share of Raritan
Bancorp Common Stock on the date such stock is purchased pursuant to the
exercise of Subscription Rights (the "Purchase Date"), over the Purchase Price.
(b) Eligible Account Holders who do not exercise their Subscription
Rights may also be required to recognize gain as a result of the receipt of such
rights. The amount of such gain should be equal to the product of (i) the
number of Subscription Rights received by the Eligible Account Holders times
(ii) the excess of the fair market value of a share of Raritan Bancorp Common
Stock on the date the Acquisition and Conversion is completed over the Purchase
Price. However, such Eligible Account Holders should also be entitled to offset
such gain with a corresponding loss upon the lapse of such Subscription Rights.
(c) If Eligible Account Holders are required to recognize gain as the
result of the receipt of Subscription Rights, Eligible Account Holders will be
required to report such gain for federal income tax purposes, even though
Eligible Account Holders who do not exercise all or a portion of the
Subscription Rights allocated to them should be entitled to offset all or a
portion of such gain with a corresponding loss to the extent such Subscription
Rights are not exercised.
(d) It does not appear that either Raritan Bancorp or Manville Savings
is required under the Federal income tax laws as now in effect to determine or
notify the Eligible Account Holders (on Form 1099 or otherwise) of the amount or
character of the gain to be reported by each Eligible Account Holder or the year
in which such gain should be reported for Federal income tax purposes.
In the opinion of PBS, which opinion is not binding on the Internal
Revenue Service ("IRS"), the Subscription Rights issued to Supplemental Eligible
Account Holders and Voting Depositors do not have any value, based on the fact
that such rights are acquired by the recipients without cost, are
nontransferable and of short
11
<PAGE>
duration, and afford the recipients the right only to purchase the Common Stock
at a price equal to the Actual Purchase Price. Assuming that, for the reasons
set forth above, the Subscription Rights issued to Supplemental Eligible Account
Holders and Voting Depositors have no value at the time issued, the Supplemental
Eligible Account Holders and Voting Depositors will not recognize gain or loss
upon the receipt of Subscription Rights or upon the exercise of Subscription
Rights.
No gain or loss will be required to be recognized by Subscribers who
acquire shares in the Community Offering. The foregoing is a summary of all
anticipated material federal income tax consequences of the Conversion and the
Offering. See "The Conversion and Merger; The Offering--Certain Federal Income
Tax Consequences" for a more complete description of all anticipated material
federal income tax consequences of the Conversion and the Offering.
ELIGIBLE ACCOUNT HOLDERS, DIRECTORS, OFFICERS AND EMPLOYEES OF
MANVILLE SAVINGS, TAX-EXEMPT PERSONS AND OTHER PERSON WHO ARE INTERESTED IN THE
ACQUISITION, THE CONVERSION, OR THE OFFERING, ARE URGED TO CONSULT THEIR TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE ACQUISITION, THE
CONVERSION AND THE OFFERING, INCLUDING TAX REPORTING REQUIREMENTS, THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, AND
THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
POTENTIAL ADVERSE IMPACT OF CHANGES IN INTEREST RATES
Raritan Savings' profitability, like that of most financial institutions,
depends to a large extent upon its net interest income, which is the difference
between interest income on interest-earning assets, such as loans and
investments, and interest expense on interest-bearing liabilities, such as
deposits and other borrowings. Raritan Savings' net interest income, for
example, could be adversely affected if changes in market interest rates
resulted in the cost of interest-bearing liabilities increasing faster than any
increase in the yield on Raritan Savings' interest-earning assets. Raritan
Savings, like other savings institutions, uses a methodology that measures its
exposure to interest rate risk based on its interest rate sensitivity gap. A gap
is considered positive when the amount of interest sensitive assets exceeds the
amount of interest sensitive liabilities. A gap is considered negative when the
amount of interest sensitive liabilities exceeds the amount of interest
sensitive assets. At December 31, 1995, Raritan Savings' cumulative one-year
interest sensitivity gap (the difference, based on certain assumptions, between
the amount of interest-earning assets anticipated by Raritan Savings to mature
or reprice within one year and the amount of interest-bearing liabilities
anticipated by Raritan Savings, based on certain assumptions, to mature or
reprice within one year) as a percentage of total assets was a negative 11.2%.
As a result, based upon the methodology used by Raritan Savings, the yield on
interest-earning assets of Raritan Savings may adjust to changes in interest
rates at a slower rate than the cost of Raritan Savings' interest-bearing
liabilities. Consequently, Raritan Savings' net interest income could be
adversely affected during periods of rapidly rising interest rates. There can be
no assurance, however, that the changes in Raritan Savings' actual net interest
income will be consistent with those projected in the methodology. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Interest Rate Sensitivity Analysis" in the accompanying 1995 Annual
Report for further discussion of Raritan Savings' exposure to interest rate
risk, as well as any shortcomings in the methodology. Changes in interest rates
also may impact the volume of mortgage loan originations as well as the value of
Raritan Savings' investments in mortgage-backed securities, investment
securities and other interest-earning assets.
EXTENSIVE GOVERNMENTAL REGULATION OF THE FINANCIAL INSTITUTION INDUSTRY
Raritan Savings and Raritan Bancorp are subject to extensive regulation
by the FDIC, the Commissioner and the Board of Governors of the Federal Reserve
System (the "FRB"), and are periodically examined by such regulatory agencies to
test compliance with various regulatory requirements. Such supervision and
regulation is intended primarily for the protection of depositors and the
deposit insurance fund, and not for the maximization of shareholder value. The
lending and savings activities of Raritan Savings are also subject to various
"consumer protection" laws that impose significant liability for noncompliance,
whether intentional or not. Accordingly, the operations and profitability of
financial institutions and their holding companies are significantly affected by
legislation and the policies of the various federal banking agencies. Since
1989, numerous legislation has been
12
<PAGE>
enacted that imposes increased regulatory restrictions and obligations on the
operations of financial institutions and mandates the development of regulations
designed to empower regulators to take prompt corrective action with respect to
institutions that fall below certain capital standards.
NO GUARANTEED DISCOUNT
There can be no assurance that the EAH Actual Purchase Price will
actually represent a discount from the market price of Raritan Bancorp Common
Stock on the date the Conversion is completed. The Actual Purchase Price will be
equal to the average closing bid price per share of Raritan Bancorp's Common
Stock as reported on the Nasdaq Stock Market during the twenty trading days
ending on the day prior to the date of the closing of the Conversion. THE EAH
ACTUAL PURCHASE PRICE WILL BE EQUAL TO 90% OF THE ACTUAL PURCHASE PRICE. Because
the EAH Actual Purchase Price and the Actual Purchase Price are determined with
reference to the average closing price over a period of time rather than the
actual market price of Raritan Bancorp Common Stock on the date the Conversion
is completed, the market price of the Raritan Bancorp Common Stock could decline
during the twenty-day averaging period so that by the date the Conversion is
completed the market price may be less than the EAH Actual Purchase Price and/or
the Actual Purchase Price. Moreover, there is no minimum or maximum Actual
Purchase Price (or EAH Actual Purchase Price) and therefore the number of shares
to be purchased by any subscriber, and the purchase price, will depend
completely on the average closing bid price of the Common Stock during the
twenty days prior to the date the Conversion is completed. See "The Conversion
and Merger; The Offering--Stock Pricing and Number of Shares to be Issued"
and "--Subscription Offering and Subscription Rights."
THE POSSIBLE DECLINE IN THE MARKET FOR COMMON STOCK AFTER THE CONVERSION
Because the EAH Actual Purchase Price may be less than the market price
of Raritan Bancorp Common Stock on the date the Conversion is completed, some
Eligible Account Holders may be inclined to immediately sell Common Stock,
purchased at the EAH Actual Purchase Price, in order to attempt to realize any
such profit. In addition, it is possible that the receipt, exercise, or lapse of
subscription rights may result in tax liability for certain Eligible Account
Holders. In such case, Eligible Account Holders may also be inclined to sell
Common Stock to realize sufficient cash to pay the tax liability resulting
therefrom. Any such sales, depending on the volume and timing, could cause the
market price of Raritan Bancorp Common Stock to decline. Purchasers should
consider these possibilities in determining whether to purchase Conversion Stock
and, if Conversion Stock is purchased, the timing of any future sale. The Common
Stock is quoted on the Nasdaq National Market System.
INABILITY TO RESELL THE COMMON STOCK UNTIL THE ISSUANCE AND RECEIPT OF
CERTIFICATES
Except for shares issued to a person who is deemed an affiliate of
Manville Savings or Raritan Bancorp for purposes of Rule 145 under the 1933 Act,
Raritan Bancorp Common Stock issued pursuant to the Conversion will be freely
transferable under the 1933 Act. However, until certificates for Raritan
Bancorp Common Stock are delivered to purchasers, purchasers may not be able to
sell the shares of Raritan Bancorp Common Stock for which they subscribe.
Accordingly, during such period subscribers will bear the risk of any decline in
the market price in the Raritan Bancorp Common Stock. Raritan Bancorp intends
to mail the certificates representing Raritan Bancorp Common Stock issued in the
Offering promptly following completion of the Conversion. See "Description of
the Agreement and Plan--Resale of Raritan Bancorp Common Stock--How to Purchase
Raritan Bancorp Common Stock in the Offering."
THE HIGHLY COMPETITIVE ENVIRONMENT IN WHICH THE BANK OPERATES
The Bank faces significant competition in its market area both in
attracting deposits and in originating loans. The Bank faces direct competition
from a significant number of financial institutions, as well as other providers
of financial services, operating in its market area, many with a state-wide or
regional presence, and, in some cases, a national presence. This competition
arises from commercial banks, savings institutions, mortgage banking companies,
credit unions, brokerage firms, mutual funds and other providers of financial
services, many of which are significantly larger than the Bank, and therefore
have greater financial and marketing resources than those of the Bank.
13
<PAGE>
ANTITAKEOVER PROVISIONS
The Certificate of Incorporation and the Bylaws of Raritan Bancorp
include certain provisions which may be considered to be antitakeover in nature
because they may have the effect of discouraging or making more difficult the
acquisition of control of Raritan Bancorp by means of an unsolicited tender or
exchange offer, proxy contest or similar transaction. See "Restrictions on
Acquisitions of Raritan Bancorp."
RARITAN BANCORP INC. AND SUBSIDIARY
SELECTED FINANCIAL AND OTHER DATA
The following tables set forth selected historical consolidated financial
and other data of Raritan Bancorp for the periods and at the dates indicated.
The information should be read in conjunction with the Consolidated Financial
Statements and Notes thereto of Raritan Bancorp in the 1995 Annual Report that
accompanies this Prospectus.
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
--------- -------- --------- ------- --------
BALANCE SHEET DATA: (Dollars In Thousands)
<S> <C> <C> <C> <C> <C>
Total assets......................................... $ 354, 810 $ 333,546 $ 307,332 $ 292,507 $ 288,889
Total net loans...................................... 192,590 180,594 162,701 157,504 155,864
Securities available-for-sale........................ 50,547 40,456 -- -- --
Investment securities, net........................... 61,406 86,224 121,074 111,666 108,846
Deposits............................................. 315,038 296,166 281,333 268,223 266,465
Shareholders' equity................................. 26,348 23,440 22,391 20,425 19,235
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
--------- -------- --------- ------- --------
(Dollars In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Interest and fee income............................... $ 23,456 $ 20,892 $ 20,049 $ 22,345 $ 20,225
Interest expense...................................... 13,007 9,992 9,230 11,706 12,820
----------- ---------- ---------- ----------- -----------
Net interest income................................... 10,449 10,900 10,819 10,639 7,405
Provision for loan losses............................. 300 450 2,290 945 882
Net interest income after provision for loan losses... 10,149 10,450 8,529 9,694 6,523
Other income.......................................... 658 702 2,658 726 398
Operating expenses.................................... 6,593 6,721 7,432 6,986 5,299
----------- ---------- ---------- ----------- -----------
Income before income tax expense and cumulative
effect of accounting changes........................ 4,214 4,431 3,755 3,434 1,622
Income tax expense.................................... 1,542 1,577 1,352 1,482 710
Cumulative effect of accounting changes............... -- -- 13 -- --
----------- ---------- ---------- ----------- -----------
Net income............................................ $ 2,672 $ 2,854 $ 2,416 $ 1,952 $ 912
=========== ========== ========== =========== ===========
Net income per share (primary)(1)..................... $ 1.63 $ 1.78 $ 1.53 $ 1.29 $ 0.60
=========== ========== ========== =========== ===========
Net income per share (fully diluted)(1)............... $ 1.63 $ 1.78 $ 1.52 $ 1.29 $ 0.60
=========== ========== ========== =========== ===========
Cash dividends per common share(1).................... $ 0.52 $ 0.46 $ 0.38 $ 0.32 $ 0.27
=========== ========== ========== =========== ===========
Book value per share.................................. $ 17.66 $ 15.52 $ 14.83 $ 13.53 $ 12.13
=========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991
--------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS:
Return on average assets.............................. 0.80% 0.88% 0.81% 0.67% 0.40%
Return on average equity.............................. 10.53 12.33 11.22 9.84 4.78
Dividend payout ratio................................. 31.90 25.84 25.00 24.81 45.00
Average equity to average assets...................... 7.64 7.14 7.20 6.84 8.28
Interest rate spread (2).............................. 2.84 3.19 3.51 3.50 2.87
Net yield on average interest-earning assets (2)...... 3.30 3.52 3.79 3.85 3.40
Average interest-earning assets to average interest-
bearing liabilities................................. 1.11x 1.10x 1.09x 1.08x 1.09x
Non-performing assets to total assets................. 0.35% 0.63% 1.17% 1.03% 1.69%
</TABLE>
14
<PAGE>
________________________
(1) Reflects the effect of a three-for-two stock split paid in the form of a
stock dividend on December 1, 1993.
(2) Calculated on a fully-taxable basis.
15
<PAGE>
RARITAN BANCORP INC.
Raritan Bancorp, a Delaware Corporation, is a bank holding company whose
only subsidiary is Raritan Savings, a New Jersey chartered stock savings bank
the deposits in which are insured by the FDIC primarily through the BIF. Raritan
Bancorp was formed in 1987 at the direction of Raritan Savings in connection
with Raritan Savings' conversion from a mutual to stock form of organization.
The sole activity of Raritan Bancorp is its ownership of all of the issued and
outstanding Common Stock of Raritan Savings. Raritan Savings was originally
chartered in 1869. At December 31, 1995, the Company had consolidated assets,
deposits, and shareholders' equity of $354.8 million, $315.0 million, and $26.3
million, respectively.
Raritan Savings is engaged primarily in the business of attracting
deposits from the general public and originating residential mortgage,
construction and consumer loans, and small business loans. In addition, a
significant portion of its assets is invested in securities. At December 31,
1995, conventional mortgage loans totalled $147.7 million, residential
construction loans totalled $8.5 million, consumer loans totalled $28.9 million,
and commercial business loans totalled $10.5 million. At such date, the Bank's
investment in securities available-for-sale totalled $50.5 million, and in
investment securities, net, totalled $61.4 million.
It is Raritan Savings policy primarily to originate adjustable-rate
mortgage loans. However, in order to meet the demands of borrowers in Raritan
Savings' local lending area for long-term, fixed-rate mortgage loans in the
current interest rate environment, Raritan Savings began originating such loans
(both 15 and 30 year loans) in 1991. Of the $36.4 million of first mortgage
loans disbursed during 1995, $1.2 million were fixed-rate, while the balance of
$35.2 million were of an adjustable or short-term nature. Consumer and
commercial lending disbursements totaled $21.5 million for 1995 and consisted
primarily of loans which are tied to the prime lending rate and are of a short-
term nature.
Raritan Savings conducts it business from its main office in Raritan and
four additional retail banking offices located in Martinsville, Somerville,
Warren and Whitehouse Station, New Jersey. Raritan Savings considers its primary
market area for deposits to be the Somerset and Hunterdon Counties, New Jersey,
while its primary market area for lending is more widespread and includes
Somerset and Hunterdon Counties, as well as contiguous municipalities in Morris,
Middlesex, Union and Mercer Counties, New Jersey.
Raritan Savings offers a wide range of services to both consumer and
commercial customers. These services include consumer and commercial checking
accounts, NOW and money market accounts, regular savings accounts, Prime
Performance accounts, which rates are tied to the prime lending rate, market-
rate certificates, IRA/Keogh accounts, automated teller machine (ATM)
accessibility using the MAC(R) Plus(R) system, real estate mortgage loans,
various consumer and commercial term and demand loans, and home equity lines of
credit.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Conversion is completed, it is presently anticipated
that the net proceeds from the sale of the Common Stock will be between
$1,945,000 and $2,755,000. The net proceeds of the Offering will be invested by
Raritan Bancorp in Raritan Savings, and will be used for general corporate
purposes, including investment in residential mortgage loans, commercial
business and consumer loans. It is expected that the net proceeds will initially
be invested primarily in federal funds and investment grade, short-term
marketable securities.
In addition, Raritan Savings intends to use a portion of the proceeds of
the Offering to establish a Residential Lending Program and a Small Business
Lending Program, for an aggregate of $4.0 million, to increase Raritan Savings'
lending in the Manville community. The Residential Lending Program will be a
$2.0 million loan fund from which loans priced at .5% below Raritan Savings'
normal lending rates will be originated. Loans under the Residential Lending
Program will be targeted toward low and moderate income individuals and families
in Manville who normally would not qualify for a loan according to Raritan
Savings' standard underwriting guidelines. Low and moderate income households
are defined as those whose aggregate income is 80% or less of the area's median
income. The loan must be for the purchase, construction, or rehabilitation of a
property that is located in Manville. The Small Business Lending Program will be
a $2.0 million loan fund from which loans priced at .5% below Raritan Savings
normal lending rates will be originated. Loans under the Small Business Lending
Program will be targeted toward small business revitalization in Manville, and
will be available for small business owners
16
<PAGE>
to improve and rehabilitate their property. Raritan Savings will not originate
loans under either program, however, unless Raritan Savings believes that the
borrower has demonstrated a reasonable probability of repayment.
MARKET FOR THE COMMON STOCK AND DIVIDEND POLICY
It is the current policy of the Company to pay a quarterly cash dividend
of $0.15 per share of common stock. Raritan Bancorp is subject to the
requirements of Delaware law, which generally limit dividends to an amount equal
to the excess of the net assets of Raritan Bancorp (the amount by which total
assets exceed total liabilities) over its statutory capital, or if there is no
such excess, to its net profits for the current and/or immediately preceding
fiscal year. During the years ended December 31, 1995 and 1994, Raritan Bancorp
declared and paid cash dividends totalling $0.52 and $0.46, respectively, per
common share.
The payment of dividends by Raritan Bancorp is dependent upon the payment
of dividends to Raritan Bancorp by Raritan Savings. Raritan Savings may pay cash
dividends when its Board of Directors determines that dividend payments are
appropriate, taking into account factors including, without limitation, Raritan
Savings' net income, capital requirements, financial condition, alternative
investment options, tax implications, prevailing economic conditions, industry
practices, and other factors deemed to be relevant at the time. New Jersey law
provides that no dividend may be paid unless, after the payment of such
dividend, the capital stock of Raritan Savings will not be impaired and either
Raritan Savings will have a statutory surplus of not less than 50% of its
capital stock or the payment of such dividend will not reduce the statutory
surplus of the Bank. The Bank has designated a capital surplus of $2.0 million,
which is not available for the payment of dividends.
Raritan Bancorp's Common Stock is quoted on the Nasdaq Stock Market under
the symbol "RARB." The following table presents, for the periods indicated, the
range of the high and low last sale prices for Raritan Bancorp's Common Stock as
reported by Nasdaq, and the cash dividends paid.
<TABLE>
<CAPTION>
High Low Cash Dividends Paid
---- --- -------------------
<S> <C> <C> <C>
1994
- ----
Quarter Ended March 31, 1994 $15.50 $14.25 $.115
Quarter Ended June 30, 1994 16.75 14.50 .115
Quarter Ended September 30, 1994 18.00 16.00 .115
Quarter Ended December 31, 1994 18.50 17.00 .115
1995
- ----
Quarter Ended March 31, 1995 $21.75 $17.00 $ .13
Quarter Ended June 30, 1995 22.25 20.75 .13
Quarter Ended September 30, 1995 22.50 21.00 .13
Quarter Ended December 31, 1995 22.50 21.50 $ .13
1996
- ----
Quarter Ended March 31, 1996 $22.25 $21.00 $ .15
Quarter Ending June 30, 1996
(Through _________ __, 1996)
</TABLE>
The last sale price on May , 1996, the day on which the registration
statement was declared effective by the Securities and Exchange Commission, as
reported on the Nasdaq National Market System, was $____. As of May __, 1996,
Raritan Bancorp had approximately ___ shareholders of record, including
brokerage firms, banks and registered clearing agencies acting as nominees for
an indeterminate number of beneficial owners.
17
<PAGE>
CAPITALIZATION
The following table presents the consolidated capitalization of Raritan
Bancorp at December 31, 1995 and the pro forma consolidated capitalization of
Raritan Bancorp at such date after giving effect to the Conversion and Merger of
Manville Savings into Raritan Savings and Raritan Bancorp's receipt of the
estimated net proceeds from the sale of the Conversion Stock offered hereby,
based on the assumptions set forth in the notes below.
<TABLE>
<CAPTION>
Pro Forma Capitalization at December 31, 1995
-----------------------------------------------------------
Raritan As Adjusted As Adjusted As Adjusted
Bancorp for Total for Total for Total
Actual Minimum(1) Midpoint(1) Maximum(1)
---------- ---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C> <C>
Deposits (2).............................. $315,038 $328,833 $328,833 $328,833
Borrowings................................ 10,206 10,206 10,206 10,206
-------- -------- -------- --------
Total deposits and borrowings........ $325,244 $339,039 $338,039 $339,039
======== ======== ======== ========
Shareholders' equity:
Preferred Stock, $.01 par value,
2,000,000 shares authorized; shares
to be issued as reflected............. $ -- $ -- $ -- $ --
Common Stock, $.01 par value,
3,500,000 shares authorized;
shares to be issued as reflected...... 17 17 17 17
Additional paid-in capital.............. 10,598 11,609 11,849 12,090
Retained earnings....................... 17,801 17,801 17,801 17,801
Fair value adjustment of securities
available-for-sale, net of tax.......... 416 416 416 416
Less: Unallocated common stock
acquired by ESOP..................... (206) (206) (206) (206)
Cost of common stock in treasury.. (2,278) (1,089)(3) (879)(3) (670)(3)
-------- -------- -------- --------
Total shareholders' equity..... $26,348 $28,548 $28,998 $29,448
======== ======== ======== ========
Book value per share of Common Stock.... $17.66 $17.69 $17.74 $17.78
======== ======== ======== ========
</TABLE>
____________________________________
(1) Assumes all shares are sold in the Offering to Eligible Account Holders for
90% of the Estimated Subscription Price at the minimum, midpoint and
maximum of the Valuation Range. The Actual Purchase Price may be higher or
lower than the Estimated Subscription Price.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Conversion Stock. Such withdrawals would reduce pro forma deposits by the
amount of such withdrawals.
(3) Assumes that the shares of Conversion Stock sold in the Offering are issued
from treasury shares.
PRO FORMA DATA
The following tables set forth selected unaudited pro forma financial
data for Raritan Bancorp reflecting the Conversion and Merger, assuming that the
Merger was accounted for using the purchase method of accounting and that the
shares of Common Stock were sold in the Offering at the maximum of the Valuation
Range. The pro forma statements of income information has been prepared assuming
(i) 164,285 shares of Raritan Bancorp Common Stock had been sold and issued from
treasury shares at the beginning of the period at the EAH Estimated Subscription
Price; (ii) total expenses of the Offering are $350,000; (iii) net proceeds from
the Offering will be contributed to Raritan Savings and will be invested by
Raritan Savings at 6.75%; and (iv) the effective tax rate of Raritan Savings for
the year ended December 31, 1995, was 36.0%. No assurance can be given that the
Conversion and Merger will be completed on the terms and conditions described
herein.
18
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF DECEMBER 31, 1995
The following unaudited pro forma combined, condensed, consolidated
balance sheet information reflects (i) the historical consolidated balance sheet
of Raritan Bancorp as of December 31, 1995, and (ii) the pro forma combined
condensed, consolidated balance sheet of Raritan Bancorp as of such date, after
giving effect to the Conversion, and Merger and the estimated net proceeds from
the sale of the Common Stock in the Offering at the maximum of the Valuation
Range. The Conversion and the Merger has been reflected on the purchase
accounting basis. Such pro forma financial information does not necessarily
reflect what the actual results of Raritan Bancorp would be following completion
of the Conversion and Merger. The information should be read in conjunction with
the historical consolidated financial statements of Raritan Bancorp, including
the notes thereto, which are included in the Raritan Bancorp's 1995 Annual
Report to Shareholders, which is incorporated by reference in, and accompanies,
this Prospectus.
<TABLE>
<CAPTION>
At December 31, 1995
------------------------------------------------------
Raritan Manville Conversion Pro-Forma
Bancorp Savings Adjustments Combined
------- ------- ----------- --------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents..................... $ 39,886 $ 1,007 $ 2,893/(1)/ $ 43,786
Securities available-for-sale, at fair value.. 50,547 128 -- 50,675
Investment securities, net.................... 61,406 1,058 -- 62,464
Net loans..................................... 192,590 12,793 186/(2)/ 205,569
Other assets.................................. 10,381 362 28/(3)/ 10,771
-------- -------- -------- ---------
Total assets................................ $354,810 $ 15,348 $ 3,107 $ 373,265
======== ======== ======== =========
Deposits...................................... $315,038 13,685 $ 110/(4)/ $ 328,833
Borrowings.................................... 10,206 -- -- 10,206
Other liabilities............................. 3,218 223 1,337/(5)/ 4,778
-------- -------- -------- ---------
Total liabilities........................... 328,462 13,908 1,447 343,817
-------- -------- -------- ---------
Shareholders' equity:
Preferred stock............................ -- -- -- --
Common stock............................... 17 -- -- 17
Additional paid-in capital................. 10,598 -- 1,492/(6)/ 12,090
Retained earnings.......................... 17,801 1,362 (1,362)/(7)/ 17,801
Fair value of adjustments of securities
available-for-sale, net of tax........... 416 78 (78)/(8)/ 416
Unallocated common stock
acquired by ESOP......................... (206) -- -- (206)
Cost of common stock in treasury........... (2,278) -- 1,608/(9)/ (670)
-------- -------- -------- ---------
Total shareholders' equity.............. 26,348 1,440 1,660 29,448
-------- -------- -------- ---------
Total liabilities and shareholders' equity.. $354,810 $ 15,348 $ 3,107 $ 373,265
======== ======== ======== =========
Book value per share.......................... $ 17.66 $ -- $ .12 $ 17.78
======== ======== ======== =========
</TABLE>
___________________________
(1) Represents estimated net proceeds from sale of Raritan Bancorp common
stock:
<TABLE>
<S> <C>
164,285 shares at $18.90 $3,105,000
less: estimated fees and expenses (212,000)
----------
$2,893,000
==========
</TABLE>
Note: $138,000 of estimated fees and expsnses were paid prior to December
31, 1995.
(2) Represents valuation premium on Manville Savings' net loans.
(3) Represents potential Federal income tax refund pertaining to Manville
Savings' paying the aforementioned special cash bonus distribution to its
depositors, distributing the pension equivalency benefits to its
employees and making charitable contributions: $163,000; merger expenses
paid prior to December 31, 1995: ($138,000); write-up of Manville
Savings' banking
(footnotes continued on next page)
19
<PAGE>
premises and equipment, net to estimated fair value: $25,000; the
allocation of negative goodwill to the estimated fair value of Manville
Savings' banking premises and equipment, net: ($97,000); net of related
deferred income taxes: $35,000; and the deferred income taxes pertaining
to valuation premiums on Manville Savings' deposits: $40,000.
(4) Represents valuation premium on Manville Savings' deposits.
(5) Represents total of the aforementioned Manville Savings' accrual
pertaining to the paying of the special cash bonus distribution to irs
depositors: $377,000; distributing the pension equivalency benefits:
$125,000; making charitable contributions: $25,000; deferred income tax
liability pertaining to the valuation premium on loans: $67,000; and the
recording of negative goodwill: $743,000.
(6) Represents total issue price of Raritan Bancorp common stock based on the
Actual Purchase Price (164,285 shares x $21.00, or $3,450,000) less cost
of treasury shares issued (164,285 shares x $9.79, or $1,608,00) less
estimated fees and expenses: $350,000.
(7) Elimination of Manville Savings' retained earnings.
(8) Elimination of Manville Savings' fair value adjustment of securities
available-for-sale, net of tax.
(9) Issuance of 164,285 shares (at $9.79) of Raritan Bancorp common
stock.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31,
1995
The following unaudited pro forma combined condensed consolidated
statement of income reflects the historical consolidated statement of income of
Raritan Bancorp for the year ended December 31, 1995, and the pro forma combined
condensed statement of income of Raritan Bancorp, after giving effect to the
Conversion and Merger. The pro forma combined condensed statement of income for
the year ended December 31, 1995 was prepared on the assumption that the
transactions had been effective as of January 1, 1995 and assumes 164,285
conversion shares sold at the maximum of the Valuation Range. Such pro forma
financial information does not necessarily reflect what the actual results of
Raritan Bancorp would be following completion of the Conversion and Merger. The
information should be read in conjunction with the historical consolidated
financial statements of Raritan Bancorp, including the notes thereto, which are
included in the Raritan Bancorp's 1995 Annual Report to Shareholders, which is
incorporated by reference in, and accompanies, this Prospectus.
20
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1995
------------------------------------------------------------
(In thousands, except per share data)
Raritan Manville Conversion Pro-Forma
Bancorp Savings Adjustments Combined
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Interest Income.......................... $ 23,456 $ 1,122 $ 149/(1)/ $ 24,727
Interest expense......................... 13,007 527 (22)/(2)/ 13,512
---------- ------- ----------- ----------
Net interest income...................... 10,449 595 171 11,215
Provision for loan losses................ 300 2 302
---------- ------- -------- ----------
Net interest income after provision for
loan losses............................. 10,149 593 171 10,913
Other income............................. 658 21 -- 679
---------- ------- -------- ----------
Operating expenses (credit).............. 6,593 423 (149)/(3)/ 6,867
---------- ------- -------- ----------
Income before income tax expense......... 4,214 191 320 4,725
Income tax expense....................... 1,542 60 62/(4)/ 1,664
---------- ------- -------- ----------
Net income............................... $ 2,672 $ 131 $ 258 $ 3,061
========== ======= ======== ==========
Net income per share (fully diluted)..... $ 1.63 $ $ 0.07 $ 1.70
========== ======= ======== ==========
Average number of fully-diluted
shares outstanding..................... 1,638,747 -- 164,285 1,803,032
========== ======= ======= =========
</TABLE>
___________________________
/(1)/ Reflects earnings of $186,000 on the estimated net proceeds of
$2,755,000, invested at 6.75% (yield on 1-year U.S. Treasury Note at
January 1, 1995);and amortization ($37,000) of valuation premium on net
loans ($186,000) amortized over five years);
/(2)/ Consists of accretion ($22,000) of valuation premium on deposits
($110,000 amortized over five years.)
/(3)/ Reflects the accretion of negative goodwill ($743,000 accretion over five
years.)
/(4)/ Income tax effect assuming an income tax rate of 36% on: earnings on
investment of the estimated net proceeds of the offering, $186,000;
amortization of the valuation premium on net loans, ($37,000); and
accretion of the valuation premium on deposits, $22,000.
21
<PAGE>
THE CONVERSION AND MERGER; THE OFFERING
THE BOARD OF DIRECTORS OF MANVILLE SAVINGS AND THE COMMISSIONER HAVE
APPROVED, AND THE FDIC HAS INDICATED THAT IT INTENDS TO ISSUED A LETTER OF NON-
OBJECTION TO THE PLAN OF CONVERSION, SUBJECT TO APPROVAL BY THE DEPOSITORS OF
MANVILLE SAVINGS ENTITLED TO VOTE ON THE MATTER AND THE SATISFACTION OF CERTAIN
OTHER CONDITIONS. SUCH APPROVAL AND NONOBJECTION, HOWEVER, DOES NOT CONSTITUTE
A RECOMMENDATION OR ENDORSEMENT OF THE PLAN OF CONVERSION BY THE COMMISSIONER OR
THE FDIC.
GENERAL
On March 23, 1994, Raritan Bancorp, Raritan Savings, and Manville Savings
entered into the Acquisition Agreement, pursuant to which Manville Savings will
be converted from a New Jersey-chartered mutual savings bank to a New Jersey-
chartered stock savings bank by merging into Raritan Savings, and Raritan
Bancorp will issue shares of Conversion Stock in the Offering. The Conversion
is also being conducted pursuant to the Plan of Conversion. The Plan of
Conversion was approved by the Commissioner and the FDIC has indicated its
intention to issue a letter of non-objection to the Conversion and Merger,
subject to, among other things, approval of the Plan of Conversion by Manville
Savings' depositors. A special meeting of depositors has been called for this
purpose to be held on June 3, 1996.
The Acquisition Agreement may be terminated at any time prior to the date
on which the Conversion is completed (the "Closing Date") by the mutual consent
in writing of the parties or by either party if the other party has materially
breached the Acquisition Agreement and the breach has not been cured within 15
days of receiving written notice of such breach. Either party also may
terminate the Acquisition Agreement at the Closing Date if the required
conditions precedent to the obligation of such party to consummate the
Conversion have not been satisfied or fulfilled. The Acquisition Agreement may
be terminated at any time if the required regulatory approvals for the
Conversion are not obtained and the time periods for appeals and requests for
reconsideration have run. The Acquisition Agreement also may be terminated by
either party if the Closing Date has not occurred prior to July 31, 1996.
Copies of the Acquisition Agreement are available without charge from Raritan
Bancorp by a written request addressed to the Secretary of Raritan Bancorp Inc.,
9 West Somerset Street, Raritan Bancorp, New Jersey 08869 or by a telephone call
to (908) 725-0080.
The Plan of Conversion provides that, subject to certain maximum and
minimum purchase limitations, subscription rights to purchase shares of Raritan
Bancorp Common Stock in the Subscription Offering have been granted to (i)
Manville Savings' account holders who had deposit accounts totaling $50 or more
as of the close of business on June 30, 1993 (the "Eligibility Record Date," and
such depositors "Eligible Account Holders"), (ii) Manville Savings' account
holders who had deposit accounts totaling $50 or more as of the close of
business on December 31, 1995 (the "Supplemental Eligibility Record Date," and
such depositors "Supplemental Eligible Account Holders"), and (iii) depositors
of Manville Savings as of the April 19, 1996 voting record date for the Special
Meeting of depositors being held to approve the Plan of Conversion ("Voting
Depositors"). Any shares of Conversion Stock not purchased in the Subscription
Offering will be offered for sale in the Community Offering, with a preference
first to Raritan Bancorp's shareholders and then to natural persons residing in
Somerset County, New Jersey, or under such other terms and conditions that may
be established at any time prior to the closing of the Community Offering by the
Board of Directors of Manville Savings and Raritan Bancorp. The aggregate
purchase price of the shares of Raritan Bancorp Common Stock to be issued in the
Offering has been determined based upon an independent appraisal of the
estimated pro forma value of Manville Savings.
DISTRIBUTION TO DEPOSITORS AND OTHERS
In connection with, and prior to the completion of the Conversion and
Merger, Manville Savings will pay a special cash bonus distribution to its
depositors in an aggregate amount of $377,000, will distribute $125,000 as
pension equivalency benefits for the beneift of its employees, and will make
charitable contributions in the aggregate amount of $25,000 for the benefit of
non-profit, public service entities operating in, and dedicated to, the Manville
community. Manville's plan for the cash bonus interest distribution to
depositors is to take all persons who received
22
<PAGE>
cash interest on a deposit account during calendar year 1993, as reported to the
Internal Revenue Service (the "IRS") on Forms 1099, and to allocate the $377,000
to each such person in proportion that the interest payments received by that
person bears to the total interest paid by Manville Savings during 1993. The
total interest payments reported to the IRS by Manville Savings for 1993 was
$401,046. By way of example, a depositor who received a Form 1099 from Manville
Savings for $2,500 for 1993, would receive a distribution of $2,350.10 ($2,500
divided by $401,046 times $377,000) in connection with the Merger Conversion.
The total interest paid to Manville Savings directors as a group for 1993, as
reported to the IRS on the Forms 1099, was $7,155. Accordingly, these insiders
would be entitled to receive, in the aggregate, $6,726, or 1.78%, of the total
distribution.
The pension equivalency benefit of $125,000 would be paid to the
employees of Manville Savings. Manville Savings has never offered a defined
benefit pension plan or a 401(k) type of plan for its employees, due to the
costs associated with such plans and Manville Savings small size. Since 1987,
the only benefit plan that has been maintained by Manville Savings is a profit
sharing plan, which is funded by contributions to this Plan, the amount of which
is determined at the sole discretion of Manville Savings' Board. There is no
minimum contribution required and the maximum contribution permitted by IRS
regulations is 15% of qualifying salaries. For the years 1987 through 1994,
Manville Savings' qualifying salaries totaled $974,813. This would have
permitted an aggregate, cumulative contribution by Manville Savings to this Plan
since 1987 of $146,222. During this period of time, Manville Savings' actual
contributions to this Plan totaled $53,160. The $125,000 pension equivalency
benefit will be distributed to the benefit of each employee in accordance with
the rules of allocation set forth in the IRS-approved Profit Sharing Plan. To
the extent permitted by IRS regulations, an additional contribution would be
made into the Profit Sharing Plan with respect to either or both of 1995 and
1996. Any excess that was not permitted to be made directly to the Profit
Sharing Plan would be paid directly to the individual employees as a bonus.
Manville Savings has made very modest charitable contributions over its
75 year history. The annual level of charitable contributions has averaged $684
during the past eight years (1994-$817; 1993-$636; 1992-$915; 1991-$680; 1990-
$845; 1989-$575; 1988-$646; 1987-$360). Accordingly, the proposed distribution
in connection with the Merger Conversion is above and beyond the typical level
of charitable distribution made by Manville Savings. The special distribution
would recognize the contribution to the community-at-large of select, Manville-
specific organizations.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
The total number of shares of Common Stock of Raritan Savings to be
issued and sold by Raritan Bancorp in the Offering will be determined jointly by
the Boards of Directors of Raritan Bancorp and Manville Savings and will be
equal to the quotient obtained by dividing (i) the Independent Valuation as
updated at the conclusion of the Offering by (ii) the average closing bid price
per share of Raritan Bancorp's Common Stock as reported on the Nasdaq National
Market System during the twenty trading days ending on the day prior to the date
of the closing of the Conversion, which will be the price per share of
Conversion Stock paid by subscribers other than Eligible Account Holders (the
"Actual Purchase Price"). THE PRICE PER SHARE OF CONVERSION STOCK PAID BY
ELIGIBLE ACCOUNT HOLDERS (THE "EAH ACTUAL PURCHASE PRICE") WILL BE EQUAL TO 90%
OF THE ACTUAL PURCHASE PRICE.
Raritan Bancorp considered the average closing bid price of Raritan
Bancorp's Common Stock as reported on the Nasdaq National Market System for the
twenty trading days ending on the date the Registration Statement was declared
effective and, after consultation with its financial advisors, such market and
financial conditions that Raritan Bancorp deemed relevant in establishing the
Estimated Subscription Price. The Estimated Subscription Price was established
at an amount that Raritan Bancorp estimated would equal or exceed the Actual
Purchase Price. In order to purchase Conversion Stock each purchaser must
complete and submit an Order Form indicating the estimated number of shares (the
"Estimated Subscription Shares") for which he is subscribing at the Estimated
Subscription Price, or the EAH Estimated Subscription Price, as applicable. The
actual number of shares purchased by subscribers (the "Actual Shares Purchased")
will be equal to the total dollar amount of such subscriber's order divided by
the Actual Purchase Price, or in the case of Eligible Account Holders, divided
by the EAH Actual Purchase Price. Manville Savings and Raritan Bancorp reserve
the right to refund subscription funds in lieu of issuing fractional shares, or
permit subscribers to elect to receive additional whole shares in such process.
The
23
<PAGE>
Actual Shares Purchased may be reduced in the event of an oversubscription.
There can be no assurance that the actual price per share paid by subscribers
will not exceed the Estimated Subscription Price, or that subscribers will not
receive fewer shares than the number for which they subscribed.
Eligible Account Holders are eligible to participate in the Subscription
Offering as a Supplemental Eligible Account Holder or Voting Depositor to the
extent such subscribers qualify as such and there are shares available for
purchase by such person, and are eligible to participate in the Community
Offering to the extent there are shares available. The purchase price for
shares purchased by Eligible Account Holders will be less than the purchase
price paid by other purchasers, if any, in the Offering. Any such person who
subscribes for Raritan Bancorp Common Stock will be deemed not to have
subscribed as an Eligible Account Holder unless and to the extent such person
affirmatively elects on the stock order form to subscribe for shares as an
Eligible Account Holder. Those persons who affirmatively elect to subscribe for
shares as an Eligible Account Holder will be entitled to a higher priority in
the event of an oversubscription for the shares of Raritan Bancorp Common Stock
in the Subscription Offering and/or the Community Offering than those who do not
subscribe for shares as an Eligible Account Holder. Thus, in the event of an
oversubscription, shares may not be available to fill the subscriptions of those
Eligible Account Holders who do not make the election described above. Raritan
Bancorp and Manville Savings cannot predict the likelihood of an
oversubscription. In addition, there are certain important differences in the
tax consequences between participating in the Subscription Offering as an
Eligible Account Holder and not participating as an Eligible Account Holder,
including the fact that purchasers that do not participate as Eligible Account
Holders should not recognize income as a result of purchasing shares, whereas
Eligible Account Holders who elect to purchase shares as such will recognize
gain attributable to the receipt of Subscription Rights.
THE INDEPENDENT VALUATION
The estimate of the pro forma market value of Manville Savings as an
entity merged with and into Raritan Savings as determined by an independent
appraiser (the "Independent Valuation") was performed by Professional Bank
Services, Inc. ("PBS"), a firm experienced in the valuation and appraisal of
savings institutions. PBS is headquartered in Louisville, Kentucky and has an
office in Washington, D.C. PBS is not affiliated with Raritan Bancorp or
Manville Savings. For its services in preparing the Independent Valuation, PBS
will receive a fee of $25,000. PBS was hired by Manville Savings on the basis of
its reputation and the fees that it offered to charge. Raritan Savings and
Raritan Bancorp have agreed to indemnify PBS and its employees and affiliates
against certain losses (including any losses in connection with claims under the
federal securities laws) arising out of its services as appraiser, except where
PBS's liability results from its negligence or bad faith. In determining the
Independent Valuation, PBS reviewed, among other factors, Manville Savings'
audited financial statements for the five years ended December 31, 1995. PBS
also examined the economy in Manville Savings' primary market area and the
competitive environment in which it operates, and compared its operating
performance with that of selected segments of the thrift industry and selected
publicly traded thrift institutions. PBS also reviewed conditions in the
securities markets in general and for thrift institution stocks in particular.
Similarly, when PBS updates the Independent Valuation following the expiration
of the Offering, it intends to consider, among other things, any new
developments or changes in Manville Savings' performance, financial condition
and management policies, and conditions in the equity markets for thrift
institution stock.
On the basis of the foregoing, PBS determined the appraised value of
Manville Savings as an entity merged with and into Raritan Savings to be
$3,000,000 and the estimated valuation range to be between $2,550,000 and
$3,450,000 as of December 6, 1995 (the "Valuation Range"). The Independent
Valuation will be updated again after the completion of the Offering. Such
valuation, however, is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing Conversion
Stock. PBS VALUED MANVILLE SAVINGS, BUT DID NOT VALUE THE SHARES OF RARITAN
BANCORP COMMON STOCK OFFERED IN THE OFFERING. PBS did not independently verify
the financial statements and other information provided by Manville Savings, nor
did PBS value independently the assets or liabilities of Manville Savings,
Raritan Bancorp, or Raritan Savings. Moreover, because such valuation is
necessarily based upon estimates and projections of a number of matters, all of
which are subject to change from time to time, no assurance can be given that
persons purchasing shares in the Conversion will thereafter be able to sell such
shares at prices at or above the price at which they purchased such shares.
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If, upon completion of the Subscription and Community Offering, at least
the minimum number of shares are subscribed for, PBS, after taking into account
factors similar to those involved in its prior appraisal, will update the
Independent Valuation, and determine its estimate of the pro forma market value
of Manville Savings as an entity merged with and into Raritan Savings, as of the
close of the Subscription and Community Offering.
If the updated Independent Valuation is either more than the maximum of
the Valuation Range or less than the minimum of the Valuation Range, Raritan
Bancorp and Manville Savings, after consulting with the Commissioner and the
FDIC, may terminate the Plan of Conversion and return all funds promptly with
interest at Raritan Savings' passbook rate of interest on payments made by check
or money order, extend or hold a new Subscription and Community Offering,
establish a new Valuation Range, commence a resolicitation of subscribers or
take such other actions as permitted by the Commissioner and FDIC in order to
complete the Conversion. In the event that a resolicitation is commenced, unless
an affirmative response is received within a reasonable period of time, all
funds will be promptly returned to investors as described above. A
resolicitation, if any, following the conclusion of the Subscription and
Community Offering would not exceed 45 days unless further extended by the
Commissioner or FDIC for periods of up to 90 days not to extend beyond June 3,
1998.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, PBS confirms to Manville Savings
and Raritan Bancorp and to the Commissioner that, to the best knowledge of PBS,
nothing of a material nature has occurred which, taking into account all
relevant factors, would cause PBS to conclude that the aggregate value of the
Conversion Stock at the Actual Purchase Price is incompatible with its estimate
of the aggregate consolidated pro forma market value of Manville Savings as an
entity merged with and into Raritan Savings. If such confirmation is not
received, Manville Savings and Raritan Bancorp may cancel, extend, reopen, or
hold new Subscription and Community Offerings, establish a new Independent
Valuation Range, or take such other action as the Commissioner may permit.
Copies of the appraisal report of PBS and the detailed memorandum of the
appraiser setting forth the method and assumptions for such appraisal are
available for inspection at the main office of Manville Savings and the other
locations specified under "Additional Information."
PURCHASE LIMITATIONS
The minimum number of shares of Conversion Stock for which any person may
subscribe in the Subscription Offering or in the Community Offering,
respectively, is that number of shares having an aggregate Actual Purchase Price
or EAH Actual Purchase Price of $500, as applicable.
No person, directly or indirectly or with an associate or a group acting
in concert, may subscribe for or purchase in the aggregate more than 5% of the
number of shares of Conversion Stock issued in the Offering. Based on the sale
of 164,285 shares of Raritan Bancorp Common Stock, the maximum purchase
limitation is 8,214 shares. However, the maximum purchase limitation may be
decreased below 5% or increased to 9.9%; provided, that orders for Conversion
Stock exceeding 5% of the shares being offered shall not exceed in the aggregate
10% of the total offering. Requests to purchase additional shares of the
Conversion Stock in the event that the purchase limitation is so increased will
be determined by the Boards of Directors of Raritan Bancorp and Manville Savings
in their sole discretion.
In the event of a decrease in the Independent Valuation, the orders of
persons who subscribed for the maximum number of shares will be reduced. In the
event of a resolicitation, subscribers will be afforded the opportunity to
increase, decrease or maintain their previously submitted order. In the event
no change from the previous order is desired, no action need be taken.
If purchasers cannot be found for an insignificant residue of
unsubscribed shares from the general public, other purchase arrangements will be
made by the Boards of Directors of Raritan Savings and Raritan Bancorp, if
possible. Such other purchase arrangements will be subject to the approval of
the Commissioner and may provide for purchases by directors, officers, their
associates and other persons in excess of the limitations provided below. If
such other purchase arrangements cannot be made, the Plan of Conversion will
terminate.
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SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS
In accordance with the Plan of Conversion, rights to subscribe for the
purchase of Common Stock have been granted under the Plan of Conversion to the
following persons in the following order of descending priority:
PRIORITY 1: ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder will
receive, without payment therefor, nontransferable subscription rights to
subscribe for in the Subscription Offering up to the greater of: 5% of the
shares of Common Stock issued in the Offering (or 8,214 shares of Conversion
Stock offered based on the issuance of 164,285 shares); or one-tenth of one
percent (.10%) of the total offering of shares of Common Stock; or fifteen times
the product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Common Stock to be issued by a fraction of which the
numerator is the amount of the Eligible Account Holder's qualifying deposit and
the denominator is the total amount of qualifying deposits of all Eligible
Account Holders, in each case on the Eligibility Record Date, subject to the
overall purchase limitation. See "--Limitations on Common Stock Purchases." If
there are not sufficient shares available to satisfy all subscriptions, shares
first will be allocated so as to permit each subscribing Eligible Account Holder
to purchase a number of shares sufficient to make his total allocation equal to
the lesser of 100 shares or the number of shares subscribed for. Thereafter,
unallocated shares will be allocated to subscribing Eligible Account Holders
whose subscriptions remain unfilled in the proportion that the amounts of their
respective eligible deposits bear to the total amount of eligible deposits of
all subscribing Eligible Account Holders whose subscriptions remain unfilled.
To ensure proper allocation of stock, each Eligible Account Holder must list on
his subscription order form all accounts in which he has an ownership interest.
Failure to list an account could result in less shares being allocated than if
all accounts had been disclosed. The subscription rights of Eligible Account
Holders who are also directors or officers of Raritan Savings or their
associates will be subordinated to the subscription rights of other Eligible
Account Holders to the extent attributable to increased deposits in the twelve
months preceding the Eligibility Record Date.
PRIORITY 2: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. To the extent there
are sufficient shares remaining after satisfaction of subscriptions by Eligible
Account Holders, each Supplemental Eligible Account Holder shall have the
opportunity to purchase up to the greater of: 5% of the shares of Common Stock
issued in the Offering (or 8,214 shares of Common Stock based on the issuance of
164,285 shares); or one-tenth of one percent (.10%) of the total offering of
shares of Common Stock; or fifteen times the product obtained by multiplying the
total number of shares to be issued in the Offering by a fraction where the
numerator is the Supplemental Eligible Account Holder's qualifying deposit and
the denominator is the total amount of qualifying deposits of all Supplemental
Eligible Account Holders, in each case on the Supplemental Eligibility Record
Date subject to the overall purchase limitations set forth herein. In the event
Supplemental Eligible Account Holders subscribe for a number of shares which,
when added to the shares subscribed for by Eligible Account Holders and the
Employee Plans is in excess of the total number of shares offered in the
Offering, the subscriptions of Supplemental Eligible Account Holders will be
allocated among subscribing Supplemental Eligible Account Holders so as to
permit each subscribing Supplemental Eligible Account Holder to purchase a
number of shares sufficient to make his total allocation equal to the lesser of
100 shares or the number of shares subscribed for. Thereafter, unallocated
shares will be allocated to each subscribing Supplemental Eligible Account
Holder whose subscription remains unfilled in the same proportion that such
subscriber's qualifying deposits on the Supplemental Eligibility Record Date
bear to the total amount of qualifying deposits of all subscribing Supplemental
Eligible Account Holders whose subscriptions remain unfilled.
PRIORITY 3: VOTING DEPOSITORS. To the extent that there are sufficient
shares remaining after satisfaction of subscriptions by the and Eligible Account
Holders Eligible Account Holders and Supplemental Eligible Account Holders, each
Voting Depositor will receive, without payment therefor, nontransferable
subscription rights to subscribe for Common Stock in the Subscription Offering
up to the greater of: 5% of the shares of Common Stock issued in its Offering
(or 8,214 shares of Common Stock based on the issuance of 164,285 shares); or
one-tenth of one percent (.10%) of the total offering of shares of Common Stock.
See "--Limitations on Common Stock Purchases." In the event the Voting
Depositors subscribe for a number of shares which, when added to the shares
subscribed for by Supplemental Eligible Account Holders and Eligible Account
Holders, is in excess of the total number of shares offered in the Conversion,
the subscriptions of such Voting Depositors will be allocated among subscribing
Voting Depositors on a pro rata basis in the same proportion as a subscriber's
total votes on the Record Date for the Special Meeting bears to the total votes
of all subscribing Voting Depositors on such date.
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EXPIRATION DATE FOR THE SUBSCRIPTION OFFERING. The Subscription Offering
will expire on June 3, 1996, unless extended for up to 45 days or such
additional periods by Raritan Savings with the approval of the Commissioner (the
"Subscription Expiration Date"). Subscription rights which have not been
exercised prior to the Subscription Expiration Date will become void.
Raritan Savings will not execute orders until all shares of Common Stock
have been subscribed for or otherwise sold. If all shares have not been
subscribed for or sold within 45 days after the Subscription Expiration Date,
unless such period is extended with the consent of the Commissioner, all funds
delivered to Raritan Savings pursuant to the Subscription Offering will be
returned promptly to the subscribers with interest and all withdrawal
authorizations will be canceled. If an extension beyond the 45 day period
following the Subscription Expiration Date is granted, Raritan Savings will
notify subscribers of the extension of time and of any rights of subscribers to
modify or rescind their subscriptions. Such extensions may not go beyond June
3, 1998.
PERSONS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES. Raritan Bancorp
will make reasonable efforts to comply with the securities laws of all states in
the United States in which persons entitled to subscribe for stock pursuant to
the Plan of Conversion reside. However, Raritan Bancorp is not required to offer
stock in the Subscription Offering to any person who resides in a foreign
country or resides in a state of the United States with respect to which (i) a
small number of persons otherwise eligible to subscribe for shares of Common
Stock reside in such state; or (ii) Raritan Bancorp determines that compliance
with the securities laws of such state would be impracticable for reasons of
cost or otherwise, regarding but not limited to a request that Raritan Bancorp
and Raritan Savings or their officers, directors or trustees, under the
securities laws of such state, register as a broker, dealer, salesman or selling
agent or to register or otherwise qualify the subscription rights or Common
Stock for sale or subject any filing with respect thereto in such state. Where
the number of persons eligible to subscribe for shares in one state is small,
Raritan Savings and Raritan Bancorp will base their decision as to whether or
not to offer the Common Stock in such state on a number of factors, including
the size of accounts being held by account holders in the state, the cost of
registering or qualifying the shares or the need to register Raritan Bancorp,
its officers, directors or employees as brokers, dealers or salesmen.
ESTIMATED SUBSCRIPTION PRICE. Raritan Bancorp considered the average
closing bid price of Raritan Bancorp's Common Stock as reported on the Nasdaq
National Market System for the twenty trading days ending on the date the
Registration Statement was declared effective and, after consultation with its
financial advisors, such market and financial conditions that Raritan Bancorp
deemed relevant in establishing the Estimated Subscription Price. The Estimated
Subscription Price was established at an amount that Raritan Bancorp estimated
would equal or exceed the Actual Purchase Price. In order to purchase
Conversion Stock each purchaser must complete and submit an Order Form
indicating the estimated number of shares (the "Estimated Subscription Shares")
for which he is subscribing at the Estimated Subscription Price or EAH Estimated
Subscription Price, as applicable. The actual number of shares purchased by
subscribers (the "Actual Shares Purchased") will be equal to the total dollar
amount of such subscriber's order divided by the Actual Purchase Price, or in
the case of Eligible Account Holders, divided by the EAH Actual Purchase Price.
Manville Savings and Raritan Bancorp reserve the right to refund subscription
funds in lieu of issuing fractional shares, or permit subscribers to elect to
receive additional whole shares in such process. The Actual Shares Purchased
may be reduced in the event of an oversubscription. There can be no assurance
that the actual price per share paid by subscribers will not exceed the
Estimated Subscription Price, or that subscribers will not receive fewer shares
than the number for which they subscribed.
COMMUNITY OFFERING
To the extent that shares remain available for purchase after
satisfaction of all subscriptions of the Eligible Account Holders, Supplemental
Eligible Account Holders and Voting Depositors, Raritan Bancorp will offer
shares pursuant to the Plan of Conversion to certain members of the general
public and in a direct community offering with preference given to Raritan
Bancorp Shareholders and then to natural persons residing in Somerset County,
New Jersey. Such persons, together with associates of and persons acting in
concert with such persons, may purchase up to 5% of the shares offered in the
Subscription and Community Offering ( or 8,214 shares based on the issuance of
164,285 shares) subject to the maximum purchase limitation. See "--Limitations
on Common Stock Purchases." THE OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON
STOCK IN THE COMMUNITY OFFERING CATEGORY IS SUBJECT TO THE RIGHT OF RARITAN
SAVINGS AND RARITAN BANCORP, IN THEIR SOLE DISCRETION, TO ACCEPT OR REJECT ANY
SUCH ORDERS
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IN WHOLE OR IN PART EITHER AT THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS
PRACTICABLE FOLLOWING THE EXPIRATION DATE. Neither Raritan Savings nor Raritan
Bancorp have established defined criteria pursuant to which subscriptions would
be rejected in the Community Offering. If Raritan Savings or Raritan Bancorp,
as the case may be, increases the maximum purchase limitation, Raritan Savings
or Raritan Bancorp, as the case may be, is only required to solicit persons who
subscribed for the maximum purchase amount and may, in the sole discretion of
Raritan Savings or Raritan Bancorp, as the case may be, resolicit certain other
large subscribers. In the event that the maximum purchase limitation is
increased above 5%, such limitation may be further increased to 9.99% provided
that orders for Common Stock exceeding 5% of the shares being offered shall not
exceed in the aggregate 10% of the total offering. Requests to purchase
additional shares of the Common Stock in the event that the purchase limitation
is so increased will be determined by the Board of Directors of Raritan Savings
and Raritan Bancorp in their sole discretion.
The Community Offering may commence concurrently with, or as soon as
practicable after the completion of, the Subscription Offering and must be
completed within 45 days after the last day of the Subscription Offering, unless
extended by Manville Savings and Raritan Bancorp with the approval of the
Commissioner. The shares may be made available in the Community Offering
through a direct community marketing program which may provide for utilization
of a broker, dealer, consultant or investment banking firm, experienced and
expert in the sale of savings institutions securities. Such entities may be
compensated on a fixed fee basis or on a commission basis, or a combination
thereof.
If orders are received in the Community Offering for shares in excess of
the available Conversion Stock, accepted subscriptions from Raritan Bancorp's
shareholders shall first be filled in full, subject to applicable purchase
limitations, before any subscriptions in the Community Offering are filled from
subscribers who are not Raritan Bancorp's shareholders. If Raritan Bancorp's
shareholders order more Conversion Stock than is available for purchase in the
Community Offering, available shares of Conversion Stock may first be allocated
to the Raritan Bancorp ESOP, and thereafter shall be allocated first to Raritan
Bancorp's shareholders so as to permit each Raritan Bancorp's stockholder to the
extent possible, to purchase a number of shares sufficient to make his total
allocation equal to 100 shares or the total amount of his subscription,
whichever is less. Any shares not so allocated shall be allocated among the
Raritan Bancorp's shareholders pro rata (to the extent of their orders) in the
same proportion as the amount of the Conversion Stock ordered by each bears to
the total amount of the Conversion Stock ordered by all Raritan Bancorp's
shareholders.
To the extent that there are shares remaining after all subscriptions by
Raritan Bancorp's shareholders, any remaining shares will be allocated among
subscribers who are natural persons residing in Somerset County, New Jersey
("Preferred Other Purchasers") and thereafter among members of the general
public using the foregoing allocation as applied to Raritan Bancorp's
shareholders. Manville Savings and Raritan Bancorp may require a person to
provide evidence, satisfactory to Manville Savings and Raritan Bancorp, that
such person qualifies as a Raritan Bancorp stockholder. All determinations as to
whether a person qualifies as a Raritan Bancorp stockholder shall be made by
Manville Savings and Raritan Bancorp in their sole discretion and shall be final
and conclusive.
Any accepted subscriptions in the Community Offering from subscribers who
are not Raritan Bancorp shareholders or Preferred Other Purchasers shall be
filled up to a maximum of 2% of the Conversion Stock and thereafter remaining
Conversion Stock shall be allocated on an equal number of shares basis per order
until all orders have been filled.
DESCRIPTION OF SALES ACTIVITIES
The Common Stock will be sold in both the Subscription and Community
Offerings by employees of Raritan Bancorp and by employees and directors of
Manville Savings. The Common Stock will be marketed principally through the
distribution of this Prospectus and through the activities in a stock conversion
center. The stock conversion center will be located at _______________________.
That area is separate and apart from the banking floor and other customer areas
of that building.
The conversion stock center is expected to operate during normal business
hours throughout the period of the Offering. An employee of a broker-dealer
registered with the SEC will supervise the conversion stock center.
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It is not expected that any employees of Raritan Bancorp or Manville Savings
will be working in the conversion stock center, other than employees providing
clerical services relating to processing orders and other mailed materials. The
stock conversion center may make telephone contact with potential offerees,
including depositors. Initial calls will be made to determine that offering and
proxy materials have been received, to relieve customer anxiety about the
transaction, and to answer questions. In addition, persons in the stock
conversion center will respond to telephone inquiries regarding the Offering.
Only officers of Raritan Bancorp or Manville Savings will be permitted to
address investment related questions.
In addition to the activities in the stock conversion center, certain
senior-level management employees of both Raritan Bancorp and Manville Savings
will participate in the Offering. It is expected that members of Manville
Savings' Board of Directors will contact certain Manville Savings depositors as
well as other persons in the community to discuss the Offering. Members of
Raritan Bancorp's senior management may assist in those efforts and, in
addition, may contact other potential offerees.
None of the Raritan Bancorp or Manville Savings employees or directors
who participate in the Offering, either in the stock conversion center or
otherwise, will receive any special compensation or other remuneration for such
activities. Management of Manville Savings and Raritan Bancorp will respond to
any inquiries made to them, whether by depositors or by members of the general
public in the Community Offering. The Offering is being conducted on a "best-
efforts" basis, subject to the minimum and maximum purchase requirements
discussed elsewhere in this Prospectus.
None of the Raritan Bancorp or the Manville Savings personnel
participating in the Offering is registered or licensed as a broker-dealer or an
agent of a broker-dealer. Each of those persons will conduct the offering
activities pursuant to an exemption from such registration provided under Rule
3a4-1 under the Securities Exchange Act of 1934. That Rule provides that certain
persons who are associated with an issuer of securities and who perform
securities sales activities as an incidental part of their normal job duties and
without any special compensation, are exempt from registration as a
broker/dealer or agent of a broker/dealer. The employees of Raritan Bancorp are
entitled to rely on such exemption due to their present association with Raritan
Bancorp. The employees of Manville Savings may be entitled to rely on such
exemption because immediately upon successful consummation of the Offering,
those persons will become associated with Raritan Bancorp. Their current
association with Raritan Bancorp is in connection with the contemplated
Conversion transaction.
PROCEDURE FOR PURCHASING SHARES IN SUBSCRIPTION AND COMMUNITY OFFERING
To ensure that each purchaser receives a Prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of an order
form will confirm receipt or delivery in accordance with Rule 15c2-8. Order
Forms will only be distributed with a Prospectus.
To purchase shares in the Subscription and Community Offering, an
executed order form with the required payment for each share subscribed for, or
with appropriate authorization for withdrawal from Manville Savings' deposit
account (which may be given by completing the appropriate blanks in the order
form), must be received by Manville Savings by 3:00 p.m., New Jersey time on the
Expiration Date. Order forms which are not received by such time or are executed
defectively or are received without full payment (or appropriate withdrawal
instructions) are not required to be accepted. In addition, Manville Savings and
Raritan Bancorp will not accept an order submitted on photocopied or facsimile
order forms. Manville Savings and Raritan Bancorp have the right to waive or
permit the correction of incomplete or improperly executed forms, but does not
represent it will do so. Once received, an executed order form may not be
modified, amended or rescinded without the consent of Raritan Bancorp and
Manville Savings unless the Conversion has not been completed within 45 days
after the end of the Subscription and Community Offering, unless such period has
been extended.
IN ORDER TO ENSURE THAT ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL ELIGIBLE
ACCOUNT HOLDERS AND VOTING DEPOSITORS ARE PROPERLY IDENTIFIED AS TO THEIR STOCK
PURCHASE PRIORITIES, DEPOSITORS AS OF THE ELIGIBILITY RECORD DATE, SUPPLEMENTAL
ELIGIBILITY RECORD DATE AND/OR THE VOTING RECORD DATE MUST LIST ALL ACCOUNTS ON
THE STOCK ORDER FORM GIVING ALL NAMES IN EACH ACCOUNT AND THE ACCOUNT NUMBER.
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Payment for subscriptions may be made (i) in cash if delivered in person
to Manville Savings, (ii) by check (including checks drawn on Raritan Savings or
Manville Savings accounts), money order or, in the case of institutions, wire
transfer, or (iii) by authorization of withdrawal from deposit accounts other
than checking accounts maintained with Manville Savings. Interest will be paid
on payments made by a check (including checks drawn on Savings Bank accounts),
or money order at Manville Savings' passbook rate of interest from the date
payment is received until the completion or termination of the Conversion. If
payment is made by authorization of withdrawal from deposit accounts (other than
checking accounts), the funds authorized to be withdrawn from a deposit account
will continue to accrue interest at the contractual rates until completion or
termination of the Conversion, but a hold will be placed on such funds, thereby
making them unavailable to the depositor until completion or termination of the
Conversion.
If a subscriber authorizes Manville Savings to withdraw the amount of the
purchase price from his deposit account (other than checking accounts), Manville
Savings will do so as of the effective date of Conversion. Manville Savings will
waive any applicable penalties for early withdrawal from certificate accounts.
If the remaining balance in a certificate account is reduced below the
applicable minimum balance requirement at the time that the funds actually are
transferred under the authorization, the certificate will be cancelled at the
time of the withdrawal, without penalty, and the remaining balance will earn
interest at Manville Savings' passbook rate of interest.
Owners of self-directed IRAs may use the assets of such IRAs to purchase
shares of Common Stock in the Subscription and Community Offering, provided that
such IRAs are not maintained at Raritan Savings or Manville Savings. Persons
with IRAs maintained at Raritan Savings or Manville Savings must have their
accounts transferred to an unaffiliated institution or broker to purchase shares
of Common Stock in the Subscription and Community Offering. In addition, the
provisions of ERISA and Internal Revenue Service regulations require that
officers, directors and ten percent shareholders who use self-directed IRA funds
to purchase shares of Common Stock in the Subscription and Community Offering,
make such purchases for the exclusive benefit of the IRAs.
Certificates representing shares of Common Stock purchased will be mailed
to purchasers at the last address of such persons appearing on the records of
Manville Savings, or to such other address as may be specified in properly
completed order forms, as soon as practicable following consummation of the sale
of all shares of Common Stock. Any certificates returned as undeliverable will
be disposed of in accordance with applicable law.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES
PRIOR TO THE COMPLETION OF THE CONVERSION, THE PLAN OF CONVERSION
PROHIBITS ANY PERSON WITH SUBSCRIPTION RIGHTS, INCLUDING ELIGIBLE ACCOUNT
HOLDERS, THE EMPLOYEE PLANS, SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS, AND VOTING
DEPOSITORS OF MANVILLE SAVINGS, FROM TRANSFERRING OR ENTERING INTO ANY AGREEMENT
OR UNDERSTANDING TO TRANSFER THE LEGAL OR BENEFICIAL OWNERSHIP OF THE
SUBSCRIPTION RIGHTS ISSUED UNDER THE PLAN OF CONVERSION OR THE SHARES OF COMMON
STOCK TO BE ISSUED UPON THEIR EXERCISE. SUCH RIGHTS MAY BE EXERCISED ONLY BY THE
PERSON TO WHOM THEY ARE GRANTED AND ONLY FOR HIS ACCOUNT. EACH PERSON EXERCISING
SUCH SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT HE IS PURCHASING
SHARES SOLELY FOR HIS OWN ACCOUNT AND THAT HE HAS NO AGREEMENT OR UNDERSTANDING
REGARDING THE SALE OR TRANSFER OF SUCH SHARES. THE PLAN OF CONVERSION ALSO
PROHIBITS ANY PERSON FROM OFFERING OR MAKING AN ANNOUNCEMENT OF AN OFFER OR
INTENT TO MAKE AN OFFER TO PURCHASE SUCH SUBSCRIPTION RIGHTS OR SHARES OF COMMON
STOCK PRIOR TO THE COMPLETION OF THE CONVERSION.
MANVILLE SAVINGS AND RARITAN BANCORP WILL PURSUE ANY AND ALL LEGAL AND
EQUITABLE REMEDIES IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF
SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE
TRANSFER OF SUCH RIGHTS.
LIMITATIONS ON COMMON STOCK PURCHASES
The Plan includes the following limitations on the number of shares of
Common Stock which may be purchased during the Conversion:
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(1) No person may purchase fewer than the number of shares of Conversion
Stock having an aggregate purchase price of $500;
(2) The maximum number of shares of Common Stock subscribed for or
purchased in all categories of the Conversion by any person, together
with associates of and groups of persons acting in concert with such
persons, shall not exceed 5% of the shares of Common Stock issued in the
Conversion, which limitation is shares based on the issuance of 164,285
shares.
(3) No more than 35% of the total number of shares offered for sale in
the Conversion may be purchased by directors and officers of Manville
Savings and their associates in the aggregate.
Depending upon market or financial conditions, the Board of Directors of
Raritan Savings and Raritan Bancorp, with the approval of the Commissioner and
without further approval of depositors, may decrease the purchase limitations.
Subject to any required regulatory approval and the requirements of applicable
laws and regulations, but without further approval of the members of Raritan
Savings, the Boards of Directors of Raritan Bancorp and Raritan Savings may, in
their sole discretion, increase the maximum purchase limitation referred to
above up to 9.99%, provided that orders for shares exceeding 5% of the shares
being offered shall not equal or exceed, in the aggregate, 10% of the total
offering. Requests to purchase additional shares under this provision will be
determined by the respective Boards of Directors in their sole discretion.
The term "associate" of a person is defined to mean: (i) any corporation
(other than Raritan Savings or a majority-owned subsidiary of Raritan Savings)
of which such person is an officer, partner or 10% stockholder; (ii) any trust
in which such person has a substantial beneficial interest or serves as a
trustee; and (iii) the parents, spouse, sisters, brothers, children of the
person, or anyone married to one of the foregoing persons. Directors are not
treated as associates solely because of their Board membership.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE CONVERSION
The following is a summary of all anticipated material federal income tax
consequences of the Conversion and the possible purchase of Raritan Bancorp
Common Stock pursuant to the Subscription Offering or the Community Offering.
The summary is based on the federal income tax laws as now in effect and as
currently interpreted; it does not take into account possible changes in such
laws or interpretations, including amendments to applicable statutes or
regulations or changes in judicial or administrative rulings, some of which may
have retroactive effect. In addition, to the extent the discussion is premised
upon the receipt of an opinion of legal counsel, purchasers should be aware that
any such opinion will not be binding on the IRS or the courts. The summary does
not purport to address all aspects of the possible federal income tax
consequences of the Conversion. In particular, and without limiting the
foregoing, this summary does not address the federal income tax consequences of
the Conversion to Eligible Account Holders in light of their particular
circumstances or status (e.g., foreign persons tax-exempt entities, etc.). Nor
does this summary address any consequences of the Conversion under any state,
local, or foreign tax laws. SUBSCRIBERS ARE THEREFORE URGED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE PROPOSED
TRANSACTIONS AND ANY PURCHASE OF RARITAN BANCORP COMMON STOCK PURSUANT TO THE
SUBSCRIPTION OFFERING OR THE COMMUNITY OFFERING, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL AND
OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
The tax consequences of the purchase of Raritan Bancorp Common Stock may
vary depending on whether the purchase is by an Eligible Account Holder in his
capacity as such. All Eligible Account Holders should read carefully the entire
discussion under "The Conversion--Certain Federal Income Tax Consequences of the
Conversion" before deciding whether to purchase Raritan Bancorp Common Stock in
such person's capacity as an Eligible Account Holder.
REORGANIZATION STATUS. The consummation of the Conversion is conditioned
upon the receipt by Raritan Bancorp of an opinion of counsel (which opinion has
been received) to the effect that, based on facts and
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representations made by Raritan Bancorp, the Conversion will constitute one or
more reorganizations within the meaning of Section 368(a) of the Code.
CERTAIN TAX CONSEQUENCES OF THE PROPOSED TRANSACTIONS TO SUBSCRIBERS.
Assuming that the Conversion qualifies as one or more reorganizations, an
Eligible Account Holder or Supplemental Eligible Account Holder should be
treated for federal income tax purposes as having exchanged his or her deposit
account(s) and depositorship interest in Manville Savings for (i) deposit
account(s) in Raritan Savings, (ii) interest(s) in the liquidation account that
is established in connection with the Conversion, and (iii) to the extent such
person actually purchases any Raritan Bancorp Common Stock in the Subscription
Offering in such person's capacity as an Eligible Account Holder or Supplemental
Eligible Account Holder, rights to purchase such shares of Conversion Stock
("Subscription Rights"). In addition, a Voting Depositor should be treated as
having exchanged his or her deposit account(s), if any, and depositorship
interest in Manville Savings, if any, for (i) deposit account(s) in Raritan
Savings and (ii) Subscription Rights.
The federal income tax consequences of the receipt, exercise and lapse of
Subscription Rights which are exercisable at a discount are uncertain, but they
may be significant and could include the recognition of gain equal to the fair
market value of such Subscription Rights. Those consequences present novel
issues of tax law which are not addressed by any direct authorities and, to the
extent related authorities do exist, they appear to be conflicting and
inconclusive. Set forth below are two possible tax consequences of the receipt
and/or exercise of Subscription Rights.
Under one scenario, only those Eligible Account Holders who actually
exercise Subscription Rights should recognize gain as a result of the exchanges
described in the preceding paragraph and the amount of such gain should be equal
to the fair market value of the Subscription Rights exercised. As a result,
Eligible Account Holders who do not exercise Subscription Rights should not
recognize gain for federal income tax purposes as a result of the Conversion.
The determination of the fair market value of the Subscription Rights will
depend on a number of factors, including the excess, if any, of the market price
of the Raritan Bancorp Common Stock over the EAH Actual Purchase Price, the
period of time during which the Subscription Rights will be outstanding and
exercisable, the nontransferability of the Subscription Rights, and perhaps
other factors. For purposes of the information returns to be filed with the IRS
relating to the gain recognized by Eligible Account Holders who exercise
Subscription Rights, Raritan Bancorp and Manville Savings intend to value the
Subscription Rights exercised based solely on the difference between the EAH
Actual Purchase Price for the shares of Raritan Bancorp Common Stock purchased
and the Actual Purchase Price.
It is possible that, consistent with earlier private letter rulings, all
Eligible Account Holders (including those who do not exercise Subscription
Rights) will be treated as having received Subscription Rights pursuant to the
Proposed Transactions. Should this be the case, each Eligible Account Holder
will recognize taxable gain in an amount equal to the fair market value of the
Subscription Rights received. In addition, the IRS may take the position that
those Eligible Account Holders who actually exercise Subscription Rights have
additional income that, when added to the income recognized on the receipt of
the Subscription Rights, generally would increase their total amount of income
to approximately the amount such Eligible Account Holders would recognize as
described above. An Eligible Account Holder who does not exercise some or all of
his or her Subscription Rights should be entitled to claim, at the time the
unexercised Subscription Rights expire, a capital loss equal to the amount of
gain attributable to the Subscription Rights not exercised, provided that the
Raritan Bancorp Common Stock that would have been acquired upon exercise of the
expired Subscription Rights would have constituted a capital asset in the hands
of the Eligible Account Holder. Thus, in general, an Eligible Account Holder
who does not exercise any Subscription Rights would have gain and an equal
offsetting loss as a result of the Conversion. Although the capital loss should
be equal in amount to the related gain recognized, the character of the loss as
a capital loss may not be the same as the character of the gain required to be
recognized upon receipt of the unexercised Subscription Rights, certain
additional tax forms may have to be filed, and, under certain circumstances, an
Eligible Account Holder may have to use the loss in a later tax year than the
year in which the gain from receipt of the unexercised Subscription Rights is
recognized. For most Eligible Account Holders, any gain recognized on the
distribution of the Subscription Rights will be treated as a capital gain.
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Based on the foregoing, if all Eligible Account Holders are treated as
having received Subscription Rights, then all Eligible Account Holders, not just
those who exercise Subscription Rights, will have to be concerned about the
value assigned to the Subscription Rights, and other questions, such as when and
how many Subscription Rights should be deemed to be received by each Eligible
Account Holder. There is no authority that clearly resolves these questions
and, in the absence of such authority, there may be several possible approaches
for determining the time at which Subscription Rights would, under these
circumstances, be deemed to be received by Eligible Account Holders.
In the opinion of PBS, which opinion is not binding on the Internal
Revenue Service ("IRS"), the Subscription Rights issued to Supplemental Eligible
Account Holders and Voting Depositors do not have any value, based on the fact
that such rights are acquired by the recipients without cost, are
nontransferable and of short duration, and afford the recipients the right only
to purchase the Common Stock at a price equal to the Actual Purchase Price.
Assuming that, for the reasons set forth above, the Subscription Rights issued
to Supplemental Eligible Account Holders and Voting Depositors have no value at
the time issued, the Supplemental Eligible Account Holders and Voting Depositors
will not recognize gain or loss upon the receipt of Subscription Rights or upon
the exercise of Subscription Rights.
EXERCISE OF SUBSCRIPTION RIGHTS. An Eligible Account Holder (i) should
not recognize any taxable income as a result of the purchase of Raritan Bancorp
Common Stock pursuant to the exercise of Subscription Rights (although as noted
above such an Eligible Account Holder will be required to recognize taxable gain
as a result of the receipt of exercised Subscription Rights), (ii) should have a
basis in such Raritan Bancorp Common Stock equal to the purchase price paid
therefor increased by the basis, if any, of the Subscription Rights exercised
(such an Eligible Account Holder's basis in the Subscription Rights should be
equal to the amount of gain (and any additional income) recognized on the
receipt (and exercise) of Subscription Rights), and (iii) should have a holding
period in the Raritan Bancorp Common Stock purchased pursuant to the exercise of
Subscription Rights commencing on the date the Subscription Rights are
exercised, which should be the Closing Date.
PURCHASE BY AN ELIGIBLE ACCOUNT HOLDER OTHER THAN IN HIS OR HER CAPACITY
AS SUCH. Under the terms of the Plan of Conversion, if an Eligible Account
Holder who is eligible to participate in both (i) the Subscription Offering as a
Supplemental Eligible Account Holder or Voting Depositor, or (ii) in the
Community Offering, purchases shares of Raritan Bancorp Common Stock, the
purchase will be deemed to have been made pursuant to the next highest priority
for which he is eligible (up to a purchase price of $250,000) unless and to the
extent the Eligible Account Holder affirmatively elects on the Stock Order Form
to purchase the shares in the Subscription Offering as an Eligible Account
Holder. An Eligible Account Holder described in the preceding sentence who is
deemed to have purchased shares of Raritan Bancorp Common Stock in a capacity
other than as an Eligible Account Holder should be treated for federal income
tax purposes as set forth below under "--Purchase of Raritan Bancorp Common
Stock Pursuant to the Community Offering."
PURCHASE OF RARITAN BANCORP COMMON STOCK BY A PURCHASER IN HIS OR HER
CAPACITY AS OTHER THAN AN ELIGIBLE ACCOUNT HOLDER. No income, gain or loss
should be recognized by Supplemental Eligible Account Holders, Voting
Depositors, or purchasers in the Community Offering, either as a result of
having the opportunity to purchase shares of Raritan Bancorp Common Stock in the
Offering or as a result of the purchase of Raritan Bancorp Common Stock in the
Offering. Supplemental Eligible Account Holders, Voting Depositors, or
purchasers in the Community Offering who purchase Raritan Bancorp Common Stock
in the Offering should have a basis in such stock equal to the purchase price
thereof, and should have a holding period for such stock commencing on the day
following the day on which the stock is purchased, which should be the day after
the closing date. A purchaser of shares of Raritan Bancorp Common Stock in the
Offering may have a tax basis in such shares that is less than the tax basis
that an Eligible Account Holder purchaser in the Subscription Offering might
have.
INDIVIDUAL RETIREMENT ACCOUNTS. Those persons who are beneficial owners
of IRA, Keogh or similar retirement accounts are not themselves Eligible Account
Holders by virtue of having such accounts, but the account itself may be an
Eligible Account Holder. Thus, the tax consequences of the receipt and exercise
of Subscription Rights should be applicable to the IRAs and Keogh accounts
themselves, and not the beneficial owners thereof. So long as such accounts are
tax-exempt, under Section 408 of the Code (in the case of IRAs) or Section
501(a) of the Code (in the case of Keogh accounts), there should be no federal
income tax consequences to the accounts resulting
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from receipt of Subscription Rights. In the case of an IRA, Keogh or similar
retirement account established at Manville Savings, or Raritan Bancorp, however,
in order to subscribe for shares in the Offering, the beneficial owner first
must authorize and direct such institution to transfer the account to a self-
directed account at an independent trustee that permits the account to hold
stock. Payment for the Raritan Bancorp Common Stock under these circumstances
should have no federal income tax consequences to the IRA or Keogh account or to
the beneficial owner of such account. To the extent that the balance in an IRA
or Keogh account is increased as a result of the exercise of Subscription
Rights, additional income generally would be recognized upon the future
withdrawal of such account balance.
CERTAIN NEW JERSEY INCOME TAX CONSEQUENCES OF THE CONVERSION
For New Jersey income tax purposes, the tax consequences of the
Conversion and the possible purchase by Eligible Account Holders of Raritan
Bancorp Common Stock pursuant to the Subscription Offering or the Community
Offering are expected to be substantially similar to the federal income tax
consequences.
REQUIRED REGULATORY APPROVALS AND CONSIDERATIONS AS TO THE MERGER
The merger of Manville Savings into Raritan Savings is subject to
approval of the FDIC pursuant to the Bank Merger Act, and the Conversion is
subject to the Non-objection of the FDIC pursuant to FDIC regulations and policy
regarding mutual-to-stock conversions of state-chartered savings banks. The Bank
Merger Act requires that the FDIC take into consideration the financial and
managerial resources and future prospects of the existing and proposed
institutions and the convenience and needs of the communities to be served.
Further, the FDIC may not approve the merger if it would result in a monopoly or
if it would be in furtherance of any combination or conspiracy to monopolize or
to attempt to monopolize the business of banking in any part of the United
States, or if its effect in any section of the country may be substantially to
lessen competition or to tend to create a monopoly, or if it would be in any
other manner in restraint of trade, unless the FDIC finds that the
anticompetitive effects of the merger are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. In addition, the FDIC must take into
account the record of performance of the existing and proposed institutions
under the Community Reinvestment Act in meeting the credit needs of the entire
community, including low- and moderate-income neighborhoods, served by such
institutions. Applicable regulations also require publication of notice of the
application for approval of the merger and provide an opportunity for the public
to comment on the application in writing and to request a hearing. The Bank
Merger Act requires that any bank merger, including the merger of Manville
Savings into Raritan Savings, may not be consummated until the 15th day after
approval under the Bank Merger Act, during which time the United States
Commissioner of Justice may challenge the merger on antitrust grounds.
In connection with their review of the Merger Conversion application, the
FDIC and the Commissioner took into account that the Common Stock will be
offered to Manville Savings' depositors at a discount to the average bid price
over the twenty day period preceding the Closing Date, and that Manville Savings
will pay a special cash bonus distribution to its depositors in an aggregate
amount of $377,000, will distribute $125,000 as pension equivalency benefits for
the benefit of its employees, and will make charitable contributions in the
aggregate amount of $25,000 for the benefit of non-profit, public service
entities operating in, and dedicated to, the Manville community.
The Commissioner approved the Conversion and the Merger on September 7,
1995. However, such approval does not constitute a recommendation or
endorsement by the Commissioner of any of the proposed transactions contemplated
by the Plan of Conversion. The FDIC has stated its intention to issue a letter
of non-objection to the Conversion and to approve the Merger, subject to, among
other things, the approval of the Plan of Conversion by Manville Savings' Voting
Depositors.
ACCOUNTING TREATMENT
The Conversion and Merger will be accounted for on a purchase accounting
basis in accordance with generally accepted accounting principles. Under
purchase accounting, the assets and liabilities of Manville Savings as of the
Closing Date will be recorded at their respective fair values, and added to
those of Raritan Savings. Any
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excess of the fair market value of the assets of Manville Savings over the
"purchase price" thereof will be recorded as negative goodwill. The
consolidated financial statements of Raritan Bancorp issued after consummation
of the Merger and Conversion will reflect these items.
TIME LIMITS ON COMPLETION OF THE CONVERSION
Applicable regulations governing mutual to stock conversions require that
the sale of the Raritan Bancorp Common Stock offered in connection with the
Conversion be completed within 45 calendar days after the expiration of the
Subscription Offering. In the event the sale of the Raritan Bancorp Common
Stock cannot be completed within the required 45-day period, one or more
extensions of time to complete the sale of the Raritan Bancorp Common Stock may
be granted by the Commissioner prior to the end of such 45-day period, but no
single extension of time may exceed 90 days. No assurance can be given that an
extension will be granted if requested. The Subscription Offering is scheduled
to expire at 3:00 p.m., New Jersey Time, on June 3, 1996. Thus, unless extended
by Manville Savings and Raritan Bancorp with the approval of the Commissioner,
such sale must be completed by July 18, 1996.
Raritan Bancorp will not issue the shares of Raritan Bancorp Common Stock
until all such shares (other than an insignificant residue) have been subscribed
for or otherwise sold. If this has not occurred within 45 days after the
expiration of the Subscription Offering, unless such period is extended with the
consent of the Commissioner, all funds delivered to Manville Savings in the
Subscription Offering and the Community Offering will be returned promptly to
those who subscribed in the Subscription Offering and the Community Offering
with interest, and all withdrawal authorizations will be canceled. If an
extension beyond the 45-day period following the expiration of the Subscription
Offering is granted, Manville Savings will notify those who subscribed in the
Subscription Offering and the Community Offering of the extension of time and of
their rights, if any, to modify or rescind their subscriptions. No sales of
shares may be completed, either in the Subscription Offering or the Community
Offering, or otherwise, unless the Plan of Conversion is approved by the Voting
Depositors of Manville Savings.
EFFECT OF THE PROPOSED TRANSACTIONS ON ACCOUNT HOLDERS AND BORROWERS
The Conversion will not change the amount or withdrawal rights of savings
deposits. Thus, depositors will continue to hold their existing certificates,
passbooks and other evidences of their accounts. In addition, such accounts
will continue to be insured by the FDIC up to the maximum amount authorized by
federal law; however, persons who have deposit accounts at both Raritan Savings
and Manville Savings prior to the Conversion will retain separate insurance
coverage in those accounts only for a period of six months from the date of the
closing of the Conversion as if the institutions remained as separate entities,
except in the case of certificate of deposit accounts that will mature more than
six months thereafter--in which event separate insurance coverage will continue
until the earliest maturity date. Thereafter, such separate insurance coverage
will cease and those depositors' accounts will be insured up to the maximum
amount permitted under federal law. Depositors whose insurance coverage is
affected by the Conversion will be notified in advance of any reduction in
deposit insurance taking effect. The principal amount, interest rate, maturity
date and other terms of Manville Savings' loans will continue under the same
contractual terms as those prior to completion of the Conversion.
VOTING RIGHTS
At present, neither holders of withdrawable accounts nor borrowers at
Manville Savings have voting rights in Manville Savings, except that the FDIC
requires the affirmative vote of a majority of depositors in connection with a
conversion from mutual to stock form. Subsequent to the Conversion, each person
who elects to purchase Raritan Bancorp Common Stock in the Offering or
otherwise, as a holder of shares of Raritan Bancorp Common Stock, will have
exclusive rights to vote on any matters to be considered by the holders of
Raritan Bancorp Common Stock. A shareholder of Raritan Bancorp is entitled to
one vote for each share of Raritan Bancorp Common Stock owned. If all of the
shares of Raritan Bancorp Common Stock offered in the Offering are purchased at
the maximum of the Valuation Range, such purchasers would own approximately 9.9%
of the issued and outstanding Common Stock of Raritan Bancorp.
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LIQUIDATION RIGHTS
Currently, in the unlikely event of liquidation of Manville Savings, any
assets remaining after satisfaction of all creditors' claims in full (including
the claims of all depositors to the withdrawal value of their accounts) would be
distributed pro rata among the depositors of Manville Savings, with the pro rata
share of each being the same proportion of all such remaining assets as the
withdrawal value of each depositor's account is to the total withdrawal value of
all accounts in Manville Savings at the time of the liquidation.
The Plan of Conversion requires that the converted institution establish
a Liquidation Account for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders. The Liquidation Account will initially be
established on the converted institution's books in an amount equal to Manville
Savings' net worth as shown on its latest statement of financial condition
contained in the final prospectus used in connection with the Conversion. Each
Eligible Account Holder and Supplemental Eligible Account Holder will receive an
initial interest in the Liquidation Account (subaccount balance) which will be
in the same proportion to the total Liquidation Account as the balance of the
deposit at Manville Savings of each Eligible Account Holder and Supplemental
Eligible Account Holder on the Eligibility Record Date and Supplemental
Eligibility Record Date, respectively, was to the total of the deposits of all
Eligible Account Holders and Supplemental Eligibility Record Date, respectively.
Neither the total amount of the Liquidation Account nor an Eligible Account
Holder's or Supplemental Eligible Account Holder's subaccount balance in the
Liquidation Account will ever increase.
The Liquidation Account will be established by Raritan Savings upon
consummation of the Conversion and will be added to the Liquidation Account
established at the time of Raritan Savings' conversion to stock form. If the
amount on deposit at Raritan Savings by any Eligible Account Holder or
Supplemental Eligible Account Holder on any annual audit year closing date after
the consummation of the Proposed Transactions is less than the amount on deposit
on the Eligibility Record Date or Supplemental Eligibility Record Date,
respectively, or any subsequent annual audit year closing date, his subaccount
balance in the Liquidation Account will be reduced by an amount proportionate to
the reduction in the related deposit at Raritan Savings and will not thereafter
be increased despite any subsequent increase in the related deposit. In the
unlikely event of liquidation of the converted institution (or following the
Conversion, Raritan Savings and its successors), its assets would first be
applied against the claims of all creditors (including the claims of all
depositors to the withdrawal value of their accounts). Any remaining assets
would then be distributed pro rata to the persons who qualified as Eligible
Account Holders and who continue to maintain their deposits at Manville Savings
(and, following the Merger, Raritan Savings and its successors) after
consummation of the Conversion in an amount equal to their subaccount balance
before any distribution may be made to any holder of the Common Stock of the
institution.
CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER CONVERSION
All shares of Common Stock purchased in connection with the Conversion by
a director or an executive officer of Manville Savings will be subject to a
restriction that the shares not be sold for a period of one year following the
Conversion, except in the event of the death of such director or executive
officer. Each certificate for restricted shares will bear a legend giving notice
of this restriction on transfer, and instructions will be issued to the effect
that any transfer within such time period of any certificate or record ownership
of such shares other than as provided above is a violation of the restriction.
Any shares of Common Stock issued at a later date as a stock dividend, stock
split, or otherwise, with respect to such restricted stock will be subject to
the same restrictions.
INTERESTS OF CERTAIN PERSONS IN THE CONVERSION
Raritan Bancorp intends to continue, following the Conversion, the
employment of each of the full-time and part-time employees (including officers)
of Manville Savings. Raritan Savings shall continue to employ Marilyn Seiwell
and Geraldine Max for a period of at least one year from the Conversion at a
rate of salary that is no less than the rate of salary paid to such persons as
of the closing of the Conversion. Raritan Bancorp will credit Manville Savings
employees as of the closing of the Conversion for all service rendered to
Manville Savings prior to the closing of the Conversion for purposes of
determining eligibility for participation under all benefit plans provided by
Raritan Bancorp. Raritan Bancorp will honor the employment agreement entered
into between Manville Savings and Mr. Reinhardt.
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At the closing of the Conversion, those individuals who are serving as
directors of Manville Savings prior to the closing of the Conversion will become
members of the Manville Savings Advisory Board, and Peter S. Johnson will become
a director of Raritan Bancorp and Raritan Savings. The Advisory Board shall
make recommendations to the Board of Directors of Raritan Savings relating to
the operations acquired in the Conversion, including, without limitation,
community relations, branch operations, business development and related
matters. All members of the Advisory Board will be eligible to participate in
Raritan Savings' deferred fee plan for directors. Advisory Board members shall
receive fees for services on the Advisory Board of not less than $5,000 on an
annual basis (except that Mr. Johnson shall not receive such fees as long as he
is receiving directors' fees from Raritan Savings for services on Raritan
Savings' Board of Directors). The Advisory Board members may select a member
from the Advisory Board to serve as Chairman of the Advisory Board, provided
that the Chairman of the Advisory Board shall receive an additional annual fee
of $1,000 for services as Chairman. To the extent that fees paid to the
directors of Raritan Savings are increased, the fees paid to the Advisory Board
shall be increased in an amount that is proportionate to the increase in the
fees paid to the directors of Raritan Savings. The term of the Advisory Board
shall be for three years, and may be renewed for successive one year terms
thereafter.
If the Conversion and Merger is consummated, Raritan Savings currently
plans to relocate the Manville Savings office to space in the CVS Plaza in
Manville Savings, which is currently under construction. Peter S. Johnson and
Ned Licitra, directors of Manville Savings, are partners in the entity that owns
the plaza. The terms of the proposed lease, including the rental fee, have been
negotiated at arms length based on a review of comparable leases in the Manville
Savings market area. If the Conversion and Merger is not consummated, Manville
Savings anticipates that it will re-locate it office to the CVS Plaza.
THE ACQUISITION AGREEMENT
GENERAL. Raritan Bancorp, Raritan Savings and Manville Savings are
parties to the Acquisition Agreement, dated as of March 23, 1994, and as amended
thereafter, pursuant to which Manville Savings will convert from the mutual to
stock form through the merger of Manville Savings with and into Raritan Savings.
The Plan of Conversion is also an exhibit to the Acquisition Agreement. The
Acquisition Agreement contains certain agreements between Raritan Bancorp,
Raritan Savings and Manville Savings relating to the Conversion and Offering,
and certain related provisions.
INDEMNIFICATION. The Acquisition Agreement provides that on and after
the date of the closing of the Conversion, Raritan Bancorp shall indemnify,
defend and hold harmless all prior and then-existing directors and officers of
Manville Savings against (i) all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement (with the
approval of Raritan Bancorp which approval shall not be unreasonably withheld)
of or in connection with any claim, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact that
such person is or was a director, officer or employee of Manville Savings,
whether pertaining to any matter existing or occurring at or prior to the date
of the closing of the Conversion and whether asserted or claimed prior to, or at
or after, the date of the closing of the Conversion ("Indemnified Liabilities")
and (ii) all Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or pertaining to the Acquisition Agreement or the
transactions contemplated thereby, to the same extent as such officer, director
or employee may be indemnified by Manville Savings as of the date thereof,
including the right to advancement of expenses.
TERMINATION. The Acquisition Agreement may be terminated at any time
prior to the closing of the Conversion by the mutual consent in writing of the
parties or by either Raritan Bancorp or Manville Savings if the other party has
materially breached the Acquisition Agreement and the breach has not been cured
within 15 days of receiving written notice of such breach. Either party also may
terminate the Acquisition Agreement at the closing of the Conversion if the
required conditions precedent to the obligation of such party to consummate the
Conversion have not been satisfied or fulfilled. The Acquisition Agreement may
be terminated at any time if the required regulatory approvals or depositor
approval are not obtained. The Acquisition Agreement also may be terminated by
either party if the Conversion has not been consummated prior to July 31, 1996.
EXPENSES. The Acquisition Agreement provides that if the Conversion is
completed all expenses will be netted against the proceeds of the Offering, and
if the Conversion is not completed each party to the Acquisition
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Agreement will generally bear all costs and expenses incurred by it in
connection with the Conversion. If the Conversion is terminated because of the
failure to obtain regulatory approval of the transactions contemplated thereby
(other than because of status of noncompliance by Manville Savings with any non-
Conversion regulatory requirements) or because of the imposition of any
condition to regulatory approval deemed by the Manville Savings Board of
Directors to be materially inconsistent with the provisions of the Acquisition
Agreement, then Raritan Bancorp shall pay ninety-five percent (95%) of all
expenses incurred by the parties in connection with the Conversion and Manville
Savings shall pay the remaining expenses. The total expenses estimated to be
incurred in connection with the Conversion and Merger is $350,000, of which
$332,000 would be paid by Raritan Bancorp if the transaction is not completed
because of the failure to obtain regulatory approval.
SUBSCRIPTIONS BY MANAGEMENT AND DIRECTORS OF MANVILLE SAVINGS
The following table sets forth the number of shares of Raritan Bancorp
Common Stock that Manville Savings' executive officers and directors propose to
purchase in the Offering, assuming that sufficient shares will be available to
satisfy their subscriptions. The table also sets forth the total expected
purchases of Common Stock in the Offering by all directors and executive
officers of Manville Savings as a group.
<TABLE>
<CAPTION>
As a percent of
164,285 shares sold
Aggregate at the maximum of
Name Total Shares Purchase Price the Offering Range
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lowell E. Reinhardt 200 .01%
Ned Licitra 1,500 .9
Louis Fries 1,000 .6
Leonard Scharffenberger 1,000 .6
Peter S. Johnson 2,000 1.2
----- ---
Total 5,700 3.5%
===== ===
</TABLE>
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MANAGEMENT OF THE COMPANY
Set forth below is certain information concerning the members of the Board of
Directors, and certain executive officers, of the Company as of March 11, 1996.
In addition, information is provided as to Peter S. Johnson, who currently is a
director of Manville Savings, and who will be appointed to the Board of
Directors of the Company and the Bank upon the consummation of the Conversion
and Merger.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME, PRINCIPAL OCCUPATION AND BENEFICIAL OWNERSHIP PERCENT
BUSINESS EXPERIENCE FOR PAST 5 YEARS OF STOCK (1) OF CLASS
- -------------------------------------- ------------------------ ---------
<S> <C> <C>
William T. Anderson, M.D., Age 60..... 24,914 (2)(3) 1.7%
Dr. Anderson has served as a
Director of the Bank since 1981
and of the Company since its
formation in 1987. He is a
physician with a family practice
at Anderson and Jobanputra, M.D.
He is also a director of Somerset
Health Care Affiliates.
William W. Crouse, Age 53............. 10,500 (2) .7
Mr. Crouse has served as a Director
of the Company and the Bank since
April, 1994. He is Vice Chairman
and General Partner of HealthCare
Investment Corporation, and he has
25 years experience in the health
care industry.
Richard E. Fischer, Age 65............ 53,445 (2) 3.7
Mr. Fischer has served as a
Director of the Bank since 1969 and
of the Company since its formation
in 1987. He is President of the
Hunterdon Lumber Company, a retail
lumber and building products
company.
William T. Kelleher, Jr., Age 44...... 35,079 (2)(4) 2.4
Mr. Kelleher, Jr. has served as
a Director of the Bank since 1983
and of the Company since its
formation in 1987. He is a partner
in the law firm of Kelleher and
Moore, and has been a municipal
court judge in the Borough of
Somerville (New Jersey) since
1983 and in the Township of
Branchburg since 1990.
Arlyn D. Rus, Age 55.................. 126,035 (5) 8.2
Mr. Rus has served as Chairman,
President and Chief Executive
Officer of the Company since
its formation in 1987. He has served
as Director, President and
Chief Executive Officer of the Bank
since 1971. Mr. Rus currently serves
as a member of the Board of
Directors of the Savings and
Community Bankers of New Jersey,
and as Chairman of the Board of
Directors of Somerset Health
Care Corporation.
Thomas F. Tansey, Age 51.............. 75,165 (6) 5.0
Mr. Tansey has served as Executive
Vice President, Chief Operating
Officer
</TABLE>
39
<PAGE>
<TABLE>
<S> <C> <C>
and Treasurer of the Company since
its formation in 1987. He has
served as Executive Vice President,
Chief Operating Officer and
Treasurer of the Bank since May
1984. He has served as a Director
of the Bank since January, 1986
and of the Company since its
formation in 1987................... 75,165 (6) 5.0
Peter S. Johnson, Age 53............. --- ---
Principal in the accounting firm of
Gillen & Johnson, P.A., Sommerville,
New Jersey
John J. Lukens, Age 48................ 12,223 (7) .8
Mr. Lukens has served as Senior
Vice President of the Company and
Senior Vice President and Senior
Lending Officer of the Bank since
June, 1992. Prior to June, 1992, he
served as a Credit Officer at
National Westminster Bank.
All directors and executive officers
as a group (11 persons)............... 594,017 (8) 35.9%
</TABLE>
___________________________
(1) Unless otherwise indicated, each person effectively exercises sole (or
shared with spouse) voting and dispositive power as to the shares reported.
(2) Includes 7,500 shares that may be acquired pursuant to the exercise of
options granted under the Directors Option Plan.
(3) Includes 862 shares owned of record by Dr. Anderson's wife.
(4) Includes 2,654 shares owned of record by Mr. Kelleher as custodian for
minor children.
(5) Includes 2,129 shares owned of record by Mr. Rus' wife, 81,750 shares that
may be acquired pursuant to presently exercisable stock options, and 13,614
shares allocated to Mr. Rus' account under the Bank's ESOP.
(6) Includes 1,500 shares owned of record by Mr. Tansey's wife, 53,250 shares
that may be acquired pursuant to presently exercisable stock options, and
9,165 shares allocated to Mr. Tansey's account under the Bank's ESOP.
(7) Includes 10,500 shares that may be acquired pursuant to presently
exercisable stock options, and 1,273 shares allocated to Mr. Lukens'
account under the Bank's ESOP.
(8) Includes 203,775 shares that may be acquired pursuant to presently
exercisable stock options, 139,764 shares held by the ESOP, and 90,320
shares owned by Directors Emeritus.
DIRECTORS' COMPENSATION
FEES. Directors of the Bank are paid an annual retainer fee of $4,000,
as well as a fee of $750 per board meeting attended and $200 per committee
meeting attended. In addition, Directors are reimbursed for any amount of
out-of-pocket expenses incurred in attending meetings. Directors do not receive
fees from the Company for services on the Company's Board.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS. Under the 1993 Stock Option
Plan for Outside Directors, each Outside Director of the Company who was an
Outside Director of the Company or the Bank at the time of adoption of the Plan,
received a non-statutory option to purchase 7,500 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock at the time of
the adoption of the plan. To the extent options for shares are available, each
subsequent Outside Director will be granted, effective as of the date on which
such subsequent Outside Director is qualified and first begins to serve as an
Outside Director, a non-statutory stock option to purchase 7,500 shares of
Common Stock, or such lesser number of shares as remain in the plan, at an
exercise price equal to the then fair market value of the Common Stock. An
aggregate of 45,000 shares of Common Stock are reserved for issuance pursuant to
the exercise of options granted under the 1993 Stock Option Plan for Outside
Directors. Options as to 30,000 shares of Common Stock reserved for issuance
40
<PAGE>
under this plan have been granted as of the date of this Proxy Statement. Each
option may be exercised in whole or in part for a period of ten years from the
date of grant or one year following the date the Outside Director ceases to be a
Director. The exercise price of a Director's option may be paid in cash or
stock.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the cash
compensation paid by the Bank, for services rendered during the years ended
December 31, 1995, 1994 and 1993 to the Chief Executive Officer, and other
executive officers of the Bank who received an amount in salary and bonus in
excess of $100,000 in the year ended December 31, 1995 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
===================================================================================================================================
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------------------------------
YEAR OTHER AWARDS PAYOUTS
ENDED ANNUAL ------------------------------- ALL OTHER
NAME AND DECEMBER COMPENSATION RESTRICTED OPTIONS/ COMPENSATION
PRINCIPAL POSITION 31, SALARY(1) BONUS (2) STOCK SARS (#) LTIP (4)
------------------ -------- --------- ----- ------------ ------------
AWARDS (3) PAYOUTS
------ -------- -------
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arlyn D. Rus 1995 $190,500 $33,750 $ -- -- -- $ -- $32,325
Chairman, 1994 184,500 36,000 -- -- -- -- 53,325
President and Chief 1993 175,400 18,000 -- -- 13,500 -- 35,174
Executive Officer
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas F. Tansey 1995 $130,500 $20,250 $ -- -- -- $ -- $26,881
Executive Vice President, 1994 123,000 21,000 -- -- -- -- 34,995
Chief Operating Officer 1993 115,400 12,000 -- -- 9,000 -- 23,371
and Treasurer
- ------------------------------------------------------------------------------------------------------------------------------------
John J. Lukens 1995 $95,000 $13,360 $ -- -- -- $ -- $13,199
Senior Vice 1994 90,000 10,632 -- -- -- -- 15,663
President 1993 85,000 6,500 -- -- -- -- 981
===================================================================================================================================
</TABLE>
__________________________________
(1) Salary amounts for Messrs. Rus and Tansey include directors fees in the
amounts of $10,500, $10,500 and $10,400 for the years 1995, 1994, and
1993, respectively.
(2) Perquisites did not exceed the lesser of $50,000 or 10% of the
individual's salary and bonus for any of the years. Personal benefits
include an automobile provided by the Bank to Messrs. Rus and Tansey,
and club membership for Mr. Rus.
(3) All numbers adjusted to reflect three-for-two stock split as of December
1, 1993.
(4) Reflects the Bank's matching contributions to the Employee's Deferred
Compensation 401(k) Plan with respect to Mr. Rus in the amounts of
$4,620, $4,620 and $4,497, with respect to Mr. Tansey in the amounts of
$4,620, $3,375 and $3,150, and with respect to Mr. Lukens in the amounts
of $2,832, $2,233, and $981 for the years 1995, 1994 and 1993,
respectively. Also includes the market value of shares at December 31 of
each year which have been allocated to the employee's account pursuant
to the Employee Stock Ownership Plan during such fiscal year; for Mr.
Rus in the amounts of $27,705, $48,705 and $30,677, for Mr. Tansey in
the amounts of $22,261, $31,620 and $20,221, and for Mr. Lukens in the
amounts of $10,367, $13,430, and $0 for the years 1995, 1994 and 1993,
respectively.
EMPLOYMENT AGREEMENTS. The Company and the Bank entered into
amended employment agreements with Arlyn D. Rus, Chairman, President and Chief
Executive Officer, and Thomas F. Tansey, Executive Vice President, Chief
Operating Officer and Treasurer, in January 1990. The employment agreements each
provided for a five-year term. Commencing on the third anniversary date of each
agreement and continuing each anniversary date thereafter, unless prior notice
of non-renewal is given, each agreement automatically extends for an additional
year so that the remaining term shall be three years. The current base salary
under the agreements, which may be increased at the discretion of the Board of
Directors, is $187,500 for Mr. Rus and $125,000 for Mr. Tansey. In addition to
the base salary, each agreement provides, among other things, for participation
in stock option plans and other fringe benefits applicable to executive
personnel.
41
<PAGE>
Each agreement provides for termination by the Company and the Bank for
"cause," as defined in the agreements, at any time. In the event the Company
and the Bank choose to terminate the executive's employment for reasons other
than for cause, or in the event of their resignation from the Company and Bank
upon failure to re-elect them to their current offices or because of a material
lessening of their functions, duties or responsibilities, or in the event of a
liquidation, dissolution, consolidation, or merger in which the Company or Bank
is not the resulting institution, or upon breach of the agreement by the Company
or the Bank, the officer or, in the event of death, his beneficiary, would be
entitled to a lump sum cash payment equal to the greater of (i) thirty-six times
his highest monthly rate of compensation or (ii) the payments owed for the
remaining term of the agreement. If termination of employment follows a change
in control of the Company, as defined in the agreements, each officer would be
entitled to a (i) severance payment equal to thirty-six times the highest
monthly compensation paid to him under the contract plus a "special retirement
benefit." The special retirement benefit would be an additional payment in an
amount intended to compensate the officer for reduced retirement benefits under
the Bank's pension plan in the event of his termination following a change of
control. The change of control severance payment to Mr. Rus and Mr. Tansey,
based on the annual compensation and special retirement benefit, would be
$735,540 and $818,595, respectively. The Bank and the Company have agreed to
indemnify the officers for the amount of any excise tax imposed on such payments
under Section 280G of the Internal Revenue Code of 1986. The agreements also
permit Mr. Rus and Mr. Tansey to terminate their employment voluntarily and
receive a severance payment equal to the highest annual rate of compensation
paid to the officer under such agreement for a one-year period or until he
obtains other employment, if earlier.
SPECIAL TERMINATION AGREEMENT. The Company has entered into a thirty-
six month special termination agreement with John J. Lukens, Senior Vice
President. The agreement renews for an additional month at the end of each month
so that the term of the agreement continues to be thirty-six months unless prior
written notice of non-extension is given. The agreement provides that at any
time following a change in control of the Company as defined therein, should the
Company or the Bank terminate the executive's employment with the Company or the
Bank, for any reason other than "cause," or if the executive terminates his
employment following a demotion, loss of title, office, significant authority, a
reduction in annual compensation, or relocation of his principal place of
employment, he would be entitled to receive a payment in an amount equal to the
product of (a) the monthly rate of base annual salary paid to him by the Company
and the Bank immediately prior to his termination, times (b) the number of
months remaining under the agreement. Upon termination for cause, no payments or
benefits are due to the executive; however, if termination of employment
following a change in control is purported to be for cause, which is disputed,
the Company shall continue to provide the executive with salary and other
benefits and the dispute shall be settled by arbitration. If cause is determined
in arbitration to have existed, the executive shall return cash payments made to
him.
The executive would also be entitled to the continuation of life, health
and disability insurance coverage maintained by the Bank at the time of such
termination for the earlier of the expiration of the number of months remaining
under the agreement or his employment by another employer. If a change in
control were to occur, and assuming it occurred on December 31, 1995 followed by
the termination of Mr. Luken's employment, the aggregate cash amount payable to
him under the special termination agreement as severance payments in addition to
other non-cash benefits provided for under the agreement would have been
approximately $285,000.
RETIREMENT PLAN. The Bank maintains and funds a tax-qualified, non-
contributory defined benefit pension plan for its employees, which is
administered by the Retirement System Group Inc. All full-time employees aged
twenty-one (21) or older who have completed at least one year of service
participate in the plan. The plan provides an annual benefit payable at age 65
equal to two percent of the employee's "average annual salary" (the average of
the highest three years base salary) multiplied by credited service, up to a
maximum of thirty (30) years, and reduced by a portion of the employee's primary
Social Security benefit. The maximum annual benefit is 60% of the average
annual salary, reduced by a portion of the employee's primary social security
benefit. Messrs. Rus, Tansey and Lukens had 33, 11, and 3 years of credited
service, respectively, under this retirement plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS. The Bank maintains a non-
qualified supplemental executive retirement plan ("SERP I") for certain
executives of the Bank to compensate those executive
42
<PAGE>
participants in the Bank's tax-qualified benefit plans whose benefits are
limited by Section 415 or Section 401(a)(17) of the Internal Revenue Code (the
"Code"). As of December 31, 1995, Messrs. Rus and Tansey were participating in
the SERP I. The SERP I provides participants with retirement benefits generally
equal to the difference between the annual benefit the participant would have
received under the Retirement Plan if such benefits were computed without giving
effect to the limitations on benefits imposed by application of Section
401(a)(17) and Section 415 of the Code and the amounts actually payable to the
Participant under the terms of the Retirement Plan. In addition, the
Participant is entitled to an ESOP benefit in a dollar amount equal to the
difference between the fair market value of the number of shares of common stock
of the Bank that would have been allocated to the account of the Participant had
the limitations of Section 401(a)(17) and 415 of the Code not been applicable
and the fair market value of the number of shares of common stock actually
allocated to the account of the Participant. SERP I also provides the
Participant with any matching contribution that he is unable to receive under
the Bank's 401(k) Plan as a result of certain limitations of the Code. Benefits
are payable in the same form as benefits in the Retirement Plan, ESOP and the
401(k) Plan.
The SERP I is considered an unfunded plan for tax and ERISA purposes. All
obligations arising under the SERP I are payable from the general assets of the
Bank; however, the Bank has set up a trust to ensure that sufficient assets will
be available to pay the benefits under the SERP I. The Bank's pension cost
attributable to the SERP I was $22,962 for the year ended December 31, 1995.
The Bank also maintains a non-qualified supplemental executive retirement
plan ("SERP II") for certain executives of the Bank to provide participants and
their beneficiaries with certain pension benefits not obtainable under the
Bank's Retirement Plan and certain welfare benefits not obtainable under the
Bank's Post-retirement Welfare Benefit Plan. SERP II credits the participant
with five additional years of service under the Bank's Retirement and Welfare
Benefit Plan for purposes of determining benefits under the Retirement and
Welfare Benefit Plan formula. The additional benefits provided by the
additional years of service are funded through SERP II. Currently, Mr. Tansey
is the only participant in SERP II.
The SERP II is considered an unfunded plan for tax and ERISA purposes.
All obligations arising under the SERP II are payable from the general assets of
the Bank; however, the Bank has set up a trust to ensure that sufficient assets
will be available to pay the benefits under the SERP II. The Bank's pension cost
attributable to the SERP II was $12,000 for the year ended December 31, 1995.
INCENTIVE STOCK OPTION PLANS. The Board of Directors of the Company has
established the Incentive Stock Option Plans which provide discretionary awards
to its officers and key employees. The grant of awards under the Option Plans
is determined by a committee of the Board of Directors consisting of three
directors (the "Option Plan Committee"), none of whom is eligible to receive
options under the Plans.
43
<PAGE>
Set forth below is certain information concerning options outstanding to
such Named Executive Officers at December 31, 1995. No options were exercised
by, or granted to, a Named Executive Officer during 1995.
<TABLE>
<CAPTION>
============================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
============================================================================================================
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT THE-MONEY OPTIONS AT
FISCAL YEAR-END FISCAL YEAR-END (1)
- ------------------------------------------------------------------------------------------------------------
SHARES ACQUIRED VALUE
NAME UPON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
(#) ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arlyn D. Rus -- $-- 81,750/4,500 $1,055,715/$27,000
- ------------------------------------------------------------------------------------------------------------
Thomas F. Tansey -- $-- 53,250/3,000 $684,360/$18,000
- ------------------------------------------------------------------------------------------------------------
John J. Lukens -- $-- 10,500/0 $127,785/$0
============================================================================================================
</TABLE>
_________________________________
(1) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of Common Stock that
would be received upon exercise, assuming such exercise occurred on
December 31, 1995, at which date the last sale price of the Common Stock as
quoted on the Nasdaq National Market was $21.50.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Bank offers residential mortgage loans and consumer loans to its
employees (other than executive officers) in the ordinary course of business and
at a preferred rate, which is 1/2% below the rate otherwise charged. The Bank
requires that an eligible employee have been with the Bank for a minimum of one
year. This rate is charged as long as such employee remains employed by the
Bank. If the employee no longer works for the Bank, the rate charged is
increased to the market rate in effect at the inception of the loan. The Bank
also charges eligible employees 1/2% percentage point less than the origination
fee normally charged to its customers on loans.
The Bank also makes loans to its executive officers and Directors and
their immediate family members and related interests, which loans are made in
the ordinary course of business, on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and do not involve more than the normal risk of
collectibility or present other unfavorable features.
The Bank has utilized the services of the Kelleher & Moore law firm to
provide general legal services during 1995. William T. Kelleher, Jr., a
Director, is a member of that law firm. During 1995, the Bank paid $76,500 in
fees to Kelleher & Moore, and the Bank has and will continue to utilize the
services of other law firms.
44
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Persons and groups owning in excess of 5% of the Company's Common Stock
are required to file certain reports regarding such ownership with the Company
and with the SEC, in accordance with the Exchange Act. The following table sets
forth information as of the Record Date, the shares of Common Stock beneficially
owned by each person who was the owner of more than five percent (5%) of the
Company's outstanding shares of Common Stock as of March 11, 1996.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- --------------------- --------
<S> <C> <C>
Raritan Savings Bank Employee 139,764 (1) 9.6%
Stock Ownership Plan
9 West Somerset Street
Raritan, New Jersey
Arlyn D. Rus 126,035 (2) 8.2
c/o Raritan Bancorp Inc.
9 West Somerset Street
Raritan, New Jersey
William T. Kelleher 75,320 5.2
c/o Kelleher & Moore
23 Maple Street
Post Office Box 727
Somerville, New Jersey
Thomas F. Tansey 75,165 (3) 5.0
c/o Raritan Bancorp Inc.
9 West Somerset Street
Raritan, New Jersey
</TABLE>
_____________________________
(1) The ESOP Administrative Committee, consisting of outside directors of the
Bank, administers the ESOP. Under the terms of the ESOP, shares of Common
Stock allocated to the account of employees are voted in accordance with
the instructions of the respective employees. Unallocated shares are voted
by the ESOP Trustee as directed by the Administrative Committee. The
Administrative Committee shall vote the unallocated shares in a manner that
reflects the directions received from employees as to allocated shares,
unless their fiduciary duties require otherwise. As of the Record Date,
104,682 shares of stock were allocated under the ESOP and 35,082 shares
remained unallocated.
(2) Includes options to purchase 81,750 shares of Common Stock which are
exercisable within 60 days of the Record Date. Includes 13,614 shares
allocated to Mr.Rus' account under the Bank's Employee Stock Ownership Plan
(the "ESOP").
(3) Includes options to purchase 53,250 shares of Common Stock which are
exercisable within 60 days of the Record Date. Includes 9,165 shares
allocated to Mr. Tansey's account under the Bank's Employee Stock Ownership
Plan (the "ESOP").
45
<PAGE>
RESTRICTIONS ON THE ACQUISITION OF RARITAN BANCORP
GENERAL
A number of provisions of Raritan Bancorp's Certificate of Incorporation
and Bylaws deal with matters of corporate governance and certain rights of
shareholders. The following discussion is a general summary of certain
provisions of Raritan Bancorp's Certificate of Incorporation and Bylaws and
certain other statutory and regulatory provisions relating to stock ownership
and transfers, and business combinations, which might be deemed to have
potential anti-takeover effects. These provisions may have the effect of
discouraging a future takeover attempt or change of control which is not
approved by the Board of Directors but which a majority of individual Company
shareholders may deem to be in their best interests or in which shareholders may
receive a substantial premium for their shares over then current market prices.
As a result, shareholders who desire to participate in such a transaction may
not have an opportunity to do so. Such provisions will also render the removal
of the current Board of Directors or management of Raritan Bancorp more
difficult. The following description of the material provisions of the
Certificate of Incorporation and Bylaws of Raritan Bancorp is necessarily
general and reference should be made in each case to such Certificate of
Incorporation and Bylaws, which are incorporated herein by reference. A copy of
the Certificate of Incorporation and the Bylaws of Raritan Bancorp are available
without charge from Raritan Bancorp.
LIMITATION ON VOTING RIGHTS. The Certificate of Incorporation of Raritan
Bancorp provides that in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or indirectly, by a person
who beneficially owns in excess of 10% of the then outstanding shares of Common
Stock (the "Limit") be entitled or permitted to any vote in respect of the
shares held in excess of the Limit. Beneficial ownership is determined pursuant
to Rule 13d-3 of the rules and regulations promulgated pursuant to the Exchange
Act, and includes shares beneficially owned by such person or any of his
affiliates (as defined in the Certificate of Incorporation), shares which such
person or his affiliates have the right to acquire upon the exercise of
conversion rights or options and shares as to which such person and his
affiliates have or share investment or voting power, but shall not include
shares beneficially owned by the ESOP or directors, officers and employees of
Raritan Savings or Raritan Bancorp or shares that are subject to a revocable
proxy and that are not otherwise beneficially owned, or deemed by Raritan
Bancorp to be beneficially owned, by such person and his affiliates. The
Certificate of Incorporation of Raritan Bancorp further provides that the
provision limiting voting rights may only be amended upon the vote of 80% of the
outstanding shares of voting stock.
BOARD OF DIRECTORS. The Board of the Directors of Raritan Bancorp is
divided into three classes, each of which shall contain approximately one-third
of the whole number of the members of the Board. Each class shall serve a
staggered term, with approximately one-third of the total number of directors
being elected each year. Raritan Bancorp's Certificate of Incorporation and
Bylaws provide that the size of the Board shall be determined by a majority of
the directors. The Certificate of Incorporation and the Bylaws provide that any
vacancy occurring in the Board, including a vacancy created by an increase in
the number of directors or resulting from death, resignation, retirement,
disqualification, removal from office or other cause, shall be filled for the
remainder of the unexpired term exclusively by a majority vote of the directors
then in office. The classified Board is intended to provide for continuity of
the Board of Directors and to make it more difficult and time consuming for a
stockholder group to fully use its voting power to gain control of the Board of
Directors without the consent of the incumbent Board of Directors of Raritan
Bancorp. The Certificate of Incorporation of Raritan Bancorp provides that a
director may be removed from the Board of Directors prior to the expiration of
his term only for cause, upon the vote of 80% of the outstanding shares of
voting stock.
In the absence of these provisions, the vote of the holders of a majority
of the shares could remove the entire Board, with or without cause, and replace
it with persons of such holders' choice.
CUMULATIVE VOTING, SPECIAL MEETINGS AND ACTION BY WRITTEN CONSENT. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, special meetings of shareholders of Raritan Bancorp may be
called only by the Board of Directors of Raritan Bancorp. The Certificate of
Incorporation also provides that any action required or permitted to be taken by
the shareholders of Raritan Bancorp may be
46
<PAGE>
taken only at an annual or special meeting and prohibits stockholder action by
written consent in lieu of a meeting.
AUTHORIZED SHARES. The Certificate of Incorporation authorizes the
issuance of 3,500,000 shares of Common Stock and 2,000,000 shares of Preferred
Stock. The shares of Common Stock and Preferred Stock were authorized in an
amount greater than that to be issued in the Conversion to provide Raritan
Bancorp's Board of Directors with as much flexibility as possible to effect,
among other transactions, financings, acquisitions, stock dividends, stock
splits and employee stock options. However, these additional authorized shares
may also be used by the Board of Directors consistent with its fiduciary duty to
deter future attempts to gain control of Raritan Bancorp. The Board of Directors
also has sole authority to determine the terms of any one or more series of
Preferred Stock, including voting rights, conversion rating and liquidation
preferences. As a result of the ability to fix voting rights for a series of
Preferred Stock, the Board has the power to the extent consistent with its
fiduciary duty to issue a series of Preferred Stock to persons friendly to
management in order to attempt to block a post-tender offer merger or other
transaction by which a third party seeks control, and thereby assist management
to retain its position. Raritan Bancorp's Board currently has no plans for the
issuance of additional shares, other than the issuance of additional shares upon
exercise of stock options.
SHAREHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH PRINCIPAL
SHAREHOLDERS. The Certificate of Incorporation requires the approval of the
holders of at least 80% of Raritan Bancorp's outstanding shares of voting stock
to approve certain "Business Combinations," as defined therein, and related
transactions. Under Delaware law, absent this provision, Business Combinations,
including mergers, consolidations and sales of all or substantially all of the
assets of a corporation must, subject to exceptions, be approved by the vote of
the holders of only a majority of the outstanding shares of Common Stock of
Raritan Bancorp and any other affected class of stock. The directors and
executive officers of Raritan Savings own in the aggregate approximately 26.3%
of the shares of the Common Stock outstanding, and the Raritan Savings Employee
Stock Ownership Plan owns approximately 9.6% of the Common Stock outstanding,
and giving effect to the issuance of 164,285 shares of Common Stock in the
Offering, would own ___% of the shares to be outstanding after completion of the
Conversion and Merger.
Under the Certificate of Incorporation, at least 80% approval of
shareholders is required in connection with any transaction involving an
Interested Stockholder (as defined below) except (i) in cases where the proposed
transaction has been approved in advance by a majority of those members of
Raritan Bancorp's Board of Directors who are unaffiliated with the Interested
Stockholder and were directors prior to the time when the Interested Stockholder
became an Interested Stockholder or (ii) if the proposed transaction met certain
conditions set forth therein which are designed to afford the shareholders a
fair price in consideration for their shares, in which cases approval of only a
majority of the outstanding shares of voting stock is required. The term
"Interested Stockholder" is defined to include any individual, corporation,
partnership or other entity (other than Raritan Bancorp or its subsidiaries)
which owns beneficially or controls, directly or indirectly, 10% or more of the
outstanding shares of voting stock of Raritan Bancorp. This provision of the
Certificate of Incorporation applies to any "Business Combination," which is
defined to include (i) any merger or consolidation of Raritan Bancorp or any of
its subsidiaries with or into any Interested Stockholder or Affiliate (as
defined in the Certificate of Incorporation) of an Interested Stockholder; (ii)
any sale, lease, exchange, mortgage, transfer, or other disposition to or with
any Interested Stockholder or Affiliate of 25% or more of the assets of Raritan
Bancorp or combined assets of Raritan Bancorp and its subsidiary; (iii) the
issuance or transfer to any Interested Stockholder or its Affiliate by Raritan
Bancorp (or any subsidiary) of any securities of Raritan Bancorp in exchange for
any assets, cash or securities the value of which equals or exceeds 25% of the
fair market value of the Common Stock of Raritan Bancorp; (iv) the adoption of
any plan for the liquidation or dissolution of Raritan Bancorp proposed by or on
behalf of any Interested Stockholder or Affiliate thereof, and (v) any
reclassification of securities, recapitalization, merger or consolidation of
Raritan Bancorp which has the effect of increasing the proportionate share of
Common Stock or any class of equity or convertible securities of Raritan Bancorp
owned directly or indirectly, by an Interested Stockholder or Affiliate thereof.
EVALUATION OF OFFERS. The Certificate of Incorporation of Raritan Bancorp
further provides that the Board of Directors of Raritan Bancorp, when evaluating
any offer of another "Person" (as defined therein), to (i) make a tender or
exchange offer for any equity security of Raritan Bancorp, (ii) merge or
consolidate Raritan Bancorp
47
<PAGE>
with another corporation or entity or (iii) purchase or otherwise acquire all or
substantially all of the properties and assets of Raritan Bancorp, may, in
connection with the exercise of its judgment in determining what is in the best
interest of Raritan Bancorp, Raritan Savings and the shareholders of Raritan
Bancorp, give due consideration to all relevant factors, including, without
limitation, the social and economic effects of acceptance of such offer on
Raritan Bancorp's customers and Raritan Savings' present and future account
holders, borrowers and employees; on the communities in which Raritan Bancorp
and Raritan Savings operate or are located; and on the ability of Raritan
Bancorp to fulfill its corporate objectives as a bank holding company and on the
ability of Raritan Savings to fulfill the objectives of a New Jersey chartered
stock savings bank under applicable statutes and regulations. By having these
standards in the Certificate of Incorporation of Raritan Bancorp, the Board of
Directors may be in a stronger position to oppose such a transaction if the
Board concludes that the transaction would not be in the best interest of
Raritan Bancorp, even if the price offered is significantly greater than the
then market price of any equity security of Raritan Bancorp.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to
Raritan Bancorp's Certificate of Incorporation must be approved by a majority
vote of its Board of Directors and also by a majority of the outstanding shares
of its voting stock, provided, however, that an affirmative vote of at least 80%
of the outstanding voting stock entitled to vote (after giving effect to the
provision limiting voting rights) is required to amend or repeal certain
provisions of the Certificate of Incorporation, including the provision limiting
voting rights, the provisions relating to approval of certain business
combinations, calling special meetings, the number and classification of
directors, director and officer indemnification by Raritan Bancorp and amendment
of Raritan Bancorp's Bylaws and Certificate of Incorporation. Raritan Bancorp's
Bylaws may be amended by its Board of Directors, or by a vote of 80% of the
total votes eligible to be voted at a duly constituted meeting of shareholders.
CERTAIN BYLAW PROVISIONS. The Bylaws of Raritan Bancorp also require a
stockholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at a stockholder meeting to give at least 90
days advance notice to the Secretary of Raritan Bancorp. The notice provision
requires a stockholder who desires to raise new business to provide certain
information to Raritan Bancorp concerning the nature of the new business, the
stockholder and the stockholder's interest in the business matter. Similarly, a
stockholder wishing to nominate any person for election as a director must
provide Raritan Bancorp with certain information concerning the nominee and the
proposing stockholder.
ANTI-TAKEOVER EFFECTS OF RARITAN BANCORP'S CERTIFICATE OF INCORPORATION AND
BYLAWS
The provisions described above are intended to reduce Raritan Bancorp's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its Board of Directors. The
foregoing provisions and limitations may make it more difficult for companies or
persons to acquire control of Raritan Savings. Additionally, the provisions
could deter offers to the shareholders which might be viewed by such
shareholders to be in their best interests.
DELAWARE CORPORATE LAW
In 1988, Delaware enacted a statute designed to provide Delaware
corporations with additional protection against hostile takeovers. The takeover
statute, which is codified in Section 203 of the Delaware General Corporate Law
("Section 203"), is intended to discourage certain takeover practices by
impeding the ability of a hostile acquiror to engage in transactions with the
target company.
In general, Section 203 provides that a "Person" (as defined therein) who
owns 15% or more of the outstanding voting stock of a Delaware corporation (an
"Interested Stockholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the three-year
period following the date such "Person" became an Interested Stockholder. The
term "business combination" is defined broadly to cover a wide range of
corporate transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.
48
<PAGE>
The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
an Interested Stockholder, the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he became an Interested Stockholder, calculated without regard to those
shares owned by the corporation's directors who are also officers or certain
employee stock plans; (iii) any business combination with an Interested
Stockholder that is approved by the Board of Directors and by a two-thirds vote
of the outstanding voting stock not owned by the Interested Stockholder; and
(iv) certain business combinations that are proposed after the corporation had
received other acquisition proposals and which are approved or not opposed by a
majority of certain continuing members of the Board of Directors. A corporation
may exempt itself from the requirements of the statute by adopting an amendment
to its Certificate of Incorporation or Bylaws electing not to be governed by
Section 203. At the present time, the Board of Directors of Raritan Bancorp does
not intend to propose any such amendment.
REGULATORY RESTRICTIONS
The Plan of Conversion prohibits any person, prior to the completion of the
Conversion, from transferring, or from entering into any agreement or
understanding to transfer, to the account of another, legal or beneficial
ownership of the subscription rights issued under the Plan of Conversion or the
Common Stock to be issued upon their exercise. The Plan of Conversion also
prohibits any person, prior to the completion of the Conversion, from offering,
or making an announcement of an offer or intent to make an offer, to purchase
such subscription rights or Common Stock.
In addition, any proposal to acquire 10% of any class of equity security of
Raritan Bancorp generally would be subject to approval by the FRB under the Bank
Holding Company Act. Persons holding revocable or irrevocable proxies may be
deemed to be beneficial owners of such securities under FRB regulations and
therefore prohibited from voting all or the portion of such proxies in excess of
the 10% aggregate beneficial ownership limit. Such regulatory restrictions may
prevent or inhibit proxy contests for control of Raritan Bancorp or Raritan
Savings which have not received prior regulatory approval.
DESCRIPTION OF CAPITAL STOCK OF RARITAN BANCORP
GENERAL
Raritan Bancorp is authorized to issue 3,500,000 shares of Common Stock
having a par value of $.01 per share and 2,000,000 shares of preferred stock
having a par value of $.01 per share (the "Preferred Stock"). Raritan Bancorp
currently has 1,449,689 shares outstanding and expects to issue up to 164,285
shares of Common Stock and no shares of Preferred Stock in the Conversion. Each
share of Raritan Bancorp's Common Stock will have the same relative rights as,
and will be identical in all respects with, each other share of Common Stock.
Upon payment of the purchase price for the Conversion Stock in accordance with
the Plan of Conversion, all shares of Conversion Stock will be duly authorized,
fully paid and nonassessable.
THE COMMON STOCK OF RARITAN BANCORP WILL REPRESENT NONWITHDRAWABLE CAPITAL,
WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY THE FDIC
OR ANY GOVERNMENT AGENCY.
COMMON STOCK
DIVIDENDS. Raritan Bancorp can pay dividends out of statutory surplus or
from certain net profits if, as, and when declared by its Board of Directors.
The payment of dividends by Raritan Bancorp is subject to limitations which are
imposed by law and applicable regulation. See "Dividend Policy." The holders of
Common Stock of Raritan Bancorp are entitled to receive and share equally in
such dividends as may be declared by the Board of Directors of Raritan Bancorp
out of funds legally available therefor. If Raritan Bancorp issues Preferred
Stock, the holders thereof may have a priority over the holders of the Common
Stock with respect to dividends.
49
<PAGE>
VOTING RIGHTS. The holders of Common Stock of Raritan Bancorp possess
exclusive voting rights in Raritan Bancorp. They elect Raritan Bancorp's Board
of Directors and act on such other matters as are required to be presented to
them under Delaware law or as are otherwise presented to them by the Board of
Directors. Except as discussed in "Restrictions on the Acquisition of Raritan
Bancorp and Raritan Savings," each holder of Common Stock is entitled to one
vote per share and does not have any right to cumulate votes in the election of
directors. If Raritan Bancorp issues Preferred Stock, holders of the Preferred
Stock may also possess voting rights. Certain matters require an 80% stockholder
vote. See "Restrictions on the Acquisition of Raritan Bancorp and Raritan
Savings."
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
Raritan Savings, Raritan Bancorp, as holder of Raritan Savings' capital stock,
would be entitled to receive, after payment or provision for payment of all
debts and liabilities of Raritan Savings (including all deposit accounts and
accrued interest thereon) and after distribution of the balance in the special
liquidation account (see "The Conversion--Liquidation Rights"), all assets of
Raritan Savings available for distribution. In the event of liquidation,
dissolution or winding up of Raritan Bancorp, the holders of its Common Stock
would be entitled to receive, after payment or provision for payment of all its
debts and liabilities, all of the assets of Raritan Bancorp available for
distribution. If Preferred Stock is issued, the holders thereof may have a
priority over the holders of the Common Stock in the event of liquidation or
dissolution.
PREEMPTIVE RIGHTS. Holders of the Common Stock of Raritan Bancorp will not
be entitled to preemptive rights with respect to any shares which may be issued.
The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of Raritan Bancorp's authorized Preferred Stock has been
issued or will be issued in the Conversion. Such stock may be issued with such
preferences and designations as the Board of Directors may from time to time
determine. The Board of Directors can, without shareholder approval, issue
Preferred Stock with voting, dividend, liquidation and conversion rights which
could dilute the voting strength of the holders of the Common Stock and may
assist management in impeding an unfriendly takeover or attempted change in
control.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Midlantic National
Bank.
EXPERTS
The consolidated financial statements of Raritan Bancorp Inc. and
subsidiary as of December 31, 1995 and 1994 and for each of the years in the
three year period ended December 31, 1995, incorporated by reference herein,
have been incorporated by reference herein in reliance upon the report of KPMG
Peat Marwick LLP, Independent Certified Public Accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. Their report contains an explanatory paragraph stating that
Raritan Bancorp Inc. changed its method of accounting for certain investments in
debt and equity securities in 1994 and changed its methods of accounting for
income taxes and postretirement benefits other than pensions in 1993.
PBS has consented to the publication herein of the summary of its report to
Raritan Bancorp and Manville Savings setting forth its opinion as to the
estimated pro forma market value of Manville Savings as an entity merged with
and into Raritan Savings and its opinion with respect to subscription rights.
LEGAL OPINIONS
The legality of the Common Stock and the federal income tax consequences of
the Conversion will be passed upon for Manville Savings and Raritan Bancorp by
Luse Lehman Gorman Pomerenk & Schick, A Professional Corporation, Washington,
D.C., special counsel to Raritan Bancorp. Luse Lehman Gorman Pomerenk & Schick
will also pass upon the federal income tax consequences of the Conversion.
50
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Previously provided.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF RARITAN AND RARITAN
SAVINGS
Previously provided.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
The exhibits and financial statement schedules filed as part of this
registration statement are as follows:
(a) LIST OF EXHIBITS
2.1 Acquisition Agreement Among Raritan Bancorp Inc. and The Raritan Savings
Bank and Manville Savings Bank. *
2.2 Plan of Merger Conversion from Mutual to Stock Form of Organization of
Manville Savings Bank Into The Raritan Savings Bank (filed as an Exhibit to
the Acquisition Agreement filed as Exhibit 2.1 hereto). *
2.3 Amendment No. 3 to Acquisition Agreement. *
3.1 Certificate of Incorporation of Raritan Bancorp, Inc. (filed as Exhibit 3.1
to the Form S-1 Registration Statement filed by Raritan Bancorp, Inc. on
March 10, 1987, Registration No. 33-12539).
3.2 Bylaws of Raritan Bancorp, Inc. (filed as Exhibit 3.2 to the Form S-1
Registration Statement filed by Raritan Bancorp, Inc., Statement No. 33-
12539 and Exhibit 28.1 to the Form 8-K filed on December 21, 1990).
5.1 Opinion of Luse Lehman Gorman Pomerenk & Schick regarding legality of
securities being registered. *
8.1 Federal Tax Opinion
8.2 Form of State Tax Opinion (to be filed supplementally or by amendment)
8.3 Letter from Professional Bank Services, Inc. on value of subscription
rights for tax purposes. *
10.1 Raritan Bancorp, Inc. Incentive Stock Option Plans (see Annex A to the
Proxy Statement dated March 23, 1988 and Exhibit A to the Proxy Statement
dated March 24, 1993).
10.2 Raritan Bancorp, Inc. Stock Option Plan for Outside Directors (see Exhibit
B to the Proxy Statement dated March 24, 1993).
10.3 Employment Agreement with Arlyn D. Rus (filed as Exhibit 10.2 to the Form
S-1 Registration Statement filed by Raritan Bancorp, Inc., Registration No.
33-12539).
10.4 Employment Agreement with Thomas F. Tansey (filed as Exhibit 10.3 to the
Form S-1 Registration Statement filed by Raritan Bancorp, Inc.,
Registration No. 33-12539).
10.5 Amended and Restated Special Termination Agreements with Ronald B. Edwards,
and Lucille H. Daniel (the original Special Termination Agreements were
filed as Exhibit 10.4 to the Form S-1 Registration Statement filed by
Raritan Bancorp, Inc., Registration No. 33-12539).
10.6 Special Termination Agreement with John Lukens (filed as Exhibit 10.6 to
the Form 10-K for the fiscal year ended December 31, 1994, filed by Raritan
Bancorp Inc.).
<PAGE>
10.7 The Raritan Savings Bank Employee Stock Ownership Plan ("ESOP") and
Employee Stock Ownership Trust ("ESOT") (filed as Exhibit 10.5 to the Form
S-1 Registration Statement filed by Raritan Bancorp, Inc., Registration No.
33-12539).
10.8 ESOP Financing Agreement (filed as Exhibit 10.6 to Amendment No. 1 to the
Form S-1 Registration Statement filed by Raritan Bancorp, Inc. and assigned
Registration No. 33-12538).
11 Computation of net income per share (Incorporated by reference to
"Financial Highlights" on page 1, and the Consolidated Statements of Income
on page 18, of the Annual Report to Stockholders for the year ended
December 31, 1994).
13.1 Annual Report to Shareholders for the year ended December 31, 1995. *
13.2 Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1996.
23.1 Consent of Independent Appraiser. *
23.2 Accountants' Consent. *
99.1 Proxy materials relating to Special Meeting of Depositors. *
99.2 Appraisal Report of Professional Bank Services. *
99.3 Form of Stock Order Form. *
99.4 Updated Appraisal Report of Professional Bank Services. *
______________
* Previously filed
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are filed because the required
information is not applicable or is included in the financial statements or
related notes.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Raritan, New Jersey on May 6, 1996 .
-------------
RARITAN BANCORP INC.
By: /s/ Arlyn D. Rus
-----------------------
Arlyn D. Rus
President, Chief Executive Officer and
Chairman of the Board
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed below by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Arlyn D. Rus President, Chief Executive May 6 1996
- ---------------------------------- -------------
Arlyn D. Rus Officer and Chairman of the
Board (Principal Executive
Officer)
/s/ Thomas F. Tansey Executive Vice President, Chief May 6, 1996 *
- ---------------------------------- -------------
Thomas F. Tansey Operating Officer, Treasurer and
Director (Principal Financial and
Accounting Officer)
/s/ William T. Anderson Director May 6, 1996 *
- ---------------------------------- --------------
William T. Anderson
/s/ Richard E. Fischer Director May 6, 1996 *
- ---------------------------------- --------------
Richard E. Fischer
/s/ William T. Kelleher, Jr. Director May 6, 1996 *
- ---------------------------------- -------------
William T. Kelleher, Jr.
Director
__________________________________ _____________
William W. Crouse
</TABLE>
*Pursuant to power of attorney.
<PAGE>
EXHIBIT INDEX
2.1 Acquisition Agreement Among Raritan Bancorp Inc. and The Raritan Savings
Bank and Manville Savings Bank. *
2.2 Plan of Merger Conversion from Mutual to Stock Form of Organization of
Manville Savings Bank Into The Raritan Savings Bank (filed as an Exhibit to
the Acquisition Agreement filed as Exhibit 2.1 hereto). *
2.3 Amendment No. 3 to Acquisition Agreement. *
3.1 Certificate of Incorporation of Raritan Bancorp, Inc. (filed as Exhibit 3.1
to the Form S-1 Registration Statement filed by Raritan Bancorp, Inc. on
March 10, 1987, Registration No. 33-12539).
3.2 Bylaws of Raritan Bancorp, Inc. (filed as Exhibit 3.2 to Form S-1
Registration Statement filed by Raritan Bancorp, Inc., Statement No. 33-
12539 and Exhibit 28.1 to the Form 8-K filed on December 21, 1990).
5.1 Opinion of Luse Lehman Gorman Pomerenk & Schick regarding legality of
securities being registered. *
8.1 Federal Tax Opinion
8.2 Form of State Tax Opinion (to be filed supplementally or by amendment)
8.3 Letter from Professional Bank Services, Inc. on value of subscription
rights for tax purposes. *
10.1 Raritan Bancorp, Inc. Incentive Stock Option Plans (see Annex A to the
Proxy Statement dated March 23, 1988 and Exhibit A to the Proxy Statement
dated March 24, 1993).
10.2 Raritan Bancorp, Inc. Stock Option Plan for Outside Directors (see Exhibit
B to the Proxy Statement dated March 24, 1993).
10.3 Employment Agreement with Arlyn D. Rus (filed as Exhibit 10.2 to the Form
S-1 Registration Statement filed by Raritan Bancorp, Inc., Registration No.
33-12539).
10.4 Employment Agreement with Thomas F. Tansey (filed as Exhibit 10.3 to the
Form S-1 Registration Statement filed by Raritan Bancorp, Inc.,
Registration No. 33-12539).
10.5 Amended and Restated Special Termination Agreements with Ronald B. Edwards,
and Lucille H. Daniel (the original Special Termination Agreements were
filed as Exhibit 10.4 to the Form S-1 Registration Statement filed by
Raritan Bancorp, Inc., Registration No. 33-12539).
10.6 Special Termination Agreement with John Lukens (filed as Exhibit 10.6 to
the Form 10-K for the fiscal year ended December 31, 1994, filed by Raritan
Bancorp Inc.)
10.7 The Raritan Savings Bank Employee Stock Ownership Plan ("ESOP") and
Employee Stock Ownership Trust ("ESOT") (filed as Exhibit 10.5 to the Form
S-1 Registration Statement filed by Raritan Bancorp, Inc., Registration No.
33-12539).
10.8 ESOP Financing Agreement (filed as Exhibit 10.6 to Amendment No. 1 to the
Form S-1 Registration Statement filed by Raritan Bancorp, Inc. and assigned
Registration No. 33-12538).
11 Computation of net income per share (Incorporated by reference to
"Financial Highlights" on page 1, and the Consolidated Statements of Income
on page 18, of the Annual Report to Stockholders for the year ended
December 31, 1994).
13.1 Annual Report to Shareholders for the year ended December 31, 1995. *
13.2 Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1996.
<PAGE>
23.1 Consent of Independent Appraiser *
23.2 Accountants' Consent. *
24 Power of Attorney (incorporated by reference to signature page of Form S-
2). *
99.1 Proxy materials relating to Special Meeting of Depositors. *
99.2 Appraisal Report of Professional Bank Services. *
99.3 Form of Stock Order Form. *
99.4 Updated Appraisal Report of Professional Bank Services. *
_____________
* Previously filed
<PAGE>
LLGPS Letterhead
(202) 274-2000
May 6, 1996
Board of Directors
Raritan Bancorp Inc.
9 West Somerset Street
Raritan, New Jersey 08869
Board of Directors
Manville Savings Bank
313 South Main Street
Manville, New Jersey 08835
RE: RARITAN BANCORP INC.
ACQUISITION OF MANVILLE SAVINGS BANK
------------------------------------
Gentlemen:
We have acted as counsel to Raritan Bancorp Inc. ("Raritan Bancorp") in
connection with the negotiation and execution of an Acquisition Agreement
between Raritan Bancorp Inc., The Raritan Savings Bank ("Raritan Savings") and
Manville Savings Bank ("Manville") dated March 23, 2994, and as thereafter
amended on January 11, 1995 (the "Acquisition Agreement"), and the related Plan
of Merger Conversion from Mutual to Stock Form of Organization of Manville
Savings Bank into The Raritan Savings Bank (the "Plan of Merger-Conversion").
Upon consummation of the transaction described in the Acquisition Agreement
and Plan of Merger-Conversion: (i) Manville, a New Jersey chartered mutual
savings bank, will merge with and into Raritan Savings, a New Jersey chartered
stock savings bank and a wholly-owned subsidiary of Raritan Bancorp, which is a
Delaware corporation registered under the Bank Holding Act of 1956, as amended
(the "Merger-Conversion"); and (ii) Raritan Bancorp will sell shares of its
common stock, par value $.01 ("Common Stock") to certain depositors of Manville
in a subscription offering ("Subscription Offering") and, possibly, to members
of the public in a community offering ("Community Offering"), as more fully
described in the Prospectus and the Plan of Merger-Conversion. Specifically, the
Plan of Merger-Conversion, subject to certain
<PAGE>
Board of Directors, Raritan Bancorp Inc.
Board of Directors, Manville Savings Bank
May 6, 1996
Page 2
maximum and minimum purchase limitations, grants nontransferable subscription
rights to purchase Raritan Bancorp Common Stock to (i) Manville's account
holders who had deposit accounts totaling $50 or more as of the close of
business on June 30, 1993 (the "Eligibility Record Date") (such depositors are
referred to as "Eligible Account Holders"), (ii) Manville's account holders who
had deposit accounts totaling $50 or more as the close of business on December
31, 1995 (the "Supplemental Eligibility Record Date") (such depositors are
referred to as "Supplemental Account Holders"), and (iii) depositors of Manville
as of the April ___, 1996 voting record date for the Special Meeting of
Depositors being held to approve the Plan of Merger-Conversion ("Voting
Depositors") (collectively, the Eligible Account Holders, the Supplemental
Account Holders and the Voting Depositors shall be referred to herein as the
"Depositors"). Any shares of Common Stock not purchased in the Subscription
Offering will be offered for sale in the Community Offering, with a preference
given first to Raritan Bancorp's stockholders and then to natural persons
residing in Somerset County, New Jersey.
The number of shares of Common Stock being offered in the Offering has been
determined by reference to (i) the estimated pro forma market value of Manville
as an entity merged with and into Raritan Savings as determined by an
independent appraiser (the "Independent Valuation") and (ii) the average closing
bid price per share of Raritan Bancorp's Common Stock as reported on the Nasdaq
Stock Market during the twenty trading days ending on the day prior to the date
of the closing of the Conversion as determined pursuant to the Plan, which will
be the price per share of Common Stock paid by subscribers other than Eligible
Account Holders (the "Actual Purchase Price"). The price per share of Common
Stock paid by Eligible Account Holders (the "EAH Actual Purchase Price") will be
equal to 90% of the Actual Purchase Price.
You have requested our opinion as to certain federal income tax
consequences of the transactions described in the Acquisition Agreement and Plan
of Merger-Conversion to satisfy the requirements of Section 4.7 of the
Acquisition Agreement concerning receipt of an opinion or opinions of counsel as
to certain tax matters. Terms capitalized herein but not defined have the
meanings set forth in the Plan of Merger-Conversion and Prospectus.
In connection with the opinions hereinafter expressed, we have examined the
following documents:
1. The Acquisition Agreement and all exhibits thereto;
2. The Plan of Merger-Conversion;
<PAGE>
Board of Directors, Raritan Bancorp Inc.
Board of Directors, Manville Savings Bank
May 6, 1996
Page 3
3. The Articles of Incorporation and Bylaws of Raritan Bancorp,
Raritan Savings and Manville;
4. The Registration Statement (Form S-2) filed by Raritan Bancorp
with the Securities and Exchange Commission in connection with
the Offering;
5. The Officer's Certificates, dated the date hereof, delivered to
us by Raritan Bancorp, Raritan Savings and Manville;
6. The Internal Revenue Code of 1986, as amended (the "Code") and
the Income Tax Regulations thereunder; and
7. Rulings issued by the Internal Revenue Service (the "Service")
and court decisions.
Based upon the foregoing and subject in every instance to the conditions,
assumptions, limitations and qualification set forth below, we are of the
opinion that:
1. The proposed Merger-Conversion will be treated as consisting of
two separate, albeit inter-related, transaction: (i) the conversion of Manville
from a mutual savings bank to a stock savings bank, with the conversion of
Manville constituting a reorganization within the meaning of Section
368(a)(1)(F), followed by (ii) the acquisition of all outstanding shares capital
stock of Manville by the Company and the merger of Manville in its stock form
into Raritan Savings, with that merger constituting a reorganization within the
meaning of Section 368(a)(1)(A) and (a)(2)(D), and therefore that:
(a) no gain or loss will be recognized to Manville, Raritan
Bancorp, or Raritan Savings as a result of the Merger-
Conversion ((S) 361(a));
(b) Raritan Savings will have the same basis in the assets of
Manville immediately after the Merger-Conversion as the
basis Manville had in such assets immediately prior to the
Merger-Conversion ((S) 362(b));
(c) the holding period of the assets of Manville held by Raritan
Savings immediately after the Merger-Conversion will include
the holding period of such assets in the hands of Manville
immediately prior to the Merger-Conversion ((S) 1223(a));
<PAGE>
Board of Directors, Raritan Bancorp Inc.
Board of Directors, Manville Savings Bank
May 6, 1996
Page 4
(d) the taxable year of Manville will end upon the effective
date of the Merger-Conversion ((S) 381(b)(1));
(e) Raritan Savings will succeed to and take into account the
earnings and profits (or any deficit therein) of Manville
that existed as of the date of the Merger-Conversion ((S)(S)
381(a)); and
(f) Raritan Savings will succeed to and take into account,
immediately after the Merger-Conversion, the dollar amounts
of those accounts of Manville that represent bad debt
reserves in respect of which Manville has taken bad debt
deductions for taxable years ending on or before the date of
the Merger-Conversion; the bad reserves of Manville will not
be required to be restored to its gross income in the
taxable year of the Merger-Conversion; and such bad debt
reserves will have the same character in the hands of
Raritan Savings after the Merger-Conversion as they would
have had in the hands of Manville if the Merger-Conversion
had not occurred (S)(S) 361(a) and 381(a) & (c)(4); Treas.
Reg. (S) 1.381(c)(4)-(1)(ii); (s) 593(e)).
2. Neither Manville nor Raritan Bancorp will recognize gain or loss
upon the receipt of money and other property, if any, in exchange for shares of
Raritan Bancorp Common Stock, regardless of whether issued pursuant to the
Subscription Offering or Community Offering.
3. Raritan Bancorp will recognize no gain or loss upon (a) the
issuance of subscription rights to Depositors to purchase Common Stock, (b) the
lapse of Subscription Rights to purchase Common Stock or (c) the receipt of
money or other property, if any, in exchange for shares of Common Stock pursuant
to the Offering.
4. No gain or loss will realized or recognized to the Manville
Depositors upon the constructive issuance to them of (i) withdrawable deposit
accounts in Raritan Savings, and (ii) with respect to Eligible Account Holders
and Supplemental Account Holders, interests in the Liquidation Account, in
constructive exchange for their withdrawable accounts in Manville.
5. The basis of each Depositor in its withdrawable deposit account
with Raritan Savings immediately after the Merger-Conversion will be the same as
the basis in its withdrawable deposit account with Manville immediately prior
to the Merger-Conversion, and
<PAGE>
Board of Directors, Raritan Bancorp Inc.
Board of Directors, Manville Savings Bank
May 6, 1996
Page 5
the basis of each Eligible Account Holder and Supplemental Account Holder in its
interest in the Liquidation Account will be zero.
We have relied upon (without any independent investigation of) the accuracy
of the statements and representations in (a) the Agreement and all exhibits
thereto, (b) the Articles of Incorporation and Bylaws of Raritan Bancorp,
Raritan Savings and Manville, (c) the Form S-2 Registration Statement filed with
the Securities and Exchange Commission in connection with the Offering and (d)
the Officer's Certificate, dated the date hereof, delivered to us by Raritan
Bancorp, Raritan Savings and Manville. We have assumed (e) the genuineness of
all signatures on all signed documents submitted to us by Raritan Bancorp,
Raritan Savings and Manville, including, without limitation, the Officer's
Certificates and certified copies of directors' resolutions; (f) the
authenticity of all documents; (g) the conformity to originals of all copies of
documents; and (h) the legal capacity of all individuals who have affixed their
signatures to documents.
Our opinions are based upon the federal income tax laws as now in effect
and as presently interpreted. Nevertheless, we wish to advise you that certain
aspects of the Conversion and Acquisition present novel issues of tax law which
are not addressed by any direct authorities and, to the extent related
authorities do exist, they appear to be inconclusive. Specifically, we refer to
the fact that the subscription rights issued to Eligible Accounts Holders will
provide such persons the opportunity to purchase Common Stock at the EAH Actual
Purchase Price per share which is equal to 90% of the Actual Purchase Price of
subscribers other than Eligible Account Holders. The federal tax consequences of
the receipt, exercise and lapse of subscription rights which are exercisable at
a discount are uncertain, but they may be significant. In this regard, it is
possible that the Service may assert, and the courts may agree, that Manville or
the Eligible Account Holders are required to recognize gain (either upon receipt
of the non-transferable Rights or upon their exercise) as a result of the
transactions described in the Agreement in an amount equal to the value of the
Rights issued to Depositors in the Subscription Offering. Notwithstanding the
opinions expressed hereinabove, we express no opinion on this issue since it is
not addressed by any direct authorities.
Our opinions are also conditioned upon the satisfaction as of the Effective
Date of each of the following:
1. All conditions precedent to the obligations of Raritan Bancorp
and Manville as set forth in the Agreement will have been satisfied or waived as
of the Effective Date, all covenants required to be performed by Raritan Bancorp
and Manville as set forth in the Agreement will have been performed by them as
of the Effective Date, and the Conversion and the Acquisition will be effected
in strict accordance with the Agreement; and
<PAGE>
Board of Directors, Raritan Bancorp Inc.
Board of Directors, Manville Savings Bank
May 6, 1996
Page 6
2. All assumptions set forth in Exhibit "A" annexed to this opinion
shall be true and correct as of and at the Effective Date.
We have not been asked to, and we do not, render any opinion with respect
to any tax matters except as expressly set forth above. Please note, also, that
we do not undertake to advise you of any changes in the opinions expressed
herein resulting from matters that might hereafter be brought to our attention,
including, but not limited to, subsequent legal developments.
Very truly yours,
/s/ Luse Lehman Gorman Pomerenk & Schick
A Professional Corporation
<PAGE>
Exhibit "A" to Opinion of Counsel
ASSUMPTIONS
1. No portion of an Eligible Account Holder's total deposit accounts with
Manville on the Eligibility Record Date will be excluded from participating in
the Liquidation Account if the Eligible Account Holder had aggregate deposits in
excess of $50 with Manville on that date;
2. No portion of a Supplemental Eligible Account Holder's total deposit
accounts with Manville on the Supplemental Eligibility Record Date will be
excluded from participating in the Liquidation Account if the Supplemental
Eligible Account Holder had aggregate deposits in excess of $50 with Manville on
that date;
3. Raritan Savings and Raritan Bancorp have no plan or intention to
redeem or otherwise acquire any of the shares of Stock to be issued by Raritan
Bancorp in the proposed transaction;
4. Immediately following the consummation of the Merger-Conversion,
Raritan Savings will posses the same assets and liabilities as it held
immediately prior to the proposed transaction, plus the assets and liabilities
held by Manville immediately prior to the proposed transaction;
5. None of the shares of Raritan Bancorp Common Stock to be purchased by
Manville depositors who are employees of Manville will be issued or acquired at
a discount from the amount to be paid by subscribers who are not employees of
Manville;
6. The proposed transaction does not involve a receivership, foreclosure,
or similar proceeding before a federal or state agency involving a financial
institution to which either Section 585 or Section 593 applies;
7. No cash or other property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders or Voting Depositors in lieu of either (a)
the nontransferable Subscription Rights to the Raritan Bancorp Common Stock, or
(b) the interest of Eligible Account Holders or Supplemental Eligible Account
Holders in the Liquidation Account of Raritan Savings;
8. Manville, Raritan Savings, and Raritan Bancorp are corporations within
the meaning of Section 7701(a)(3); and
9. Manville Depositors will pay all expenses of the Merger-Conversion, if
any, solely attributable to them.
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Period Ended March 31, 1996
Commission File Number: 0-15830
Raritan Bancorp Inc.
(exact name of registrant as specified in its charter)
Delaware 22-2792402
(State of Incorporation) (I.R.S. Employer Identification Number)
9 West Somerset Street, Raritan, New Jersey 08869
(address of principal executive offices) (zip code)
908-725-0080
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
X Yes No
--- ____
Applicable only to corporate issuers:
As of May 1, 1996, 1,425,189 common shares, $.01 par value per
share were outstanding.
<PAGE>
RARITAN BANCORP INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS 1
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS 11
ITEM 2 CHANGES IN THE RIGHTS OF THE CORPORATION'S
SECURITY HOLDERS 11
ITEM 3 DEFAULTS BY THE CORPORATION ON ITS SENIOR
SECURITIES 11
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 11
ITEM 5 OTHER INFORMATION 11
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RARITAN BANCORP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
(UNAUDITED) (AUDITED)
------------------- -------------------
<S> <C> <C>
ASSETS:
- ------
CASH AND DUE FROM BANKS $ 8,490 $ 8,586
FEDERAL FUNDS SOLD 10,000 31,300
SHORT-TERM INVESTMENT 14,000 -
------------------- -------------------
TOTAL CASH AND CASH EQUIVALENTS 32,490 39,886
SECURITIES AVAILABLE FOR SALE, AT FAIR VALUE 50,000 50,547
INVESTMENT SECURITIES, NET (FAIR VALUE: $58,182
AT March 31, 1996 AND $60,831 AT DECEMBER 31, 1995) 59,455 61,406
LOANS 197,534 195,639
LESS: UNEARNED INCOME 440 467
ALLOWANCE FOR LOAN LOSSES 2,606 2,582
------------------- -------------------
NET LOANS 194,488 192,590
------------------- -------------------
BANKING PREMISES AND EQUIPMENT, NET 3,295 3,231
FEDERAL HOME LOAN BANK OF NEW YORK STOCK, AT COST 2,669 2,669
ACCRUED INTEREST RECEIVABLE 1,995 1,859
OTHER ASSETS 2,449 2,662
------------------- -------------------
TOTAL ASSETS $ 346,841 $ 354,810
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
DUE TO DEPOSITORS:
INTEREST-BEARING $ 299,343 $ 294,210
NON-INTEREST-BEARING 19,222 20,828
------------------- ------------------
TOTAL DEPOSITS 318,565 315,038
BORROWINGS 206 10,206
ACCRUED INTEREST PAYABLE 55 61
ACCRUED EXPENSES
AND OTHER LIABILITIES 2,899 3,157
------------------- -------------------
TOTAL LIABILITIES 321,725 328,462
------------------- -------------------
SHAREHOLDERS' EQUITY:
PREFERRED STOCK, $.01 PAR VALUE, 2,000,000
SHARES AUTHORIZED, NONE ISSUED
COMMON STOCK, $.01 PAR VALUE, 3,500,000
SHARES AUTHORIZED; 1,725,000 SHARES ISSUED
WITH 1,426,689 SHARES OUTSTANDING AT
MARCH 31, 1996 AND 1,492,189 SHARES
OUTSTANDING AT DECEMBER 31, 1995 17 17
ADDITIONAL PAID-IN CAPITAL 10,596 10,598
RETAINED EARNINGS 18,323 17,801
FAIR VALUE ADJUSTMENT OF SECURITIES
AVAILABLE FOR SALE, NET OF TAX 108 416
LESS: UNALLOCATED COMMON STOCK ACQUIRED BY THE ESOP (206) (206)
COST OF COMMON STOCK IN TREASURY, 298,311
SHARES AT MARCH 31, 1996 AND 232,811 SHARES
AT DECEMBER 31,1995 (3,722) (2,278)
------------------- -------------------
TOTAL SHAREHOLDERS' EQUITY 25,116 26,348
COMMITMENTS AND CONTINGENCIES ------------------- -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 346,841 $ 354,810
=================== ===================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1996 1995
------------- -------------
<S> <C> <C>
INTEREST INCOME:
INTEREST AND FEES ON REAL ESTATE LOANS $ 3,096 $ 2,832
INTEREST AND FEES ON OTHER LOANS 903 856
INTEREST AND DIVIDENDS ON INVESTMENT SECURITIES:
TAXABLE 1,692 1,882
TAX-EXEMPT 13 13
INTEREST ON DEPOSITS IN OTHER BANKS 315 95
------------- -------------
TOTAL INTEREST INCOME 6,019 5,678
------------- -------------
INTEREST EXPENSE:
INTEREST ON DEPOSIT ACCOUNTS 3,210 2,859
INTEREST ON BORROWINGS 10 148
------------- -------------
TOTAL INTEREST EXPENSE 3,220 3,007
------------- -------------
NET INTEREST INCOME 2,799 2,671
PROVISION FOR LOAN LOSSES 75 75
------------- -------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,724 2,596
OTHER INCOME:
SERVICE CHARGES AND OTHER INCOME 174 151
GAINS ON NET SECURITIES TRANSACTIONS - -
GAINS ON SALE OF LOANS - -
------------- -------------
TOTAL OTHER INCOME 174 151
------------- -------------
OPERATING EXPENSES:
SALARIES AND EMPLOYEE BENEFITS 907 853
OCCUPANCY EXPENSE 199 159
FDIC INSURANCE PREMIUM 43 169
NET COST OF OPERATION OF OTHER REAL ESTATE 8 20
OTHER OPERATING EXPENSES 560 506
------------- -------------
TOTAL OPERATING EXPENSES 1,717 1,707
------------- -------------
INCOME BEFORE INCOME TAX EXPENSE 1,181 1,040
INCOME TAX EXPENSE 438 387
------------- -------------
NET INCOME $ 743 $ 653
============= =============
AVERAGE NUMBER OF SHARES OUTSTANDING:
PRIMARY 1,597,324 1,629,686
============= =============
FULLY DILUTED 1,597,324 1,635,910
============= =============
NET INCOME PER SHARE:
PRIMARY $ 0.46 $ 0.40
============= =============
FULLY DILUTED $ 0.46 $ 0.40
============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
RARITAN BANCORP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED MARCH 31,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 743 $ 653
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
INCREASE IN ACCRUED INTEREST RECEIVABLE (136) (28)
AMORTIZATION ON SECURITIES, NET 54 27
PROVISION FOR LOAN LOSSES 75 75
GAIN ON NET SECURITIES TRANSACTIONS - -
INCREASE (DECREASE) IN ACCRUED INTEREST PAYABLE (6) 8
INCREASE IN ACCRUED EXPENSES 69 83
INCREASE IN PREPAID EXPENSES (127) (254)
DEPRECIATION 89 91
CREDIT TO DEFERRED INCOME TAX BENEFIT (79) (11)
INCREASE IN INCOME TAXES PAYABLE 492 398
NET INCREASE, OTHER (310) (769)
----------- ----------
TOTAL CASH PROVIDED BY OPERATING ACTIVITIES $ 864 $ 273
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM CALL AND REPAYMENTS OF SECURITIES AVAILABLE-
FOR-SALE 3,017 814
PROCEEDS FROM REPAYMENTS OF INVESTMENT SECURITIES, NET 1,928 2,799
PURCHASE OF SECURITIES AVAILABLE-FOR-SALE (2,962) -
PURCHASE OF FEDERAL HOME LOAN BANK
OF NEW YORK STOCK - (4)
NET DISBURSEMENTS FROM LOANS (1,950) (4,279)
PROCEEDS FROM DISPOSAL OF REAL ESTATE - 25
CAPITAL EXPENDITURES (153) (2)
----------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (120) (647)
CASH FLOWS FROM FINANCING ACTIVITIES:
NET DECREASE IN DEMAND DEPOSITS, MONEY MARKET ACCOUNTS,
NOW ACCOUNTS, PRIME PERFORMANCE ACCOUNTS,
AND SAVINGS ACCOUNTS (3,776) (13,083)
NET INCREASE IN MARKET-RATE CERTIFICATES 7,303 12,240
COMMON STOCK SOLD UNDER STOCK OPTION PLAN 30 -
TREASURY STOCK ACQUIRED, AT COST (1,476) -
REPAYMENT OF ADVANCE FROM FEDERAL HOME LOAN BANK OF NEW YORK (10,000) -
NET CHANGE IN BORROWING UNDER REPURCHASE AGREEMENT - (2,953)
CASH DIVIDENDS PAID (221) (196)
----------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (8,140) (3,992)
----------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,396) (4,366)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 39,886 16,343
----------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 32,490 $ 11,977
=========== ================
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION: FOR THE THREE MONTHS ENDED MARCH
--------------------------------
1996 1995
----------- ---------------
INTEREST PAID $ 3,211 $ 2,848
=========== ===============
INCOME TAXES PAID $ 25 $ -
=========== ===============
MORTGAGE LOANS ORIGINATED TO REFINANCE THE
DISPOSAL OF REAL ESTATE ACQUIRED BY FORECLOSURE $ - $ 75
=========== ===============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
RARITAN BANCORP INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: The consolidated financial statements include the accounts of the
Raritan Bancorp Inc. ("Corporation") and its wholly-owned subsidiary, The
Raritan Savings Bank ("Bank").
The consolidated balance sheet at March 31, 1996, the consolidated statements of
income for the three month periods ended March 31, 1996 and 1995, and the
consolidated statements of cash flows for the three month periods ended March
31, 1996 and 1995, have been prepared by the Corporation without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial condition, results of
operations, and changes in cash flows at March 31, 1996 for all periods
presented have been made.
Included in cash and cash equivalents are cash and amounts due from banks,
federal funds sold and term deposits with original maturities of less than
ninety days. Generally, federal funds sold are for one-day periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These consolidated financial statements are to be read in
conjunction with the December 31, 1995 audited financial statements and notes
thereto.
Interim results are not necessarily indicative of results for the full
year.
Note 2: Securities available for sale, at fair value, and investment securities,
net:
The amortized cost of securities and their estimated fair values at March 31,
1996, were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Securities available for sale, at fair value:
U.S. Treasury securities and obligations
of U.S. Government agencies $14,482 $ 23 $ (49) $14,456
Obligations of states and political
subdivisions 761 40 - 801
Mortgage-backed securities issued by
Federal agencies 34,595 421 (273) 34,743
--------------------------------------------
$49,838 $ 484 $ (322) $50,000
=============================================
Investment securities, net:
Mortgage-backed securities issued by Federal agencies $59,455 $ - $(1,273) $58,182
=============================================
</TABLE>
4
<PAGE>
The amortized cost of securities and their estimated market value at December
31, 1995 were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(Audited)
(In thousands)
<S> <C> <C> <C> <C>
Securities available-for-sale, at fair value:
U.S. Treasury securities and obligations
of U.S. Government agencies $ 12,533 $ 51 $ - $12,584
Obligations of states and political
subdivisions 761 43 - 804
Mortgage-backed securities issued by
Federal agencies 36,630 579 (50) 37,159
---------------------------------------------
$ 49,924 $ 673 $ (50) $50,547
===============================================
Investment securities, net:
Mortgage-backed securities issued by Federal agencies $ 61,406 $ - $ (575) $60,831
===============================================
</TABLE>
There were no sales of securities during the three month periods ended March 31,
1996 and 1995.
Note 3: Loans and Allowance for Loan Losses:
Loans are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
--------------- -----------------
(Unaudited) (Audited)
(In thousands)
<S> <C> <C>
Real estate:
Conventional $148,712 $147,673
Construction 8,216 8,536
---------------------------------
156,928 156,209
Consumer loans 29,513 28,886
Commercial loans 11,093 10,544
---------------------------------
$197,534 $195,639
=================================
</TABLE>
The activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
---- ----
(Unaudited)
(In thousands)
<S> <C> <C>
Balance at beginning of period $2,582 $2,729
Provision charged to operations 75 75
Charge-offs (54) (89)
Recoveries 3 -
---------------------------
Balance at end of period $2,606 $2,715
============================
</TABLE>
5
<PAGE>
Non-performing loans (over 90 days delinquent), in-substance foreclosed loans
(included in Loans) and real estate acquired by foreclosure (included in Other
Assets), totaled $2,371,000 and $2,105,000 at September 30, 1995 and December
31, 1994, respectively, as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
Number Amount Number Amount
of Loans (In thousands) of Loans (In Thousands)
-------- -------------- -------- --------------
Description: (Unaudited) (Audited)
<S> <C> <C> <C> <C>
First mortgage loans 5 $ 831 3 $ 317
Home equity loans 1 37 2 36
Second mortgage loans - - 2 98
Consumer loans 1 12 - -
Commrecial loans 3 354 2 326
Loans with modified terms 3 271 3 278
---------------------------------------------
Total non-performing loans 13 1,505 12 1,055
Real estate acquired by foreclosure (included 1 170 1 170
in Other Assets) ----------------------------------------------
14 1,675 13 1,225
Non-accrual loans less than 90 days delinquent 4 913 - -
----------------------------------------------
18 $ 2,588 13 $ 1,225
==============================================
</TABLE>
The loss of interest on loans charged-off, real estate acquired by foreclosure
and non-accrual loans less than 90 days delinquent totaled approximately $55,000
and $75,000 for the three months ended March 31, 1996 and 1995, respectively.
At March 31, 1996 and December 31, 1995, the Corporation had impaired loans
totaling $1,505,000 and $1,055,000, respectively. The Corporation calculated a
total allowance of $273,000 and $122,000 at March 31, 1996 and December 31,
respectively. Impaired loans averaged $1,742,000 and $1,124,000 for the three
months ended March 31, 1996 and 1995, respectively. Interest income totaling
$23,000 and $3,000 was recognized, all on a cash basis, on impaired loans for
the three months ended March 31, 1996 and 1995, respectively.
Note 4: Pending Acquisition and Merger ("Manville"):
On March 8, 1996, the Federal Deposit Insurance Corporation stated in writing
that it intends to issue a letter of non-objection to the conversion of Manville
Savings Bank, SLA from a New Jersey-chartered mutual savings bank to a New
Jersey-chartered stock savings bank by merging into the Raritan Savings Bank,
and Raritan Bancorp is to issue shares of conversion stock in an offering to the
depositors of Manville Savings. The conversion and merger are being conducted
pursuant to a plan of conversion. The plan of conversion and the merger of
Manville Savings into Raritan Savings have been approved by the Commissioner of
Banking of the State of New Jersey. The merger is also subject to, among other
things, the approval of the plan of conversion by Manville Savings' depositors.
The transaction is expected to close during the second quarter of 1996.
At March 31, 1996, Manville had total assets of $15.6 million and total deposits
of $14.1 million.
6
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
At March 31, 1996, the Corporation's total assets decreased to $346.8 million
from $354.8 million at December 31, 1995. Net loans and deposits increased to
$194.5 million and $318.6 million from $192.6 million and $315.0 million,
respectively, at December 31, 1995. Deposits outflows, exclusive of interest
credited, exceeded inflows by $.3 million during the first three months of 1996.
Non-performing loans (over 90 days delinquent), real estate acquired by
foreclosure and non-accrual loans less than 90 days delinquent totaled
$2,588,000 or 1.32% of total net loans plus real estate acquired by foreclosure
at March 31, 1996, compared to $1,225,000 or 0.64% of total net loans plus real
estate acquired by foreclosure at December 31, 1995.
During each of the three month periods ended March 31, 1996 and 1995, the
Corporation added $75,000 respectively, to the allowance for loan losses. The
identical provisions were in response to a strengthening economy and recovering
real estate market in central New Jersey, together with aggressive recognition
and resolution of existing and potential problem areas. The overall loan
portfolio is also reviewed when calculating the provision.
Non-performing loans (over 90 days delinquent), real estate acquired by
foreclosure (included in Other Assets) and non-accrual loans less than 90 days
delinquent totaled $2,588,000 and $1,225,000 at March 31, 1996 and December 31,
1995, respectively, as follows:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
Number Amount Number Amount
of Loans (In thousands) of Loans (In Thousands)
-------- -------------- -------- -------------
Description: (Unaudited) (Audited)
<S> <C> <C> <C> <C>
First mortgage loans 5 $ 831 3 $ 317
Home equity loans 1 37 2 36
Second mortgage loans - - 2 98
Consumer loans 1 12 - -
Commrecial loans 3 354 2 326
Loans with modified terms 3 271 3 278
-----------------------------------------
Total non-performing loans 13 1,505 12 1,055
Real estate acquired by foreclosure
(included in Other Assets) 1 170 1 170
------------------------------------------
14 1,675 13 1,225
Non-accrual loans less than 90 days delinquent 4 913 - -
------------------------------------------
18 $ 2,588 13 $ 1,225
==========================================
</TABLE>
Of the thirteen non-performing loans at March 31, 1996, twelve ($1,476,000) are
collateralized by real estate and one ($29,000) is unsecured. Real estate
acquired by foreclosure consists of one single-family residence. The four non-
accrual loans are secured by real estate.
Based on a review of each individual non-performing loan and non-accrual loan
less than 90 days delinquent, and loans rated loss, doubtful, substandard and
special mention according to regulatory definition, a specific allowance of
$1,238,000 has been allocated to such loans, together with a general allowance
of $1,368,000 on the remaining loan portfolio taken as a whole. During the
quarter ended March 31, 1996 loans totaling $54,000 were charged off.
On an ongoing basis, management reviews the overall adequacy of the allowance
for loan losses based on an evaluation of the risk characteristics of the loan
portfolio both on potential individual problem loans,
7
<PAGE>
and on the aggregate loan portfolio taken as a whole. Such factors as the
financial condition of the borrower, the fair value of the underlying collateral
and other items which, in management's opinion, deserve recognition in
estimating the adequacy of the allowance for loan losses are evaluated. When
reviewing the adequacy of the allowance for loan losses, management reviews the
status of the current (and potential) non-performing loans, delinquency trends,
coverage ratios and various economic and other factors, and determines what
levels of allowance for loan losses is necessary to absorb current losses in the
loan portfolio.
Shareholders' equity totaled $25.1 million, or $17.60 per share at March 31,
1996, compared to $26.3 million, or $17.66 per share at December 31, 1995. The
increase in shareholders' equity is the result of net income totaling $743,000
for the three months ended March 31, 1996, the issuance of 3,000 shares of
common stock for $30,000 via the exercise of stock options, offset by a decrease
in the fair value adjustment of securities available-for-sale of $308,000, by
paying dividends of $221,000 to shareholders and the repurchase of 68,500 shares
of the Corporation's common stock for $1,476,000.
Results of Operations:
Raritan Bancorp Inc. and its subsidiary recorded net income of $743,000 for the
first quarter of 1996 compared to $653,000 for the same period in 1995.
Net interest income increased for the first quarter of 1996 to $2,799,000 from
$2,671,000, or 4.8% for the comparable quarter in 1995, as a result of an
increase in average net earning assets to $34.9 million from $29.2 million a
year earlier, offset by a decrease in the interest rate spread to 2.92% from
2.99% a year earlier. Higher cost of consumer deposit rates (when compared to
the first three months of 1995) contributed to the decrease in the interest rate
spread.
Net interest income for the first three months of 1996 was also affected by the
loss of interest on non-performing loans, non-accrual loans and real estate
acquired by foreclosure. When a loan becomes more than ninety days delinquent,
the Corporation ceases to accrue income and deducts interest income on that loan
which had previously been accrued into interest income for such period of time.
The loss of interest on loans charged off, non-performing loans, non-accrual
loans,and real estate acquired by foreclosure for the first three months of 1996
was approximately $55,000 compared to $75,000 for the corresponding 1995.
The provision for loans losses for the first quarter of both 1996 and 1995 was
$75,000. As described in the discussion of the Corporation's financial
condition, The identical provisions were in response to a strengthening economy
and recovering real estate market in central New Jersey, together with
aggressive recognition and resolution of existing and potential problem areas.
The overall loan portfolio is also reviewed when calculating the provision.
Management calculated the provision based on a review of the required
allowance at March 31, 1996. All non-performing loans and loans rated loss,
doubtful, substandard and special mention according to regulatory definition
were reviewed and a specific allowance of $1,238,000 was determined to be
adequate by comparing the existing loan balances with the value of supporting
collateral. A review of the remaining loan portfolio was made and a general
allowance of approximately $1,368,000 was deemed reasonable and was established
by assigning risk factors to the various loan categories based on the collateral
securing the appropriate loans and historical trends. The first quarter, 1996
provision of $75,000 was then charged to operations to establish the $2,606,000
allowance for loan losses at March 31, 1996.
Other expenses for the first three months of 1996 were $1,717,000 compared to
$1,707,000 for the corresponding period in 1995. Salaries and employee benefits
increased $54,000, or 6.3%, to $907,000 for the first quarter of 1996 from
$853,000 for the comparable period in 1995. Merit and cost of living adjustments
contributed to the increase. Occupancy expense increased $40,000, or 25.2%, for
the first
8
<PAGE>
quarter of 1996, compared to the corresponding 1995 period primarily as a result
of increased snow removal costs incurred during 1996. The FDIC insurance premium
decreased $126,000, or 74.6%, to $43,000 for the first quarter of 1996 from
$169,000 for the comparable period in 1995 as a result of the reduction in the
FDIC's Bank Insurance Fund's insurance premium rates. Net cost of operation of
other real estate decreased $12,000 for the first quarter of 1996 from the
corresponding period in 1995 as most provisions and expenditures had already
been made in prior periods to bring the properties to saleable condition. Other
operating expenses increased $54,000, or 10.7%, to $560,000, for the first
quarter of 1996 when compared to the first quarter of 1995. Increases in outside
service bureau expenses, supervisory examination fees, consultant fees and
marketing expenses offset by a decrease in legal fees contributed to the
increase.
The Corporation's annualized return on average total assets and average
shareholders' equity was 0.86% and 11.46%,respectively, for the first quarter of
1996, compared to 0.79% and 10.81%, respectively, for the comparable period in
1995.
Liquidity and Capital Resources
The Corporation's liquidity is a measure of its ability to fund loans and
withdrawal of deposits in a cost-effective manner. The Corporation's principal
sources of funds are deposits, scheduled amortization and repayment of loan
principal, maturities of investment securities and funds provided by operations.
At March, 31, 1996, the Corporation's liquid assets (cash and cash equivalents
and investment securities maturing in one year or less) totaled $41.0 million
which represents 11.8% of total assets.
The Corporation's main liquidity demands come from loan disbursements which
totaled approximately $14.3 million for the first three months of 1996. At March
31, 1996 outstanding commitments to extend credit totaled $32.8 million.
Management believes that the Corporation has adequate sources of liquidity to
fund these commitments.
The Bank has a borrowing arrangement with the Federal Home Loan Bank of New York
which can provide additional funds, if needed. At March 31, 1996, this borrowing
capacity totaled $35.4 million.
Both the Corporation and the Bank are subject to regulatory capital requirements
mandated by the Federal Reserve Board (FRB) and the Federal Deposit Insurance
Corporation (FDIC), respectively. Both are required to maintain minimum capital
requirements, defined by both the FRB and FDIC as risk-based ratio capital (Tier
1 and Total) and leverage capital ratio.
The following chart presents the minimum capital requirement ratios and the
actual ratios for both the Corporation and the Bank:
<TABLE>
<CAPTION>
March 31, 1996
--------------
Required Actual Excess
-------- ------ ------
<S> <C> <C> <C>
THE CORPORATION:
Risk-based capital:
Tier 1 4.00% 13.576% 9.576%
Total 8.00 14.829 6.829
Leverage capital ratio 4.00 6.98 2.98
THE BANK:
Risk-based capital:
Tier 1 4.00% 13.562% 9.562%
Total 8.00 14.816 6.816
Leverage capital ratio 4.00 6.97 3.97
</TABLE>
9
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
(a) The annual meeting of the security holders of Raritan Bancorp Inc.
took place on April 4, 1996.
(b)(i) The following directors were elected to a three-year term:
<TABLE>
<CAPTION>
Number of Votes Number of Votes
Name Expiration of Term in Favor Withheld
---- ------------------- -------- --------
<S> <C> <C> <C>
William T. Anderson, M.D. 1999 1,309,876 52,416
William W. Crouse 1999 1,310,976 51,316
</TABLE>
(b)(ii) The following directors' term of office continued after the
meeting:
<TABLE>
<CAPTION>
Expiration
Name of Term
---- ----------
<S> <C>
William T. Kelleher, Jr. 1997
Thomas F. Tansey 1997
Arlyn D. Rus 1998
Richard E. Fischer 1998
</TABLE>
(c) KPMG Peat Marwick LLP was ratified as the Corporation's auditors by
a vote of 1,314,960 shares For, 4,565 shares Against and 12,573 shares
Abstained.
10
<PAGE>
(d) A shareholder proposal regarding the sale of the Corporation was
defeated by a vote of 954,574 shares Against, 144,750 shares For and 12,573
shares Abstained.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
Not applicable.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RARITAN BANCORP INC.
--------------------
(Registrant)
Date: May 1, 1996 By: /s/ Arlyn D. Rus
----------------
Arlyn D. Rus
Chairman, President and
Chief Executive Officer
Director
Date: May 1, 1996 By: /s/ Thomas F. Tansey
--------------------
Thomas F. Tansey
Executive Vice President,
Chief Operating Officer and
Treasurer
Director
12
