________________, 1996
Board of Directors
First Federal Savings and Loan
Association of Allen Parish
222 South 10th Street
Oakdale, LA 71463
RE: FEDERAL INCOME TAX CONSEQUENCES RELATING TO CONVERSION OF
THE ASSOCIATION FROM A FEDERAL MUTUAL SAVINGS AND LOAN
ASSOCIATION TO A FEDERAL STOCK SAVINGS AND LOAN ASSOCIATION
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 First Federal Savings and Loan Association of Allen Parish
(the "Association") from a federal mutual savings and loan association to a
federal stock savings and loan association (the "Stock Association"), and the
formation of a holding company parent to be known as First Allen Parish Bancorp,
Inc. (the "Holding Company"), which will acquire all of the outstanding stock of
the Stock Association.
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 Association on June 3, 1996 (the
"Plan"); the Federal Mutual Charter and Bylaws of the Association; 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
First Federal Savings and Loan
Association of Allen Parish
_________________, 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 Association at a meeting duly called and held; that the Association 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 Association. 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 Association, as set forth below.
REPRESENTATIONS
---------------
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 saving accounts plus
interests in the liquidation account ("Liquidation Account") of Stock
Association 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
First Federal Savings and Loan
Association of Allen Parish
_________________, 1996
Page 3
withdrawable savings accounts, voting and liquidation rights) in the Association
surrendered in exchange therefor.
3. Holding Company and Stock Association 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 Association,
there is no plan or intention by any member of the Association, who holds more
than 1% of the qualifying deposits in the Association, and there is no plan or
intention on the part of the remaining members to dispose of their withdrawable
savings accounts in Stock Association 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 Association as of the same date.
5. Immediately following the consummation of the proposed transaction,
Stock Association will possess the same assets and liabilities as the
Association held immediately prior to the proposed transaction, plus proceeds
from the sale of stock of Stock Association 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 Association immediately preceding the transaction) will in
the aggregate constitute less than one percent (1%) of the net assets of the
Association.
7. Following the proposed transaction, Stock Association will continue
the historic business of the Association or use a significant portion of the
Association's historic business assets in a business.
8. Stock Association has no plan or intention to sell or otherwise
dispose of any of the assets of the Association acquired in the proposed
transaction, except for dispositions in the ordinary course of business.
9. There is no plan or intention for Stock Association to be liquidated
or merged with another corporation following the Conversion.
10. Both Stock Association 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
Board of Directors
First Federal Savings and Loan
Association of Allen Parish
_________________, 1996
Page 4
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.
11. Stock Association has no plan or intention to reacquire any of its
stock issued in the proposed transaction.
12. The Association 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 Association,
Stock Association 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 Association, Stock Association 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 Association.
16. Association 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 Association 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 Association 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. Association will have a positive regulatory
net worth at the time of the Conversion.
18. Association, Stock Association and Holding Company are corporations
within the meaning of Section 7701(a)(3) of the Code. Association and Stock
Association are domestic building and loan associations within the meaning of
Section 7701(a)(19)(C) of the Code.
Board of Directors
First Federal Savings and Loan
Association of Allen Parish
_________________, 1996
Page 5
19 Neither Association nor Stock Association is an investment company as
defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
20. The exercise price of the subscription rights received by the
Association'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 Association 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 Association's savings depositors will pay expenses of the
conversion solely attributable to them, if any. Holding Company and the
Association 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 Association arise solely by
virtue of the fact that they are account holders in the Association.
24 No creditors of the Association or the depositors in their role as
creditors, have taken any steps to enforce their claims against the Association
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 Association including depositors as
equity holders of the Association.
25. The liabilities of the Association assumed by Stock Association plus
the liabilities, if any, to which the transferred assets are subject were
incurred by the Association 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 Association received by it in the proposed transaction.
Board of Directors
First Federal Savings and Loan
Association of Allen Parish
_________________, 1996
Page 6
27. No amount of savings accounts or deposits as of the Eligibility Record
Date will be excluded from participation in the Liquidation Account.
OPINION
-------
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 Association from a federal
mutual savings and loan association to a federal stock savings and
loan association, 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 Association or to the Stock Association as a
result of such conversion. (See Rev. Rul. 80-105, 1980-1 C.B. 78).
The Association and the Stock Association 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 Association on the
receipt of money from the Holding Company in exchange for shares of
common stock of the Stock Association. (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 Association will have the same basis in the hands of
the Stock Association as in the hands of the Association immediately
prior to the Conversion. (Section 362(b) of the Code).
5. The holding period of the assets of the Association to be received by
the Stock Association will include the period during which the assets
were held by the Association prior to the Conversion. (Section
1223(2) of the Code).
6. No gain or loss will be recognized by the depositors of the
Association upon the issuance to them of withdrawable savings accounts
in the Stock
Board of Directors
First Federal Savings and Loan
Association of Allen Parish
_________________, 1996
Page 7
Association in the same dollar amount as their savings accounts in the
Association plus an interest in the Liquidation Account of the Stock
Association, as described above, in exchange for their savings
accounts in the Association. (Section 354(a) of the Code).
7. The basis of the depositors' savings accounts in the Stock Association
received by the depositors of the Association will be the same as the
basis of their savings accounts in the Association surrendered in
exchange therefor. The basis of each account holder's interests in
the Liquidation Account of the Stock Association 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 Association will be
treated as if there had been no reorganization. Accordingly, the
taxable year of the Association will not end on the effective date of
the Conversion merely because of the transfer of assets of the
Association to the Stock Association, and the tax attributes of the
Association will be taken into account by the Stock Association 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 Association before the
reorganization and the part of the taxable year of the Stock
Association after the
Board of Directors
First Federal Savings and Loan
Association of Allen Parish
_________________, 1996
Page 8
reorganization will constitute a single taxable year of the Stock
Association. (Treas. Reg. (S)1.381(b)-1(a)(2); Rev. Rul. 57-276, 1957-
1 C.B. 126).
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 Association will
succeed to and take into account, immediately after the
reorganization, those accounts of the Association which represent bad
debt reserves in respect of which the Association 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 Association or the Stock Association
for the taxable year of the transfer, and such bad debt reserves will
have the same character in the hands of the Stock Association as they
would have had in the hands of the Association 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 Association
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 Association 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
----------------
Board of Directors
First Federal Savings and Loan
Association of Allen Parish
_________________, 1996
Page 9
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. 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
-------
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-1 ("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 Association 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
--------------
This opinion is rendered solely for the benefit of the Holding Company, the
Association 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