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NEW YORK – Two former credit unions that converted to banks made their initial showing on Wall Street very profitable. Citizens Community Bancorp (CZWI) is the stock issuing owner of Citizens Community Federal Bank, headquartered in Eau Claire, Wisconsin and Kaiser Federal Bancorp (KFED) is the stock issuing owner of the Kaiser Federal Bank, headquartered in La Jolla, California. CZWI is being traded on the OTC Bulletin Board system and KFED is being traded on the NASDAQ exchange. The first public sales of the stock have helped directors and officers at each organization to profit handsomely by their investments. Based on the stock’s most recent price, Citizen’s CEO James Cooley made $49,000 on shares owned by he and his wife. Cooley’s son made $12,250 on his 5,000 shares. Director Richard McHugh and his wife also invested in 20,000 shares and thus made $49,000. Senior Vice President Timothy Cruciani made $24,500 on his 10,000 shares, as did Director David Westrate. His daughter held 5,000 shares and made $12,250. Other investors at the 5,000 share level included Vice President Rebecca Johnson, CFO John Zettler and director Thomas Kempen. According to filings with the Securities and Exchange Commission, however, not everyone made money on thousands of shares. Director Donna Talmage, for example, made $245 on her 100 shares and Senior Vice President Johnny Thompson made just over $3,700 on his 1,518 shares. In the case of Kaiser, the stock’s prospectus indicates that two of the bank executive officers, CFO Daniel Cano and COO Jeanne Thompson and their families have committed to purchase 30,000 shares apiece at $10.00 per share. CCO Nancy Huber and her family have committed to buy 15,000 shares at $10.00 per share, according to the filing. Five of the bank’s seven directors, CEO and Director Kay Hoveland, Chair James Breeden, Gerald Murbach, Robert Steinbach and Marilyn Owsley and their families have committed to purchasing 30,000 shares apiece. Two of the directors, Frank Nicewicz and Rita Zwern and their families committed to purchase 15,000 shares apiece. As of press time the officers and directors and their families which purchased 30,000 shares have made just over $104,700 on their investment, and those purchasing 15,000 have made just over $52,350. Citizens Federal switched to a mutual bank charter in December 2001, after having been the first to try to convert in the mid-1990s. That first conversion effort failed, the bank said on its Web site, but it “helped pioneer industry modifications that soon opened the door to such conversions.” Kaiser Federal began as Kaiser Permanente Federal Credit Union in 1953 and converted to a mutual bank in 1999. It did so in order to “obtain more flexibility and ensure the institution’s survival through sustained growth,” according to the bank’s Web site. Both institutions chose to issue stock under a mutual holding company form of organization, one that allows a mutual savings bank to both retain depositor or member ownership and issue stock, according to Richard Garabedian, a partner with Luse Gorman Pomerenk & Schick, a Washington D.C. based law firm which has guided credit unions through conversions. A mutual holding company structure allows depositors or members to keep ownership over a mutual holding company that, in turn, will own a stock issuing company, Garabedian explained. It will be the stock issuing company that actually owns the bank and can own others as well, along with other sorts of related concerns, he added. One drawback from point of view of being a purely stock issuing institution is that, under a mutual model, the stock issuing company can only issue, at most, 49% of its stock. The rest has to be held by the stock issuing company’s majority owner, the holding company with its member or depositor owners. In practice, Garabedian said, firms often only issue 45% or even less to the public. This can limit the capital which can be raised through issuing stock, but it allows the members or depositors to continue to vote for the board of directors of the holding company, he added. A mutual holding company structure can also effectively prevent the bank from being purchased in a buy out by a larger, stock issuing, institution. -

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