UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549


___________________________





FORM
      10-K





[X]
            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended September 30, 2007          OR[   ]
            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





Commission
      File Number:  001-33003





CITIZENS
      COMMUNITY BANCORP, INC.


(Exact
      name of small business issuer as specified in its charter)





Maryland
            
            20-5120010(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)2174
                EastRidge Center, Eau Claire, Wisconsin
            
            54701(Address
                of principal executive offices)
            (Zip
                Code)





Registrant's
      telephone number, including area code:  (715) 836-9994





Securities
      registered pursuant to Section 12(b) of the Act:  None





Securities
                registered pursuant to Section 12(g)of the Act:
            Common
                Stock, par value $0.01 per share(Title
                of Class)





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.  YES      NO
X





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. YES     NO  X





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.    YES  X   NO





Indicate
      by check mark whether disclosure of delinquent filers pursuant to Item 405
      of
      Regulation S-B is not contained herein, and will not be contained, to the best
      of the registrant's knowledge, in definitive proxy or other information
      statements incorporated by reference in Part III of this Form 10-K or any
      amendments to this Form 10-K.    X





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.


Large
      accelerated filer       Accelerated
      filer        Non-accelerated
      filer   X





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).   YES   
      NO  X





The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant, computed by reference to the average of the bid and asked price
      of
      such stock as of the last business day of the registrant's most recently
      completed second fiscal quarter, was $62,525,255.  (The exclusion from
      such amount of the market value of the shares owned by any person shall not
      be
      deemed an admission by the registrant that such person is an affiliate of the
      registrant.)





As
      of
      December 20, 2007, there were issued and outstanding 7,118,205 shares of the
      Registrant's common stock.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





Part
      II
      of Form 10-K B
      Annual Report to Stockholders for the fiscal year ended September 30,
      2007.


Part
      III
      of Form 10-K B
      Portions of the Proxy Statement for the 2008 Annual Meeting of
      Stockholders.








**PART
      I**




Item
      1.                      Description
      of Business




**General**




Historically,
      Citizens Community Federal (the "Bank") was a federal credit
      union.   The Bank accepted deposits and made loans to members,
      who live, work or worship in the Wisconsin counties of Chippewa and Eau Claire,
      and parts of Pepin, Buffalo and Trempealeau.   In addition, this
      included businesses and other entities located in these counties, and members
      and employees of the Hocak Nation.   In December 2001, the Bank
      converted to a federal mutual savings bank in order to better serve our
      customers and the local community through the broader lending ability of a
      federal savings bank, and to expand our customer base beyond the limited field
      of membership permitted for credit unions.   As a federal savings
      bank, the Bank has expanded authority in structuring residential mortgage and
      consumer loans, and the ability to make commercial loans, although the Bank
      does
      not currently have any immediate plans to commence making commercial loans.
      In
      2004, Citizens Community Federal reorganized into the mutual holding
      company form of organization.  The Bank is a federally chartered stock
      savings institution with 12 full service offices.




On
      July
      1, 2005, Citizens Community Bancorp acquired Community Plus Savings Bank,
      Rochester Hills, Michigan, through a merger with and into Citizens Community
      Federal.  In accordance with the merger agreement, Citizens Community
      Bancorp issued 705,569 additional shares to Citizens Community MHC, based on
      the
      $9.25 million independently appraised value of Community Plus Savings
      Bank.  At June 30, 2005, Community Plus Savings Bank had total assets
      of $46.0 million and deposits and other liabilities of $41.8 million, prior
      to
      purchase accounting adjustments.




On
      October 31, 2006, Citizens Community MHC (the "MHC") completed its
      reorganization into stock form and Citizens Community Bancorp, Inc. (the
      "Company") succeeded to the business of Citizens Community Bancorp, the MHC's
      former stock holding company subsidiary.  Each outstanding share of
      common stock of the former mid-tier stock holding company (other than shares
      held by the MHC which were canceled) was converted into 1.91067 shares of common
      stock of the Company.  As part of the second-step mutual to stock
      conversion transaction, the Company sold a total of 5,290,000 shares to eligible
      depositors of the Bank in a subscription offering at $10.00 per share, including
      341,501 shares purchased by the Bank's employee stock ownership plan with funds
      borrowed from the Company.




Citizens
      Community Bancorp, Inc. is incorporated under the laws of the State of Maryland
      to hold all of the stock of Citizens Community Federal.  Citizens
      Community Bancorp, Inc. is a unitary savings and loan holding company and is
      subject to regulation by the Office of Thrift Supervision
      (OTS).  Citizens Community Bancorp, Inc. has no significant assets
      other than all of the outstanding shares of common stock of Citizens Community
      Federal, the net proceeds of the reorganization it kept and its loan to the
      Citizens Community Bancorp, Inc. employee stock ownership plan.




At
      September 30, 2007, the Company had total assets of $386.1 million, total
      deposits of $207.7 million and stockholders' equity of $78.1
      million.****The Company and the Bank are examined and
      regulated by the OTS, its primary federal regulator.   The
      Company and the Bank are also regulated by the FDIC.   The
      Bank is required to have certain reserves set by the Federal Reserve Board
      and
      is a member of the Federal Home Loan Bank of Chicago, which is one of the 12
      regional banks in the Federal Home Loan Bank System.




**Forward
      Looking Statements**




This
      document, including information incorporated by reference, contains
      forward-looking statements about the Company and its subsidiaries which we
      believe are within the meaning of the Private Securities Litigation Reform
      Act
      of 1995.  These forward-looking statements include, without
      limitation, statements with respect to anticipated future operating and
      financial performance, growth opportunities, interest rates, cost savings and
      funding advantages expected or anticipated to be realized by
      management.  Words such as "may," "could," "should," "would,"
      "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar
      expressions are intended to identify these forward-looking
      statements.  Forward-looking statements by the Company and its
      management are based on beliefs, plans, objectives, goals, expectations,
      anticipations, estimates and the intentions of management and are not guarantees
      of future performance.  The Company disclaims any obligation to update
      or revise any forward-looking statements based on the occurrence of future
      events, the receipt of new information, or otherwise.




1


The
      important factors we discuss below, as well as other factors discussed under
      the
      caption "Management's Discussion and Analysis of Financial Condition and Results
      of Operations" and identified in our filings with the SEC and those presented
      elsewhere by our management from time to time, could cause actual results to
      differ materially from those indicated by the forward-looking statements made
      in
      this document:




·
            further
                developments in the Company's ongoing review of and efforts to resolve
                possible problem credit relationships, which could result in, among
                other
                things, further downgrades of aforementioned loans, additional provisions
                to the loan loss reserve and the incurrence of other material non-cash
                and
                cash charges;




·
            the
                strength of the U.S. economy in general and the strength of the local
                economies in which we conduct
                operations;




·
            the
                effects of, and changes in, trade, monetary and fiscal policies and
                laws,
                including interest rate policies of the Federal Reserve
                Board;




·
            inflation,
                interest rate, market and monetary
                fluctuations;




·
            the
                timely development of and acceptance of our new products and services,
                and
                the perceived overall value of these products and services by users
                including the features, pricing and quality compared to competitors'
                products and services;




·
            the
                willingness of users to substitute our products and services for
                products
                and services of our competitors;




·
            the
                impact of changes in financial services' laws and regulations (including
                laws concerning taxes, banking, securities and
                insurance);




·
            the
                impact of technological changes;




·
            acquisitions;




·
            changes
                in consumer spending and saving habits;
                and




·
            our
                success at managing the risks detailed
                above.




The
      Company disclaims any obligation to update or revise any forward-looking
      statements based on the occurrence of future events, the receipt of new
      information, or otherwise.




**Market
      Area**




The
      Bank
      is a community-oriented financial institution offering a variety of financial
      services to meet the needs of the communities we serve.  The Bank is
      headquartered in Eau Claire, Wisconsin, and has twelve retail offices primarily
      serving Eau Claire, Buffalo, Jackson, Sauk, Barron and Chippewa counties in
      Wisconsin; Blue Earth and Washington Counties in Minnesota; and Oakland and
      McComb counties in Michigan.  The geographic market area for loans and
      deposits is principally northwestern and central Wisconsin, Minnesota, and
      southeastern Michigan.




In
      all
      but Washington, Oakland and McComb counties, the economy is historically based
      in manufacturing, but has moved to a more service-oriented economy in the last
      four decades.  Median household income and per-capita income for this
      area are below the state and national averages, reflecting the lack of urban
      nature of the market and availability of high-paying white collar and technical
      jobs.  Washington, Oakland and McComb counties, all located in or near
      large metropolitan areas, have a more diverse economy.  Major
      employers in the Eau Claire market area include Chippewa Valley Technical
      College, Consumer Co-op Association and the University of Wisconsin-Eau
      Claire.  In the Mankato, Minnesota area, major employers include
      Minnesota State University, Immanuel Saint Joseph's Hospital and Taylor
      Corporation.  Anderson Windows, 3M and Imation are the largest
      employers in the Oakdale, Minnesota region.  In Michigan's Oakland and
      McComb counties, the largest employers are Delphi Automated Systems, Affinia
      Group and Spectrum Health Hospitals.




2


**Competition**




The
      Bank
      faces strong competition in originating real estate and other loans, and in
      attracting deposits.  Competition in originating real estate loans
      comes primarily from other savings institutions, commercial banks, credit unions
      and mortgage bankers.  Other savings institutions, commercial banks,
      credit unions and finance companies provide vigorous competition in consumer
      lending.




The
      Bank
      attracts deposits through its branch office system. Competition for those
      deposits is principally from other savings institutions, commercial banks and
      credit unions located in the same community, as well as mutual funds and other
      alternative investments.  The Bank competes for these deposits by
      offering superior service and a variety of deposit  accounts at
      competitive rates.  Based on branch deposit data provided by the FDIC
      at June  30, 2007, the Bank's share of deposits was approximately
      9.94% in Eau Claire County and less than 2.64% in all other market area
      counties.




**Internet
      Website**




The
      Company maintains a Website at www.citizenscommunityfederal.net.  The
      information contained on that Website is not included as part of, or
      incorporated by reference into, this Annual Report on Form
      10-K.  Citizens Community Bancorp, Inc. currently makes available on
      or through its Website its Annual Report on Form 10-K, Quarterly Reports on
      Form
      10-Q and Current Reports on Form 8-K or amendments to these reports. These
      materials are also available free of charge on the Securities and Exchange
      Commission's Website at www.sec.gov.




**Selected
      Consolidated Financial Information**




This
      information is incorporated by reference from pages 2 and 3 of the 2007
      Annual Report to Stockholders attached hereto as Exhibit 13 ("Annual
      Report").




**Yields
      Earned and Rates Paid**




This
      information contained under the section captioned "Average Balances, Net
      Interest Income, Yields Earned and Rates Paid" is incorporated herein by
      reference from page 13 of the Annual Report.




**Rate/Volume
      Analysis**




This
      information is incorporated by reference from page 14 of the Annual
      Report.




**Average
      Balance, Interest and Average Yields and Rates**




This
      information contained under the section captioned "Average Balances, Net
      Interest Income, Yields Earned and Rates Paid" is incorporated herein by
      reference from page 13 of the Annual Report.




**Lending
      Activities**




*General*.  Citizens
      Community Federal's first mortgage loans currently being originated carry a
      fixed rate of interest.  First mortgage loans generally are long-term
      and amortize on a monthly basis with principal and interest due each
      month.  A majority of Citizens Community Federal's first mortgage
      loans also contain a payable-on-demand clause, which allows Citizens Community
      Federal to call the loan due after a stated period, usually between two and
      five
      years from origination.  Citizens Community Federal also has home
      equity loans in its portfolio, which have an interest rate that adjusts based
      on
      the prime rate.  At September 30, 2007, the net loan portfolio totaled
      $320.0 million, which constituted 82.9% of total assets.




Mortgage
      loans up to $500,000 and consumer loans may be approved at various levels by
      loan officers and senior management.  The President may approve loans
      up to our regulatory lending limit, along with recommendations from the Chief
      Financial Officer and the Executive Vice President.  Loans outside our
      general underwriting guidelines must be approved by the board of
      directors.  At September 30, 2007, our regulatory lending limit to any
      one borrower and the borrower's related entities was approximately $6.5
      million.  The largest lending relationship to a single borrower or a
      group of related borrowers consisted of two loans to a single borrower with
      a
      total balance of $452,000. These loans were current as of September 30,
      2007.




3


*Loan
      Portfolio Composition*.  The following table presents information
      concerning the composition of the Citizen Community Federal's loan portfolio
      in
      dollar amounts and in percentages (before deductions for allowances for loan
      losses) as of the dates indicated.







At
                September 30,2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent(Dollars
                in thousands)Real
                Estate Loans:One-
                to four-family first mortgages
            
            $
            177,281
            
            
            
            55.3
            %
            
            $
            156,235
            
            
            
            60.3
            %
            
            $
            136,647
            
            
            
            62.5
            %
            
            $
            89,841
            
            
            
            58.8
            %
            
            $
            71,108
            
            
            
            57.5
            %Second
                mortgages
            
            
            10,461
            
            
            
            3.2
            
            
            
            9,161
            
            
            
            3.5
            
            
            
            7,630
            
            
            
            3.5
            
            
            
            5,398
            
            
            
            3.5
            
            
            
            4,661
            
            
            
            3.8Multi-family
                and commercial
            
            
            215
            
            
            
            0.1
            
            
            
            240
            
            
            
            0.1
            
            
            
            274
            
            
            
            0.1
            
            
            
            321
            
            
            
            0.2
            
            
            
            239
            
            
            
            0.3Total
                real estate loans
            
            
            187,957
            
            
            
            58.6
            
            
            
            165,636
            
            
            
            63.9
            
            
            
            144,551
            
            
            
            66.1
            
            
            
            95,560
            
            
            
            62.5
            
            
            
            76,008
            
            
            
            61.6Consumer
                Loans:Automobile
                (1)
            
            
            27,168
            
            
            
            8.5
            
            
            
            24,445
            
            
            
            9.4
            
            
            
            25,980
            
            
            
            11.9
            
            
            
            25,808
            
            
            
            16.9
            
            
            
            26,905
            
            
            
            21.7Other
                secured personal loans (2)
            
            
            100,966
            
            
            
            31.5
            
            
            
            64,384
            
            
            
            24.9
            
            
            
            43,460
            
            
            
            19.
            
            
            
            27,607
            
            
            
            18.0
            
            
            
            17,028
            
            
            
            13.8Unsecured
                personal loans (3)
            
            
            4,610
            
            
            
            1.4
            
            
            
            4,774
            
            
            
            1.8
            
            
            
            4,743
            
            
            
            2.2
            
            
            
            3,955
            
            
            
            2.6
            
            
            
            3,633
            
            
            
            2.9Total
                consumer loans
            
            
            132,744
            
            
            
            41.4
            
            
            
            93,603
            
            
            
            36.1
            
            
            
            74,183
            
            
            
            33.9
            
            
            
            57,370
            
            
            
            37.5
            
            
            
            47,566
            
            
            
            38.4Gross
                loans
            
            
            320,701
            
            
            
            100.0
            %
            
            
            259,239
            
            
            
            100.0
            %
            
            
            218,734
            
            
            
            100.0
            %
            
            
            152,930
            
            
            
            100.0
            %
            
            
            123,574
            
            
            
            100.0
            %Net
                deferred loan costs
            
            
            252
            
            
            
            
            
            
            
            63
            
            
            
            
            
            
            
            -
            
            
            
            
            
            
            
            -
            
            
            
            
            
            
            
            -Allowance
                for loan losses
            
            
            (926
            )
            
            
            
            
            
            
            (835
            )
            
            
            
            
            
            
            (803
            )
            
            
            
            
            
            
            (554
            )
            
            
            
            
            
            
            (467
            )Total
                loans receivable, net
            
            $
            320,027
            
            
            
            
            
            
            $
            258,467
            
            
            
            
            
            
            $
            217,931
            
            
            
            
            
            
            $
            152,376
            
            
            
            
            
            
            $
            123,107


_______________


(1)
            Includes
                both direct and indirect lending activities.(2)
            Includes
                both direct and indirect lending activities for personal items other
                than
                automobiles.(3)
            Includes
                only direct lending.








4


The
      following table shows the composition of Citizen Community Federal's loan
      portfolio by fixed- and adjustable-rate at the dates indicated.




At
                September 30,2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent
            
            
            Amount
            
            
            Percent
            
            
            Amount
            
            
            PercentFixed
                Rate Loans:
            
            (Dollars
                in thousands)Real
                estateOne-
                to four-family first mortgages(1)
            
            $
            170,127
            
            
            
            53.0
            %
            
            $
            148,211
            
            
            
            57.0
            %
            
            $
            128,300
            
            
            
            58.7
            %
            
            $
            89,841
            
            
            
            58.8
            %
            
            $
            71,108
            
            
            
            57.5
            %Second mortgages
            
            
            9,989
            
            
            
            3.1
            
            
            
            8,367
            
            
            
            3.2
            
            
            
            6,189
            
            
            
            2.8
            
            
            
            4,772
            
            
            
            3.1
            
            
            
            4,099
            
            
            
            3.3Multi-family and commercial
            
            
            215
            
            
            
            0.1
            
            
            
            240
            
            
            
            0.1
            
            
            
            274
            
            
            
            0.1
            
            
            
            321
            
            
            
            0.2
            
            
            
            239
            
            
            
            0.3Total
                fixed-rate real estate loans
            
            
            180,331
            
            
            
            56.2
            
            
            
            156,818
            
            
            
            60.3
            
            
            
            134,763
            
            
            
            61.6
            
            
            
            94,934
            
            
            
            62.1
            
            
            
            75,446
            
            
            
            61.1Consumer loans
            
            
            132,744
            
            
            
            41.4
            
            
            
            93,603
            
            
            
            36.3
            
            
            
            74,183
            
            
            
            33.9
            
            
            
            57,370
            
            
            
            37.5
            
            
            
            47,566
            
            
            
            38.5Total
                fixed rate loans
            
            
            313,075
            
            
            
            97.6
            
            
            
            250,421
            
            
            
            96.6
            
            
            
            208,946
            
            
            
            95.5
            
            
            
            152,304
            
            
            
            99.6
            
            
            
            123,012
            
            
            
            99.6Adjustable Rate Loans:Real estateOne- to four-family first
                mortgages
            
            
            7,154
            
            
            
            2.2
            
            
            
            8,024
            
            
            
            3.1
            
            
            
            8,347
            
            
            
            3.8
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---Second mortgages
            
            
            472
            
            
            
            0.2
            
            
            
            794
            
            
            
            0.3
            
            
            
            1,441
            
            
            
            0.7
            
            
            
            626
            
            
            
            0.4
            
            
            
            562
            
            
            
            0.4Multi-family and commercial
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---Total adjustable rate
                real estate loans
            
            
            7,626
            
            
            
            2.4
            
            
            
            8,818
            
            
            
            3.4
            
            
            
            9,788
            
            
            
            4.5
            
            
            
            626
            
            
            
            0.4
            
            
            
            562
            
            
            
            0.4Consumer
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---Total adjustable rate loans
            
            
            7,626
            
            
            
            2.4
            
            
            
            8,818
            
            
            
            3.4
            
            
            
            9,788
            
            
            
            4.5
            
            
            
            626
            
            
            
            0.4
            
            
            
            562
            
            
            
            0.4Total loans
            
            
            320,701
            
            
            
            100.0
            %
            
            
            259,239
            
            
            
            100.0
            %
            
            
            218,734
            
            
            
            100.0
            %
            
            
            152,930
            
            
            
            100.0
            %
            
            
            123,574
            
            
            
            100.0
            %Net
                deferred loan costs
            
            
            252
            
            
            
            
            
            
            
            63
            
            
            
            
            
            
            
            ---
            
            
            
            
            
            
            
            ---
            
            
            
            
            
            
            
            ---Allowance for loan losses
            
            
            (926
            )
            
            
            
            
            
            
            (835
            )
            
            
            
            
            
            
            (803
            )
            
            
            
            
            
            
            (554
            )
            
            
            
            
            
            
            (467
            )Total loans receivable, net
            
            $
            320,027
            
            
            
            
            
            
            $
            258,467
            
            
            
            
            
            
            $
            217,931
            
            
            
            
            
            
            $
            152,376
            
            
            
            
            
            
            $
            123,107


__________________


(1)
            Includes
                $144.5 million in 2007, $122.2 million in 2006, $102.9 million in
                2005,
                $81.6 million in 2004 and $66.4 million in 2003 of loans with a payable
                on
                demand clause.








5


The
      following schedule illustrates the contractual maturity of Citizen Community
      Federal's loan portfolio at September 30, 2007.  Mortgages which have
      adjustable or renegotiable interest rates are shown as maturing in the period
      during which the contract is due.  The schedule does not reflect the
      effects of possible prepayments or enforcement of due-on-demand
      clauses.




Real
                Estate
            
            
            ConsumerOne-
                to Four- Family
              First
                Mortgage(1)
            
            
            Second
                Mortgage
            
            
            Multi-Family
                and
              Commercial
            
            
            Automobile
            
            
            Secured
                Personal
            
            
            Unsecured
                Personal
            
            
            TotalAmount
            
            
            Weighted
              Average
              Rate
            
            
            Amount
            
            
            Weighted
              Average
              Rate
            
            
            Amount
            
            
            Weighted
              Average
              Rate
            
            
            Amount
            
            
            Weighted
              Average
              Rate
            
            
            Amount
            
            
            Weighted
              Average
              Rate
            
            
            Amount
            
            
            Weighted
              Average
              Rate
            
            
            Amount
            
            
            Weighted
              Average
              Rate2008(2)
            
            
            $
            301
            
            
            
            6.33
            %
            
            $
            893
            
            
            
            8.76
            %
            
            $
            135
            
            
            
            7.25
            %
            
            $
            847
            
            
            
            8.71
            %
            
            $
            2,445
            
            
            
            8.11
            %
            
            $
            2,496
            
            
            
            14.56
            %
            
            $
            7,117
            
            
            
            10.43
            %2009
            
            
            
            171
            
            
            
            6.30
            
            
            
            660
            
            
            
            7.89
            
            
            
            51
            
            
            
            6.75
            
            
            
            2,881
            
            
            
            8.56
            
            
            
            2,797
            
            
            
            8.24
            
            
            
            398
            
            
            
            10.54
            
            
            
            6,958
            
            
            
            8.412010
            
            
            
            227
            
            
            
            6.64
            
            
            
            1,342
            
            
            
            7.99
            
            
            
            ---
            
            
            
            ---
            
            
            
            5,987
            
            
            
            8.96
            
            
            
            5,069
            
            
            
            8.38
            
            
            
            852
            
            
            
            10.40
            
            
            
            13,477
            
            
            
            8.702011-2012
            
            
            
            932
            
            
            
            6.38
            
            
            
            3,031
            
            
            
            8.61
            
            
            
            ---
            
            
            
            ---
            
            
            
            13,232
            
            
            
            8.96
            
            
            
            18,639
            
            
            
            8.50
            
            
            
            820
            
            
            
            11.04
            
            
            
            36,654
            
            
            
            8.682013-2014
            
            
            
            2,385
            
            
            
            6.06
            
            
            
            984
            
            
            
            8.99
            
            
            
            29
            
            
            
            6.50
            
            
            
            1,899
            
            
            
            7.67
            
            
            
            11,469
            
            
            
            7.82
            
            
            
            6
            
            
            
            ---
            
            
            
            16,772
            
            
            
            7.622015-2029
            
            
            
            51,899
            
            
            
            6.11
            
            
            
            3,287
            
            
            
            8.25
            
            
            
            ---
            
            
            
            ---
            
            
            
            2,322
            
            
            
            8.27
            
            
            
            60,523
            
            
            
            7.79
            
            
            
            38
            
            
            
            ---
            
            
            
            118,069
            
            
            
            7.072030
                and
              after
            
            
            
            121,366
            
            
            
            6.40
            
            
            
            264
            
            
            
            5.99
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            24
            
            
            
            8.28
            
            
            
            ---
            
            
            
            ---
            
            
            
            121,654
            
            
            
            6.40$
            177,281
            
            
            
            6.31
            %
            
            $
            10,461
            
            
            
            8.35
            %
            
            $
            215
            
            
            
            7.03
            %
            
            $
            27,168
            
            
            
            8.76
            %
            
            $
            100,966
            
            
            
            7.97
            %
            
            $
            4,610
            
            
            
            12.72
            %
            
            $
            320,701
            
            
            
            7.20
            %


_______________


(1)
            Includes
                $144.5 million of loans with a payable on demand
                clause.(2)
            Includes
                home equity lines of credit, credit card loans, loans having no stated
                maturity and overdraft loans.





The
      total
      amount of loans due after September 30, 2007, which have predetermined interest
      rates is $313.4 million, while the total amount of loans due after such date
      which have floating or adjustable interest rates is $7.6 million.










6


*First
      Mortgage Lending*.  Citizens Community Federal focuses its lending
      efforts primarily on the origination of loans secured by first mortgages on
      owner-occupied, one- to four-family residences in our market area.  At
      September 30, 2007, one- to four-family residential mortgage loans totaled
      $177.3 million, or 55.3% of the gross loan portfolio.




For
      the
      year, mortgage originations increased primarily due to general increases in
      demand throughout all of our markets.




Citizens
      Community Federal generally underwrites its one- to four-family loans based
      on
      the applicant's employment and credit history, their debt to income ratio and
      the appraised value of the subject property.  Presently, Citizens
      Community Federal generally lends up to 80% of the appraised value for one-
      to
      four-family residential loans and up to 70% for non-owner occupied residential
      loans.  For loans used to purchase the property with a loan-to-value
      ratio in excess of 80%, Citizens Community Federal requires private mortgage
      insurance in order to reduce our exposure below 80%.  Properties
      securing one- to four-family loans are appraised by independent fee appraisers
      approved by the board of directors to the extent the loan exceeds
      $50,000.  In-house appraisals, prepared by persons other than the
      originating loan officer, may be used for loans of less than $50,000, or loans
      of less than $100,000 if the loan-to-value ratio is less than
      50%.  Citizens Community Federal requires its borrowers to obtain
      evidence of clear title and hazard insurance, and flood insurance, if
      necessary.




Citizens
      Community Federal currently originates most of its one- to four-family mortgage
      loans on a fixed-rate basis.  Citizens Community Federal's pricing
      strategy for mortgage loans includes setting interest rates that benefit our
      asset/liability management strategies.  Our one- to four-family loans
      are not assumable.




Most
      mortgage loans include a payable-on-demand clause, which allows the loan to
      be
      called at any time after the demand date.  Citizens Community Federal
      has had no reason to utilize the clause over the past several years, because
      rates have been historically low during this period.  May 2000 was the
      last and only time the clause was utilized.  At that time, 13 loans,
      totaling $541,442, were called.  It is Citizens Community Federal's
      policy to write the majority of its real estate loans with a payable-on-demand
      clause.  The intent of the clause is to give Citizens Community
      Federal some ability to protect against sharp and prolonged interest rate
      increases and their impact on net interest margin.  The clause is not
      intended for responding to temporary interest rate fluctuations.  The
      following factors are considered in determining whether and when to utilize
      the
      clause: (1) a significant, prolonged increase in market rates of interest;
      (2)
      the liquidity needs of Citizens Community Federal; (3) Citizens Community
      Federal's desire to restructure its balance sheet; and (4) an unsatisfactory
      payment history, including delinquent real estate taxes.  Other
      factors considered include the remaining term of the loan (i.e., a shorter
      remaining term could justify not calling a loan with the same rate as a loan
      with a longer remaining term), other lending relationships, payment history
      and
      the equity position of the borrower.  When Citizens Community Federal
      determines to utilize the clause, we call loans with the lowest interest rates
      first.




The
      following trigger guidelines are used to determine whether to utilize the
      payable-on-demand clause:  (1) when rates available for six month
      investment certificates of deposit exceed the rate on loans eligible to be
      called under the payable-on-demand clause by more than 75 basis points; or
      (2)
      when local market rates of interest for real estate loans exceed the rate on
      existing loans with the payable-on-demand clause by 150 basis
      points.  If either of these triggers are reached, management has 12
      months to utilize the clause and call loans, if management determines that
      doing
      so would be in the overall best interests of Citizens Community
      Federal.  The existence of the payable-on-demand clauses is not
      considered as a factor in determining our accounting policies for loan
      origination fees and costs, because we have only used the clause once in May
      2000 with respect to 13 loans.




The
      demand date is set based on the loan-to-value ratio and other underwriting
      criteria, and is usually two to five years from the date of
      origination.  During the fiscal year ended September 30, 2007,
      Citizens Community Federal originated $32.1 million of one- to four-family
      loans
      that included the payable-on-demand clause.  Fixed-rate loans secured
      by one- to four-family residences have contractual maturities of up to 30 years,
      and are generally fully amortizing, with payments due monthly.




We
      recently implemented a mortgage banking operation. We utilize internal marketing
      efforts to originate real estate loans.  We fund these loans and sell
      them with servicing released in the secondary market to Countrywide Financial
      Corporation.  This generates additional loan fee income on the sale of
      loans. Our relationship with Countrywide Financial Corporation, like all of
      our
      relationships with outside vendors, is subject to periodic review to minimize
      risk and exposure to the Company. We cannot provide any assurances that this
      arrangement will continue in the future.




7


*Second
      Mortgage Lending*.  Citizens Community Federal also offers second
      mortgage loans and home equity lines of credit.  Home equity lines of
      credit totaled $461,000 and comprised 0.001% of the gross loan portfolio at
      September 30, 2007.****These loans may be originated in
      amounts, together with the amount of the existing first mortgage, of up to
      80%
      of the value of the property securing the loan.  A loan may go over
      80% of the value of the property securing the loan if Citizens Community Federal
      holds the first mortgage.  Home equity lines of credit are originated
      with an adjustable rate of interest, based on the prime rate of interest plus
      a
      margin, fixed for the first year and adjustable monthly
      thereafter.  Home equity lines of credit have up to a 10-year draw
      period and require the payment of 1.5% of the outstanding loan balance per
      month
      during the draw period, which amount may be re-borrowed at any time during
      the
      draw period.  Once the draw period has lapsed, the payment is fixed
      based on the loan balance at that time.  At September 30, 2007,
      un-funded commitments on these lines of credit totaled $692,000.




Citizens
      Community Federal also offers second mortgage loans with a fixed rate of
      interest.  These loans may be amortized up to 15 years with a balloon
      payment at three, five or 10 years.  At September 30, 2007, fixed-rate
      second mortgage loans totaled $10.0 million, or 3.1% of the gross loan
      portfolio.




*Consumer
      Lending*.  At September 30, 2007, consumer and other loans totaled
      $132.7 million, or 41.4% of the gross loan portfolio.  Citizens
      Community Federal offers a variety of secured consumer loans, including new
      and
      used auto, motorcycle, boat and recreational vehicle loans, loans secured by
      savings deposits, and a limited amount of unsecured loans.  Citizens
      Community Federal originates consumer and other loans primarily in its market
      areas.  For fiscal 2007, consumer lending increased as a result of a
      strong loan demand throughout our branch system.




Citizens
      Community Federal originates secured loans on an indirect basis through its
      indirect dealer program.  These secured consumer loans consist of
      loans for a wide variety of products, including motorcycles, recreational
      vehicles, pianos, all-terrain vehicles, pools and spas.  An indirect
      dealer network is currently comprised of 529 active dealers with businesses
      located throughout Citizens Community Federal's market area.  In some
      instances, the participating dealer may receive a premium rate for the amount
      over our initial interest rate.  The loans are generally originated
      with terms from 36 to 60 months and carry fixed rates of
      interest.  Citizens Community Federal follows its internal
      underwriting guidelines in evaluating loans obtained through the indirect dealer
      program, including using credit scoring to approve loans.




Auto
      loans totaled $27.2 million at September 30, 2007, or 8.4% of gross
      loans.  Auto loans may be written for up to five years for a new car
      and four years for a used car with fixed rates of
      interest.  Loan-to-value ratios are up to 100% of the sales price for
      new autos and 100% of the retail value on used autos, based on a valuation
      from
      official used car guides.  In addition, Citizens Community Federal
      may, on occasion, originate secured auto loans in excess of 100% loan-to-value
      ratio based upon the credit quality of the borrower.  Auto loans also
      may be originated through Citizens Community Federal's indirect lending
      program.  Indirect auto loans are made using the same underwriting
      guidelines as auto loans originated directly by Citizens Community
      Federal.




Citizens
      Community Federal originates secured direct loans on a variety of collateral
      with terms varying from 36 to 60 months.  At September 30, 2007,
      Citizens Community Federal had secured direct consumer loans totaling $36.1
      million, of which $19.4 million was for automobiles.  At September 30,
      2007, the indirect lending portfolio totaled $92.1 million, of which $7.8
      million was for automobiles.




Citizens
      Community Federal also originates unsecured consumer loans consisting primarily
      of credit card loans totaling $1.5 million at September 30, 2007, overdraft
      protection loans totaling $730,000 at September 30, 2007, and loans made through
      the Freedom Loan program.  The Freedom Loan program offers unsecured
      loans to consumers with a fixed rate of interest for a maximum term of 48 months
      for amounts not to exceed $20,000 per individual.  At September 30,
      2007, loans originated through the Freedom Loan program totaled $2.3
      million.




Consumer
      loans generally have shorter terms to maturity, which reduces Citizens Community
      Federal's exposure to changes in interest rates, and carry higher rates of
      interest than do one- to four-family residential mortgage loans.  In
      addition, management believes that offering consumer loan products helps to
      expand and create stronger ties to our existing customer base by increasing
      the
      number of customer relationships and providing cross-marketing
      opportunities.




Consumer
      and other loans may entail greater risk than do one- to four-family residential
      mortgage loans, particularly in the case of consumer loans which are secured
      by
      rapidly depreciable assets, such as automobiles and recreational
      vehicles.  In these cases, any repossessed collateral for a defaulted
      loan may not provide an adequate




8


source
      of
      repayment of the outstanding loan balance.  As a result, consumer loan
      collections are dependent on the borrower's continuing financial stability
      and,
      thus, are more likely to be adversely affected by job loss, divorce, illness
      or
      personal bankruptcy.




*Multi-family
      and Commercial Real Estate Lending*.  We generally do not engage
      in this type of lending, but may consider doing so in the
      future.  However, as part of the acquisition of the Chippewa Falls
      branch on November 1, 2002, Citizens Community Federal obtained a nominal amount
      of multi-family and commercial real estate loans.****At
      September 30, 2007, our two multi-family and commercial real estate loans
      totaled $215,000, or 0.1% of our loan portfolio.  In order to monitor
      the adequacy of cash flows on these loans, the borrower is requested or required
      to provide periodic financial information.




**Loan
      Originations and Repayments**




Citizens
      Community Federal originates loans through marketing efforts and our existing
      and walk-in customers.  The ability to originate loans is dependent
      upon customer demand for loans in Citizens Community Federal's market
      areas.  Demand is affected by competition and the interest rate
      environment.  Since becoming a savings bank, Citizens Community
      Federal has significantly increased its origination of residential real estate
      loans.  During the past few years, Citizens Community Federal, like
      many other financial institutions, has experienced significant prepayments
      on
      loans due to the low interest rate environment prevailing in the United
      States.  In periods of economic uncertainty, the ability of financial
      institutions, including Citizens Community Federal, to originate or purchase
      large dollar volumes of real estate loans may be substantially reduced or
      restricted, with a resultant decrease in interest income. Citizens Community
      Federal does not engage in, nor have any exposure to, subprime
      lending.




At
      the
      start of fiscal 2007, we implemented a mortgage banking operation.  We
      originate these loans using our internal marketing efforts.  We fund
      these loans and sell them in the secondary market to Countrywide Financial
      Corporation with servicing released.  For fiscal 2007, we had
      originated loans totaling $1.2 million through this operation.  These
      loans have been subsequently sold in the secondary market. Our relationship
      with
      Countrywide Financial Corporation, like all of our relationships with outside
      vendors, is subject to periodic review to minimize risk and exposure to the
      Company. We cannot provide any assurances that this arrangement will continue
      in
      the future.




The
      following table shows the loan origination, purchase, sale and repayment
      activities of Citizens Community Federal for the periods indicated.




Year
                ended September 30,2007
            
            
            2006
            
            
            2005(In
                thousands)Originations
                by Type:Real
                estate(1)
            
            $
            41,701
            
            
            $
            48,280
            
            
            $
            53,731Non-real
                estate-consumer
            
            
            91,447
            
            
            
            70,286
            
            
            
            55,010Total
                loans originated
            
            
            133,148
            
            
            
            118,566
            
            
            
            108,741Loans
                obtained through merger
            
            
            ---
            
            
            
            ---
            
            
            
            26,670Repayments:Principal
                repayments
            
            
            71,512
            
            
            
            77,564
            
            
            
            69,405Loans
                transferred to otherreal
                estate/collateral
            
            
            174
            
            
            
            434
            
            
            
            203Net
                increase(decrease)
            
            $
            61,462
            
            
            $
            40,568
            
            
            $
            65,803


______________


(1)
            Real
                estate loans include loans with a payable–on-demand feature of $32.1
                million in fiscal 2007, $42.3 million in fiscal 2006 and $45.0 million
                in
                fiscal 2005.  Real estate loans also include home equity lines
                of credit of $349,000 for fiscal 2007, $125,000 for fiscal 2006 and
                $274,000 in fiscal 2005.





**Asset
      Quality**




*Procedures*.  When
      a borrower fails to make a payment on a mortgage loan on or before the due
      date,
      a late notice is mailed five days after the due date.  When the loan
      is 10 days past due, a loan officer will begin contacting the borrower by
      phone.  This process will continue until satisfactory payment
      arrangements have been made.  If the loan becomes two payments and ten
      days past due, a notice of right-to-cure default is sent.  If the loan
      becomes over




9


90
      days
      delinquent, a drive-by inspection is done while further attempts to contact
      the
      borrower by phone are made.  After the loan is 120 days past due, and
      acceptable arrangements have not been made, Citizens Community Federal will
      generally refer the loan to legal counsel, with instructions to prepare a notice
      of intent to foreclose.  This notice allows the borrower up to 30 days
      to bring the loan current.  During this 30-day period, Citizens
      Community Federal will still attempt to contact the borrower to implement
      satisfactory payment arrangements.  If the loan becomes 150 days past
      due and satisfactory arrangements have not been made, foreclosure will be
      instituted.




For
      consumer loans a similar process is followed, with the initial written contact
      being made once the loan is five days past due.  Follow-up contacts
      are generally on an accelerated basis compared to the mortgage loan
      procedure.




Citizens
      Community Federal divides its loans into two categories, mortgage loans and
      non-mortgage loans.  For all loans in both categories, Citizens
      Community Federal employs a dual-loss reserve strategy.  First, using
      a running five-year history, all loans, excluding classified loans, are assigned
      an inherent loss reserve.  Next, each loan (mortgage and non-mortgage)
      that becomes over 61 days delinquent is reviewed by senior
      management.  In addition, Citizens Community Federal assesses several
      factors including negative change in income, negative change in collateral,
      negative change in employment and other characteristics.




The
      procedure for charging off consumer loans does not differentiate between the
      different types of consumer loans.  Citizens Community Federal's loan
      underwriting is based mainly on the borrowers' ability to pay, along with the
      value of the collateral.  All closed-end consumer loans are either
      charged off or recognized as a specific loss after they become delinquent 120
      days.  All open-end consumer loans are charged off or recognized as a
      specific loss after they become delinquent 180 days.  Consumer loans
      with collateral are charged off or recognized as a specific loss down to
      collateral resale value less 10 percent if repossession of collateral is
      assured.




In
      lieu
      of charging off the entire balance, loans with non-real estate collateral may
      be
      written down to the value of the collateral, if repossession is assured and
      in
      process.  For open-end and closed-end loans secured by real estate, a
      current assessment of value will be made no later than 180 days past
      due.  Any outstanding loan balance in excess of the value of the
      property, less selling costs, is charged off.




*Delinquent
      Loans*.  The following table sets forth our loan delinquencies by
      type, number and amount at September 30, 2007.




Loans
                Delinquent For:60-89
                Days
            
            
            90
                Days and Over
            
            
            Total
                Delinquent LoansNumber
            
            
            Amount
            
            
            Number
            
            
            Amount
            
            
            Number
            
            
            Amount(Dollars
                in thousands)Real
                estate
            
            
            2
            
            
            $
            236
            
            
            
            4
            
            
            $
            297
            
            
            
            6
            
            
            $
            533Consumer(1)
            
            
            139
            
            
            
            510
            
            
            
            259
            
            
            
            1,223
            
            
            
            398
            
            
            
            1,733Total
            
            
            141
            
            
            $
            746
            
            
            
            263
            
            
            $
            1,520
            
            
            
            404
            
            
            $
            2,266


__________


(1)           Includes
      credit card accounts.





*Non-performing
      Assets*.  The table below sets forth the amounts and categories of
      non-performing assets in our loan portfolio.  Loans are placed on
      non-accrual status when the loan becomes more than 90 days
      delinquent.  At all dates presented, we had no troubled debt
      restructurings which involve forgiving a portion of interest or principal on
      any
      loans or making loans at a rate materially less than that of market
      rates.  Foreclosed assets owned include assets acquired in settlement
      of loans.






10






At
                September 30,2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003(Dollars
                in thousands)Non-Accruing
                Loans:One-
                to
                four-family
            
            $
            297
            
            
            $
            406
            
            
            $
            207
            
            
            $
            300
            
            
            $
            162Consumer(1)
            
            
            1,223
            
            
            
            984
            
            
            
            462
            
            
            
            397
            
            
            
            400Total
            
            
            1,520
            
            
            
            1,390
            
            
            
            669
            
            
            
            697
            
            
            
            562Foreclosed
                Assets:One-
                to
                four-family
            
            
            94
            
            
            
            376
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---Consumer
            
            
            29
            
            
            
            13
            
            
            
            32
            
            
            
            ---
            
            
            
            ---Total
            
            
            123
            
            
            
            389
            
            
            
            32
            
            
            
            ---
            
            
            
            ---Total
                non-performing
                assets
            
            $
            1,643
            
            
            $
            1,779
            
            
            $
            701
            
            
            $
            697
            
            
            $
            562Total
                as a percentage of total
                assets
            
            
            0.43
            %
            
            
            0.63
            %
            
            
            0.29
            %
            
            
            0.43
            %
            
            
            0.43
            %


___________


(1)
            Includes
                credit card accounts.





For
      the
      years ended September 30, 2007, and 2006, gross interest income which would
      have
      been recorded had the non-accruing loans been current in accordance with their
      original terms amounted to $101,900 and $52,400, respectively.  No
      amount was included in interest income on these loans for these
      periods.




*Other
      Loans of Concern*.  In addition to the non-performing assets set
      forth in the table above, as of September 30, 2007, there was also an aggregate
      of $758,000 of loans with respect to which known information about the possible
      credit problems of the borrowers have caused management to have doubts as to
      the
      ability of the borrowers to comply with present loan repayment terms and which
      may result in the future inclusion of such items in the non-performing asset
      categories.  These loans are not considered "classified" due to their
      delinquency status; however, they are identified as "watch"
      loans.  They are not reserved for in the allowance for loan losses
      other than as part of the inherent portion.  These loans have been
      considered in management's determination of the adequacy of our allowance for
      loan losses.




*Classified
      Assets*.  OTS regulations provide for the classification of loans
      and other assets, such as debt and equity securities considered to be of lesser
      quality, as "substandard," "doubtful" or "loss."  An asset is
      considered "substandard" if it is inadequately protected by the current net
      worth and paying capacity of the obligor or of the collateral pledged, if
      any.  "Substandard" assets include those characterized by the
      "distinct possibility" that the insured institution will sustain "some loss"
      if
      the deficiencies are not corrected.  Assets classified as "doubtful"
      have all of the weaknesses inherent in those classified "substandard," with
      the
      added characteristic that the weaknesses present make "collection or liquidation
      in full," on the basis of currently existing facts, conditions, and values,
      "highly questionable and improbable."  Assets classified as "loss" are
      those considered "uncollectible" and of such little value that their continuance
      as assets without the establishment of a specific loss reserve is not
      warranted.




When
      we
      classify problem assets as either substandard or doubtful, we may establish
      general allowances for loan losses in an amount deemed prudent by management
      and
      approved by the board of directors.  General allowances represent loss
      allowances which have been established to recognize the inherent risk associated
      with lending activities, but which, unlike specific allowances, have not been
      allocated to particular problem assets.  When we classify problem
      assets as "loss," we are required either to establish a specific allowance
      for
      losses equal to 100% of that portion of the asset so classified or to charge
      off
      such amount.  Our determination as to the classification of our assets
      and the amount of its valuation allowances is subject to review by the OTS
      and
      the FDIC, which may order the establishment of additional general or specific
      loss allowances.




In
      connection with the filing of our periodic reports with the OTS and in
      accordance with our classification of assets policy, we regularly review the
      problem assets in our portfolio to determine whether any assets require
      classification in accordance with applicable regulations.  On the
      basis of management's review of our assets, at September 30, 2007, Citizens
      Community Federal had classified $1.3 million of the loans in its portfolio
      as
      substandard, all of which was included in non-performing assets, $0 as doubtful
      and $0 as loss.  The total amount classified represented 1.66% of
      CCB's equity capital and 0.34% of assets at September 30, 2007.




11


*Provision
      for Loan Losses*.  Citizens Community Federal recorded a provision
      for loan losses for the year ended September 30, 2007 of $470,000, compared
      to
      $251,000 for the year ended September 30, 2006 and $414,000 for the year ended
      September 30, 2005.  The provision for loan losses is charged to
      income to bring the allowance for loan losses to reflect probable incurred
      losses based on the factors discussed below under "Allowance for Loan
      Losses."  The provision for loan losses for the year ended September
      30, 2007 was based on management's review of such factors which indicated that
      the allowance for loan losses reflected probable incurred losses in the loan
      portfolio as of the year ended September 30, 2007.




*Allowance
      for Loan Losses*.  Citizens Community Federal maintains an
      allowance for loan losses to absorb probable incurred losses in the loan
      portfolio.  The allowance is based on ongoing, quarterly assessments
      of the estimated probable incurred losses in the loan portfolio.  In
      evaluating the level of the allowance for loan losses, management considers
      the
      types of loans and the amount of loans in the loan portfolio, historical loss
      experience, adverse situations that may affect the borrower's ability to repay,
      estimated value of any underlying collateral, and prevailing economic
      conditions.




At
      September 30, 2007, the allowance for loan losses was $926,000, or 0.29%, of
      the
      total loan portfolio. Assessing the allowance for loan losses is inherently
      subjective as it requires making material estimates, including the amount and
      timing of future cash flows expected to be received on impaired loans, that
      may
      be susceptible to significant change.  In the opinion of management,
      the allowance, when taken as a whole, reflects estimated probable loan losses
      in
      our loan portfolios.




The
      following table sets forth an analysis of our allowance for loan
      losses.




Year
                Ended September 30,2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003(Dollars
                in Thousands)Balance at beginning of period
            
            $
            835
            
            
            $
            803
            
            
            $
            554
            
            
            $
            467
            
            
            $
            349Charge-offs:One- to four-family
            
            
            (83
            )
            
            
            (19
            )
            
            
            (24
            )
            
            
            ---
            
            
            
            (16
            )Consumer
            
            
            (330
            )
            
            
            (228
            )
            
            
            (212
            )
            
            
            (342
            )
            
            
            (297
            )Total charge-offs
            
            
            (413
            )
            
            
            (247
            )
            
            
            (236
            )
            
            
            (342
            )
            
            
            (313
            )Recoveries:Consumer
            
            
            34
            
            
            
            28
            
            
            
            31
            
            
            
            33
            
            
            
            25Total recoveries
            
            
            34
            
            
            
            28
            
            
            
            31
            
            
            
            33
            
            
            
            25Net charge-offs
            
            
            (379
            )
            
            
            (219
            )
            
            
            (205
            )
            
            
            (309
            )
            
            
            (288
            )Other-obtained through merger
            
            
            ---
            
            
            
            ---
            
            
            
            40
            
            
            
            ---
            
            
            
            ---Additions charged to operations
            
            
            470
            
            
            
            251
            
            
            
            414
            
            
            
            396
            
            
            
            406Balance at end of period
            
            $
            926
            
            
            $
            835
            
            
            $
            803
            
            
            $
            554
            
            
            $
            467Ratio
                of allowance for loan losses to
              net
                loans outstanding at
              end
                of
                period
            
            
            0.29
            %
            
            
            0.32
            %
            
            
            0.37
            %
            
            
            0.36
            %
            
            
            0.38
            %Ratio
                of net charge-offs during the
              period
                to average loans outstanding
              during
                the
                period
            
            
            0.13
            %
            
            
            0.08
            %
            
            
            0.12
            %
            
            
            0.22
            %
            
            
            0.25
            %Ratio
                of net charge-offs during the
              period
                to average non-performing
              assets
            
            
            22.15
            %
            
            
            17.66
            %
            
            
            28.37
            %
            
            
            49.05
            %
            
            
            49.23
            %





12


The
      distribution of our allowance for losses on loans at the dates indicated is
      summarized as follows:




At
                September 30,2007
            
            
            2006
            
            
            2005Amount
                of
              Loan
                Loss
              Allowance
            
            
            Loan
              Amounts
                by
              Category
            
            
            Percent
                of
              Loans
                in Each
              Category
                to
              Total
                Loans
            
            
            Amount
                of
              Loan
                Loss
              Allowance
            
            
            Loan
              Amounts
                by
              Category
            
            
            Percent
                of
              Loans
                in Each
              Category
                to
              Total
                Loans
            
            
            Amount
                of
              Loan
                Loss
              Allowance
            
            
            Loan
              Amounts
                by
              Category
            
            
            Percent
                of
              Loans
                in Each
              Category
                to
              Total
                Loans(Dollars in Thousands)Real estate
            
            $
            64
            
            
            $
            187,957
            
            
            
            59
            %
            
            $
            52
            
            
            $
            165,636
            
            
            
            64
            %
            
            $
            59
            
            
            $
            144,551
            
            
            
            66
            %Consumer
            
            
            862
            
            
            
            132,744
            
            
            
            41
            
            
            
            783
            
            
            
            93,603
            
            
            
            36
            
            
            
            744
            
            
            
            74,183
            
            
            
            34Unallocated
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---Total
            
            $
            926
            
            
            $
            320,701
            
            
            
            100
            %
            
            $
            835
            
            
            $
            259,239
            
            
            
            100
            %
            
            $
            803
            
            
            $
            218,734
            
            
            
            100
            %








At
                September 30,2004
            
            
            2003Amount
                of
              Loan
                Loss
              Allowance
            
            
            Loan
              Amounts
                by
              Category
            
            
            Percent
                of
              Loans
                in Each
              Category
                to
              Total
                Loans
            
            
            Amount
                of
              Loan
                Loss
              Allowance
            
            
            Loan
              Amounts
                by
              Category
            
            
            Percent
                of
              Loans
                in Each
              Category
                to
              Total
                Loans(Dollars in Thousands)Real estate
            
            $
            61
            
            
            $
            95,560
            
            
            
            62
            %
            
            $
            9
            
            
            $
            75,769
            
            
            
            61
            %Consumer
            
            
            490
            
            
            
            57,370
            
            
            
            38
            
            
            
            433
            
            
            
            47,805
            
            
            
            39Unallocated
            
            
            3
            
            
            
            ---
            
            
            
            ---
            
            
            
            25
            
            
            
            ---
            
            
            
            ---Total
            
            $
            554
            
            
            $
            152,930
            
            
            
            100
            %
            
            $
            467
            
            
            $
            123,574
            
            
            
            100
            %








13


**Investment
      Activities**




Federally chartered
      savings institutions have the authority to invest in various types of liquid
      assets, including United States Treasury obligations, securities of various
      federal agencies, including callable agency securities, certain certificates
      of
      deposit of insured banks and savings institutions, certain bankers' acceptances,
      repurchase agreements and federal funds.  Subject to various
      restrictions, federally chartered savings institutions may also invest their
      assets in investment grade commercial paper and corporate debt securities,
      and
      mutual funds whose assets conform to the investments that a federally chartered
      savings institution is otherwise authorized to make directly.




The
      chief
      financial officer has the basic responsibility for the management of our
      investment portfolio, subject to the direction and guidance of the ALM
      Committee.  The chief financial officer considers various factors when
      making decisions, including the marketability, maturity and tax consequences
      of
      the proposed investment.  The maturity structure of investments will
      be affected by various market conditions, including the current and anticipated
      slope of the yield curve, the level of interest rates, the trend of new deposit
      inflows, and the anticipated demand for funds via deposit withdrawals and loan
      originations and purchases.




The
      general objectives of our investment portfolio are to provide liquidity when
      loan demand is high, to assist in maintaining earnings when loan demand is
      low
      and to maximize earnings while satisfactorily managing risk, including credit
      risk, reinvestment risk, liquidity risk and interest rate risk.




In
      fiscal
      2007, we utilized our expertise as a mortgage loan originator, selectively
      purchasing non-agency mortgage-backed securities ("MBS") that either met or
      exceeded our underwriting guidelines.  This strategy
      was  employed to complement consumer loan
      underwriting.  Strong loan demand in consumer lending required
      management of the structure of the balance sheet and compliance with the 35%
      consumer lending bucket cap.  Management chose to increase the asset
      base by purchasing AAA-rated MBSs funded by FHLB advances.  This
      allowed the Bank to continue making consumer loans.




The
      securities purchased are AAA-rated Jumbo Prime MBS, with an average
      loan-to-value ratio of 68.98% and an average FICO score of 741.  We
      have stayed within the Jumbo Prime sector, purchasing no Sub-Prime or Alt-A
      MBS
      to date.  Furthermore, while the bank has purchased hybrid ARM
      securities, we have refrained from purchasing any negative-amortization loans
      or
      option ARMs.  Finally, the MBS portfolio consists only of those assets
      that are Secondary Mortgage Enhancement Act of 1984 ("SMMEA") eligible, meaning
      that the MBS purchased are in one of the two highest rating categories and
      are
      first-lien mortgages only.




The
      following table sets forth the composition of Citizens Community Federal's
      investment securities and interest-bearing deposits at the dates
      indicated.




At
                September 30,2007
            
            
            2006
            
            
            2005Book
              Value
            
            
            %
                of Total
            
            
            Book
              Value
            
            
            %
                of Total
            
            
            Book
              Value
            
            
            %
                of Total(Dollars
                in Thousands)Investment
                securities:Federal
                Home Loan Bank stock
            
            $
            4,822
            
            
            
            10.77
            %
            
            $
            3,060
            
            
            
            63.74
            %
            
            $
            2,095
            
            
            
            37.24
            %Interest-bearing
                deposits with banks
            
            
            371
            
            
            
            0.83
            
            
            
            959
            
            
            
            19.97
            
            
            
            1,444
            
            
            
            25.67Mortgage-backed
                securities
            
            
            39,592
            
            
            
            88.40
            
            
            
            782
            
            
            
            16.29
            
            
            
            946
            
            
            
            16.81Corporate
                notes
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            981
            
            
            
            17.44Mutual
                funds
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            160
            
            
            
            2.84$
            44,785
            
            
            
            100.00
            %
            
            $
            4,801
            
            
            
            100.00
            %
            
            $
            5,626
            
            
            
            100.00
            %





**Sources
      of Funds**




*General*.  Citizens
      Community Federal's sources of funds are deposits, borrowings, payment of
      principal and interest on loans, interest earned on or maturation of other
      investment securities and funds provided from operations.




*Deposits*.  Citizens
      Community Federal offers a variety of deposit accounts to both consumers and
      businesses having a wide range of interest rates and terms.  Deposits
      consist of savings accounts, money market




14


deposit
      accounts, demand accounts and certificates of deposit.  Citizens
      Community Federal solicits deposits primarily in its market areas and from
      financial institutions and has accepted a limited amount of brokered
      deposits.  At September 30, 2007, Citizens Community Federal had $4.3
      million of brokered deposits.  We obtain these deposits from brokers
      when the rates requested are less than the amount we pay our retail
      customers.  The typical term for these brokered deposits are 12 to 18
      months.  Our experience is that these are not volatile deposits
      subject to significant early withdrawal.  Citizens Community Federal
      primarily relies on competitive pricing policies, marketing and customer service
      to attract and retain these deposits.  Citizens Community Federal from
      time to time participates in an auction for brokered deposits to assist in
      finding the lowest cost deposits possible.  Citizens Community Federal
      constantly searches for the most cost-effective source of funds, either through
      brokered deposits, or through marketing our own rates to protect our margin
      and
      maintain our sales culture.




The
      flow
      of deposits is influenced significantly by general economic conditions, changes
      in money market and prevailing interest rates and competition.  The
      variety of deposit accounts we offer has allowed us to be competitive in
      obtaining funds and to respond with flexibility to changes in consumer
      demand.  We have become more susceptible to short-term fluctuations in
      deposit flows, as customers have become more interest rate
      conscious.  We try to manage the pricing of our deposits in keeping
      with our asset/liability management, liquidity and profitability objectives,
      subject to competitive factors.  Based on experience, management
      believes that Citizens Community Federal's deposits are relatively stable
      sources of funds.  Despite this stability, the ability to attract and
      maintain these deposits and the rates paid on them has been and will continue
      to
      be significantly affected by market conditions.




**Deposit
      Flow**




The
      following table sets forth deposit flows during the periods
      indicated.




Year
                Ended September 30,2007
            
            
            2006
            
            
            2005(Dollars
                in Thousands)Opening
                balance
            
            $
            186,711
            
            
            $
            177,469
            
            
            $
            127,976Deposits
                assumed in merger
            
            
            ---
            
            
            
            ---
            
            
            
            41,571Net
                deposits
            
            
            14,029
            
            
            
            4,060
            
            
            
            4,659Interest
                credited
            
            
            6,994
            
            
            
            5,182
            
            
            
            3,263Ending
                balance
            
            $
            207,734
            
            
            $
            186,711
            
            
            $
            177,469Net
                increase
            
            $
            21,023
            
            
            $
            9,242
            
            
            $
            49,493Percent
                increase
            
            
            11.3
            %
            
            
            5.2
            %
            
            
            38.7
            %





15


The
      following table sets forth the dollar amount of savings deposits in the various
      types of deposit programs we offered at the dates indicated.




At
                September 30,2007
            
            
            2006
            
            
            2005Amount
            
            
            Percent
              of
                Total
            
            
            Amount
            
            
            Percent
              of
                Total
            
            
            Amount
            
            
            Percent
              of
                Total(Dollars
                in Thousands)Transaction Accounts
              and Savings Deposits:Demand accounts
            
            $
            18,657
            
            
            
            8.98
            %
            
            $
            18,669
            
            
            
            10.00
            %
            
            $
            19,315
            
            
            
            10.88
            %Savings accounts
            
            
            22,855
            
            
            
            13.06
            
            
            
            24,975
            
            
            
            13.38
            
            
            
            27,193
            
            
            
            17.09Money market accounts
            
            
            27,121
            
            
            
            11.00
            
            
            
            22,262
            
            
            
            11.92
            
            
            
            30,323
            
            
            
            15.33Total non-certificates
            
            
            68,633
            
            
            
            33.04
            
            
            
            65,906
            
            
            
            35.30
            
            
            
            76,831
            
            
            
            43.30Certificates:6-12
                month
            
            
            53,868
            
            
            
            25.93
            
            
            
            26,413
            
            
            
            14.14
            
            
            
            15,519
            
            
            
            8.7415-18
                month
            
            
            30,055
            
            
            
            14.47
            
            
            
            44,715
            
            
            
            23.95
            
            
            
            33,818
            
            
            
            19.0524-60
                month
            
            
            18,744
            
            
            
            9.02
            
            
            
            25,313
            
            
            
            13.56
            
            
            
            30,368
            
            
            
            17.11Anniversary
            
            
            170
            
            
            
            0.08
            
            
            
            463
            
            
            
            0.25
            
            
            
            493
            
            
            
            0.28Institutional
            
            
            26,378
            
            
            
            12.70
            
            
            
            14,796
            
            
            
            7.92
            
            
            
            12,415
            
            
            
            7.00Borrowers
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            1
            
            
            
            0.01IRA
            
            
            9,886
            
            
            
            4.76
            
            
            
            9,105
            
            
            
            4.88
            
            
            
            8,024
            
            
            
            4.51Total certificates
            
            
            139,101
            
            
            
            66.96
            
            
            
            120,805
            
            
            
            64.70
            
            
            
            100,638
            
            
            
            56.70Total Deposits
            
            $
            207,734
            
            
            
            100.00
            %
            
            $
            186,711
            
            
            
            100.00
            %
            
            $
            177,469
            
            
            
            100.00
            %





The
      following table shows rate and maturity information for Citizens Community
      Federal's certificates of deposit at September 30, 2007.




0.00-1.99
            %
            
            
            2.00-3.99
            %
            
            
            4.00-5.99
            %
            
            Total
            
            
            Percent
              of
                Total(Dollars
                in Thousands)Certificate Accounts Maturing During
              the 12 Months Ended:September
                30, 2008
            
            $
            135
            
            
            $
            9,255
            
            
            $
            96,640
            
            
            $
            106,030
            
            
            
            76.23
            %September
                30, 2009
            
            
            71
            
            
            
            1,039
            
            
            
            26,887
            
            
            
            27,997
            
            
            
            20.13September
                30, 2010
            
            
            ---
            
            
            
            3
            
            
            
            2,613
            
            
            
            2,616
            
            
            
            1.88September
                30, 2011
            
            
            ---
            
            
            
            ---
            
            
            
            2,299
            
            
            
            2,299
            
            
            
            1.65Thereafter
            
            
            ---
            
            
            
            ---
            
            
            
            159
            
            
            
            159
            
            
            
            0.11Total
            
            $
            206
            
            
            $
            10,297
            
            
            $
            128,598
            
            
            $
            139,101
            
            
            
            100.0
            %Percent of total
            
            
            0.15
            %
            
            
            7.40
            %
            
            
            92.45
            %





16


The
      following table indicates the amount of Citizens Community Federal's
      certificates of deposit by time remaining until maturity as of September 30,
      2007.




3
                Months
              or
                Less
            
            
            Over
                3 to
              6
                Months
            
            
            Over
                6 to
              12
                Months
            
            
            Over
              12
                Months
            
            
            Total(In
                thousands)Certificates
                of depositless
                than
                $100,000
            
            $
            21,988
            
            
            $
            26,489
            
            
            $
            33,177
            
            
            $
            27,226
            
            
            $
            108,880Certificates
                of depositof
                $100,000 or
                more
            
            
            3,833
            
            
            
            7,679
            
            
            
            12,864
            
            
            
            5,845
            
            
            
            30,221Total
                certificates of deposit
            
            $
            25,821
            
            
            $
            34,168
            
            
            $
            46,041
            
            
            $
            33,071
            
            
            $
            139,101





*Borrowings*.  Although
      deposits are our primary source of funds, Citizens Community Federal may utilize
      borrowings when they are a less costly source of funds and can be invested
      at a
      positive interest rate spread, when it desires additional capacity to fund
      loan
      demand or when they meet asset/liability management goals.  Borrowings
      consist of advances from the Federal Home Loan Bank of Chicago.  See
      Note 10 of the Notes to Consolidated Financial Statements.




Citizens
      Community Federal may obtain advances from the Federal Home Loan Bank of Chicago
      upon the security of certain of our mortgage loans and mortgage-backed and
      other
      securities.  These advances may be made pursuant to several different
      credit programs, each of which has its own interest rate, range of maturities
      and call features.  At September 30, 2007, Citizens Community Federal
      had $96.4 million in Federal Home Loan Bank advances outstanding and the ability
      to borrow an additional $38.6 million.  These advances were taken as a
      liquidity source to fund increasing loan demand and the purchase of investment
      securities.




Citizens
      Community Federal is authorized to borrow from the Federal Reserve Bank of
      Chicago's "discount window" after it has exhausted other reasonable alternative
      sources of funds, including Federal Home Loan Bank borrowings.  We
      have never borrowed from our Federal Reserve Bank.




The
      following table sets forth the maximum month-end balance and average balance
      of
      borrowings for the periods indicated.




Year
                Ended September 30,2007
            
            
            2006
            
            
            2005(In
                Thousands)Maximum Balance:FHLB advances
            
            $
            96,446
            
            
            $
            61,200
            
            
            $
            36,200Average Balance:FHLB
                advances
            
            $
            48,643
            
            
            $
            48,700
            
            
            $
            24,850





The
      following table sets forth certain information as to Citizens Community
      Federal's borrowings at the dates indicated.





At
                September 30,2007
            
            
            2006
            
            
            2005(Dollars
                in Thousands)FHLB advances
            
            $
            96,446
            
            
            $
            61,200
            
            
            $
            36,200Weighted
                average interest rate
              of
                FHLB advances
            
            
            5.19
            %
            
            
            5.52
            %
            
            
            4.09
            %






17





**Subsidiary
      and Other Activities**




As
      a
      federally chartered savings bank, Citizens Community Federal is permitted by
      OTS
      regulations to invest up to 2% of assets, or $7.7 million at September 30,
      2007,
      in the stock of, or unsecured loans to, service corporation subsidiaries.
      Citizens Community Federal may invest an additional 1% of our assets in service
      corporations where such additional funds are used for inner-city or community
      development purposes.  Citizens Community Federal does not currently
      have any subsidiary service corporations.




**Employees**




At
      September 30, 2007, the Bank had a total of 85 full-time employees and 76
      part-time employees.  Employees are not represented by any collective
      bargaining group.  Management considers its employee relations to be
      good.




**REGULATION**




Set
      forth
      below is a brief description of certain laws and regulations that are applicable
      to Citizens Community Bancorp, Inc. and Citizens Community
      Federal.  The description of these laws and regulations, as well as
      descriptions of laws and regulations contained elsewhere herein, does not
      purport to be complete and is qualified in its entirety by reference to the
      applicable laws and regulations.




Legislation
      is introduced from time to time in the United States Congress that may affect
      our operations.  In addition, the regulations governing Citizens
      Community Bancorp, Inc. and Citizens Community Federal may be amended from
      time
      to time by the OTS, the FDIC or the SEC, as appropriate.  Any such
      legislative or regulatory changes in the future could adversely affect our
      operations and financial condition.  No assurance can be given as to
      whether or in what form any such changes may occur.




**Citizens
      Community Federal**




Citizens
      Community Federal, as a federally chartered savings bank, is subject to
      regulation and oversight by the OTS extending to all aspects of its
      operations.  Citizens Community Federal also is subject to regulation
      and examination by the FDIC, which insures the deposits of Citizens Community
      Federal to the maximum extent permitted by law.  This regulation of
      Citizens Community Federal is intended for the protection of depositors and
      the
      insurance of accounts fund and not for the purpose of protecting
      stockholders.  As a federal savings bank, Citizens Community Federal
      is required to file periodic reports with the OTS and is subject to periodic
      examinations by the OTS.




*OTS
      Regulation*.  Our relationship with our depositors and borrowers
      is regulated to a great extent by federal laws and OTS regulations, especially
      in such matters as the ownership of savings accounts and the form and content
      of
      our mortgage requirements.  In addition, the branching authority of
      Citizens Community Federal is regulated by the OTS.  Citizens
      Community Federal is generally authorized to branch nationwide.




The
      investment and lending authority of Citizens Community Federal is prescribed
      by
      federal laws and regulations, and it is prohibited from engaging in any
      activities not permitted by such laws and regulations.  As a federal
      savings bank, Citizens Community Federal is required to meet a qualified thrift
      lender test.  This test requires Citizens Community Federal to have at
      least 65% of its portfolio assets, as defined by regulation, in qualified thrift
      investments on a monthly average for nine out of every 12 months on a rolling
      basis.  In addition, Citizens may have no more than 35% of total
      assets in consumer loans, commercial paper and corporate debt
      securities  As an alternative, we may maintain 60% of the Bank's
      assets in those assets specified in Section 7701(a)(19) of the Internal Revenue
      Code.  Under either test, we are required to maintain a significant
      portion of our assets in residential-housing-related loans and
      investments.  Any institution that fails to meet the qualified thrift
      lender test becomes subject to certain restrictions on its operations and must
      convert to a national bank charter, unless it re-qualifies as, and thereafter
      remains, a qualified thrift lender.  If such an institution has not
      re-qualified or converted to a national bank within three years after the
      failure, it must divest of all investments and cease all activities not
      permissible for a national bank.  We were not subject to a similar
      requirement when we were a credit union and were not in compliance with this
      requirement at the time we became a federal savings bank.  As of
      September 30, 2007, Citizens Community Federal met this requirement with a
      qualified thrift lender percentage of 83.53.  In addition, at
      September 30, 2007, Citizens had 33.73% of its assets in consumer loans,
      commercial paper and corporate debt securities, in compliance with the
      limit.




18


Under
      OTS
      regulations, Citizens Community Federal is subject to a lending limit for loans
      to one borrower or group of related borrowers.  This lending limit is
      equal to the greater of $500,000 or 15% of unimpaired capital and surplus
      (except for loans fully secured by certain readily marketable collateral, in
      which case the limit is increased to 25% of impaired capital and
      surplus).  At September 30, 2007, Citizens Community Federal's lending
      limit under this restriction was $6.5 million.  Our outstanding loans
      are in compliance with this lending limit.




The
      OTS's
      oversight of Citizens Community Federal includes reviewing its compliance with
      the customer privacy requirements imposed by the Gramm-Leach-Bliley Act of
      1999
      and the anti-money laundering provisions of the USA Patriot Act.  The
      Gramm-Leach-Bliley privacy requirements place limitations on the sharing of
      consumer financial information with unaffiliated third parties.  They
      also require each financial institution offering financial products or services
      to retail customers to provide such customers with its privacy policy and with
      the opportunity to "opt out" of the sharing of their personal information with
      unaffiliated third parties.  The USA Patriot Act significantly expands
      the responsibilities of financial institutions in preventing the use of the
      United States financial system to fund terrorist activities.  Its
      anti-money laundering provisions require financial institutions operating in
      the
      United States to develop anti-money laundering compliance programs and due
      diligence policies and controls to ensure the detection and reporting of money
      laundering.  These compliance programs are intended to supplement
      existing compliance requirements under the Bank Secrecy Act and the Office
      of
      Foreign Assets Control Regulations.




We
      are
      subject to periodic examinations by the OTS.  During these
      examinations, the examiners may require Citizens Community Federal to provide
      for higher general or specific loan loss reserves, which can impact our capital
      and earnings.  As a federal savings bank, Citizens Community Federal
      is subject to a semi-annual assessment, based upon its total assets, to fund
      the
      operations of the OTS.




Transactions
      between Citizens Community Federal and its affiliates generally are required
      to
      be on terms as favorable to the institution as transactions with non-affiliates,
      and certain of these transactions, such as loans to an affiliate, are restricted
      to a percentage of Citizens Community Federal's capital.  In addition,
      Citizens Community Federal may not lend to any affiliate engaged in activities
      not permissible for a bank holding company or acquire the securities of most
      affiliates.  Citizens Community Bancorp, Inc. is an affiliate of
      Citizens Community Federal.  Citizens Community Federal has entered
      into an expense allocation agreement and a tax allocation agreement with
      Citizens Community Bancorp, Inc. in order to meet these
      requirements.




The
      OTS
      has adopted guidelines establishing safety and soundness standards on such
      matters as loan underwriting and documentation, asset quality, earnings
      standards, internal controls and audit systems, interest rate risk exposure
      and
      compensation and other employee benefits.  Any institution regulated
      by the OTS that fails to comply with these standards must submit a compliance
      plan.




The
      OTS
      has extensive enforcement authority over all savings associations and their
      holding companies, including, Citizens Community Federal and Citizens Community
      Bancorp, Inc. This enforcement authority includes, among other things, the
      ability to assess civil money penalties, to issue cease-and-desist or removal
      orders and to initiate injunctive actions.  In general, these
      enforcement actions may be initiated for violations of laws and regulations
      and
      unsafe or unsound practices.  Other actions or inactions may provide
      the basis for enforcement action, including misleading or untimely reports
      filed
      with the OTS.  Except under certain circumstances, public disclosure
      of final enforcement actions by the OTS is required by law.




*FDIC
      Regulation and Insurance of Accounts*.  Citizens Community
      Federal's deposits are insured up to the applicable limits by the FDIC, and
      such
      insurance is backed by the full faith and credit of the United States
      Government.  As insurer, the FDIC imposes deposit insurance premiums
      and is authorized to conduct examinations of and to require reporting by
      FDIC-insured institutions.  It also may prohibit any FDIC-insured
      institution from engaging in any activity the FDIC determines by regulation
      or
      order to pose a serious risk to the deposit insurance fund.  The FDIC
      also has the authority to initiate enforcement actions against Citizens
      Community Federal and may terminate our deposit insurance if it determines
      that
      we have engaged in unsafe or unsound practices or is in an unsafe or unsound
      condition.




**Citizens
      Community Bancorp, Inc.**




As
      a
      savings association holding company, Citizens Community Bancorp, Inc. is subject
      to regulation, supervision and examination by the OTS.  Applicable
      federal law and regulations limit the activities of Citizens Community Bancorp,
      Inc. and require the approval of the OTS for any acquisition or divestiture
      of a
      subsidiary,




19


including another
      financial institution or holding company thereof.  Citizens Community
      Bancorp, Inc. is an affiliate of Citizens Community Federal, so its transactions
      with Citizens Community Federal are subject to regulatory limits and must be
      on
      terms as favorable to Citizens Community Federal as in transactions with
      non-affiliates.




If
      Citizens Community Federal fails the qualified thrift lender test Citizens
      Community Bancorp, Inc. must obtain the approval of the OTS prior to continuing
      after such failure, directly or through other subsidiaries, any business
      activity other than those approved for bank holding companies or their
      subsidiaries.  In addition, within one year of such failure Citizens
      Community Bancorp, Inc. must register as, and will become subject to, the
      restrictions applicable to bank holding companies.




**Regulatory
      Capital Requirements**




*Capital
      Requirements for Citizens Community Federal*.  Citizens Community
      Federal is required to maintain minimum levels of regulatory capital under
      OTS
      regulations.  These regulations established three capital standards, a
      tangible capital requirement, a leverage or core capital requirement and a
      risk-based capital requirement.  The OTS is also authorized to impose
      capital requirements in excess of these standards on a case-by-case
      basis.




The
      capital regulations require tangible capital of at least 1.5% of adjusted total
      assets, as defined by regulation.  Tangible capital generally includes
      common stockholders' equity and retained earnings, and certain noncumulative
      perpetual preferred stock and related earnings and excludes most intangible
      assets, which also are deducted from assets for purposes of calculating this
      capital ratio.  At September 30, 2007, Citizens Community Federal had
      tangible capital of $43.7 million, or 11.5% of adjusted total assets, which
      was
      approximately $38.0 million above the required level.




The
      capital standards require core or Tier 1 capital equal to at least 3.0% of
      adjusted total assets for the strongest institutions with the highest
      examination rating and 4.0% of adjusted total assets for all other institutions,
      unless the OTS requires a higher level based on the particular circumstances
      or
      risk profile of the institution.  Core capital generally consists of
      tangible capital, plus certain intangibles.  At September 30, 2007,
      Citizens Community Federal had $7.0 million of intangibles, $0 of which were
      included in core capital.  At September 30, 2007, Citizens Community
      Federal had core capital equal to $43.7 million, or 11.5% of adjusted total
      assets, which was $28.5 million above the required level of 4%.




The
      OTS
      also requires Citizens Community Federal to have total capital of at least
      8.0%
      of risk-weighted assets.  Total capital consists of core or Tier 1
      capital, as defined above, and Tier 2 capital, which consists of certain
      permanent and maturing capital instruments that do not qualify as Tier 1 capital
      and of the allowance for possible loan and lease losses up to a maximum of
      1.25%
      of risk-weighted assets.  Tier 2 capital may be used to satisfy this
      risk-based requirement only to the extent of Tier 1 capital.  In
      determining the amount of risk-weighted assets, all assets, including certain
      off-balance sheet items, will be multiplied by a risk weight, ranging from
      0% to
      100%, based on the risk inherent in the type of asset.  The OTS is
      authorized to require Citizens Community Federal to maintain an additional
      amount of total capital to account for concentration of credit risk, level
      of
      interest rate risk, equity investments in non-financial companies and the risk
      of non-traditional activities.  At September 30, 2007, Citizens
      Community Federal had $246.8 million in risk-weighted assets and total capital
      of $44.4 million, or 18.0% of risk-weighted assets, which was $24.7 million
      above the required level.




The
      OTS
      is authorized and, under certain circumstances, required to take certain actions
      against savings banks that fail to meet these capital requirements, or that
      fail
      to maintain an additional capital ratio of Tier 1 capital of at least 4.0%
      of
      risk weighted-assets.  The OTS is generally required to take action to
      restrict the activities of an "under-capitalized institution," which is an
      institution with less than either a 4.0% core capital ratio, a 4.0% Tier 1
      risked-based capital ratio or an 8.0% total risk-based capital
      ratio.  Any such institution must submit a capital restoration plan,
      and, until such plan is approved by the OTS, it may not increase its assets,
      acquire another institution, establish a branch or engage in any new activities,
      and generally may not make capital distributions.  The OTS is
      authorized to impose the additional restrictions on under-capitalized
      institutions.




Any
      institution that fails to comply with its capital plan or has Tier 1 risk-based
      or core capital ratios of less than 3.0% or a total risk-based capital ratio
      of
      less than 6.0% is considered "significantly undercapitalized" and must be made
      subject to one or more additional specified actions and operating restrictions
      that may cover all aspects of its operations and may include a forced merger
      or
      acquisition of the institution.  An institution with tangible equity
      to total assets of less than 2.0% is "critically undercapitalized" and becomes
      subject to further mandatory restrictions


20


on
      its.  The OTS generally is authorized to reclassify an institution
      into a lower capital category and impose the restrictions applicable to such
      category if the institution is engaged in unsafe or unsound practices or is
      in
      an unsafe or unsound condition.  The imposition by the OTS of any of
      these measures on Citizens Community Federal may have a substantial adverse
      effect on its operations and profitability.




Institutions
      with at least a 4.0% core capital ratio, a 4.0% Tier 1 risked-based capital
      ratio and an 8.0% total risk-based capital ratio are considered "adequately
      capitalized."  An institution is deemed a "well capitalized"
      institution if it has at least a 5% leverage capital ratio, a 6.0% Tier 1
      risked-based capital ratio and an 10.0% total risk-based capital
      ratio.  At September 30, 2007, Citizens Community Federal was
      considered a "well capitalized" institution.




The
      OTS
      is also generally authorized to reclassify an institution into a lower capital
      category and impose the restrictions applicable to such category if the
      institution is engaged in unsafe or unsound practices or is in an unsafe or
      unsound condition.  The imposition by the OTS of any of these measures
      on Citizens Community Federal may have a substantial adverse effect on its
      operations and profitability.




*Capital
      Requirements for Citizens Community Bancorp, Inc*.  Citizens
      Community Bancorp, Inc. is not subject to any specific capital
      requirements.  The OTS, however, does expect Citizens Community
      Bancorp, Inc. to support Citizens Community Federal, including providing
      additional capital when Citizens Community Federal does not meet its capital
      requirements.  As a result of this expectation, the OTS regulates the
      ability of Citizens Community Federal to pay dividends to Citizens Community
      Bancorp, Inc.




**Limitations
      on Dividends and Other Capital Distributions**




OTS
      regulations impose various restrictions on savings institutions with respect
      to
      the ability of Citizens Community Federal to make distributions of capital,
      which include dividends, stock redemptions or repurchases, cash-out mergers
      and
      other transactions charged to the capital account.  Citizens Community
      Federal must file a notice or application with the OTS before making any capital
      distribution.  Citizens Community Federal generally may make capital
      distributions during any calendar year in an amount up to 100% of net income
      for
      the year to date plus retained net income for the two preceding years, so long
      as it is well-capitalized after the distribution.  If Citizens
      Community Federal, however, proposes to make a capital distribution when it
      does
      not meet its current minimum capital requirements (or will not following the
      proposed capital distribution) or that will exceed these net income limitations,
      it must obtain OTS approval prior to making such distribution.  The
      OTS may always object to any distribution based on safety and soundness
      concerns.




Citizens
      Community Bancorp, Inc. is not subject to OTS regulatory restrictions on the
      payment of dividends.  Dividends from Citizens Community Bancorp,
      Inc., however, may depend, in part, upon its receipt of dividends from Citizens
      Community Federal.  In addition, Citizens Community Federal may not
      make a distribution that would constitute a return of capital during the
      three-year term of the business plan submitted in connection with this mutual
      holding company reorganization and stock issuance.  No insured
      depository institution may make a capital distribution if, after making the
      distribution, the institution would be undercapitalized.




**Federal
      Securities Law**




The
      stock
      of Citizens Community Bancorp, Inc. is registered with the SEC under the
      Securities Exchange Act of 1934, as amended.  Citizens Community
      Bancorp, Inc. is subject to the information, proxy solicitation, insider trading
      restrictions and other requirements of the SEC under the Securities Exchange
      Act
      of 1934.




Citizens
      Community Bancorp, Inc. stock held by persons who are affiliates of Citizens
      Community Bancorp, Inc. may not be resold without registration unless sold
      in
      accordance with certain resale restrictions.  Affiliates are generally
      considered to be officers, directors and principal stockholders.  If
      Citizens Community Bancorp, Inc. meets specified current public information
      requirements, each affiliate of Citizens Community Bancorp, Inc. will be able
      to
      sell in the public market, without registration, a limited number of shares
      in
      any three-month period.




The
      SEC
      and NASDAQ have adopted regulations and policies under the Sarbanes-Oxley Act
      of
      2002 that apply to Citizens Community Bancorp, Inc. as a registered company
      under the Securities Exchange Act of 1934 and a NASDAQ-traded
      company.  The stated goals of these Sarbanes-Oxley requirements are to
      increase corporate responsibility, provide for enhanced penalties for accounting
      and auditing improprieties at publicly traded




21


companies
      and to protect investors by improving the accuracy and reliability of corporate
      disclosures pursuant to the securities laws.  The SEC and NASDAQ
      Sarbanes-Oxley-related regulations and policies include very specific additional
      disclosure requirements and new corporate governance rules.  The
      Sarbanes-Oxley Act represents significant federal involvement in matters
      traditionally left to state regulatory systems, such as the regulation of the
      accounting profession, and to state corporate law, such as the relationship
      between a board of directors and management and between a board of directors
      and
      its committees.




**TAXATION**




**Federal
      Taxation**




*General*.  Citizens
      Community Bancorp, Inc., and Citizens Community Federal are subject to federal
      income taxation in the same general manner as other corporations, with some
      exceptions discussed below.  The following discussion of federal
      taxation is intended only to summarize certain pertinent federal income tax
      matters and is not a comprehensive description of the tax rules applicable
      to
      Citizens Community Bancorp, Inc. or Citizens Community Federal.  Prior
      to December 2001, Citizens Community Federal was a credit union and was not
      generally subject to corporate income tax.  The Company files
      consolidated federal tax returns with Citizens Community
      Federal.  Neither the Company nor Citizens Community Federal has been
      audited by the Internal Revenue Service during the past five years.




*Method
      of Accounting*.  For federal income tax purposes, Citizens
      Community Federal currently reports its income and expenses on the accrual
      method of accounting and uses a fiscal year ending on September 30 for filing
      its federal income tax return.




*Minimum
      Tax*.  The Internal Revenue Code imposes an alternative minimum
      tax at a rate of 20% on a base of regular taxable income plus certain tax
      preferences, called alternative minimum taxable income.  The
      alternative minimum tax is payable to the extent such alternative minimum
      taxable income is in excess of the regular tax.  Net operating losses
      can offset no more than 90% of alternative minimum taxable
      income.  Certain payments of alternative minimum tax may be used as
      credits against regular tax liabilities in future years.  Citizens
      Community Federal has not been subject to the alternative minimum tax, nor
      do we
      have any such amounts available as credits for carryover.




*Net
      Operating Loss Carryovers*.  A financial institution may carryback
      net operating losses to the preceding two taxable years and forward to the
      succeeding 20 taxable years.  This provision applies to losses
      incurred in taxable years beginning after August 6, 1997.  At
      September 30, 2007, Citizens Community Federal had no net operating loss
      carryforwards for federal income tax purposes.




*Corporate
      Dividends-Received Deduction*.  We have elected to file a
      consolidated return with Citizens Community Federal, dividends it receives
      from
      Citizens Community Federal will not be included as income to Citizens Community
      Bancorp, Inc.  The corporate dividends-received deduction is 100% or
      80%, in the case of dividends received from corporations with which a corporate
      recipient does not file a consolidated tax return, depending on the level of
      stock ownership of the payer of the dividend.




**State
      Taxation**




Citizens
      Community Bancorp, Inc. and Citizens Community Federal are subject to the
      Wisconsin corporate franchise (income) tax, which is assessed at the rate of
      7.9% of taxable income.  Wisconsin taxable income generally is the
      same as federal taxable income with certain adjustments.  Citizens
      Community Federal has branch offices in Minnesota and Michigan and, accordingly,
      is subject to state taxes in these states as well.  Neither the
      Company nor Citizens Community Federal has been audited by Wisconsin or any
      other state taxing authorities during the past five years.




As
      a
      Maryland corporation, Citizens Community Bancorp, Inc. is required to file
      an
      annual report with and pay an annual fee to the State of Maryland.




**Executive
      Officers Who Are Not Directors**




The
        business
        experience for at least the past five years for each of our executive officers
        who do not serve as directors is set forth below.




22




***John
      Zettler***.  Mr. Zettler is currently serving as Chief
      Financial Officer.  In his capacity as Senior Vice President, Mr.
      Zettler assists the President in all of his duties with primary responsibility
      for financial information and human resources activity of Citizens Community
      Federal.  Mr. Zettler joined Citizens Community Federal in 1980 and
      was named Senior Vice President in 1997.




***Timothy
      J. Cruciani***.  Mr. Cruciani is currently serving as
      Executive Vice President.  He joined Citizens Community Federal in
      1989.  Mr. Cruciani oversees the operations of Citizens Community
      Federal.




***Rebecca
      Johnson***.  Ms. Johnson serves as Senior Vice President
      MIC/Accounting for Citizens Community Federal, a position she has held since
      2002.  She directs all computer/data processing and accounting
      activities associated with Citizens Community Federal.  Ms. Johnson
      joined Citizens Community Federal in 1980.




**Item
      1A.   Risk Factors**




An
      investment in our common stock is subject to risks inherent in our business.
      Before making an investment decision, you should carefully consider the risks
      and uncertainties described below together with all of the other information
      included and incorporated by reference in this report. In addition to the risks
      and uncertainties described below, other risks and uncertainties not currently
      known to us or that we currently deem to be immaterial also may materially
      and
      adversely affect our business, financial condition and results of operations.
      The value or market price of our common stock could decline due to any of these
      identified or other risks, and you could lose all or part of your
      investment.




**Risks
      Related to Our Business**




*Our
      loan portfolio possesses increased risk due to our substantial number of
      consumer loans.*




Our
      consumer loans accounted for approximately $132.7 million, or 41%, of our total
      loan portfolio as of September 30, 2007, of which $27.2 million consisted of
      automobile loans, $101.0 million consisted of personal loans secured by other
      collateral and $4.6 million consisted of unsecured personal
      loans.  Generally, we consider these types of loans to involve a
      higher degree of risk compared to first mortgage loans on one- to four-family,
      owner-occupied residential properties.  As a result of our large
      portfolio of consumer loans, it may become necessary to increase the level
      of
      our provision for loan losses, which could hurt our profits.  Consumer
      loans generally entail greater risk than do one- to four-family residential
      mortgage loans, particularly in the case of loans that are secured by rapidly
      depreciable assets, such as automobiles.  In these cases, any
      repossessed collateral for a defaulted loan may not provide an adequate source
      of repayment of the outstanding loan balance.  In addition, $7.8
      million of our automobile loans and $84.3 million of our other secured consumer
      loans were indirect loans originated by or through third parties, which present
      greater risk than our direct lending products.  See "Lending
      Activities - Consumer Lending" and "Asset Quality."




*If
      our allowance for loan losses is not sufficient to cover actual loan losses,
      our
      earnings could decrease.*




We
      make
      various assumptions and judgments about the collectibility of our loan
      portfolio, including the creditworthiness of our borrowers and the value of
      the
      real estate and other assets serving as collateral for the repayment of many
      of
      our loans.  In determining the amount of the allowance for loan
      losses, we review our loans and our loss and delinquency experience and evaluate
      economic conditions.  Management recognizes that significant new
      growth in the loan portfolio and the refinancing of existing loans can result
      in
      completely new portfolios of unseasoned loans that may not perform in a
      historical or projected manner.  If our assumptions are incorrect, our
      allowance for loan losses may not be sufficient to cover actual losses,
      resulting in additions to our allowance.  Material additions to our
      allowance could decrease our net income.  Our allowance for loan
      losses was 0.29% of net loans, and 60.9% of non-performing loans at September
      30, 2007.  Our regulators periodically review our allowance for loan
      losses and may require us to increase our provision for loan losses or recognize
      additional loan charge-offs.  Any increase in our allowance for loan
      losses or loan charge-offs as required by these regulatory authorities will
      have
      a material adverse effect on our financial condition and results of
      operations.  As of September 30, 2007, we believe that the current
      allowance reflects probable incurred credit losses in the
      portfolio.




23


*Rising
      interest rates may hurt our profits.*




To
      be
      profitable we have to earn more interest on our loans and investments than
      we
      pay on our deposits and borrowings.  Interest rates have decreased in
      fiscal 2007 after rising in fiscal 2006.  If interest rates begin to
      rise again, our net interest income and the value of our assets could be reduced
      if interest paid on interest-bearing liabilities, such as deposits and
      borrowings, increases more quickly than interest received on interest-earning
      assets, such as loans and investments.  This is most likely to occur
      if short-term interest rates increase at a faster rate than long-term interest
      rates, which would cause income to go down.  In addition, rising
      interest rates may hurt our income, because they may reduce the demand for
      loans
      and the value of our securities.  A flat yield curve also may hurt our
      income, because it would reduce our ability to reinvest proceeds from loan
      and
      investment repayments at higher rates.  See "Management's Discussion
      and Analysis of Financial Condition and Results of Operations - Quantitative
      and
      Qualitative Disclosures About Market Risk" in the Annual Report, attached hereto
      as Exhibit 13.




During
      2006 and 2007, interest rates on deposits had been increasing at a slightly
      faster pace than rates on loans, which reduced our net interest margin, return
      on assets and return on equity.  See "Selected Consolidated Financial
      Information and Other Data" and "Management's Discussion and Analysis of
      Financial Condition and Results of Operations - Quantitative and Qualitative
      Disclosures About Market Risk" in the Annual Report, attached hereto as Exhibit
      13.




*If
      economic conditions deteriorate, our results of operations and financial
      condition could be adversely impacted as borrowers' ability to repay loans
      declines and the value of the collateral securing our loans
      decreases.*




Our
      financial results may be adversely affected by changes in prevailing economic
      conditions, including decreases in real estate values, changes in interest
      rates
      that cause a decrease in interest rate spreads, adverse employment conditions,
      the monetary and fiscal policies of the federal government and other significant
      external events.  In addition, we have a significant amount of real
      estate loans.  Accordingly, decreases in real estate values could
      adversely affect the value of collateral securing our loans.  Adverse
      changes in the economy may also have a negative effect on the ability of our
      borrowers to make timely repayments of their loans.  These factors
      could expose us to an increased risk of loan defaults and losses and have an
      adverse impact on our earnings.




*We
      operate in a highly regulated environment and may be affected adversely by
      negative examination results and changes in laws and
      regulations.*




Citizens
      Community Federal is subject to extensive regulation, supervision and
      examination by the OTS, our chartering authority, and by the Federal Deposit
      Insurance Corporation ("FDIC"), the insurer of our deposits.  Citizens
      Community Bancorp, Inc. is subject to regulation and supervision by the
      OTS.  This regulation and supervision governs the activities in which
      we may engage and are intended primarily for the protection of the deposit
      insurance fund administered by the FDIC and our
      depositors.  Regulatory authorities have extensive discretion in their
      supervisory and enforcement activities, including the imposition of restrictions
      on our operations, the classification of our assets and determination of the
      level of our allowance for loan losses.  Any change in this regulation
      and oversight, whether in the form of regulatory policy, regulations,
      legislation or supervisory action, may have a material impact on our operations
      and profitability.




*Strong
      competition within our market areas may limit our growth and
      profitability.*




Competition
      in the banking and financial services industry is intense.  In our
      market areas, we compete with numerous commercial banks, savings institutions,
      mortgage brokerage firms, credit unions, finance companies, mutual funds,
      insurance companies, and brokerage and investment banking firms operating
      locally and elsewhere.  Some of our competitors have substantially
      greater resources and broader lending authority than we have, greater name
      recognition and market presence, which benefit them in attracting business,
      and
      offer certain services that we do not or cannot provide.  In addition,
      larger competitors may be able to price loans and deposits more aggressively
      than we do.  Our profitability depends upon our continued ability to
      successfully compete in our market areas.  The greater resources and
      deposit and loan products offered by some of our competitors may limit our
      ability to increase our interest-earning assets.




24


*Our
      business is geographically concentrated in Wisconsin, Minnesota and Michigan
      and
      a downturn in economic conditions in these states could reduce our
      profits.*




Most
      of
      our loans are to individuals located in Wisconsin, Minnesota and
      Michigan.  Any decline in the economy of these states could have an
      adverse impact on our earnings.  Decreases in local real estate values
      could adversely affect the value of property used as
      collateral.  Adverse changes in the economy also may have a negative
      effect on the ability of our borrowers to make timely repayments of their loans,
      which would have an adverse impact on our earnings.




**Item
      1B.                      Unresolved
      Staff Comments**




None.




25


**Item
      2.                      Description
      of Properties**




The
      following table provides a list of the Bank's main and branch offices and
      indicates whether the properties are owned or leased.




Location
            Owned
                or
              Leased
            Lease
                Expiration
              Date
            Net
                Book Value at
              September
                30, 2007
              (In
                Thousands)ADMINISTRATIVE
                OFFICES:
            Leased
            April
                30, 2009
            N/A2174
                EastRidge CenterEau
                Claire, WI 54701BRANCH
                OFFICES:Westside
                Branch
            Owned
            N/A
            $2982125
                Cameron StreetEau
                Claire, WI 54703Eastside
                Branch
            Owned
            N/A
            $3521028
                N.  Hillcrest ParkwayAltoona,
                WI 54720Fairfax
                Branch
            Owned
            N/A
            $785219
                Fairfax StreetAltoona,
                WI 54720Mondovi
                Branch
            Leased
            June
                30, 2008
            N/A695
                E.  Main StreetMondovi,
                WI 54755Rice
                Lake Branch
            Leased
            April
                30, 2008
            N/A2462
                S.  Main StreetRice
                Lake, WI 54868Chippewa
                Falls Branch
            Owned
            N/A
            $361427
                W.  Prairie View RoadChippewa
                Falls, WI 54729Baraboo
                Branch
            Owned(1)
            N/A
            $2S.
                2423 Highway 12Baraboo,
                WI 53913Black
                River Falls Branch
            Owned(1)
            N/A
            $19W.
                9036 Highway 54 E.Black
                River Falls, WI 54615Mankato
                Branch
            Leased
            October
                30, 2010
            N/A1410
                Madison AvenueMankato,
                MN 56001Oakdale
                Branch
            Leased
            September
                30, 2009
            N/A7035
                10th Street NorthOakdale,
                MN 55128Lake
                Orion Branch(2)
            Leased
            February
                28, 2012
            N/A688
                S.  Lapeer RoadLake
                Orion, MI 48362Rochester
                Hills Branch
            Owned
            N/A
            $546310
                West Tienken RoadRochester
                Hills, MI 48306


______________


(1)
            The
                building is owned and the land is leased.(2)
            Citizens
                Community Federal has a right to cancel this lease on or after March
                1,
                2007, with the cancellation to take effect 90 days after it exercises
                the
                right to cancel.





**Item
      3.                      Legal
      Proceedings**




In
      the
      opinion of management, the Bank is not a party to any other pending claims
      or
      lawsuits that are expected to have a material effect on the Bank's financial
      condition or operations.   Periodically, there have been various
      claims and lawsuits involving the Bank, mainly as a defendant, such as claims
      to
      enforce liens,




26


condemnation
      proceedings on properties in which the Bank holds security interests, claims
      involving the making and servicing of real property loans and other issues
      incident to the Bank's business.  Aside from such pending claims and
      lawsuits, which are incident to the conduct of the Bank's ordinary business,
      the
      Bank is not a party to any material pending legal proceedings that would have
      a
      material effect on the financial condition or operations of the
      Bank.




**Item
      4.                      Submission
      of Matters to a Vote of Security Holders**




No
      matters were submitted to a vote of security holders during the quarter ended
      September 30, 2007.




**PART
      II**




**Item
      5.                      Market
      for the Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities**




(a)
            The
                information contained in the section captioned "Stockholder Information"
                in the Annual Report, attached hereto as Exhibit 13, is incorporated
                herein by reference.




(b)
            Information
                regarding our equity compensation plans is included in Item 12 of
                this
                Form 10-K.




*(c)*
            *Issuer
                Purchases of Equity Securities.*The following table
                summarizes the Company's stock repurchase activity for each month
                during
                the three months ended September 30 ,2007.  All shares
                repurchased during the three months ended September 30, 2007, were
                repurchased in the open market.




(a)
              Total
                Number of Shares (or Units) Purchased
            (b)
              Average
                Paid per Share (or Unit)
            (c)
              Total
                Number of Shares (or Units) Purchased as part of Publicly Announced
                Plans
                or Programs
            (d)
              Maximum
                Number (or Approximate Dollar Value) of Shares (or Units) that May
                Yet Be
                Purchased Under Plans or ProgramsPeriodQuarter
                ended September 30, 2007
            ---
            N/A
            ---
            $  ---





**Item
      6.                      Selected
      Financial Data**




The
      information contained in the section captioned "Selected Consolidated Financial
      Information" in the Annual Report is incorporated herein by
      reference.




**Item
      7.                      Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations**




The
      information contained in the section captioned "Management's Discussion and
      Analysis of Financial Condition and Results of Operations" in the Annual Report
      is incorporated herein by reference.




**Item
      7A                      Quantitative
      and Qualitative Disclosures About Market Risk**




The
      information contained in the section captioned "Management's Discussion and
      Analysis of Financial Condition and Results of Operations - Quantitative and
      Qualitative Disclosures about Market Risk" in the Annual Report is incorporated
      herein by reference.




27


**Item
      8.                      Financial
      Statements and Supplementary Data**




Report
      From Independent Registered Accounting Firm*




(a)
            Consolidated
                Balance Sheets as of September 30, 2007, and 2006*(b)
            Consolidated
                Statements of Income for the Years Ended September 30, 2007, 2006
                and
                2005*(c)
            Consolidated
                Statements of Changes in Stockholders' Equity For the Years Ended
                September 30, 2007, 2006 and 2005*(d)
            Consolidated
                Statements of Cash Flows For the Years Ended September 30, 2007,
                2006 and
                2005*(e)
            Notes
                to Consolidated Financial Statements*____________*
            Contained
                in the Annual Report filed as an exhibit hereto and incorporated
                herein by reference.   All schedules have been omitted
                as the required information is either inapplicable or contained in
                the
                Consolidated Financial Statements or related Notes contained in the
                Annual
                Report.








**Item
      9.                      Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure**




No
      disclosure under this item is required.




**Item
      9A.                      Controls
      and Procedures**




(a)           Evaluation
      of Disclosure Controls and Procedures




The
      Company does not expect that its disclosure controls and procedures will prevent
      all error and all fraud. A control procedure, no matter how well conceived
      and
      operated, can provide only reasonable, not absolute, assurance that the
      objectives of the control procedure are met. Because of the inherent limitations
      in all control procedures, no evaluation of controls can provide absolute
      assurance that all control issues and instances of fraud, if any, within the
      Company have been detected.  These inherent limitations include the
      realities that judgments in decision-making can be faulty, and that breakdowns
      can occur because of simple error or mistake. Additionally, controls can be
      circumvented by the individual acts of some persons, by collusion of two or
      more
      people, or by management override of the control.  The design of any
      control procedure also is based in part upon certain assumptions about the
      likelihood of future events, and there can be no assurance that any design
      will
      succeed in achieving its stated goals under all potential future conditions;
      over time, controls may become inadequate because of changes in conditions,
      or
      the degree of compliance with the policies or procedures may
      deteriorate.  Because of the inherent limitations in a cost-effective
      control procedure, misstatements due to error or fraud may occur and not be
      detected.




We
      performed an evaluation of the significant policies, controls and procedures
      of
      the Company and have concluded that the Company's disclosure controls and
      procedures are effective in ensuring that information required to be disclosed
      in the reports is accumulated and communicated to management in a timely manner
      and recorded, processed and summarized accurately.




Section
      404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and
      annually report on their systems of internal control over financial
      reporting.  We are in the process of evaluating, documenting and
      testing our system of internal control over financial reporting to provide
      the
      basis for our report that will, for the first time, be a required part of our
      annual report on Form 10-K for the fiscal year ending September 30,
      2008.  In addition, our independent accountants must report on
      management's evaluation in the subsequent years.  Due to the ongoing
      evaluation and testing of our internal controls, there can be no assurance
      that
      if any control deficiencies are identified they will be remediated before the
      end of the 2008 fiscal year, or that there may not be significant deficiencies
      or material weaknesses that would be required to be reported.  In
      addition, we expect the evaluation process and any required remediation, if
      applicable, to increase our accounting, legal and other costs and divert
      management resources from core business operations.




**Item
      9B.                      Other
      Information**




None.




28


PART
      III




**Item
                10.**
            **Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act**




*Directors*




Information
      concerning the directors of the Company is incorporated herein by reference
      from
      the definitive proxy statement for the annual meeting of shareholder to be
      held
      February 21, 2008, a copy of which will be filed not later than 120 days after
      the close of the fiscal year.




*Executive
      Officers*




Information
      concerning the executive officers of the Company is incorporated herein by
      reference from the definitive proxy statement for the annual meeting of
      shareholders to be held February 21, 2008, except for information contained
      under the headings "Compensation Committee Report" and "Stock Performance
      Presentation," a copy of which will be field not later than 120 days after
      the
      close of the fiscal year.




*Audit
      Committee Matters and Audit Committee Financial Expert*





The
      Board
      of Directors of the Company has a standing Audit/Compliance Committee, which
      has
      been established in accordance with Section 3(a)(58)(A) of the Exchange
      Act.  The members of that committee are Directors Westrate (Chairman),
      McHugh and Schilling, all of whom are considered independent under applicable
      Nasdaq listing standards.  The Board of Directors has determined that
      Mr. Schilling is an "audit committee financial expert" as defined in applicable
      SEC rules.  Additional information concerning the audit committee of
      the Company's Board of Directors is incorporated herein by reference from the
      Company's definitive proxy statement for its Annual Meeting of Stockholders
      to
      be held February 21, 2008, except for information contained under the headings
      "Compensation Committee Report," and "Report of the Audit/Compliance Committee,"
      a copy of which will be filed not later than 120 days after the close of the
      fiscal year.




*Section
      16(a) Compliance*




Section
      16(a) of the Securities Exchange Act of 1934 requires that the Company's
      directors and executive officers, and persons who own more than 10% of the
      Company's common stock, file with the SEC initial reports of ownership and
      reports of changes in ownership of the Company's common
      stock.   Officers, directors and greater than 10% shareholders
      are required by SEC regulations to furnish the Company with copies of all
      Section 16(a) forms they file.   To the Company's knowledge no
      late reports occurred during the fiscal year ended September 30,
      2007.   All other Section 16(a) filing requirements applicable to
      our executive officers, directors and greater than 10% beneficial owners were
      complied with.




*Code
      of Ethics*




The
      Company's code of conduct, adopted on October 31, 2006, is applicable to its
      principal executive officer, principal financial officer and principal
      accounting officer (as well as all other employees), does meet the definition
      of
      "code of ethics" set forth in Item 406 of SEC Regulation S-K.  A copy
      of this document is available free of charge by contacting John D. Zettler,
      our
      investor relations officer, at (715) 836-9994.  A copy of the
      Company's Code of Ethics is being filed with the SEC as Exhibit 14 to this
      Annual Report on Form 10-K for the fiscal year ending September 30,
      2007.




*Nomination
      Procedures*




There
      have been no material changes to the procedures by which stockholders may
      recommend nominees to the Company's Board of Directors.




29


**Item
      11.                                Executive
      Compensation**




Information
      concerning executive compensation is incorporated herein by reference from
      the
      definitive proxy statement for the annual meeting of shareholders to be held
      February 21, 2008, except for information contained under the headings
      "Compensation Committee Report" and "Stock Performance Presentation," a copy
      of
      which will be filed not later than 120 days after the close of the fiscal
      year.




**Item
      12.                                Security
      Ownership of Certain Beneficial Owners and Management and
      Related**


**Stockholder
      Matters**




Information
      concerning security ownership of certain beneficial owners and management is
      incorporated herein by reference from the definitive proxy statement for the
      annual meeting of shareholders to be held February 21, 2008, except for
      information contained under the headings "Compensation Committee Report" and
      "Stock Performance Presentation," a copy of which will be filed not later than
      120 days after the close of the fiscal year.




The
      following table sets forth information as of September 30, 2007, with respect
      to
      compensation plans under which shares of common stock were issued.




**Equity
      Compensation Plan Information**




Plan
                Category
            Number
                of securities to
              be
                issued upon exercise
              of
                outstanding options
              warrants
                and rights
            Weighted-average
              exercise
                price of
              outstanding
                options
              warrants
                and rights
            Number
                of Securities
              remaining
                available for
              future
                issuance under
              equity
                compensation plansEquity
                Compensation Plans Approved By Security Holders
            190,806(1)
            $7.04(1)
            89,413(1)Equity
                Compensation Plans Not Approved By Security Holders
            ---
            ---
            ---


____________________


(1)   Reflects
      amounts after exchange ratio related to second-step offering.





**Item
      13.                                Certain
      Relationships and Related Transactions**




Information
      concerning certain relationships and related transactions is incorporated herein
      by reference from the definitive proxy statement for the annual meeting of
      shareholders to be held February 21, 2008, except for information contained
      under the headings "Compensation Committee Report" and "Stock Performance
      Presentation," a copy of which will be filed not later than 120 days after
      the
      close of the fiscal year.









30


**PART
      IV**




**Item
      14.                                Principal
      Accountant Fees and Services**




Information
      concerning fees and services by our principal accountants is incorporated herein
      by reference from our definitive Proxy Statement for the 2007 Annual Meeting
      of
      Stockholders, a copy of which will be filed not later than 120 days after the
      close of the fiscal year.




**Item
      15.                                Exhibits
      and Financial Statement Schedules**




(a)(1)           Financial
      Statements:




Part
      II, Item 8 is hereby incorporated
      by reference.




(a)(2)           Financial
      Statement Schedules:




All
      financial statement schedules have
      been omitted as the information is not required under the related instructions
      or is not applicable.




(a)(3)           Exhibits:




Regulation
                S-K
              Exhibit
                Number
            Document
            Reference
                to
              Prior
                Filing
              or
                Exhibit Number
              Attached
                Hereto3(i)
            Articles
                of Incorporation of the Registrant
            *3(ii)
            Bylaws
                of the Registrant
            *10
            Material
                contracts:(a)
            Registrant's
                2004 Stock Option Plan
            **(b)
            Registrant's
                2004 Recognition and Retention Plan
            **(c)
            Employment
                Agreements:(i)
            James
                G. Cooley
            *(ii)
            Johnny
                W. Thompson
            *(iii)
            John
                D. Zettler
            *(iv)
            Timothy
                J. Cruciani
            *(v)
            Rebecca
                Johnson
            *(vi)
            Brian
                P. Ashley
            ***(e)
            Tax
                Allocation Agreement
            **13
            2007
                Annual Report to Stockholders
            1314
            Code
                of Conduct and Ethics
            1421
            Subsidiaries
                of the Registrant
            2123
            Consent
                of Auditors
            2331
            Rule
                13a-14(a)/15d-14(a) Certifications
            3132
            Section
                1350 Certifications
            32


_______________________


*
            Filed
                as exhibit to the Company's registration statement filed on June
                30, 2007,
                (File No.333-135527) pursuant to Section 5 of the Securities Act of
                1933.  All of such previously filed documents are hereby
                incorporated herein by reference in accordance with Item 601 of Regulation
                S-K.**
            Filed
                as exhibit to Citizen Community Bancorp's Annual Report on Form 10-KSB
                for
                the fiscal year ended September 30, 2004.***
            Filed
                as exhibit to Citizen Community Bancorp's Annual Report on Form 10-KSB
                for
                the fiscal year ended September 30,
                2005.





31


SIGNATURES





Pursuant
      to the requirements of section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





CITIZENS
                COMMUNITY BANCORP, INC.Date:
            December
                20, 2007
            
            By:
            /s/
                James G.
                Cooley
              James
                G. Cooley
              President
                and Chief Executive Officer
              (Duly
                Authorized Representative)





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.








By:
            /s/
                Richard McHugh
            
            December
                20, 2007Richard
              McHugh
              Chairman
                of the BoardBy:
            /s/
                James G. Cooley
            
            December
                20, 2007James
              G. Cooley
              President,
                Chief Executive Officer and Director
              (Principal
                Executive Officer)By:
            /s/
                Thomas C. Kempen
            
            December
                20, 2007Thomas
              C. Kempen
              Vice
                Chairman of the BoardBy:
            /s/
                Brian R. Schilling
              Brian
                R. Schilling
              Director
                and Treasurer
            
            December
                20, 2007By:
            /s/
                Adonis E. Talmage
            
            December
                20, 2007Adonis
              E. Talmage
              Director
                and SecretaryBy:
            /s/
                David B. Westrate
            
            December
                20, 2007David
              B. Westrate
              DirectorBy:
            /s/
                John D. Zettler
            
            December
                20, 2007John
              D. Zettler
              Senior
                Vice President and Chief Financial Officer
              (Principal
                Financial Officer)





32


**Index
      to Exhibits**





Regulation
                S-K
              Exhibit
                Number
            
            Document13
            
            2007
                Annual Report to Stockholders14
            
            Code
                of Conduct and Ethics21
            
            Subsidiaries
                of the Registrant23
            
            Consent
                of Auditors31
            
            Rule
                13a-14(a)/15d-14(a) Certifications32
            
            Section
                1350 Certifications