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EXHIBIT 8.01
TUCKER ARENSBERG, P.C.
1500 ONE PPG PLACE
PITTSBURGH, PA 15222
(412) 566-1212
May 9, 1996
Board of Directors
Prestige Bank, a Federal Savings Bank
710 Old Clairton Road
Pleasant Hills, Pennsylvania 15236
Board of Directors
Prestige Bancorp, Inc.
710 Old Clairton Road
Pleasant Hills, Pennsylvania 15236
Re: Certain Federal and Pennsylvania Tax Consequences of the Conversion of
Prestige Bank from a Federally Chartered Mutual Savings Bank to a
Chartered Stock Savings Bank and the Offer and Sale of Common Stock
of Prestige Bancorp, Inc.
Ladies and Gentlemen:
You have requested our opinion on certain Federal and Pennsylvania
income tax consequences of the proposed conversion (the "Conversion") of
Prestige Bank, a Federal Savings Bank from a Federally chartered mutual savings
bank to a Federally chartered stock savings bank (hereinafter referred to in
its mutual or stock form, as applicable, as "Prestige Bank" or the "Bank") and
the acquisition of the Bank's capital stock by Prestige Bancorp, Inc., a
Pennsylvania corporation (the "Company"), pursuant to the Bank's Plan of
Conversion adopted by the Board of Directors of the Bank on February 14, 1996
(the "Plan of Conversion").
We have reviewed the Corporation's Registration Statement on Form S-1
(SEC Reg. No. 333-2692) as amended by Amendment No. 1 filed on May 3, 1996 and
Amendment No. 2 filed on May 9, 1996 (the "Registration Statement"), relating to
the proposed issuance of up to 1,322,500 shares of its common stock, par value
$1.00 per share (the "Common Stock"), the Prospectus contained therein (the
"Prospectus"), the Articles of Incorporation and Bylaws of the Company, the
existing Federal mutual and proposed Federal stock Charter and Bylaws of the
Bank, the Plan of Conversion of the Bank, the Bank's Application for Conversion
with the Office of Thrift Supervision, Department of Treasury (the "OTS"), and
such other corporate records and
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May 9, 1996
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documents as we have deemed relevant for the purposes of issuing this opinion.
All capitalized terms which are not separately defined herein shall
have the meanings assigned to them in the Prospectus, unless otherwise
indicated or the context clearly requires otherwise.
STATEMENT OF FACTS
The Bank is a Federally chartered mutual savings bank which conducts
business from offices located in Allegheny County, Pennsylvania. The Bank's
deposits are insured by the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation to the maximum extent permitted by law.
As a mutual savings bank, the Bank has never been authorized to issue
capital stock. Instead, the proprietary interest in the residual net worth of
the Bank belongs to the deposit account holders of the Bank, hereinafter
sometimes referred to as the "depositors". A depositor of the Bank has a right
to share, pro rata, with respect to the withdrawal value of his or her
respective deposit account in any liquidation proceeds distributed in the event
the Bank is ever liquidated. In addition, a depositor of the Bank is entitled
to interest on his or her account balance as fixed and paid by the Bank.
In order to provide organizational and economic strength to the Bank,
the Board of Directors on February 14, 1996, adopted the Plan of Conversion
whereby the Bank will convert itself into a Federally chartered stock savings
bank, the stock of which will be held entirely by the Company. The Company
will acquire the stock of the Bank by purchase, using no less than
approximately 50% of the net proceeds received from the sale of its own stock
under the Plan of Conversion. The Company will have authorized capital
consisting of 10,000,000 shares of common stock par value $1.00 (the "Common
Stock") and 5,000,000 shares of preferred stock. Only Common Stock will be
issued in connection with the Conversion. In connection with the Conversion,
the Company will issue shares of its Common Stock in Subscription and Community
Offerings and, if necessary, a Syndicated Community Offering. The Common Stock
offered for sale in the Subscription Offering will be done so pursuant to non-
transferrable subscription rights which will be issued without payment
therefor. The holders of the non-transferable subscription rights will not be
entitled to
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May 9, 1996
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receive cash or other property in return for or in lieu of such rights. It is
anticipated that all such shares of Common Stock not subscribed for in the
Subscription and Community Offerings will be offered to the general public in a
Syndicated Community Offering. The aggregate sales price of the Common Stock
issued in the Conversion will be based on an independent appraiser's valuation
of the estimated pro forma market value of the Common Stock of the converted
Bank. The Conversion and sale of the Common Stock will be accomplished
pursuant to the rules and regulations and will be subject to the approval of
the OTS.
In accordance with the Plan of Conversion, non-transferable rights to
subscribe for the purchase of Common Stock have been granted to the following
persons in the following order of priority: (1) holders of deposit accounts
with a balance of $50 or more as of December 31, 1994 (the "Eligible Account
Holders"); (2) the Company's and Bank's tax-qualified employee stock ownership
plan (the "ESOP"); (3) depositors of the Bank with a balance of $50 or more as
of March 31, 1996 (the "Supplemental Eligible Account Holders"); (4) all other
depositors of the Bank as of April 30, 1996, and borrowers of the Savings Bank
as of March 1, 1991 which continue as borrowers as of April 30, 1996 (the
"Other Members"); and (5) directors, officers and employees of the Bank as of
April 30, 1996 (the "Directors, Officers and Employees"). All subscriptions
received will be subject to the availability of Common Stock after satisfaction
of all subscriptions of all persons having prior rights in the Subscription
Offering and to the maximum and minimum purchase limitations set forth in the
Plan of Conversion.
The Conversion will be effected only upon completion of the sale of
all shares of Common Stock of the Company to be issued pursuant to the Plan of
Conversion. The Company has no plan or intention to dispose of any shares of
the capital stock of the Bank, to cause the Bank to be merged with any other
corporation, or to liquidate the Bank.
The Conversion will not affect the business of the Bank. Mortgages
and other loans from the Bank will remain unchanged and retain their same
characteristics after the Conversion. There is no plan or intention for the
Bank to sell or otherwise dispose of any of its assets following the
Conversion, except for in the dispositions ordinary course of business.
Each deposit account in the Bank at the time of the consummation of
the Conversion shall become, without any action
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May 9, 1996
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by the account holder, a deposit account in the converted Bank equivalent in
withdrawable amount, and subject to the same terms and conditions as the
deposit account in the Bank immediately prior to the Conversion. In addition,
at the time of the Conversion, the Bank shall establish a liquidation account
in an amount equal to the Bank's net worth as reflected in the final Prospectus
utilized in the Conversion. The liquidation account will be maintained for the
benefit of all Eligible Account Holders and Supplemental Eligible Account
Holders who maintain their deposit accounts in the Bank after the Conversion.
Each such account holder will, with respect to each deposit account, have an
inchoate interest in a portion of the liquidation account which is the account
holder's subaccount balance. An account holder's subaccount balance in the
liquidation account will be determined at the time of the Conversion and can
never increase thereafter. It will, however, be decreased to reflect
subsequent withdrawals that reduce, as of annual closing dates, the amount in
each depositor's account below the amount in the account as of the specified
record date. In the event of a complete liquidation of the Bank, each Eligible
Account Holder and Supplemental Eligible Account Holder will be entitled to
receive a liquidation distribution in the amount of the balance of his or her
subaccount in the liquidation account before any distribution may be made with
respect to the capital stock of the Bank.
LIMITATIONS ON OPINION
Our opinions expressed herein are based solely upon current provisions
of the Internal Revenue Code of 1986, as amended, (the "Code"), and the
Pennsylvania Tax Reform Code of 1971, as amended, (the "Tax Reform Code"),
including applicable regulations and current judicial and administrative
authority. Any future amendments to the Code, the Tax Reform Code, or
applicable regulations, or new judicial decisions or administrative
interpretations, any of which could be retroactive in effect, could cause us to
modify our opinions.
OPINION
Based solely upon the Company's and Bank's representations to us by
letter dated May 9, 1996, (the "Representation Letter"), and assuming the
transaction occurs in accordance with the Plan of Conversion (and taking into
consideration the limitations set forth in this opinion), we render the
following opinions.
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I. FEDERAL LAW.
Under current Federal tax law it is our opinion that:
(1) Pursuant to the Conversion, the changes at the corporate level
other than changes in the form of organization will be
insubstantial. Based upon that fact and the fact that the
equity interest of a depositor in a mutual savings bank is
more nominal than real, unlike that of a shareholder of a
corporation, the Conversion of the Bank from a mutual savings
bank to a stock savings bank will constitute a reorganization
within the meaning of Section 368(a)(1)(F) of the Code because
the Conversion is a mere change in identity, form or place of
organization (see Rev. Rul. 80-105, 1980-1 C.B. 78). The Bank
will not recognize gain or loss as a result of the Conversion.
The Bank will be "a party to a reorganization" within the
meaning of Section 368(b) of the Code.
(2) No gain or loss shall be recognized by the Bank or the Company
on the receipt by the Bank of money from the Company in
exchange for shares of the Bank's capital stock or by the
Company upon the receipt of money from the sale of its Common
Stock (Section 1032(a) of the Code).
(3) The basis of the assets of the Bank shall be the same as the
basis of such assets in the hands of the Bank immediately
prior to the Conversion (Section 362(b) of the Code).
(4) The holding period of the assets of the Bank shall include the
period of time during which the Bank held the assets prior to
the Conversion (Section 1223(2) of the Code).
(5) No gain or loss shall be recognized by the Eligible Account
Holders and the Supplemental Eligible Account Holders of the
Bank on the issuance to them of withdrawable deposit accounts
in the converted Bank plus interests in the liquidation
account of the converted Bank in exchange for their
withdrawable deposit accounts in the Bank plus any related
interest in the residual equity of the Bank or to the other
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May 9, 1996
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depositors on the issuance to them of withdrawable deposit
accounts (Section 354(a) of the Code).
(6) Provided that the amount to be paid for the Common Stock
pursuant to the subscription rights is equal to the fair
market value of the Common Stock, no gain or loss will be
recognized by Eligible Account Holders and Supplemental
Eligible Account Holders upon the distribution to them of the
nontransferable subscription rights to purchase shares of the
Common Stock in the Company (Section 356(a) of the Code).
Gain realized, if any, by the Eligible Account Holders and
Supplemental Eligible Account Holders on the distribution to
them of nontransferable subscription rights to purchase shares
of Common Stock will be recognized but only in an amount not
in excess of the fair market value of such subscription rights
(Section 356(a)). Eligible Account Holders and Supplemental
Eligible Account Holders will not realize any taxable income
as a result of the exercise by them of the nontransferable
subscription rights (Rev. Rul. 56-572, 1956-2 C.B. 182).
(7) The basis of the withdrawable deposit accounts in the
converted Bank to be received by the Eligible Account Holders,
Supplemental Eligible Account Holders and other depositors of
the Bank will be the same as the basis of their withdrawable
deposit accounts in the Bank surrendered in exchange therefor
(Section 358(a)(1) of the Code). The basis of the interests
in the liquidation account of the converted Bank to be
received by the Eligible Account Holders and Supplemental
Eligible Account Holders of the Bank shall be zero (Rev. Rule,
71-233, 1971-1 C.B. 113). The basis of the Company Common
Stock to its stockholders will be the purchase price thereof
plus the basis, if any, of nontransferable subscription rights
(Section 1012 of the Code). Accordingly, assuming the
nontransferable subscription rights have no value, the basis
of the Common Stock to the Eligible Account Holders and
Supplemental Eligible Account Holders will be the amount paid
therefor.
(8) The holding period of the Common Stock purchased pursuant to
the exercise of subscription rights shall commence on the date
on which the right to acquire such
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stock was exercised (Section 1223(6) of the Code) and on the
day after the date of purchase if purchased in the Syndicated
Community Offering (Rev. Rul. 70-598, 1970-2 C.B. 168; Rev.
Rul. 66-97, 1966-1 C.B. 190).
Our opinion under paragraph (6) above is predicted on the
representation that no person shall receive any payment in lieu of the issuance
of subscription rights. Our opinion under paragraphs (6) and (7) above assumes
that the subscription rights to purchase shares of Common Stock received by
Eligible Account Holders, Supplemental Eligible Account Holders and other
depositors of the Bank have a fair market value of zero. We understand, that
you have received an opinion of FinPro, Inc. ("FinPro") that the subscription
rights do not have any value. For purposes of our opinions expressed herein,
we assume that the subscription rights do not have any value, in accordance
with the FinPro opinion, and we express no view regarding the valuation of the
subscription rights.
If the subscription rights are subsequently found to have a fair
market value, income may be recognized by various recipients of the
subscription rights (in certain cases, whether or not the rights are exercised)
and the Company and/or the converted Bank may be taxable on the distribution of
the subscription rights.
II. PENNSYLVANIA LAW.
Under current Pennsylvania tax law it is our opinion that:
(1) The Bank is a Mutual Thrift Institution as defined under
Article XV of the Tax Reform Code, and is subject to the
Mutual Thrift Institutions Tax (See Tax Reform Code Sections
8501 et. seq.) (the "MTIT"). Because the Bank is subject to
the MTIT, it is exempt from all other corporate taxes imposed
by the Commonwealth of Pennsylvania and from all local
taxation imposed by political subdivisions of the Commonwealth
of Pennsylvania, excepting taxes on real estate or the
transfer thereof (Tax Reform Code Section 8502(e)).
(2) Under the MTIT the Bank is subject to taxation on its net
income for financial accounting purposes as determined in
accordance with generally accepted accounting principles
("GAAP"), with certain exceptions not relevant hereto. (Tax
Reform Code Sections 8502(a)
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and 8502(c)). With your permission we have assumed without
independent investigation that the Conversion, including the
Bank's sale of its capital stock to the Company, will not give
rise to net income, gain or loss for financial accounting
purposes as determined under GAAP. Accordingly, under such
circumstances, it is our opinion, no taxable income or loss
should be recognized under the MTIT as a result of the
Conversion.
(3) The Company is subject to the Pennsylvania Corporate Net
Income Tax (See Tax Reform Code Sections 7401 et. seq.) (the
"CNI Tax"). The CNI Tax applies to corporations having
capital stock, which are organized or doing business in
Pennsylvania, and which are not savings institutions. The
Company's taxable income which is subject to the CNI Tax is
defined as "taxable income . . . as returned to and
ascertained by the Federal government...", with certain
adjustments not relevant hereto (Tax Reform Code Section
7401(3)). As indicated above, we are of the opinion that the
Company will recognize no gain or other taxable income for
Federal tax purposes as a result of the Conversion, and
accordingly, we likewise believe that the Company will
recognize no "taxable income," within the meaning of the CNI
Tax, as a result of the Conversion.
(4) In addition to the CNI Tax the Company will be subject to the
Pennsylvania Capital Stock Tax (See Tax Reform Code Sections
7601 et. seq.) (the "CS Tax"). The CS Tax is determined by a
fixed formula which contains, in part, a history of net income
(See Tax Reform Code Sections 7601 and 7602). Because there
is no income, gain or loss for financial reporting purposes as
determined under GAAP, the Conversion should not give rise to
the assessment of additional CS Tax.
(5) The Bank's Eligible Account Holders and Supplemental Eligible
Account Holders who reside in Pennsylvania are subject to
taxation under the Pennsylvania Personal Income Tax (Tax
Reform Code Sections 7301 et. seq.) (the "PIT"). The PIT is
imposed on eight classes of income (See Tax Reform Code
Section 7302.2). It is our opinion that the Conversion will
not give rise to a class of income subject to the PIT unless
the subscription rights are deemed to have value for Federal
tax purposes as described above. In such a
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case, the Bank's individual members may be deemed to have
income for purposes of the PIT.
* * *
Since this letter is rendered in advance of the closing of this
transaction, we have assumed that the transaction will be consummated in
accordance with the Plan of Conversion in effect as of the date of this
opinion, as well as all the information and representations referred to herein.
Any change in the transaction could cause us to modify our opinion.
We consent to the inclusion of this opinion as an exhibit to the Form
AC and the Registration Statement and any amendments thereof and the references
to and summary of this opinion in such Form AC and the Registration Statement
and any amendments thereof.
Very truly yours,
/s/ TUCKER ARENSBERG, P.C.
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TUCKER ARENSBERG, P.C.