August 8, 2006
Mail-Stop 4561
Via facsimile and U.S. Mail
Mr. James G. Cooley
President and Chief Executive Officer
Citizens Community Bancorp, Inc.
2174 EastRidge Center
Eau Claire, Wisconsin 54701
Re: Citizens Community Bancorp, Inc.
Amendment No.1 to Form SB-2 on Form S-1
File No. 333-135527
Filed July 12, 2006
Form 10-KSB for the Fiscal Year Ended September 30,
2005
File Number: 000-50585
Filed December 23, 2005
Dear Mr. Cooley:
We have reviewed your filing only for the issues related to
the
comparison of shareholder rights and accounting issues and have
the
following comments. We have also reviewed your response letter
dated
May 12, 2006 addressing our comment letter dated April 24, 2006
regarding your Form 10-KSB for the Fiscal Year Ended September 30,
2005. Where indicated, we think you should revise your document
in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects. We welcome any questions you may have
about our comments or on any other aspect of our review. Feel
free
to call us at the telephone numbers listed at the end of this
letter.
Form S-1
Risk Factors, page 14
1. The staff notes three risk factors relating to changes in
shareholder rights resulting from the changed charter, by-laws
and/or
Maryland law. Those risks are the last 2 on page 16 and the last
risk
on page 17. However, several changes are not described. In this
regard, the staff notes the discussion beginning on page 116
under,
"Comparison of Citizens Community Bancorp, Inc.`s and CCB`s
stockholders" contains several more changes that may be considered
risks. They are:
* The new Articles of Incorporation authorize the Board of
Directors
to authorize additional shares of common and preferred stock
without
shareholders approval which would dilute existing holders and may
prevent takeover and/or merger offers;
* The new Articles of Incorporation authorize the Board of
directors
to adopt stock-related compensation plans and issue shares to
directors and officers without shareholder approval that will
dilute
existing shareholder holdings;
* The new Articles of Incorporation make it harder for
shareholders
to remove directors as it requires a vote of 80% of outstanding
shares to remove a director;
* The new Articles of Incorporation provide for increased
indemnification of officers and directors which may result in
increased costs borne by shareholders;
* The new Articles of Incorporation provides that officers and
directors will not be personally liable to the Company or its
shareholders to the fullest extent permitted by Maryland law
whereas
federal law, which currently applies to the Company, prohibits and
personal limitation on liability;
* The new Articles of Incorporation greatly limits the ability of
shareholders to call for a special meeting of stockholders.
Currently, holders of 10% of outstanding shares can call for a
special meeting while the new articles requires holders of 50% of
outstanding shares are needed;
* The new Articles of Incorporation require 90 days advance notice
for shareholders to nominate directors or bring other business
before
an Annual Meeting of Stockholders whereas the current bylaws of
the
Company allow any shareholder to make any proposal as late as
while
at the Annual Meeting;
* The new Articles of Incorporation raise the required stock
holdings
from 1% to 5% for stockholders to Examine the Company`s books and
records;
* The new Articles of Incorporation reduces the barriers for 10%
holders to exercise their voting rights;
* The new Articles of Incorporation reduces the required level of
Board approval and shareholders approval for Mergers,
Consolidations
and Sales of Assets;
* The new Articles of Incorporation requires an 80% supermajority
vote to approve a Business Combination with Interested
Shareholders
while currently the Company has no such rule;
* The new Maryland law governing the Company has diminished
Dissenters`/appraisal rights for stockholders;
* The new Articles of Incorporation allow the Board much greater
latitude in evaluating offers even if the price offered is
significantly greater than the then current market price which may
make prevent holders from realizing a greater return for their
shares; and,
* The new Articles of Incorporation make it harder for
shareholders
to changes the Articles which confer greater powers and authority
to
the Board while the new by-laws make it easier for the Board to
make
changes to the by-laws.
Please revise the Risk Factors to address these issues or advise
the
staff of the reasons why the Company believes these are not
additional risks.
2. Revise the last risk factor on page 16 to insert "without
shareholder approval" after the word "shares" in the second line
of
the caption.
3. Revise the last risk factor on page 17 to insert the words
"that
limit" after the word "changes" in the caption and delete the word
"in".
Comparison of Rights of Citizens Community Bancorp, Inc.`s and
CCB`s
Stockholders, page 116
4. Revise the first paragraph to delete the qualification
contained
in the last sentence and instead, indicate that the discussion
contains all material changes. Any reference to the Articles and
by-
laws should contain no qualification.
Form 10-KSB for the Fiscal Year Ended September 30, 2005
2005 Annual Report
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Commitments, page 12
1. We note your response to comment 2 of our letter dated April
24,
2006. Please revise your MD&A in future filings beginning with
your
next amendment to Form S-1 to include the disclosure provided in
your
May 12, 2006 response letter regarding the purpose behind the
payable
on demand clause and circumstances under which you are able to and
historically have invoked your rights under the payable on demand
clause.
2. As a related matter, we note the disclosure on page 72 of your
Form S-1 filed July 12, 2006 which states that by continuing to
use
payment on demand clauses, less than 10% of Citizen Community
Federal
assets were represented by traditional fixed-rate mortgage loans
with
amortizations of 15 years or greater. Please revise future
filings
beginning with your next amendment to your Form S-1 to quantify
the
extent to which your use of these clauses has affected the
company`s
liquidity and overall financial performance for the periods
presented.
Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies, page 26
3. We understand that you follow a cash basis methodology of
recognizing loan origination fees to income when received.
Therefore, we believe your accounting policy for loan origination
fees is inconsistent with paragraph 5 of SFAS 91 which requires
such
fees to be deferred and recognized over the life of the loan as an
adjustment of the yield.
You have stated that you historically have not followed this
particular guidance of SFAS 91 both because your computer system
did
not have the capability to prepare a detailed computation on a
loan
by loan basis and because your manual computations to date have
demonstrated that lack of deferring loan fees has been immaterial
to
your annual financial statements.
You have represented, and your auditors concur, that the amount of
error caused by not deferring loan origination fees is not
material
to the annual or quarterly financial statements you have provided
in
filings made with the Commission, although we understand that your
annual calculations involve the use of significant estimates and
your
quarterly calculations seem less detailed than your annual
calculations. In your letter dated May 12, 2006, you provided
calculations which you believe support your conclusion that the
difference is immaterial. We do not have sufficient information
to
agree or disagree with your conclusion that the differences were
immaterial to your financial statements for the three year period
ended September 30, 2005 which have been included in your Form 10-
KSB
and Form S-1 filed with the Commission.
Since the company`s management is in possession of all facts with
respect to the matters discussed above and addressed in your
correspondence, they are responsible for the accuracy and adequacy
of
the financial statements and disclosures made notwithstanding the
staff`s comments in this letter, and your independent registered
accountant is responsible for its report on the financial
statements.
All persons who are responsible for the accuracy and adequacy of
the
disclosure in the company`s filings made with the Commission are
urged to be certain that all information required for investors to
make an informed decision is provided.
In your letter dated May 12, 2006, you indicated that your new
computer system has the ability to properly defer net loan fees on
loan originations. We strongly recommend that you take full
advantage of these features of your new computer system. For
future
periods, if you continue to use a cash basis methodology for
recognizing loan origination fees, we expect that you will be able
to
quantify the difference that results from using a method
inconsistent
with the provisions of SFAS 91 based on a rigorous computation
method
that is performed on a quarterly and annual basis.
4. We note your response to comment 7 of our letter dated April
24,
2006 and the revised disclosures you have included on page F-12 of
your consolidated financial statements included in your Form S-1
filed on July 12, 2006. Please revise your Form 10-KSB and future
filings beginning with your next amendment to your Form S-1 so
that
EPS is presented for the period beginning with your
demutualization.
Because your demutualization occurred during the middle of a
quarter,
the numerator for your EPS calculation should be only for the
period
beginning with the demutualization (March 29, 2004) through the
end
of the reporting period. The denominator should reflect all
shares
(shares sold in the subscription offering and shares issued to the
mutual holding company). Please also revise both your filings to
include clear disclosure about how EPS has been calculated as well
as
the fact that EPS for the year ended September 30, 2004 is only
for
the period since the demutualization occurred.
Closing Comments
As appropriate, please amend your registration statement and
Form 10-KSB in response to these comments. You may wish to
provide
us with marked copies of the amendments to expedite our review.
Please furnish a cover letter with your amendments that keys your
responses to our comments and provides any requested supplemental
information. Detailed cover letters greatly facilitate our
review.
Please understand that we may have additional comments after
reviewing your amendments and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any
proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
Any questions regarding the accounting comments may be
directed
to Lisa Haynes (202) 551-3424 or John P. Nolan at (202) 551-3492.
All other questions may be directed to Michael Clampitt at (202)
551-
3434 or to me at (202) 551-3698.
Sincerely,
Mark Webb
Branch Chief-Legal
Financial Services Group
Cc: Martin Meyerwitz, P.C.
Silver, Freedman & Taff, L.L.P.
1700 Wisconsin Avenue, NW
Washington, DC 20007
Facsimile (202) 337-5502
Phone (202) 295-4500
Mr. J.G. Cooley
Citizens Community Bancorp, Inc.
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