Exhibit 8.1
June 13, 1996
Board of Directors
Community Bank of
Excelsior Springs, A Savings Bank
1001 N. Jesse James Road
Excelsior Springs, Missouri 64024
RE: FEDERAL INCOME TAX CONSEQUENCES RELATING TO CONVERSION OF THE
BANK FROM A FEDERAL MUTUAL SAVINGS INSTITUTION TO A FEDERAL STOCK
SAVINGS INSTITUTION AND THE ACQUISITION OF THE STOCK
INSTITUTION'S STOCK BY A STOCK HOLDING COMPANY
Gentlemen:
In accordance with your request, set forth herein is the opinion of this
firm relating to the federal income tax consequences of the proposed conversion
("Conversion") of Community Bank of Excelsior Springs, A Savings Bank (the
"Bank") from a federal mutual savings institution to a federal stock savings
institution (the "Stock Bank"), and the formation of a holding company parent to
be known as CBES Bancorp, Inc. (the "Holding Company"), which will acquire all
of the outstanding stock of the Stock Bank.
For purposes of this opinion, we have examined such documents and questions
of law as we have considered necessary or appropriate, including but not limited
to the Plan of Conversion as adopted by the Bank on May 14, 1996 (the "Plan");
the Federal Mutual Charter and Bylaws of the Bank; and the Certificate of
Incorporation and Bylaws of the Holding Company. In such examination, we have
assumed, and have not independently verified, the genuineness of all signatures
on original documents where due execution and delivery are requirements to the
effectiveness thereof. Terms used but not defined herein, whether capitalized or
not, shall have the same meanings as defined in said documents.
Board of Directors
Community Bank of
Excelsior Springs,
June 13, 1996
Page 2
In issuing our opinion, we have assumed that the Plan has been duly and
validly authorized and has been approved and adopted by the board of directors
of the Bank at a meeting duly called and held; that the Bank will comply with
the terms and conditions of the Plan, and that the various representations and
warranties which are provided to us are accurate, complete, true and correct.
Accordingly, we express no opinion concerning the effect, if any, of variations
from the foregoing. We specifically express no opinion concerning tax matters
relating to the Plan under state and local tax laws and under Federal income tax
laws except on the basis of the documents and assumptions described above.
In issuing the opinion set forth below, we have relied solely on existing
provisions of the Internal Revenue Code of 1986, as amended (the "Code");
existing and proposed Treasury Regulations (the "Regulations") thereunder;
current administrative rulings, notices and procedures; and court decisions.
Such laws, regulations, administrative rulings, notices and procedures and court
decisions are subject to change at any time. Any such change could affect the
continuing validity of the opinions set forth below. 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.
In rendering our opinion, we have assumed that the persons and entities
identified in the Plan of Conversion will at all times comply with the
requirements of Code Section 368(a)(1)(F), the other applicable state and
Federal laws and the representations of the Bank. In addition, we have assumed
that the activities of the persons and entities identified in the Plan will be
conducted strictly in accordance with the Plan. Any variations may affect the
opinions we are rendering.
For purposes of this opinion, we are relying on the representations
provided to us by the Bank, as set forth below.
REPRESENTATIONS
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1. The Conversion is implemented in accordance with the terms of the Plan
of Conversion (the "Plan") and all conditions precedent contained in the Plan
shall be performed or waived prior to the consummation of the Conversion.
2. The fair market value of the withdrawable deposit accounts plus
interests in the liquidation account ("Liquidation Account") of Stock Bank to be
received under the Plan, in each instance, shall be equal to the fair market
value of the membership interests (i.e.,
Board of Directors
Community Bank of
Excelsior Springs,
June 13, 1996
Page 3
withdrawable deposit accounts, voting and liquidation rights) in the Bank
surrendered in exchange therefor.
3. Holding Company and Stock Bank each have no plan or intention to
redeem or otherwise re-acquire any of the stock issued in the proposed
transaction.
4. To the best of the knowledge of the management of the Bank, there is
no plan or intention by any member of the Bank, who holds more than 1% of the
qualifying deposits in the Bank, and there is no plan or intention on the part
of the remaining members to dispose of their withdrawable deposit accounts in
Stock Bank that would reduce their aggregate interest in the Liquidation Account
as of the Effective Date of the Conversion, to less than 50% of the value of
their interests in the Bank as of the same date.
5. Immediately following the consummation of the proposed transaction,
Stock Bank will possess the same assets and liabilities as the Bank held
immediately prior to the proposed transaction, plus proceeds from the sale of
stock of Stock Bank to Holding Company.
6. Assets used to pay expenses of the Conversion (without reference to
the expenses of the Direct Community Offering) and all distributions (except for
regular normal interest payments and other payments in the normal course of
business made by the Bank immediately preceding the transaction) will in the
aggregate constitute less than one percent (1%) of the net assets of the Bank.
7. Following the proposed transaction, Stock Bank will continue the
historic business of the Bank or use a significant portion of the Bank's
historic business assets in a business.
8. Stock Bank has no plan or intention to sell or otherwise dispose of
any of the assets of the Bank acquired in the proposed transaction, except for
dispositions in the ordinary course of business.
9. There is no plan or intention for Stock Bank to be liquidated or
merged with another corporation following the Conversion.
10. Both Stock Bank and Holding Company have no plan or intention, either
currently or at the time of the Conversion, to issue additional shares of stock
following the proposed transaction, other than shares that may be issued to
employees and/or directors pursuant to certain stock option and stock incentive
plans or that may be issued to employee benefit plans.
Board of Directors
Community Bank of
Excelsior Springs,
June 13, 1996
Page 4
11. Stock Bank has no plan or intention to reacquire any of its stock
issued in the proposed transaction.
12. The Bank is not under the jurisdiction of a court in any Title 11 or
similar case within the meaning of Section 368(a)(3)(A). The proposed
transaction does not involve a receivership, foreclosure, or similar proceeding
before a federal or state agency involving a financial institution to which
Section 585 or 593 of the Code applies.
13. Compensation to be paid to depositor-employees of the Bank, Stock Bank
or Holding Company will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
14. No shares of Holding Company Conversion Stock will be issued to or
purchased by depositor-employees of the Bank, Stock Bank or Holding Company at a
discount or as compensation in the proposed transaction.
15. No cash or other property will be given to Eligible Account Holders or
others in lieu of (a) non-transferable subscription rights or (b) an interest in
the Liquidation Account of Stock Bank.
16. Bank utilizes a reserve for bad debts in accordance with Section 593
of the Internal Revenue Code of 1986, as amended (the "Code") and, following the
conversion, Stock Bank shall likewise utilize a reserve for bad debts in
accordance with Section 593 of the Code.
17. At the time of the proposed transaction, the fair market value of the
assets of the Bank on a going concern basis will equal or exceed the amount of
its liabilities to be assumed plus the amount of liabilities to which the
transferred assets are subject. Bank will have a positive regulatory net worth
at the time of the Conversion.
18. Bank, Stock Bank and Holding Company are corporations within the
meaning of Section 7701(a)(3) of the Code. Bank and Stock Bank are domestic
building and loan associations within the meaning of Section 7701(a)(19)(C) of
the Code.
19 Neither Bank nor Stock Bank is an investment company as defined in
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
Board of Directors
Community Bank of
Excelsior Springs,
June 13, 1996
Page 5
20. The exercise price of the subscription rights received by the Bank's
Eligible Account Holders and Supplemental Eligible Account Holders to purchase
Holding Company Stock will be equal to the fair market value of the Holding
Company Conversion Stock at the time of the completion of the proposed
transaction as determined by an independent appraisal.
21. The Bank has received or will receive an opinion from an independent
appraiser to the effect that the subscription rights to be received by Eligible
Account Holders and Supplemental Eligible Account Holders and other eligible
subscribers do not have any ascertainable fair market value.
22. The Bank's savings depositors will pay expenses of the conversion
solely attributable to them, if any. Holding Company and the Bank will pay their
own expenses for the transaction and will not pay any expenses solely
attributable to the savings depositors or to the Holding Company stockholders.
The stockholders of Holding Company will pay the expenses incurred by themselves
in connection with the proposed transaction.
23. The Eligible Account Holders', Supplemental Eligible Account Holders',
and Other Members' proprietary interests in the Bank arise solely by virtue of
the fact that they are account holders in the Bank.
24 No creditors of the Bank or the depositors in their role as creditors,
have taken any steps to enforce their claims against the Bank by instituting
Bankruptcy or other legal proceedings, in either a court or appropriate
regulatory agency, that would eliminate the proprietary interests of the members
prior to the Conversion of the Bank including depositors as equity holders of
the Bank.
25. The liabilities of the Bank assumed by Stock Bank plus the
liabilities, if any, to which the transferred assets are subject were incurred
by the Bank in the ordinary course of its business and are associated with the
assets transferred.
26. Holding Company has no plan or intention to sell or otherwise dispose
of the stock of Stock Bank received by it in the proposed transaction.
27. No amount of deposit accounts or deposits as of the Eligibility Record
Date will be excluded from participation in the Liquidation Account.
Board of Directors
Community Bank of
Excelsior Springs,
June 13, 1996
Page 6
OPINION
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Based on the foregoing, and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed Conversion:
1. The change in the form of operation of the Bank from a federal mutual
savings institution to a federal stock savings institution, as
described above, will constitute a reorganization within the meaning
of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as
amended ("Code"), and no gain or loss will be recognized to either the
Bank or to the Stock Bank as a result of such conversion. (See Rev.
Rul. 80-105, 1980-1 C.B. 78). The Bank and the Stock Bank will each be
a party to a reorganization within the meaning of Section 368(b) of
the Code. (Rev. Rul. 72-206, 1972-1 C.B. 104)
2. No gain or loss will be recognized by the Stock Bank on the receipt of
money from the Holding Company in exchange for shares of common stock
of the Stock Bank. (Section 1032(a) of the Code).
3. The Holding Company will recognize no gain or loss upon receipt of
money from stockholders in exchange for shares of Holding Company
Conversion Stock. (Section 1032(a) of the Code).
4. The assets of the Bank will have the same basis in the hands of the
Stock Bank as in the hands of the Bank immediately prior to the
Conversion. (Section 362(b) of the Code).
5. The holding period of the assets of the Bank to be received by the
Stock Bank will include the period during which the assets were held
by the Bank prior to the Conversion. (Section 1223(2) of the Code).
6. No gain or loss will be recognized by the depositors of the Bank upon
the issuance to them of withdrawable deposit accounts in the Stock
Bank in the same dollar amount as their deposit accounts in the Bank
plus an interest in the Liquidation Account of the Stock Bank, as
described above,
Board of Directors
Community Bank of
Excelsior Springs,
June 13, 1996
Page 7
in exchange for their deposit accounts in the Bank. (Section 354(a) of
the Code).
7. The basis of the depositors' deposit accounts in the Stock Bank
received by the depositors of the Bank will be the same as the basis
of their deposit accounts in the Bank surrendered in exchange
therefor. The basis of each account holder's interests in the
Liquidation Account of the Stock Bank received by the depositors will
be zero, that being the cost of such property. The basis of the non-
transferable subscription rights will be zero, provided that such
subscription rights are not deemed to have a fair market value and
that the subscription price of such stock issuable upon exercise of
such rights is equal to the fair market value of such stock. The basis
of the Holding Company Conversion Stock to its stockholders will be
the purchase price thereof, increased by the basis, if any, of the
subscription rights exercised. (Section 1012 of the Code). The
stockholder's holding period will commence upon the exercise of the
subscription rights. (Section 1223(6) of the Code).
8. Provided that the amount to be paid for Holding Company Stock pursuant
to the exercise of subscription rights is equal to the fair market
value of such Common Stock, no gain or loss will be recognized by
depositors under the Plan upon the distribution to them of non-
transferable subscription rights to purchase shares of Holding Company
Conversion Stock. (Rev. Rul. 56-572, 1956-2 C.B. 234).
9. For purposes of Section 381 of the Code, the Stock Bank will be
treated as if there had been no reorganization. Accordingly, the
taxable year of the Bank will not end on the effective date of the
Conversion merely because of the transfer of assets of the Bank to the
Stock Bank, and the tax attributes of the Bank will be taken into
account by the Stock Bank as if there had been no reorganization.
(Treas. Reg. (S)1.381(b)-(1)(a)(2)).
10. The part of the taxable year of the Bank before the reorganization and
the part of the taxable year of the Stock Bank after the
reorganization will constitute a single taxable year of the Stock
Bank. (Treas. Reg. (S)1.381(b)-1(a)(2); Rev. Rul. 57-276, 1957-1 C.B.
126).
Board of Directors
Community Bank of
Excelsior Springs,
June 13, 1996
Page 8
11. Pursuant to the provisions of Section 381(c)(4) of the Code and Treas.
Reg. Section 1.381(c)(4)-1(a)(1)(ii), the Stock Bank will succeed to
and take into account, immediately after the reorganization, those
accounts of the Bank which represent bad debt reserves in respect of
which the Bank has taken a bad debt deduction for taxable years ending
on or before the date of the transfer. The bad debt reserves will not
be required to be restored to the gross income of either the Bank or
the Stock Bank for the taxable year of the transfer, and such bad debt
reserves will have the same character in the hands of the Stock Bank
as they would have had in the hands of the Bank if no distribution or
transfer had occurred. (Section 593(e) of the Code).
12. Regardless of any book entries that are made for the establishment of
the Liquidation Account, the Conversion, as described above, will not
diminish the accumulated earnings and profits of the Stock Bank
available for the subsequent distribution of dividends within the
meaning of Section 316 of the Code. (Treas. Reg. (S)1.312-11(b) and
(c)). The creation of the Liquidation Account on the records of the
Stock Bank will have no effect on its taxable income, deductions for
additions to reserves for bad debts under Section 593 of the Code, or
distributions to stockholders under Section 593(e) of the Code. (Rev.
Rul. 68-475, 1968-2 C.B. 259).
13. A shareholder's holding period for Holding Company Conversion Stock
acquired through the exercise of the Subscription Rights shall begin
on the date on which the Subscription Rights are exercised. (Section
1223(6) of the Code.) The holding period for the Holding Company
Conversion Stock purchased pursuant to the Community Offering or
Public Offering or under other purchase arrangements will commence on
the date following the date on which such stock is purchased. (Rev.
Rul. 70-598, 1970-2 C.B. 168).
SCOPE OF OPINION
----------------
Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any federal,
state, local, foreign or other tax considerations. If any of the information on
which we have relied is incorrect, or if changes in the relevant facts occur
after the date hereof, our opinion could be affected thereby.
Board of Directors
Community Bank of
Excelsior Springs,
June 13, 1996
Page 9
Moreover, our opinion is based on the case law, Code, Treasury Regulations
thereunder and Internal Revenue Service rulings as they now exist. These
authorities are all subject to change, and such change may be made with
retroactive effect. We can give no assurance that, after such change, our
opinion would not be different. We undertake no responsibility to update or
supplement our opinion. This opinion is not binding on the Internal Revenue
Service and there can be no assurance, and none is hereby given, that the
Internal Revenue Service will not take a position contrary to one or more of the
positions reflected in the foregoing opinion, or that our opinion will be upheld
by the courts if challenged by the Internal Revenue Service.
CONSENT
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We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-1 or other applicable form ("Registration
Statement") of the Holding Company filed with the Securities and Exchange
Commission with respect to the Conversion and as an exhibit to the application
for Conversion on Form AC ("Form AC") of the Bank filed with the OTS with
respect to the Conversion. We also hereby consent to the references to this firm
in the prospectus which is a part of both the Registration Statement and the
Form AC.
USE OF OPINION
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This opinion is rendered solely for the benefit of the Holding Company, the
Bank and prospective investors in connection with the proposed transactions
described herein and is not to be relied upon or used for any other purpose
without our prior written consent.
Very truly yours,
LUSE LEHMAN GORMAN POMERENK & SCHICK
A Professional Corporation