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Exhibit 8
FORM OF FEDERAL TAX OPINION
(202) 274-2000
June __, 2004
Boards of Directors
Putnam Bancorp MHC, Inc.
PSB Holdings, Inc.
40 Main Street
Putnam, Connecticut 06260
Ladies and Gentlemen:
You have requested this firm's opinion regarding the material federal
income tax consequences which will result from a stock offering of the shares of
common stock of PSB Holdings, Inc., a federal mid-tier holding company (the
"Company") and the wholly owned subsidiary of Putnam Bancorp MHC, Inc., a
federal mutual holding company (the "Mutual Holding Company"). The Company owns
all of the outstanding common stock of Putnam Savings Bank, a federally
chartered savings bank (the "Bank").
In connection therewith, we have made such investigations as we have deemed
relevant or necessary for the purpose of this opinion. In our examination, we
have assumed the authenticity of original documents, the accuracy of copies and
the genuineness of signatures. We have further assumed the absence of adverse
facts not apparent from the face of the instruments and documents we examined
and have relied upon the accuracy of the factual matters set forth in the PSB
Holdings, Inc. Stock Issuance Plan (the "Stock Issuance Plan") and the
Registration Statement filed on Form SB-2 by the Company with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933.
Our opinion is based upon the existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations thereunder (the "Treasury
Regulations"), and upon current Internal Revenue Service ("IRS") published
rulings and existing court decisions, any of which could be changed at any time.
Any such changes may be retroactive and could significantly modify the
statements and opinions expressed herein. Similarly, any change in the facts and
assumptions stated below, upon which this opinion is based, could modify the
conclusions. This opinion is as of the date hereof, and we disclaim any
obligation to advise you of any change in any matter considered herein after the
date hereof.
We, of course, opine only as to the matters we expressly set forth, and no
opinions should be inferred as to any other matters or as to the tax treatment
of the transactions that we do not specifically address. We express no opinion
as to other federal laws and regulations, or as to
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Boards of Directors
Putnam Bancorp MHC, Inc.
PSB Holdings, Inc.
June __, 2004
Page 2
laws and regulations of other jurisdictions, or as to factual or legal matters
other than as set forth herein.
For purposes of this opinion, we have relied on the representations as to
certain factual matters provided to us by the Company, as set forth in the
affidavit of its authorized officer. Capitalized terms used but not defined
herein shall have the same respective meanings as set forth in the Stock
Issuance Plan.
DESCRIPTION OF PROPOSED TRANSACTIONS
Based solely upon our review of the documents described above, and in
reliance upon such documents, we understand that the relevant facts are as
follows.
In May 2003, pursuant to the Amended Plan of Reorganization of Putnam
Savings Bank, the Bank reorganized from a Connecticut-chartered mutual savings
bank into the mutual holding company structure (the "Reorganization"). As part
of the Reorganization, the Bank became a Connecticut-chartered stock savings
bank wholly owned by the Company. Simultaneously, the Company became wholly
owned by the Mutual Holding Company.
In connection with the Stock Issuance Plan, the Company and the Mutual
Holding Company converted to a federally-chartered stock holding company and a
federally-chartered mutual holding company, respectively, and the Bank converted
from a Connecticut-chartered savings bank to a federally-chartered savings bank.
The Company currently has 100 shares of common stock ("Common Stock")
outstanding, which are 100% owned by the Mutual Holding Company. On April 7,
2004, the Board of Directors of the Company adopted the Stock Issuance Plan
which provides for the offer and sale of up to 49.9% of the shares of Common
Stock to qualified depositors, the Bank's tax-qualified employee plans
("Employee Plans"), employees officers and directors of the Bank and, to the
extent shares remain available, members of the public in a community offering
("Community Offering") or a syndicated community offering ("Syndicated Community
Offering"), or a combination thereof. It is contemplated that in connection with
the offering, the number of shares of Common Stock that the Company will issue
to the Mutual Holding Company will be approximately 53.7% of the outstanding
shares. The 100 shares of Company common stock now held by the Mutual Holding
Company will be cancelled. The Company is offering from 1,985,813 shares up to
2,686,688 shares of its Common Stock for sale in the offering (with a mid point
of 2,336,250 shares and an adjusted maximum of 3,089,691 shares), which will
represent approximately 44.5% of its outstanding shares. All shares of Common
Stock sold in the offering will be issued from authorized but unissued shares of
the Company.
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Boards of Directors
Putnam Bancorp MHC, Inc.
PSB Holdings, Inc.
June __, 2004
Page 3
Pursuant to the terms set forth in the Stock Issuance Plan, the Company
will offer shares of Common Stock to Eligible Account Holders, the Employee
Plans, Supplemental Eligible Account Holders and employees, officers and
directors of the Bank or the Company in the respective priorities set forth in
the Stock Issuance Plan. Any shares of Common Stock not subscribed for by the
foregoing classes of persons may be offered for sale to certain members of the
general public, with preference first given to natural persons residing in
Windham County, Connecticut. Any shares of Common Stock not purchased in the
Community Offering may be offered for sale to the general public in a Syndicated
Community Offering. The offering will have no impact on depositors, borrowers or
other customers of the Bank.
In furtherance of the Bank's commitment to its community, the Stock
Issuance Plan provides for the establishment of a charitable foundation
("Foundation") in connection with the offering. The Foundation is intended to
complement the Bank's existing community reinvestment activities in a manner
that will allow the Bank's local communities to share in the growth and
profitability of the Company and the Bank over the long term. Consistent with
the Bank's goal, the Company intends to donate to the Foundation cash and shares
of Common Stock, in an aggregate amount up to 4% of the value of the shares of
Company Common Stock being offered for sale (or 1.8% of the Company's
outstanding shares.
The offering will be effected as follows, or in any other manner approved
by the OTS. Each of the steps shall be deemed to occur in such order as is
necessary to consummate the offering pursuant to the Stock Issuance Plan and the
intent of the Board of Directors of the Company.
1. In connection with the offering, the Company will issue to the Mutual
Holding Company between 2,397,254 shares and 3,243,344 shares of its
Common Stock (at the minimum and maximum of the offering range), in
exchange for the 100 shares of Company Common Stock that the Mutual
Holding Company presently holds.
2. The Company will offer for sale in the offering, from 1,985,813 shares
up to 2,686,688 shares of its Common Stock (at the minimum and maximum
of the offering range). All shares sold in the offering will be issued
by the Company from authorized but unissued shares of Common Stock.
All Common Stock will be offered for sale in the offering on a
priority basis as set forth in the Stock Issuance Plan.
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Boards of Directors
Putnam Bancorp MHC, Inc.
PSB Holdings, Inc.
June __, 2004
Page 4
OPINIONS
Based on the foregoing description of the offering, and subject to the
qualifications and limitations set forth in this letter, we are of the opinion
that the following are the material federal income tax consequences of the
offering:
1. Neither the Mutual Holding Company nor the Company will recognize gain
or loss upon the exchange by the Mutual Holding Company of 100 shares of the
Company Common Stock it presently holds for the shares of the Company Common
Stock issued in connection with the offering. See Section 1036 of the Code.
2. It is more likely than not that the fair market value of the
non-transferable subscription rights to purchase the Company Common Stock will
be zero. Accordingly, no gain or loss will be recognized by Eligible Account
Holders, Supplemental Eligible Account Holders, or the employees, officers and
directors of the Bank and the Company upon the distribution to them of the
nontransferable subscription rights to purchase the Company Common Stock. No
taxable income will be realized by the Eligible Account Holders, Supplemental
Eligible Account Holders, or the employees, officers and directors of the Bank
and the Company as a result of the exercise of the nontransferable subscription
rights. Rev. Rul. 56-572, 1956-2 C.B. 182.
3. It is more likely than not that the basis of the Company Common Stock
to persons who purchase in the offering will be the purchase price thereof.
Section 1012 of the Code. The holding period of a stockholder who purchases
shares in the offering will commence upon the consummation of the sale of such
Common Stock to such stockholder pursuant to the exercise of the subscription
rights. Section 1223(6) of the Code.
4. No gain or loss will be recognized by the Company on the receipt of
money in exchange for the Company Common Stock sold in the offering.
Section 1032 of the Code.
Our opinion under 2 above is predicated on the representation that no
person shall receive any payment, whether in money or property, in lieu of the
issuance of subscription rights. Our opinions under 2 and 3 are based on the
assumption that nontransferable subscription rights do not have any economic
value at the time of distribution or at the time the subscription rights are
exercised. In this regard, we note that the subscription rights will be granted
at no cost to the recipients, will be legally non-transferable and of short
duration, and will provide the recipient with the right only to purchase shares
of common stock at the same price to be paid by the general public in the
offering. We also note that the Internal Revenue Service has not in the past
concluded that the subscription rights have value. Based on the foregoing, we
believe that it is more likely than not that the nontransferable subscription
rights to purchase common stock have no value. However, the issue of whether or
not the subscription rights have value is based on all the facts and
circumstances. If the nontransferable subscription rights are subsequently found
to
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Boards of Directors
Putnam Bancorp MHC, Inc.
PSB Holdings, Inc.
June __, 2004
Page 5
have an ascertainable value greater than zero, income may be recognized by
various recipients of the nontransferable subscription rights (in certain cases,
whether or not the rights are exercised) and the Company could recognize gain on
the distribution of the nontransferable subscription rights. Unlike private
rulings, an opinion of Luse Gorman Pomerenk & Schick, P.C., is not binding on
the Internal Revenue Service and the Internal Revenue Service could disagree
with the conclusions reached herein.
We hereby consent to the filing of the opinion as an exhibit to the
Company's Registration Statement on Form SB-2 as filed with the SEC and the
Company's Form MHC-2 as filed with the Office of Thrift Supervision. We also
consent to the references to our firm in the Prospectus contained in the Form
SB-2 and the Form MHC-2 under the caption "Legal and Tax Matters."
Very truly yours,
LUSE GORMAN POMERENK & SCHICK,
A PROFESSIONAL CORPORATION
By:
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