<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-K

[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.

For the fiscal year ended December 31, 1996
                          -----------------

Commission file number 0-15830
                       -------

                             Raritan Bancorp Inc.
          ----------------------------------------------------------
            (Exact name of registrant as specified in its charter)


            Delaware                                     22-2792402
---------------------------------           ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


     9 West Somerset Street
      Raritan, New Jersey                                  08869
---------------------------------           ------------------------------------
(Address of principal executive                          (Zip Code)
           offices)


                        Telephone Number: (908) 725-0080
                                          --------------

     Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                       Yes  [X]                 No
                           -----                   -----

  Securities Registered Pursuant to Section 12(g) of the Exchange Act: Common
                                     Stock

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

     The aggregate market value of the voting stock held by nonaffiliates of the
registrant, computed by reference to the last reported sales price of such stock
on the NASDAQ National Market System on March 10, 1997 was approximately
$27,155,400.

     The number of shares outstanding of the registrant's Common Stock, the
registrant's only class of outstanding capital stock, as of March 10, 1997 was
1,524,084.

                      Documents Incorporated by Reference

     The following documents, in whole or in part, are specifically incorporated
by reference in the indicated Part of this Annual Report on Form 10-K:

I.    Portions of the Raritan Bancorp, Inc. 1996 Annual Report are incorporated
      by reference into certain items of Part I and Part II.

II.   Portions of the Raritan Bancorp, Inc. Proxy Statement for the 1996 Annual
      Meeting of Shareholders are incorporated by reference into certain items
      of Part III.
<PAGE>

                             RARITAN BANCORP INC.
                                   FORM 10-K

                               TABLE OF CONTENTS

                                                                            Page
                                     PART I
<TABLE>
<CAPTION>

<S>             <C>                                            <C>
Item 1.    Business .......................................................  1
           (a)    General Development of Business .........................  1
           (b)    Financial Information About Industry Segments ...........  1
           (c)    Narrative Description of Business .......................  2
                  (1)    General Description of Business ..................  2
                  (2)    Regulation and Supervision .......................  2
                  (3)    Monetary Policies ................................  9
                  (4)    Employees ........................................  9
                  (5)    Statistical Information ..........................  9
                         (a)   Distribution of Assets, Liabilities and
                               Shareholders' Equity; Interest Rates and
                               Interest Differential ......................  9
                         (b)   Securities Portfolio ....................... 10
                         (c)   Loan Portfolio ............................. 12
                         (d)   Maturity of Loans .......................... 12
                         (e)   Nonperforming Assets ....................... 15
                         (f)   Summary of Loan Loss Experience and
                               Allocation of the Allowance for Loan
                               Losses ..................................... 16
                         (g)   Deposits ................................... 17
                         (h)   Maturities of Time Deposits ................ 17
                         (i)   Return on Equity and Assets ................ 18
                         (j)   Short-term Borrowings ...................... 18
                         (k)   Competition ................................ 19
                         (l)   Executive Officers ......................... 19

Item 2.    Properties ..................................................... 20

Item 3.    Legal Proceedings .............................................. 21

Item 4.    Submission of Matters to a Vote of Security Holders ............ 21


                                    PART II

Item 5.    Market for Registrant's Common Equity and Related Shareholder
           Matters ........................................................ 21

</TABLE>
                                       i
<PAGE>

<TABLE>
<S>                    <C>                                              <C>
           (a)    Market Information ...................................... 21
           (b)    Shareholders ............................................ 21
           (c)    Dividends ............................................... 21

Item 6.    Selected Financial Data ........................................ 22

Item 7.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations .................. 22

Item 8.    Financial Statements and Supplementary Data .................... 22

Item 9.    Changes in and Disagreements with Accountants
           on Accounting and Financial Disclosure ......................... 23


                                   PART III



Item 10.    Directors and Officers of the Registrant ...................... 23

Item 11.    Executive Compensation ........................................ 23

Item 12.    Security Ownership of Certain Beneficial Owners and
            Management .................................................... 23

Item 13.    Certain Relationships and Related Transactions ................ 23


                                    PART IV



Item 14.    Exhibits, Financial Statement Schedules and Reports
            on Form 8-K ................................................... 24
            (a)    (1)   Consolidated Financial Statements ................ 24
                   (2)   Consolidated Financial Statement Schedules ....... 24
            (b)    Reports on Form 8-K .................................... 24
            (c)    Exhibits Required by Securities and Exchange Commission
                   Regulation S-K ......................................... 24
</TABLE>


                                      ii
<PAGE>

                                    PART I


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

            (a)    General Development of Business

                   Raritan Bancorp, Inc.

        Raritan Bancorp, Inc. (the "Corporation"), a Delaware Corporation, is a
bank holding company whose only subsidiary is The Raritan Savings Bank (the
"Bank"), an FDIC/BIF insured, New Jersey chartered savings bank, headquartered
in Raritan, New Jersey.  The Corporation was formed at the direction of the Bank
in connection with the Bank's conversion from a mutual to stock form of
organization (the "Conversion").  The Conversion of the Bank and its acquisition
by the Corporation was consummated on May 21, 1987.  The sole activity of the
Corporation is its ownership of all of the issued and outstanding common stock
of the Bank.


                   The Raritan Savings Bank

        The Bank is a New Jersey chartered stock savings bank organized in 1869.
Its main office is located at 9 West Somerset Street, Raritan, New Jersey 08869,
and its telephone number is 908-725-0080.  It also operates branch offices in
Manville, Martinsville, Somerville, Warren and Whitehouse Station, New Jersey.
The deposit accounts in the Bank are insured by the Federal Deposit Insurance
Corporation (the "FDIC") primarily through the Bank Insurance Fund (the "BIF").
Effective August 1, 1996, the Manville Savings Bank, SLA (Manville) was merged
with, and into, the Bank pursuant to a merger agreement.  As part of the merger,
124,596 common shares of the Corporation were issued.  Proceeds from the
issuance of these shares totaled $2.0 million.  The transaction was accounted
for using the purchase method of accounting.  Negative goodwill totaling
$746,000 was recorded and will be accreted to income over a period of five years
using the straight-line method.  Net loans and deposits acquired totaled $11.9
million and $12.5 million, respectively.  The acquisition had an immaterial
impact on the results of operations of the Corporation.

        The Bank considers its primary market area for deposits to be the areas
serviced by these six offices, 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.
These areas include mostly manufacturing and service companies.  There are four
other financial institutions in Raritan.

            (b) Financial Information About Industry Segments

                Not applicable.
<PAGE>

            (c) Narrative Description of Business

                (1)     General Description of Business

        The Corporation is a bank holding company whose only subsidiary is the
Bank.

        The Bank 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 portion of its assets
is invested in securities, including mortgage-backed securities.

        It is the Bank's policy primarily to originate adjustable-rate mortgage
loans and other loans of an adjustable or short-term nature.  However, in order
to meet the demands of borrowers in the Bank's local lending area for long-term,
fixed-rate mortgage loans in the current interest rate environment, the Bank
began originating such loans (both 15 and 30 year loans) in 1991.  Of the $52.9
million of first mortgage loans disbursed during 1996, $3.2 million were fixed-
rate, while the balance of $49.7 million were of an adjustable or short-term
nature.  Consumer and commercial lending disbursements totaled $30.8 million for
1996 and consisted primarily of loans which are tied to the prime lending rate
and are of a short-term nature.

        The Bank 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
whose rates are tied to the prime lending rate, market-rate certificates,
IRA/Keough accounts, automated teller machine ("ATM") accessibility using the
MAC(R) Plus(R) system, real estate mortgage loans, various consumer and
commercial time and demand loans, and home equity lines of credit.

                (2)     Regulation and Supervision

        General.  As a New Jersey chartered savings bank, the deposits of which
        -------
are insured by the FDIC primarily through the BIF, the Bank is subject to
extensive regulation by the FDIC and the New Jersey Department of Banking (the
"Banking Department").  Both the Banking Department  and FDIC periodically
examine the Bank for compliance with various regulatory requirements.  The Bank
must file reports with the FDIC and the Banking Department describing its
activities and financial condition. The Board of Governors of the Federal
Reserve System ("FRB") approved the Corporation's application to acquire the
capital stock of the Bank and thereby to become a bank holding company. The
Corporation is therefore subject to regulation, examination, supervision by the
FRB.  This supervision and regulation is intended primarily for the protection
of depositors.  The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes.  Any change in such regulations could have a material
adverse impact on the Corporation, the Bank and their operations. Certain of
these regulatory requirements are referred to below or appear elsewhere

                                       2
<PAGE>

herein.  The Corporation is also subject to the reporting requirements of the
Securities and Exchange Commission ("SEC").

        To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions involved.  In this regard, it
should be noted that there have been numerous statements by legislative and
regulatory officials and industry officials regarding the potential for
legislative and regulatory changes.

        New Jersey Law.  The Bank is a stock-form savings bank organized under
        --------------
the laws of the State of New Jersey, and its deposits are insured by the FDIC.
The Bank derives its lending, investment and other powers from the applicable
provisions of New Jersey law and the regulations of the Banking Department,
subject to limitations or other modifications under applicable federal laws and
regulations of such agencies as the FDIC and the Federal Reserve Board.

        The Banking Department regulates the Bank's internal organization as
well as its deposit, lending and investment activities.  The Commissioner of the
Banking Department must approve changes to the Bank's Certificate of
Incorporation, establishing or relocating branch offices, mergers and the
issuance of additional stock.  Many of the areas regulated by the Banking
Department are subject to similar regulation by the FDIC.  New Jersey-chartered
savings banks have lending, investment and other powers similar to those
authorized for federally-chartered savings institutions, including commercial
lending authority and the ability to offer personal and commercial checking and
NOW accounts, and have virtually the same powers as commercial banks.

        The Financial Institutions Reform, Recovery and Enforcement Act of 1989.
        -----------------------------------------------------------------------
On August 9, 1989, the President of the United States signed into law the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"),
a major reform intended primarily to recapitalize the savings and loan industry.
Although the primary emphasis of the new law was to recapitalize and restructure
the regulation and insurance of the savings and loan industry, certain
provisions did affect banks and FDIC-insured savings banks.  Notably, FIRREA
abolished the Federal Savings and Loan Insurance Corporation and required that
the FDIC establish two separate insurance funds, the Bank Insurance Fund ("BIF")
and the Savings Association Insurance Fund ("SAIF").  Banks, including state-
chartered savings banks, are insured under the BIF.  "Savings associations"
(i.e., savings and loan associations) are insured under the SAIF.  Under FIRREA,
the BIF may not be commingled with the SAIF and vice versa.  See "Insurance of
Deposits."  Also under FIRREA, bank holding companies now are able to acquire
any savings association without the imposition of cross-marketing restrictions
on transactions between the association and its holding company affiliates.

        The Federal Deposit Insurance Corporation Improvement Act of 1991.  On
        -----------------------------------------------------------------
December 19, 1991 the Federal Deposit Insurance Corporation Improvement Act of
1991 (the "Act") was signed by the President.  Among other things, the Act
provided additional sources of funding to the BIF, which generally insures the
deposits of banks, including state-chartered

                                       3
<PAGE>

savings banks. The Act also authorizes the FDIC to impose emergency special
assessments on BIF-members where deemed necessary, in addition to the regular
insurance assessments. The Act also adopted a number of new mandatory
supervisory measures designed to reduce costs to the deposit insurance fund. For
example, effective December 19, 1992, the regulatory agencies were required to
take certain supervisory actions (the "Prompt Corrective Action" provisions)
against undercapitalized banks. The severity of such action depends upon the
degree of undercapitalization. The Act generally requires, subject to a narrow
exception, the appointment of a receiver or conservator for banks whose tangible
capital level falls below 2%, which appointment must be made within a maximum of
270 days after the threshold is reached. The final Prompt Corrective Action
rules generally provide that an insured institution that has total risk-based
capital of less than 8.0% or a leverage ratio that is less than 4.0% would be
considered to be "undercapitalized", an insured institution that has total risk-
based capital less than 6.0% or a leverage ratio that is less than 3.0% would be
considered to be "significantly under-capitalized" and an insured institution
that has a tangible capital to assets ratio equal to or less than 2% would be
deemed to be "critically undercapitalized." Generally, under the rule, an
insured institution that is "undercapitalized," "significantly under-
capitalized," or "critically undercapitalized" becomes immediately subject to
certain regulatory restrictions, including, but not limited to, restrictions on
growth, investment activities, capital distributions, and affiliate
transactions. The filing of a capital restoration plan, which must be guaranteed
by the parent holding company, is also required. In addition, "critically
undercapitalized" institutions must receive prior written approval from the FDIC
to engage in any material transaction other than in the normal course of
business.

        Pursuant to the Act, the federal regulatory agencies adopted final
regulations prescribing standards relating to a variety of operating matters
such as internal controls, information systems and external audit systems, loan
documentation and credit underwriting, interest rate exposure, asset growth and
quality and employee compensation.

        The Act also places new restrictions on investments by, and the
activities of, insured state banks such as the Bank.  Effective December 19,
1992, neither state banks nor their subsidiaries may engage in activities not
permissible for national banks or their subsidiaries unless the FDIC determines
that the activity would pose no significant risk to the deposit insurance fund
and the bank is and continues to comply with applicable federal capital
standards.  Additionally, subject to exceptions for majority-owned subsidiaries
and certain other limited exceptions, state banks may not acquire or retain any
equity investment of a type or in an amount not permissible for national banks.
Generally, nonconforming investments must be divested over a five-year
transition period.

        Insurance of Deposits.  The Bank's deposit accounts primarily are
        ---------------------
insured by the BIF up to applicable limits, generally $100,000 per insured
depositor.  In September 1991, the Bank assumed $80.3 million of insured deposit
liabilities relating to the Warren and Whitehouse Station, New Jersey branch
offices of a savings association being operated by the Resolution Trust
Corporation, and also acquired deposits totaling $12.5 million as a result of
the Manville merger. These deposits are insured by the Savings Association
Insurance Fund ("SAIF"),  up to applicable limits, generally $100,000 per
insured depositor.  The SAIF, like the BIF, is administered by the

                                       4
<PAGE>

FDIC. The FDIC promulgates regulations, conducts periodic examinations, requires
the filing of reports and generally supervises the operations of its insured
banks.  The approval of the FDIC is required prior to a merger or consolidation
or the establishment or relocation of an office facility.  This supervision and
regulation is intended primarily for the protection of depositors.

        On September 30, 1996, legislation was enacted which, among other
things, imposed a special one-time assessment on SAIF Insured Deposits,
including approximately $83.0 million in "Oakar" and "Sasser" deposits held by
the Bank, to recapitalize the SAIF and spread the obligations for payment of
Financing Corporation (FICO) bonds across all SAIF and Bank Insurance Fund (BIF)
members. The Federal Deposit Insurance Corporation (FDIC) special assessment
levied amounted to 65.7 basis points on SAIF assessable deposits held as of
March 31, 1995. The Bank took a charge of $436,000 before tax-effect, as a
result of the special assessment. This legislation will eliminate the
substantial disparity between the amount that BIF and SAIF member institutions
had been paying for deposit insurance premiums.

        Beginning on January 1, 1997, BIF members will pay a portion of the FICO
payment equal to 1.3 basis points on BIF-insured deposits compared to 6.4 basis
points on SAIF insured deposits and will pay a pro-rata share of the FICO
payment on the earlier of January 1, 2000, or the date upon which the last
savings association ceases to exist. The legislation also requires BIF and SAIF
to be merged by January 1, 1999, provided that subsequent legislation is adopted
to eliminate the savings association charter and no savings associations remain
as of that time.

        Beginning January 1, 1997, SAIF assessment rates will range from 0 to 27
basis points, based upon an institution's regulatory risk classifaction and
capital group. Based upon its current classification the rate applicable to the
SAIF deposits held be the Bank would be zero.

        Capital Requirements.  Both the FRB and the FDIC have issued regulations
        --------------------
which require both the Corporation and the Bank, respectively, to maintain
minimum levels of capital. In general, the regulations require a leverage
capital ratio of 4% of total assets to be maintained. At December 31, 1996, the
Corporation's and Bank's leverage capital ratio was each 7.44%.

        The FDIC and the FRB also have adopted a risk-based capital policy which
imposes an additional capital standard on insured banks and bank holding
companies. Under this regulation, the Corporation and Bank must classify its
assets and certain off-balance sheet activities into categories, and maintain
specified levels of capital for each category. The least capital is required for
the category having the least risk, and the most capital is required for the
category deemed to have the greatest risk. At December 31, 1996, the Corporation
and the Bank were required to have a Tier 1 risk-based capital ratio of 4% and
total-risk-based capital ratio of 8%. At December 31, 1996, the Corporation's
Tier 1 and total risk-based capital ratios were 12.834% and 14.086%,
respectively. The Bank's Tier 1 and total risk-based capital ratios were 12.833%
and 14.085%, respectively.

                                       5
<PAGE>

        Under the Act, the capital regulations of the FDIC and the FRB are
required eventually to include a component that takes into account, and may
require additional capital as a result of, the interest rate risk inherent in an
institution's portfolio.

        Any insured bank which does not operate in accordance with or conform to
FDIC regulations, policies and directives may be sanctioned for noncompliance.
For example, enforcement proceedings may be instituted against any insured bank,
or any director, officer or employee thereof who engages in unsafe and unsound
practices including the violation of applicable laws and regulations.  The FDIC
has the authority to terminate or suspend insurance of accounts pursuant to
procedures established for that purpose.

        Federal Reserve System.  Under the FRB regulations, the Bank is required
        ----------------------
to maintain reserves against its transaction accounts (primarily checking and
NOW accounts), nonpersonal money market deposit accounts, and nonpersonal time
deposits. Because reserves must generally be maintained in cash or in
noninterest bearing accounts, the effect of the reserve requirement is to reduce
the Bank's level of investable funds. These regulations generally require
reserves of 3% of total transaction accounts of up to $49.3 million. Total
transaction accounts amounting to over $49.3 million require a reserve of $1.5
million plus 10% (subject to adjustment by the FRB of between 8% and 14%) of
that portion of total transaction accounts in excess of such amount. In
addition, reserves in the amount of 3% must be maintained on nonpersonal money
market deposit accounts and on nonpersonal time deposits that have original
maturities of less than one and one half years and Eurocurrency liabilities.
Institutions are permitted to designate and exempt $4.4 million of reservable
liabilities from these reserve requirements. These amounts and percentages are
subject to adjustment by the FRB. The Bank was in compliance with these
requirements at December 31, 1996.

        The Corporation received the approval of the FRB under the BHCA for the
acquisition of the Bank.  As a condition for obtaining FRB approval, the
Corporation has agreed that it will not engage in real estate investment
activities unless it provides the FRB with 30 days notice of such activities and
the FRB notifies the Corporation of its nonobjections.

        The Corporation will be required to obtain the prior approval of the FRB
to acquire all, or substantially all, of the assets of any bank or bank holding
company.  Prior FRB approval will be required for the Corporation to acquire
direct or indirect ownership or control of any voting securities of any bank or
bank holding company if, after giving effect to such acquisition, it would,
directly or indirectly, own or control more than 5% of any voting shares of such
bank or bank holding company.  In addition to the approval of the FRB, before
any bank acquisition can be completed, prior approval thereof may also be
required to be obtained from other agencies having supervisory jurisdiction over
the bank to be acquired.

        In addition, a bank holding company is generally prohibited from
engaging in, or acquiring direct or indirect control of any company engaged in
nonbanking activities.  One of the principal exceptions to this prohibition is
for activities found by the FRB to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto.  Some of the

                                       6
<PAGE>

principal activities that the FRB has determined by regulation to be so closely
related to banking are:  (i) making or servicing loans; (ii) performing certain
data processing services; (iii) providing discount brokerage services; (iv)
acting as fiduciary, investment or financial advisor; (v) leasing personal or
real property; (vi) making investments in corporations or projects designed
primarily to promote community welfare; and (vii) acquiring a savings and loan
association.  Legislation has been proposed in Congress to relax, and even
eliminate, the restrictions on activities that may be engaged in by nonbank
subsidiaries of a bank holding company.

        Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extension of credit to
the bank holding company or any of its subsidiaries, on investments in the stock
or other securities of such holding company or its subsidiaries, and on the
acceptance of such stocks or securities as collateral for loans.  Moreover,
subsidiaries of bank holding companies are prohibited from engaging in certain
tie-in arrangements (with the Corporation or any of its subsidiaries) in
connection with any extension of credit, lease or sale of property or furnishing
of services.

        The Corporation and its subsidiary Bank are affected by the monetary and
fiscal policies of various agencies of the United States Government, including
the Federal Reserve System.  In view of changing conditions in the national
economy and in the money markets, it is impossible for the management of the
Corporation to accurately predict future changes in monetary policy or the
effect of such changes on the business or financial condition of the Corporation
and the Bank.

        Community Reinvestment Act.  Under the Community Reinvestment Act
        --------------------------
("CRA"), as implemented by FDIC regulations, a savings institution has a
continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including low
and moderate income neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to its particular community, consistent with the CRA.
The CRA requires the FDIC, in connection with its examination of a savings
institution, to assess the institution's record of meeting the credit needs of
its community and to take such record into account in its evaluation of certain
applications by such institution. Public disclosure of an institution's CRA
rating is required.  The FDIC provides a written evaluation of an institution's
CRA performance utilizing a four-tiered descriptive rating system which replaced
the five-tiered numerical rating system. The Bank has a satisfactory rating.

        Acquisition of the Corporation.  Under the Federal Change in Bank
        ------------------------------
Control Act ("CIBCA"), a notice must be submitted to the FRB if any person or
group acting in concert seeks to acquire 10% or more of the Corporation's shares
of Common Stock outstanding, unless the FRB finds that the acquisition will not
result in a change in control of the Corporation.  Under the CIBCA, the FRB has
60 days within which to act on such notices, taking into consideration certain
factors, including the financial and managerial resources of the acquiror, the
convenience and needs of the communities served by the Corporation and the Bank,
and the antitrust effects of the acquisition.  Under the BHCA, any company would
be required to obtain prior approval from the

                                       7
<PAGE>

FRB before it may obtain control of the Corporation.  Control generally is
defined to mean the beneficial ownership of 25% or more of any class of voting
securities of the Corporation.  Under New Jersey law, the Commissioner is
required to approve in advance any acquisition of the Corporation's Common Stock
in excess of 25% of the shares outstanding.

        Federal Income Taxation.  For Federal income tax purposes, the
        -----------------------
Corporation files a consolidated return with its subsidiary Bank, using the
accrual method of accounting.  The Bank is, with certain exceptions, subject to
the rules of Federal income taxation generally applicable to corporations.  The
maximum Federal corporate income tax rate for all taxable income including
capital gains is currently 34%.

        If certain conditions were met, under tax law that existed prior to
1996, thrift institutions, in determining taxable income, were allowed a special
bad debt deduction based on a percentage of taxable income before such
deduction.  The Corporation prepares and files its tax return on a calendar-year
basis.  The Corporation used the experience method in preparing the Federal
income tax return for calendar years 1996, 1995 and 1994.  The tax bad debt
reserve method was repealed for tax years beginning after 1995.  As a result,
the Corporation may no longer use the percentage of taxable income reserve
method.  A small thrift (one with $500 million or less in assets) is allowed to
use either the specific charge-off method or the "bank" experience method of
Section 585 of the Internal Revenue Code to compute its bad debt deduction.

        Based upon 1996 Federal tax law changes, thrift institutions are
generally required to recapture into income the portion of its bad debt reserve
(other than supplemental reserve) that exceeds its base year (December 31, 1987)
reserves.  The recapture amount generally will be taken into income ratably (on
a straight-line basis) over a six-year period.  Under a small thrift exception,
the Corporation's tax reserves for bad debts equaled its allowable experience
reserve method and therefore, the Corporation will have no recapture.

        The Corporation has not recognized a deferred tax liability of
approximately $746,000 for bad debt reserves for tax purposes which arose in tax
years beginning before December 31, 1987 (i.e., base year).  A deferred tax
liability will be recognized if the Corporation expects that charges to the bad
debt reserves, other than the losses on loans or recomputations of bad debt
deductions resulting from operating loss carrybacks to prior years, would result
in taxable income. The Corporation does not anticipate any such recognition in
the foreseeable future.

        To the extent that (i) the Bank's reserve for losses on qualifying real
property loans exceeds the amount that would have been allowed under the
experience method and (ii) the Bank makes distributions to shareholders (as
dividends or redemptions of stock or in partial or complete liquidation) that
are considered to result in distributions from the excess bad debt reserve or
the supplemental reserve for losses on loans ("Excess Distributions"), then the
amounts considered distributed will be included in the Bank's taxable income.
The amount considered distributed includes the federal income tax payable on the
Excess Distribution.  In contrast, dividends paid out of the Bank's current or
accumulated earnings and profits, as calculated for federal income tax purposes,
will not be considered to result in distributions from the Bank's bad debt
reserves.

                                       8
<PAGE>

Distributions in excess of the Bank's current and accumulated earnings and
profits, distributions in redemption of stock and distributions in partial or
complete liquidation of the Bank generally are considered, in whole or in part,
to result in distributions from the Bank's bad debt reserves and the
supplemental reserve for losses on loans.

State Income Taxation
---------------------

        The Bank is taxed under the New Jersey Savings Institutions Tax Act.
The tax is an annual privilege tax imposed at the rate of 3% on the net income
of the Bank as reported for federal income tax purposes with certain
modifications.  The Corporation is taxed under the New Jersey Corporation
Business Tax Act.  If it meets certain tests, the Corporation would be taxed as
an investment company at an effective annual rate of 2.34% of New Jersey taxable
income. If it fails to meet such test, it will be taxed at an annual rate of
9.375% of New Jersey taxable income.  As a Delaware business corporation, the
Corporation is subject to an annual Delaware franchise tax.

               (3)  Monetary Policies

        The Corporation and its subsidiary Bank are affected by the monetary and
fiscal policies of various agencies of the United States Government, including
the Federal Reserve System.  In view of changing conditions in the national
economy and in the money markets, it is impossible for the management of the
Corporation to accurately predict future changes in monetary policy or the
effect of such changes on the business or financial condition of the
Corporation.

               (4)  Employees

        The Corporation had 78 full-time and 11 part-time employees on December
31, 1996

               (5)  Statistical Information

        The statistical information on the Corporation set forth in the
following sections is furnished pursuant to Industry Guide 3 under the
Securities Exchange Act of 1934.

                    (a)    Distribution of Assets, Liabilities and Shareholders'
                           Equity; Interest Rates and Interest Differential.

        Information regarding the distribution of assets, liabilities and
shareholders' equity; interest rates and interest differential appear on pages
16 and 17 of the Annual Report to Shareholders for the year ended December 31,
1996, and are incorporated herein by reference.

                                       9
<PAGE>

                    (b)    Securities Portfolio


        The following table sets forth the carrying amount of securities at the
dates indicated.
<TABLE>
<CAPTION>

                                                                    At December 31,
                                                          ----------------------------------
<S>                                                        <C>           <C>         <C>

                                                           1996          1995         1994
                                                           ----          ----         ----
                                                                     (In thousands)

U.S. government obligations and obligations
 of U.S. government agencies.................           $ 17,143     $  12,584     $  15,295
Obligations of states and political
 subdivisions................................                748           804           770
Mortgage-backed securities issued
 by Federal agencies.........................             81,111        98,565       110,615
Federal Home Loan Mortgage
 Corporation common stock....................                170            --            --
                                                        --------     ---------     ---------
                                                        $ 99,172     $ 111,953     $ 126,680
                                                        ========     =========     =========

</TABLE>

          The mortgage backed securities owned by the Bank are issued and
guaranteed by either the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation.  These securities consist of pools of underlying
mortgages with similar interest rates and similar maturities.  The Bank receives
a pro rata share (based on its percentage ownership in each individual pool) in
the principal and interest cash flows to be received as the underlying mortgages
are repaid by the mortgagors.

          The overall return (i.e. yield) earned on mortgage backed securities
is highly sensitive to repayments on the underlying mortgage loans which can be
made before their scheduled maturity date.  In periods of falling market
interest rates, prepayment of the underlying mortgages may accelerate and reduce
the yield on a particular mortgage backed security.

          The credit risk associated with mortgage backed securities is
nonexistent because payment of interest and ultimate repayment of principal is
guaranteed by the Federal National Mortgage Association, ("FNMA"), or the
Federal Home Loan Mortgage Corporation ("FHLMC"), as applicable.

          The following table sets forth the maturities and average weighted
yields for the securities available-for-sale and investment securities, net,
portfolios at December 31, 1996.  Yields on tax-exempt securities are shown on a
fully tax-equivalent basis assuming an approximate 36% combined Federal and New
Jersey State income tax rates:

                                       10
<PAGE>

<TABLE>
<CAPTION>

                                                                              Mortgage-
                                                       Obligations of          backed
                                         U.S.Gov't       State and        Securities Issued    FHLMC
                         U.S. Gov't.      Agency         Political            by Federal      Common
                         Obligations    Obligations     Subdivisions           Agencies        Stock    Total
                         -----------    -----------     ------------           --------        -----    -----
<S>                      <C>            <C>             <C>               <C>                 <C>       <C>
Due within 1 year
  Amount................   $2,496           $500            $--                  $--            $--     $2,996
  Yield.................     5.47%          7.35%            --                   --             --       5.78%
Due from 1-5 years:
  Amount................      196         11,955             --                   --             --     12,151
  Yield.................     6.46%          6.40%            --                   --             --       6.40%
Due from 5-10 years:
  Amount................      --           1,996             --                   --             --      1,996
  Yield.................      --            7.00%            --                   --             --       7.00%
Due after 10 years:
  Amount................      --             --              748                  --             --        748
  Yield.................      --             --            10.71%                 --             --      10.71%
Mortgage-backed
 securities issued by
 Federal agencies:
  Amount................      --             --              --                81,111            --     81,111
  Yield.................      --             --              --                  6.11%           --       6.11%
FHLMC Common Stock
  Amount................      --             --              --                   --             170       170
  Yield.................      --             --              --                   --            1.26%     1.26%
Total:
  Amount................   $2,692        $14,451            $748              $81,111           $170   $99,172
  Yield.................     5.54%          6.52%          10.71%                6.11%          1.26%     6.18%
</TABLE>

          Mortgage-backed securities issued by Federal agencies are disclosed
separately because the principal balance is not due at a single maturity date.

          At December 31, 1996, there were no securities held of a single issuer
(excluding U.S. Government Obligations and U.S. Government Agency Obligations)
which exceeded 10% of shareholders' equity.

                                      11
<PAGE>

          (c)    Loan Portfolio

     The following table sets forth the composition of the Corporation's loan
portfolio.

<TABLE>
<CAPTION>
                                                                      At December 31,
                                             --------------------------------------------------------------
                                                1996         1995         1994         1993         1992
                                             ----------   ----------   ----------   ----------   ----------
                                                                    (In thousands)
<S>                                          <C>          <C>           <C>         <C>          <C>
Real estate-mortgage.................          $179,135     $147,673     $138,975     $123,539     $111,961
Real estate-construction.............            11,019        8,536        6,454        4,379        6,172
Consumer.............................            35,300       28,886       28,660       28,826       32,209
Commercial...........................            10,020       10,544        9,007        8,705        8,704
In-substance foreclosed loans........                --           --          701          860          941
                                             ----------   ----------   ----------   ----------   ----------
    Total loans......................           235,474      195,639      183,797      166,309      159,987

Less: Unearned income................              (404)        (467)        (474)        (514)        (664)
      Allowance for loan losses......            (2,965)      (2,582)      (2,729)      (3,094)      (1,797)
      Valuation allowance............                --           --           --           --          (22)
                                             ----------   ----------   ----------   ----------   ----------
Net loans............................          $232,105     $192,590     $180,594     $162,701     $157,504
                                             ==========   ==========   ==========   ==========   ==========
</TABLE>
          (d)    Maturity of Loans

      The following table sets forth the maturities and sensitivities of loans
to changes in interest rates at December 31, 1996. The table does not take into
consideration scheduled loan amortization or prepayments.

<TABLE>
<CAPTION>
                                                      Maturing
                                      ------------------------------------------
                                      One Year One Through   After
                                      or Less  Five Years  Five Years    Total
                                      -------  ----------  -----------  --------
                                                    (In thousands)
<S>                                   <C>      <C>         <C>          <C>
Real estate-mortgage................  $46,438     $78,980     $ 53,717  $179,135
Real estate-construction............   11,019          --           --    11,019
Consumer............................   16,027       9,551        9,567    35,145
Commercial..........................   10,150          25           --    10,175
                                      -------     -------     --------  --------
        Total loans.................  $83,634     $88,556     $ 63,284  $235,474
                                      =======     =======     ========  ========
Loans due after 1 year with:
  Predetermined interest rates......              $ 6,200      $43,421  $ 49,621
  Floating or adjustable interest
   rates............................               82,356       19,863   102,219
                                                  -------      -------  --------
                                                  $88,556      $63,284  $151,840
                                                  =======      =======  ========
</TABLE>

The following loan products are currently being offered by the Bank:

          Residential First Real Estate Loans:  The Bank makes available to
          ------------------------------------
potential borrowers in its primary consumer area a various range of residential
loans including adjustable rate mortgage loans ("ARMS") and fixed rate loans up
to terms of 30 years.  ARMS are considered by

                                      12
<PAGE>

management to be advantageous to the Bank because adjustable-rate loans better
match its shorter-term liability base.

          Under the Bank's current ARM programs, the potential borrower may
choose among loans that have the initial interest rate fixed for one, three,
five or ten years before the adjustments begin.  Currently, ARMS are indexed to
the one, three or five year U.S. Treasury constant maturities.  All of the
Bank's residential mortgage lending is subject to non-discriminatory
underwriting standards.  All loans are subject to underwriting review and
approval by various levels of Bank personnel, depending on the size of the loan.
Generally, the Bank requires a loan to value ratio of no more than 80%.
However, circumstances may allow a loan to value ratio as high as 90%. The
collateral for these loans are borrowers who own primary residences.  These
loans represent the least degree of credit risk of all loan products offered
(except loans secured by customers' deposits) by the Bank.

          In addition to interest earned on loans, the Bank receives fees for
originating loans and for providing loan commitments.  The Bank also charges
fees for late payments and other miscellaneous services.  Fees received in
connection with loan originations are deferred and amortized into interest
income over the estimated life of the loan.  The Bank may also purchase such
loans (servicing also acquired).

          Construction Loans:  The Bank provides financing for basically two
          -------------------
different categories of construction loans.  An individual construction loan is
made to the intended occupant of a house to finance its construction.
Construction loans are also made to developers who are in the business of
improving lots and building homes for resale.  Generally, the Bank requires a
loan to value ratio of not more than 75% for these type of loans.  These loans
involve somewhat more risk than residential real estate loans.  Loans to
developers are riskier than an individual construction loan since payment of
interest and repayment depends upon the sale of the individual houses in the
development.  Construction loans require approval by various levels of Bank
personnel, depending on the size of the loan.

          Commercial (Small Business) Loans:  As part of the overall
          ----------------------------------
diversification of the loan portfolio, the Bank will entertain loan requests
from entities that manufacture wholesale or retail products and/or provide
services in our market area.  The Bank will consider the following types of
credits:  real estate loans, working capital lines of credit, and
equipment/vehicle loans.  Since commercial lending entails greater risks than
residential and construction lending and repayment generally depends upon the
cash flows of the borrowing entity, interest rates are generally of a variable
nature.  Maturities or repricings are of shorter terms (generally no longer than
five years). Depending on the types of collateral and repayment terms, loan to
value ratios generally cannot be greater than 80%.  Depending on the nature of
the loan requests, commercial loans require approval at various levels of Bank
personnel.

          Second Mortgage and Other Consumer Loans:  The Bank also offers
          -----------------------------------------
consumer loans which include second mortgage loans for a variety of purposes
including the renovation or remodeling of property, or for uses unrelated to the
security.  Consumer loans for the purchases of

                                      13
<PAGE>

automobiles are also originated.  These type loans, in addition to being an
important part of the Bank's orientation toward consumer financial services,
help promote increased net interest income stability because of their somewhat
shorter maturities and faster prepayment characteristics.  These loans are made
based on an evaluation of the collateral and potential borrower's
creditworthiness, including such factors as income, other indebtedness and
credit history.  Generally, second mortgage loans do not exceed 80% of the value
of the collateral, less the outstanding balance of any fixed mortgage loan.
These loans pose more credit risk than residential first real estate loans, but
is offset by higher interest rates and are of a variable nature and shorter-
term.

          Other Types of Lending:  The Bank will also offer collateral loans
          -----------------------
(secured by deposit at the Bank or readily marketable securities) and personal
loans to individuals.  These are generally loans of small dollar amounts and
shorter terms.  Collateral loans offer no credit risk because of their 100%
secured status, and personal loans offer minimal credit risk because of their
small balances (average balance was $7,000 at December 31, 1996).

          The Bank will from time to time issue (for a fee) a standby letter of
credit which is an obligation of the Bank to a third party that in the event a
particular act or deed of one of the Bank's borrowers is not performed, then the
Bank will reimburse that third party.  The most common purpose is to guaranty
the workmanship within a housing tract.  Standby letters of credit are issued to
the Bank's most credit-worthy customers and require the same diligence as the
Bank would exercise in underwriting a loan in the amount of the guaranty.  At
December 31, 1996 the total amount of standby letters of credit outstanding
totaled $2.0 million.

          New Jersey's employment rolls continue to grow with an approximate
0.8% increase in 1996 and a 1.0% increase projected for 1997.  This expansion
will be mostly in the services sector, offset by declines mainly in
manufacturing.  Information technology is becoming the leading industry in New
Jersey.  This job growth has led New Jersey to the 5th largest office inventory
in the country (behind New York, Los Angeles, Chicago and San Francisco).
Decreases in the overall vacancy rate, and in particular Class A (high qualify
buildings in prime locations) have led to new construction of these type office
buildings.

          In the Bank's main lending areas--Somerset and Hunterdon Counties--new
home construction continued with 3,095 permits issued for the first ten months
of 1996, compared to 2,605 for the comparable 1995 period, and 18.8% increase.

          Somerset County currently ranks as the wealthiest in the country with
an annual median discretionary household income of $78,205, followed closely by
Hunterdon County with a median discretionary income of $77,277 per year.

                                      14
<PAGE>

          (e)   Nonperforming Assets

     The following table sets forth information with respect to nonperforming
assets, which includes ninety days or more past due loans, nonaccrual loans, and
real estate acquired by foreclosure:

<TABLE>
<CAPTION>
                                                    At December 31,
                                     ----------------------------------------------
                                      1996      1995      1994      1993      1992
                                     ------    ------    ------    ------    ------
                                                (Dollars in thousands)
<S>                                  <C>      <C>        <C>       <C>       <C>
Loans:
 90 days or more past due
  (nonaccruing)..................    $1,317    $1,055    $  321    $  899    $  696
Nonaccrual loans (less than
 90 days past due)...............        66        --       197       734        --
In-substance foreclosed
 loans...........................        --        --       701       860       941
                                     ------    ------    ------    ------    ------
 Total non-performing loans......     1,383     1,055     1,219     2,493     1,637
Real estate acquired by
  foreclosure....................       103       170     1,083     1,828     1,385
                                     ------    ------    ------    ------    ------
  Total nonperforming
   assets........................     1,486     1,225     2,302     4,321     3,022
Loans with modified terms........        --        --        --        --     1,808
                                     ------    ------    ------    ------    ------
                                     $1,486    $1,225    $2,302    $4,321    $4,830
                                     ======    ======    ======    ======    ======
Total non-performing loans as
  a percentage of total net
  loans..........................      0.60%     0.55%     0.67%     1.53%     1.04%
Non-performing assets as a
  percentage of total net
  loans and real estate
  acquired by foreclosure........      0.64%     0.64%     1.27%     2.63%     3.04%

</TABLE>

     Gross interest on non-performing loans at December 31, 1996 that would
have been recorded in accordance with the original terms of these loans had they
been performing totaled $142,000 for 1996.  Interest income recognized on non-
performing loans at December 31, 1996 totaled $4,000.

     The accrual of income on loans is generally discontinued and all interest
income previously accrued and unpaid is deducted from income when a loan becomes
more than ninety days delinquent, or when certain factors indicate reasonable
doubt as to the timely collectibility of such income. Income is recognized
subsequently only in the period collected.

     At December 31, 1996, there were no loans, other than those referred to
above or included in the above table, which could be considered potential
problem loans. It is management's policy to review all delinquent loans to
determine future collectibility of both principal and interest.

     At December 31, 1996, there were no concentrations of loans exceeding 10%
total loans outstanding.


                                      15
<PAGE>

          (f)  Summary of Loan Loss Experience and Allocation of the Allowance
               for Loan Losses

     The allowance for loan losses is established through a provision for loan
losses charged to expense.  Loans are charged against the allowance for loan
losses when management believes the collectibility of the principal is unlikely.
The allowance is an amount that management believes will be adequate to absorb
inherent losses on existing loans that may become uncollectible.  The
determination of the balance of the allowance for loan losses is based on an
analysis of the loan portfolio, economic conditions, historical loan loss
experience, the borrower's ability to repay, collateral value and other factors
that warrant recognition in providing an adequate allowance. While management
uses available information to recognize losses on loans, future additions may be
necessary based on changes in economic conditions.  In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for losses on loans.  Such agencies may
require the Bank to recognize additions to the allowance based on their
judgments of information available to them at the time of their examination.

     The following table analyzes the allowance for loan losses for the years
indicated.

<TABLE>
<CAPTION>

                                                 Year Ended December 31,
                                       -------------------------------------------
                                        1996     1995     1994      1993     1992
                                       ------   ------   ------    ------   ------
                                                  (Dollars in Thousands)
<S>                                    <C>      <C>      <C>      <C>       <C>
Beginning balance....................  $2,582   $2,729   $3,094   $ 1,797   $1,201
Loans charged off:
          Real estate................    (247)    (213)    (787)     (891)    (365)
          Consumer...................    (133)    (252)     (38)     (128)     (34)
                                       ------   ------   ------   -------   ------
                                         (380)    (465)    (825)   (1,019)    (399)
Recoveries:
          Real estate................      --        9        4        --        8
          Consumer...................      10        9        6        26       42
                                       ------   ------   ------   -------   ------
                                           10       18       10        26       50
                                       ------   ------   ------   -------   ------
Net charge-offs......................    (370)    (447)    (815)     (993)    (349)
Provision for loan losses............     450      300      450     2,290      945
Manville Savings' acquisition........     303       --       --        --       --
Ending balance.......................  $2,965   $2,582   $2,729   $ 3,094   $1,797
                                       ======   ======   ======   =======   ======
Ratio of net charge-offs
          during the period to
          average loans outstanding
          during the period..........    0.18%    0.24%    0.47%     0.63%    0.22%

</TABLE>

                                      16
<PAGE>

     The following table presents the allocation of the allowance for loan
losses by loan category at the dates indicated.

<TABLE>
<CAPTION>

                                          At December 31,
                               --------------------------------------
                                1996    1995    1994    1993    1992
                               ------  ------  ------  ------  ------
                                           (In thousands)
<S>                            <C>     <C>     <C>     <C>     <C>
Real estate..................  $1,824  $1,432  $2,198  $1,968  $1,483
Consumer and other...........   1,141   1,150     531   1,126     314
                               ------  ------  ------  ------  ------
Total allowances for loan
        losses.............    $2,965  $2,582  $2,729  $3,094  $1,797
                               ======  ======  ======  ======  ======

</TABLE>

     The percentage of loans in each category to total loans is as follows:

<TABLE>
<CAPTION>

                                          At December 31,
                               --------------------------------------
                                1996    1995    1994    1993    1992
                               ------  ------  ------  ------  ------
<S>                            <C>     <C>     <C>     <C>     <C>
Real estate-mortgage.......     76.07%  75.49%  75.61%  74.25%  69.98%
Real estate-construction...      4.68    4.36    3.51    2.64    3.86
Consumer...................     14.99   14.76   15.60   17.35   20.13
Commercial.................      4.26    5.39    4.90    5.24    5.44
In-substance foreclosed
        loans.....................        --      --     .38     .52     .59
                               ------  ------  ------  ------  ------
        Total..............    100.00% 100.00% 100.00% 100.00% 100.00%
                               ======  ======  ======  ======  ======
</TABLE>
          (g) Deposits

     The average balance of deposits and the average rates paid thereon are
summarized in Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differential, on page 18 of the Annual Report to
Shareholders for the year ended December 31, 1996, and are incorporated herein
by reference.

          (h) Maturities of Time Deposits

The following table summarizes the maturity distribution of all time market rate
certificates in amounts of $100,000 or more, at December 31, 1996.  There are no
other time deposits in amounts of $100,000 or more.

<TABLE>
<CAPTION>

                 Maturity                            Amount
                 --------                            ------
                                                 (In thousands)
        <S>                                      <C>
        3 months or less.....................         $ 4,602
        Over 3 through 6 months..............           3,913
        Over 6 through 12 months.............           2,285
        Over 12 months.......................           5,699
                                                      -------
         Total...............................         $16,499
                                                      =======
</TABLE>

                                      17
<PAGE>

     The above table includes accounts in domestic bank offices. The Bank does
not have any foreign banking offices.

           (i)   Return on Equity and Assets

     The following table shows the operating and capital ratios for the
Corporation for the years indicated.

<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                           ---------------------------------
                                             1996         1995        1994
                                           --------     --------    --------
<S>                                        <C>          <C>         <C>
Net income to average assets........         0.89%        0.80%       0.88%
Net income to average shareholders
    equity..........................        11.71        10.53       12.33
Dividend payout ratio...............        31.58        31.90       25.84
Average shareholders' equity to
    average total assets............         7.60         7.64        7.14

</TABLE>

           (j)   Short-term Borrowings

<TABLE>
<CAPTION>

                                                   At December 31,
                                         ---------------------------------
                                           1996         1995        1994
                                         --------     --------    --------
                                                   (in thousands)
<S>                                      <C>          <C>         <C>
Federal Home Loan Bank of
 New York Advance; interest rate:
 6.875% and 5.375%, at December 31
 31, 1996 and 1995, respectively:...     $ 10,000     $ 10,000          --
Borrowings under repurchase
 agreements:
 Collateralized by U.S. Treasury
 securities and obligations of
 U.S. government agencies with
 a carrying value, including
 accrued interest receivable, of
 $9,982; interest rate: 6.430%......           --           --       9,792
                                         --------     --------    --------
                                         $ 10,000     $ 10,000    $  9,792
                                         ========     ========    ========
</TABLE>

     The Corporation may enter into sales of securities under repurchase
agreements. Such agreements are treated as financings and the obligations to
repurchase the same securities sold are



                                      18
<PAGE>

reflected as a liability in the Consolidated Balance Sheet.  The dollar amount
of securities underlying the agreements are book entry securities.

     At December 31, 1996 and 1995, there were no agreements outstanding to
repurchase the same securities. At December 31, 1994, agreements outstanding to
repurchase the same securities totaled $9,792,000.

     Agreements to repurchase the same securities averaged $0, $4,300,000 and
$1,896,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
The maximum amounts outstanding at any month-end under such agreements during
the years ended December 31, 1996, 1995 and 1994 totaled $0, $9,735,000 and
$9,792,000, respectively. Accrued interest payable totaled $0 at December 31,
1996 and 1995, and $18,000 at December 31, 1994. The average interest rate on
such agreements was 0.00%, 6.33% and 5.54% for the years ended December 31,
1996, 1995 and 1994, respectively.

           (k)    Competition

     The Bank faces significant competition both in making mortgage and consumer
loans and in attracting deposits.  The Bank's competition for loans comes
principally from savings and loan associations and savings banks, mortgage
banking companies (many of which are subsidiaries of major commercial banks),
insurance companies and other institutional lenders.  Its most direct
competition for deposits has historically come from savings and loan
associations, savings banks, commercial banks, credit unions and other financial
institutions.  The Bank faces additional competition for deposits from short-
term money market funds, stock funds, and other corporate and government
securities funds.  In light of the elimination of federal interest rate controls
on deposits, the Bank may face increasing competition among financial
institutions for deposits. Competition may increase as a result of the
continuing reduction in the effective restrictions on the interstate operations
of financial institutions.  Many of the Bank's competitors, whether traditional
financial institutions or otherwise, have much greater financial and marketing
resources than those of the Bank.

     The Bank competes for loans principally through the interest rates and loan
fees it charges and the efficiency and quality of services it provides borrowers
and their real estate brokers and print media.  It competes for deposits through
pricing and the offering of a variety of deposit accounts.

           (l)    Executive Officers

     Information concerning executive officers of the Corporation during fiscal
year 1996, who were not also directors of the Corporation, is also provided
below.

                                       19
<PAGE>

<TABLE>
<CAPTION>                                    Positions with Corporation and
                                           Business Experience for Past Five
Name and Age                                             Years
------------                               ---------------------------------
<S>                                     <C>
Lucille H. Daniel                       Vice President and Secretary of the
Age 62                                  Corporation and the Bank.

John J. Lukens                          Senior Vice President of the
Age 49                                  Corporation and Senior Vice
                                        President, Senior Loan Officer of the
                                        Bank since June, 1992.  Prior to such
                                        time, he was a Vice President and
                                        Credit Officer at National
                                        Westminster Bank, New Jersey.

</TABLE>

Item 2.    Properties
---------------------

          The following table sets forth certain information to each of the
Bank's offices.  The total net book value of the Bank's premises and equipment
at December 31, 1995, was $3.2 million. See Note 6 to the Consolidated Financial
Statements.  The Corporation believes that its facilities are adequate for
conduct of its current business.
<TABLE>
<CAPTION>
                                                                                 Expiration
                                                                               Date of Current        Lease
Location:                               Opened       Owned         Leased        Lease Term       Renewal Option
---------                               ------       -----         ------      -------------      --------------
<S>                                     <C>          <C>          <C>          <C>             <C>
Main office                               1869        X
9 West Somerset Street
Raritan, New Jersey  08869

Branches:
---------

339 South Main Street                     1996                        X           2006                  three 5-year
Manville, New Jersey 08835                                                                                 options

1921 Washington Valley Road               1976        X
Martinsville, New Jersey  08836

151 Adamsville Road                       1980                        X           2001                  one 6-year
Somerville, New Jersey  08876                                                                             option

51 Mountain Boulevard                     1991         X
Warren, New Jersey  07059

Whitehouse Mall                           1991                        X           2001                  one 5-year
Routes 22 East and 523                                                                                    option
Whitehouse Station, NJ  08889

Loan Production Office:
-----------------------

28 West Somerset Street                   1987                        X           1997                      None
Raritan, New Jersey  08869

Future Branch and Operations Center:
------------------------------------

Raritan Plaza                             1997                        X           2007                  two 5-year
Route 28                              (Projected)                              (Projected)                options
Bridgewater, New Jersey 08807
</TABLE>

                                       20
<PAGE>

Item 3.    Legal Proceedings
----------------------------

           Not applicable.

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

           Not applicable.

                                 PART II

Item 5.    Market for Registrant's Common Equity and Related Shareholder Matters
--------------------------------------------------------------------------------

              (a)   Market Information

         Raritan Bancorp's common stock is quoted on the NASDAQ National Market
System under the symbol "RARB."

         The following table presents the range of the high and low prices for
Raritan Bancorp's common stock as obtained from NASDAQ.
<TABLE>
<CAPTION>

                       1996            1995
                  --------------  --------------
Quarter Ending     High    Low     High    Low
----------------  ------  ------  ------  ------
<S>               <C>     <C>     <C>     <C>
March 31........  $22.25  $21.00  $21.75  $17.00
June 30.........   22.00   20.75   22.25   20.75
September 30....   22.00   20.25   22.50   21.00
December 31.....   23.50   21.25   22.50   21.50
</TABLE>

              (b)   Shareholders

       At March 10, 1997 Raritan Bancorp, Inc. had approximately 550
shareholders of record, including brokerage firms, banks and registered clearing
agencies acting as nominees for an indeterminate number of beneficial owners.

              (c)   Dividends

       Subject to applicable law, the Board of Directors of the Corporation and
the Bank may each provide for the payment of dividends.

       The Bank will not be permitted to pay dividends on its capital stock if
its retained earnings would thereby be reduced below the amount required for the
liquidation account established at the time of its conversion to stock form and
the issuance of stock resulting from the Manville merger and acquisition
(approximately $1,005,000 at December 31, 1996), or applicable regulatory
capital

                                       21
<PAGE>

requirements.  New Jersey law provides that no dividend may be paid unless,
after the payment of such dividend, the capital stock of the Bank will not be
impaired and either the Bank 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.

       The Bank may pay cash dividends when its Board of Directors determines
that dividend payments are appropriate, taking into account factors including,
without limitation, the Bank's 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.  The Corporation expects to follow the same dividend policy as that of the
Bank.  The Corporation is subject to the requirements of Delaware law, which
generally limit dividends to an amount equal to the excess of the net assets of
the Corporation (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, 1996 and 1995, the Corporation
declared and paid cash dividends totaling $0.60 and $0.52, respectively, per
common share.

       On January 21, 1997, the Board of Directors of the Corporation declared a
quarterly cash dividend in the amount of $0.175 per common share.  The dividend
was paid on March 1, 1997 to shareholders of record as of February 15, 1997.

Item 6.  Selected Financial Data
--------------------------------

       Information relating to Selected Consolidated Financial Data on page 9 of
the Annual Report to Shareholders for the year ended December 31, 1996 is
incorporated herein by reference.

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

       Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 8 to 18 of the Annual Report to Shareholders for the year
ended December 31, 1996, is incorporated herein by reference.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

       The Consolidated Financial Statements and Report by KPMG Peat Marwick LLP
dated January 21, 1997, appear on pages 19 to 36 of the Annual Report to
Shareholders for the year ended December 31, 1996 and are incorporated herein by
reference.

                                       22
<PAGE>

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

       None.

                                    PART III


Item 10.  Directors and Officers of the Registrant
--------------------------------------------------

       Information is contained in "Election of Directors" on pages 4 to 6
inclusive of Raritan Bancorp Inc.'s Proxy Statement dated March 28, 1997, and is
incorporated herein by reference. Information regarding executive officers who
are not also directors of the Corporation or the Bank is contained in Part I of
this report in reliance of General Instruction G.

Item 11.  Executive Compensation
--------------------------------

       Information is contained in Compensation of Directors and Officers on
pages 6 through 10, inclusive, of Raritan Bancorp Inc.'s Proxy Statement dated
March 28, 1997 and is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

       Information is contained on pages 4 to 6 inclusive of Raritan Bancorp
Inc.'s Proxy Statement dated March 28, 1997 and is incorporated herein by
reference.

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

     Information is contained in Certain Relationships and Related Transactions
on page 10 of Raritan Bancorp Inc.'s Proxy Statement dated March 28, 1997, and
is incorporated herein by reference.

                                       23
<PAGE>

                                    PART IV


Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------------------------------------------------------------------------

          (a)   (1)   Consolidated Financial Statements

     The following financial statements are incorporated herein by reference to
the Annual Report to Shareholders for the year ended December 31, 1996, a copy
of which is attached hereto.
<TABLE>
<CAPTION>

                                                   Annual Report
                                                   Page Reference
                                                   --------------
          <S>                                      <C>
          Consolidated Balance Sheets............       19

          Consolidated Statements of Income......       20

          Consolidated Statements of Changes in
            Shareholders' Equity.................       21

          Consolidated Statements of Cash Flows..       22

          Notes to Consolidated Financial
            Statements...........................     23-35

          Independent Auditors' Report...........       36

</TABLE>
                (2)   Consolidated Financial Statement Schedules

     All statement schedules are omitted as the information, if applicable, is
presented in the above financial statements or notes thereto.

          (b)   Reports on Form 8-K

     None

          (c)   Exhibits Required by Securities and Exchange Commission
Regulation S-K.

                                       24
<PAGE>

Exhibit
Number
------

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).

3.1(a) Certificate of Amendment to the Certificate of Incorporation of Raritan
       Bancorp, Inc. (Filed as Exhibit 3.1(a) to the Annual Report on Form 10-K
       for the year ended December 31, 1995).

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).

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 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; the Restated Termination Agreements were
       filed as Exhibit 10.5 to the Annual Report on Form 10-K for the year
       ended December 31, 1995).

10.6   Special Termination Agreement with John J. Lukens (filed as Exhibit 10.6
       to the Annual Report on Form 10-K for the year ended December 31, 1994).

10.7   Supplemental Executive Retirement Plan I (filed as Exhibit 10.9 to the
       Annual Report on Form 10-K for the year ended December 31, 1994).

10.8   Supplemental Executive Retirement Plan II (filed as Exhibit 10.10 to the
       Annual Report on Form 10-K for the year ended December 31, 1994).

11     Computation of net income per share (Incorporated by reference to
       "Financial Highlights" on page 1, and the Consolidated Statements of
       Income on page 20, of the Annual Report to Stockholders for the year
       ended December 31, 1996).

                                       25
<PAGE>

13     Annual Report to Shareholders for the year ended December 31, 1996.

22     Subsidiaries of Raritan Bancorp, Inc.*

24     Accountants' Consent.
_________________________
* See Part 1, Item 1(a) of Form 10-K.

                                       26
<PAGE>

                                   SIGNATURES


      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed in
its behalf by the undersigned, thereunto duly authorized.

                                          RARITAN BANCORP, INC.



                                          By: /s/ Arlyn D. Rus
                                             --------------------------
                                             Arlyn D. Rus, President and
                                             Chief Executive Officer

Date: March 17, 1997

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 17, 1997, by the following persons on
behalf of the Registration and in the capacities indicated.


/s/ Arlyn D. Rus                        /s/ Thomas F. Tansey
-----------------------------------     ---------------------------------------
Arlyn D. Rus, Chairman of the Board,    Thomas F. Tansey, Executive Vice
President and Chief Executive           President, Chief Operating Officer and
Officer                                 Treasurer
                                        Director
                                        (Principal Financial and Accounting
                                        Officer)


/s/ William T. Anderson                 /s/ Peter S. Johnson
-----------------------------------     ---------------------------------------
William T. Anderson, Director           Peter S. Johnson, Director


/s/ William T. Kelleher, Jr.            /s/ William W. Crouse
-----------------------------------     ---------------------------------------
William T. Kelleher, Jr., Director      William W.  Crouse