EXHIBIT 8.2
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
October 27, 1997
Board of Directors
Newport Federal Savings Bank
200 Olivia Drive
Newport, Arkansas 72112
Gentlemen:
You have requested the opinion of KPMG Peat Marwick LLP as to the Arkansas
income tax consequences of the transaction described below. In formulating our
opinion and preparing this opinion letter, we have relied upon certain factual
representations made by Newport Federal Savings Bank (the "Bank"), entities
related to the Bank, and their respective employees and Directors, as well as
the Plan of Conversion as adopted on May 29, 1997 by the Board of Directors of
the Bank (the "Plan").
STATEMENT OF FACTS
The Bank is a federally chartered mutual savings and loan association with one
office in Newport, Arkansas. The Bank is a member of the FHLB System, and the
deposits of the Bank are insured by the Federal Deposit Insurance Corporation
("FDIC") up to applicable limits. The Bank is subject to comprehensive
regulation and supervision by the Office of Thrift Supervision ("OTS") and to
examination by the OTS.
The Bank is in the process of converting from a mutual form of ownership to a
stock form of ownership (the "Conversion"). One hundred percent (100%) of the
outstanding capital stock of the Bank following the conversion (the "Converted
Bank") will be acquired by a parent holding company known as North Arkansas
Bancshares, Inc., a newly formed holding corporation (the "Holding Company").
In the Conversion, the Bank will be converted from a federally chartered mutual
savings bank to a federally charted capital stock savings bank. The Converted
Bank will then issue to the Holding Company, 100,000 shares of the Converted
Bank's common stock, representing all of the shares of capital stock to be
issued by the Converted Bank in the Conversion, in exchange for payment by the
Holding Company of at least fifty percent (50%) of the aggregate net proceeds
realized by the Holding Company from the sale of its shares of common stock (the
"Common Stock") sold pursuant to the Plan, after deducting the amount necessary
to fund a loan to an Employee Stock Ownership Plan being established in
connection with the Conversion, or such other portion of the aggregate net
proceeds as may be authorized or required by the OTS.
Board of Directors
Newport Federal Savings Bank
October 27, 1997
Page 2
Also in connection with the Plan, the Holding Company will offer its shares of
Common Stock for sale in a Subscription Offering. Shares of Common Stock
remaining, if any, may then be offered to the general public in a Community
Offering. Shares of the Common Stock not otherwise subscribed for in the
Subscription Offering and Community Offering may be offered at the discretion of
the Holding Company to certain members of the general public as part of a
community offering on a best efforts basis by a selling group of selected
broker-dealers.
The purchase price per share and total number of shares of Common Stock to be
offered and sold pursuant to the Plan will be determined by the Board of
Directors of the Bank and the Holding Company on the basis of the estimated pro
forma market value of the Converted Bank as a subsidiary of the Holding Company,
which value will be determined by an independent appraiser. The aggregate
purchase price for all shares of the Common Stock will be equal to such
estimated pro forma market value. All such shares of Common Stock will be
issued and sold at a uniform price per share. The Conversion, including the
sale of newly issued shares of the stock of the Converted Bank to the Holding
Company, will be deemed effective concurrently with the closing of the sale of
the Common Stock.
The Conversion will not interrupt the business of the Bank. The Converted Bank
will, after the Conversion, engage in the same business as that of the Bank
immediately prior to the Conversion, and will continue to be subject to
regulation and supervision by the OTS and the FDIC. Further, the deposits of
the Converted Bank will continue to be insured by the FDIC. Each depositor will
retain a withdrawable savings account or accounts equal in dollar amount to, and
on the same terms and conditions as, the withdrawable account or accounts at the
time of Conversion except to the extent funds on deposit are used to pay for
Common Stock purchased in connection with the Conversion. All loans of the Bank
will remain unchanged and retain their same characteristics in the Converted
Bank immediately following the Conversion.
Management of the Bank and the Holding Company believes that the Conversion will
qualify as a tax-free reorganization for federal income tax purposes within the
meaning of Section 368(a)(1)(F) of the U.S. Internal Revenue Code of 1986, as
amended the (the "Code"). It is the opinion of Housley Kantarian & Bronstein,
P.C., counsel to the Board of Directors of the Bank of the Conversion (the
"Counsel"), that the Conversion will qualify as a tax-free reorganization for
federal income tax purposes within the meaning of Section 368(a)(1)(F) of the
Code. We assume that the presentation, by Counsel, that the Conversion will
qualify as a tax-free reorganization for federal income tax purposes within the
meaning of Section 368(a)(1)(F) of the Code, is correct.
OPINION
The State of Arkansas has specifically adopted certain provisions promulgated
under the Internal Revenue Code of 1986. Other Internal Revenue Code provisions
are only addressed through
Board of Directors
Newport Federal Savings Bank
October 27, 1997
Page 3
regulations issued under the Arkansas Income Tax Act of 1987. Arkansas
Regulations Section 1.84-2014(3) specifically defines a reorganization to
include a mere change in identity, form, or place of organization, however,
effected. Further Section 1.84-2014(1) provides in part that no gain or loss
should be recognized if property is transferred to a corporation by one person
solely in exchange for stock or securities in such corporation and, immediately
after the exchange, such person is in control of the corporation, or by two or
more persons solely in exchange for stock or securities in such corporation, and
if, immediately after the exchange, such persons are in control of the
corporation, and the amount of stock and securities received by each is
substantially in proportion to his interest in the property prior to the
exchange. The language of this regulation is similar to the language of Section
368(a)(1)(F) of the Code, and the operative provisions of Sections 354 and 361.
Based upon the facts as stated in this opinion and upon the facts and
assumptions set forth in and the analysis and opinion rendered in Counsel's
federal income tax opinion letter dated October 16,1997, it is our opinion that
Arkansas income tax consequences will follow the federal. Therefore, the
Conversion will constitute a tax-free transaction under Arkansas state laws and
regulations. There will be no Arkansas income tax consequences for the Bank,
the Converted Bank, the Holding Company, or the account holders of the Bank
resulting from the Conversion.
However, each depositor of the Bank will recognize gain upon the receipt of his
or her respective interest in the Liquidation Account established by the
Converted Bank pursuant to the Plan and the receipt of his or her subscription
rights deemed to have been received for federal income tax purposes, but only to
the extent of the excess of the combined fair market value of a depositor's
interest in such Liquidation Account and subscription rights over the
depositor's basis in the former interests in the Bank other than deposit
accounts. Persons who subscribe in the Conversion but who are not depositors of
the Bank will recognize gain upon the receipt of subscription rights deemed to
have been received for federal income tax purposes, but only to the extent of
the excess of the fair market value of such subscription rights over such
person's former interests in the Bank, if any. Any such gain realized in the
Conversion would be subject to immediate recognition.
SCOPE OF OPINION
Our opinion is based upon the Arkansas statues and regulations in effect as of
the date of this letter. If there are any significant changes by the foregoing
tax authorities (for which we shall have not responsibility to advise you), it
may result in our opinion being rendered invalid or necessitating, upon your
request, a reconsideration of the opinion.
Our opinion is based upon our assumption (without independent investigation or
review) that all of the representations in or referred to in Counsel's federal
income tax opinion letter are accurate and true (without independent
investigation or review).
Board of Directors
Newport Federal Savings Bank
October 27, 1997
Page 4
No opinion is expressed as to the federal income tax treatment of the
transaction as covered by Counsel's federal income tax opinion letter or to the
tax treatment for Arkansas income tax purposes of any existing conditions or
effects of the transaction which are not specifically set forth in Counsel's
opinion or in our opinion above.
While this letter represents our considered judgment as to the proper Arkansas
income tax treatment to the parties concerned, it is not binding on the Arkansas
tax authorities or the courts and should not be considered a guarantee that the
Arkansas tax authorities or the courts will concur with our opinion.
CONSENTS
We hereby consent to the filing of this opinion with the OTS as an exhibit to
the Application H-(e)1-S filed by the Holding Company with the OTS in connection
with the Conversion and the reference to our firm in the Application H-(e)1-S
under Item 110.55 therein. We also hereby consent to the filing of this opinion
with the Securities and Exchange Commission ("SEC") and the OTS as exhibits to
the Registration Statement and Form AC, respectively, and the references to our
firm in the Prospectus , which is a part of both the said Registration Statement
and the said Form AC, under the headings "The Conversion - Effect of Conversion
to Stock Form on Depositors and Borrowers of Newport Federal Savings Bank - Tax
Effects" and "Legal and Tax Matters." Other than the uses indicated in this
paragraph, our opinion may not be relied upon, distributed, or disclosed by
anyone without our prior written consent.
Very truly yours,
KPMG Peat Marwick LLP
/s/ Joseph I. Strack
Joseph I. Strack, Partner
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