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Exhibit 8.2
[Crowe, Chizek and Company LLP Letterhead]
June 23, 2000
Board of Directors
First Federal Bancshares, Inc.
109 East Depot Street
Colchester, Illinois 62326
Board of Directors
First Federal Bank, F.S.B.
109 East Depot Street
Colchester, Illinois 62326
Re: Illinois Income Tax Consequences of the Conversion of First
Federal Bank, F.S.B. from a Federally-chartered Mutual Savings
Bank to a Federally-chartered Stock Savings Bank and the Offer and
Sale of Common Stock of First Federal Bancshares, Inc. ("the
Conversion")
To the Members of the Board of Directors:
In accordance with your request, we render our opinion relating to the Illinois
income tax consequences of the conversion of First Federal Bank, F.S.B.
STATEMENT OF FACTS
The facts and circumstances surrounding the proposed charter conversion are
quite detailed and are described at length in the Plan of Conversion and the
Prospectus. However, a brief summary of the proposed plan of conversion is as
follows:
First Federal Bank, F.S.B. (the "Bank") is a federally-chartered mutual savings
bank. As a mutual savings bank, the Bank has no authorized stock. For what are
stated to be valid business reasons, the Bank wishes to amend its charter to
permit it to continue operations in the form of a federally-chartered stock
savings bank (the "Converted Bank"). The fair market value of the Converted Bank
deposit accounts received by the Bank's deposit account holders will be equal to
the fair market value of the Bank deposit accounts surrendered as a result of
the conversion process. In connection with the proposed charter conversion, the
Converted Bank will become a wholly-owned subsidiary of First Federal
Bancshares, Inc. (the "Holding Company"), a newly organized Delaware
corporation.
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Board of Directors
First Federal Bancshares, Inc.
First Federal Bank, F.S.B.
June 23, 2000
Page 2
OPINION
You have provided us with a copy of the federal income tax opinion of the
proposed transaction prepared by Muldoon, Murphy & Faucette, L.L.P., dated
June 23, 2000 (the "Federal Tax Opinion") in which they have opined, INTER
ALIA, that the transaction will be a transaction described in Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended.
Our opinion regarding the Illinois income tax consequences is based on the facts
and incorporates the capitalized terms contained in the Federal Tax Opinion. Our
opinion on the Illinois income tax consequences assumes that the final federal
income tax consequences of the proposed transaction will be those outlined in
the Federal Tax Opinion.
Should it finally be determined that the facts and the federal income tax
consequences are not as outlined in the Federal Tax Opinion, the Illinois income
tax consequences and our Illinois tax opinion will differ from what is contained
herein. Our opinion is based on the current Illinois tax law which is subject to
change.
Our opinion adopts and relies upon the facts, assumptions, and conclusions as
set forth in the Federal Tax Opinion. Based upon that information, we render the
following opinion with respect to the Illinois income tax consequences of the
proposed transaction.
(1) No gain or loss shall be recognized by the Bank or the Converted Bank
as a result of the conversion. ITA Sec. 403(a) (35 ILCS 5/403(a))
(2) No gain or loss will be recognized by the Converted Bank or the Holding
Company upon the receipt by the Converted Bank of money from the
Holding Company in exchange for shares of the Converted Bank's capital
stock or by the Holding Company upon the receipt of money from the sale
of its common stock. ITA Sec. 403(a) (35 ILCS 5/403(a))
(3) The basis of the Bank's assets in the hands of the Converted Bank will
be the same as the basis of those assets in the hands of the Bank
immediately prior to the transaction. ITA Sec. 403(a) (35 ILCS
5/403(a))
(4) The Converted Bank's holding period of the assets of the Bank will
include the period during which such assets were held by the Bank prior
to the conversion. ITA Sec. 403(a) (35 ILCS 5/403(a))
(5) No gain or loss shall be recognized by the Eligible Account Holders and
the Supplemental Eligible Account Holders of the Bank on the issuance
to them of withdrawable deposit accounts in the Converted Bank plus
interests in the liquidation account of the Converted Bank in exchange
for their deposit accounts in the Bank or to the other depositors on
the issuance to them of withdrawable deposit accounts. ITA Sec.
203(a)(1) (35 ILCS 5/203(a)(1))
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Board of Directors
First Federal Bancshares, Inc.
First Federal Bank, F.S.B.
June 23, 2000
Page 3
(6) Provided that the amount to be paid for such stock pursuant to the
subscription rights is equal to the fair market value of the stock, no
gain or loss will be recognized by Eligible Account Holders and
Supplemental Eligible Account Holders upon the distribution to them of
the nontransferable subscription rights to purchase shares of stock in
the Holding Company. Gain realized, if any, by the Eligible Account
Holders and Supplemental Eligible Account Holders on the distribution
to them of nontransferable subscription rights to purchase shares of
common stock will be recognized but only in an amount not in excess
of the fair market value of such subscription rights. Eligible
Accounts Holders and Supplemental Eligible Account Holders will not
realize any taxable income as a result of the exercise by them of
the nontransferable subscription rights. ITA Sec. 203(a)(1) (35
ILCS 5/203(a)(1))
(7) A depositor's basis in the savings deposits of the Converted Bank will
be the same as the basis of the savings deposits in the Bank. The basis
of the interests in the liquidation account of the Converted Bank
received by Eligible Account Holders and Supplemental Eligible Account
Holders will be equal to the cost of such property (i.e., the fair
market value of the proprietary interests in the Bank) which in this
transaction we assume to be zero. The basis of the Holding Company
common stock to its stockholders will be the purchase price thereof,
plus the basis, if any, of nontransferable subscription rights.
Accordingly, assuming the nontransferable subscription rights have no
value, the basis of the common stock to the Eligible Account Holders
and Supplemental Eligible Account Holders will be the amount paid
therefor. The holding period of the common stock purchased pursuant to
the exercise of subscription rights shall commence on the date on which
the right to acquire such stock was exercised. ITA Sec. 203(a)(1) (35
ILCS 5/203(a)(1))
The above opinions are effective to the extent that the Bank is solvent. No
opinion is expressed about the tax treatment of the transaction if the Bank is
insolvent. Whether or not the Bank is solvent will be determined at the end of
the taxable year in which the transaction is consummated.
Our opinion is based upon legal authorities currently in effect, which
authorities are subject to modification or challenge at any time and perhaps
with retroactive effect. Further, no opinion is expressed under the provisions
of any of the other sections of the Illinois Code and Income Tax Regulations
which may also be applicable thereto, or to the tax treatments of any conditions
existing at the time of, or effects resulting from, the transaction which are
not specifically covered by the opinions set forth above.
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Board of Directors
First Federal Bancshares, Inc.
First Federal Bank, F.S.B.
June 23, 2000
Page 4
If any fact contained in this opinion letter or the Federal Tax Opinion changes
to alter the federal tax treatment, it is imperative that we be notified in
order to determine the effect on the Illinois income tax consequences, if any.
We consent to the inclusion of this opinion as an exhibit to the Form AC,
Application for Conversion of the Bank, and any amendments thereto, and the
references to and summary of this opinion in such Application for Conversion. We
also consent to the inclusion of this opinion as an exhibit to the Form SB-2,
Registration Statement, and the Form H-(e)1-S, Application of First Federal
Bancshares, Inc., and any amendments thereto, and the references to and summary
of this opinion in both the Form SB-2 and the Form H-(e)1-S.
Very Truly Yours,
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
