May 29,
2009
Amit
Pande
Accounting
Branch Chief
U.S.
Securities and Exchange Commission
100 F
Street, N.E.
Washington,
D.C. 20549
Dear Mr.
Pande:
Citizens
Community Bancorp, Inc. (the "Company") received comments from the SEC in a
comment letter dated May 15, 2009 concerning the Company's Form 10-K for the
fiscal year ended September 30, 2008 and Form 10-Q for the quarters ended
December 31, 2008 and March 31, 2009. Each comment is provided below, followed
by the Company's response.
Form 10-K for the fiscal
year ended September 30, 2008
Federal Home Loan Bank
Stock, page 36
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1.
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We
note your response to comment two of our letter dated April 16, 2009,
where you stated that the Company's future filings will disclose in more
detail factors that were considered in determining that the FHLB stock was
not impaired. We did not note these disclosures in your Form 10-Q filed
May 12, 2009. Please confirm the additional disclosures will be included
in your Form 10-Q for the quarter ended June 30, 2009 and provide us with
a copy of your proposed disclosures based on your consideration of other
than temporary impairment of FHLB stock at March 31, 2009. Further, please
also clarify in your disclosures how you define foreseeable future with
respect to your retaining the FHLB
stock.
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RESPONSE: The
Company hereby confirms that additional disclosures will be included in our Form
10-Q for the quarter ended June 30, 2009 regarding the impairment analysis of
our FHLB stock. Set forth below is our proposed disclosure based on our
consideration of other-than-temporary-impairment of FHLB stock as of March 31,
2009.
"The
Company is required to be a member of and maintain a certain amount of capital
stock of the FHLB of Chicago ("FHLB") to obtain an advance from the FHLB. As of
March 31, 2009, the carrying amount of the investment in FHLB stock was
$5,787,000. There is no ready market for the FHLB stock and no quoted market
values as shares can only be purchased or sold between members of the FHLB at
the $100 par value. Therefore, the Company accounts for this investment as a
long-term asset and carries it at cost. The Company reviews this investment for
impairment in accordance with Statement of Position (SOP) 01-6, Accounting by Certain Entities
(Including Entities With Trade Receivables) That Lend to or Finance the
Activities of Others, whenever it measures fair value of the investments
or, at a minimum, whenever an event or
Amit Pande
U.S. Securities and Exchange Commission
May 29, 2009
Page 2
change in
circumstances has occurred that may have significant adverse effect on the fair
value of the investments.
On
October 10, 2007, the FHLB entered into a consensual cease and desist order with
its regulator, the Federal Housing Finance Board ("Finance
Board"). Under this order, the FHLB must maintain certain minimum
capital ratios; therefore, restricting capital stock repurchases and
redemptions, including redemptions upon membership withdrawal or termination,
without approval of the Director of the Office of Supervision of the Finance
Board. As a result of this order, and taking into consideration the net losses
over several periods and the restrictions placed on stock redemptions, the
Company considers the following in order to determine whether FHLB stock should
be classified as other-than-temporarily-impaired:
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·
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Significance
and length of the decline in net assets compared to the capital
stock;
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·
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Commitments
by FHLB to make payments required by law or
regulation;
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·
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Impact
of legislative or regulatory
changes;
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·
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Liquidity
position of the FHLB.
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In
analyzing these factors, we look at the FHLB's current operating results, net
book value, regulatory capital, ability to declare dividends and repurchase
stock and credit ratings, along with other information that may, from time to
time, be viewed as material.
After
considering these factors and the Company's intention and ability to hold the
FHLB stock for the time necessary to recover the initial investment, the Company
determined that the FHLB stock was not impaired as of March 31,
2009."
Please be
further advised that the Company has revised its proposed disclosure to
eliminate using the phrase "foreseeable future" with respect to its retention of
FHLB stock, in order to avoid any confusion or misinterpretation of the relevant
timeframe.
Form 10-Q for the three
months ended December 31, 2008
Note 5 - Fair Value
Accounting, page 9
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4.
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We
note your response to comment five of our letter dated April 16, 2009.
Please confirm that in future filings, beginning with the Form 10-Q for
the quarter ended June 30, 2009, the Company will disclose the valuation
techniques (e.g., future cash flows) and significant observable and
unobservable inputs it used for valuing its investment
securities.
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RESPONSE: This will
confirm that in future filings beginning with the Form 10-Q for the quarter
ended June 30, 2009, the Company will disclose the valuation techniques (e.g.,
future cash flows) and significant observable and unobservable inputs it used
for valuing its investment securities.
Amit Pande
U.S. Securities and Exchange Commission
May 29, 2009
Page 2
In
addition to the foregoing, please be advised that:
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·
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the
Company acknowledges that it is responsible for the adequacy and accuracy
of the disclosure in the filing;
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·
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the
Company acknowledges that staff comments or changes to disclosure in
response to staff comments do not foreclose the Commission from taking any
action with respect to the filing;
and
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·
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the
Company acknowledges that it may not assert staff comments as a defense in
any proceeding initiated by the Commission or any person under the federal
securities laws of the United
States.
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If you
have any questions regarding these comments or require any additional
information, do not hesitate to contact me at (715) 836-9994, extension
109.
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Sincerely,
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/s/ John D. Zettler
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John
D. Zettler
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Chief
Financial Officer
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cc: Lindsay
Bryan, Staff Accountant