Filed
Pursuant to Rule 424(b)(3)
under the
Securities Act of 1933
Registration
No. 333-157012
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PROSPECTUS
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1ST
CONSTITUTION BANCORP
Warrant
to Purchase 210,233 Shares of Common Stock, No Par Value
210,233
Shares of Common Stock, No Par Value
This
prospectus relates to the potential resale from time to time by selling
securityholders of a warrant to purchase 210,233 shares of common stock (which
reflects an adjustment, in accordance with the terms and conditions of the
warrant, from 200,222 shares of common stock to reflect a 5% stock dividend
payable on February 2, 2009 to holders of record of common stock as of January
20, 2009), or the warrant, and any shares of common stock issuable from time to
time upon exercise of the warrant. In this prospectus, we refer to
the warrant and the shares of common stock issuable upon exercise of the warrant
collectively as the securities. The warrant, along with 12,000 shares
of our Fixed Rate Cumulative Perpetual Preferred Stock, Series B (liquidation
preference amount of $1,000 per share), or the senior preferred shares, were
originally issued by us pursuant to a Letter Agreement dated December 23, 2008,
and the related Securities Purchase Agreement – Standard Terms, between us and
the United States Department of the Treasury, which we refer to as the initial
selling securityholder or Treasury, in a transaction exempt from the
registration requirements of the Securities Act of 1933, as amended, or the
Securities Act.
The
initial selling securityholder and its successors, including transferees, which
we collectively refer to as the selling securityholders, may offer the
securities from time to time directly or through underwriters, broker-dealers or
agents and in one or more public or private transactions and at fixed prices,
prevailing market prices, at prices related to prevailing market prices or at
negotiated prices. If these securities are sold through underwriters,
broker-dealers or agents, the selling securityholders will be responsible for
underwriting discounts or commissions or agents’ commissions.
We will
not receive any proceeds from the sale of securities by the selling
securityholders.
Our
common stock is listed on the NASDAQ Global Market under the symbol
“FCCY”. On January 16, 2009, the closing price for the common stock
was $9.25 per share. The warrant is not currently listed on any
established securities exchange or quotation system and we do not intend to seek
such a listing for the warrant unless we are requested to do so by the
Treasury.
Investing
in our securities involves risks. You should carefully review the
information contained in this prospectus under the heading “Risk Factors”
beginning on page 2 of this prospectus.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY BANK REGULATORY AGENCY, NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE
SECURITIES ARE NOT DEPOSITS OR ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE COMMISSIONER OF BANKING AND INSURANCE OF THE STATE OF
NEW JERSEY OR ANY OTHER GOVERNMENTAL AGENCY.
Our
principal executive offices are located at 2650 Route 130 North, Cranbury, New
Jersey 08512 and our telephone number is (609) 655-4500.
The date
of this prospectus is February 6, 2009.
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PROSPECTUS
SUMMARY
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RISK
FACTORS
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FORWARD-LOOKING
STATEMENTS
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INFORMATION
ABOUT THE COMPANY
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DESCRIPTION
OF CAPITAL STOCK
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DESCRIPTION
OF WARRANT
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USE
OF PROCEEDS
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PLAN
OF DISTRIBUTION
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SELLING
SECURITYHOLDERS
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INTERESTS
OF NAMED EXPERTS AND COUNSEL
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EXPERTS
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WHERE
YOU CAN FIND MORE INFORMATION
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ABOUT
THIS PROSPECTUS
Unless
this prospectus indicates otherwise or the context otherwise requires, the terms
“we,” “our,” “us,” “1st Constitution Bancorp” or the “Company” as used in this
prospectus refer to 1st Constitution Bancorp and, as the context
requires, its subsidiaries including 1st Constitution Bank and 1st Constitution
Capital Trust II. The term the “Bank” as used in this prospectus
refers to 1st Constitution Bank.
We have
not authorized anyone to provide you with information different from that
contained or incorporated by reference in this prospectus. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of the securities.
This
summary highlights selected information contained elsewhere in this
prospectus. Because it is a summary, it does not contain all of the
information that you should consider before investing in our
securities. You should read the entire prospectus carefully,
including the “Risk Factors” section and the other documents we refer to and
incorporate by reference, in order to understand this offering
fully. In particular, we incorporate important business and financial
information into this prospectus by reference.
1st
Constitution Bancorp is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended. The Company was organized under the laws of the
State of New Jersey in February 1999 for the purpose of acquiring all of the
issued and outstanding stock of 1st Constitution Bank and thereby enabling the
Bank to operate within a bank holding company structure. The Company became an
active bank holding company on July 1, 1999. The Bank is a wholly-owned
subsidiary of the Company. Other than its investment in the Bank, the Company
currently conducts no other significant business activities.
On
December 23, 2008, the Company entered into a Letter Agreement and a Securities
Purchase Agreement – Standard Terms with the Treasury, pursuant to which the
Company agreed to issue and sell, and the Treasury agreed to purchase, (i)
12,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock,
Series B, having a liquidation preference of $1,000 per share, and (ii) a
ten-year warrant to purchase up to 200,222 shares of the Company’s common stock,
no par value, at an initial exercise price of $8.99 per share. As a
result of a 5% stock dividend payable on February 2, 2009 to holders of our
common stock as of the close of business on January 20, 2009, which we refer to
as the 2009 stock dividend, the shares of common stock initially underlying the
warrant was adjusted to 210,233 shares of common stock and the initial per share
exercise price was adjusted to $8.562 per share, each in accordance with the
terms and conditions of the warrant. The warrant was immediately
exercisable upon its issuance and will expire on December 23, 2018.
We are
registering the resale of the warrant sold to the Treasury pursuant to the
transaction described above and elsewhere in this prospectus, as well as the
shares of the Company’s common stock to be issued upon the exercise of the
warrant. We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 with respect to the securities offered under
this prospectus.
The
common stock of the Company is listed on the NASDAQ Global Market under the
symbol “FCCY”. Our principal executive offices are located at 2650
Route 130 North, Cranbury, New Jersey 08512 and our telephone number is
(609) 655-4500.
An
investment in our securities involves risks. The material risks and
uncertainties that management believes affect the Company are described below.
Before making an investment decision, you should carefully consider the risks
and uncertainties described below together with all of the other information
included or incorporated by reference in this prospectus. The risks
and uncertainties described below are not the only ones facing the
Company. Additional risks and uncertainties that management is not
aware of or that management currently believes are immaterial may also impair
the Company’s business operations. This prospectus is qualified in
its entirety by these risk factors.
Recent
negative developments in the financial services industry and the U.S. and global
credit markets may adversely impact our operations and results.
Negative
developments in the latter half of 2007 and the year of 2008 in the capital
markets have resulted in uncertainty in the financial markets in general with
the expectation of the general economic downturn continuing in 2009. Loan
portfolio performances have deteriorated at many institutions resulting from,
amongst other factors, a weak economy and a decline in the value of the
collateral supporting their loans. The competition for our deposits has
increased significantly due to liquidity concerns at many of these same
institutions. Stock prices of bank holding companies, like ours, have been
negatively affected by the current condition of the financial markets, as has
our ability, if needed, to raise capital or borrow in the debt markets compared
to recent years. As a result, there is a potential for new federal or
state laws and regulations regarding lending and funding practices and liquidity
standards, and financial institution regulatory agencies are expected to be very
aggressive in responding to concerns and trends identified in examinations,
including the expected issuance of many formal enforcement
actions. Negative developments in the financial services industry and
the impact of new legislation in response to those developments could negatively
impact our operations by restricting our business operations, including our
ability to originate or sell loans, and adversely impact our financial
performance.
Decreases
in local real estate values would adversely affect the value of property used as
collateral for our loans. Adverse changes in the economy also may have a
negative effect on the ability of our borrowers to make timely repayments of
their loans, which would have an adverse impact on our earnings.
The
Company faces significant competition.
The
Company faces significant competition from many other banks, savings
institutions and other financial institutions which have branch offices or
otherwise operate in the Company’s market area. Non-bank financial institutions,
such as securities brokerage firms, insurance companies and money market funds,
engage in activities which compete directly with traditional bank business,
which has also led to greater competition. Many of these competitors have
substantially greater financial resources than the Company, including larger
capital bases that allow them to attract customers seeking larger loans than the
Company is able to accommodate and the ability to aggressively advertise their
products. There can be no assurance that the Company and the Bank will be able
to successfully compete with these entities in the future.
The
Company is subject to interest rate risk.
The
Company’s earnings are largely dependent upon its net interest income. Net
interest income is the difference between interest income earned on
interest-earning assets such as loans and securities and interest expense paid
on interest-bearing liabilities such as deposits and borrowed funds. Interest
rates are highly sensitive to many factors that are beyond the Company’s
control, including general economic conditions and policies of various
governmental and regulatory agencies and, in particular, the Board of Governors
of the Federal Reserve System. Changes in monetary policy, including changes in
interest rates, could influence not only the interest the Company receives on
loans and securities and the amount of interest it pays on deposits and
borrowings, but such changes could also affect (i) the Company’s ability to
originate loans and obtain deposits, (ii) the fair value of the Company’s
financial assets and liabilities, and (iii) the average duration of the
Company’s mortgage-backed securities portfolio. If the spread between the
interest rates paid on deposits and other borrowings and the interest rates
received on loans and other investments narrows, the Company’s net interest
income, and therefore earnings, could be adversely affected. Earnings could also
be adversely affected if the interest rates received on loans and other
investments fall more quickly than the interest rates paid on deposits and other
borrowings.
Although
management believes it has implemented effective asset and liability management
strategies to reduce the potential effects of changes in interest rates on the
Company’s results of operations, any substantial, unexpected, prolonged change
in market interest rates could have a material adverse effect on the Company’s
financial condition and results of operations.
The Company is subject to
risks associated with speculative
construction lending.
The risks
associated with speculative construction lending include the borrower’s
inability to complete the construction process on time and within budget, the
sale of the project within projected absorption periods, the economic risks
associated with real estate collateral, and the potential of a rising interest
rate environment. Such loans may include financing the development and/or
construction of residential subdivisions. This activity may involve financing
land purchase, infrastructure development (i.e. roads, utilities, etc.), as well
as construction of residences or multi-family dwellings for subsequent sale by
developer/builder. Because the sale of developed properties is integral to the
success of developer business, loan repayment may be especially subject to the
volatility of real estate market values. Management has established underwriting
and monitoring criteria to minimize the inherent risks of speculative commercial
real estate construction lending. Further, management concentrates
lending efforts with developers demonstrating successful performance on
marketable projects within the Bank’s lending areas.
Federal
and state government regulation impacts the Company’s operations.
The
operations of the Company and the Bank are heavily regulated and will be
affected by present and future legislation and by the policies established from
time to time by various federal and state regulatory authorities. In particular,
the monetary policies of the Federal Reserve Board have had a significant effect
on the operating results of banks in the past and are expected to continue to do
so in the future. Among the instruments of monetary policy used by the Federal
Reserve Board to implement its objectives are changes in the discount rate
charged on bank borrowings. It is not possible to predict what changes, if any,
will be made to the monetary policies of the Federal Reserve Board or to
existing federal and state legislation or the effect that such changes may have
on the future business and earnings prospects of the Company.
The
Company and the Bank are subject to examination, supervision and comprehensive
regulation by various federal and state agencies. Compliance with the rules and
regulations of these agencies may be costly and may limit growth and restrict
certain activities, including payment of dividends, investments, loans and
interest rate charges, interest rates paid on deposits, and locations of
offices. The Bank is also subject to capitalization guidelines set forth in
federal legislation.
The laws
and regulations applicable to the banking industry could change at any time, and
we cannot predict the impact of these changes on our business and profitability.
Because government regulation greatly affects the business and financial results
of all commercial banks and bank holding companies, the cost of compliance could
adversely affect the Company’s ability to operate profitably.
If
our allowance for loan losses is not sufficient to cover actual loan losses, our
earnings could decrease.
We make
various assumptions and judgments about the collectibility of our loan
portfolio, including the creditworthiness of our borrowers and the value of the
real estate and other assets serving as collateral for the repayment of many of
our loans. In determining the amount of the allowance for loan losses, we review
our loans and our loss and delinquency experience, and we evaluate economic
conditions. If our assumptions are incorrect, our allowance for loan losses may
not be sufficient to cover losses inherent in our loan portfolio, resulting in
additions to our allowance. Material additions to our allowance would materially
decrease our net income.
In
addition, bank regulators periodically review our allowance for loan losses and
may require us to increase our provision for loan losses or recognize further
loan charge-offs. Any increase in our allowance for loan losses or loan
charge-offs as required by these regulatory authorities might have a material
adverse effect on our financial condition and results of
operations.
We
have significant investments in mortgage-backed securities and securities of
this kind may be subject to deterioration in value in certain market
conditions.
The
Company has a significant investment in collateralized mortgage obligations and
trust preferred securities. At September 30, 2008, the Company held
collateralized mortgage obligations with an aggregate market value of $6,909,259
in the Available for Sale portfolio. These securities had an
unrealized loss of $315,982. The Company also held trust preferred
securities in the Available for Sale portfolio with an aggregate market value of
$1,876,539 and an unrealized loss of $576,140 at September 30,
2008. Several financial institutions have reported significant
write-downs of the value of mortgage-related and trust preferred
securities. Certain of these types of securities may also not be
marketable except at significant discounts. While management of the
Company is unaware of any other-than-temporarily impairment in the Company’s
portfolio of these securities, market, entity or industry conditions could
further deteriorate and result in the recognition of future impairment losses
related to these securities.
We
had a material weakness in our internal control over financial reporting as of
December 31, 2007, and we cannot assure that we have developed an effective
remediation plan..
We have
identified deficiencies constituting material weaknesses in our internal control
over financial reporting as of December 31, 2007 and have developed and
implemented a plan to remediate such deficiencies. We believe that
such plan has adequately addressed these deficiencies, but there can be no
assurance that we have discovered all of the deficiencies that may exist in our
internal control over financial reporting.
The
price of our common stock may fluctuate.
The price
of our common stock on the NASDAQ Global Market constantly changes and recently,
given the uncertainty in the financial markets, has fluctuated widely. We expect
that the market price of our common stock will continue to fluctuate. Holders of
our common stock will be subject to the risk of volatility and changes in
prices.
Our
common stock price can fluctuate as a result of a variety of factors, many of
which are beyond our control. These factors include:
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quarterly
fluctuations in our operating and financial
results;
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operating
results that vary from the expectations of management, securities analysts
and investors;
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changes
in expectations as to our future financial performance, including
financial estimates by securities analysts and
investors;
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events
negatively impacting the financial services industry which result in a
general decline in the market valuation of our common
stock;
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announcements
of material developments affecting our operations or our dividend
policy;
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future
sales of our equity securities;
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new
laws or regulations or new interpretations of existing laws or regulations
applicable to our business;
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changes
in accounting standards, policies, guidance, interpretations or
principles; and
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general
domestic economic and market
conditions.
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In
addition, recently the stock market generally has experienced extreme price and
volume fluctuations, and industry factors and general economic and political
conditions and events, such as economic slowdowns or recessions, interest rate
changes or credit loss trends, could also cause our stock price to decrease
regardless of our operating results.
The
Company is subject to liquidity risk.
Liquidity
risk is the potential that the Company will be unable to meet its obligations as
they become due, capitalize on growth opportunities as they arise, or pay
regular dividends because of an inability to liquidate assets or obtain adequate
funding in a timely basis, at a reasonable cost and within acceptable risk
tolerances.
Liquidity
is required to fund various obligations, including credit commitments to
borrowers, mortgage and other loan originations, withdrawals by depositors,
repayment of borrowings, dividends to shareholders, operating expenses and
capital expenditures.
Liquidity
is derived primarily from retail deposit growth and retention; principal and
interest payments on loans; principal and interest payments; sale, maturity and
prepayment of investment securities; net cash provided from operations and
access to other funding sources.
Our
access to funding sources in amounts adequate to finance our activities could be
impaired by factors that affect us specifically or the financial services
industry in general. Factors that could detrimentally impact our access to
liquidity sources include a decrease in the level of our business activity due
to a market downturn or adverse regulatory action against us. Our ability to
borrow could also be impaired by factors that are not specific to us, such as a
severe disruption of the financial markets or negative views and expectations
about the prospects for the financial services industry as a whole as evidenced
by turmoil faced by banking organizations in 2008 in the domestic and worldwide
credit markets.
Our
preferred shares impact net income available to our common stockholders and our
earnings per share.
As long
as there are senior preferred shares outstanding, no dividends may be paid on
our common stock unless all dividends on the senior preferred shares have been
paid in full. The dividends declared on our senior preferred shares
will reduce the net income available to common shareholders and our earnings per
common share. Additionally, warrants to purchase the Company’s common
stock issued to the Treasury, in conjunction with the senior preferred shares,
may be dilutive to our earnings per share. The senior preferred
shares will also receive preferential treatment in the event of liquidation,
dissolution or winding up of the Company.
Moreover,
holders of our common stock are entitled to receive dividends only when, as and
if declared by our board of directors. The Company has never paid a cash
dividend and the Company’s Board of Directors has no plans to pay a cash
dividend in the foreseeable future. We are not required to declare cash
dividends on our common stock.
Future
offerings of debt or other securities may adversely affect the market price of
our stock.
In the
future, we may attempt to increase our capital resources or, if our or the
Bank’s capital ratios fall below the required minimums, we or the Bank could be
forced to raise additional capital by making additional offerings of debt or
preferred equity securities, including medium-term notes, trust preferred
securities, senior or subordinated notes and preferred stock. Upon
liquidation, holders of our debt securities and shares of preferred stock and
lenders with respect to other borrowings will receive distributions of our
available assets prior to the holders of our common stock. Additional
equity offerings may dilute the holdings of our existing shareholders or reduce
the market price of our common stock, or both. Holders of our common
stock are not entitled to preemptive rights or other protections against
dilution.
The
Company may lose lower-cost funding sources.
Checking,
savings, and money market deposit account balances and other forms of customer
deposits can decrease when customers perceive alternative investments, such as
the stock market, as providing a better risk/return tradeoff. If
customers move money out of bank deposits and into other investments, the
Company could lose a relatively low-cost source of funds, increasing its funding
costs and reducing the Company’s net interest income and net
income.
There
may be changes in accounting policies or accounting standards.
The
Company’s accounting policies are fundamental to understanding its financial
results and condition. Some of these policies require use of
estimates and assumptions that may affect the value of the Company’s assets or
liabilities and financial results. The Company identified its
accounting policies regarding the allowance for loan losses, security
impairment, goodwill and other intangible assets, and income taxes to be
critical because they require management to make difficult, subjective and
complex judgments about matters that are inherently uncertain. Under
each of these policies, it is possible that materially different amounts would
be reported under different conditions, using different assumptions, or as new
information becomes available.
From time
to time the Financial Accounting Standards Board and the Securities and Exchange
Commission change the financial accounting and reporting standards that govern
the form and content of the Company’s external financial
statements. In addition, accounting standard setters and those who
interpret the accounting standards (such as the FASB, SEC, banking regulators
and the Company’s outside auditors) may change or even reverse their previous
interpretations or positions on how these standards should be
applied. Changes in financial accounting and reporting standards and
changes in current interpretations may be beyond the Company’s control, can be
hard to predict and could materially impact how the Company reports its
financial results and condition. In certain cases, the Company could
be required to apply a new or revised standard retroactively or apply an
existing standard differently (also retroactively) which may result in the
Company restating prior period financial statements in material
amounts.
The
Company encounters continuous technological change.
The
financial services industry is continually undergoing rapid technological change
with frequent introductions of new technology-driven products and
services. The effective use of technology increases efficiency and
enables financial institutions to better serve customers and to reduce
costs. The Company’s future success depends, in part, upon its
ability to address the needs of its customers by using technology to provide
products and services that will satisfy customer demands, as well as to create
additional efficiencies in the Company’s operations. Many of the
Company’s competitors have substantially greater resources to invest in
technological improvements. The Company may not be able to
effectively implement new technology-driven products and services or be
successful in marketing these products and services to its
customers. Failure to successfully keep pace with technological
change affecting the financial services industry could have a material adverse
impact on the Company’s business and, in turn, the Company’s financial condition
and results of operations.
The
Company is subject to operational risk.
The
Company faces the risk that the design of its controls and procedures, including
those to mitigate the risk of fraud by employees or outsiders, may prove to be
inadequate or are circumvented, thereby causing delays in detection of errors or
inaccuracies in data and information. Management regularly reviews
and updates the Company’s internal controls, disclosure controls and procedures,
and corporate governance policies and procedures. Any system of
controls, however well designed and operated, is based in part on certain
assumptions and can provide only reasonable, not absolute, assurances that the
objectives of the system are met. Any failure or circumvention of the
Company’s controls and procedures or failure to comply with regulations related
to controls and procedures could have a material adverse effect on the Company’s
business, results of operations and financial condition.
The
Company may also be subject to disruptions of its systems arising from events
that are wholly or partially beyond its control (including, for example,
computer viruses or electrical or telecommunications outages), which may give
rise to losses in service to customers and to financial loss or
liability. The Company is further exposed to the risk that its
external vendors may be unable to fulfill their contractual obligations (or will
be subject to the same risk of fraud or operational errors by their respective
employees as is the Company) and to the risk that the Company’s (or its
vendors’) business continuity and data security systems prove to be
inadequate.
The
Company’s performance is largely dependent on the talents and efforts of highly
skilled individuals. There is intense competition in the financial
services industry for qualified employees. In addition, the Company
faces increasing competition with businesses outside the financial services
industry for the most highly skilled individuals. The Emergency
Economic Stabilization Act and the agreements between the Company and the
Treasury related to the purchase of the Company’s Fixed Rate Cumulative
Perpetual Preferred Stock, Series B and common stock warrants place restrictions
on the Company’s ability to pay compensation to its senior
officers. The Company’s business operations could be adversely
affected if it were unable to attract new employees and retain and motivate its
existing employees.
There
may be claims and litigation pertaining to fiduciary
responsibility.
From time
to time as part of the Company’s normal course of business, customers make
claims and take legal action against the Company based on actions or inactions
of the Company. If such claims and legal actions are not resolved in
a manner favorable to the Company, they may result in financial liability and/or
adversely affect the market perception of the Company and its products and
services. This may also impact customer demand for the Company’s
products and services. Any financial liability or reputation damage
could have a material adverse effect on the Company’s business, which, in turn,
could have a material adverse effect on its financial condition and results of
operations.
FORWARD-LOOKING STATEMENTS
This
prospectus and the documents incorporated by reference contain statements that
are considered “forward looking statements” within the meaning of United States
securities laws. In addition, the Company and its management may make other
written or oral communications from time to time that contain forward-looking
statements. Forward-looking statements, including statements about industry
trends, management’s future expectations and other matters that do not relate
strictly to historical facts, are based on assumptions by management, and are
often identified by such forward-looking terminology as “expect,” “look,”
“believe,” “anticipate,” “estimate,” “seek,” “may,” “will,” “trend,” “target”
and “goal” or similar statements or variations of such terms. Forward-looking
statements may include, among other things, statements about the Company’s
confidence in its strategies and its expectations about financial performance,
market growth, market and regulatory trends and developments, acquisitions and
divestitures, new technologies, services and opportunities and
earnings.
Forward-looking
statements are subject to various risks and uncertainties, which change over
time, are based on management’s expectations and assumptions at the time the
statements are made, and are not guarantees of future results. Management’s
expectations and assumptions, and the continued validity of the forward-looking
statements, are subject to change due to a broad range of factors affecting the
national and global economies, the equity, debt, currency and other financial
markets, as well as risk factors specific to the Company and its subsidiaries,
including the Bank. Actual outcomes and results may differ materially from what
is expressed in our forward-looking statements and from our historical financial
results due to the risk factors discussed elsewhere in this prospectus or
disclosed in our other SEC filings.
Forward-looking
statements should not be relied upon as representing our expectations or beliefs
as of any date subsequent to the time this prospectus is filed with the SEC. The
Company undertakes no obligation to revise the forward-looking statements
contained in this prospectus to reflect events after the time it is filed with
the SEC, other than as required by law. The risk factors discussed in
this prospectus are not intended to be a complete summary of all risks and
uncertainties that may affect our business. Though we strive to monitor and
mitigate risk, we cannot anticipate all potential economic, operational and
financial developments that may adversely impact our operations and our
financial results.
Forward-looking
statements should not be viewed as predictions, and should not be the primary
basis upon which investors evaluate the Company. Any investor in the Company
should consider all risks and uncertainties disclosed in our SEC filings
described below under the heading “Where You Can Find More Information,” all of
which are accessible on the SEC’s website at http://www.sec.gov.
INFORMATION ABOUT THE COMPANY
1st
Constitution Bancorp
1st
Constitution Bancorp is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended. The Company was organized under the laws of the
State of New Jersey in February 1999 for the purpose of acquiring all of the
issued and outstanding stock of 1st Constitution Bank and thereby enabling the
Bank to operate within a bank holding company structure. The Company became an
active bank holding company on July 1, 1999. The Bank is a wholly-owned
subsidiary of the Company. Other than its investment in the Bank, the Company
currently conducts no other significant business activities.
As of
September 30, 2008, the Company had:
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consolidated
assets of $513.6 million;
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total
deposits of $390.6 million;
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total
loans of $361.4 million; and
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total
shareholders’ equity of $43.1
million.
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The
Company’s principal executive offices and telephone number are:
2650
Route 130 North
Cranbury,
New Jersey 08512
(609)
655-4500
1st
Constitution Bank
1st
Constitution Bank, a commercial bank formed under the laws of the State of New
Jersey, engages in the business of commercial and retail banking. As a community
bank, the Bank offers a wide range of services (including demand, savings and
time deposits and commercial and consumer/installment loans) to individuals,
small businesses and not-for-profit organizations principally in Middlesex,
Mercer and Somerset Counties, New Jersey. The Bank conducts its operations
through its main office located in Cranbury, New Jersey, and operates ten
additional branch offices in downtown Cranbury, Hamilton Square, Hightstown,
Jamesburg, Montgomery, Perth Amboy, Plainsboro, West Windsor, Fort Lee and
Princeton, New Jersey. The Bank’s deposits are insured up to applicable legal
limits by the Federal Deposit Insurance Corporation.
Management
efforts focus on positioning the Bank to meet the financial needs of the
communities in Middlesex, Mercer and Somerset Counties and the Fort Lee
area of Bergen County and to provide financial services to individuals,
families, institutions and small businesses. To achieve this goal, the Bank is
focusing its efforts on:
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expansion
of its branch network;
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innovative
product offerings; and
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technological
advances and e-commerce.
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The Bank
operates eleven branches, and manages an investment portfolio through 1st
Constitution Investment Company of Delaware, Inc., its
subsidiary. FCB Assets Holdings, Inc., a subsidiary of the Bank, is
used by the Bank to manage and dispose of repossessed real estate.
1st
Constitution Capital Trust II, a subsidiary of the Company, was created in May
2006 to issue trust preferred securities to assist the Company to raise
additional regulatory capital.
Lending
Activities
The
Bank’s lending activities include both commercial and consumer loans. Loan
originations are derived from a number of sources including real estate broker
referrals, mortgage loan companies, direct solicitation by the Bank’s loan
officers, existing depositors and borrowers, builders, attorneys, walk-in
customers and, in some instances, other lenders. The Bank has established
disciplined and systematic procedures for approving and monitoring loans that
vary depending on the size and nature of the loan.
The Bank
offers a variety of commercial loan services including term loans, lines of
credit, and loans secured by equipment and receivables. A broad range of
short-to-medium term commercial loans, both secured and unsecured, are made
available to businesses for working capital (including inventory and
receivables), business expansion (including acquisition and development of real
estate and improvements), and the purchase of equipment and machinery. The Bank
also makes construction loans to real estate developers for the acquisition,
development and construction of residential subdivisions.
A portion
of the Bank’s lending activities consists of the origination of fixed and
adjustable rate residential first mortgage loans secured by owner-occupied
property located in the Bank’s primary market areas. Home mortgage lending is
unique in that a broad geographic territory may be serviced by originators
working from strategically placed offices either within the Bank’s traditional
banking facilities or from affordable storefront locations in commercial
buildings. The Bank also offers construction loans, second mortgage home
improvement loans and home equity lines of credit. The Bank also
initiated in 2008 a program of mortgage warehouse lending.
Non-residential
consumer loans made by the Bank include loans for automobiles, recreation
vehicles, and boats, as well as personal loans (secured and unsecured) and
deposit account secured loans. The Bank also conducts various indirect lending
activities through established retail companies in its market areas.
Non-residential consumer loans are attractive to the Bank because they typically
have a shorter term and carry higher interest rates than are charged on other
types of loans. Non-residential consumer loans, however, do pose additional risk
of collectibility when compared to traditional types of loans, such as
residential mortgage loans granted by commercial banks.
DESCRIPTION OF CAPITAL STOCK
The
authorized capital stock of the Company presently consists of 30,000,000 shares
of common stock and 5,000,000 shares of preferred stock, 40,000 of which have
been designated Series A Junior Participating Preferred Stock and 12,000 of
which have been designated Fixed Rate Cumulative Perpetual Preferred Stock,
Series B. As of January 20, 2009, 4,227,197 shares of the
Company’s common stock and 12,000 shares of preferred stock were
outstanding.
The
following is merely a summary of the terms of the Company’s capital
stock. This
summary does not purport to be complete in all respects. This description is
subject to and qualified in its entirety by reference to the Company’s
Certificate of Incorporation, as amended, including the Certificate of Amendment
with respect to the Series A Junior Participating Preferred Stock and the
Certificate of Amendment with respect to the Fixed Rate Cumulative Perpetual
Preferred Stock, Series B, copies of which have been filed with the SEC and are
also available upon request from us.
General
The
Company is a New Jersey general business corporation governed by the New Jersey
Business Corporation Act and a registered bank holding company under the Bank
Holding Company Act.
COMMON
STOCK
The
following description contains certain general terms of the Company’s common
stock.
Dividend
Rights
The
holders of the Company’s common stock are entitled to dividends when, as, and if
declared by the Company’s Board of Directors out of funds legally available for
the payment of dividends. Generally, New Jersey law prohibits corporations from
paying dividends, if after giving effect to the distribution, the corporation
would be unable to pay its debts as they become due in the usual course of its
business or the corporation’s total assets would be less than its total
liabilities.
The
primary source of dividends paid to the Company’s shareholders is dividends paid
to the Company by the Bank. Thus, as a practical matter, any restrictions on the
ability of the Bank to pay dividends will act as restrictions on the amount of
funds available for payment of dividends by the Company. Dividend payments by
the Bank to the Company are subject to the New Jersey Banking Act of 1948 and
the Federal Deposit Insurance Act, under which the Bank may not pay any
dividends, if after paying the dividend, it would be undercapitalized under
applicable capital requirements. In addition to these explicit limitations, the
federal regulatory agencies are authorized to prohibit a banking subsidiary or
bank holding company from engaging in an unsafe or unsound banking practice.
Depending upon the circumstances, the agencies could take the position that
paying a dividend would constitute an unsafe or unsound banking
practice.
The
dividend rights of holders of the Company’s common stock are qualified and
subject to the dividend rights of holders of the Company’s preferred stock
described below.
Voting
Rights
Each
holder of the Company’s common stock is entitled to one vote for each share held
on all matters voted upon by the shareholders, including the election of
directors. There is no cumulative voting in the election of
directors.
Preemptive
Rights
Holders
of shares of the Company’s common stock are not entitled to preemptive rights
with respect to any shares of the common stock that may be issued.
Liquidation
Rights
In the
event of liquidation, dissolution or winding up of the Company, or upon any
distribution of its capital assets, after the payment of debts and liabilities
and subject to the prior rights of the preferred stock holders, holders of the
Company’s common stock are entitled to receive, on a pro rata per share basis,
all remaining assets of the Company.
Assessment
and Redemption
All
outstanding shares of the Company’s common stock are fully paid and
non-assessable. The Company’s common stock is not redeemable at the
option of the issuer or the holders thereof.
Transfer
Agent
Registrar
and Transfer Company is presently the transfer agent for the Company’s common
stock.
Listing
The
Company’s common stock is listed on the NASDAQ Global Market under the symbol
“FCCY”.
FIXED
RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES B
The
following description contains certain general terms of the Company’s Fixed Rate
Cumulative Perpetual Preferred Stock, Series B. Twelve thousand of
these shares of senior preferred stock have been authorized, and all shares of
the senior preferred stock were issued as of December 23, 2008. These
senior preferred shares have no maturity date.
Dividend
& Repurchase Rights
The Fixed
Rate Cumulative Perpetual Preferred Stock, Series B, is senior to our common
stock and will pay cumulative dividends at a rate of 5% per annum until the
fifth anniversary of the date of the original investment of the Treasury,
December 23, 2013, and thereafter at a rate of 9% per
annum. Dividends will be payable quarterly in arrears on the
fifteenth day of February, May, August, and November of each
year. Unpaid dividends are compounded (i.e. dividends are paid on the
amount of unpaid dividends).
As long
as the senior preferred shares are outstanding, the Company will not be able to
pay dividends on any common stock shares or any preferred shares ranking pari passu with the senior
preferred shares, unless all dividends on the senior preferred shares have been
paid in full.
Furthermore,
until the earlier of the third anniversary of the Treasury's investment or the
date on which the Treasury has transferred all of the senior preferred stock to
unaffiliated third parties or such stock is redeemed in full, the Company may
not, without the consent of the Treasury, increase the amount of cash dividend
on its common stock. The Treasury’s consent is not required where
dividends on common stock are payable solely in shares of the Company’s common
stock.
The
Treasury’s consent will be required for any repurchase of the Company’s common
stock or other capital stock or other equity securities of the Company, or any
trust preferred securities, other than repurchases of the senior preferred
shares and share repurchases in connection with any employee benefit plan in the
ordinary course of business consistent with past practice, until the earlier of
the third anniversary of the Treasury’s investment or the date on which the
senior preferred shares are redeemed in whole or the Treasury has transferred
all of the senior preferred shares to unaffiliated third parties.
For as
long as the Treasury continues to own any senior preferred shares, the Company
may not repurchase any senior preferred shares from any other holder of such
shares unless it offers to repurchase a ratable portion of the senior preferred
shares then held by the Treasury on the same terms and conditions.
Conversion
Holders
of the senior preferred shares have no right to exchange or convert such shares
into any other securities of the Company.
Voting
Rights
The
senior preferred shares are non-voting shares, other than class voting rights
granted under New Jersey law and class voting rights on (i) any authorization or
issuance of shares ranking senior to the senior preferred shares; (ii) any
amendment to the rights of the senior preferred shares, or (iii) any merger,
exchange or similar transaction which would adversely affect the rights of the
senior preferred shares. If dividends on the senior preferred shares
as described above are not paid in full for six dividend periods, whether or not
consecutive, the senior preferred shareholders will have the right to elect two
directors. The right to elect directors will cease when all unpaid dividends
(including compounded dividends) have been paid in full.
Liquidation
Rights
The
senior preferred shares have a liquidation preference of $1,000 per
share. In the event of liquidation, dissolution or winding up of the
Company, holders of the Company’s senior preferred stock are entitled to receive
full payment of the liquidation amount per share and the amount of any accrued
and unpaid dividends, before any distribution of assets or proceeds is made to
the holders of the Company’s common stock.
Redemption
The
Company may redeem the senior preferred shares three years after the date of the
Treasury’s investment, or earlier if it raises in an equity offering net
proceeds equal to the amount of the senior preferred shares to be
redeemed. It must raise proceeds equal to at least 25% of the issue
price of the senior preferred shares to redeem any senior preferred shares prior
to the end of the third year. The redemption price is equal to the
sum of the liquidation amount per share and any accrued and unpaid dividends on
the senior preferred shares up to, but excluding, the date fixed for
redemption.
Other
Matters
The
senior preferred shares are freely transferable. The senior preferred
shares are not subject to any mandatory redemption, sinking fund or other
similar provisions.
Anti-Takeover
Provisions
Certificate of
Incorporation
Provisions
of our certificate of incorporation may have anti-takeover
effects. These provisions may discourage attempts by others to
acquire control of the Company without negotiation with our Board of
Directors. The effect of these provisions is discussed briefly
below.
1. Authorized
Stock
The
shares of our common stock authorized by our certificate of incorporation but
not issued provide our Board of Directors with the flexibility to effect
financings, acquisitions, stock dividends, stock splits and stock-based grants
without the need for a stockholder vote. Our Board of Directors,
consistent with its fiduciary duties, could also authorize the issuance of
shares of preferred stock, and could establish voting conversion, liquidation
and other rights for our preferred stock being issued, in an effort to deter
attempts to gain control of the Company. For a further discussion,
see “Anti-Takeover Provisions – Blank Check Preferred Stock” below.
2. Classification
of Board of Directors
Our
certificate of incorporation currently provides that our Board of Directors is
divided into three classes of as nearly equal size as possible, with one class
elected annually to serve for a term of three years. This
classification of our Board of Directors has the effect of making it more
difficult for shareholders to change the composition of the Board of Directors,
whether or not a change in the Board of Directors would be beneficial to the
Company. It may discourage a takeover of the Company because a
shareholder with a majority interest in the Company would have to wait for at
least two consecutive annual meetings of shareholders to elect a majority of the
members of our Board of Directors.
Rights
Agreement
On March
18, 2004, the Company’s Board of Directors declared a dividend distribution of
one right for each outstanding share of common stock, no par value per share, of
the Company. The distribution is payable to the shareholders of record at the
close of business on March 29, 2004. Each right entitles the registered holder
to purchase from the Company one one-hundredth of a share of a series of the
Company’s preferred stock designated as Series A Junior Participating Preferred
Stock, or Series A preferred stock, at a price of $142.00 per one one-hundredth
of a share, subject to adjustment.
Initially,
the rights are attached to all common stock certificates representing shares
then outstanding, and no separate rights certificates are distributed. Subject
to certain exceptions specified in the Rights Agreement, the rights will
separate from the common stock and a “distribution date” will occur upon the
earlier of (i) 10 business days following a public announcement that a person or
group of affiliated or associated persons, or an “acquiring person,” has
acquired beneficial ownership of 12% or more of the outstanding shares of common
stock, or the “stock acquisition date,” other than as a result of repurchases of
stock by the Company or certain inadvertent actions which are promptly remedied,
or (ii) 10 business days (or such later date as the Board shall determine prior
to any person becoming an acquiring person) following the commencement of a
tender offer or exchange offer that would result in a person or group becoming
an acquiring person. Until the distribution date, (A) the rights will be
evidenced by the common stock certificates and will be transferred with and only
with such common stock certificates, (B) new common stock certificates issued
after the record date will contain a notation incorporating the Rights Agreement
by reference and (C) the surrender for transfer of any certificates for common
stock outstanding will also constitute the transfer of the rights associated
with the common stock represented by such certificate. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a triggering event (as defined below) that, upon any exercise of rights, a
number of rights be exercised so that only whole shares of Series A preferred
stock will be issued.
The
rights are not exercisable until the distribution date and will expire at 5:00
P.M. (New York City time) on March 29, 2014, or the “expiration date,” unless
such date is extended or the rights are earlier redeemed or exchanged by the
Company as described below.
As soon
as practicable after the distribution date, rights certificates will be mailed
to holders of record of the common stock as of the close of business on the
distribution date and, thereafter, the separate rights certificates alone will
represent the rights. Except as otherwise determined by the Board of Directors,
only shares of common stock issued prior to the distribution date will be issued
with rights.
In the
event that a person becomes an acquiring person, each holder of a right will
thereafter have the right to receive, upon exercise, common stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the right. Notwithstanding any
of the foregoing, following the occurrence of the event set forth in this
paragraph, all rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any acquiring person will be null
and void. However, rights are not exercisable following the occurrence of the
event set forth above until such time as the rights are no longer redeemable by
the Company as set forth below.
For
example, at an exercise price of $142.00 per right, each right now owned by an
acquiring person (or by certain related parties) following an event set forth in
the preceding paragraph would entitle its holder to purchase $284.00 worth of
common stock (or other consideration, as noted above) for $142.00. Assuming that
the common stock had a per share value of $20 at such time, the holder of each
valid right would be entitled to purchase 14.2 shares of common stock for
$142.00, or if the Company elects, in its sole determination, to pay cash in
lieu of fractional shares of common stock, such holder would be entitled to
purchase 14 shares of common stock for $142.00 and to receive back from the
Company $4.00 as payment for the 2/10
ths of a share of common stock otherwise issuable by the
Company upon the exercise of such valid right.
In the
event that, on or at any time after a stock acquisition date, the Company (i)
engages in a merger or other business combination transaction in which the
Company is not the surviving corporation, (ii) the Company engages in a merger
or other business combination transaction in which the Company is the surviving
corporation and any shares of the Company’s common stock are changed into or
exchanged for other securities or assets or (iii) 50% or more of the assets,
cash flow or earning power of the Company and its subsidiaries (taken as a
whole) are sold or transferred, each holder of a right (except as noted below)
shall thereafter have the right to receive, upon the exercise thereof at the
then current exercise price of the right, that number of shares of common stock
of the acquiring company which at the time of such transaction would have a
market value (determined as provided in the Rights Agreement) of two times the
exercise price of the right. The events set forth in this paragraph and in the
second preceding paragraph are referred to as the “triggering
events.”
At any
time until the time at which any person becomes an acquiring person, the Company
may redeem the rights in whole, but not in part, at a price of $0.01 per right,
payable in cash, common stock or other consideration deemed appropriate by the
Board of Directors. Immediately upon the action of the Board of Directors of the
Company electing to redeem the rights, the rights will terminate and the only
right of the holders of rights will be to receive the $0.01 redemption
price.
At any
time after a person becomes an acquiring person and prior to the acquisition by
such person or group of fifty percent (50%) or more of the outstanding common
stock, the Board of Directors may exchange the rights (other than rights owned
by such person or group which have become void), in whole or in part, for common
stock at an exchange ratio of one share of common stock, or one one-hundredth of
a share of Series A preferred stock (or of a share of a class or series of the
Company’s preferred stock having equivalent rights, preferences and privileges),
per right (subject to adjustment).
Until a
right is exercised, the holder thereof, as such, will have no rights as a
shareholder of the Company, including, without limitation, the right to vote or
to receive dividends. While the distribution of the rights will not be taxable
to shareholders or to the Company, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the rights become
exercisable for common stock (or other consideration) of the Company or for
common stock of the acquiring company or in the event of the redemption of the
rights as set forth above.
Any of
the provisions of the Rights Agreement may be amended by the Board of Directors
of the Company prior to the distribution date. After the distribution date, the
provisions of the Rights Agreement may be amended by the Board in order to cure
any ambiguity, to make changes which do not adversely affect the interests of
holders of rights, or to shorten or lengthen any time period under the Rights
Agreement. The foregoing notwithstanding, no amendment may be made at such time
as the rights are not redeemable, except for amendments which cure ambiguity or
correct or supplement any provision of the Rights Agreement which does not
adversely affect the holders of the rights.
Each
share of common stock of the Company outstanding at the close of business on
March 29, 2004 received one right. So long as the rights are attached to the
common stock, one additional right (as such number may be adjusted pursuant to
the provisions of the Rights Agreement) is deemed to be delivered for each share
of common stock issued or transferred by the Company after such date. In
addition, following the distribution date and prior to the expiration or
redemption of the rights, the Company may issue rights when it issues common
stock only if the Board deems it to be necessary or appropriate, or in
connection with the issuance of shares of common stock pursuant to the exercise
of stock options or under employee plans or upon the exercise, conversion or
exchange of certain securities of the Company. Forty thousand (40,000) shares of
Series A preferred stock are currently reserved for issuance upon exercise of
the rights.
The
rights may have certain anti-takeover effects. The rights will cause substantial
dilution to a person or group that attempts to acquire the Company in a manner
which causes the rights to become discount rights unless the offer is
conditional on a substantial number of rights being acquired. The rights,
however, should not affect any prospective offeror willing to make an offer at a
price that is fair and not inadequate and otherwise in the best interest of the
Company and its shareholders. The rights should not interfere with any merger or
other business combination approved by the Board since the Board may, at its
option, at any time until the time a person becomes an acquiring person redeem
all but not less than all the then outstanding rights at the redemption
price.
The
Rights Agreement, dated as of March 18, 2004, between the Company and Registrar
and Transfer Company, as Rights Agent, is attached hereto as Exhibit 4.2 and is
incorporated herein by reference. The foregoing description of the rights is
qualified in its entirety by reference to such exhibit.
Blank Check Preferred
Stock
The
remaining 4,948,000 undesignated shares of preferred stock are typically
referred to as “blank check” preferred stock. This term refers to
stock for which the rights and restrictions are determined by the board of
directors of a corporation. The Company’s certificate of incorporation
authorizes the Company’s Board of Directors to issue new shares of the Company’s
preferred stock without further shareholder action.
The
Company’s certificate of incorporation gives the Board of Directors authority at
any time to:
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divide
any or all of the remaining authorized but unissued shares of preferred
stock into classes and to divide such classes into
series;
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determine
the designation, number of shares, relative rights, preferences and
limitations of any class or series of preferred
stock;
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increase
the number of shares of any class or series of preferred
stock;
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decrease
the number of shares in a class or series, but not to a number less than
the number of shares of such class or series then
outstanding;
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change
the designation, number of shares, relative rights, preferences and
limitations of any class or series;
and
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determine
the relative rights and preferences which are subordinate to, or equal
with, the shares of any other class or
series.
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With
respect to any class or series of preferred stock, the Company’s certificate of
incorporation further gives the Board of Directors authority at any time to
determine:
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the
dividend rate on shares of such class or series and any restrictions,
limitations or conditions upon the payment of such dividends, and whether
dividends are cumulative, and the dates on which dividends, if declared,
shall be payable;
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whether
the shares of such class or series shall be redeemable and, if so, the
terms of redemption;
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the
rights of holders of shares of such class or series in the event of the
liquidation, dissolution or winding up of the Company, whether voluntary
or involuntary, or any other distribution of its
assets;
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whether
the shares of such class or series shall be subject to the operation of a
purchase, retirement or sinking fund and, if so, the terms and conditions
thereof;
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whether
the shares of such class or series shall be convertible into shares of any
other class or series of the same or any other class, and if so, the terms
of such conversion; and
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the
extent of voting powers, if any, of the shares of such class or
series.
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The
issuance of additional common or preferred stock may be viewed as having adverse
effects upon the holders of common stock. Holders of the Company’s
common stock will not have preemptive rights with respect to any newly issued
stock. The Company’s Board of Directors could adversely affect the
voting power of holders of the Company’s common stock by issuing shares of
preferred stock with certain voting, conversion and/or redemption
rights. In the event of a proposed merger, tender offer or other
attempt to gain control of the Company that the Board of Directors does not
believe to be in the best interests of its shareholders, the Board could issue
additional preferred stock which could make any such takeover attempt more
difficult to complete. Blank check preferred stock may also be used
in connection with the issuance of a shareholder rights plan, sometimes called a
poison pill. In connection with our Rights Agreement, 40,000 shares
of Series A Junior Participating Preferred Stock, no par value, have been
designated and reserved for issuance. We may issue these shares of
preferred stock under certain circumstances if the rights distributed to our
stockholders pursuant to our Rights Agreement become exercisable. See
the description of the Rights Agreement above in “Anti-Takeover Provisions –
Rights Agreement.”
On
December 23, 2008, the Company issued and sold to the Treasury a ten-year
warrant to purchase up to 200,222 shares of the Company’s common stock, no par
value, in addition to the 12,000 shares of the Company’s Fixed Rate Cumulative
Perpetual Preferred Stock, Series B. As a result of the 2009 stock
dividend, the shares of common stock initially underlying the warrant were
adjusted from 200,222 to 210,233 shares of common stock in accordance with the
terms and conditions of the warrant. The warrant is immediately
exercisable by the holder and will expire on December 23, 2018. The
warrant may be exercised in whole or in part.
The
initial exercise price of the warrant was $8.99 per share, determined by
reference to the market price of the Company’s common stock on the date of the
Treasury’s approval of the Company’s application to sell to the Treasury the
senior preferred shares (calculated on a 20-day trailing average of days on
which the Company’s common stock was traded). As a result of the 2009
stock dividend, the initial per share exercise price of $8.99 per share was
adjusted to $8.562 per share in accordance with the terms and conditions of the
warrant.
Exercise
of Warrant
Without
the consent of both the Company and the warrantholder, the warrant may only be
exercised on a net basis. Therefore, the holder does not pay the
exercise price but instead authorizes the Company to reduce the shares
receivable on exercise of the warrant by the number of shares with a then
current market value equal to the exercise price. To exercise the
warrant, the holder must present and surrender the warrant and a notice of
exercise to the Company.
Rights
of Warrantholder
A holder
of the warrant as such is not entitled to vote or exercise any of the rights as
a stockholder of the Company until such time as such warrant has been duly
exercised.
Transferability
of Warrant
The
warrant and all rights thereunder are transferable, in whole or in part, by a
holder upon surrender of the warrant, duly endorsed, to the office or agency of
the Company. Thereafter, a new warrant registered in the name of the
designated transferee or transferees will be made and delivered by the
Company.
Share
Adjustment
The
warrant contains provisions that will adjust the exercise price of the warrant
and the number of shares purchasable upon exercise of the warrant proportionally
to reflect any share dividend or other distribution, share subdivision,
combination or reclassification which affects holders of record of the Company’s
common stock as of any date on or after the issuance date of the warrant. In the
event of any merger, consolidation, or other business combination to which the
Company is a party, the warrantholder’s right to receive shares of common stock
upon exercise of the warrant will be converted into the right to exercise the
warrant to acquire the number of shares of stock or other securities or property
which the common stock issuable upon exercise of the warrant immediately prior
to such business combination would have been entitled to receive upon
consummation of the business combination.
If the
Company raises equity capital on or before December 31, 2009 in aggregate gross
proceeds of not less than 100% of the issue price of the senior preferred shares
sold to the Treasury and if the Treasury is still the holder of the warrant,
then the number of shares of the Company’s common stock underlying the warrant
will be reduced by one half.
The
foregoing is merely a summary of the terms of the warrant. This
summary does not purport to be complete in all respects and is subject to and
qualified in its entirety by reference to the warrant, a copy of which has been
filed with the SEC and is also available upon request from
us.
We will
not receive any proceeds from any sale of the securities by the selling
securityholders.
The
selling securityholders and their successors, including their transferees, may
sell the securities directly to purchasers or through underwriters,
broker-dealers or agents, who may receive compensation in the form of discounts,
concessions or commissions from the selling securityholders or the purchasers of
the securities. These discounts, concessions or commissions as
to any particular underwriter, broker-dealer or agent may be in excess of those
customary in the types of transactions involved.
The securities
may be sold in one or more transactions at fixed prices, at prevailing market
prices at the time of sale, at varying prices determined at the time of sale or
at negotiated prices. These sales may be effected in transactions,
which may involve crosses or block transactions:
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on
any national securities exchange or quotation service on which
the common stock may be listed or quoted at the time of sale,
including, as of the date of this prospectus, the NASDAQ Global
Market;
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in
the over-the-counter market;
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in
transactions otherwise than on these exchanges or services or in the
over-the-counter market; or
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through
the writing of options, whether the options are listed on an options
exchange or otherwise.
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In
addition, any securities that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
prospectus.
In
connection with the sale of the securities or otherwise, the selling
securityholders may enter into hedging transactions with broker-dealers, which
may in turn engage in short sales of the common stock issuable
upon exercise of the warrant in the course of hedging the positions they
assume. The selling securityholders may also sell short the common
stock issuable upon exercise of the warrant and deliver common stock
to close out short positions, or loan or pledge the common
stock issuable upon exercise of the warrant to broker-dealers that in turn
may sell these securities.
The
aggregate proceeds to the selling securityholders from the sale of
the securities will be the purchase price of the securities less
discounts and commissions, if any.
In
effecting sales, broker-dealers or agents engaged by the selling securityholders
may arrange for other broker-dealers to participate. Broker-dealers
or agents may receive commissions, discounts or concessions from the selling
securityholders in amounts to be negotiated immediately prior to the
sale.
In
offering the securities covered by this prospectus, the selling securityholders
and any broker-dealers who execute sales for the selling securityholders may be
deemed to be “underwriters” within the meaning of Section 2(a)(11) of the
Securities Act in connection with such sales. Any profits realized by
the selling securityholders and the compensation of any broker-dealer may be
deemed to be underwriting discounts and commissions. Selling
securityholders who are “underwriters” within the meaning of
Section 2(a)(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act and may be subject to certain
statutory and regulatory liabilities, including liabilities imposed pursuant to
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities
Exchange Act of 1934, or the Exchange Act.
In order
to comply with the securities laws of certain states, if applicable, the
securities must be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the
securities may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
The
anti-manipulation rules of Regulation M under the Exchange Act may apply to
sales of securities pursuant to this prospectus and to the activities of
the selling securityholders. In addition, we will make copies of this
prospectus available to the selling securityholders for the purpose of
satisfying the prospectus delivery requirements of the Securities Act, which may
include delivery through the facilities of The NASDAQ Stock Market pursuant to
Rule 153 under the Securities Act.
At the
time a particular offer of securities is made, if required, a prospectus
supplement will set forth the number and type of securities being offered and
the terms of the offering, including the name of any underwriter, dealer or
agent, the purchase price paid by any underwriter, any discount, commission and
other item constituting compensation, any discount, commission or concession
allowed or reallowed or paid to any dealer, and the proposed selling price to
the public.
We have
agreed to indemnify the selling securityholders against certain liabilities,
including certain liabilities under the Securities Act. We
have also agreed, among other things, to bear substantially all expenses
(other than underwriting discounts and selling commissions) in connection with
the registration and sale of the securities covered by this
prospectus.
On
December 23, 2008, we issued the securities covered by this prospectus, as well
as 12,000 shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series
B, to the United States Department of the Treasury, which is the initial selling
securityholder under this prospectus, in a transaction exempt from the
registration requirements of the Securities Act. The initial selling
securityholder, or its successors, including transferees, may from time to time
offer and sell, pursuant to this prospectus or a supplement to this prospectus,
any or all of the securities covered by this prospectus which they
own. The securities to be offered under this prospectus for the
account of the selling securityholders are:
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a
warrant to purchase 210,233 shares of our common stock (as adjusted from
an initial 200,222 shares of common stock underlying the warrant as a
result of the 2009 stock dividend in accordance with the terms and
conditions of the warrant); and
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210,233
shares of our common stock (as adjusted from an initial 200,222 shares of
common stock underlying the warrant to 210,233 shares of common stock as a
result of the 2009 stock dividend in accordance with the terms and
conditions of the warrant) issuable upon exercise of the warrant, which
shares, if issued, would represent ownership of approximately 4.97% of our
common stock outstanding as of January 20,
2009.
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For
purposes of this prospectus, we have assumed that, after completion of the
offering, none of the securities covered by this prospectus will be held by the
selling securityholders.
Beneficial
ownership is determined in accordance with the rules of the SEC and includes
voting or investment power with respect to the securities. To our
knowledge, the initial selling securityholder has sole voting and investment
power with respect to the securities.
We do not
know when or in what amounts the selling securityholders may offer the
securities for sale. The selling securityholders might not sell any or all of
the securities offered by this prospectus. Because the selling securityholders
may offer all or some of the securities covered by this prospectus pursuant to
this offering, and because currently no sale of any of the securities is subject
to any agreements, arrangements or understandings, we cannot estimate the number
of the securities that will be held by the selling securityholders after
completion of the offering.
Other
than with respect to the acquisition of the securities, the initial selling
securityholder has not had a material relationship with us.
Information
about the selling securityholders may change over time and changed information
will be set forth in supplements to this prospectus if and when
necessary.
INTERESTS OF NAMED EXPERTS AND COUNSEL
The
validity of the securities of the Company offered hereby has been passed upon
for the Company by Day Pitney LLP, New York, New York. Attorneys in
the law firm of Day Pitney LLP who have participated in the legal matters
relating to this registration statement beneficially own an aggregate of 14,101
shares of the Company’s common stock as of January 20, 2009.
The
financial statements incorporated by reference in this prospectus and elsewhere
in the registration statement have been so incorporated by reference in reliance
upon the report of Grant Thornton LLP, independent registered public
accountants, upon the authority of said firm as experts in accounting and
auditing in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have
filed a registration statement on Form S-3 with the SEC covering the
securities that may be sold under this prospectus. This prospectus
summarizes material provisions of contracts and other documents that we refer
you to. For further information on the Company and the securities,
you should refer to our registration statement and its exhibits. As
permitted by the rules and regulations of the SEC, the registration statement
that contains this prospectus includes additional information not contained in
this prospectus. Because the prospectus may not contain all the
information that you may find important, you should review the full text of
these documents. We have included copies of these documents as
exhibits to our registration statement of which this prospectus is a
part.
We also
file reports, proxy statements and other information with the
SEC. Our SEC filings are available over the Internet at the SEC’s
website at http://www.sec.gov. You may also read and copy any
document we file by visiting the SEC’s public reference room in Washington,
D.C. The SEC’s address in Washington, D.C. is 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information about the public reference room. You may also
inspect our SEC reports and other information at the offices of The NASDAQ Stock
Market at One Liberty Plaza, 165 Broadway, New York, New York
10006.
The SEC
allows us to “incorporate by reference” the information we file with them, which
means:
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incorporated
documents are considered part of the
prospectus;
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we
can disclose important information to you by referring you to those
documents; and
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information
that we file with the SEC will automatically update and supersede this
incorporated information.
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We
incorporate by reference the following documents that we have filed or furnished
with the SEC:
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Annual
Report on Form 10-K for the year ended December 31,
2007;
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Quarterly
Reports filed on Form 10-Q for the quarters ended March 31, 2008, June 30,
2008, and September 30, 2008;
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Current
Reports filed or furnished on Form 8-K dated March 14, 2008, April
23, 2008, December 23, 2008 and January 30,
2009;
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The
definitive proxy statement for our 2008 annual meeting of shareholders;
and
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The
description of the common stock which is contained in the Company’s
Registration Statement on Form 8-A including any amendment or report
filed for the purpose of updating such
description.
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We also
incorporate by reference each of the following documents that we file with the
SEC in the future until this offering is completed:
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reports
filed under Sections 13(a) and (c) of the Exchange
Act;
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any
document filed under Section 14 of the Exchange Act;
and
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any
reports filed under Section 15(d) of the Exchange
Act.
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You
should rely only on information contained or incorporated by reference in this
prospectus. We have not authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not
making an offer to sell these securities in any jurisdiction where the offer or
sale is not permitted.
You
should assume that the information appearing in this prospectus is accurate as
of the date of this prospectus only. Our business, financial
condition and results of operation may have changed since that
date.
To
receive a free copy of any of the documents incorporated by reference in this
prospectus (other than exhibits, unless they are specifically incorporated by
reference in the documents), call or write our Shareholder Relations Department,
as follows:
1st
Constitution Bancorp
2650
Route 130 North
Cranbury,
New Jersey 08512
Attention: Robert
F. Mangano, President & Chief Executive Officer
Telephone:
(609) 655-4500