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**TABLE        OF CONTENTS**

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**FROM        YOUR BOARD OF DIRECTORS**

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|   | · | Expansion                in select locations that we believe offer excellent growth                potential; |
|--------|--------|---------------------------------------------------------------------------------------------------------------|

|   | · | A                continued emphasis on increasing core deposits;                and |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | Rigorous                management of our lending portfolio to minimize risk and maximize                income. |
|--------|--------|------------------------------------------------------------------------------------------------------------------|

|   | [signature                cut] | [signature                cut] |
|--------|--------------------------------|--------------------------------|

|   | Richard                McHugh | James                G. Cooley |
|--------|-------------------------------|--------------------------------|

|   | Chairman | President,                Chief Executive Officer |
|--------|----------|---------------------------------------------------|

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**SELECTED      CONSOLIDATED FINANCIAL INFORMATION**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | September                30,  |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2007                          |    |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | (In                Thousands) |    |
| Selected                Financial Condition Data:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                          |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                                                                                                               |   | $                             | 386,113 |   |   | $ | 283,990 |   |   | $ | 245,707 |   |   | $ | 161,980 |   |   | $ | 130,400 |   |
| Loans                receivable,                net                                                                                       |   |                          | 320,027 |   |   |   | 258,467 |   |   |   | 217,931 |   |   |   | 152,376 |   |   |   | 123,107 |   |
| Other                interest-bearing                deposits                                                                             |   |                          | 371     |   |   |   | 959 |   |   |   | 1,444 |   |   |   | --- |   |   |   | --- |   |
| Securities                available for                sale                                                                               |   |                          | 39,592  |   |   |   | 782 |   |   |   | 2,088 |   |   |   | --- |   |   |   | --- |   |
| Deposits                                                                                                                                  |   |                          | 207,734 |   |   |   | 186,711 |   |   |   | 177,469 |   |   |   | 127,976 |   |   |   | 114,963 |   |
| Total                borrowings                                                                                                           |   |                          | 96,446  |   |   |   | 61,200 |   |   |   | 36,200 |   |   |   | 13,500 |   |   |   | 3,700 |   |
| Stockholders'                equity(1)                                                                                                    |   |                          | 78,149  |   |   |   | 30,082 |   |   |   | 29,553 |   |   |   | 19,606 |   |   |   | 10,991 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | Year                Ended September 30, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 2007                                    |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | (In                Thousands)           |   |
| Selected                Operations Data:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                interest                income                                                                                            |   | $                                       | 19,346 |   |   | $ | 15,311 |   |   | $ | 11,926 |   |   | $ | 9,619 |   |   | $ | 8,880 |   |
| Total                interest                expense                                                                                           |   |                                    | 8,889  |   |   |   | 7,221 |   |   |   | 3,992 |   |   |   | 2,889 |   |   |   | 3,178 |   |
| Net                interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                    | 10,457 |   |   |   | 8,090 |   |   |   | 7,934 |   |   |   | 6,730 |   |   |   | 5,702 |   |
| Provision                for loan                losses                                                                                        |   |                                    | 470    |   |   |   | 251 |   |   |   | 414 |   |   |   | 396 |   |   |   | 406 |   |
| Net                interest income after provision for loan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                    | 9,987  |   |   |   | 7,839 |   |   |   | 7,520 |   |   |   | 6,334 |   |   |   | 5,296 |   |
| Fees                and service                charges                                                                                         |   |                                    | 1,262  |   |   |   | 1,243 |   |   |   | 1,160 |   |   |   | 1,038 |   |   |   | 1,009 |   |
| Gain                (loss) on sales of loans, mortgage-backed                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities                and investment securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                    | ---    |   |   |   | 27 |   |   |   | --- |   |   |   | --- |   |   |   | --- |   |
| Other                non-interest                income                                                                                        |   |                                    | 464    |   |   |   | 387 |   |   |   | 861 |   |   |   | 331 |   |   |   | 323 |   |
| Total                non-interest                income                                                                                        |   |                                    | 1,726  |   |   |   | 1,657 |   |   |   | 2,021 |   |   |   | 1,369 |   |   |   | 1,332 |   |
| Total                non-interest                expense                                                                                       |   |                                    | 10,522 |   |   |   | 8,741 |   |   |   | 7,806 |   |   |   | 6,323 |   |   |   | 5,641 |   |
| Income                before                taxes                                                                                              |   |                                    | 1,191  |   |   |   | 755 |   |   |   | 1,735 |   |   |   | 1,380 |   |   |   | 987 |   |
| Income                tax                provision                                                                                             |   |                                    | 448    |   |   |   | 309 |   |   |   | 684 |   |   |   | 543 |   |   |   | 390 |   |
| Net                income                                                                                                                      |   | $                                       | 743    |   |   | $ | 446 |   |   | $ | 1,051 |   |   | $ | 837 |   |   | $ | 597 |   |
| Basic                and diluted earnings per                share                                                                             |   |                                    | 0.11   |   |   |   | 0.06 | (2) |   | $ | 0.18 | (2) |   | $ | 0.14 | (2) |   | N/A(1) |   |

*(Footnotes      on following page)*

----

**Selected      Financial Ratios and Other Data**

|                                                                          |   | September                30, |   |
|-------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                          |   | 2007                         |   |   | 2006 |   |   | 2005 |   |   | 2004 |   |   | 2003 |   |
| Performance                Ratios                                             |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return                on assets (ratio of net income to average total assets) |   |                         | 0.22   | % |   |   | 0.17 | % |   |   | 0.56 | % |   |   | 0.57 | % |   |   | 0.49 | % |
| Return                on equity (ratio of net income to average               |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| equity)                                                                       |   |                         | 1.09   | % |   |   | 1.50 | % |   |   | 4.87 | % |   |   | 5.47 | % |   |   | 5.59 | % |
| Interest                rate spread information                               |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average                during period                                          |   |                         | 3.07   | % |   |   | 3.28 | % |   |   | 4.28 | % |   |   | 4.50 | % |   |   | 4.82 | % |
| End                of period                                                  |   |                         | 3.05   | % |   |   | 3.11 | % |   |   | 3.92 | % |   |   | 4.59 | % |   |   | 4.80 | % |
| Net                interest margin                                            |   |                         | 3.77   | % |   |   | 3.54 | % |   |   | 4.19 | % |   |   | 4.70 | % |   |   | 4.90 | % |
| Ratio                of operating expense to average total assets             |   |                         | 3.14   | % |   |   | 3.30 | % |   |   | 4.12 | % |   |   | 4.33 | % |   |   | 4.59 | % |
| Ratio                of average interest-bearing assets to                    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average                interest-bearing liabilities                           |   |                         | 1.24   | % |   |   | 1.09 | % |   |   | 1.11 | % |   |   | 1.10 | % |   |   | 1.05 | % |
|                                                                |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Quality                Ratios                                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-performing                assets to total assets at end                   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of                period                                                      |   |                         | 0.43   | % |   |   | 0.63 | % |   |   | 0.29 | % |   |   | 0.43 | % |   |   | 0.43 | % |
| Allowance                for loan losses to non-performing                    |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loans                                                                         |   |                         | 60.92  | % |   |   | 60.07 | % |   |   | 118.26 | % |   |   | 79.51 | % |   |   | 82.92 | % |
| Allowance                for loan losses to net loans                         |   |                         | 0.29   | % |   |   | 0.32 | % |   |   | 0.37 | % |   |   | 0.36 | % |   |   | 0.38 | % |
|                                                                |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital                Ratios                                                 |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity                to total assets at end of period                        |   |                         | 20.24  | % |   |   | 10.59 | % |   |   | 12.03 | % |   |   | 12.10 | % |   |   | 8.43 | % |
| Average                equity to average assets                               |   |                         | 21.42  | % |   |   | 11.26 | % |   |   | 11.40 | % |   |   | 10.46 | % |   |   | 8.70 | % |
|                                                                          |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                Data                                                     |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Number                of full-service offices                                 |   |                         | 12     |   |   |   | 12 |   |   |   | 12 |   |   |   | 9 |   |   |   | 8 |   |

| (1) | Prior                to March 29, 2004, Citizens Community Federal was a mutual institution                whose equity was retained earnings, therefore, per share earnings                prior to                that date are not meaningful. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The                formation of the Company was completed March 29, 2004, the date of                closing                of the initial public offering.  The basic and diluted EPS are                presented for the period March 29, 2004, through September 30,                2004.  The weighted average number of shares outstanding for                this period was 3,038,769 for basic and diluted EPS.  Earnings                per share were restated to reflect the impact of the second-step                conversion and reorganization of the Company, which occurred October                31,                2006. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**MANAGEMENT'S      DISCUSSION AND ANALYSIS OF**

**FINANCIAL      CONDITION AND RESULTS OF OPERATIONS**

**General**

** **

**Evolution      of Business Strategy**

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**Comparison      of Operating Results for the Year Ended September 30, 2007, and September 30,      2006**

**Overview**

**Interest      Income**

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**Interest      Expense**

**Net      Interest Income**
** **

**Provision      for Loan Losses**

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**Non-Interest      Income**

**Non-Interest      Expense**

**Income      Tax Expense**

**Comparison      of Operating Results for the Year Ended September 30, 2006, and September 30,      2005**

**Overview**

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**Interest      Income**

**Interest      Expense**

**Net      Interest Income**

**Provision      for Loan Losses**

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**Non-Interest      Income**

**Non-Interest      Expense**

**Income      Tax Expense**

**Comparison      of Financial Condition at September 30, 2007, and September 30,      2006**

**Total      Assets**

**Securities      Available for Sale**

----

**FHLB      Stock.  **

**Loans      Receivable.**

**Allowance      for Loan Losses**

|                                                        |   | Year                EndedSeptember                30, |   |
|-------------------------------------------------------------|--------|-------------------------------------------------------|--------|
|                                                        |   | 2007                                                  |   |   | 2006 |   |
| Balance                at Beginning                         |   | $                                                     | 835    |   |   | $ | 803 |   |
| Provisions Charged to Operating Expense |   |                                                  | 470    |   |   |   | 251 |   |
| Loans Charged Off                                 |   |                                                  | (413   | ) |   |   | (247 | ) |
| Recoveries on Loans                               |   |                                                  | 34     |   |   |   | 28 |   |
| Balance at End                                    |   | $                                                     | 926    |   |   | $ | 835 |   |

**Office      Properties and Equipment**

----

**Deposits**

**Borrowed      Funds**

**Stockholders'      Equity.**

**Comparison      of Financial Condition at September 30, 2006, and September 30,      2005**

**Total      Assets**

**Cash      and Cash Equivalents.**

**Loans      Receivable.**

----

**Allowance      for Loan Losses**

|                                                        |   | Year                EndedSeptember                30, |   |
|-------------------------------------------------------------|--------|-------------------------------------------------------|--------|
|                                                        |   | 2006                                                  |   |   | 2005 |   |
| Balance                at Beginning                         |   | $                                                     | 803    |   |   | $ | 554 |   |
| Other                - Obtained through Merger              |   |                                                  |   |   |   |   | 40 |   |
| Provisions Charged to Operating Expense |   |                                                  | 251    |   |   |   | 414 |   |
| Loans Charged Off                                 |   |                                                  | (247   | ) |   |   | (236 | ) |
| Recoveries on Loans                               |   |                                                  | 28     |   |   |   | 31 |   |
| Balance at End                                    |   | $                                                     | 835    |   |   | $ | 803 |   |

**Office      Properties and Equipment**

**Deposits**

**Borrowed      Funds**

**Stockholders'      Equity.**

----

**Average      Balances, Net Interest Income, Yields Earned and Rates      Paid**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | Year                ended September 30, |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 2007                                    |    |   | 2006 |   |   | 2005 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | AverageOutstandingBalance               |    |   | InterestEarned/Paid |   |   | Yield/Rate |   |   | AverageOutstandingBalance |   |   | InterestEarned/Paid |   |   | Yield/Rate |   |   | AverageOutstandingBalance |   |   | InterestEarned/Paid |   |   | Yield/Rate |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | (In                Thousands)           |    |
| Interest-Earning Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Cash equivalents                                                                                                                                |   | $                                       | 5,953   |   |   | $ | 167 |   |   |   | 2.81 | % |   | $ | 6,135 |   |   | $ | 184 |   |   |   | 3.00 | % |   | $ | 5,489 |   |   | $ | 134 |   |   |   | 2.44 | % |
|     Loans receivable(1)                                                                                                                             |   |                                    | 285,668 |   |   |   | 19,713 |   |   |   | 6.90 |   |   |   | 237,553 |   |   |   | 15,664 |   |   |   | 6.59 |   |   |   | 176,802 |   |   |   | 11,763 |   |   |   | 6.65 |   |
|     Other interest-bearing deposits                                                                                                            |   |                                    | 567     |   |   |   | 30 |   |   |   | 5.29 |   |   |   | 1,153 |   |   |   | 46 |   |   |   | 3.99 |   |   |   | 215 |   |   |   | 8 |   |   |   | 3.72 |   |
|     Securities available for sale                                                                                                         |   |                                    | 9,487   |   |   |   | 379 |   |   |   | 3.99 |   |   |   | 1,478 |   |   |   | 58 |   |   |   | 3.92 |   |   |   | 522 |   |   |   | 21 |   |   |   | 4.02 |   |
|     Federal Home Loan Bank stock                                                                                                     |   |                                    | 3,115   |   |   |   | 83 |   |   |   | 2.66 |   |   |   | 2,280 |   |   |   | 65 |   |   |   | 2.85 |   |   |   | 1,345 |   |   |   | 54 |   |   |   | 4.01 |   |
|         Total interest-earning assets                                                                                      |   | $                                       | 304,790 |   |   |   | 20,372 |   |   |   | 6.68 |   |   | $ | 248,599 |   |   |   | 16,017 |   |   |   | 6.44 |   |   | $ | 184,373 |   |   |   | 11,980 |   |   |   | 6.50 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-Bearing Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Savings accounts                                                                                                                                |   | $                                       | 22,858  |   |   |   | 218 |   |   |   | 0.95 |   |   | $ | 24,703 |   |   |   | 167 |   |   |   | 0.68 |   |   | $ | 15,877 |   |   |   | 122 |   |   |   | 0.77 |   |
|     Demand accounts(2)                                                                                                                              |   |                                    | 19,283  |   |   |   | 28 |   |   |   | 0.15 |   |   |   | 19,622 |   |   |   | 28 |   |   |   | 0.14 |   |   |   | 13,346 |   |   |   | 30 |   |   |   | 0.22 |   |
|     Money market accounts                                                                                                                      |   |                                    | 24,323  |   |   |   | 588 |   |   |   | 2.42 |   |   |   | 26,623 |   |   |   | 500 |   |   |   | 1.88 |   |   |   | 24,527 |   |   |   | 433 |   |   |   | 1.77 |   |
|     CDs                                                                                                                                                  |   |                                    | 120,148 |   |   |   | 5,707 |   |   |   | 4.75 |   |   |   | 104,536 |   |   |   | 4,126 |   |   |   | 3.95 |   |   |   | 78,052 |   |   |   | 2,370 |   |   |   | 3.04 |   |
|     IRAs                                                                                                                                                 |   |                                    | 10,876  |   |   |   | 453 |   |   |   | 4.17 |   |   |   | 10,252 |   |   |   | 361 |   |   |   | 3.52 |   |   |   | 9,316 |   |   |   | 308 |   |   |   | 3.31 |   |
|     Federal Home Loan Bank advances                                                                                                  |   |                                    | 48,643  |   |   |   | 1,895 |   |   |   | 3.90 |   |   |   | 42,500 |   |   |   | 2,039 |   |   |   | 4.80 |   |   |   | 25,140 |   |   |   | 729 |   |   |   | 2.90 |   |
|         Total interest-bearing liabilities                                                                                 |   | $                                       | 246,130 |   |   |   | 8,889 |   |   |   | 3.61 |   |   | $ | 228,237 |   |   |   | 7,221 |   |   |   | 3.16 |   |   | $ | 166,258 |   |   |   | 3,992 |   |   |   | 2.40 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                                                                                                |   |                                    |    |   |   | $ | 11,483 |   |   |   |   |   |   |   |   |   |   | $ | 8,796 |   |   |   |   |   |   |   |   |   |   | $ | 7,988 |   |   |   |   |   |
| Net interest rate spread                                                                                                                                      |   |                                    |    |   |   |   |   |   |   |   | 3.07 | % |   |   |   |   |   |   |   |   |   |   | 3.28 | % |   |   |   |   |   |   |   |   |   |   | 4.10 | % |
| Net interest margin(3)                                                                                                                                             |   |                                    |    |   |   |   |   |   |   |   | 3.77 | % |   |   |   |   |   |   |   |   |   |   | 3.54 | % |   |   |   |   |   |   |   |   |   |   | 4.33 | % |
| Average interest-earning assets to average interest-bearing   liabilities                                                            |   |                                    |    |   |   |   | 1.24x |   |   |   |   |   |   |   |   |   |   |   | 1.09x |   |   |   |   |   |   |   |   |   |   |   | 1.11x |   |   |   |   |   |

| (1) | Calculated                net of loan fees of $(1,026,000) in 2007, $(706,000) in 2006 and                $(54,000)                in 2005, loan discounts, loans in process and allowance for losses                on                loans. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Includes                $13.8 million, $13.8 million and $14.4 million of non-interest-bearing                demand deposits during the years ended September 30, 2007, 2006 and                2005,                respectively.           |
| (3) | Net                interest income divided by interest-earning                assets.                                                                                                                                                         |

----

**Rate/Volume      Analysis**

|                                                                                                                                                                                                                                                                                                                                                                                        |   | Year                Ended September 30,2007                vs. 2006 |   |   | Year                Ended September 30,2006                vs. 2005 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                        |   | Increase                (Decrease)Due                to             |   |   | TotalIncrease                                                       |   |   | Increase                (Decrease)Due                to |   |   | TotalIncrease |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   | Volume                                                              |   |   | Rate                                                                |   |   | (Decrease) |   |   | Volume |   |   | Rate |   |   | (Decrease) |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   | (In                Thousands)                                       |   |
| Interest-Earning Assets:                                                                                                                                                                                                                                                                                                                                                               |   |                                                                |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Loans receivable(1)                                                                                                 |   | $                                                                   | 3,293  |   |                                                                | $      | 756 |   |   | $ | 4,049 |   |   | $ | 4,007 |   |   | $ | (106 | ) |   | $ | 3,901 |   |
|     Other                                                                                                                    |   |                                                                | 318    |   |                                                                |   | (12 | ) |   |   | 306 |   |   |   | 132 |   |   |   | 4 |   |   |   | 136 |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Total interest-earning                assets                                                |   | $                                                                   | 3,611  |   |                                                                | $      | 744 |   |   | $ | 4,355 |   |   | $ | 4,139 |   |   | $ | (102 | ) |   |   | 4,037 |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-Bearing Liabilities:                                                                                                                                                                                                                                                                                                                                                          |   |                                                                |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Savings accounts                                                                                                    |   | $                                                                   | (12    | )      |                                                                |   | 63 |   |   |   | 51 |   |   | $ | 62 |   |   | $ | (17 | ) |   |   | 45 |   |
|     Demand accounts                                                                                                     |   |                                                                | ---    |   |                                                                |   | --- |   |   |   | --- |   |   |   | 11 |   |   |   | (13 | ) |   |   | (2 | ) |
|     Money market account                                                                                           |   |                                                                | (46    | )      |                                                                |   | 134 |   |   |   | 88 |   |   |   | 38 |   |   |   | 29 |   |   |   | 67 |   |
|     IRA accounts                                                                                                        |   |                                                                | 23     |   |                                                                |   | 69 |   |   |   | 92 |   |   |   | 32 |   |   |   | 21 |   |   |   | 53 |   |
|     Certificates of deposit                                                                                        |   |                                                                | 669    |   |                                                                |   | 912 |   |   |   | 1,581 |   |   |   | 932 |   |   |   | 824 |   |   |   | 1,756 |   |
|     Federal                Home Loan Bank advances                                                                                                                                                                                                                                                                                                                 |   |                                                                | 271    |   |                                                                |   | (415 | ) |   |   | (144 | ) |   |   | 673 |   |   |   | 637 |   |   |   | 1,310 |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Total interest-bearing liabilities                                                                                                                                                                                                                                                                                                |   | $                                                                   | 905    |   |                                                                | $      | 763 |   |   |   | 1,668 |   |   | $ | 1,748 |   |   | $ | 1,481 |   |   |   | 3,229 |   |
|                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                                                                    |   |                                                                |   |   |                                                                |   |   |   |   | $ | 2,687 |   |   |   |   |   |   |   |   |   |   | $ | 808 |   |

| (1)  | Calculated                net of loan fees of $(1,026,000) in 2007, $(706,000) in 2006 and                $(54,000)                in 2005. |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------|

**Liquidity      and Commitments**

----

**Capital**

** **

**Impact      of Inflation**

----

**Stockholder      Performance Presentation**

** **

**COMPARISON      OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG**

**CITIZENS      COMMUNITY BANCORP, INC., NASDAQ MARKET INDEX AND PEER GROUP      INDEX**

|                                                  |  03/30/2004         | 9/30/2004         | 9/30/2005 | 9/30/2006 | 9/30/2007         |
|-------------------------------------------------------|--------------------------|-------------------|-----------|-----------|-------------------|
|  Citizens                Community Bancorp, Inc. |  $100.00            | 102.69            | 103.03    | 156.68    |   80.41 |
|  Peer                Group Index                 |    100.00 | 103.02            | 100.86    | 114.09    | 106.47            |
|  NASDAQ                Market Index              |    100.00 |   95.54 | 108.69    | 115.14    | 137.59            |

----

**Recent      Accounting Pronouncements**

**Future      Accounting Changes**

*The Fair Value Option for      Financial Assets and Financial Liabilities*

*Employers' Accounting for Defined      Benefit Pension and Other Postretirement Plans.  *
*Employers' Accounting for Pensions;*
*Employers' Accounting for Settlements and Curtailments of Defined      Benefit      Pension Plans and for Termination Benefits;*
*Employers'      Accounting for Postretirement Benefits Other Than Pensions;*
*Employers' Disclosures About Pensions and Other      Postretirement Benefits*

*Staff Accounting Bulletin No. 108*

----

*Accounting for Uncertainty in Income Taxes. *
*Accounting for Income Taxes*

**Quantitative      and Qualitative Disclosures About Market Risk**

*Our      Risk When Interest Rates Change*

*How      We Measure Our Risk of Interest Rate Changes*

----

|   | · | originating                shorter-term consumer loans; |
|--------|--------|---------------------------------------------------------|

|   | · | originating                prime-based home equity lines of                credit; |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | managing                our deposits to establish stable deposit                relationships; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | using                Federal Home Loan Bank advances to align maturities and repricing                terms;                and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|

|   | · | attempting                to limit the percentage of long-term, fixed-rate loans in our portfolio                which do not contain a payable-on-demand                clause. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Change                in Interest Rates inBasis                Points ("bp")(Rate                Shock in Rates)(1) | Net                Portfolio Value | Net                Portfolio Value as % ofPresent                Value of Assets |
|---------------------------------------------------------------------------------------------------------------------|------------------------------------|----------------------------------------------------------------------------------|
|                                                                                                                | Amount                             | Change                                                                           | Change | NPV                Ratio | Change |
| (Dollars                in thousands)                                                                               |
|                                                                                                                |                               |                                                                             |   |   |   |
| +300                 bp                                                                                        | $36,641                            | $(7,080)                                                                         | (16)% | 10.01% | (148)                bp |
| +200                 bp                                                                                        | 39,118                             | (4,603)                                                                          | (11)    | 10.55    | (95)    |
| +100                 bp                                                                                        | 41,514                             | (2,207)                                                                          | (5)   | 11.05    | (44)    |
| 0  bp                                                                                                     | 43,721                             | ---                                                                              | ---    | 11.50    | ---    |
| -100                 bp                                                                                        | 45,442                             | 1,721                                                                            | 4  | 11.81    | 32   |
| -200                 bp                                                                                        | 46,445                             | 2,724                                                                            | 6  | 11.96    | 46   |

| (1) | Assumes                an instantaneous uniform change in interest rates at all                maturities. |
|-----|------------------------------------------------------------------------------------------------------------|

| Change                in Interest Rates inBasis                Points ("bp")(Rate                Shock in Rates)(1) | Net                Portfolio Value | Net                Portfolio Value as % ofPresent                Value of Assets |
|---------------------------------------------------------------------------------------------------------------------|------------------------------------|----------------------------------------------------------------------------------|
|                                                                                                                | Amount                             | Change                                                                           | Change | NPV                Ratio | Change |
| (Dollars                in thousands)                                                                               |
|                                                                                                                |                               |                                                                             |   |   |   |
| +300                 bp                                                                                        | $14,290                            | $(6,749)                                                                         | (32)% | 5.41% | (226)                bp |
| +200                 bp                                                                                        | 16,590                             | (4,449)                                                                          | (21) | 6.20 | (147)                    |
| +100                 bp                                                                                        | 18,862                             | (2,177)                                                                          | (10) | 6.96 | (71)                  |
| 0  bp                                                                                                     | 21,039                             | ---                                                                              | --- | 7.66 | ---    |
| -100                 bp                                                                                        | 23,005                             | 1,966                                                                            | 9 | 8.29 | 62   |
| -200                 bp                                                                                        | 24,778                             | 3,738                                                                            | 18 | 8.83 | 116     |

| (1) | Assumes                an instantaneous uniform change in interest rates at all                maturities. |
|-----|------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | Six Monthsor Less      |    |   | Over SixMonths toOne Year |   |   | Over Oneto ThreeYears |   |   | Over Threeto FiveYears |   |   | OverFiveYears |   |   | Total  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|--------|------------------------------------------|--------|--------|---------------------------------|--------|--------|----------------------------------|--------|--------|---------------|--------|--------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | (Dollars in Thousands) |    |
| Real estate mortgage loans                                                                                                                                                                         |   | $                                | 34,208  |   |                                     | $      | 27,724 |                            |   | $      | 68,816                           |   |   | $             | 31,665 |   |   | $      | 25,544 |   |   | $ | 187,957 |   |
| Consumer loans                                                                                                                                                                                               |   |                             | 56,968  |   |                                     |   | 37,716 |                            |   |   | 32,881                           |   |   |          | 3,190  |   |   |   | 1,989 |   |   |   | 132,744 |   |
| Securities available for sale                                                                                                                                                                      |   |                             | 2,646   |   |                                     |   | 2,721  |                            |   |   | 11,552                           |   |   |          | 10,814 |   |   |   | 11,859 |   |   |   | 39,592 |   |
| Other interest-bearing deposits                                                                                                                                                                         |   |                             | ---     |   |                                     |   | ---    |                            |   |   | 371                              |   |   |          | ---    |   |   |   | --- |   |   |   | 371 |   |
| Federal Home Loan Bank stock                                                                                                                                                                                                                                                                                                                                                                                                             |   |                             | ---     |   |                                     |   | ---    |                            |   |   | ---                              |   |   |          | 4,822  |   |   |   | --- |   |   |   | 4,822 |   |
| Cash equivalents(1)                                                                                                                                                                                          |   |                             | 6,354   |   |                                     |   | ---    |                            |   |   | ---                              |   |   |          | ---    |   |   |   | --- |   |   |   | 6,354 |   |
| Total interest-earning assets                                                                                                                                                                           |   | $                                | 100,176 |   |                                     | $      | 68,161 |                            |   | $      | 113,620                          |   |   | $             | 50,491 |   |   | $      | 39,392 |   |   | $ | 371,840 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             |    |   |                                     |   |   |                            |   |   |                             |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Savings accounts                                                                                                                                                                                        |   |                             | 2,286   |   |                                     |   | 2,286  |                            |   |   | 17,553                           |   |   |          | 702    |   |   |   | 28 |   |   |   | 22,855 |   |
| Demand and money market                                                                                                                                                                            |   |                             | 6,780   |   |                                     |   | 6,780  |                            |   |   | 10,170                           |   |   |          | 2,543  |   |   |   | 19,505 |   |   |   | 45,778 |   |
| Certificates of deposit                                                                                                                                                                                 |   |                             | 59,997  |   |                                     |   | 46,042 |                            |   |   | 30,612                           |   |   |          | 2,450  |   |   |   | --- |   |   |   | 139,101 |   |
| Federal                Home Loan Bank advances                                                                                                                                                                                                                                                                                                                                                                                                          |   |                             | 48,434  |   |                                     |   | 5,492  |                            |   |   | 24,620                           |   |   |          | 15,050 |   |   |   | 2,850 |   |   |   | 96,446 |   |
| Total interest-bearing liabilities                                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                                | 117,497 |   |                                     | $      | 60,600 |                            |   | $      | 82,955                           |   |   | $             | 20,745 |   |   | $      | 22,383 |   |   |   | 304,180 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             |    |   |                                     |   |   |                            |   |   |                             |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets less                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                             |    |   |                                     |   |   |                            |   |   |                             |   |   |          |   |   |   |   |   |   |   |   |   |   |
| interest-bearing liabilities                                                                                                                                                                                 |   | $                                | (17,321 | )      |                                     | $      | 7,561  |                            |   | $      | 30,665                           |   |   | $             | 29,746 |   |   | $      | 17,009 |   |   | $ | 67,660 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             |    |   |                                     |   |   |                            |   |   |                             |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Cumulative interest rate sensitivity gap                                                                                                                                                                                                                                                                                                                                                                                                 |   | $                                | (17,321 | )      |                                     | $      | (9,760 | )                               |   | $      | 20,905                           |   |   | $             | 50,651 |   |   | $      | 67,660 |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             |    |   |                                     |   |   |                            |   |   |                             |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Cumulative                interest rate gap as apercentage                of assets at September 30,2007                                                                                                          |   |                             | (4.49   | )%     |                                     |   | (2.53  | )%                              |   |   | 5.41                             | %      |   |          | 13.12  | %      |   |   | 17.52 | % |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                             |    |   |                                     |   |   |                            |   |   |                             |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Cumulative interest rate gap as a percentage of interest-earning assetsat September                30, 2007                                                |   |                             | (4.66   | )%     |                                     |   | (2.62  | )%                              |   |   | 5.62                             | %      |   |          | 13.62  | %      |   |   | 18.20 | % |   |   |   |   |

| (1) | Net                of corporate checks issued of                $4,612. |
|-----|-------------------------------------------------------------------------|

----

**Critical      Accounting Policies**

*Allowance      for Loan Losses*

----

----

----

| *Assets*                                                                           |   | 2007                          |    |   | 2006   |   |
|------------------------------------------------------------------------------------|--------|-------------------------------|---------|--------|--------|--------|
|                                                                               |   | (In                Thousands) |    |
|                                                                               |   |                          |    |   |   |   |
| Cash                and cash equivalents                                           |   | $                             | 6,354   |   |   | $      | 6,170 |   |
| Interest-bearing                deposits                                           |   |                          | 371     |   |   |   | 959 |   |
| Securities                available-for-sale `                                     |   |                          | 39,592  |   |   |   | 782 |   |
| Loans                receivable - Net of allowance for loan losses of $926 and     |   |                          |    |   |   |   |   |   |
| $835                in 2007 and 2006, respectively                                 |   |                          | 320,027 |   |   |   | 258,467 |   |
| Loans                held for sale                                                 |   |                          | 0       |   |   |   | 321 |   |
| Federal                Home Loan Bank stock - At cost                              |   |                          | 4,822   |   |   |   | 3,060 |   |
| Office                properties and equipment - Net                               |   |                          | 3,460   |   |   |   | 3,681 |   |
| Accrued                interest receivable                                         |   |                          | 1,397   |   |   |   | 861 |   |
| Intangible                assets                                                   |   |                          | 1,528   |   |   |   | 1,829 |   |
| Goodwill                                                                           |   |                          | 5,466   |   |   |   | 5,466 |   |
| Other                assets                                                        |   |                          | 3,096   |   |   |   | 2,394 |   |
|                                                                               |   |                          |    |   |   |   |   |   |
| TOTAL                ASSETS                                                        |   | $                             | 386,113 |   |   | $      | 283,990 |   |
|                                                                               |   |                          |    |   |   |   |   |   |
| *Liabilities                and Stockholders’ Equity*                        |   |                          |    |   |   |   |   |   |
|                                                                               |   |                          |    |   |   |   |   |   |
| Deposits                                                                           |   | $                             | 207,734 |   |   | $      | 186,711 |   |
| Borrowed                funds                                                      |   |                          | 96,446  |   |   |   | 61,200 |   |
| Other                liabilities                                                   |   |                          | 3,784   |   |   |   | 5,997 |   |
|                                                                               |   |                          |    |   |   |   |   |   |
| Total                liabilities                                                   |   |                          | 307,964 |   |   |   | 253,908 |   |
|                                                                               |   |                          |    |   |   |   |   |   |
| Preferred                stock - Par value $.01:                                   |   |                          |    |   |   |   |   |   |
| Authorized                - 0 shares in 2007 and 1,000,000 shares in 2006          |   |                          |    |   |   |   |   |   |
| Issued                and outstanding - 0 shares outstanding in 2007 and 2006      |   |                          |    |   |   |   |   |   |
| Common                stock - Par value $.01:                                      |   |                          |    |   |   |   |   |   |
| Authorized                - 20,000,000 shares in 2007 and 5,000,000 shares in 2006 |   |                          |    |   |   |   |   |   |
| Issued                and outstanding - 7,118,205 shares in 2007 and 3,747,319     |   |                          |    |   |   |   |   |   |
| shares                in 2006                                                      |   |                          | 71      |   |   |   | 37 |   |
| Additional                paid-in capital                                          |   |                          | 69,934  |   |   |   | 18,833 |   |
| Retained                earnings                                                   |   |                          | 12,420  |   |   |   | 12,792 |   |
| Unearned                ESOP shares                                                |   |                          | (3,877  | )      |   |   | (894 | ) |
| Unearned                compensation                                               |   |                          | (207    | )      |   |   | (334 | ) |
| Accumulated                other comprehensive loss                                |   |                          | (192    | )      |   |   | (11 | ) |
| Treasury                stock, at cost - 0 and 22,691shares, respectively          |   |                          | 0       |   |   |   | (341 | ) |
|                                                                               |   |                          |    |   |   |   |   |   |
| Total                stockholders’ equity                                    |   |                          | 78,149  |   |   |   | 30,082 |   |
|                                                                               |   |                          |    |   |   |   |   |   |
| TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY                    |   | $                             | 386,113 |   |   | $      | 283,990 |   |

----

----

|                                                               |   | 2007                          |   |   | 2006   |   |   | 2005   |   |
|--------------------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                               |   | (In                Thousands) |   |
| Interest                and dividend income:                       |   |                          |   |   |   |   |   |   |   |
| Interest                and fees on loans                          |   | $                             | 18,687 |   |   | $      | 14,958 |   |   | $ | 11,709 |   |
| Interest                on investments                             |   |                          | 659    |   |   |   | 353    |   |   |   | 217 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Total                interest and dividend income                  |   |                          | 19,346 |   |   |   | 15,311 |   |   |   | 11,926 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Interest                expense:                                   |   |                          |   |   |   |   |   |   |   |   |   |   |
| Interest                on deposits                                |   |                          | 6,994  |   |   |   | 5,182  |   |   |   | 3,263 |   |
| Interest                on borrowed funds                          |   |                          | 1,895  |   |   |   | 2,039  |   |   |   | 719 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Total                interest expense                              |   |                          | 8,889  |   |   |   | 7,221  |   |   |   | 3,982 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Net                interest income                                 |   |                          | 10,457 |   |   |   | 8,090  |   |   |   | 7,934 |   |
| Provision                for loan losses                           |   |                          | 470    |   |   |   | 251    |   |   |   | 414 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Net                interest income after provision for loan losses |   |                          | 9,987  |   |   |   | 7,839  |   |   |   | 7,520 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Noninterest                income:                                 |   |                          |   |   |   |   |   |   |   |   |   |   |
| Service                charges on deposit accounts                 |   |                          | 980    |   |   |   | 981    |   |   |   | 832 |   |
| Insurance                commissions                               |   |                          | 450    |   |   |   | 372    |   |   |   | 397 |   |
| Loan                fees and service charges                       |   |                          | 282    |   |   |   | 262    |   |   |   | 329 |   |
| Security                gains                                      |   |                          | 0      |   |   |   | 27     |   |   |   | 0 |   |
| Other                                                              |   |                          | 14     |   |   |   | 15     |   |   |   | 463 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Total                noninterest income                            |   |                          | 1,726  |   |   |   | 1,657  |   |   |   | 2,021 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Noninterest                expense:                                |   |                          |   |   |   |   |   |   |   |   |   |   |
| Salaries                and related benefits                       |   |                          | 6,026  |   |   |   | 4,978  |   |   |   | 4,688 |   |
| Occupancy                - Net                                     |   |                          | 1,143  |   |   |   | 1,016  |   |   |   | 752 |   |
| Office                                                             |   |                          | 836    |   |   |   | 767    |   |   |   | 668 |   |
| Data                processing                                     |   |                          | 452    |   |   |   | 438    |   |   |   | 330 |   |
| Amortization                of core deposit intangible             |   |                          | 301    |   |   |   | 302    |   |   |   | 96 |   |
| Advertising                                                        |   |                          | 161    |   |   |   | 218    |   |   |   | 201 |   |
| Professional                fees                                   |   |                          | 690    |   |   |   | 314    |   |   |   | 424 |   |
| Other                                                              |   |                          | 913    |   |   |   | 708    |   |   |   | 647 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Total                noninterest expense                           |   |                          | 10,522 |   |   |   | 8,741  |   |   |   | 7,806 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Income                before provision for income taxes            |   |                          | 1,191  |   |   |   | 755    |   |   |   | 1,735 |   |
| Provision                for income taxes                          |   |                          | 448    |   |   |   | 309    |   |   |   | 684 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Net                income                                          |   | $                             | 743    |   |   | $      | 446    |   |   | $ | 1,051 |   |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Basic                earnings per share                            |   | $                             | 0.11   |   |   | $      | 0.06   | *      |   | $ | 0.18 | * |
|                                                               |   |                          |   |   |   |   |   |   |   |   |   |   |
| Diluted                earnings per share                          |   | $                             | 0.11   |   |   | $      | 0.06   | *      |   | $ | 0.18 | * |

----

----

|                                                                                                                                    |   |                                           |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|-----------|--------|--------|--------|--------|------------|--------|--------|----------|--------|--------|----------|--------|--------|--------------|--------|--------|---------------|--------|--------|----------|--------|--------|--------|--------|
|                                                                                                                                    |   |                                           |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   | Accumulated   |   |   |     |   |   |   |   |
|                                                                                                                                    |   |                                           |      |   |   |   |   | Additional |   |   |     |   |   | Unearned |   |   |         |   |   | Other         |   |   |     |   |   |   |   |
|                                                                                                                                    |   |                                           |      |   | Common |   |   | Paid-In    |   |   | Retained |   |   | ESOP     |   |   | Unearned     |   |   | Comprehensive |   |   | Treasury |   |   |   |   |
|                                                                                                                                    |   | Shares                                         |      |   | Stock  |   |   | Capital    |   |   | Earnings |   |   | Shares   |   |   | Compensation |   |   | Loss          |   |   | Stock    |   |   | Totals |   |
|                                                                                                                                    |   | (In                  Thousands, Except Shares) |      |
|                                                                                                                                    |   |                                           |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |
| Balance                  - September 30, 2004                                                                                           |   |                                           | 3,041,750 |   |   | $      | 30     |       |   | $      | 9,030    |   |   | $        | 11,678 |   |         | $      | (1,133 | )             |   | $      | 0        |   |   | $      | 0      |   |   | $ | 0 |   |   | $ | 19,605 |   |
|                                                                                                                                    |   |                                           |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                  income:                                                                                                  |   |                                           |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                                                                                                             |   |                                           | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 1,051  |   |         |   | 0      |          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 1,051 |   |
| Net                  unrealized loss on available-for-sale                        securities - Net of tax      |   |                                           | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |          |   |   | 0        |   |   |   | (4     | ) |   |   | 0 |   |   |   | (4 | ) |
|                                                                                                                                    |   |                                           |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  comprehensive income                                                                                             |   |                                           |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   | 1,047 |   |
|                                                                                                                                    |   |                                           |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                  stock issued due to merger`                                                                                     |   |                                           | 705,569   |   |   |   | 7      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 7 |   |
| Additional                  paid-in capital due to merger                                                                               |   |                                           | 0         |   |   |   | 0      |       |   |   | 9,759    |   |   |     | 0      |   |         |   | 0      |          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 9,759 |   |
| Common                  stock purchased - 59,637 shares                                                                                 |   |                                           | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |          |   |   | 0        |   |   |   | 0      |   |   |   | (895 | ) |   |   | (895 | ) |
| Committed                  ESOP shares                                                                                                  |   |                                           | 0         |   |   |   | 0      |       |   |   | 43       |   |   |     | 0      |   |         |   | 120    |          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 163 |   |
| Common                    stock awarded for Recognition and                         Retirement Plan - 33,386 shares |   |                                           | 0         |   |   |   | 0      |       |   |   | (52      | )      |   |     | 0      |   |         |   | 0      |          |   |   | (449     | )      |   |   | 0      |   |   |   | 501 |   |   |   | 0 |   |
| Amortization                  of restricted stock                                                                                       |   |                                           | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |          |   |   | 60       |   |   |   | 0      |   |   |   | 0 |   |   |   | 60 |   |
| Cash                  dividends ($.20 per share)                                                                                        |   |                                           | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | (193   | )      |         |   | 0      |          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | (193 | ) |
|                                                                                                                                    |   |                                           |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  - September 30, 2005                                                                                           |   |                                           | 3,747,319 |   |   |   | 37     |       |   |   | 18,780   |   |   |     | 12,536 |   |         |   | (1,013 | )             |   |   | (389     | )      |   |   | (4     | ) |   |   | (394 | ) |   |   | 29,553 |   |

----

----

|                                                                                                                                  |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   | Accumulated   |   |   |     |   |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|--------|--------|--------|--------|------------|--------|--------|----------|--------|--------|----------|--------|--------|--------------|--------|--------|---------------|--------|--------|----------|--------|--------|--------|--------|
|                                                                                                                                  |   |                                         |      |   |   |   |   | Additional |   |   |     |   |   | Unearned |   |   |         |   |   | Other         |   |   |     |   |   |   |   |
|                                                                                                                                  |   |                                         |      |   | Common |   |   | Paid-In    |   |   | Retained |   |   | ESOP     |   |   | Unearned     |   |   | Comprehensive |   |   | Treasury |   |   |   |   |
|                                                                                                                                  |   | Shares                                       |      |   | Stock  |   |   | Capital    |   |   | Earnings |   |   | Shares   |   |   | Compensation |   |   | Gain/(Loss)   |   |   | Stock    |   |   | Totals |   |
|                                                                                                                                  |   | (In                Thousands, Except Shares) |      |
|                                                                                                                                  |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |
| Balance                - September 30, 2005 (brought forward)                                                                         |   |                                         | 3,747,319 |   |   | $      | 37     |       |   | $      | 18,780   |   |   | $        | 12,536 |   |         | $      | (1,013 | )             |   | $      | (389     | )      |   | $      | (4     | ) |   | $ | (394 | ) |   | $ | 29,553 |   |
|                                                                                                                                  |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                income:                                                                                                  |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                                             |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 446    |   |         |   | 0      |          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 446 |   |
| Reclassification                adjustment for net security gains  included                in income, net of tax of $11     |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |          |   |   | 0        |   |   |   | (16    | ) |   |   | 0 |   |   |   | (16 | ) |
| Net                unrealized gain on available-for-sale                     securities - Net of tax              |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |          |   |   | 0        |   |   |   | 9      |   |   |   | 0 |   |   |   | 9 |   |
|                                                                                                                                  |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                comprehensive income                                                                                             |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   | 439 |   |
|                                                                                                                                  |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Committed                ESOP shares                                                                                                  |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 119    |          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 119 |   |
| Appreciation                in fair value of ESOP shares                        charged to expense |   |                                         | 0         |   |   |   | 0      |       |   |   | 64       |   |   |     | 0      |   |         |   | 0      |          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 64 |   |
| Common                stock awarded for Recognition and                                                                               |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                     Retention Plan - 3,576 shares                                                                 |   |                                         | 0         |   |   |   | 0      |       |   |   | (11      | )      |   |     | 0      |   |         |   | 0      |          |   |   | (43      | )      |   |   | 0      |   |   |   | 54 |   |   |   | 0 |   |
| 16                shares of common stock purchased                     from Employee                              |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   | 0 |   |
| 401(k)                Retirement Plan                                                                                                 |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |          |   |   | 0        |   |   |   | 0      |   |   |   | (1 | ) |   |   | (1 | ) |
| Amortization                of restricted stock                                                                                       |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |          |   |   | 98       |   |   |   | 0      |   |   |   | 0 |   |   |   | 98 |   |
| Cash                dividends ($0.20 per share)                                                                                       |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | (190   | )      |         |   | 0      |          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | (190 | ) |
|                                                                                                                                  |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |          |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                - September 30, 2006                                                                                           |   |                                         | 3,747,319 |   |   |   | 37     |       |   |   | 18,833   |   |   |     | 12,792 |   |         |   | (894   | )             |   |   | (334     | )      |   |   | (11    | ) |   |   | (341 | ) |   |   | 30,082 |   |

----

----

|                                                                                                                     |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   | Accumulated                |   |   |     |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|--------|--------|--------|--------|------------|--------|--------|----------|--------|--------|----------|--------|--------|--------------|--------|--------|----------------------------|--------|--------|----------|--------|--------|--------|--------|
|                                                                                                                     |   |                                         |      |   |   |   |   | Additional |   |   |     |   |   | Unearned |   |   |         |   |   | Other                      |   |   |     |   |   |   |   |
|                                                                                                                     |   |                                         |      |   | Common |   |   | Paid-In    |   |   | Retained |   |   | ESOP     |   |   | Unearned     |   |   | Comprehensive              |   |   | Treasury |   |   |   |   |
|                                                                                                                     |   | Shares                                       |      |   | Stock  |   |   | Capital    |   |   | Earnings |   |   | Shares   |   |   | Compensation |   |   | Gain                (Loss) |   |   | Stock    |   |   | Totals |   |
|                                                                                                                     |   | (In                Thousands, Except Shares) |      |
|                                                                                                                     |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |                       |   |   |     |   |   |   |   |
| Balance                - September 30, 2006 (brought forward)                                                            |   |                                         | 3,747,319 |   |   | $      | 37     |       |   | $      | 18,833   |   |   | $        | 12,792 |   |         | $      | (894   | )                          |   | $      | (334     | )      |   | $      | (11    | ) |   | $ | (341 | ) |   | $ | 30,082 |   |
|                                                                                                                     |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |                       |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjustment                to initially apply FASB                     Statement No. 158 - Net of tax |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | (621   | ) |   |   |   |   |   |   | (621 | ) |
| Comprehensive                income:                                                                                     |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |                       |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                                |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 743    |   |         |   | 0      |                       |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 743 |   |
| Pension                curtailment - Net of tax                                                                          |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | 75     |   |   |   | 0 |   |   |   | 75 |   |
| Amortization                of unrecognized prior service costs                                                          |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |                       |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                    and netgains/losses - Net of tax                                                       |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | 262    |   |   |   | 0 |   |   |   | 262 |   |
| Net                unrealized gain on available-for-sale                    securities - Net of tax       |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | 103    |   |   |   |   |   |   |   | 103 |   |
|                                                                                                                     |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |                       |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                comprehensive income                                                                                |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |                       |   |   |     |   |   |   |   |   |   |   |   |   |   |   | 1,183 |   |
|                                                                                                                     |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |                       |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale                of common stock (net of CCMHC                     shares reissued)               |   |                                         | 3,369,061 |   |   |   | 34     |       |   |   | 51,204   |   |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 51,238 |   |
| Unearned                shares held by ESOP                                                                              |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | (3,415 | )                          |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | (3,415 | ) |
| Stock                option expense                                                                                      |   |                                         | 0         |   |   |   | 0      |       |   |   | 75       |   |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 75 |   |
| Committed                ESOP shares                                                                                     |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 432    |                       |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 432 |   |
| Appreciation                in fair value of ESOP shares                     charged to expense      |   |                                         | 0         |   |   |   | 0      |       |   |   | 76       |   |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 76 |   |
| Cancellation                of treasury stock                                                                            |   |                                         | 0         |   |   |   | 0      |       |   |   | (341     | )      |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | 0      |   |   |   | 341 |   |   |   | 0 |   |
| Dissolution                of CCMHC                                                                                      |   |                                         | 0         |   |   |   | 0      |       |   |   | 92       |   |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 92 |   |
| Cancellation                of unvested restricted stock                                                                 |   |                                         | (2,733    | )      |   |   | 0      |       |   |   | (37      | )      |   |     | 0      |   |         |   | 0      |                       |   |   | 37       |   |   |   | 0      |   |   |   | 0 |   |   |   | 0 |   |
| Stock                options exercised                                                                                   |   |                                         | 4,558     |   |   |   | 0      |       |   |   | 32       |   |   |     | 0      |   |         |   | 0      |                       |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | 32 |   |
| Amortization                of restricted stock                                                                          |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | 0      |   |         |   | 0      |                       |   |   | 90       |   |   |   | 0      |   |   |   |   |   |   |   | 90 |   |
| Cash                dividends ($0.20 per share)                                                                          |   |                                         | 0         |   |   |   | 0      |       |   |   | 0        |   |   |     | (1,115 | )      |         |   | 0      |                       |   |   | 0        |   |   |   | 0      |   |   |   | 0 |   |   |   | (1,115 | ) |
|                                                                                                                     |   |                                         |      |   |   |   |   |       |   |   |     |   |   |     |   |   |         |   |   |                       |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                - September 30, 2007                                                                              |   |                                         | 7,118,205 |   |   | $      | 71     |       |   | $      | 69,934   |   |   | $        | 12,420 |   |         | $      | (3,877 | )                          |   | $      | (207     | )      |   | $      | (192   | ) |   | $ | 0 |   |   | $ | 78,149 |   |

----

----

|                                                                     |   | 2007                          |     |   | 2006   |   |    | 2005   |   |
|--------------------------------------------------------------------------|--------|-------------------------------|----------|--------|--------|--------|---------|--------|--------|
|                                                                     |   | (In                Thousands) |     |
|                                                                     |   |                          |     |   |   |   |    |   |   |
| Increase                (decrease) in cash and cash equivalents:         |   |                          |     |   |   |   |    |   |   |
| Cash                flows from operating activities:                     |   |                          |     |   |   |   |    |   |   |
| Net                income                                                |   | $                             | 743      |   |   | $      | 446     |   |   | $ | 1,051 |   |
|                                                                     |   |                          |     |   |   |   |    |   |   |   |   |   |
| Adjustments                to reconcile net income to net cash provided  |   |                          |     |   |   |   |    |   |   |   |   |   |
| by                (used in) operating activities:                        |   |                          |     |   |   |   |    |   |   |   |   |   |
| Securities                discount accretion                             |   |                          | (17      | )      |   |   | 0       |   |   |   | 0 |   |
| Provision                for depreciation                                |   |                          | 493      |   |   |   | 416     |   |   |   | 278 |   |
| Provision                for loan losses                                 |   |                          | 470      |   |   |   | 251     |   |   |   | 414 |   |
| Gain                on sale of securities                                |   |                          | 0        |   |   |   | (27     | )      |   |   | 0 |   |
| Amortization                of purchase accounting adjustments           |   |                          | (68      | )      |   |   | (76     | )      |   |   | (19 | ) |
| Amortization                of core deposit intangible                   |   |                          | 301      |   |   |   | 302     |   |   |   | 95 |   |
| Amortization                of restricted stock                          |   |                          | 90       |   |   |   | 98      |   |   |   | 60 |   |
| Provision                for stock options                               |   |                          | 75       |   |   |   | 0       |   |   |   | 0 |   |
| Provision                (benefit) for deferred income taxes             |   |                          | (230     | )      |   |   | (338    | )      |   |   | 104 |   |
| Net                change in loans held for sale                         |   |                          | 321      |   |   |   | (321    | )      |   |   | 0 |   |
| Federal                Home Loan Bank stock dividends                    |   |                          | 0        |   |   |   | (16     | )      |   |   | (54 | ) |
| ESOP                contribution expense in excess of shares released    |   |                          | 76       |   |   |   | 64      |   |   |   | 43 |   |
| Increase                in accrued interest receivable and other assets  |   |                          | (967     | )      |   |   | (891    | )      |   |   | (584 | ) |
| Increase                (decrease) in other liabilities                  |   |                          | (2,497   | )      |   |   | 3,850   |   |   |   | 360 |   |
|                                                                     |   |                          |     |   |   |   |    |   |   |   |   |   |
| Total                adjustments                                         |   |                          | (1,953   | )      |   |   | 3,312   |   |   |   | 697 |   |
|                                                                     |   |                          |     |   |   |   |    |   |   |   |   |   |
| Net                cash provided by (used in) operating activities       |   |                          | (1,210   | )      |   |   | 3,758   |   |   |   | 1,748 |   |
|                                                                     |   |                          |     |   |   |   |    |   |   |   |   |   |
| Cash                flows from investing activities:                     |   |                          |     |   |   |   |    |   |   |   |   |   |
| Proceeds                from maturities of interest-bearing deposits     |   |                          | 588      |   |   |   | 492     |   |   |   | 363 |   |
| Sale                of Federal Home Loan Bank stock                      |   |                          | 496      |   |   |   | 0       |   |   |   | 0 |   |
| Purchase                of Federal Home Loan Bank stock                  |   |                          | (2,258   | )      |   |   | (949    | )      |   |   | (928 | ) |
| Purchase                securities available for sale                    |   |                          | (39,219  | )      |   |   | 0       |   |   |   | 0 |   |
| Proceeds                from maturities of securities available for sale |   |                          | 583      |   |   |   | 0       |   |   |   | 0 |   |
| Proceeds                from sale of securities available for sale       |   |                          | 0        |   |   |   | 1,325   |   |   |   | 0 |   |
| Net                increase in loans                                     |   |                          | (62,074  | )      |   |   | (40,737 | )      |   |   | (39,271 | ) |
| Net                capital expenditures                                  |   |                          | (272     | )      |   |   | (1,171  | )      |   |   | (235 | ) |
| Cash                received for branch acquisition                      |   |                          | 0        |   |   |   | 0       |   |   |   | 13,172 |   |
|                                                                     |   |                          |     |   |   |   |    |   |   |   |   |   |
| Net                cash used in investing activities                     |   |                          | (102,156 | )      |   |   | (41,040 | )      |   |   | (26,899 | ) |

----

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|                                                                                          |   | 2007                          |    |   | 2006   |   |   | 2005   |   |
|-----------------------------------------------------------------------------------------------|--------|-------------------------------|---------|--------|--------|--------|--------|--------|--------|
|                                                                                          |   | (In                Thousands) |    |
| Cash                flows from financing activities:                                          |   |                          |    |   |   |   |   |   |   |
| Net                increase in borrowings                                                     |   | $                             | 35,246  |   |   | $      | 25,000 |   |   | $ | 22,700 |   |
| Increase                in deposits                                                           |   |                          | 21,040  |   |   |   | 9,259  |   |   |   | 7,917 |   |
| Payments                to acquire treasury stock                                             |   |                          | 0       |   |   |   | (1     | )      |   |   | (895 | ) |
| Proceeds                from sale of common stock                                             |   |                          | 51,238  |   |   |   | 0      |   |   |   | 0 |   |
| Dissolution                of CCMHC                                                           |   |                          | 92      |   |   |   | 0      |   |   |   | 0 |   |
| Stock                options exercised                                                        |   |                          | 32      |   |   |   | 0      |   |   |   | 0 |   |
| Loan                to ESOP for purchase of common stock                                      |   |                          | (3,415  | )      |   |   | 0      |   |   |   | 0 |   |
| Reduction                in unallocated shares held by ESOP                                   |   |                          | 432     |   |   |   | 119    |   |   |   | 119 |   |
| Cash                dividends paid                                                            |   |                          | (1,115  | )      |   |   | (190   | )      |   |   | (193 | ) |
|                                                                                          |   |                          |    |   |   |   |   |   |   |   |   |   |
| Net                cash provided by financing activities                                      |   |                          | 103,550 |   |   |   | 34,187 |   |   |   | 29,648 |   |
|                                                                                          |   |                          |    |   |   |   |   |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents                           |   |                          | 184     |   |   |   | (3,095 | )      |   |   | 4,497 |   |
| Cash                and cash equivalents at beginning                                         |   |                          | 6,170   |   |   |   | 9,265  |   |   |   | 4,768 |   |
|                                                                                          |   |                          |    |   |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents at end                                               |   | $                             | 6,354   |   |   | $      | 6,170  |   |   | $ | 9,265 |   |
|                                                                                          |   |                          |    |   |   |   |   |   |   |   |   |   |
| Supplemental                cash flow information:                                            |   |                          |    |   |   |   |   |   |   |   |   |   |
| Cash                paid during the year for:                                                 |   |                          |    |   |   |   |   |   |   |   |   |   |
| Interest                on deposits                                                           |   | $                             | 6,994   |   |   | $      | 5,231  |   |   | $ | 3,117 |   |
| Interest                paid on borrowings                                                    |   |                          | 1,757   |   |   |   | 2,028  |   |   |   | 729 |   |
| Income                taxes                                                                   |   |                          | 806     |   |   |   | 555    |   |   |   | 728 |   |
|                                                                                          |   |                          |    |   |   |   |   |   |   |   |   |   |
| Supplemental                schedule of noncash investing and financing activities:           |   |                          |    |   |   |
|                                                                                          |   |                          |    |   |   |   |   |   |   |   |   |   |
|       Loans                transferred to foreclosed properties |   | $                             | 94      |   |   | $      | 376    |   |   | $ | 148 |   |

----

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| Note                1 | Summary                of Significant Accounting PoliciesNature                of Operations Citizens                Community Bancorp, Inc.  (the “Company”) is a federally                chartered holding company which owns all of the common stock of Citizens                Community Federal (the "Bank").  The Bank operates as a full                service savings bank with primary markets in, but not limited to,                Wisconsin, Minnesota, and Michigan.  It is engaged in the                business of attracting deposits from the general public and investing                those deposits in residential and consumer loans. On                October 31, 2006, a second-step conversion was completed, and as                a result,                the Company was formed.  Prior to the second-step conversion,                Citizens Community Bancorp was a majority-owned subsidiary of CCMHC,                a                federally chartered mutual holding company.  See Note 2 for                further discussion. Principles                of Consolidation The                consolidated financial statements include the accounts of Citizens                Community Bancorp, Inc. and its wholly owned subsidiary, Citizens                Community Federal.  All significant intercompany balances and                transactions have been eliminated.  The accounting and reporting                policies of the Company conform to accounting principles generally                accepted in the United States and to the practices within the banking                industry. Use                of Estimates in Preparation of Financial Statements The                preparation of the consolidated financial statements in conformity                with                accounting principles generally accepted in the United States requires                management to make certain estimates and assumptions that affect                the                reported amounts of assets and liabilities, the disclosure of contingent                assets and liabilities at the date of the financial statements, and                the                reported amounts of revenue and expenses during the reporting                period.  Actual results could differ from these                estimates. Cash                and Cash Equivalents For                purposes of reporting cash flows in the consolidated financial statements,                cash and cash equivalents include cash due from banks and interest-bearing                deposits with original maturities of three months or                less. |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Note                1 | Summary                of Significant Accounting Policies (Continued) Other                Interest-Bearing Deposits Other                interest-bearing deposits mature within three years and are carried                at                cost, which approximates fair value. Securities Securities                are classified as available for sale and are carried at fair value,                with                unrealized gains and losses reported in other comprehensive                income.  Amortization of premiums and accretion of discounts are                recognized in interest income using the interest method over the                estimated                lives of the securities. Declines                in fair value of securities that are deemed to be other than temporary,                if                applicable, are reflected in earnings as realized losses.  In                estimating other-than-temporary impairment losses, management considers                the length of time and the extent to which fair value has been less                than                cost, the financial condition and near-term prospects of the issuer,                and                the intent and ability of the Company to retain its investment in                the                issuer for a period of time sufficient to allow for any anticipated                recovery in fair value.  Gains and losses on the sale of                securities are recorded on the trade date and determined using the                specific-identification method. Loans Loans                that management has the intent and ability to hold for the foreseeable                future, or until maturity or payoff, generally are reported at their                outstanding unpaid principal balances adjusted for charge-offs, the                allowance for loan losses, and any deferred fees or costs on originated                loans.  Interest on loans is accrued and credited to income                based on the unpaid principal balance.  Loan origination fees,                net of certain direct origination costs, are deferred and recognized                as an                adjustment of the related loan yield over the life of the                loan. Allowance                for Loan Losses The                allowance for loan losses is established through a provision for                loan                losses charged to expense.  Loan losses are charged against the                allowance for loan losses when management believes that the collectibility                of the principal is unlikely.  Subsequent recoveries, if any,                are credited to the allowance. Management                regularly evaluates the allowance for loan losses using the Company's                past                loan loss experience, known and inherent risks in the portfolio,                composition of the portfolio, adverse situations that may affect                the                borrower's ability to repay, estimated value of any underlying collateral,                current economic conditions, and other relevant factors.  This                evaluation is inherently subjective since it requires material estimates                that may be susceptible to significant                change. |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Note                1 | Summary                of Significant Accounting Policies (Continued) Allowance                for Loan Losses (Continued) The                allowance for loan losses consists of specific, general, and unallocated                components.  The specific component relates to loans that are                classified as doubtful, substandard, or special mention and includes                allowances estimated for any impaired loans.  The general                component covers nonclassified loans and is based on historical loss                experience adjusted for qualitative factors.  An unallocated                component is maintained to cover uncertainties that could affect                management's estimate of probable losses and reflects the margin                or                imprecision inherent in the underlying assumptions used in the                methodologies for estimating specific and general losses in the                portfolio. The                allowance for loan losses includes specific allowances related to                loans                that have been judged to be impaired under current accounting                standards.  A loan is impaired when, based on current                information, it is probable that the Company will not collect all                amounts                due in accordance with the contractual terms of the loan                agreement.  Management determines whether a loan is impaired on                a case-by-case basis, taking into consideration the payment status,                collateral value, length and reason of any payment delays, the borrower's                prior payment record, and any other relevant factors.  Specific                allowances for impaired loans are based on discounted cash flows                of                expected future payments using the loan's initial effective interest                rate                or the fair value of the collateral if the loan is collateral                dependent. In                addition, various regulatory agencies periodically review the allowance                for loan losses.  These agencies may require additions to the                allowance for loan losses based on their judgments of                collectibility. In                management's judgment, the allowance for loan losses is maintained                at a                level that represents its best estimate of probable losses relating                to                specifically identified loans, as well as probable losses inherent                in the                balance of the loan portfolio.  While management uses the best                information available to make its evaluation, future adjustments                to the                allowance may be necessary if there are significant changes in economic                conditions. Loans                Held for Sale Loans                originated and intended for sale in the secondary market are carried                at                the lower of cost or estimated fair value in the aggregate.  Net                unrealized losses, if any, are recognized through a valuation allowance                by                charges to income. Federal                Home Loan Bank Stock The                Bank owns stock in the Federal Home Loan Bank (FHLB).  FHLB                stock is carried at cost which approximates fair value.  The                Bank is required to hold the stock as a member of the FHLB system,                and                transfer of the stock is substantially restricted.  The stock is                pledged as collateral for outstanding FHLB                advances. |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Note                1 | Summary                of Significant Accounting Policies (Continued) Office                Properties and Equipment Office                properties and equipment are stated at cost.  Maintenance and                repair costs are charged to expense as incurred.  Gains or                losses on disposition of office properties and equipment are reflected                in                income.  Depreciation is computed principally on the                straight-line method and is based on the estimated useful lives of                the                assets, varying from 10 to 40 years for buildings and 3 to 10 years                for                equipment. Intangible                Assets and Goodwill Intangible                assets attributable to the value of core deposits acquired and the                excess                of purchase price over fair value of assets acquired (goodwill) are                stated                at cost less accumulated amortization.  Intangible assets are                amortized on a straight-line basis over periods of seven to fifteen                years.  Goodwill is not amortized. The                Company reviews intangible assets and goodwill for impairment at                least                annually and whenever events or changes in circumstances indicate                that the                carrying amount of an asset may not be recoverable.  The                evaluation includes assessing the estimated fair value of the intangible                asset based on market prices for similar assets, where available,                and the                present value of the estimated future cash flows associated with                the                intangible asset.  Adjustments are recorded if it is determined                that the benefit of the intangible asset has decreased. Foreclosed                Assets Assets                acquired through, or in lieu of, loan foreclosure are held for sale                and                are initially recorded at fair value at the date of foreclosure,                establishing a new cost basis.  Subsequent to foreclosure,                valuations are periodically performed by management, and the assets                are                carried at the lower of carrying amount or fair value less cost to                sell.  Revenue and expenses from operations and changes in the                valuation allowance are included in net expenses from foreclosed                assets. Income                Taxes Deferred                income taxes have been provided under the liability                method.  Deferred tax assets and liabilities are determined                based on the difference between the consolidated financial statement                and                tax basis of assets and liabilities as measured by the current enacted                tax                rates which will be in effect when these differences are expected                to                reverse.  Provision (credit) for deferred taxes is the result of                changes in the deferred tax assets and liabilities. Advertising                Costs Advertising                costs are expensed as incurred. |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Note                1 | Summary                of Significant Accounting Policies (Continued) Off-Balance-Sheet                Financial Instruments In                the ordinary course of business, the Bank has entered into                off-balance-sheet financial instruments consisting of commitments                to                extend credit and commitments under credit card                arrangements.  Such financial instruments are recorded in the                financial statements when they become payable. Other                Comprehensive Income (Loss) The                Company's accumulated other comprehensive income (loss) is comprised                of                the unrealized gain (loss) on securities available for sale and prior                service costs, and net gain and loss required to be recognized under                FAS                No. 158, net of tax, and is shown on the consolidated statements                of                stockholders' equity. Segment                Information The                Company, through a branch network of its banking subsidiary, provides                a                full range of banking services in northern Wisconsin, Minnesota,                and                Michigan. While                the Company’s chief decision makers monitor the revenue streams of various                Company products and services, operations are managed and financial                performance is evaluated on a companywide basis.  Accordingly,                all of the Company’s banking operations are considered by management to be                aggregated in one reportable operating segment. Rate                Lock Commitments The                Company enters into commitments to originate loans whereby the interest                rate on the loan is determined prior to funding (rate lock                commitments).  Rate lock commitments on mortgage loans that are                intended to be sold are considered to be derivatives.  Rate lock                commitments are recorded only to the extent of fees received since                recording the estimated fair value of these commitments would not                have a                significant impact on the consolidated financial                statements.  Fees received are subsequently included in the net                gain or loss on the sale of loans. Stock-Based                Compensation Effective                October 1, 2006, the Company adopted SFAS No. 123 (R), *Share-Based                Payment*, which requires the Company to measure all employee                stock-based compensation awards using a fair value method and to                record                such expense in its consolidated financial statements. The                Company accounts for employee stock compensation plans using the                fair-value-based method of accounting.  Under this method,                compensation cost is measured at the grant date based on the value                of the                award and is recognized over the service period, which is also the                vesting                period. |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Note                1 | Summary                of Significant Accounting Policies (Continued) Stock-Based                Compensation (Continued) Pursuant                to SFAS No. 123 disclosure requirements, pro forma net income and                basic                and diluted earnings per share are presented below as if compensation                cost                for stock options was determined under the fair value method and                amortized                to expense over the options' vesting periods for each                year. |
|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|                                                                        |   | Year                Ended     |   |
|-----------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                        |   | September                30,  |   |
|                                                                        |   | 2006                          |   |   | 2005 |   |
|                                                                        |   | (In                Thousands) |   |
|                                                                        |   |                          |   |   |   |   |
| Net                income, as reported                                      |   | $                             | 446    |   |   | $ | 1,051 |   |
| Deduct:                                                                     |   |                          |   |   |   |   |   |   |
| Total                stock-based employee compensation expense              |   |                          |   |   |   |   |   |   |
| determined                under the fair-value-based method for all awards, |   |                          |   |   |   |
| net                of related tax effects                                   |   |                          | 67     |   |   |   | 45 |   |
|                                                                        |   |                          |   |   |   |   |   |   |
| Pro                forma net income                                         |   | $                             | 379    |   |   | $ | 1,006 |   |
|                                                                        |   |                          |   |   |   |   |   |   |
| Earnings                per share - Basic and diluted                       |   |                          |   |   |   |   |   |   |
| As                reported:                                                 |   |                          |   |   |   |   |   |   |
| Basic                                                                       |   | $                             | 0.12   |   |   | $ | 0.35 |   |
| Diluted                                                                     |   | $                             | 0.12   |   |   | $ | 0.35 |   |
|                                                                        |   |                          |   |   |   |   |   |   |
| Pro                forma:                                                   |   |                          |   |   |   |   |   |   |
| Basic                                                                       |   | $                             | 0.10   |   |   | $ | 0.33 |   |
| Diluted                                                                     |   | $                             | 0.10   |   |   | $ | 0.33 |   |

| NOTE                1 | Presentation All                footnote information is presented in thousands, except for per share                amounts. Recent                Accounting Changes In                February 2007, the Financial Accounting Standards Board (FASB) issued                Statement of Financial Accounting Standards (SFAS) No. 159, *The Fair                Value Option for Financial Assets and Financial                Liabilities*.  This statement permits entities to choose to                measure many financial instruments and certain other items at fair                value                that are not currently required to be measured at fair                value.  The objective is to improve financial reporting by                providing entities with the opportunity to mitigate volatility in                reported                earnings caused by measuring related assets and liabilities differently                without having to apply complex hedge accounting                provisions. |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

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| Note                1 | Summary                of Significant Accounting Policies (Continued) This                statement also establishes presentation and disclosure requirements                designed to facilitate comparisons between entities that choose different                measurement attributes for similar types of assets and                liabilities.  SFAS No. 159 is effective for financial statements                issued for fiscal years beginning after November 15, 2007.  The                Company believes the adoption of this statement will not have a                significant effect on the financial statements of the                Company. In                September 2006, the Financial Accounting Standards Board issued Statement                of Financial Accounting Standard No. 158, *Employers' Accounting for                Defined Benefit Pension and Other Postretirement                Plans.  *This statement amends SFAS No. 87, *Employers'                Accounting for Pensions;* SFAS No. 88, *Employers' Accounting for                Settlements and Curtailments of Defined Benefit Pension Plans and                for                Termination Benefits;* SFAS No. 106, *Employers' Accounting for                Postretirement Benefits Other Than Pensions;* and SFAS No. 132                (revised 2003), *Employers' Disclosures About Pensions and Other                Postretirement Benefits*.  SFAS No. 158 requires an employer                to recognize the overfunded or underfunded status of a defined benefit                postretirement plan (other than a multiemployer plan) as an asset                or                liability in its statement of financial position and to recognize                gains or                losses and prior service costs or credits that arise during the year                but                are not recognized as components of net periodic benefit cost under                SFAS                No. 87 as a component of other comprehensive income.  It also                requires an employer to measure the funded status of a plan as of                the date                of its year-end statement of financial position, with limited                exceptions.  SFAS No. 158 is effective for public companies as                of the end of the fiscal year ending after December 15,                2006.  The requirement to measure plan assets and benefit                obligations as of the date of the fiscal year-end statement of financial                position is effective for fiscal years ending after December 15,                2008.  The Company adopted this statement which resulted in an                increase in liabilities and a decrease in equity of approximately                $621 for                the underfunded status of the plan, net of tax. In                September 2006, the Securities and Exchange Commission's office (SEC)                announced *Staff Accounting Bulletin No. 108* (SAB                108).  SAB 108 addresses how to quantify financial statement                errors that arose in prior periods for purposes of assessing their                materiality in the current period.  It requires analysis of                misstatements using both an income statement (rollover) approach                and a                balance sheet (iron curtain) approach in assessing                materiality.  It clarifies that immaterial financial statement                errors in a prior SEC filing can be corrected in subsequent filings                without the need to amend the prior filing.  In addition, SAB                108 provides transitional relief for correcting errors that would                have                been considered immaterial before its issuance.  The adoption of                SAB 108 will not have an impact on our consolidated financial position,                results of operations, or cash                flows. |
|-----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Note                1 | Summary                of Significant Accounting Policies (Continued) In                June 2006, the Financial Accounting Standards Board issued FASB                InterpretationNo.                48 (FIN 48), *Accounting for Uncertainty in Income Taxes.*This                interpretation clarifies the accounting for uncertainty in income                taxes                recognized in a company's financial statements in accordance with                SFAS No.                109, *Accounting for Income Taxes*.  FIN 48 prescribed a                recognition threshold and measurement attribute for the financial                statement recognition and measurement of a tax position taken or                expected                to be taken in a tax return.  This interpretation also provides                guidance on derecognition, classification, interest and penalties,                accounting in interim periods, disclosure, and transition.  FIN                48 is effective for fiscal years beginning after December 15, 2006,                for                public companies.  The adoption of this interpretation will not                have a significant effect on the financial statements of the                Company.                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Note                2 | Second-Step                Conversion On                October 31, 2006, a second-step conversion was completed in which                Citizens                Community MHC converted to stock form.  Through this                transaction, Citizens Community Bancorp (CCB) ceased to exist and                was                replaced by Citizens Community Bancorp, Inc. (CCB, Inc.) as the holding                company for the Bank.  A total of 5,290,000 shares of common                stock was sold in the offering at $10 per share through which CCB,                Inc.                received proceeds of $51,238 net of offering costs of                $1,662.  CCB, Inc. also contributed $25,619 or approximately 50%                of the net proceeds to the Bank in the form of a capital                contribution.  CCB, Inc. lent $3,415 to the Bank’s employee                stock ownership plan, and the plan used those funds to acquire 341,501                shares of common stock at $10 per share. As                part of the conversion, outstanding public shares of CCB were exchanged                for 1.91067 shares of CCB, Inc., the new holding company of Citizens                Community Federal.  The exchange resulted in an additional                1,826,380 of outstanding shares of CCB, Inc. for a total of 7,116,380                outstanding shares.  Treasury stock held was cancelled as of                that date. At                the time of closing of the conversion on October 31, 2006, approximately                $49,485, less offering expenses, became capital of CCB,                Inc. |

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| Note                3 | Cash                and Cash Equivalents In                the normal course of business, the Bank maintains cash and due from                bank                balances with correspondent banks which routinely exceed insured                amounts.  Accounts at each institution are insured by the                Federal Deposit Insurance Corporation up to $100.  The Bank                monitors the financial condition of correspondent banks and believes                credit risk is minimal. |
|-----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Note                4 | Securities The                amortized cost and estimated fair value of securities, with gross                unrealized gains and losses at September 30,                follows:                                                                                                                                                                                                                                                                                                                                                   |

|                                          |   |                          |   |   | Gross      |   |   | Gross      |   |   |                      |   |
|-----------------------------------------------|--------|-------------------------------|--------|--------|------------|--------|--------|------------|--------|--------|---------------------------|--------|
|                                          |   | Amortized                     |   |   | Unrealized |   |   | Unrealized |   |   | Estimated                 |   |
|                                          |   | Cost                          |   |   | Gains      |   |   | Losses     |   |   | Fair                Value |   |
|                                          |   | (In                Thousands) |   |
| 2007                                          |   |                          |   |   |       |   |   |       |   |   |                      |   |
|                                          |   |                          |   |   |       |   |   |       |   |   |                      |   |
| Securities                Available for Sale: |   |                          |   |   |       |   |   |       |   |   |                      |   |
|                                          |   |                          |   |   |       |   |   |       |   |   |                      |   |
| Debt                securities:               |   |                          |   |   |       |   |   |       |   |   |                      |   |
| Mortgage-related                securities    |   | $                             | 39,450 |   |       | $      | 150    |       |   | $      | 8                         |   |   | $ | 39,592 |   |
|                                          |   |                          |   |   |       |   |   |       |   |   |                      |   |   |   |   |   |

|                                          |                          | Gross      | Gross      |                      |
|-----------------------------------------------|-------------------------------|------------|------------|---------------------------|
|                                          | Amortized                     | Unrealized | Unrealized | Estimated                 |
|                                          | Cost                          | Gains      | Losses     | Fair                Value |
|                                          | (In                Thousands) |
| 2006                                          |                          |       |       |                      |
|                                          |                          |       |       |                      |
| Securities                Available for Sale: |                          |       |       |                      |
|                                          |                          |       |       |                      |
| Debt                securities:               |                          |       |       |                      |
| Mortgage-related                securities    | $796                          | $0         | $14        | $782                      |

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| Note                4 | Securities                (Continued) The                following tables show the fair value and gross unrealized losses                of                securities with unrealized losses at September 30, aggregated by                investment category and length of time that individual securities                have                been in a continuous unrealized loss                position: |
|-----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                       |   | Less                than 12 Months |   |   | 12                Months or More |   |   | Total  |   |
|--------------------------------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|--------|--------|--------|
| Description                                |   | Fair                               |   |   | Unrealized                       |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| of                Securities               |   | Value                              |   |   | Losses                           |   |   | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
|                                       |   | (In                Thousands)      |   |
| 2007                                       |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                       |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-related                securities |   | $                                  | 0      |   |                             | $      | 0      |   |   | $ | 655 |   |   | $ | 8 |   |   | $ | 655 |   |   | $ | 8 |   |
|                                       |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                temporarily impaired  |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities                                 |   | $                                  | 0      |   |                             | $      | 0      |   |   | $ | 655 |   |   | $ | 8 |   |   | $ | 655 |   |   | $ | 8 |   |

| 2006                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-related                securities |   | $      | 0      |   |   | $      | 0      |   |   | $      | 782    |   |   | $      | 14     |   |   | $      | 782 |   |   | $ | 14 |   |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                temporarily impaired  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities                                 |   | $      | 0      |   |   | $      | 0      |   |   | $      | 782    |   |   | $      | 14     |   |   | $      | 782 |   |   | $ | 14 |   |
|                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                | At                September 30, 2007, three securities have unrealized losses with                aggregate                depreciation of less than 1% of the Company’s amortized cost                basis.  The unrealized losses relate principally to the increase                in interest rates and are not due to changes in the financial condition                of                the issuer.  When analyzing an issuer’s financial condition,                management considers whether the securities are issued by a government                body or agency, whether a rating agency has downgraded the securities,                and                industry analysts’ reports.  Since management has the ability to                hold securities until the foreseeable future for securities available                for                sale, no declines are deemed to be other than                temporary. |
|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                | Following                is a summary of the proceeds from sales of securities available for                sale,                as well as gross gains and losses for the years ended September                30: |
|--------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | 2007                          |   |   | 2006   |   |   | 2005   |   |
|--------|--------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|
|   |   | (In                Thousands) |   |
|   |   |                          |   |   |   |   |   |   |   |
|   | $      | 0                             |   |   | $      | 1,325  |   |   | $      | 0 |   |
|   |   | 0                             |   |   |   | 27     |   |   |   | 0 |   |

|                | No                securities were pledged by the Company as of September 30, 2007 and                2006. |
|--------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|

----

----

| Note                5 | Loans The                composition of loans at September 30                follows: |
|-----------------------|--------------------------------------------------------------------------------------------|

|                                           |   | 2007                          |    |   | 2006   |   |
|------------------------------------------------|--------|-------------------------------|---------|--------|--------|--------|
|                                           |   | (In                Thousands) |    |
|                                           |   |                          |    |   |   |   |
| Real                estate loans:              |   |                          |    |   |   |   |
| First                mortgages--1- to 4-family |   | $                             | 177,281 |   |   | $      | 156,235 |   |
| Multifamily                and commercial      |   |                          | 215     |   |   |   | 240 |   |
| Second                mortgages                |   |                          | 10,461  |   |   |   | 9,161 |   |
|                                           |   |                          |    |   |   |   |   |   |
| Total                real estate loans         |   |                          | 187,957 |   |   |   | 165,636 |   |
|                                           |   |                          |    |   |   |   |   |   |
| Consumer                loans:                 |   |                          |    |   |   |   |   |   |
| Automobile                                     |   |                          | 27,168  |   |   |   | 24,445 |   |
| Secured                personal                |   |                          | 100,966 |   |   |   | 64,384 |   |
| Unsecured                personal              |   |                          | 4,610   |   |   |   | 4,774 |   |
|                                           |   |                          |    |   |   |   |   |   |
| Total                consumer loans            |   |                          | 132,744 |   |   |   | 93,603 |   |
|                                           |   |                          |    |   |   |   |   |   |
| Gross                loans                     |   |                          | 320,701 |   |   |   | 259,239 |   |
| Allowance                for loan losses       |   |                          | (926    | )      |   |   | (835 | ) |
| Net                deferred loan costs         |   |                          | 252     |   |   |   | 63 |   |
|                                           |   |                          |    |   |   |   |   |   |
| Loans                receivable, net           |   | $                             | 320,027 |   |   | $      | 258,467 |   |

|               | The                aggregate amount of nonperforming loans was $1,520 and $1,390 at                September                30, 2007 and 2006, respectively.  Nonperforming loans are those                which are contractually past due more than 90 days as to interest                or                principal payments, on a nonaccrual of interest status, or loans                the terms                of which have been renegotiated to provide a reduction or deferral                of                interest or principal.  If interest on those loans had been                accrued, such income would have been $102, $52, and $36, in 2007,                2006,                and 2005, respectively.  No loans were considered impaired in                2007 and 2006. Directors,                officers, principal stockholders, and employees of the Company, including                their families and firms in which they are principal owners, are                considered to be related parties.  Substantially all loans to                directors and executive officers were made on the same terms, including                interest rates and collateral, as those prevailing at the time for                comparable transactions with others and, in the opinion of management,                did                not involve more than the normal risk of collectibility or present                other                unfavorable features. |
|--------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                5 | Loans                (Continued) Activity                in related-party loans for the years ended September 30, 2007 and                2006, is                as follows: |
|-----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | 2007                          |   |   | 2006   |   |
|------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|
|                                           |   | (In                Thousands) |   |
|                                           |   |                          |   |   |   |   |
| Loans                outstanding, October 1    |   | $                             | 46     |   |   | $      | 62 |   |
| New                loans                       |   |                          | 0      |   |   |   | 26 |   |
| Repayments                                     |   |                          | (19    | )      |   |   | (42 | ) |
|                                           |   |                          |   |   |   |   |   |   |
| Loans                outstanding, September 30 |   | $                             | 27     |   |   | $      | 46 |   |

|            | An                analysis of the activity in the allowance for loan losses at September                30                follows: |
|--------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|

|                                                                  |                          | 2007   |   |   | 2006   |   |   | 2005   |   |
|-----------------------------------------------------------------------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                  | (In                Thousands) |   |
|                                                                  |                          |   |   |   |   |   |   |   |   |
| Balance                at beginning                                   |                          | $      | 835    |   |   | $      | 803    |   |   | $ | 554 |   |
| Provisions                charged to operating expense                |                          |   | 470    |   |   |   | 251    |   |   |   | 414 |   |
| Allowance                for loan losses obtained through bank merger |                          |   | 0      |   |   |   | 0      |   |   |   | 40 |   |
| Loans                charged off                                      |                          |   | (413   | )      |   |   | (247   | )      |   |   | (236 | ) |
| Recoveries                on loans                                    |                          |   | 34     |   |   |   | 28     |   |   |   | 31 |   |
|                                                                  |                          |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at end                                         |                          | $      | 926    |   |   | $      | 835    |   |   | $ | 803 |   |

| Note                6 | Office                Properties and Equipment Office                properties and equipment at September 30 consists of the                following: |
|-----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                 |   | 2007                          |   |   | 2006   |   |
|------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|
|                                                 |   | (In                Thousands) |   |
|                                                 |   |                          |   |   |   |   |
| Land                                                 |   | $                             | 613    |   |   | $      | 613 |   |
| Buildings                                            |   |                          | 3,007  |   |   |   | 2,997 |   |
| Furniture,                equipment, and vehicles    |   |                          | 3,487  |   |   |   | 3,225 |   |
|                                                 |   |                          |   |   |   |   |   |   |
| Subtotals                                            |   |                          | 7,107  |   |   |   | 6,835 |   |
| Less                - Accumulated depreciation       |   |                          | 3,647  |   |   |   | 3,154 |   |
|                                                 |   |                          |   |   |   |   |   |   |
| Office                properties and equipment - Net |   | $                             | 3,460  |   |   | $      | 3,681 |   |

|            | Depreciation                charged to operating expense totaled $493, $416, and $278, for the                years                ended September 30, 2007, 2006, and 2005,                respectively. |
|--------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                7 | Intangible                Assets The                carrying amount of the core deposit intangible at September 30 is                as                follows: |
|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                |   | 2007                          |   |   | 2006   |   |   | 2005   |   |
|-------------------------------------|--------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                |   | (In                Thousands) |   |
|                                |   |                          |   |   |   |   |   |   |   |
| Balance                at beginning |   | $                             | 1,829  |   |   | $      | 2,131  |   |   | $ | 349 |   |
| Capitalized                         |   |                          | 0      |   |   |   | 0      |   |   |   | 1,877 |   |
| Amortization                        |   |                          | (301   | )      |   |   | (302   | )      |   |   | (95 | ) |
|                                |   |                          |   |   |   |   |   |   |   |   |   |   |
| Balance                at end       |   | $                             | 1,528  |   |   | $      | 1,829  |   |   | $ | 2,131 |   |

|            | Estimated                future amortization expense for amortizing core deposit intangible                is $301                annually. |
|--------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| Note                8 | Goodwill Goodwill                resulting from an acquisition in 2005 was $5,466 as of September                30, 2007                and 2006.  The Company tested for impairment during the fourth                quarter and determined there was no impairment of goodwill during                2007 or                2006. |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| Note                9 | Deposits The                composition of deposits at September 30                follows: |
|-----------------------|--------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|                                                |   | 2007                          |    |   | 2006   |   |
|-----------------------------------------------------|--------|-------------------------------|---------|--------|--------|--------|
|                                                |   | (In                Thousands) |    |
|                                                |   |                          |    |   |   |   |
| Non-interest-bearing                demand deposits |   | $                             | 13,783  |   |   | $      | 13,785 |   |
| Interest-bearing                demand deposits     |   |                          | 4,874   |   |   |   | 4,884 |   |
| Savings                accounts                     |   |                          | 22,855  |   |   |   | 24,975 |   |
| Money                market accounts                |   |                          | 27,121  |   |   |   | 22,262 |   |
| Certificate                accounts                 |   |                          | 139,101 |   |   |   | 120,805 |   |
|                                                |   |                          |    |   |   |   |   |   |
| Total                deposits                       |   | $                             | 207,734 |   |   | $      | 186,711 |   |

----

----

| Note                9 | Deposits                (Continued) Interest                expense on deposits for the years ended September 30 was as                follows: |
|-----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                            |   | 2007                          |   |   | 2006   |   |   | 2005   |   |
|-------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                            |   | (In                Thousands) |   |
|                                            |   |                          |   |   |   |   |   |   |   |
| Interest-bearing                demand deposits |   | $                             | 28     |   |   | $      | 28     |   |   | $ | 30 |   |
| Savings                accounts                 |   |                          | 218    |   |   |   | 167    |   |   |   | 147 |   |
| Money                market accounts            |   |                          | 588    |   |   |   | 500    |   |   |   | 433 |   |
| Certificate                accounts             |   |                          | 6,160  |   |   |   | 4,487  |   |   |   | 2,653 |   |
|                                            |   |                          |   |   |   |   |   |   |   |   |   |   |
| Totals                                          |   | $                             | 6,994  |   |   | $      | 5,182  |   |   | $ | 3,263 |   |

|            | The                aggregate amount of time deposit accounts with individual balances                greater                than $100,000 was $30,221 and $20,012 at September 30, 2007 and 2006,                respectively. At                September 30, 2007, the scheduled maturities of certificate accounts                are                as follows: |
|--------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                      |   | (In                Thousands) |
|---------------------------|--------|-------------------------------|
|                      |   |                          |
| 2008                      |   | $106,030                      |
| 2009                      |   | 27,997                        |
| 2010                      |   | 2,616                         |
| 2011                      |   | 2,299                         |
| After                2011 |   | 159                           |
|                      |   |                          |
| Total                     |   | $139,101                      |

|            | Deposits                from directors, executive officers, principal shareholders and their                affiliates, totaled $446 as of September 30,                2007. |
|--------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                10 | Borrowed                Funds Borrowed                funds consist of the following at September                30: |
|------------------------|---------------------------------------------------------------------------------------------------------------------------|

|                                           |   | 2007                                  |      |   | 2006   |   |
|------------------------------------------------|--------|---------------------------------------|-----------|--------|--------|--------|
|                                           |   | Rates                                 |      |   | Amount |   |   | Rates |   |   | Amount |   |
|                                           |   | (Dollars                in Thousands) |      |
|                                           |   |                                  |      |   |   |   |   |   |   |   |   |   |
| Federal                Home Loan Bank (FHLB):  |   |                                  |      |   |   |   |   |   |   |   |
| Fixed                rate, fixed term advances |   |                                  | 4.84-5.48 | %      |   | $      | 53,087 |   |   |   | 4.70-5.53 | % |   | $ | 10,092 |   |
| Adjustable                rate advances        |   |                                  | 5.09      | %      |   |   | 43,359 |   |   |   | 5.62 | % |   |   | 51,108 |   |
|                                           |   |                                  |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Totals                                         |   |                                  |      |   |   | $      | 96,446 |   |   |   |   |   |   | $ | 61,200 |   |

|            | The                following is a summary of scheduled maturities of fixed-term borrowed                funds as of September 30, 2007: |
|--------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

|                      |   | Weighted |   |   |                          |   |
|---------------------------|--------|----------|--------|--------|-------------------------------|--------|
|                      |   | Average  |   |   | Total                         |   |
|                      |   | Rate     |   |   | Amount                        |   |
|                      |   |     |   |   | (In                Thousands) |   |
|                      |   |     |   |   |                          |   |
| 2008                      |   |     | 5.15   | %      |                          | $      | 17,337 |   |
| 2009                      |   |     | 5.15   | %      |                          |   | 13,250 |   |
| 2010                      |   |     | 5.15   | %      |                          |   | 4,600 |   |
| 2011                      |   |     | 5.25   | %      |                          |   | 6,050 |   |
| 2012                      |   |     | 5.23   | %      |                          |   | 9,000 |   |
| After                2012 |   |     | 5.41   | %      |                          |   | 2,850 |   |
|                      |   |     |   |   |                          |   |   |   |
| Total                     |   |     |   |   |                          | $      | 53,087 |   |

|            | Actual                maturities may differ from the scheduled principal maturities due                to call                options on the various advances. The                Company has a master contract agreement with the Federal Home Loan                Bank                that provides for borrowing up to the maximum of 75% of the book                value of                the Company's qualifying one- to four-family residential real estate                loans.  The FHLB provides both fixed and floating rate                advances.  Floating rates are tied to short-term market rates of                interest, such as London InterBank Offered Rate (LIBOR), federal                funds, or                treasury bill rates.  Advances with call provisions permit the                FHLB to request payment beginning on the call date and quarterly                thereafter.  FHLB advances are subject to a prepayment penalty                if they are repaid prior to maturity.  FHLB advances are also                secured by FHLB stock owned by the Company at September 30, 2007                and 2006,                respectively. |
|--------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                11 | Income                Taxes The                components of the provision for income taxes are as                follows: |
|------------------------|---------------------------------------------------------------------------------------------------------------------------------|

|                                                |   | 2007   |   |   | 2006                          |   |   | 2005   |   |
|-----------------------------------------------------|--------|--------|--------|--------|-------------------------------|--------|--------|--------|--------|
|                                                |   |   |   |   | (In                Thousands) |   |
|                                                |   |   |   |   |                          |   |   |   |   |
| Current                tax expense:                 |   |   |   |   |                          |   |   |   |   |
| Federal                                             |   | $      | 580    |   |                          | $      | 509    |   |   | $ | 491 |   |
| State                                               |   |   | 98     |   |                          |   | 138    |   |   |   | 89 |   |
|                                                |   |   |   |   |                          |   |   |   |   |   |   |   |
| Total                current tax expense            |   |   | 678    |   |                          |   | 647    |   |   |   | 580 |   |
|                                                |   |   |   |   |                          |   |   |   |   |   |   |   |
| Deferred                tax expense (benefit):      |   |   |   |   |                          |   |   |   |   |   |   |   |
| Federal                                             |   |   | (190   | )      |                          |   | (261   | )      |   |   | 98 |   |
| State                                               |   |   | (40    | )      |                          |   | (77    | )      |   |   | 6 |   |
|                                                |   |   |   |   |                          |   |   |   |   |   |   |   |
| Total                deferred tax expense (benefit) |   |   | (230   | )      |                          |   | (338   | )      |   |   | 104 |   |
|                                                |   |   |   |   |                          |   |   |   |   |   |   |   |
| Total                provision for income taxes     |   | $      | 448    |   |                          | $      | 309    |   |   | $ | 684 |   |

|            | Deferred                income taxes are provided for the temporary differences between the                financial reporting basis and the tax basis of the Company’s assets and                liabilities.  The major components of net deferred tax asset                (liability) at September 30 are as                follows: |
|--------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                |   | 2007                          |   |   | 2006   |   |
|---------------------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|
|                                                                |   | (In                Thousands) |   |
|                                                                |   |                          |   |   |   |   |
| Deferred                tax assets:                                 |   |                          |   |   |   |   |
| Mutual                savings bank conversion costs                 |   | $                             | 11     |   |   | $      | 21 |   |
| Director/officer                compensation plans                  |   |                          | 1,148  |   |   |   | 749 |   |
| Wisconsin                net operating loss carryforwards           |   |                          | 0      |   |   |   | 9 |   |
| Allowance                for loan losses                            |   |                          | 169    |   |   |   | 80 |   |
| Net                unrealized loss on securities available for sale |   |                          | 0      |   |   |   | 3 |   |
| Purchase                accounting adjustments                      |   |                          | 119    |   |   |   | 145 |   |
|                                                                |   |                          |   |   |   |   |   |   |
| Deferred                tax assets                                  |   |                          | 1,447  |   |   |   | 1,007 |   |
|                                                                |   |                          |   |   |   |   |   |   |
| Deferred                tax liabilities:                            |   |                          |   |   |   |   |   |   |
| Deferred                loan costs                                  |   |                          | (64    | )      |   |   | (25 | ) |
| Office                properties and equipment                      |   |                          | (84    | )      |   |   | (40 | ) |
| Federal                Home Loan Bank stock                         |   |                          | (68    | )      |   |   | (80 | ) |
| Prepaids                                                            |   |                          | (81    | )      |   |   | (28 | ) |
| Core                deposit intangible                              |   |                          | (494   | )      |   |   | (605 | ) |
| Net                unrealized gain on securities available for sale |   |                          | (50    | )      |   |   | 0 |   |
| Other                                                               |   |                          | (16    | )      |   |   | (10 | ) |
|                                                                |   |                          |   |   |   |   |   |   |
| Deferred                tax liabilities                             |   |                          | (857   | )      |   |   | (788 | ) |
|                                                                |   |                          |   |   |   |   |   |   |
| Net                deferred tax asset (liability)                   |   | $                             | 590    |   |   | $      | 219 |   |

----

----

| Note                11 | Income                Taxes (Continued) A                summary of the sources of differences between income taxes at the                federal                statutory rate and the provision for income taxes for the years ended                September 30 follows: |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | 2007                                  |   |   | 2006                     |   |   | 2005   |   |   |                     |
|-------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------|--------|--------|--------|--------|--------|--------------------------|
|                                                        |   |                                  |   |   | Percent                  |   |   |   |   |   | Percent                  |   |   |   |   |   | Percent |   |   |   |
|                                                        |   |                                  |   |   | of                Pretax |   |   |   |   |   | of                Pretax |   |   |   |   |   | of                Pretax |   |   |   |
|                                                        |   | Amount                                |   |   | Income                   |   |   | Amount |   |   | Income                   |   |   | Amount |   |   | Income |   |   |   |
|                                                        |   | (Dollars                in Thousands) |   |
|                                                        |   |                                  |   |   |                     |   |   |   |   |   |                     |   |   |   |   |   |   |   |   |   |
| Tax                expense at statutory rate                |   | $                                     | 405    |   |                     |   | 34.00  | %      |   | $      | 257                      |   |   |   | 34.0 | % |   | $ | 590 |   |   |   | 34.0 | % |   |   |   |   |   |
| Increase                in taxes resulting from state taxes |   |                                  | 43     |   |                     |   | 3.60   | %      |   |   | 52                       |   |   |   | 6.9 | % |   |   | 94 |   |   |   | 5.4 | % |   |   |   |   |   |
|                                                        |   |                                  |   |   |                     |   |   |   |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                provision for income taxes             |   | $                                     | 448    |   |                     |   | 37.6   | %      |   | $      | 309                      |   |   |   | 40.9 | % |   | $ | 684 |   |   |   | 39.4 | % |   |   |   |   |   |

| Note                12 | Retirement                Plans 401(k)                Plan The                Company sponsors a 401(k) profit sharing plan that covers substantially                all employees.  Employees may make pretax voluntary                contributions to the plan which are matched in part by the                Company.  Employer matching contributions to the plan were $84,                $83, and $74, for 2007, 2006, and 2005, respectively. Supplemental                Executive and Director Retirement Plan The                Company maintains an unfunded Supplemental Executive Retirement Plan                (SERP) providing retirement benefits for key employees designated                by the                Board of Directors.  Benefits under the SERP generally are based                on the key employees' years of service and compensation during the                years                preceding retirement.  The Company also maintains an unfunded                Directors' Retirement Plan.  The benefit amounts are determined                by individual director agreements. |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                12 | Retirement                Plans (Continued) The                components of the SERP and Directors' Retirement plans' cost at September                30 are summarized as follows: |
|------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                   |   | 2007                          |   |   | 2006   |   |   | 2005   |   |
|--------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                   |   | (In                Thousands) |   |
|                                                   |   |                          |   |   |   |   |   |   |   |
| Beginning                accrued benefit cost          |   | $                             | 1,613  |   |   | $      | 1,220  |   |   | $ | 686 |   |
|                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |
| Service                cost                            |   |                          | 64     |   |   |   | 86     |   |   |   | 64 |   |
| Interest                cost                           |   |                          | 148    |   |   |   | 137    |   |   |   | 110 |   |
| Expected                return on plan assets          |   |                          | 0      |   |   |   | 0      |   |   |   | 0 |   |
| Amortization                of prior service costs     |   |                          | 117    |   |   |   | 156    |   |   |   | 135 |   |
| Unrecognized                net loss                   |   |                          | 0      |   |   |   | 14     |   |   |   | 4 |   |
|                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |
| Net                periodic benefit cost               |   |                          | 329    |   |   |   | 393    |   |   |   | 313 |   |
| Additional                costs associated with merger |   |                          | 0      |   |   |   | 0      |   |   |   | 221 |   |
| Curtailment                                            |   |                          | 207    |   |   |   | 0      |   |   |   | 0 |   |
|                                                   |   |                          |   |   |   |   |   |   |   |   |   |   |
| Ending                accrued benefit cost             |   | $                             | 2,149  |   |   | $      | 1,613  |   |   | $ | 1,220 |   |

----

----

| Note                12 | Retirement                Plans (Continued) The                following table sets forth the change in projected benefit obligation                and                change in plan assets, funded status of the SERP and Directors' Retirement                plans, and net liability recognized in the Company's balance sheet                at                September 30: |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                           |   | 2007                          |   |   | 2006   |   |   | 2005   |   |
|----------------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                           |   | (In                Thousands) |   |
|                                                           |   |                          |   |   |   |   |   |   |   |
| Change                in benefit obligation:                   |   |                          |   |   |   |   |   |   |   |
| Projected                benefit obligation, beginning of year |   | $                             | 2,646  |   |   | $      | 2,613  |   |   | $ | 1,734 |   |
| Service                cost                                    |   |                          | 64     |   |   |   | 86     |   |   |   | 64 |   |
| Interest                cost                                   |   |                          | 148    |   |   |   | 137    |   |   |   | 110 |   |
| Plan                amendments/effect of merger                |   |                          | 0      |   |   |   | 0      |   |   |   | 481 |   |
| Actuarial                loss                                  |   |                          | (124   | )      |   |   | (190   | )      |   |   | 224 |   |
| Benefits                paid                                   |   |                          | (107   | )      |   |   | 0      |   |   |   | 0 |   |
|                                                           |   |                          |   |   |   |   |   |   |   |   |   |   |
| Projected                benefit obligation, end of year       |   | $                             | 2,627  |   |   | $      | 2,646  |   |   | $ | 2,613 |   |
|                                                           |   |                          |   |   |   |   |   |   |   |   |   |   |
| Change                in plan assets:                          |   |                          |   |   |   |   |   |   |   |   |   |   |
| Plan                assets at fair value, beginning of year    |   | $                             | 0      |   |   | $      | 0      |   |   | $ | 0 |   |
| Actual                return on plan assets                    |   |                          | 0      |   |   |   | 0      |   |   |   | 0 |   |
| Company                contributions                           |   |                          | 0      |   |   |   | 0      |   |   |   | 0 |   |
| Benefits                paid                                   |   |                          | 0      |   |   |   | 0      |   |   |   | 0 |   |
|                                                           |   |                          |   |   |   |   |   |   |   |   |   |   |
| Plan                assets at fair value, end of year          |   | $                             | 0      |   |   | $      | 0      |   |   | $ | 0 |   |

----

----

| Note                12 | Retirement                Plans (Continued) Weighted                average assumptions used in determining the benefit obligation and                net                pension costs as of September 30 are as                follows: |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                            |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |   |   |
| Benefit                obligation actuarial assumptions:        |   |   |   |   |   |   |   |   |   |
| Discount                rate                                    |   |   | 6.00   | %      |   |   | 5.75   | %      |   |   | 5.25 | % |
| Rate                of compensation increase                    |   |   | 5.00   | %      |   |   | 5.00   | %      |   |   | 5.00 | % |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                pension cost actuarial assumption:           |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount                rate                                    |   |   | 5.75   | %      |   |   | 5.25   | %      |   |   | 6.00 | % |
| Expected                long-term rate of return on plan assets |   | N/A    |   |   | N/A    |   |   | N/A    |   |
| Rate                of compensation increase                    |   |   | 5.00   | %      |   |   | 5.00   | %      |   |   | 5.00 | % |

|            | Estimated                future benefit payments as of September 30, 2007, which reflect expected                future service, as appropriate, are as                follows: |
|--------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                       |   | (In                Thousands) |   |
|----------------------------|--------|-------------------------------|--------|
|                       |   |                          |   |
| 2008                       |   | $                             | 0      |   |
| 2009                       |   |                          | 40     |   |
| 2010                       |   |                          | 47     |   |
| 2011                       |   |                          | 49     |   |
| 2012                       |   |                          | 112    |   |
| 2013                - 2017 |   |                          | 1,325  |   |

|            | Employee                Stock Ownership Plan The                Board of Directors approved an Employee Stock Ownership Plan (ESOP)                that                became effective March 29, 2004.  The Plan is designed to                provide eligible employees the advantage of ownership of Company                stock.  Employees are eligible to participate in the Plan after                reaching age twenty-one, completing one year of service, and working                at                least one thousand hours of consecutive service during the                year.  Contributions are allocated to eligible participants on                the basis of compensation. |
|--------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                12 | Retirement                Plans (Continued) The                ESOP borrowed $1,192 from the Company to finance the purchase of                227,821                shares in connection with the initial public offering.  The loan                is payable in annual installments over ten years at an annual interest                rate equal to 5%. The                ESOP borrowed $3,415 from the Company to finance the purchase of                341,501                shares in connection with the second-step conversion.  The loan                is payable in annual installments over ten years at an annual interest                rate of 4.9%. The                loans can be prepaid without penalty.  Loan payments are                principally funded by cash contributions from the Company, subject                to                federal tax law limits. Shares                used as collateral to secure the loan are released and available                for                allocation to eligible employees as the principal and interest on                the loan                are paid.  Eligible employees must obtain a year of service and                be 21 years old.  Employees become fully vested in their ESOP                account after five years of service.  Dividends on unallocated                shares are generally applied toward payment of the loan.  ESOP                shares committed to be released are considered outstanding in determining                earnings per share. Contribution                expense to the ESOP is based on the fair value (average stock price)                of                the shares scheduled to be released, and totaled $508 in                2007.  One-tenth of the shares are scheduled to be released each                year.  The cost of all unallocated shares held by the ESOP has                been reflected in the consolidated balance sheets as a reduction                to                equity. The                ESOP shares as of September 30, 2007, were as                follows: |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Allocated                                                                     |   |   | 67,962  |   |
|-------------------------------------------------------------------------------|--------|--------|---------|--------|
| Committed                to be released                                       |   |   | 56,934  |   |
| Unallocated                                                                   |   |   | 444,046 |   |
|                                                                          |   |   |    |   |
| Estimated                fair value of unallocated shares held (In Thousands) |   | $      | 4,196   |   |

| Note                13 | Leases The                Company leases certain branch facilities and its administrative offices                under operating leases.  Rent expense under these operating                leases was $302, $316, and $248 for the years ended September 30,                2007,                2006, and 2005, respectively. |
|------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                13 | Leases Future                minimum lease payments by year and in aggregate under the original                terms                of the noncancelable operating leases consist of the                following: |
|------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|       |   | (In                Thousands) |   |
|------------|--------|-------------------------------|--------|
|       |   |                          |   |
| 2008       |   | $                             | 267    |   |
| 2009       |   |                          | 223    |   |
| 2010       |   |                          | 91     |   |
| 2011       |   |                          | 44     |   |
| Thereafter |   |                          | 17     |   |
|       |   |                          |   |   |
| Total      |   | $                             | 642    |   |

| Note                14 | Stock-Based                Compensation Plans Recognition                and Retention Plans On                February 4, 2005, shareholders approved the Citizens Community Bancorp,                Inc. 2004 Recognition and Retention Plan (Recognition Plan) which                authorized the Board of Directors to award up to 113,910 shares of                common                stock.  On February 4, 2005, and November 5, 2005, the Board of                Directors granted 63,789 and 6,833 shares, respectively.  The                market value of the shares awarded at the grant date amounted to                $449 and                $42, respectively, and has been recognized in the accompanying balance                sheet as unearned stock-based compensation.  The market value of                the shares awarded is being recognized as compensation expense ratably                over the five-year vesting period.  During fiscal year 2007,                4,557 shares were forfeited.  There were no forfeited shares for                fiscal years 2006 and 2005.  Compensation expense related to the                Recognition Plan was $90, $98, and $60 for the years ended September                30,                2007, 2006, and 2005, respectively. Stock                Option Plan In                February 2005, the 2004 stock option and incentive plan was approved                by                Citizens Community Bancorp, Inc.'s shareholders.  The plan                provides for the grant of nonqualified and incentive stock                options.  The plan provides for the grant of options for up to                284,778 shares.  At September 30, 2007, 202,197 options had been                granted under this plan at a weighted average exercise price of $7.04                per                share.  Exercised options will be satisfied by the issuance of                previously unissued shares or treasury stock.  Options vest over                a five-year period.  Unexercised nonqualified stock options                expire in 15 years and unexercised incentive stock options expire                in 10                years.  The fair value of stock options granted in 2005 was                estimated at the date of grant using the Black-Scholes                methodology.  No options were granted in 2007                or |
|------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                14 | Stock-Based                Compensation Plans (Continued) Stock                Option Plan (Continued) in                2006.  The following assumptions were made in estimating the                fair value for options granted for the year ended September 30,                2005. |
|------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                  |   | 2005   |   |
|-------------------------------------------------------|--------|--------|--------|
|                                                  |   |   |   |
| Dividend                yield                         |   |   | 1.49   | % |
| Risk-free                interest rate                |   |   | 4.16   | % |
| Weighted                average expected life (years) |   |   | 10     |   |
| Expected                volatility                    |   |   | 16.08  | % |

|               | The                weighted average fair value of options at their grant date, using                the                assumptions shown above, was computed at $3.66 per share.  Total                compensation expense of $75 was recognized during 2007.  As of                September 30, 2007, there was $264 total unrecognized compensation                cost                related to the nonvested share-based compensation arrangement, which                is                expected to be recognized over the next three                years. |
|--------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                          |   | 2007   |    |   | 2006     |   |
|---------------------------------------------------------------|--------|--------|---------|--------|----------|--------|
|                                                          |   |   |    |   | Weighted |   |   |   |   |   | Weighted |   |
|                                                          |   | Option |    |   | Average  |   |   | Option |   |   | Average |   |
|                                                          |   | Shares |    |   | Price    |   |   | Shares |   |   | Price |   |
|                                                          |   |   |    |   |     |   |   |   |   |   |   |   |
| Outstanding                - Beginning of year                |   |   | 202,197 |   |     | $      | 7.04 |   |   |   | 202,197 |   |   | $ | 7.04 |   |
| Options                forfeited                              |   |   | 6,833   |   |     |   |   |   |   |   | 0 |   |   |   |   |   |
| Options                exercised                              |   |   | 4,558   |   |     |   |   |   |   |   | 0 |   |   |   |   |   |
|                                                          |   |   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding                - End of Year                      |   |   | 190,806 |   |     | $      | 7.04 |   |   |   | 202,197 |   |   | $ | 7.04 |   |
|                                                          |   |   |    |   |     |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable                at September 30, 2007              |   |   |    |   |     |   |   |   |   |   |   |   |   |   | 69,489 |   |
| Weighted                average fair value of options granted |   |   |    |   |     |   |   |   |   |   | $ | 3.66 |   |
| Available                for future grant at year-end         |   |   |    |   |     |   |   |   |   |   |   |   |   |   | 89,413 |   |

----

----

| Note                14 | Stock-Based                Compensation Plans (Continued) The                following table summarizes information about Plan awards outstanding                at                September 30, 2007: |
|------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Options                Outstanding |    |
|------------------------------------|---------|
|                               |    | Weighted                Average |   | Weighted                Average |   |
| Number                Outstanding  |    | Remaining                Contractual Life |   | Exercise                Price |   |
|                               |    |   |   |   |   |
|                               | 119,606 |   | 7.42                years |   | $ | 7.04 |   |
|                               | 71,200  |   | 12.42                years |   | $ | 7.04 |   |

|   |   |
|--------|--------|

| Note                15 | Earnings                Per Share Basic                and diluted earnings per share data are based on the weighted-average                numbers of common shares outstanding during each                period.  Diluted earnings per share are further adjusted for                potential common shares that were dilutive and outstanding during                the                period.  Potential common shares consist of stock options                outstanding under the incentive plan.  The dilutive effect of                potential common shares is computed using the treasury stock                method.  All stock options are assumed to be 100% vested for                purposes of the earnings per share computations.  The                computation of earnings per share for the years ended September 30,                2007,                2006, and 2005, are as follows: |
|------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | 2007   |      |   |   | 2006   | *         |   |   | 2005   | *         |
|-------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|
|                                                        |   |   |      |   |   |   |      |   |   |   |      |
| Weighted                average shares outstanding          |   |   | 6,709,115 |   |   |   | 6,933,254 |   |   |   | 5,746,686 |   |
| Effect                of dilutive stock options outstanding |   |   | 25,834    |   |   |   | 25,718    |   |   |   | 2,524     |   |
|                                                        |   |   |      |   |   |   |      |   |   |   |      |   |
| Diluted                weighted average shares outstanding  |   |   | 6,734,949 |   |   |   | 6,958,972 |   |   |   | 5,749,210 |   |
|                                                        |   |   |      |   |   |   |      |   |   |   |      |   |
| Basic                earnings per share                     |   | $      | 0.11      |   |   | $      | 0.06      |   |   | $      | 0.18      |   |
|                                                        |   |   |      |   |   |   |      |   |   |   |      |   |
| Diluted                earnings per share                   |   | $      | 0.11      |   |   | $      | 0.06      |   |   | $      | 0.18      |   |

|   |   |
|--------|--------|

----

----

| Note                16 | Commitments                and Contingencies Financial                Instruments with Off-Balance-Sheet Risk The                Company’s financial statements do not reflect various commitments and                contingent liabilities which arise in the normal course of business                and                which involve elements of credit risk, interest rate risk, and liquidity                risk.  These commitments and contingent liabilities are                commitments to extend credit. A                summary of the Company’s commitments and contingent liabilities at                September 30 follows: |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                  |   | 2007                          |   |   | 2006   |   |
|-----------------------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|
|                                                                  |   | (In                Thousands) |   |
|                                                                  |   |                          |   |   |   |   |
| Commitments                to extend credit - Fixed rate 6.99 - 9.50% |   |                          |   |   |   |   |
| in                2007 and 7.0% - 8.00% in 2006                       |   | $                             | 428    |   |   | $      | 500 |   |
| Unused                lines of credit:                                |   |                          |   |   |   |   |   |   |
| Real                estate equity advance plan (REAP)                 |   |                          | 692    |   |   |   | 1,193 |   |
| Kwik                cash and lines of credit                          |   |                          | 2,049  |   |   |   | 1,823 |   |
| MasterCard                and VISA credit cards                       |   |                          | 4,721  |   |   |   | 4,829 |   |
|                                                                  |   |                          |   |   |   |   |   |   |
| Totals                                                                |   | $                             | 7,890  |   |   | $      | 8,345 |   |

|               | Commitments                to extend credit are agreements to lend to a customer as long as                there is                no violation of any conditions established in the                contract.  Commitments generally have fixed expiration dates or                other termination clauses and may require payment of a fee.  A                portion of the commitments is expected to be drawn upon, thus representing                future cash requirements.  Management evaluates each customer’s                creditworthiness on a case-by-case basis.  The amount of                collateral obtained upon extension of credit is based on management’s                credit evaluation of the customer.  Collateral held varies but                may include real estate and personal property.  Substantial                amounts of unsecured personal loans are granted by the                Company.  However, ongoing credit evaluations of customers are                performed. Concentration                of Credit Risk The                majority of the Company’s loans and commitments have been granted to                customers in the Company’s local market areas.  The                concentrations of credit by type are set forth in Note                5.  Management believes the diversity of the various economies                will prevent significant losses in the event of an economic                downturn. Contingencies In                the normal course of business, the Company occasionally becomes involved                in various legal proceedings.  In the opinion of management, any                liability from such proceedings would not have a material adverse                effect                on the business or financial condition of the                Company. |
|--------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                17 | Capital                Requirements The                Bank is subject to various regulatory capital requirements administered                by                the federal agencies.  Failure to meet minimum capital                requirements can initiate certain mandatory, and possibly additional                discretionary, actions by regulators that, if undertaken, could have                a                direct material effect on the Bank’s financial                statements.  Under capital adequacy guidelines and the                regulatory framework for prompt corrective action, the Bank must                meet                specific capital guidelines that involve quantitative measures of                the                Bank’s assets, liabilities, and certain off-balance-sheet items as                calculated under regulatory accounting practices.  The capital                amounts and classification are also subject to qualitative judgments                by                the regulators about components, risk weightings, and other                factors. Quantitative                measures established by regulation to ensure capital adequacy require                the                Bank to maintain minimum amounts and ratios (set forth in the table                below)                of total and Tier I capital to risk-weighted assets and of Tier I                capital                to average assets.  It is management’s opinion as of September                30, 2007, that the Bank meets all capital adequacy                requirements. As                of September 30, 2007, the most recent notification from the Office                of                Thrift Supervision categorized the Bank as well-capitalized under                the                regulatory framework for prompt corrective action.  To be                categorized as well-capitalized, the Bank must maintain minimum net                worth                ratios as set forth in the table.  There are no conditions or                events since that notification that management believes have changed                the                Bank’s category. The                Bank’s actual and regulatory capital amounts and ratios are presented                in                the following table: |
|------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                             |   |                                  |   |   |                             |   |   |                              |   |   |                             |                             |   |   | To                Be Well- |   |
|----------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|----------------------------------|--------|--------|-----------------------------------|--------|--------|----------------------------------|----------------------------------|--------|--------|----------------------------|--------|
|                                                                             |   |                                  |   |   |                             |   |   |                              |   |   |                             | Capitalized                Under |   |
|                                                                             |   |                                  |   |   |                             |   |   | For                Capital        |   |   | Prompt                Corrective |                             |
|                                                                             |   | Actual                                |   |   | Adequacy                Purposes |   |   | Actions                Provisions |   |
|                                                                             |   | Amount                                |   |   | Ratio                            |   |   | Amount                            |   |   |                             | Ratio                            |   |   | Amount                     |   |   |   | Ratio |   |
|                                                                             |   | (Dollars                in Thousands) |   |
|                                                                             |   |                                  |   |   |                             |   |   |                              |   |   |                             |                             |   |   |                       |   |   |   |   |   |
| September                30, 2007                                                |   |                                  |   |   |                             |   |   |                              |   |   |                             |                             |   |   |                       |   |   |   |   |   |
|                                                                             |   |                                  |   |   |                             |   |   |                              |   |   |                             |                             |   |   |                       |   |   |   |   |   |
| Total                risk-based capital (to risk-weighted                assets) |   | $                                     | 44,416 |   |                             |   | 18.00  | %                                 |   | $      | 19,757                           |                             | >   |   |                       | 8.00   | % |   | $ | 24,696 |   | > |   |   | 10.00 | % |
| Tier                1 capital (to risk-weighted                assets)           |   | $                                     | 43,709 |   |                             |   | 17.70  | %                                 |   | $      | 9,878                            |                             | >   |   |                       | 4.00   | % |   | $ | 14,817 |   | > |   |   | 6.00 | % |
| Tier                1 capital (to adjusted total                assets)          |   | $                                     | 43,709 |   |                             |   | 11.50  | %                                 |   | $      | 15,161                           |                             | >   |   |                       | 4.00   | % |   | $ | 18,952 |   | > |   |   | 5.00 | % |
| Tangible                capital (to tangible assets)                             |   | $                                     | 43,709 |   |                             |   | 11.50  | %                                 |   | $      | 5,685                            |                             | >   |   |                       | 1.50   | % |   | N/A |   |   |   | N/A |   |
|                                                                             |   |                                  |   |   |                             |   |   |                              |   |   |                             |                             |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| September                30, 2006                                                |   |                                  |   |   |                             |   |   |                              |   |   |                             |                             |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                  |   |   |                             |   |   |                              |   |   |                             |                             |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Total                risk-based capital (to risk-weighted                assets) |   | $                                     | 20,428 |   |                             |   | 11.00  | %                                 |   | $      | 14,920                           |                             | >   |   |                       | 8.00   | % |   | $ | 18,650 |   | > |   |   | 10.00 | % |
| Tier                1 capital (to risk-weighted                assets)           |   | $                                     | 19,761 |   |                             |   | 10.60  | %                                 |   | $      | 7,460                            |                             | >   |   |                       | 4.00   | % |   |   | 11,190 |   | > |   |   | 6.00 | % |
| Tier                1 capital (to adjusted total                assets)          |   | $                                     | 19,761 |   |                             |   | 7.20   | %                                 |   | $      | 10,943                           |                             | >   |   |                       | 4.00   | % |   | $ | 13,679 |   | > |   |   | 5.00 | % |
| Tangible                capital (to tangible assets)                             |   | $                                     | 19,761 |   |                             |   | 7.20   | %                                 |   | $      | 4,104                            |                             | >   |   |                       | 1.50   | % |   | N/A |   |   |   | N/A |   |

----

----

| Note                18 | Fair                Values of Financial Instruments Current                accounting standards require that the Company disclose estimated                fair                values for its financial instruments.  Fair value estimates,                methods, and assumptions for the Company’s financial instruments are                summarized below. Cash                and Cash Equivalents The                carrying values approximate the fair values for these assets. Interest-Bearing                Deposits The                carrying values approximate the fair values for these assets. Securities                Available for Sale Fair                values are based on quoted market prices, where available.  If a                quoted market price is not available, fair value is estimated using                quoted                market prices for similar securities. Loans Fair                value is estimated for portfolios of loans with similar financial                characteristics.  Loans are segregated by type such as                residential mortgage and consumer.  The fair value of loans is                calculated by discounting scheduled cash flows through the estimated                maturity using market discount rates reflecting the credit and interest                rate risk inherent in the loan.  The estimate of maturity is                based on the Company’s repayment schedules for each loan                classification. The                methodology in determining fair value of nonaccrual loans is to average                them into the blended interest rate at 0% interest.  This has                the effect of decreasing the carrying amount below the risk-free                rate                amount and therefore, discounts the estimated fair value. Impaired                loans are measured at the estimated fair value of the expected future                cash                flows at the loan’s effective interest rate or the fair value of the                collateral for loans which are collateral dependent.  Therefore,                the carrying values of impaired loans approximate the estimated fair                values for these assets. Federal                Home Loan Bank Stock Fair                value for the Federal Home Loan Bank stock is based on its redeemable                (carrying) value, since the market for this stock is                restricted. Deposits The                fair value of deposits with no stated maturity, such as demand deposits,                savings accounts, and money market accounts, is the amount payable                on                demand at the reporting date.  The fair value of certificate                accounts is calculated by using discounted cash flows applying interest                rates currently being offered on similar                certificates. |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Note                18 | Fair                Values of Financial Instruments (Continued) Borrowed                Funds The                fair value of borrowed funds is estimated using discounted cash flows                based on the Bank’s current incremental borrowing rates for similar                borrowing arrangements. Accrued                Interest The                carrying amount of accrued interest approximates its fair                value. Off-Balance-Sheet                Instruments The                fair value of commitments would be estimated using the fees currently                charged to enter into similar agreements, taking into account the                remaining terms of the agreements, the current interest rates, and                the                present creditworthiness of the customers.  Since this amount is                immaterial, no amounts for fair value are presented. The                carrying amount and estimated fair value of financial instruments                at                September 30 were as follows: |
|------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                         |   | 2007                          |    |   | 2006      |   |
|----------------------------------------------|--------|-------------------------------|---------|--------|-----------|--------|
|                                         |   |                          |    |   | Estimated |   |   |   |   |   | Estimated |   |
|                                         |   | Carrying                      |    |   | Fair      |   |   | Carrying |   |   | Fair |   |
|                                         |   | Amount                        |    |   | Value     |   |   | Amount |   |   | Value |   |
|                                         |   | (In                Thousands) |    |
|                                         |   |                          |    |   |      |   |   |   |   |   |   |   |
| Financial                assets:             |   |                          |    |   |      |   |   |   |   |   |   |   |
| Cash                and cash equivalents     |   | $                             | 6,354   |   |      | $      | 6,354 |   |   | $ | 6,170 |   |   | $ | 6,170 |   |
| Interest-bearing                deposits     |   |                          | 371     |   |      |   | 371 |   |   |   | 959 |   |   |   | 959 |   |
| Securities                available for sale |   |                          | 39,592  |   |      |   | 39,592 |   |   |   | 782 |   |   |   | 782 |   |
| Loans                held for sale           |   |                          | 0       |   |      |   | 0 |   |   |   | 321 |   |   |   | 321 |   |
| Loans                receivable              |   |                          | 320,027 |   |      |   | 311,642 |   |   |   | 258,467 |   |   |   | 250,966 |   |
| FHLB                stock                    |   |                          | 4,822   |   |      |   | 4,822 |   |   |   | 3,060 |   |   |   | 3,060 |   |
| Accrued                interest receivable   |   |                          | 1,397   |   |      |   | 1,397 |   |   |   | 861 |   |   |   | 861 |   |
|                                         |   |                          |    |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Financial                liabilities:        |   |                          |    |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                     |   |                          | 207,734 |   |      |   | 208,282 |   |   |   | 186,711 |   |   |   | 186,688 |   |
| Borrowed                funds                |   |                          | 96,446  |   |      |   | 101,230 |   |   |   | 61,200 |   |   |   | 60,386 |   |
| Accrued                interest payable      |   |                          | 402     |   |      |   | 402 |   |   |   | 264 |   |   |   | 264 |   |

----

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| Note                18     | Fair                Values of Financial Instruments (Continued) Limitations Fair                value estimates are made at a specific time, based on relevant market                information and information about the financial                instrument.  These estimates do not reflect any premium or                discount that could result from offering for sale at one time the                Company’s entire holdings of a particular financial                instrument.  Because no market exists for a significant portion                of the Company’s financial instruments, fair value estimates are based on                judgments regarding future expected loss experience, current economic                conditions, risk characteristics of various financial instruments,                and                other factors.  These estimates are subjective in nature and                involve uncertainties and matters of significant judgment and therefore                cannot be determined with precision.  Changes in assumptions                could significantly affect the estimates.  Fair value estimates                are based on existing on- and off-balance-sheet financial instruments                without attempting to estimate the value of anticipated future business                and the value of assets and liabilities that are not considered financial                instruments.  Significant assets and liabilities that are not                considered financial assets or liabilities include premises and equipment,                other assets, and other liabilities. In                addition, the tax ramifications related to the realization of the                unrealized gains or losses can have a significant effect on fair                value                estimates and have not been considered in the                estimates. |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **Note                19** | Condensed                Parent Company Only Financial Statements The                following condensed balance sheets as of September 30, 2007 and 2006,                and                condensed statements of income and cash flows for each of the years                in the                three-year period ended September 30, 2007, for Citizens Community                Bancorp, Inc. should be read in conjunction with the consolidated                financial statements and the notes thereto.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

| *Assets*                                  |   | 2007                          |   |   | 2006   |   |
|-------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|
|                                      |   | (In                Thousands) |   |
|                                      |   |                          |   |   |   |   |
| Cash                and cash equivalents  |   | $                             | 23,630 |   |   | $      | 2,088 |   |
| Investment                in subsidiary   |   |                          | 50,510 |   |   |   | 27,045 |   |
| Note                receivable - ESOP     |   |                          | 4,009  |   |   |   | 949 |   |
|                                      |   |                          |   |   |   |   |   |   |
| TOTAL                ASSETS               |   | $                             | 78,149 |   |   | $      | 30,082 |   |
|                                      |   |                          |   |   |   |   |   |   |
| *Stockholders'                Equity*     |   |                          |   |   |   |   |   |   |
|                                      |   |                          |   |   |   |   |   |   |
| TOTAL                STOCKHOLDERS' EQUITY |   | $                             | 78,149 |   |   | $      | 30,082 |   |

----

----

| Note                19 | **Condensed                Parent Company Only Financial Statements                (Continued)** |
|------------------------|--------------------------------------------------------------------------------------------------|

|                                                                        |   | 2007                          |   |   | 2006   |   |   | 2005   |   |
|-----------------------------------------------------------------------------|--------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                        |   | (In                Thousands) |   |
|                                                                        |   |                          |   |   |   |   |   |   |   |
| Income                - Interest and dividends                              |   | $                             | 240    |   |   | $      | 89     |   |   | $ | 103 |   |
|                                                                        |   |                          |   |   |   |   |   |   |   |   |   |   |
| Expenses                - Other                                             |   |                          | 292    |   |   |   | 132    |   |   |   | 160 |   |
|                                                                        |   |                          |   |   |   |   |   |   |   |   |   |   |
| Income                before provision for income taxes and equity in       |   |                          |   |   |   |   |   |   |   |   |   |   |
| undistributed                net income of subsidiary                       |   |                          | (52    | )      |   |   | (43    | )      |   |   | (57 | ) |
|                                                                        |   |                          |   |   |   |   |   |   |   |   |   |   |
| Benefit                for income taxes                                     |   |                          | (43    | )      |   |   | (6     | )      |   |   | (23 | ) |
|                                                                        |   |                          |   |   |   |   |   |   |   |   |   |   |
| Loss                before equity in undistributed net income of subsidiary |   |                          | (9     | )      |   |   | (37    | )      |   |   | (34 | ) |
|                                                                        |   |                          |   |   |   |   |   |   |   |   |   |   |
| Equity                in undistributed net income of subsidiary             |   |                          | 752    |   |   |   | 483    |   |   |   | 1,085 |   |
|                                                                        |   |                          |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                   |   | $                             | 743    |   |   | $      | 446    |   |   | $ | 1,051 |   |

----

----

| Note                19 | **Condensed                Parent Company Only Financial Statements                (Continued)** |
|------------------------|--------------------------------------------------------------------------------------------------|

|                                                                |   | 2007                          |    |   | 2006   |   |   | 2005   |   |
|---------------------------------------------------------------------|--------|-------------------------------|---------|--------|--------|--------|--------|--------|--------|
|                                                                |   | (In                Thousands) |    |
|                                                                |   |                          |    |   |   |   |   |   |   |
| Increase                (decrease) in cash and cash equivalents:    |   |                          |    |   |   |   |   |   |   |
| Cash                flows from operating activities:                |   |                          |    |   |   |   |   |   |   |
| Net                income                                           |   | $                             | 743     |   |   | $      | 446    |   |   | $ | 1,051 |   |
| Provision                for stock options                          |   |                          | 75      |   |   |   | 0      |   |   |   | 0 |   |
| Adjustments                to reconcile net income to net cash      |   |                          |    |   |   |   |   |   |   |   |   |   |
| provided                by operating activities - Equity in         |   |                          |    |   |   |   |   |   |   |   |   |   |
| undistributed                income of subsidiary                   |   |                          | (752    | )      |   |   | (483   | )      |   |   | (1,085 | ) |
|                                                                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Net                cash provided by (used in) operating activities  |   |                          | 66      |   |   |   | (37    | )      |   |   | (34 | ) |
|                                                                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Cash                flows from investing activities:                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Investment                in subsidiary                             |   |                          | (25,619 | )      |   |   | 0      |   |   |   | 0 |   |
| Loan                to ESOP                                         |   |                          | (3,415  | )      |   |   | 0      |   |   |   | 0 |   |
| Principal                received on ESOP loan                      |   |                          | 355     |   |   |   | 102    |   |   |   | 97 |   |
|                                                                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Net                cash provided by (used in) investing activities  |   |                          | (28,679 | )      |   |   | 102    |   |   |   | 97 |   |
|                                                                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Cash                flows from financing activities:                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Sale                of common stock                                 |   |                          | 51,238  |   |   |   | 0      |   |   |   | 0 |   |
| Stock                options exercised                              |   |                          | 32      |   |   |   | 0      |   |   |   | 0 |   |
| Purchase                of treasury stock                           |   |                          | 0       |   |   |   | (1     | )      |   |   | (895 | ) |
| Cash                dividends paid                                  |   |                          | (1,115  | )      |   |   | (190   | )      |   |   | (193 | ) |
|                                                                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Net                cash provided by (used in) financing activities  |   |                          | 50,155  |   |   |   | (191   | )      |   |   | (1,088 | ) |
|                                                                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Net                increase (decrease) in cash and cash equivalents |   |                          | 21,542  |   |   |   | (126   | )      |   |   | (1,025 | ) |
| Cash                and cash equivalents at beginning               |   |                          | 2,088   |   |   |   | 2,214  |   |   |   | 3,239 |   |
|                                                                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents at end                     |   | $                             | 23,630  |   |   | $      | 2,088  |   |   | $ | 2,214 |   |
|                                                                |   |                          |    |   |   |   |   |   |   |   |   |   |
| Supplemental                cash flow information:                  |   |                          |    |   |   |   |   |   |   |   |   |   |
| Cash                received during the year for income taxes       |   | $                             | 43      |   |   | $      | 6      |   |   | $ | 23 |   |

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**CITIZENS      COMMUNITY BANCORP, INC.**

**STOCKHOLDER      INFORMATION**

**ANNUAL      MEETING**

**STOCK      LISTING**

**PRICE      RANGE OF COMMON STOCK**

|                                                                                                                                                                                                                                                                                                                                                              | HIGH              | LOW               | DIVIDENDS |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|-------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                              |              |              |      |
|                    Fiscal 2007                                                                                                                                                                                                                                                                                                                     |              |              |      |
| First                Quarter                                                        | $20.00            | $  9.65 | $0.05     |
| Second                Quarter                                                       | $  9.78 | $  9.33 | $0.05     |
| Third                Quarter                                                        | $  9.55 | $  8.75 | $0.05     |
| Fourth                Quarter                                                       | $  9.54 | $  8.04 | $0.05     |
|                                                                                                                                                                                                                                                                                                                                                              |              |              |      |
|                    Fiscal 2006                                                                                                                                                                                                                                                                                                                     |              |              |      |
| First                Quarter                                                        | $13.20            | $10.30            | $0.05     |
| Second                Quarter                                                       | $14.25            | $12.90            | $0.05     |
| Third                Quarter                                                        | $18.39            | $13.75            | $0.05     |
| Fourth                Quarter                                                       | $21.15            | $17.65            | $0.05     |
|                                                                                                                                                                                                                                                                                                                                                              |              |              |      |
|                    Fiscal 2005                                                                                                                                                                                                                                                                                                                     |              |              |      |
| First                Quarter                                                        | $15.50            | $12.90            | $0.05     |
| Second                Quarter                                                       | $15.50            | $13.00            | $0.05     |
| Third                Quarter                                                        | $14.75            | $12.75            | $0.05     |
| Fourth                Quarter                                                       | $13.00            | $12.50            | $0.05     |

----

| **STOCKHOLDERS                AND GENERAL INQUIRIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | **TRANSFER                AGENT**                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Citizens                Community Bancorp, Inc. files an annual report with the Securities                and                Exchange Commission on Form 10-K and three quarterly reports on Form                10-Q.  Copies of these forms are available by                request.  Requests, as well as inquiries from stockholders,                analysts and others seeking information about Citizens Community                Bancorp,                Inc. should be directed to John D. Zettler, Senior Vice President                and                Chief Financial Officer, at 2174 EastRidge Center, Eau Claire, WI                54701,                telephone (715) 836-9994. www.citizenscommunityfederal.net |   | Stockholders                should direct inquiries concerning their stock, change of name, address                or                ownership; report lost certificates or consolidate accounts to our                transfer agent at 1-800-368-5948 or write:Registrar                and Transfer Co.10                Commerce DriveCranford,                NJ  070161-(800)                368-5948 |

**ANNUAL      AND OTHER REPORTS**

----

**CITIZENS      COMMUNITY BANCORP, INC.**

**CORPORATE      INFORMATION**

| **Citizens                Community Bancorp, Inc.****Board of Directors**                                                                                                                                                                                                                                                                                                                                                                                                         |   | **Citizens                Community Federal****Officers**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Richard                McHugh, *Chairman*Thomas                C. Kempen, *Vice Chairman*Brian                R. SchillingDonna                E. TalmageDavid                B. WestrateJames                G. Cooley                                                                                                                                                                                                                                                      |   | James                G. Cooley*, President and Chief Executive Officer*John                D. Zettler, Senior *Vice President and**   Chief                Financial Officer*Timothy                J. Cruciani, *Executive Vice President*Rebecca                Johnson, Senior*Vice President,*   *MIC/Accounting*                                                                                                                                                                                                                                        |
| **Citizens                Community Federal Locations:**                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| *Administrative                Offices*2174                EastRidge CenterEau                Claire, WI 54701 *Branch                Offices:***Westside                Branch**2125                Cameron StreetEau                Claire, WI 54703 **East                Branch**1028                N. Hillcrest ParkwayAltoona,                WI 54720 **Fairfax                Branch**219                Fairfax StreetAltoona,                WI 54720   |   | **Mondovi                Branch**695                E. Main StreetMondovi,                WI 54755 **Rice                Lake Branch**2462                S. Main StreetRice                Lake, WI 54868 **Chippewa                Falls Branch**427                W. Prairie View RoadChippewa                Falls, WI 54729 **Baraboo                Branch**S2423                Highway 12Baraboo,                WI 53913 **Black                River Falls Branch**W9036                Highway 54 E.Black                River Falls, WI 54615   |   | *Michigan                Offices:***Rochester                Hills Branch**310                W. Tienken RoadRochester                Hills, MI  48306 **Lake                Orion Branch**688                S. Lapeer RoadLake                Orion, MI  48362 *Minnesota                Offices:***Mankato                Branch**1410                Madison AvenueMankato,                MN 56001 **Oakdale                Branch**7035                10th                Street NorthOakdale,                MN  55128 |
| **Independent Auditors**Wipfli, LLP3703                Oakwood Hills PkwyEau                Claire, WI  54703                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|  **Special Counsel**Silver, Freedman & Taff, L.L.P.3299                K Street, N.W.Suite                100Washington, D.C.  20007                                                                                                                                                                                                                                                                                                  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

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