Exhibit 8.1
January 7, 1994
The Board of Directors
Concho Bancshares, Inc.
P. O. Box 60410
San Angelo, Texas 76906
Dear Sirs
Pursuant to Section 2.2 of the Stock Exchange Agreement and Plan of
Reorganization, dated as of December 7, 1993 (the "Agreement") among First
Financial Bankshares, Inc. ("First Financial"), Concho Bancshares, Inc.
("Concho") and Southwest Bank of San Angelo ("Southwest Bank"), our opinion has
been requested with respect to certain of the Federal income tax consequences of
the exchange by the Concho shareholders of their Concho stock for First
Financial voting common stock (the "Stock Exchange") and the merger of Concho
with and into First Financial Bankshares of Delaware, Inc. ("FFB Delaware"), a
wholly-owned subsidiary of First Financial (the "Merger"). This opinion letter
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supersedes our opinion letter dated December 17, 1993.
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In rendering our opinion, we have reviewed the Agreement and such other
documents as we have deemed necessary or appropriate. We have relied upon the
accuracy and completeness of the facts, information, covenants and
representations contained in the Agreement and such other documents.
Furthermore, we have assumed that the Stock Exchange and Merger will be
consummated in accordance with the Agreement and that the Merger will qualify as
a merger under applicable State law.
In rendering our opinion, we have considered the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder, pertinent judicial authorities, interpretive rulings of
the Internal Revenue Service and such other authorities as we have considered
relevant. It should be noted that statutes, regulations, judicial decisions and
administrative interpretations are subject to change at any time and, in some
circumstances, with retroactive effect. A material change in the authorities
upon which our opinion is based could affect our conclusions. However, we
assume no obligation to revise or supplement this opinion if any subsequent
change were to occur.
Requisite to a tax-free reorganization under the Code is a continuity of
interest in the business enterprise on the part of those persons who were the
owners of the enterprise prior to the reorganization. Accordingly, the Concho
shareholders, as a group, will be required to satisfy the continuity of interest
doctrine through a post-exchange continuing ownership
The Board of Directors
Concho Bancshares, Inc.
January 7, 1994
Page 2
of the First Financial voting common stock received in the Stock Exchange. In
this regard, a disposition by the Concho shareholders of a substantial portion
(in the aggregate) of their post-exchange First Financial shares which is
pursuant to a plan, intention or arrangement existing at the time of the Stock
Exchange will result in a failure to satisfy the continuity of interest
doctrine. The Internal Revenue Service takes the position that 50 percent (in
the aggregate) constitutes a "substantial portion." A failure to satisfy the
continuity of interest doctrine will result in the Stock Exchange being a
taxable transaction to the Concho shareholders. In rendering our opinion, we
have assumed that the continuity of interest doctrine can and will be satisfied.
Also requisite to a tax-free reorganization under the Code is a continuity of
the business enterprise under the modified corporate form. The continuity of
business enterprise doctrine requires that the acquiring corporation either
continue the acquired corporation's historic business or use a significant
portion of the acquired corporation's historic business assets in a business.
Accordingly, in order to satisfy the continuity of business enterprise doctrine,
First Financial and/or one or more of its controlled subsidiaries will be
required to either continue the historic business of Concho and Southwest Bank
or use a significant portion of the historic business assets of Concho and
Southwest Bank in a business. A failure to satisfy the continuity of business
enterprise doctrine will result in the Stock Exchange being a taxable
transaction to the Concho shareholders. In rendering our opinion, we have
assumed that the continuity of business enterprise doctrine will be satisfied.
In addition to the requirements noted in the foregoing for a tax-free
reorganization under the Code, there is the requirement that, immediately after
a stock-for-stock exchange, the acquiring corporation must have control of the
acquired corporation. For purposes of the reorganization provisions of the
Code, the term "control" means the ownership of stock possessing at least 80
percent of the total combined voting power of all classes of stock entitled to
vote and at least 80 percent of the total number of shares of all other classes
of stock of the corporation. Therefore, in order to satisfy the control
requirement, First Financial and/or one or more of its controlled subsidiaries
will have to own at least 80 percent of the outstanding stock of Concho
immediately after the Stock Exchange. If the Stock Exchange is consummated with
First Financial acquiring less than 80 percent of the outstanding stock of
Concho, the Stock Exchange will be a taxable transaction to the Concho
shareholders. In rendering our opinion, we have assumed that the control
requirement will be satisfied.
Based solely upon and subject to the foregoing, we are of the opinion that under
current law:
1. The Stock Exchange and Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Code, and First Financial,
Concho and FFB Delaware each will be a party to the reorganization
within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by the Concho shareholders upon
receipt of
The Board of Directors
Concho Bancshares, Inc.
January 7, 1994
Page 3
First Financial voting common stock in exchange for their Concho
stock, except for any gain or loss recognized with respect to
shareholders who receive cash in lieu of fractional share interests in
First Financial voting common stock or pursuant to the exercise of
statutory dissenter rights.
3. The aggregate Federal income tax basis of the shares of First
Financial voting common stock received by the Concho shareholders in
exchange for their shares of Concho stock will be the same as the
aggregate adjusted tax basis of their Concho stock exchanged therefor,
less the tax basis, if any, allocated to fractional share interests.
4. The holding period of the First Financial voting common stock received
by the Concho shareholders in exchange for their shares of Concho
stock in the hands of the Concho shareholders will include the holding
period of their Concho stock exchanged therefor.
Except as set forth above, we express no opinion as to the tax consequences,
whether Federal, State or local, of the Stock Exchange and Merger, or of any
transactions related thereto. We are furnishing this opinion to you solely in
connection with Section 2.2 of the Agreement. This opinion is solely for your
benefit and is not to be used, circulated, quoted or otherwise referred to for
any purpose without our prior consent.
We hereby consent to the references made to us in the Summary and under the
heading "The Exchange Offer - Certain Federal Income Tax Consequences" in the
Offering Circular/Prospectus of First Financial Relating to the Stock Exchange,
and to the inclusion of this opinion as an Annex to the Offering
Circular/Prospectus and the filing of this opinion as an exhibit to the
Registration Statement on Form S-4 of which such Offering Circular/Prospectus is
a part.
Very truly yours
ARMSTRONG, BACKUS & CO., L.L.P.