Exhibit 8.1
Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding federal income tax consequences
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
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Telephone: (202) 347-0300
Facsimile: (202) 347-2172
WWW.EMTH.COM
TIMOTHY B. MATZ JEFFREY D. HAAS
STEPHEN M. EGE KEVIN M. HOULIHAN
RAYMOND A. TIERNAN KENNETH B. TABACH
W. MICHAEL HERRICK PATRICIA J. WOHL
GERARD L. HAWKINS FIORELIO J. VICENCIO*
NORMAN B. ANTIN DAVID TEEPLES*
JOHN P. SOUKENIK* CRISTIN ZEISLER
GERALD F. HEUPEL, JR. ANDREW ROSENSTEIN
JEFFREY A. KOEPPEL ERIC M. MARION*
DANIEL P. WEITZEL DANIEL R. KLEINMAN*
PHILIP ROSS BEVAN ____________
HUGH T. WILKINSON
April 28,1999 OF COUNSEL
ALLIN P. BAXTER
JACK I. ELIAS
SHERYL JONES ALU
*NOT ADMITTED IN D.C.
Board of Directors
FPB Financial Corp.
300 West Morris Street
Hammond, Louisiana 70403
Gentlemen:
You have requested our opinion regarding the material federal income tax
consequences of the conversion of Florida Parishes Bank (the "Bank"), a
federally chartered mutual savings bank, to stock form (the "Conversion"). In
the Conversion, all of the Bank's to-be-issued capital stock will be acquired by
FPB Financial Corp. (the "Company"), a newly organized Louisiana-chartered
corporation. For the reasons set forth below, and based on your factual
representations in a letter dated April 27, 1999 ("Representation Letter"), it
is our opinion that the proposed Conversion will qualify as a reorganization
within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986,
as amended (the "Code"). Our opinion also addresses the other material income
tax consequences which follow from this conclusion.
This Opinion Letter, including the opinions contained herein, is governed
by, and should be interpreted in accordance with, the Legal Opinion Accord (the
"Accord") of the American Bar Association Section of Business Law (1991). As a
consequence, it is subject to a number of qualifications, exceptions,
definitions, limitations on coverage and other limitations, all as more
particularly described in the Accord, and herein, and this Opinion Letter should
be read in conjunction with the Accord. Our opinions herein are limited to the
Code and the regulations
Board of Directors
April 28, 1999
Page 2
promulgated thereunder (the "Subject Laws"). We express no opinion as to other
federal laws and regulations or as to laws and regulations of Louisiana or other
jurisdictions or as to factual or legal matters other than as set forth herein.
We have reviewed the Company's Registration Statement on Form SB-2 relating
to the proposed issuance of up to 449,650 shares of common stock, par value $.01
per share ("Common Stock"), subject to adjustment by the Company in connection
with the Conversion, the Prospectus contained therein, the Articles of
Incorporation and the Bylaws of the Company, the existing mutual and proposed
stock Charter of the Bank, the Plan of Conversion of the Bank, the Bank's
Application for Conversion and such other corporate records and documents as we
have deemed relevant and necessary for the purposes of this opinion. In our
examination of documents, we have assumed, without independent verification, the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents to us as
certified, conformed or reproduced copies, and the authenticity of such
originals of such latter documents. As to matters of fact which are material to
this opinion, we have relied upon the accuracy of the factual matters set forth
in the Company's Registration Statement on Form SB-2, the Bank's Application for
Conversion and the Representation Letter.
The Bank is a federally chartered mutual savings bank which conducts
business from its office in Hammond, Louisiana. At December 31, 1998, the Bank
had total assets of approximately $41.1 million, deposits of approximately $34.1
million and equity of approximately $3.6 million. The Bank is regulated and
supervised by the Office of Thrift Supervision (the "OTS"), and its deposits are
insured by the Savings Association Insurance Fund ("SAIF"), administered by the
Federal Deposit Insurance Corporation. The Bank converted to a federal mutual
savings bank on February 23, 1999. Prior thereto, the Bank was a
Louisiana-chartered savings and loan association known as "Florida Parishes
Homestead Association." References herein to the Bank include the Association as
its predecessor.
As a mutual savings bank, the Bank has no capital stock. Each depositor has
both a deposit account in the institution and a pro rata ownership interest in
the net worth of the institution based on the balance in his or her deposit
account. This ownership interest is tied directly to the depositors' deposit
accounts, and the depositors ordinarily cannot realize the value of their
ownership, except in the unlikely event that the Bank were to be liquidated. In
such event, the depositors would share pro rata in any residual net worth after
other claims, including those of the depositors for the amount of their
deposits, are paid.
The Company is a recently formed Louisiana corporation which will acquire
all of the to-be-outstanding capital stock of the Bank upon consummation of the
Conversion and, thereby, become a unitary savings and loan holding company. The
Company will purchase all of the capital stock of the Bank with a portion of the
net proceeds from the Conversion.
Board of Directors
April 28, 1999
Page 3
On December 8, 1998, the Board of Directors of the Bank adopted a Plan of
Conversion. The purpose of the Conversion is to enable the Bank to issue and
sell shares of its capital stock to the Company and thereby enhance the equity
capital base of the Bank, which will support continuing deposit growth of the
Bank, possible diversification or opening of branch offices, and further enhance
the Bank's capabilities to serve the borrowing and other financial needs of the
communities it serves. The use of the holding company format will provide
greater organizational flexibility and possible diversification.
The Company has filed a Registration Statement on Form SB-2 to register its
Common Stock under the Securities Act of 1933 pursuant to which it will offer
for sale shares of its Common Stock. The Common Stock will be offered for sale
in a Subscription Offering pursuant to subscription rights which will not be
transferable and will be issued without payment therefor. The recipients will
not be entitled to receive cash or other property in lieu of such rights. It is
anticipated that any shares of Common Stock remaining unsold after the
Subscription Offering will be sold through a Community Offering. All shares of
Common Stock will be sold at a uniform price based upon an independent
valuation.
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. Management has informed us that 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. Mortgage and other
loans of the Bank will remain unchanged and retain their same characteristics
after the Conversion. Management has informed us that there is no plan or
intention for the Bank to sell or otherwise dispose of any of its assets
following the Conversion, except for dispositions in the ordinary course of
business.
Each deposit account in the Bank at the time of the consummation of the
Conversion shall become, without any action by the account holder, a deposit
account in the converted Bank equivalent in withdrawable amount, and subject to
the same terms and conditions (except as to voting and liquidation rights), 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
Board of Directors
April 28, 1999
Page 4
each depositor's account below the amount in the account at the time of the
Conversion. 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.
LAW AND ANALYSIS
----------------
Section 368(a)(1)(F) of the Code provides that a mere change in the
identity, form or place of organization of one corporation, however effected, is
a reorganization. If a transaction qualifies as an "F"-type reorganization, it
will generally be nontaxable to the corporation and its shareholders under
related provisions of the Code.
In Rev. Rul. 80-105, 1980-1 C.B. 78, the Internal Revenue Service
considered the federal income tax consequences of the conversion of a federal
mutual savings and loan association to a state stock savings and loan
association. The ruling concluded that the conversion qualified as a mere change
in identity, form of place or organization within the meaning of Section
368(a)(1)(F). The rationale for this conclusion is not clearly expressed in the
ruling, but two factors are stressed. First, the changes at the corporate level
other than the place of organization and form of organization were regarded as
insubstantial. The converted association continued its business in the same
manner; it had the same savings accounts and loans. The converted association
continued its membership in the Federal Savings and Loan Insurance Corporation
(replaced subsequently by the SAIF) and remained subject to the regulations of
the Federal Home Loan Bank Board, which was replaced subsequently by the Office
of Thrift Supervision. Second, the ruling states that the ownership rights of
the depositors in the mutual company are "more nominal than real." Although the
ruling does not explain the significance of this statement, subsequent
administrative interpretations have indicated that the Internal Revenue Service
believes these nominal rights are preserved in the liquidation account that is
typically established for the depositors' benefit. This approach enables the
Internal Revenue Service to distinguish the tax treatment of conversion
transactions from the tax treatment of acquisitive transactions in which mutual
companies acquire stock companies. See Paulsen v. Com'r, 469 U.S. 131 (1985);
Rev. Rul. 69-6 1969-1 C.B. 104.
The Internal Revenue Service has extended the holding of Rev. Rul. 80-105
to transactions similar to the one contemplated by the Bank and the Company, in
which a conversion from mutual to stock form occurs simultaneously with the
creation of a holding company. See e.g. private letter rulings numbered 9140014
and 9144031. While these rulings have no precedential value, they do indicate
the current views of the Internal Revenue Service on the issues presented.
Hanover Bank v. U.S., 369 U.S. 672, 686 (1962).
Board of Directors
April 28, 1999
Page 5
In our opinion and based on your Representation Letter, the conversion of
the Bank from a federally chartered mutual savings bank to a federally chartered
stock savings bank, and the sale of its capital stock to the Company, will
constitute a reorganization within the meaning of Section 368(a)(1)(F) of the
Code because the transaction represents a mere change in the form of
organization of a single corporation. There will be no change in the Bank's
business or operations, nor in its loans and deposits, all of which will become
loans and deposits of the converted savings bank. The only significant
difference between the assets of the Bank before and after the Conversion will
be the infusion of new capital. An infusion of capital occurs in all conversion
transactions, however, and had no effect upon the Internal Revenue Service's
analysis in Rev. Rul. 80-105. The ownership rights of the depositors of the
mutual savings bank, which have nominal value, will be preserved through their
interests in the liquidation account in the converted savings bank. This account
will be substantially the same as the liquidation account described in Rev. Rul.
80-105.
Because the Bank's change in form from mutual to stock ownership will
constitute a reorganization under Section 368(a)(1)(F) of the Code, and neither
the Bank nor the Company will recognize any gain or loss as a result of the
Conversion pursuant to Section 361 of the Code and Rev. Rul. 80-105, it is also
our opinion that (1) no gain or loss will be recognized by the Bank or the
Company upon the purchase of the Bank's capital stock by the Company; (2) no
gain or loss will be recognized by Eligible Account Holders and Supplemental
Eligible Account Holders upon the issuance to them of deposit accounts in the
Bank in its stock form plus their interests in the liquidation account in
exchange for their deposit accounts in the Bank; (3) assuming the
non-transferable subscription rights to purchase Company Common Stock have no
value, the tax basis of the depositors' deposit accounts in the Bank immediately
after the Conversion will be the same as the basis of their deposit accounts
immediately prior to the Conversion; (4) assuming the non-transferable
subscription rights to purchase Company Common Stock have no value, the tax
basis of each Eligible Account Holder's and Supplemental Eligible Account
Holder's interest in the liquidation account will be zero; and (5) the tax basis
to the stockholders of the Common Stock of the Company purchased in the
Conversion will be the amount paid therefor, and the holding period for such
shares will begin on the date of consummation of the Conversion if purchased
through the exercise of subscription rights and on the date after the day of
purchase if purchased in the Community Offering.
It is further our opinion that the Eligible Account Holders and
Supplemental Eligible Account Holders will recognize gain, if any, upon the
issuance to them of withdrawable savings accounts in the Bank following the
Conversion, interests in the liquidation account and non-transferable
subscription rights to purchase Company Common Stock in exchange for their
savings accounts and proprietary interests in the Bank, but only to the extent
of the value, if any, of the subscription rights.
The opinions expressed above are limited to the material income tax
consequences of the Conversion under the Subject Laws. Further, our opinions are
based on research of the Code,
Board of Directors
April 28, 1999
Page 6
applicable Treasury Regulations, current published administrative decisions of
the Internal Revenue Service, existing judicial decisions as of the date hereof,
and your Representation Letter. No assurance can be given that legislative,
administrative or judicial decisions or interpretations may not be forthcoming
that will significantly change the opinions set forth herein. We express no
opinions other than those stated immediately above as our opinions. We hereby
consent to the filing of this opinion as an exhibit to the Company's
Registration Statement and the Bank's Application for Conversion.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ Gerald F. Heupel, Jr.
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Gerald F. Heupel, Jr., a Partner