MALIZIA SPIDI & FISCH, PC
ATTORNEYS AT LAW
1100 NEW YORK AVENUE, N.W. 637 KENNARD ROAD
SUITE 340 WEST STATE COLLEGE, PENNSYLVANIA 16801
WASHINGTON, D.C. 20005 (814) 466-6625
(202) 434-4660 FACSIMILE: (814) 466-6703
FACSIMILE: (202) 434-4661
September 7, 2001
Boards of Directors
Peoples Home Savings Bank
PHS Bancorp, M.H.C.
PHS Bancorp, Inc.
PHSB Financial Corporation
744 Shenango Road
Beaver Falls, PA 15010
Board Members:
You have asked us to give certain limited opinions regarding certain
Pennsylvania tax consequences to PHS Bancorp, M.H.C. (the "MHC"), PHS Bancorp,
Inc. (the "Mid-Tier"), Peoples Home Savings Bank (the "Savings Bank"), and PHSB
Financial Corporation (the "Holding Company") and the Bank's depositors under
the laws of the Commonwealth of Pennsylvania of the proposed mutual-to-stock
conversion and reorganization (the "Conversion and Reorganization") under which
the MHC will convert from the mutual holding company form to the stock form. In
addition, the MHC will simultaneously reorganize its corporate structure to the
holding company structure as described in the Plan of Conversion and
Reorganization of PHS Bancorp, M.H.C. and Plans of Merger between PHS Bancorp,
M.H.C., PHS Bancorp, Inc. and Peoples Home Savings Bank, adopted on August 16,
2001 (the "Plan"). With respect to this opinion, the capitalized terms used but
not defined herein shall have the same meaning set forth in the Plan.
You have previously received an opinion of this firm regarding the
material federal income tax consequences of the Conversion and Reorganization
(the "Federal Tax Opinion"). Based upon the facts stated in the Federal Tax
Opinion, including certain representations of the MHC, the Mid-Tier, the Bank,
and the Holding Company, the Federal Tax Opinion concludes, among other things,
that certain transactions contemplated by the Conversion and Reorganization
qualify as tax- free reorganizations under Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the MHC, the Bank, the
Mid-Tier, the Holding Company and Depositors of the Savings Bank with a
liquidation interest in the MHC will not recognize income, gain, or loss for
federal income tax purposes upon the implementation of the Plan.
Our opinion is based upon (1) the facts and circumstances attendant to
the Conversion and Reorganization, including the representations of the Savings
Bank, the Mid-Tier, the MHC and the Holding Company, as described in the Federal
Tax Opinion, (2) current provisions of
MALIZIA SPIDI & FISCH, PC
Boards of Directors
Peoples Home Savings Bank
PHS Bancorp, M.H.C.
PHS Bancorp, Inc.
PHSB Financial Corporation
September 7, 2001
Page 2
Pennsylvania law, as reflected in Pennsylvania statutes, administrative
regulations and rulings thereunder, and court decisions, (3) the Federal Tax
Opinion, and (4) the assumption that the Conversion and Reorganization will not
result in the recognition of any gain or income on the books of the Savings
Bank, the Mid-Tier, the Holding Company, or the MHC under generally accepted
accounting principles.
It is our opinion that under the laws of the Commonwealth of
Pennsylvania, (a) the Savings Bank will not recognize any net income or net loss
for purposes of the Pennsylvania Mutual Thrift Institutions Tax (the "MTIT")
solely as a result of the Conversion and Reorganization, provided the Savings
Bank does not recognize any net income or net loss under generally accepted
accounting principles, applied as required by the law imposing such tax; and (b)
Eligible Account Holders, Supplemental Eligible Account Holders and Current
Depositors of the Savings Bank and the Holding Company will not recognize any
gain or loss for Pennsylvania income tax purposes solely as a result of the
Conversion and Reorganization, provided they do not recognize any gain or loss
for federal income tax purposes solely as a result of such transactions.
We exempt from our opinion, however, the income tax consequences of any
cash received by Mid-Tier shareholders who are paid cash in lieu of fractional
shares.
Our opinions herein are expressly limited to the MTIT, the Pennsylvania
Personal Income Tax (the "PIT"), and the Pennsylvania Corporate Net Income Tax
("CNIT"), and specifically do not include any opinions with respect to the
consequences to depositors of the Savings Bank of the implementation of the
Conversion and Reorganization under any other taxes imposed by the Commonwealth
of Pennsylvania or any other subdivision thereof, or imposed by states other
than Pennsylvania and local jurisdictions of such states. In addition, the
opinions herein specifically do not include (1) an opinion with respect to the
consequences to the Savings Bank, the MHC, the Mid-Tier, and the Holding Company
of the implementation of the Plan under any local taxes imposed by any political
subdivision of the Commonwealth of Pennsylvania, and under any state or local
realty or other transfer tax, or (2) an opinion with respect to tax liabilities
under the MTIT, the PIT, or the CNIT attributable to events after the Conversion
and Reorganization or to any assets held or acquired by the Holding Company
other than stock of the Bank.
Our opinion is based on the facts and conditions as stated herein,
whether directly or by reference to the Federal Tax Opinion. If any of the facts
and conditions are not entirely complete or accurate, it is imperative that we
be informed immediately, as the inaccuracy or incompleteness could have a
material effect on our conclusions. This opinion is limited to the effect of the
income
MALIZIA SPIDI & FISCH, PC
Boards of Directors
Peoples Home Savings Bank
PHS Bancorp, M.H.C.
PHS Bancorp, Inc.
PHSB Financial Corporation
September 7, 2001
Page 3
tax laws of the Commonwealth of Pennsylvania and to the specific conclusions set
forth above, and no other opinions are expressed or implied. Changes to the law
or its interpretation that we have relied upon may be applied retroactively and
may affect the opinion expressed herein. In rendering our opinion, we are
relying upon the relevant provisions of the Code, the laws of the Commonwealth
of Pennsylvania, as amended, the regulations and rules thereunder and judicial
and administrative interpretations thereof, which are subject to change or
modification by subsequent legislative, regulatory, administrative, or judicial
decisions. Any such changes could also have an effect on the validity of our
opinion. We undertake no responsibility to update or supplement our opinion. Our
opinion is not binding on the Internal Revenue Service or the Commonwealth of
Pennsylvania, nor can any assurance be given that any of the foregoing parties
will not take a contrary position or that our opinion will be upheld if
challenged by such parties.
USE OF OPINION
This opinion is given solely for the benefit of the parties to the
Plan, the depositors of the Savings Bank, and the shareholders of the Mid-Tier
and may not be relied upon by any other person or entity or referred to in any
document without our express written consent.
CONSENT
Finally, we hereby consent to the filing of this opinion as an exhibit
to the Application for Conversion of the MHC filed with the Pennsylvania
Department of Banking (the "Pennsylvania Application"), and the filing of this
opinion as an exhibit to the Holding Company's Registration Statement on Form
SB-2 ("Form SB-2") to be filed with the Securities and Exchange Commission, and
to reference to our firm in the prospectus contained in the Pennsylvania
Application and Form SB-2.
Very truly yours,
/s/Malizia Spidi & Fisch, PC
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Malizia Spidi & Fisch, PC