Attached files
file | filename |
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S-1/A - FORM S-1/A - CENTURY NEXT FINANCIAL Corp | g23775a1sv1za.htm |
EX-5.0 - EX-5.0 - CENTURY NEXT FINANCIAL Corp | g23775a1exv5w0.htm |
EX-2.1 - EX-2.1 - CENTURY NEXT FINANCIAL Corp | g23775a1exv2w1.htm |
EX-1.1 - EX-1.1 - CENTURY NEXT FINANCIAL Corp | g23775a1exv1w1.htm |
EX-8.2 - EX-8.2 - CENTURY NEXT FINANCIAL Corp | g23775a1exv8w2.htm |
EX-23.2 - EX-23.2 - CENTURY NEXT FINANCIAL Corp | g23775a1exv23w2.htm |
EX-99.2 - EX-99.2 - CENTURY NEXT FINANCIAL Corp | g23775a1exv99w2.htm |
EX-99.1 - EX-99.1 - CENTURY NEXT FINANCIAL Corp | g23775a1exv99w1.htm |
Exhibit 8.1
Law Offices
Elias, Matz, Tiernan & Herrick L.L.P.
11th Floor
734 15th Street, N.W.
Washington, D.C. 20005
734 15th Street, N.W.
Washington, D.C. 20005
Telephone: (202) 347-0300
Facsimile: (202) 347-2172
www.emth.com
Facsimile: (202) 347-2172
www.emth.com
July 21, 2010
Boards of Directors
Century Next Financial Corporation
Bank of Ruston
505 North Vienna Street
Ruston, Louisiana 71270
Century Next Financial Corporation
Bank of Ruston
505 North Vienna Street
Ruston, Louisiana 71270
Gentlemen:
You have requested our opinion regarding certain federal income tax consequences of the
proposed conversion (the Conversion) of Bank of Ruston from a federally chartered mutual savings
bank to a federally chartered stock savings bank (the Bank, in its mutual or stock form, as the
sense of the context requires) pursuant to a Plan of Conversion of the Bank adopted as of May 18,
2010 (the Plan of Conversion). In the Conversion, all of the Banks to-be-issued capital stock
will be acquired by Century Next Financial Corporation (the Company), a newly-organized Louisiana
corporation. For the reasons set forth below and based on your representations in a letter dated
July 21, 2010 (the 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 certain other federal income tax
consequences which follow from this conclusion. Unless otherwise defined, all capitalized terms
used but not defined in this letter have the meanings given to them in the Plan of Conversion.
In providing our opinion, we have reviewed the Companys Registration Statement on Form S-1
relating to the proposed issuance of up to 1,058,000 shares of common stock, par value $.01 per
share (Common Stock), the Prospectus contained therein, the Articles of Incorporation and Bylaws
of the Company, the existing mutual and proposed federal stock Charter of the Bank, the Plan of
Conversion and such other corporate records and documents as we have deemed relevant for the
purposes of this opinion. In our examination, we assumed that original documents were authentic,
copies were accurate and signatures were genuine. We assumed that all parties will comply with the
terms and conditions of the Plan of Conversion, and that the various representations and warranties
which have been provided to us are accurate, complete, true and correct. Accordingly, we express
no opinion concerning the effect, if any, of variations from the foregoing.
Elias, Matz, Tiernan & Herrick L.L.P.
July 21, 2010
Page 2
July 21, 2010
Page 2
We specifically
express no opinion concerning tax matters relating to the Plan of Conversion under state and local
tax laws. In addition, we have assumed that the factual statements and representations made to us
for purposes of this opinion in the Representation Letter are true, complete and correct and will
remain true, complete and correct at all times up to and including the consummation of the
Conversion and that the Conversion will be completed in accordance with applicable federal and
state laws. If any of the above described assumptions are untrue for any reason or if the
Conversion is consummated in a manner that is different from the manner described in the Plan of
Conversion, our opinion as expressed below may be adversely affected.
Our opinion is based on current provisions of the Code, Treasury regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service (the Service) and case law,
any of which may be changed at any time with retroactive effect. Any change in applicable laws or
the facts and circumstances surrounding the Conversion, or any inaccuracy in the statements, facts,
assumptions or representations upon which we have relied, may affect the continuing validity of our
opinion as set forth herein.
We are furnishing this opinion in connection with the transactions contemplated by the Plan of
Conversion.
FACTS
The Bank is a federally chartered mutual savings bank which conducts business from its main
office located in Ruston, Louisiana. As of March 31, 2010, the Bank had $87.0 million in assets,
$76.9 million in deposits and $8.6 in equity capital. The Bank is subject to regulation and
supervision by the Office of Thrift Supervision, as its chartering authority. Additionally, the
Bank is subject to regulation by the Federal Deposit Insurance Corporation as the administrator of
the Deposit Insurance Fund (DIF). The Bank is also subject to certain reserve requirements
established by the Board of Governors of the Federal Reserve System and is a member of the Federal
Home Loan Bank of Dallas (FHLB), which is one of the 12 regional banks comprising the FHLB
System.
As a mutual savings bank, the Bank has no capital stock. Each depositor has both a deposit
account in the institution and an inchoate theoretical 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 account, and the depositors are unable to 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 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 holding company. The Company shall purchase all of the capital stock of the Bank with a
portion of the net proceeds from the Conversion.
Elias, Matz, Tiernan & Herrick L.L.P.
July 21, 2010
Page 3
July 21, 2010
Page 3
The purpose of the Conversion is to enable the Bank to issue and sell shares of its capital
stock to the Company and enhance both the equity capital base of the Bank and the Banks capability
to meet the borrowing and other financial needs of the communities it serves. The use of the
holding company format will provide greater organizational flexibility and the ability for possible
diversification. Pursuant to the Plan of Conversion, nontransferable rights to subscribe for
shares of Common Stock have been granted, in order of priority, to (i) depositors of the Bank with
account balances of $50.00 or more as of the close of business on December 31, 2008 (Eligible
Account Holders), (ii) the Companys employee stock ownership plan (ESOP), (iii)
depositors of the Bank with account balances of $50.00 or more as of the close of business on June
30, 2010 (Supplemental Eligible Account Holders), and (iv) depositors of the Bank as of the close
of business on a to be established voting record date (Other Members), in each case subject to
the limitations described therein (the Subscription Offering). In the event that there are any
shares which are not sold in the Subscription Offering, the Company anticipates that it will offer
any such shares for sale in a community offering (the Community Offering) to natural persons
residing in Lincoln Parish, Louisiana.
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 recipients with the right only
to purchase shares of Common Stock at the same price to be paid by members of the general public in
any Community Offering, with the price to be paid for the Common Stock being equal to the value
determined by an independent appraiser. We also note that RP Financial, LC has issued a letter
dated June 17, 2010 stating that the subscription rights will have no ascertainable market value.
In addition, no cash or property will be given to eligible subscribers in lieu of non-transferable
subscription rights or to eligible subscribers who fail to exercise such rights. As a result, at
the time the subscription rights are granted, we believe that it is more likely than not that the
nontransferable subscription rights to purchase Common Stock will have no ascertainable value.
The Company is filing the Registration Statement on Form S-1 to register its Common Stock
under the Securities Act of 1933, as amended (the 1933 Act), 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 be nontransferable 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 Registration Statement
registers the sale of shares of Common Stock under the 1933 Act. Such shares will be sold for cash
pursuant to the Plan of Conversion to Eligible Account Holders, the Employee Stock Ownership Plan,
Supplemental Eligible Account Holders, Other Members and others in the Subscription Offering and
the Community Offering, if necessary (collectively, the Conversion Shares).
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.
Elias, Matz, Tiernan & Herrick L.L.P.
July 21, 2010
Page 4
July 21, 2010
Page 4
The Conversion will not affect the business of the Bank. 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 dispositions in the ordinary course of business.
Each deposit account in the Bank at the time of the consummation of the Conversion shall
become, as a result of the Conversion and 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 Banks 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 holders subaccount balance. An account holders 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 depositors 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.
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 (Type F reorganization).
If a transaction qualifies as a Type F reorganization, it will generally be nontaxable to the
corporation and its stockholders under related provisions of the Code.
In Rev. Rul. 80-105, 1980-1 C.B. 78, the Service considered the federal income tax
consequences of the conversion of a federal mutual savings and loan association into a state stock
savings and loan association. The ruling concluded that the conversion qualified as a mere change
in identity, form or place of organization within the meaning of Section 368(a)(1)(F) of the Code.
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 and 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 DIF) 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 Service believes these nominal rights are preserved in the
liquidation account that is
Elias, Matz, Tiernan & Herrick L.L.P.
July 21, 2010
Page 5
July 21, 2010
Page 5
typically established for the depositors benefit. This approach
enables the 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. Comr, 469 U.S. 131 (1985); Rev. Rul. 69-6, 1969-1 C.B. 104.
The 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 Service on the issues presented. Hanover Bank v. U.S., 369 U.S. 672,
686 (1962).
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 Banks business or
operations, nor in its loans and deposits, all of which will become loans and deposits of the
converted 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 Services analysis in Rev. Rul.
80-105. The ownership rights of the depositors of the mutual Bank, which have nominal value, will
be preserved through their inchoate interests in the liquidation account in the converted Bank.
This account will be substantially the same as the liquidation account described in Rev. Rul.
80-105.
Because the Banks 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 (i) no gain or loss will be recognized by the Company
upon its receipt of money in exchange for shares of Common Stock issued pursuant to the Plan of
Conversion; (ii) no gain or loss will be recognized by the Bank or the Company upon the purchase of
the Banks capital stock by the Company; (iii) 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 in its mutual form; (iv) 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; (v) the tax basis of each Eligible
Account Holders and Supplemental Eligible Account Holders interest in the liquidation account
will be zero; (vi) the tax basis to the stockholders of the Common Stock of the Company purchased
in the Conversion will be the amount paid therefor; and (vii) the holding period for shares of
Common Stock will begin on the date of the exercise of the subscription right if purchased in the Subscription Offering and
on the day after the date of purchase if purchased in the Community Offering.
It is further our opinion that it is more likely than not that the Eligible Account Holders
and Supplemental Eligible Account Holders will not recognize gain upon the issuance to them of
Elias, Matz, Tiernan & Herrick L.L.P.
July 21, 2010
Page 6
July 21, 2010
Page 6
withdrawable savings accounts in the Bank following the Conversion, interests in the liquidation
account and nontransferable subscription rights to purchase Common Stock in exchange for their
savings accounts and proprietary interests in the Bank. We note, however, that the issue of
whether or not the subscription rights have value is dependent upon all of the facts and
circumstances that occur. We further note that in PLR 9332029, the IRS was requested to address
the federal tax treatment of the receipt and exercise of nontransferable subscription rights in
another conversion, and the IRS declined to express any opinion. If the nontransferable
subscription rights to purchase Common Stock are subsequently found to have an ascertainable market
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
and/or the Bank may be taxed on the distribution of the nontransferable subscription rights under
Section 311 of the Code. In this event, the nontransferable subscription rights may be taxed
partially or entirely at ordinary income tax rates.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement
and the Application for Conversion.
ELIAS, MATZ, TIERNAN & HERRICK L.L.P. | ||||
By: | /s/Eric M. Marion | |||
Eric M. Marion, a Partner |