Exhibit 22.2
                        The Company's 1997 Annual Report

<PAGE>

                        CITIZENS COMMUNITY BANCORP, INC.

                               1997 ANNUAL REPORT




<PAGE>

























                               1997 ANNUAL REPORT




Contents                                                               Page

Corporate Profile and General Information................................1

Common Stock Prices and Dividends........................................1

Consolidated Financial Highlights........................................2

Message from the Chairman..............................................3-4

Selected Financial Data..................................................5

Management's Discussion and Analysis of Financial Condition
         and Results of Operations....................................6-18

Consolidated Financial Statements....................................19-34

Independent Auditors' Report............................................20

Officers and Directors..................................................36












<PAGE>



                                CORPORATE PROFILE


Citizens Community Bancorp, Inc. (the "Holding Company") was incorporated on May
24,  1995.  The Holding  Company  owns 100% of the  outstanding  common stock of
Citizens  Community  Bank of Florida (the "Bank") and Citizens  Financial  Corp.
("Citizens  Financial")  (collectively  the "Company").  The Holding Company was
organized  simultaneously  with the Bank and its only  business is the ownership
and  operation  of the  Bank  and  Citizens  Financial.  The  Bank is a  Florida
state-chartered  commercial bank and is insured by the Federal Deposit Insurance
Corporation.  The Bank  opened  for  business  on March 8,  1996,  and  provides
community  banking  services to businesses and  individuals  in Collier  County,
Florida. Citizens Financial is a mortgage broker operating in Southwest Florida.
The Company has adopted a fiscal year ending  December 31. At December 31, 1997,
the Company  operated two retail banking offices,  one in Marco Island,  Florida
and one in  Naples,  Florida  and had total  assets of $44.4  million  and total
stockholders'  equity of $6.8 million. The Board of Directors voted to split the
Company's  common stock  two-for-one  effective  December  15,  1997;  all share
information presented in this report reflects this stock split.

                               GENERAL INFORMATION

Corporate
Headquarters                650 East Elkcam Circle Marco  Island,  Florida 34145
                            (941) 389-1800

Annual Meeting              The Annual Meeting of the Stockholders  will be held
                            at the Marriotts'  Marco Island Resort and Golf Club
                            located  at  400  South  Collier  Boulevard,   Marco
                            Island, Florida at 4:00 P.M., April 30, 1998.

Form 10-K                   A  copy  of the  Form  10-KSB,  as  filed  with  the
                            Securities and Exchange Commission,  may be obtained
                            by stockholders  without charge upon written request
                            to Mr.  Stephen  A.  McLaughlin,  Vice  President  -
                            Secretary - Treasurer,  Citizens  Community Bancorp,
                            Inc., 650 East Elkcam Circle, Marco Island,  Florida
                            34145.

Transfer Agent and
Registrar                   Citizens Community Bancorp, Inc.
                            650 East Elkcam Circle
                            Marco Island, Florida  34145

Corporate Counsel           Igler & Dougherty, P.A.
                            1501 Park Avenue East
                            Tallahassee, Florida  32301

Independent
Auditors                    Hacker, Johnson, Cohen & Grieb PA
                            Certified Public Accountants
                            500 North Westshore Boulevard
                            Tampa, Florida  33609

                        COMMON STOCK PRICES AND DIVIDENDS

Although there is no established  public trading market for the Company's common
stock,  the  brokerage  firm of A.G.  Edwards & Sons,  Inc.,  from  time-to-time
facilitates   occasional   trades  of  the   Company's   common   stock  in  the
over-the-counter  market.  The stock was originally offered and sold in a public
offering in 1996 for $4.50 per share. The Company has never paid cash dividends.
Future dividends, if any, will be determined by the Board of Directors.

As of February 5, 1998, the Company had 532 holders of record of common stock.

                                        1

<PAGE>
<TABLE>
<CAPTION>




                        CONSOLIDATED FINANCIAL HIGHLIGHTS

                   At December 31, or For the Year Then Ended
                (Dollars in thousands, except per share figures)

                                                                                                      1997           1996
                                                                                                      ----           ----
<S>                                                                                              <C>           <C>      
At Year End:

         Assets...............................................................................    $ 44,422        25,027
         Loans, net...........................................................................      26,420        12,116
         Securities...........................................................................       2,499         2,240
         Deposits.............................................................................      36,938        17,885
         Stockholders' equity.................................................................       6,771         5,964
         Book value per share.................................................................        4.31          4.22
         Shares outstanding (1)...............................................................   1,571,624     1,415,220
         Equity-to-assets ratio...............................................................       15.24%        23.83%
         Nonperforming assets-to-total assets ratio...........................................         NIL           NIL

For The Year:

         Interest income......................................................................       2,523           740
         Net income (loss)....................................................................         110          (342)
         Basic earnings (loss) per share (1)..................................................         .07          (.26)
         Diluted earnings (loss) per share (1)................................................         .07          (.26)
         Return on average assets.............................................................         .30%       (2.71%)
         Return on average equity.............................................................        1.72%      (10.35%)
         Average equity-to-average assets ratio...............................................       17.47%        26.16%
         Noninterest expenses to average assets...............................................        3.45          7.24


                                                                                                          Average Yield
                                                                                                              or Rate
                                                                                                            During the
                                                                                                            Year Ended
                                                                                                           December 31,
                                                                                                      1997      1996
                                                                                                      ----      ----
Yields and Rates:

         Loan portfolio.......................................................................        9.32%         8.39%
         Securities...........................................................................        6.01          5.78
         Other interest-earnings assets.......................................................        5.50          5.62
         All interest-earnings assets.........................................................        8.04          6.61
         Deposits and borrowings..............................................................        4.02          4.28
         Interest-rate spread (2).............................................................        4.02          2.33
         Net interest margin (3)..............................................................        4.20          4.08

-----------------
</TABLE>

(1)      All share amounts  reflect the 2 for 1 stock split  effective  December
         15, 1997.
(2)      Average yield on all interest-earning  assets less average rate paid on
         all interest-bearing liabilities.
(3)      Net interest income divided by average interest-earning assets.


                                        2

<PAGE>



                            MESSAGE FROM THE CHAIRMAN


         On behalf of  management  and the Board of  Directors,  I am pleased to
present the 1997 Annual Report for Citizens Community  Bancorp,  Inc. The Annual
Report is  presented  in a standard  format and the  information  and  financial
statements contained therein are set forth in accordance with generally accepted
accounting principals. References to share amounts have been adjusted to reflect
the two-for-one stock split, effective December 15, 1997.

         The year ended December 31, 1997, was the Company's  first full year of
operation and a number of important initiatives and goals were achieved. I would
like  to  take  this   opportunity   to  discuss   some  of  the  more   notable
accomplishments for 1997.

         Earnings.  For the first  time since  commencing  its  operations,  the
Company  achieved   positive   earnings  in  all  four   consecutive   quarters.
Consolidated  net earnings for the year ended December 31, 1997,  were $109,506,
or $.07 per share,  as compared to a loss of  $(342,255) or $(.26) per share for
1996.  While we are pleased that  Citizens  became  profitable in its first full
year of operations, we must continue to strive to steadily increase earnings for
1998.

         Growth.  For the year ended  December 31,  1997,  the Company had total
consolidated  assets of $44.4  million  from  $25.0  million  for the year ended
December 31, 1996,  an 89% increase for the 12-month  period.  Consolidated  net
loans increased to $26.4 million,  which  represents an increase of 118% for the
period.  Consolidated  stockholders'  equity was $6.8 million, or 15.2% of total
assets.  As of December 31, 1997 there were 646,375  shares  available for issue
under Warrants that had not been exercised. The Warrants will expire on June 16,
1998. If the Warrants are fully exercised,  the Company's  stockholders'  equity
would increase to  approximately  $10.0  million.  This capital level would make
Citizens one of the better capitalized small banks in Southwest  Florida,  which
we believe will provide sufficient capital to support anticipated growth.

         Personnel.  Our goal in 1997 was to establish a solid executive banking
staff.  We believe we  accomplished  this goal with the  addition  of Michael A.
Micallef,  David Klein and Sharon Ginn. The first addition was David Klein,  who
was hired as Vice  President  and Loan Officer for Citizens  Community  Bank and
presently serves as EVP. David has almost 20 years of banking  experience in all
areas of  commercial  lending.  He was  formerly  with  Bank of Bowie in  Prince
George's County, Maryland, where he served as Vice President and Loan Officer.

         Michael  Micallef was brought in to add stability and experience to the
President and Chief Executive  position at Citizens  Community Bank. Michael has
over 30 years of  banking  experience,  the past 19 years of which  have been in
South Florida. He was formerly the President and Chief Executive Officer of Bank
Boynton, Boynton Beach, Florida.

         The final  addition was Sharon Ginn,  who was named Vice  President and
Cashier of Citizens Community Bank in November,  1997. Sharon brings with her an
extensive bank accounting background.  She was formerly with First National Bank
and Trust Co. of the Treasure  Coast,  Stuart,  Florida,  where she served as an
AVP/Accounting Manager.

         At December 31,  1997,  the Company had 19  full-time  employees  and 6
part-time employees.

         Other. With the continued consolidation within the banking industry due
to mergers and  acquisitions,  the most recent being the acquisitions of Barnett
Banks, Inc., Jacksonville, Florida by NationsBank and Mercantile Bank in Naples,
Florida,  by  First  National  Bank  of  Pennsylvania,   we  envision  that  new
opportunities  will arise which will allow the Company to expand its presence in
Southwest  Florida.  One of the major advantages that a locally-owned  community

                                        3

<PAGE>



bank has is its ability to be responsive to customer  needs.  The operative word
is service.  We can make credit decisions  locally,  which provides a quick turn
around for loan  applications.  While we will not  compromise  our  underwriting
standards,  we believe  customers  want to know as quickly as  possible  if your
institution will be able to accommodate their loan request.

         We  intend  to  develop  long-term  banking  relationships  within  the
communities we serve. This will require us to remain competitive in the products
and  technological  services that we offer. We recognize that as a young bank we
cannot provide every service or product that is available.  Rather, we intend to
provide the services and products which best suit the expertise of our staff and
will provide greater profitability to the Company. To meet the business needs of
Marco Island and Naples,  we have  instituted a Courier  Service which went into
effect in  mid-February,  1998.  We have also  targeted new branch  locations in
Naples to further  expand our presence and customer base in our primary  service
area. The Company will continue to explore potential growth areas as they become
available, with our ultimate focus on enhancing shareholder value.

         The Company has a web site  (www.ccbank.com)  where our  customers  and
shareholders,   can  obtain  the  latest  information  about  the  Company.   In
conclusion, we want to thank you for your continued support of our efforts.

Sincerely,

CITIZENS COMMUNITY BANCORP, INC.

/s/ Richard Storm, Jr.

Richard Storm, Jr.
Chairman

March 31, 1998








                                        4

<PAGE>

<TABLE>
<CAPTION>
                             SELECTED FINANCIAL DATA

                   At December 31, or for the Year then Ended
                (Dollars in thousands, except per share figures)

                                                                                                      1997          1996
                                                                                                      ----          ----
<S>                                                                                             <C>            <C>      
At Year End:
Cash and cash equivalents.................................................................        $ 12,211         8,042
Securities................................................................................           2,499         2,240
Loans, net................................................................................          26,420        12,116
All other assets..........................................................................           3,292         2,630
                                                                                                   -------      --------

         Total assets.....................................................................        $ 44,422        25,028
                                                                                                    ======       =======

Deposit accounts..........................................................................          36,938        17,885
All other liabilities.....................................................................             713         1,179
Stockholders' equity......................................................................           6,771         5,964
                                                                                                    ------       -------

         Total liabilities and stockholders' equity.......................................        $ 44,422        25,028
                                                                                                    ======       =======

For the Year:

Total interest income.....................................................................           2,523           740
Total interest expense....................................................................           1,208           283
                                                                                                    ------      --------

Net interest income.......................................................................           1,315           457
Provision for loan losses.................................................................             153           145
                                                                                                   -------      --------

Net interest income after provision for loan losses.......................................           1,162           312
                                                                                                    ------      --------

Noninterest income........................................................................             273            70
Noninterest expenses......................................................................           1,260           915
                                                                                                    ------      --------

Earnings (loss) before income tax credit..................................................             175          (533)
Income taxes (benefit)....................................................................              65          (191)
                                                                                                   -------      --------

Net earnings (loss).......................................................................        $    110          (342)
                                                                                                    ======      ========

Basic earnings (loss) per share (1).......................................................        $    .07          (.26)
                                                                                                    ======     =========

Diluted earnings (loss) per share (1).....................................................             .07          (.26)
                                                                                                    ======     =========

Ratios and Other Data:

Return on average assets..................................................................             .30%       (2.71%)
Return on average equity..................................................................            1.72%      (10.35%)
Average equity to average assets..........................................................           17.47%        26.16%
Interest-rate spread during the period....................................................            4.02%         2.33%
Net yield on average interest-earning assets..............................................            8.04%         6.61%
Noninterest expenses to average assets....................................................            3.45%         7.24%
Ratio of average interest-earning assets to average
         interest-bearing liabilities.....................................................            1.05          1.69
Nonperforming loans and foreclosed real estate as a percentage of
         total assets at end of year......................................................             NIL           NIL
Allowance for credit losses as a percentage
         of total loans at end of year....................................................            1.12%         1.18%
Total number of banking offices...........................................................               2             1
Total shares outstanding at end of year (1)...............................................       1,571,624     1,415,220
Book value per share at end of year.......................................................      $     4.31          4.22

</TABLE>


(1)      Share amounts  reflect the two-for-one  stock split effective  December
         15, 1997.



                                        5

<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                      Year Ended December 31, 1997 and 1996


General

Citizens Community Bancorp, Inc. (the "Holding Company") was incorporated on May
24,  1995.  The Holding  Company  owns 100% of the  outstanding  common stock of
Citizens  Community Bank (the "Bank") and Citizens  Financial  Corp.  ("Citizens
Financial")  (collectively  the  "Company").  The Holding  Company was organized
simultaneously  with the Bank and its  primary  business  is the  ownership  and
operation  of  the  Bank  and  Citizens   Financial.   The  Bank  is  a  Florida
state-chartered  commercial bank and is insured by the Federal Deposit Insurance
Corporation.  The Bank  opened  for  business  on March 8,  1996,  and  provides
community  banking  services to businesses and  individuals  in Collier  County,
Florida.  Citizens  Financial  which was  incorporated  on March  27,  1997 as a
mortgage origination company, but is currently inactive.

Liquidity and Capital Resources

A  state-chartered  commercial  bank is  required  under  Florida  Law and  FDIC
regulations  to  maintain  a  liquidity  reserve  of at least  15% of its  total
transaction  accounts and 8% of its total  non-transaction  accounts  subject to
certain restrictions.  The reserve may consist of cash-on-hand,  demand deposits
due from  correspondent  banks, and other investments and short-term  marketable
securities.

The Company's primary source of cash during the year ended December 31, 1997 was
from net deposit inflows of $19.1 million.  Cash was used primarily to originate
loans.  At  December  31,  1997,  the  Company had  outstanding  commitments  to
originate loans totaling $1.0 million and commitments to borrowers for available
lines of credit  totaling $5.1 million.  At December 31, 1997, the Bank exceeded
its regulatory liquidity requirements.

Regulation and Legislation

As  a  state-chartered  commercial  bank,  the  Bank  is  subject  to  extensive
regulation by the Florida  Department of Banking and Finance ("Florida DBF") and
the Federal Deposit Insurance Corporation ("FDIC").  The Bank files reports with
the Florida DBF and the FDIC concerning its activities and financial  condition,
in addition to obtaining  regulatory  approvals  prior to entering  into certain
transactions   such  as  mergers  with  or   acquisitions   of  other  financial
institutions.  Periodic  examinations  are  performed by the Florida DBF and the
FDIC to monitor the Bank's compliance with the various regulatory  requirements.
The Holding  Company and the Bank are also subject to regulation and examination
by the Federal Reserve Board of Governors.

Year 2000 Compliance

Management has an ongoing  program  designed to ensure that its  operational and
financial systems will not be adversely affected by year 2000 software failures,
due to processing  errors  arising from  calculations  using the year 2000 date.
Based on current  estimates  the Bank expects to incur from between  $25,000 and
$30,000  over the next three  years on its  program to  redevelop,  replace,  or
repair its  computer  applications  to make them "year  2000  compliant."  While
management  believes it is doing everything  technologically  possible to assure
year 2000 compliance,  it is to some extent  dependent upon vendor  cooperation.
Management  is requiring its computer  system and software  vendors to represent
that the products provided are, or will be, year 2000 compliant, and has planned
a  program  of  testing  for  compliance.  It is  recognized  that any year 2000
compliance failures could result in additional expense to the Bank.

Credit Risk

The Company's primary business is making  commercial,  business,  consumer,  and
real estate loans. That activity entails potential loan losses, the magnitude of
which  depend on a variety of economic  factors  affecting  borrowers  which are
beyond the control of the Company. While the Company has instituted underwriting

                                        6

<PAGE>



guidelines  and credit review  procedures to protect the Company from  avoidable
credit losses,  some losses will inevitably occur. At December 31, 1996 or 1997,
the Company had no nonperforming assets on loans delinquent 90 days or more, and
has no charge-off experience.


                                        7

<PAGE>



The following table presents information regarding the Company's total allowance
for losses as well as the  allocation of such amounts to the various  categories
of loans (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                            At December 31,
                                                                              ---------------------------------------
                                                                                     1997                  1996
                                                                              ---------------------------------------
                                                                                          Loans                 Loans
                                                                                           To                    To
                                                                                          Total                 Total
                                                                              Amount      Loans      Amount     Loans
                                                                              ------      -----      ------     -----
<S>                                                                            <C>          <C>       <C>        <C> 

               Commercial real estate loans............................        $  94         35%      $  62        31%
               Residential real estate loans...........................           42         27          22        36
               Commercial loans........................................          117         29          55        31
               Consumer loans..........................................           45          9           6         2
                                                                                ----       ----         ---       ---

               Total allowance for loan losses.........................        $ 298        100%      $ 145       100%
                                                                                 ===        ===         ===       ===

               Allowance for credit losses as a percentage
                  of the total loans outstanding.......................         1.12%                            1.18%
                                                                                ====                             ====
</TABLE>

Loan Portfolio Composition

Commercial  real estate loans and land loans comprise the largest group of loans
in the Company's  portfolio  amounting to $9.4 million, or 35% of the total loan
portfolio as of December 31, 1997.  Commercial real estate loans consist of $8.6
million of loans secured by other nonresidential  property and $800,000 of loans
secured by undeveloped land.

Residential  real estate loans comprise the second largest group of loans in the
Company's  loan  portfolio,  amounting  to $7.3 million or 27% of the total loan
portfolio as of December 31, 1997, of which approximately 98% are first mortgage
loans.  As of December  31,  1997,  consumer  loans and savings  account  loans,
amounted to $2.3 million or 9% of the total loan portfolio.

The following table sets forth the composition of the Company's loan portfolio:
<TABLE>
<CAPTION>

                                                                                            At December 31,
                                                                               --------------------------------------
                                                                                      1997                  1996
                                                                               --------------------------------------
                                                                                           % of                  % of
                                                                               Amount      Total    Amount      Total
                                                                               ------      -----    ------      -----
                                                                                                (in thousands)

<S>                                                                          <C>             <C>   <C>            <C>
         Commercial real estate........................................      $  9,423         35%  $  3,758        31%
         Residential real estate.......................................         7,261         27      4,384        36
         Commercial....................................................         7,710         29      3,815        31
         Consumer......................................................         2,261          9        305         2
                                                                               ------      -----     ------       ---

                                                                               26,655        100%    12,262       100%
                                                                                             ===                  ===

         Add (Subtract):
           Deferred costs (fees) net...................................            63                    (1)
           Allowance for credit losses.................................          (298)                 (145)
                                                                              -------                ------

         Loans, net....................................................      $ 26,420              $ 12,116
                                                                               ======                ======
</TABLE>

                                        8

<PAGE>

Securities

The  securities  portfolio  is  comprised  primarily  of U.S.  Treasury and U.S.
Government agency securities.  According to Financial  Accounting  Standards No.
115, the  securities  portfolio  is  categorized  as either "held to  maturity",
"available for sale" or "trading".  Securities held to maturity  represent those
securities  which the  Company  has the  positive  intent and ability to hold to
maturity.  These  securities are carried at amortized cost and were comprised of
U.S.  Treasury  and U.S.  Government  agency  securities  at December  31, 1997.
Securities  available for sale represent those investments which may be sold for
various   reasons   including   changes   in   interest   rates  and   liquidity
considerations.  These  securities  are  reported  at  fair  market  value  with
unrealized  gains  and  losses  being  reported  as  a  separate   component  of
stockholders  equity, net of income taxes. Trading securities are held primarily
for resale and are recorded at their fair values.  Unrealized gains or losses on
trading securities are included  immediately in earnings.  At December 31, 1997,
the Company had no securities categorized as available for sale or trading.

The following  table sets forth the carrying  value of the Company's  securities
portfolio:
<TABLE>
<CAPTION>

                                                                                                     At December 31,
                                                                                                     ---------------
                                                                                                   1997          1996
                                                                                                   ----          ----
                                                                                                       (in thousands)
     Securities held to maturity:
<S>                                                                                             <C>             <C>  
         U.S. Treasury securities.........................................................      $   250         1,743
         U.S. Government agency securities................................................        2,249           497
                                                                                                  -----         -----

                                                                                                $ 2,499         2,240
                                                                                                  =====         =====
</TABLE>

The following table sets forth, by maturity  distribution,  certain  information
pertaining to the securities held to maturity  portfolio as follows  (dollars in
thousands):
<TABLE>
<CAPTION>

                                                                           After One Year
                                                   One Year or Less         to Five Years               Total
                                                   ----------------         -------------               -----
                                               Carrying      Average    Carrying     Average     Carrying     Average
                                                Value         Yield      Value        Yield       Value        Yield
                                                -----         -----      -----        -----       -----        -----

December 31, 1997:
<S>                                               <C>         <C>          <C>        <C>         <C>          <C>  
     U.S. Treasury securities...............      $ 250       6.04%        $  -       -   %       $    250     6.04%
     U.S. Government
         agency securities..................        749       5.80           1,500    6.00           2,249     5.93
                                                    ---                      -----                   -----

     Total..................................      $ 999       5.81%        $ 1,500    6.00%       $  2,499     5.94%
                                                    ===       ====           =====    ====           =====     ====

December 31, 1996:
     U.S. Treasury securities...............        247       6.00%          1,496    5.78%          1,743     5.80%
     U.S. Government
         agency securities..................        497       5.80             -        -              497     5.80
                                                    ---                     ------                   -----

     Total..................................      $ 744       5.88%        $ 1,496    5.78%       $  2,240     5.80%
                                                    ===       ====           =====    ====           =====     ====
</TABLE>


                                       10

<PAGE>



                         Regulatory Capital Requirements

Under FDIC regulations,  the Bank is required to meet certain minimum regulatory
capital requirements. This is not a valuation allowance and has not been created
by charges  against  earnings.  It  represents a  restriction  on  stockholders'
equity.

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  (as  defined  in the  regulations)  to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
<TABLE>
<CAPTION>

                                                                                                    To Be Well
                                                                                                    Capitalized
                                                                        Minimum                    for Purposes
                                                                      For Capital                  of Prompt and
                                               Actual              Adequacy Purposes:            Corrective Action
                                       ---------------------       ------------------            -----------------
                                       Amount            %          Amount          %           Amount            %
                                       ---------------------       ------------------            -----------------
                                                                          (dollars in thousands)
     As of December 31, 1997:
         Total capital (to Risk-
<S>                                  <C>               <C>         <C>              <C>         <C>              <C>  
         Weighted Assets)........... $ 4,643           17.67%      $ 2,102          8.00%       $ 2,627          10.0%
         Tier I Capital (to Risk-
         Weighted Assets)...........   4,354           16.57         1,051          4.00          1,576           6.0
         Tier I Capital
         (to Average Assets)........   4,354           10.67         1,633          4.00          2,041           5.0

     As of December 31, 1996:
         Total capital (to Risk-
         Weighted Assets)...........   3,890           30.80%        1,011          8.00%         1,264          10.0%
         Tier I Capital (to Risk-
         Weighted Assets)...........   3,747           29.65           505          4.00            758           6.0
         Tier I Capital
         (to Average Assets)........   3,747           19.46           770          4.00            963           5.0
</TABLE>

                                   Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk arises primarily from  interest-rate  risk inherent in
its lending and deposit  taking  activities.  To that end,  management  actively
monitors and manages its interest-rate risk exposure.  The measurement of market
risk associated  with financial  instruments is meaningful only when all related
and offsetting on- and  off-balance-sheet  transactions are aggregated,  and the
resulting  net  positions are  identified.  Disclosures  about the fair value of
financial instruments,  which reflect changes in market prices and rates, can be
found in Note 7 of Notes to Consolidated Financial Statements.

The Company's  primary objective in managing  interest-rate  risk is to minimize
the  adverse  impact of changes  in  interest  rates on the Bank's net  interest
income and capital, while adjusting the Company's  asset-liability  structure to
obtain the maximum  yield-cost  spread on that  structure.  The  Company  relies
primarily  on its  asset-liability  structure  to  control  interest  rate risk.
However,  a sudden and  substantial  increase  in interest  rates may  adversely
impact the Company's  earnings,  to the extent that the interest  rates borne by
assets and liabilities do not change at the same speed,  to the same extent,  or
on the same basis. The Company does not engage in trading activities.


                                       11

<PAGE>



                           Asset - Liability Structure

As part of its  asset and  liability  management,  the  Company  has  emphasized
establishing and implementing internal  asset-liability  decision processes,  as
well as communications  and control  procedures to aid in managing the Company's
earnings.  Management  believes that these processes and procedures  provide the
Company  with  better  capital   planning,   asset  mix  and  volume   controls,
loan-pricing  guidelines,  and deposit  interest-rate  guidelines  which  should
result in tighter controls and less exposure to interest-rate risk.

The matching of assets and  liabilities  may be analyzed by examining the extent
to which such  assets and  liabilities  are  "interest  rate  sensitive"  and by
monitoring  an  institution's  interest  rate  sensitivity  "gap."  An  asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap  is  defined  as  the  difference   between   interest-earning   assets  and
interest-bearing  liabilities  maturing or repricing within a given time period.
The gap ratio is computed as rate sensitive assets/rate sensitive liabilities. A
gap ratio of 1.0% represents perfect matching. A gap is considered positive when
the amount of  interest-rate  sensitive assets exceeds  interest-rate  sensitive
liabilities.  A gap is  considered  negative  when the  amount of  interest-rate
sensitive liabilities exceeds interest-rate sensitive assets. During a period of
rising  interest  rates,  a negative  gap would  adversely  affect net  interest
income, while a positive gap would result in an increase in net interest income.
During a period of falling  interest  rates,  a negative  gap would result in an
increase in net interest income, while a positive gap would adversely affect net
interest income.

In order to minimize the potential for adverse effects of material and prolonged
increases  in  interest  rates  on the  results  of  operations,  the  Company's
management  continues  to monitor  asset and  liability  management  policies to
better match the maturities and repricing terms of its  interest-earning  assets
and interest-bearing liabilities. Such policies have consisted primarily of: (i)
emphasizing the origination of adjustable-rate  loans; (ii) maintaining a stable
core deposit base; and (iii) maintaining a significant  portion of liquid assets
(cash and short-term securities).


                                       12

<PAGE>



The  following  table sets forth certain  information  relating to the Company's
interest-earning  assets and  interest-bearing  liabilities at December 31, 1997
that are estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):
<TABLE>
<CAPTION>

                                                     More
                                                     Than        More
                                                     Three     Than Six     More
                                                     Months     Months    Than One                    Over
                                         Three       to Six     to One     Year to      More Than      Ten
                                         Months      Months      Year     Five Years   Five Years     Years     Total
                                         ------      ------      ----     ----------   ----------     -----     -----
<S>                                    <C>           <C>         <C>          <C>           <C>       <C>      <C>   
Mortgage and commercial loans (1):
    Variable rate .................... $  6,346       1,069         893        1,904          101      -       10,313
    Fixed rate    ....................      803         331       1,363       12,004          762     1,079    16,342
                                        -------      ------      ------       ------       ------     -----    ------

         Total loans..................    7,149       1,400       2,256       13,908          863     1,079    26,655

Federal funds sold....................    9,057        -           -            -            -         -        9,057
Securities (2)........................      500        -            499        1,500         -         -        2,499
                                        -------    --------      ------       ------      -------  --------    ------

         Total rate-sensitive assets..   16,706       1,400       2,755       15,408          863     1,079    38,211
                                         ------       -----       -----       ------        -----     -----    ------

Deposit accounts (3):
    Money market deposits.............    1,302        -           -            -            -         -        1,302
    NOW deposits......................   15,462        -           -            -            -         -       15,462
    Savings deposits..................      839        -           -            -            -         -          839
    Certificates of deposit...........    3,440       2,800       5,293        4,547          102      -       16,182
                                         ------       -----      ------       ------       ------  --------    ------

         Total rate-sensitive
             liabilities..............   21,043       2,800       5,293        4,547          102      -       33,785
                                         ======       =====      ======       ======       ======  ========    ======

GAP repricing differences............. $ (4,337)     (1,400)     (2,538)      10,861          761     1,079     4,426
                                         ======       =====       =====       ======       ======     =====    ======

Cumulative GAP........................   (4,337)     (5,737)     (8,275)       2,586        3,347     4,426
                                         ======       =====       =====       ======        =====     =====

Cumulative GAP/total assets...........    (9.8%)     (12.9%)     (18.6%)         5.8%         7.5%     10.0%
                                          ====        ====        ====       =======       ======     =====

</TABLE>


(1)      In preparing the table above, adjustable-rate loans are included in the
         period in which the interest  rates are next scheduled to adjust rather
         than in the  period  in which the loans  mature.  Fixed-rate  loans are
         scheduled, including repayment, according to their maturities.
(2)      Securities are scheduled through the maturity dates.
(3)      Money-market,   NOW,  and  savings   deposits  are  regarded  as  ready
         accessible  withdrawable accounts.  Time deposits are scheduled through
         the maturity dates.






                                       13

<PAGE>

The following table reflects the contractual  principal  repayments by period of
the Company's loan portfolio at December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
                                                                            Commercial
                                                            Residential        Real
         Years Ending                          Commercial    Mortgage         Estate         Consumer
         December 31,                            Loans        Loans           Loans           Loans             Total
         ------------                            -----        -----           -----           -----             -----
<S>                                               <C>             <C>            <C>            <C>            <C>   
           1998.............................      $ 2,466         1,323          3,013            447           7,249
           1999.............................          494           540            604            252           1,890
           2000.............................        1,140         1,095          1,393            221           3,849
           2001-2002........................        1,233           482          2,207            214           4,136
           2003-2004........................        1,481           489          1,810            255           4,035
           2005 and beyond..................          896         3,332            396            872           5,496
                                                  -------         -----         ------          -----          ------

           Total............................      $ 7,710         7,261          9,423          2,261          26,655
                                                    =====         =====          =====          =====          ======
</TABLE>

Of the $19.4  million  of loans due after  1998,  71% of such  loans  have fixed
interest rates and 29% have adjustable interest rates.

Scheduled  contractual  principal  repayments of loans do not reflect the actual
life of such assets.  The average life of loans is substantially less than their
average contractual terms due to prepayments.  In addition,  due-on-sale clauses
on loans  generally  give the Company the right to declare a  conventional  loan
immediately due and payable in the event, among other things,  that the borrower
sells the real property subject to the mortgage and the loan is not repaid.  The
average life of mortgage loans tends to increase, however, when current mortgage
loan rates are  substantially  higher than rates on existing mortgage loans and,
conversely,  decrease when rates on existing mortgages are substantially  higher
than current mortgage loan rates.

Origination, Sale and Repayment of Loans. The Company generally originates loans
on real estate  located in its primary  geographical  lending  area in Southwest
Florida.  Residential mortgage loan originations by the Company are attributable
to depositors,  other existing  customers,  advertising  and referrals from real
estate  brokers  and  developers.   The  Company's  residential  mortgage  loans
generally  are  originated  to  ensure   compliance   with   documentation   and
underwriting  standards which permit their sale to the Federal National Mortgage
Association ("Fannie Mae") and other investors in the secondary market.

The Company has, to a limited  extent,  engaged in the sale of whole loans.  The
Company utilizes the sale of fixed-rate loans and ARM loans to provide liquidity
and funding sources for higher yielding loans.

The following table sets forth total loans originated, repaid and sold:
<TABLE>
<CAPTION>
                                                                                              Year Ended December 31,
                                                                                              -----------------------
                                                                                             1997                1996
                                                                                             ----                ----
                                                                                                     (in thousands)
<S>                                                                                          <C>               <C>   
      Originations:
         Commercial loans................................................................    $    756           3,855
         Commercial real estate loans....................................................       9,426           3,797
         Residential mortgage loans......................................................      13,897           4,384
         Consumer loans..................................................................       2,888             305
                                                                                               ------         -------

             Total loans originated......................................................      26,967          12,341

         Less:
         Principal reductions............................................................       7,887              79
         Loans sold......................................................................       4,687            -
                                                                                               ------          ------

         Increase (decrease) in total loans..............................................    $ 14,393          12,262
                                                                                               ======          ======
</TABLE>
                                                            14

<PAGE>

Deposits and Other Sources of Funds

General. In addition to deposits, the sources of funds available for lending and
other business purposes include loan repayments, loan sales, and securities sold
under agreements to repurchase.  Loan repayments are a relatively  stable source
of funds,  while deposit  inflows and outflows are influenced  significantly  by
general interest rates and money market conditions.  Borrowings may be used on a
short-term basis to compensate for reductions in other sources, such as deposits
at less  than  projected  levels  and are also used to fund the  origination  of
mortgage loans designated to be sold in the secondary markets.

Deposits.   Deposits  are  attracted  principally  from  the  Company's  primary
geographic market areas in Collier County,  Florida.  The Company offers a broad
selection  of  deposit  instruments  including  demand  deposit  accounts,   NOW
accounts,  money market  accounts,  regular savings  accounts,  term certificate
accounts and  retirement  savings plans (such as IRA  accounts).  Certificate of
deposit  rates  are  set to  encourage  longer  maturities  as cost  and  market
conditions will allow.  Deposit account terms vary, with the primary differences
being the  minimum  balance  required,  the time period the funds must remain on
deposit and the interest rate.

The Company has  emphasized  commercial  banking  relationships  in an effort to
increase  demand  deposits as a  percentage  of total  deposits.  The  Company's
courier  service is expected to be in operation by the end of the first  quarter
of 1998.  The courier  service will serve the  Company's  business  customers in
Marco Island and Naples.

Management  sets the deposit  interest rates weekly based on a review of deposit
flows for the  previous  week,  a survey of rates  among  competitors  and other
financial institutions in Florida.

The following  table shows the  distribution  of, and certain other  information
relating to, the Company's deposit accounts by type (dollars in thousands):
<TABLE>
<CAPTION>

                                                                                     At December 31,
                                                                 ------------------------------------------------------
                                                                             1997                      1996
                                                                 ------------------------------------------------------
                                                                                 % of                         % of
                                                                   Amount       Deposits       Amount        Deposits
                                                                   ------       --------       ------        --------

<S>                                                               <C>             <C>            <C>            <C>    
         Demand deposits......................................    $  3,153          8.54%        $  2,366        13.23%
         NOW deposits.........................................      15,462         41.86            8,311        46.47
         Money-market deposits................................       1,302          3.52              418         2.34
         Savings deposits.....................................         839          2.27              360         2.01
                                                                  --------        ------          -------       ------

                  Subtotal....................................      20,756         56.19           11,455        64.05

         Certificate of deposits:
                  4.00% - 4.99%...............................       1,101          2.98              447         2.50
                  5.00% - 5.99%...............................       8,221         22.26            4,966        27.77
                  6.00% - 6.99%...............................       6,860         18.57            1,017         5.68
                                                                    ------        ------           ------       ------

         Total certificates of deposit (1)....................      16,182         43.81            6,430        35.95
                                                                    ------        ------           ------       ------

         Total deposit........................................    $ 36,938        100.00%        $ 17,885       100.00%
                                                                    ======        ======           ======       ======
</TABLE>



(1)      Includes individual  retirement accounts ("IRAs") totaling $611,000 and
         $253,000 at December 31, 1997 and 1996, all of which are in the form of
         certificates of deposit.




                                       16

<PAGE>






<TABLE>
<CAPTION>

Jumbo certificates ($100,000 and over) mature as follows (in thousands):

                                                                                                          At December 31,
                                                                                                      1997        1996

<S>                                                                                               <C>            <C>
         Due three months or less...........................................................      $    872         -
         Due over three months to six months................................................           411         507
         Due over six months to one year....................................................         1,831         260
         Due over one year..................................................................           905         700
                                                                                                    ------       -----

                                                                                                   $ 4,019       1,467
                                                                                                     =====       =====

</TABLE>

                                       17

<PAGE>

Results of Operations

The  operating  results of the  Company  depend  primarily  on its net  interest
income,  which is the difference  between  interest  income on  interest-earning
assets  and  interest  expense  on  interest-bearing   liabilities,   consisting
primarily  of deposits.  Net interest  income is  determined  by the  difference
between   yields   earned  on   interest-earning   assets   and  rates  paid  on
interest-bearing  liabilities  ("interest-rate spread") and the relative amounts
of  interest-earning  assets and  interest-bearing  liabilities.  The  Company's
interest-rate  spread is  affected  by  regulatory,  economic,  and  competitive
factors that  influence  interest  rates,  loan demand,  and deposit  flows.  In
addition,  the  Company's  net  earnings  are  also  affected  by the  level  of
nonperforming  loans and  foreclosed  real  estate,  as well as the level of its
noninterest income, and its noninterest expenses,  such as salaries and employee
benefits, occupancy and equipment costs and income taxes.

The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend  income of the Company from
interest-earning  assets and the resultant  average yield; (ii) the total dollar
amount of interest  expense on  interest-bearing  liabilities  and the resultant
average costs; (iii) net  interest/dividend  income;  (iv) interest rate spread;
(v) net interest margin. Average balances are based on average daily balances.
<TABLE>
<CAPTION>

                                                                    1997                              1996
                                                     -------------------------------------------------------------------
                                                                  Interest   Average                Interest  Average
                                                     Average         and      Yield/     Average      and      Yield/
                                                     Balance     Dividends    Rate       Balance   Dividends     Rate
                                                     -------     ---------    ----       -------   ---------     ----
Interest-earning assets:
<S>                                                  <C>           <C>          <C>     <C>            <C>        <C>  
     Loans......................................     $  20,537       1,914      9.32%   $  3,842         323      8.39%
     Securities.................................         2,346         141      6.01       2,052         119      5.78
     Other interest-earning assets (1)..........         8,516         468      5.50       5,306         298      5.62
                                                       -------       -----                ------         ---      ----

         Total interest-earning assets..........        31,399       2,523      8.04      11,200         740      6.61
                                                                     -----                               ---

Noninterest-earning assets......................         5,157                             1,443
                                                        ------                            ------

         Total assets...........................      $ 36,556                          $ 12,643
                                                        ======                            ======

Interest-bearing liabilities:
     Demand, money market and
         NOW deposits...........................        17,638         517      2.93       4,087         148      3.62
     Savings....................................           573          17      3.01         163           5      2.99
     Certificates of deposit....................        11,704         664      5.67       2,296         124      5.39
     Other......................................           125          10      8.00          66           6      9.42
                                                       -------       -----               -------         ---

         Total interest-bearing liabilities.....        30,040       1,208      4.02       6,612         283      4.28
                                                                     -----                               ---

Noninterest-bearing liabilities.................           128                             2,724
Stockholders' equity............................         6,388                             3,307
                                                        ------                            ------

         Total liabilities and
           stockholders' equity.................      $ 36,556                          $ 12,643
                                                        ======                            ======

Net interest/dividend income....................                   $ 1,315                             $ 457
                                                                     =====                               ===

Interest-rate spread (2)........................                                4.02%                             2.33%
                                                                                ====                              ====

Net interest margin (3).........................                                4.20%                             4.08%
                                                                                ====                              ====

Ratio of average interest-earning assets to
     average interest-bearing liabilities.......          1.05                              1.69
                                                          ====                              ====
----------------------------------------
</TABLE>
(1)  Includes interest-bearing deposits and federal funds sold.
                                       18

<PAGE>



(2)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(3)  Net   interest   margin  is  net  interest   income   dividend  by  average
     interest-earning assets.


                                       19

<PAGE>



Rate/Volume Analysis

The following table sets forth certain information regarding changes in interest
income and interest expense of the Company for the periods  indicated.  For each
category   of   interest-earning   assets  and   interest-bearing   liabilities,
information is provided on changes  attributable  to (1) changes in rate (change
in rate  multiplied by prior  volume),  (2) changes in volume  (change in volume
multiplied  by prior  rate)  and (3)  changes  in  rate-volume  (change  in rate
multiplied by change in volume).

<TABLE>
<CAPTION>

                                                                                         Year Ended December 31,
                                                                                             1997 vs. 1996
                                                                                       --------------------------
                                                                                       Increase (Decrease) Due to
                                                                                       --------------------------
                                                                                                      Rate/
                                                                                  Rate    Volume     Volume     Total
                                                                                  ----    ------     ------     -----
                                                                                                (In thousands)
<S>                                                                               <C>       <C>         <C>     <C>
Interest earning assets:
    Loans....................................................................     $ 35      1,401       155     1,591
    Securities...............................................................        5         17       -          22
    Other interest-earning assets............................................       (6)       180        (4)      170
                                                                                   ---      -----      ----     -----

      Total..................................................................       34      1,598       151     1,783
                                                                                    --      -----       ---     -----

Interest-bearing liabilities:
    Deposits:
      Demand, money-market and NOW deposits..................................      (28)       491       (94)      369
      Savings................................................................       -          12       -          12
      Certificates of deposit................................................        7        507        26       540
      Other..................................................................       (1)         6        (1)        4
                                                                                   ---     ------       ---     -----

      Total..................................................................      (22)     1,016       (69)      925
                                                                                    --      -----       ---     -----

Net change in net interest income............................................     $ 56        582       220       858
                                                                                    ==     ======       ===     =====
</TABLE>
                                       20
<PAGE>


                              Results of Operations

Comparison of Years Ended December 31, 1997 and 1996


    General.  Net earnings for the year ended December 31, 1997 were $109,506 or
      $.07 per basic  share  ($.07 per  diluted  share)  compared  to a net loss
      $(342,295) or $(.26) per basic share ($.26 per diluted share) for the year
      ended December 31, 1996.  This  improvement in the Company's net operating
      results  was  primarily  due to an  increase  in net  interest  income and
      noninterest   income  partially  offset  by  an  increase  in  noninterest
      expenses.

    Interest Income and Expense.  Interest income increased by $1.8 million from
      $.7 million for the year ended  December  31, 1996 to $2.5 million for the
      year ended  December 31, 1997.  Interest  income on loans  increased  $1.6
      million due an increase in the average  loan  portfolio  balance from $3.8
      million for the year ended December 31, 1996 to $20.5 million for 1997, as
      well as an  increase  in the  weighted-average  yield of 93 basis  points.
      Interest on securities increased $22,000 due to an increase in the average
      securities  balance from $2.1 million in 1996 to $2.3 million in 1997,  as
      well as an increase  in the  average  yield from 5.78% in 1996 to 6.01% in
      1997.  Interest  on  other  interest-earning   assets  increased  $170,000
      primarily   due  to  an  increase  from  $5.3  million  in  average  other
      interest-earning assets in 1996 to $8.5 million in 1997.

      Interest  expense  increased  $925,000 in 1997 compared to 1996.  Interest
      expense  increased  due to an  increase  of 5 basis  points in the average
      yield paid on deposits for the year ended  December  31, 1997  compared to
      1996,  and an  increase  in average  deposits  from $6.5  million to $29.9
      million from 1996 to 1997.

    Provision  for Loan  Losses.  The  provision  for loan losses was charged to
      earnings to bring the total  allowance  to a level deemed  appropriate  by
      management and is based upon historical experience, the volume and type of
      lending  conducted  by the  Company,  industry  standards,  the amounts of
      nonperforming  loans,  general economic  conditions,  particularly as they
      relate to the  Company's  market areas,  and other factors  related to the
      collectibility of the Company's loan portfolio.  Management  believes that
      the  allowance  for loan losses of  $298,000  is adequate at December  31,
      1997.

    Other Income.  Other  income  increased  from $70,000 in 1996 to $273,000 in
      1997 primarily  because of gains from the sale of loans of $68,000 in 1997
      with no  corresponding  amount in 1996 and  increased  service  charges on
      deposit accounts in 1997 compared to 1996.

    Other Expense.  Total other  expense  increased  $345,000 for the year ended
      December 31, 1997 compared to 1996, primarily due to increases in employee
      compensation  and benefits of $310,000 due to  additional  employees.  All
      other  operating  expenses  increased  primarily  due to the growth of the
      Bank.

    Income Taxes.  The income tax provision  was $66,000 (an  effective  rate of
      37.6%) for 1997 compared to a credit of $(191,000)  (an effective  rate of
      (35.8)%) for 1996).



                                       21

<PAGE>



                     Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in
accordance with GAAP,  which requires the measurement of financial  position and
operating results in terms of historical dollars, without considering changes in
the relative  purchasing power of money over time due to inflation.  Unlike most
industrial  companies,  substantially  all of the assets and  liabilities of the
Company  are  monetary  in  nature.  As a  result,  interest  rates  have a more
significant  impact on the Bank's performance than the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or in
the same  magnitude as the prices of goods and  services,  since such prices are
affected by inflation to a larger extent than interest rates.

                         Future Accounting Requirements

Financial Accounting Standards 130 - Reporting  Comprehensive Income establishes
standards for reporting comprehensive income. The Standard defines comprehensive
income as the change in equity of an  enterprise  except  those  resulting  from
stockholder transactions. All components of comprehensive income are required to
be reported in a new financial statement that is displayed with equal prominence
as existing  financial  statements.  The Company  will be required to adopt this
Standard  effective  January 1, 1998. As the Statement  addresses  reporting and
presentation  issues only, there will be no impact on operating results from the
adoption of this Standard.

Financial Accounting Standards 131 - Disclosures about Segments of an Enterprise
and Related  Information  establishes  standards for related  disclosures  about
products and services,  geographic areas, and major customers.  The Company will
be required to adopt this  Standard  effective  January 1, 1998. As the Standard
addresses  reporting  and  disclosure  issues  only,  there will be no impact on
operating results from adoption of this Standard.




                                       22

<PAGE>


























                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
                              Marco Island, Florida


                    Audited Consolidated Financial Statements
             December 31, 1997 and 1996 and For the Years Then Ended


                  (Together with Independent Auditors' Report)























                                       23

<PAGE>






















                          Independent Auditors' Report



Board of Directors
Citizens Community Bancorp, Inc.
Marco Island, Florida:

We have  audited  the  accompanying  consolidated  balance  sheets  of  Citizens
Community  Bancorp,  Inc. and Subsidiaries  (the "Company") at December 31, 1997
and 1996,  and the related  consolidated  statements of  operations,  changes in
stockholders'  equity,  and cash flows for the years then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of the Company at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years  then  ended in  conformity  with  generally  accepted  accounting
principles.




/s/HACKER, JOHNSON, COHEN & GRIEB PA
------------------------------------
   HACKER, JOHNSON, COHEN & GRIEB PA
   Tampa, Florida
   February 6, 1998





                                       24

<PAGE>
<TABLE>
<CAPTION>

                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                                                                                                At December 31,
                                                                                                ---------------
                                                                                            1997              1996
                                                                                            ----              ----
<S>                                                                                    <C>                 <C>       
    Assets

Cash and due from banks..............................................................  $  3,153,577         1,353,777
Federal funds sold...................................................................     9,057,000         6,688,000
                                                                                         ----------        ----------

              Cash and cash equivalents..............................................    12,210,577         8,041,777

Securities held to maturity..........................................................     2,498,614         2,240,290
Loans, net of allowance for loan losses of $298,000 and $145,000.....................    26,420,149        12,115,911
Premises and equipment, net..........................................................     2,845,997         2,293,140
Accrued interest receivable and other assets.........................................       308,152           132,406
Deferred income taxes................................................................       138,043           204,000
                                                                                         ----------        ----------

              Total assets...........................................................  $ 44,421,532        25,027,524
                                                                                         ==========        ==========

    Liabilities and Stockholders' Equity

Liabilities:
    Demand deposits..................................................................     3,153,135         2,366,487
    Savings and NOW deposits.........................................................    16,300,813         8,670,357
    Money-market deposits............................................................     1,302,296           417,775
    Time deposits....................................................................    16,182,123         6,430,485
                                                                                         ----------        ----------

              Total deposits.........................................................    36,938,367        17,885,104

    Official checks..................................................................       473,521           579,703
    Mortgage payable.................................................................        -                525,000
    Accrued interest payable and other liabilities...................................       238,886            73,534
                                                                                         ----------        ----------

              Total liabilities......................................................    37,650,774        19,063,341
                                                                                         ----------        ----------

Commitments (Note 7)

Stockholders' Equity:
    Preferred stock, $.01 value, 2,000,000 shares authorized,
         none issued or outstanding..................................................        -                   -
    Common stock, $.01 par value 8,000,000 shares authorized
         and 1,571,624 and 707,610 shares issued and outstanding.....................        15,716             7,076
    Additional paid-in capital.......................................................     7,010,515         6,322,086
    Accumulated deficit..............................................................      (255,473)         (364,979)
                                                                                        -----------        ----------

              Total stockholders' equity.............................................     6,770,758         5,964,183
                                                                                         ----------        ----------

              Total liabilities and stockholders' equity.............................  $ 44,421,532        25,027,524
                                                                                         ==========        ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.

                                       25

<PAGE>
<TABLE>
<CAPTION>
                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                                                                                         Year Ended December 31,
                                                                                         -----------------------
                                                                                         1997               1996
                                                                                         ----               ----
<S>                                                                                    <C>                 <C>    
Interest income:
    Loans  ........................................................................  $ 1,913,828            322,538
    Securities.....................................................................      140,545            118,531
    Federal funds sold.............................................................      468,404            254,864
    Deposits in banks..............................................................        -                 43,863
                                                                                     -----------            -------

           Total interest income...................................................    2,522,777            739,796
                                                                                     -----------            -------

Interest expense:
    Deposits.......................................................................    1,197,823            276,691
    Other  ........................................................................        9,573              6,182
                                                                                     -----------           --------

           Total interest expense..................................................    1,207,396            282,873
                                                                                     -----------            -------

Net interest income................................................................    1,315,381            456,923

Provision for loan losses..........................................................      153,000            145,000
                                                                                     -----------            -------

           Net interest income after provision for loan losses.....................    1,162,381            311,923
                                                                                     -----------            -------

Noninterest income:
    Gain on sale of loans..........................................................       68,476              -
    Other service charges and fees.................................................      176,974             57,412
    Other  ........................................................................       27,652             12,297
                                                                                     -----------           --------

           Total noninterest income................................................      273,102             69,709
                                                                                     -----------           --------

Noninterest expense:
    Compensation and  benefits.....................................................      641,693            332,124
    Occupancy and equipment........................................................      167,755            153,548
    Advertising....................................................................       31,917             20,491
    Organizational expenses........................................................       -                 100,079
    Professional fees..............................................................       18,108             35,257
    Office supplies................................................................       30,120             68,982
    Data processing................................................................       62,195             33,765
    Other  ........................................................................      308,232            170,681
                                                                                     -----------            -------

           Total noninterest expense...............................................    1,260,020            914,927
                                                                                     -----------            -------

Earnings (loss) before income taxes (benefit)......................................      175,463           (533,295)

           Income taxes (benefit)..................................................       65,957           (191,000)
                                                                                     -----------            -------

Net earnings (loss)................................................................  $   109,506           (342,295)
                                                                                     ===========            =======

Earnings (loss) per share:

           Basic...................................................................  $       .07               (.26)
                                                                                     ===========           ========
           Diluted.................................................................  $       .07               (.26)
                                                                                     ===========           ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
                                       26
<PAGE>
<TABLE>
<CAPTION>
                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
           Consolidated Statements of Changes in Stockholders' Equity


                                                   Common Stock
                                        -----------------------------------
                                                       Number                    Additional                           Total
                                        Preferred       of                         Paid-In        Accumulated     Stockholders'
                                          Stock        Shares        Amount        Capital         Deficit             Equity
                                          -----        ------        ------        -------         -------             ------

<S>                                     <C>         <C>              <C>           <C>               <C>             <C>      
Balance at December 31, 1995...........  $ 21,000        -             -                -             (22,684)          (1,684)

Redemption of 210 shares of
     preferred stock...................   (21,000)       -             -                -                -             (21,000)

Issuance of 707,610 shares of
     common stock......................      -        707,610         7,076        6,322,086             -           6,329,162

Net loss   ............................      -            -            -                -            (342,295)        (342,295)
                                         ---------- ----------       ------        ---------          -------        ---------

Balance at December 31, 1996...........      -        707,610         7,076        6,322,086         (364,979)       5,964,183

Issuance shares of common
     stock at $9.00....................      -         77,452           774          689,545             -             690,319

Two-for-one stock split on
     December 15, 1997.................      -        785,062         7,851           (7,851)            -                -

Issuance of shares at $4.50............      -          1,500            15            6,735             -               6,750

Net earnings...........................      -            -            -                -             109,506          109,506
                                       -----------------------       ------        ---------          -------        ---------

Balance at December 31, 1997........... $      -    1,571,624        15,716        7,010,515         (255,473)       6,770,758
                                         ========== =========        ======        =========          =======        =========

</TABLE>


















See Accompanying Notes to Consolidated Financial Statements.


                                       27

<PAGE>
<TABLE>
<CAPTION>
                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows


                                                                                         Year Ended December 31,
                                                                                         -----------------------
                                                                                         1997               1996
                                                                                         ----               ----
<S>                                                                                  <C>                <C>         
Cash flows from operating activities:
    Net earnings (loss)............................................................  $   109,506           (342,295)
    Adjustments to reconcile net earnings (loss) to net cash used in
      operating activities:
         Depreciation..............................................................       82,818             73,610
         Provision for loan losses.................................................      153,000            145,000
         Provision (credit) for deferred income taxes..............................       65,957           (191,000)
         Amortization of loan fees, premiums and discounts.........................     (148,005)           (19,340)
         (Increase) decrease in accrued interest receivable and other assets.......     (175,746)            14,592
         Loans originated for sale.................................................   (4,687,283)            -
         Sale of loans originated for sale.........................................    4,755,759             -
         Gain on sale of loans.....................................................      (68,476)            -
         Increase in accrued interest payable and other liabilities................      165,352             24,503
                                                                                     -----------        -----------

                  Net cash provided by (used in) operating activities..............      252,882           (294,930)
                                                                                     -----------        -----------

Cash flows from investing activities:
    Purchase of securities held to maturity........................................   (1,750,000)        (5,220,309)
    Maturities of securities held to maturity......................................    1,500,000          3,000,000
    Net increase in loans..........................................................  (14,317,557)       (12,261,552)
    Purchase of premises and equipment.............................................     (635,675)        (1,163,961)
                                                                                     -----------        -----------

                  Net cash used in investing activities............................  (15,203,232)       (15,645,822)
                                                                                     ------------       -----------

Cash flows from financing activities:
    Net increase in demand, savings, NOW and money-market deposits.................    9,301,625         11,454,619
    Net increase in time deposits..................................................    9,751,638          6,430,485
    Net (decrease) increase in official checks.....................................     (106,182)           579,703
    Repayment of advances from organizers..........................................       -                (239,000)
    Redemption of preferred stock..................................................       -                 (21,000)
    Sale of common stock...........................................................      697,069          6,329,162
    Payment of mortgage payable....................................................     (525,000)          (593,806)
                                                                                     -----------        ------------

                  Net cash provided by financing activities........................   19,119,150         23,940,163
                                                                                      ----------        -----------

Net increase in cash and cash equivalents..........................................    4,168,800          7,999,411

Cash and cash equivalents at beginning of year.....................................    8,041,777             42,366
                                                                                      ----------        -----------

Cash and cash equivalents at end of year...........................................  $12,210,577          8,041,777
                                                                                      ==========        ===========

Supplemental disclosure of cash flow information: Cash paid during the year for:
         Interest .................................................................  $ 1,093,507            233,273
                                                                                      ==========        ===========

         Income taxes..............................................................  $     -                  -
                                                                                     ===========        ===========

    Noncash transactions-
         Issuance of mortgage payable for acquisition of property..................  $     -                525,000
                                                                                     ==============     ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.

                                                          28

<PAGE>






                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                 For the Years Ended December 31, 1997 and 1996


(1) Summary of Significant Accounting Policies
    Organization.  Citizens Community Bancorp,  Inc. (the "Holding Company") was
         incorporated  on May 24,  1995.  The Holding  Company  owns 100% of the
         outstanding  common  stock of Citizens  Community  Bank of Florida (the
         "Bank") and 100% of Citizens  Financial  Corp.  ("Citizens  Financial")
         (collectively  the  "Company").   The  Holding  Company  was  organized
         simultaneously  with the Bank and its primary business is the ownership
         and operation of the Bank and Citizens Financial. The Bank is a Florida
         state-chartered  commercial  bank and is insured by the Federal Deposit
         Insurance  Corporation.  The Bank opened for  business on March 8, 1996
         and provides  community  banking services to businesses and individuals
         in Collier County, Florida. Citizens Financial was formed and commenced
         business as a mortgage broker in 1997.

    Basis of Presentation. The accompanying consolidated financial statements of
         the Company include the accounts of the Holding  Company,  the Bank and
         Citizens   Financial.   All  significant   intercompany   accounts  and
         transactions have been eliminated in consolidation.  The accounting and
         reporting  practices  of the  Company  conform  to  generally  accepted
         accounting  principles  and to general  practices  within  the  banking
         industry.

    Estimates.  The  preparation  of financial  statements  in  conformity  with
         generally accepted  accounting  principles  requires management to make
         estimates and  assumptions  that affect the reported  amounts of assets
         and liabilities and disclosure of contingent  assets and liabilities at
         the  date of the  financial  statements  and the  reported  amounts  of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates.

    Securities Held to Maturity.  United States  government  treasury and agency
    securities for which the Company has the positive intent and ability to hold
    to maturity are reported at cost,  adjusted for amortization of premiums and
    accretion of discounts  which are  recognized  in interest  income using the
    interest method over the period to maturity.

    Loans Held for Sale.  Mortgage loans originated and intended for sale in the
         secondary  market are carried at the lower of cost or estimated  market
         value in the  aggregate.  At  December  31, 1997 and 1996 there were no
         loans held for sale.

    Loans Receivable.  Loans  receivable that  management  has  the  intent  and
         ability to hold for the foreseeable future or until maturity or pay-off
         are  reported  at  their   outstanding   principal   adjusted  for  any
         charge-offs,  the allowance  for loan losses,  and any deferred fees or
         costs on  originated  loans and  unamortized  premiums or  discounts on
         purchased loans.

         Loan  origination  fees  and  certain  direct   origination  costs  are
         capitalized and recognized as an adjustment of the yield of the related
         loan.

         The  accrual of interest on impaired  loans is  discontinued  when,  in
         management's  opinion,  the borrower may be unable to meet  payments as
         they become due.  When  interest  accrual is  discontinued,  all unpaid
         accrued   interest  is  reversed.   Interest   income  is  subsequently
         recognized only to the extent cash payments are received.

         The  allowance  for loan losses is  increased  by charges to income and
         decreased by charge-offs  (net of  recoveries).  Management's  periodic
         evaluation  of the adequacy of the  allowance is based on the Company's
         past loan loss  experience,  known and inherent risks in the portfolio,
         adverse situations that may affect the borrower's ability to repay, the
         estimated  value of any  underlying  collateral,  and current  economic
         conditions.

                                       29

<PAGE>
                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
              Notes to Consolidated Financial Statements, Continued

(1)  Summary of Significant Accounting Policies, Continued
    Premises  and  Equipment.  Premises  and  equipment  are stated at cost less
    accumulated   depreciation.   Depreciation   expense  is   computed  on  the
    straight-line basis over the estimated useful life of each type of asset.

    Stock-Based  Compensation.  Statement of Financial  Accounting Standards No.
         123,  "Accounting  for  Stock-Based   Compensation"  ("Statement  123")
         establishes a "fair value" based method of accounting  for  stock-based
         compensation  plans and encourages all entities to adopt that method of
         accounting for all of their employee stock compensation plans. However,
         it also allows an entity to continue to measure  compensation  cost for
         those  plans  using the  intrinsic  value  based  method of  accounting
         prescribed  by APB  Opinion  No. 25,  "Accounting  for Stock  Issued to
         Employees"  (Opinion 25). The Company has elected to follow  Opinion 25
         and  related  interpretations  in  accounting  for its  employee  stock
         options. Statement 123 requires the disclosure of proforma net earnings
         and earnings per share  determined as if the Company  accounted for its
         employee stock options under the fair value method of that Statement.

    Income Taxes. Deferred tax assets and liabilities are reflected at currently
         enacted income tax rates applicable to the period in which the deferred
         tax assets or  liabilities  are expected to be realized or settled.  As
         changes  in tax laws or rates are  enacted,  deferred  tax  assets  and
         liabilities are adjusted through the provision for income taxes.

    Off-Balance-Sheet  Instruments.  In the  ordinary  course  of  business  the
         Company  has  entered  into  off-balance-sheet   financial  instruments
         consisting of commitments to extend credit. Such financial  instruments
         are recorded in the financial statements when they are funded.

    Advertising.  The Company expenses all media advertising as incurred.

    Fair Values of Financial Instruments.  The following methods and assumptions
         were  used by the  Company  in  estimating  fair  values  of  financial
         instruments disclosed herein:

         Cash  and  Cash  Equivalents.  The  carrying  amounts  of cash and cash
         equivalents approximate their fair value.

         Securities  Held to Maturity.  Fair values for  securities are based on
         quoted market prices, where available.  If quoted market prices are not
         available,  fair values are based on quoted market prices of comparable
         instruments.

         Loans.  For  variable-rate  loans that reprice  frequently  and have no
         significant  change in credit  risk,  fair values are based on carrying
         values. Fair values for certain fixed-rate  mortgage (e.g.  one-to-four
         family  residential),  commercial real estate and commercial  loans are
         estimated  using  discounted  cash flow analyses,  using interest rates
         currently  being  offered for loans with similar  terms to borrowers of
         similar credit quality.

         Deposit  Liabilities.  The  fair  values  disclosed  for  demand,  NOW,
         money-market  and savings  deposits  are, by  definition,  equal to the
         amount payable on demand at the reporting date (that is, their carrying
         amounts).  Fair  values for  fixed-rate  certificates  of  deposit  are
         estimated  using  a  discounted  cash  flow  calculation  that  applies
         interest rates currently being offered on certificates to a schedule of
         aggregated expected monthly maturities on time deposits.

         Accrued Interest.  The carrying amounts of accrued interest approximate
         their fair values.

         Off-Balance-Sheet   Instruments.   Fair  values  for  off-balance-sheet
         lending  commitments are based on fees currently  charged to enter into
         similar  agreements,  taking into  account the  remaining  terms of the
         agreements and the counterparties' credit standing.

                                       30

<PAGE>
                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued

(1)  Summary of Significant Accounting Policies, Continued
    Earnings (Loss) Per Share. Earnings (loss) per share ("EPS") of common stock
         has been computed on the basis of the weighted-average number of shares
         of common stock  outstanding.  For purposes of calculating  diluted EPS
         because  there is no active  trading  market for the  Company's  common
         stock,  the average  book value per share was used.  For 1997 and 1996,
         outstanding warrants and stock options were not dilutive.  The weighted
         average  number of shares  outstanding  in 1997 and 1996 were 1,558,457
         and 1,331,624, respectively.

    Future  Accounting  Requirements.   Financial  Accounting  Standards  130  -
         Reporting  Comprehensive  Income  establishes  standards  for reporting
         comprehensive  income. The Standard defines comprehensive income as the
         change  in  equity  of  an  enterprise   except  those  resulting  from
         stockholder  transactions.  All components of comprehensive  income are
         required to be reported in a new financial  statement that is displayed
         with equal  prominence as existing  financial  statements.  The Company
         will be required to adopt this Standard  effective  January 1, 1998. As
         the Statement  addresses  reporting and presentation issues only, there
         will be no  impact  on  operating  results  from the  adoption  of this
         Standard.

         Financial  Accounting  Standards 131 - Disclosures about Segments of an
         Enterprise and Related  Information  establishes  standards for related
         disclosures  about products and services,  geographic  areas, and major
         customers.  The  Company  will  be  required  to  adopt  this  Standard
         effective  January 1, 1998.  As the Standard  addresses  reporting  and
         disclosure  issues only,  there will be no impact on operating  results
         from adoption of this Standard.

(2)  Securities Held to Maturity
    Securities have been  classified  as held to maturity,  in  accordance  with
         management's  intent.  The  carrying  amount  of  securities  and their
         approximate fair values are as follows:
<TABLE>
<CAPTION>

                                                     Amortized         Unrealized        Unrealized          Fair
                                                         Cost            Gains             Losses            Value
                                                     ---------         ----------        ----------          ----
<S>                                                 <C>                    <C>               <C>             <C>      
         December 31, 1997:
              U.S. Treasuries...................    $   249,786                56              -               249,842
              U.S. Government agencies..........      2,248,828               -              (1,410)         2,247,418
                                                      ---------            ------             -----          ---------

                                                    $ 2,498,614                56            (1,410)         2,497,260
                                                      =========            ======             =====          =========

         December 31, 1996:
              U.S. Treasuries...................      1,743,345            10,069            (2,251)         1,751,163
              U.S. Government agencies..........        496,945               -              (5,079)           491,866
                                                      ---------            ------             -----          ---------

                                                    $ 2,240,290            10,069            (7,330)         2,243,029
                                                      =========            ======             =====          =========
</TABLE>
    There were no sales of securities in 1997 or 1996.

<TABLE>
<CAPTION>
    The scheduled maturities of securities at December 31, 1997 are as follows:
                                                                                              Amortized        Fair
                                                                                               Cost            Value
                                                                                              ---------        -----

<S>                                                                                         <C>              <C>    
              Due in one or less..........................................................  $   998,614        998,200
              Due after one through five years.............................................   1,500,000      1,499,060
                                                                                              ---------      ---------
                                                                                            $ 2,498,614      2,497,260
                                                                                              =========      =========

</TABLE>
                                       31
<PAGE>

                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(3)  Loans
    The components of loans are as follows:
<TABLE>
<CAPTION>

                                                                                                  At December 31,
                                                                                                  ---------------
                                                                                                1997           1996
                                                                                                ----           ----

<S>                                                                                        <C>             <C>       
              Commercial real estate....................................................   $  9,422,955     3,757,335
              Residential real estate...................................................      7,260,686     4,384,301
              Commercial................................................................      7,710,001     3,814,584
              Consumer..................................................................      2,261,622       305,332
                                                                                             ----------    ----------

                                                                                             26,655,264    12,261,552

              Add (Subtract):
                Deferred costs (fees), net..............................................         62,885          (641)
                Allowance for loan losses...............................................       (298,000)     (145,000)
                                                                                            -----------   -----------

              Loans, net................................................................   $ 26,420,149    12,115,911
                                                                                             ==========    ==========

    An analysis of the change in the allowance for loan losses follows:

                                                                                                       Year Ended December 31,
                                                                                               1997           1996
                                                                                               ----           ----

<S>                                                                                           <C>             <C>    
              Beginning balance.........................................................      $ 145,000          -
              Provision for loan losses.................................................        153,000       145,000
                                                                                                -------       -------

                                                                                              $ 298,000       145,000
                                                                                                =======       =======

    The Company had no impaired loans in 1997 or 1996.

</TABLE>

                                       32

<PAGE>



                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued

<TABLE>
<CAPTION>

(4)  Premises and Equipment
    A summary of premises and equipment follows:


                                                                                               At December 31,
                                                                                               ---------------
                                                                                            1997             1996
                                                                                            ----             ----

<S>                                                                                     <C>                 <C>      
              Land..................................................................    $   931,056           931,056
              Bank premises.........................................................      1,581,383           536,576
              Construction in progress..............................................         -                696,276
              Furniture, fixtures and equipment.....................................        442,775           163,566
                                                                                          ---------         ---------

                  Total, at cost....................................................      2,955,214         2,327,474

                  Less accumulated depreciation.....................................        109,217            34,334
                                                                                         ----------         ---------

                  Premises and equipment, net.......................................    $ 2,845,997         2,293,140
                                                                                          =========         =========
</TABLE>

(5)  Deposits
    The  aggregate amount of certificates of deposit with a minimum denomination
         of $100,000,  was  approximately  $4,019,000 and $1,467,000 at December
         31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
    A schedule of maturities of certificates of deposit follows:

              Year Ending
              December 31,                                                                 Amount
              ------------                                                                 ------

<S>               <C>                                                                  <C>         
                  1998..............................................................   $ 11,532,779
                  1999..............................................................      4,261,691
                  2000..............................................................        285,653
                  2001..............................................................        -
                  2002 and thereafter...............................................        102,000
                                                                                        -----------

                                                                                       $ 16,182,123
</TABLE>

(6)  Mortgage Payable
    At   December 31, 1996, the Company had an 8% note payable collateralized by
         a mortgage on a future branch site.  The note was payable based on a 20
         year amortization with a balloon payment due 2001. This note was repaid
         during 1997.








                                       33

<PAGE>



                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(7) Financial Instruments
    The  Company is a party to financial instruments with off-balance-sheet risk
         in the normal  course of  business to meet the  financing  needs of its
         customers. These financial instruments are commitments to extend credit
         and  may  involve,   to  varying   degrees,   elements  of  credit  and
         interest-rate  risk in excess of the amount  recognized  in the balance
         sheet. The contract amounts of these instruments  reflect the extent of
         involvement the Company has in these financial instruments.

    The Company's  exposure to credit loss in the event of nonperformance by the
    other party to the financial  instrument for commitments to extend credit is
    represented by the contractual amount of those instruments. The Company uses
    the  same   credit   policies   in  making   commitments   as  it  does  for
    on-balance-sheet instruments.

    Commitments to extend credit are agreements to lend to a customer as long as
    there  is no  violation  of  any  condition  established  in  the  contract.
    Commitments  generally  have  fixed  expiration  dates or other  termination
    clauses and may require  payment of a fee. Since some of the commitments are
    expected to expire without being drawn upon, the total commitment amounts do
    not necessarily  represent future cash  requirements.  The Company evaluates
    each customer's  credit  worthiness on a case-by-case  basis.  The amount of
    collateral  obtained if deemed  necessary by the Company  upon  extension of
    credit is based on management's credit evaluation of the counterparty.

    The estimated  fair values of the Company's  financial  instruments  were as
follows (in thousands):
<TABLE>
<CAPTION>

                                                                 At December 31, 1997         At December 31, 1996
                                                                 --------------------         --------------------
                                                                 Carrying        Fair         Carrying           Fair
                                                                  Amount         Value          Amount           Value
                                                                  ------         -----          ------           -----
<S>                                                              <C>              <C>            <C>            <C>   
         Financial assets:
              Cash and cash equivalents.....................     $ 12,211         12,211          8,042          8,042

              Securities held to maturity...................        2,499          2,497          2,241          2,243

              Loans receivable..............................       26,420         26,681         12,116         12,116

              Accrued interest receivable...................          220            220            101            101

         Financial liabilities:

              Deposit liabilities...........................       36,938         37,053         17,885         17,921

    A    summary of the notional amounts of the Company's financial instruments,
         which approximates market value with off balance sheet risk at December
         31, 1997 follows (in thousands):

<S>                                                                                        <C>     
              Unfunded loan commitments at variable rates.............................     $    997
                                                                                             ======

              Available lines of credit...............................................     $  5,110
                                                                                              =====
</TABLE>



                                       34

<PAGE>



                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(8)  Credit Risk
    The  Company  grants  the  majority  of its  loans to  borrowers  throughout
         Collier County,  Florida.  Although the Company has a diversified  loan
         portfolio,  a significant  portion of its  borrowers'  ability to honor
         their  contracts  is  dependent  upon the  economy in  Collier  County,
         Florida.

(9)  Income Taxes
    The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>

                                                                                                Year Ended December 31,
                                                                                                -----------------------
                                                                                                  1997          1996
                                                                                                  ----          ----
              Deferred:
<S>                                                                                             <C>           <C>      
                  Federal...................................................................    $ 56,317      (163,000)
                  State.....................................................................       9,640       (28,000)
                                                                                                  ------       -------

                     Total deferred provision (credit)......................................    $ 65,957      (191,000)
                                                                                                  ======       =======
</TABLE>

    The  reasons for the  differences  between the statutory  federal income tax
         rate and the effective tax rate are summarized as follows:
<TABLE>
<CAPTION>

                                                                                 1997                    1996
                                                                           ------------------      ------------------
                                                                                       % of                    % of
                                                                                     Pretax                   Pretax
                                                                           Amount  Earnings        Amount      Loss
                                                                           ------  --------        ------      ----
              Income tax benefit at statutory Federal
<S>                                                                       <C>           <C>      <C>           <C>    
                  income tax rate......................................   $ 59,657      34.0%    $(181,320)    (34.0)%
              Increase (decreases) resulting from
                  State taxes, net of federal tax benefit..............      6,362       3.6       (18,480)     (3.4)
                  Other................................................        (62)      -           8,800       1.6
                                                                          --------   -------       -------      ----

                                                                          $ 65,957      37.6%    $(191,000)    (35.8)%
                                                                            ======      ====       =======      ====

                                                                     (continued)
</TABLE>




                                       35

<PAGE>



                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(9)  Income Taxes, Continued
    The tax  effects  of  temporary  differences  that give rise to  significant
    portions  of the  deferred  tax  assets and  deferred  tax  liabilities  are
    presented below.
<TABLE>
<CAPTION>

                                                                                                At December 31,
                                                                                                ---------------
                                                                                             1997            1996
                                                                                             ----            ----
<S>                                                                                       <C>               <C>    
              Deferred tax assets:
                  Allowance for loan losses...........................................    $     -            45,000
                  Contributions.......................................................        1,451           1,000
                  Net operating loss carryforward.....................................      154,500         158,000
                  Organization and start-up costs.....................................       33,753          -
                                                                                            -------         -------

                    Total deferred tax asset..........................................      189,704         204,000
                                                                                            -------         -------

              Deferred tax liabilities:
                  Depreciation........................................................       25,522          -
                  Accrual to cash adjustment..........................................       24,154          -
                  Allowance for loan losses...........................................        1,985          -
                                                                                            -------         ------

                    Total deferred tax liabilities....................................       51,661          -
                                                                                            -------         ------

                    Net deferred income taxes.........................................    $ 138,043         204,000
                                                                                            =======         =======
</TABLE>

    At   December 31, 1997,  the Company had a net operating  loss  carryforward
         for federal and state income tax purposes of approximately  $411,000 to
         offset future taxable income, which expires in the year 2011.

(10)  Stock Options
    The  Company  established  an  Incentive  Stock Option plan for officers and
         employees and reserved  200,000 shares of common stock for the plan. At
         December  31, 1997,  36,600  shares  remain  available  for grant.  The
         options  vest at the rate of 20% per  year  beginning  one  year  after
         grant.
<TABLE>
<CAPTION>

                                                                                  Range
                                                                                 of Per     Weighted-
                                                                      Number      Share      Average      Aggregate
                                                                      of          Option    Per Share      Option
                                                                      Shares     Price        Price        Price
                                                                      ------     -----        -----        -----
<S>                                                                 <C>      <C>                 <C>         <C>    

              Outstanding at December 31, 1995....................      -    $       -             -            -
              Options granted.....................................   51,000         4.50         4.50        229,500
                                                                     ------                                  -------

              Outstanding at December 31, 1996....................   51,000         4.50         4.50        229,500
              Options granted.....................................  125,000    4.50-6.00         5.18        648,090
              Options terminated..................................  (12,600)        4.50         4.50        (56,700)
              Options exercised...................................   (8,000)        4.50         4.50        (36,000)
                                                                    -------                                  -------

              Outstanding at December 31, 1997....................  155,400  $ 4.50-6.00         5.05        784,890
                                                                    =======    =========         ====        =======
</TABLE>

    The  weighted-average remaining contractual of the outstanding stock options
         at  December  31,  1997  and  1996  was 114  months  and  76.8  months,
         respectively.
                                                                     (continued)

                                       36

<PAGE>

                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued

(10)  Stock Options, Continued
    These options are exercisable as follows:

               Year Ending
               -----------

                     1998.........................................    43,800
                     1999.........................................    28,600
                     2000.........................................    28,600
                     2001.........................................    25,800
                     2002.........................................    28,600
                                                                     -------

                                                                     155,400
                                                                     =======

    In order to calculate the fair value of the options, it was assumed that the
       risk-free interest rate was 6.0%, there would be no dividends paid by the
       Company over the exercise period,  the expected life of the options would
       be the entire exercise period and stock  volatility  would be zero due to
       the lack of an active  market for the stock.  The  following  information
       pertains  to the fair value of the  options  granted to  purchase  common
       stock:
<TABLE>
<CAPTION>

                                                                                          1997               1996
                                                                                          ----               ----
               Weighted-average grant-date fair value of options
<S>                                                                                    <C>                 <C>   
                     issued during the year.........................................   $ 168,041           59,505
                                                                                         =======           ======
</TABLE>

    Forpurposes  of pro  forma  disclosures,  the  estimated  fair  value of the
       options is amortized to expense over the  options'  vesting  period.  The
       Company's pro forma net earnings and earnings per share were as follows:
<TABLE>
<CAPTION>

                                                                                            1997             1996
                                                                                            ----             ----

<S>                                                                                     <C>               <C>      
               Net earnings (loss) - as reported ...................................    $ 109,506         (342,295)
               Net earnings (loss) - pro forma......................................       97,605         (342,295)
               Basic earnings (loss) per share - as reported........................          .07             (.26)
               Basic earnings (loss) per share - pro forma..........................          .06             (.26)
</TABLE>

(11)  Stockholders' Equity
    TheBoard of  Directors  voted to split the  common  shares on a  two-for-one
       basis effective December 15, 1997. All share amounts reflect this split.

    TheBank is subject to certain  restrictions  on the amount of dividends that
       it may declare without prior regulatory  approval.  At December 31, 1997,
       the Bank had no amounts available for dividends.

    As of December 31,  1996,  the Company had sold  1,415,220  shares of common
       stock for an aggregate of  $6,368,490.  The Company  incurred  $39,328 in
       offering  expenses  relating to their  public  offering of the  Company's
       common stock and  warrants.  Offering  expenses  were  deducted  from the
       proceeds received from the sale of common stock and warrants.

    During the initial  offering period shares were offered in units with a unit
       consisting  of one share of common  stock and one  warrant.  Each warrant
       entitles the holder  thereof to purchase one share of  additional  common
       stock for $4.50 per share  during  the 24 month  period  ending  June 16,
       1998.  There were  670,000  warrants  issued and as of December  31, 1997
       there were 642,775 warrants outstanding entitling the holders to purchase
       642,775 shares of the Company's stock.

                                                                     (continued)
                                       37

<PAGE>



                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(12) Regulatory Matters
    TheHolding  Company and the Bank are subject to various  regulatory  capital
       requirements administered by various regulatory banking 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  Company'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 Bank's 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 (as defined in the  regulations)
       to risk- weighted assets (as defined), and of Tier I capital (as defined)
       to average assets (as defined).  Management believes,  as of December 31,
       1997, that the Company meets all capital  adequacy  requirements to which
       it is subject.

    As of December 31, 1997,  the most recent  notification  from the regulatory
    authorities  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  total  risk-based,  Tier  I
    risk-based,  and Tier I leverage 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  capital  amounts and
    ratios are also presented in the table (dollars in thousands).
<TABLE>
<CAPTION>

                                                                                                    To Be Well
                                                                                                 Capitalized Under
                                                                         Minimum                   the Provisions
                                                                       For Capital                 of Prompt and
                                               Actual               Adequacy Purposes:           Corrective Action
                                       -----------------------   ----------------------     ------------------------
                                       Amount            %          Amount           %          Amount            %
                                       ------         ------       ------         ------        ------         ------
     As of December 31, 1997:
         Total capital (to Risk
<S>                                   <C>              <C>       <C>              <C>        <C>               <C>  
         Weighted Assets)..........   $ 4,643          17.67%    $ 2,102          8.00%      $ 2,627           10.0%
         Tier I Capital (to Risk
         Weighted Assets)..........     4,354          16.57       1,051          4.00         1,576            6.0
         Tier I Capital
         (to Average Assets).......     4,354          10.67       1,633          4.00         2,041            5.0

     As of December 31, 1996:
         Total capital (to Risk
         Weighted Assets)..........     3,890          30.80       1,011          8.00         1,264           10.0
         Tier I Capital (to Risk
         Weighted Assets)..........     3,747          29.65         505          4.00           758            6.0
         Tier I Capital
         (to Average Assets).......     3,747          19.46         770          4.00           963            5.0
</TABLE>

                                                                     (continued)

                                       38

<PAGE>



                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(13)  Parent Company Only Financial Information
     The Holding Company's financial information is as follows:
<TABLE>
<CAPTION>

                                               Condensed Balance Sheets
                                                    (In thousands)
                                                                                                     At December 31,
                                                                                                     ---------------
                                                                                                    1997         1996
                                                                                                    ----         ----
                  Assets

<S>                                                                                               <C>            <C>  
              Cash.............................................................................   $   271        1,313
              Loans receivable.................................................................     1,261          661
              Investment in subsidiary.........................................................     4,458        3,747
              Premises and equipment, net......................................................       785          754
              Other assets.....................................................................      -              23
                                                                                                 --------        -----

                  Total assets.................................................................   $ 6,775        6,498
                                                                                                    =====        =====

                  Liabilities and Stockholders' Equity

              Mortgage payable.................................................................     -              525
              Liabilities......................................................................         4            9
              Stockholders' equity.............................................................     6,771        5,964
                                                                                                    -----        -----

                  Total liabilities and stockholders' equity...................................   $ 6,775        6,498
                                                                                                    =====        =====

                                          Condensed Statements of Operations
                                                    (In thousands)
                                                                                                        Year Ended
                                                                                                       December 31,
                                                                                                       ------------
                                                                                                    1997          1996
                                                                                                    ----          ----

              Revenues.........................................................................     $ 162          69
              Expenses.........................................................................      (146)        (78)
                                                                                                      ---         ---

                  Income (loss) before income (loss) of subsidiary.............................        16          (9)
                  Income (loss) of subsidiary..................................................        94        (333)
                                                                                                    -----         ---

                  Net income (loss)............................................................     $ 110        (342)
                                                                                                      ===         ===
</TABLE>

                                                                     (continued)
                                                          39

<PAGE>
                CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

              Notes to Consolidated Financial Statements, Continued


(13)  Parent Company Only Financial Information, Continued

<TABLE>
<CAPTION>

                                          Condensed Statements of Cash Flows
                                                    (In thousands)
                                                                                                        Year Ended
                                                                                                       December 31,
                                                                                                       ------------
                                                                                                     1997        1996
                                                                                                     ----        ----
         Cash flows from operating activities:
<S>                                                                                               <C>          <C>  
              Net earnings (loss).............................................................    $   110        (342)
              Adjustments to reconcile net earnings (loss) to net cash provided
                by operating activities:
                  Equity in undistributed (earnings) loss of subsidiaries.....................        (94)        333
                  Net decrease in other assets................................................         23         137
                  Decrease in other liabilities...............................................         (5)        (40)
                  Depreciation................................................................         17           3
                                                                                                   ------       -----

                  Net cash provided by operating activities...................................         51          91
                                                                                                   ------       -----

         Cash flows from investing activities:
              Purchase of property and equipment, net of transfer to subsidiary...............        (48)        446
              Net increase in loans receivable................................................       (600)       (661)
                                                                                                   ------       -----

                  Net cash used in investing activities.......................................       (648)       (215)
                                                                                                   ------       -----

         Cash flows from financing activities:
              Repayment of mortgage note payable..............................................       (525)       (594)
              Net proceeds from issuance of common stock......................................        697       6,329
              Retire preferred stock..........................................................       -            (21)
              Repayment of advances from organizers...........................................       -           (239)
              Investment in subsidiary........................................................       (617)     (4,080)
                                                                                                   ------       -----

                  Net cash provided by financing activities...................................       (445)      1,395
                                                                                                  -------       -----

         Net (decrease) increase in cash......................................................     (1,042)      1,271

         Cash at beginning of the year........................................................      1,313          42
                                                                                                    -----      ------

         Cash at end of year..................................................................    $   271       1,313
                                                                                                    =====       =====
</TABLE>




                                       40

<PAGE>

                             DIRECTORS AND OFFICERS

CITIZENS COMMUNITY BANCORP, INC.

OFFICERS

Richard Storm, Jr.
Chairman and Chief Executive Officer & President

James S. Hagedorn
Vice Chairman

Stephen A. McLaughlin
Vice President
Secretary/Treasurer

Diane M. Beyer
Assistant Secretary

Jack Wolf
Assistant Treasurer

Bruce G. Fedor
Vice President General Counsel

DIRECTORS

Richard Storm, Jr.
Chairman
President Storm & Company
President Loanstar Capital

Joel M. Cox, Sr.
Vice President and Director of Cox's Insurance Agency

Stephen A. McLaughlin
Vice President-Secretary/Treasurer

James S. Hagedorn
Vice Chairman
President Waterside Properties

Diane M. Beyer
Human Resources Consultant

Thomas B. Garrision
Network Technology Manager for Barron-Collier
Companies

Dennis J. Lynch
Owner and President of Dennis J. Lynch and Associates, a
commercial real estate sales agency

Jack Wolf
Practicing Dentist in Naples, Florida

Louis Smith
Owner of Pat's Hallmark Card Store

                                       41

<PAGE>

CITIZENS COMMUNITY BANK OF FLORIDA

OFFICERS

Michael A. Micallef, Jr.
President and Chief Executive Officer

Joel M. Cox, Sr.
Chairman

James S. Hagedorn
Vice Chairman

David E. Klein
Executive Vice President

Bruce G. Fedor
Vice President & Compliance Officer

Stephen A. McLaughlin
Vice President, Secretary to the Board

Sharon K. Ginn
Vice President-Cashier

Scott Dupes
Vice President/Branch Manager - East Trail

Jamie Greusel
Assistant Secretary

DIRECTORS

Joel M. Cox, Sr.
Chairman

James S. Hagedorn
Vice Chairman

Michael A. Micallef, Jr.
President

Stephen A. McLaughlin
Secretary

Diane M. Beyer
Human Resources Consultant

Thomas B. Garrison
Network Technology Manager for Barron-Collier
Companies

Jamie B. Greusel
Partner - Berry & Greusel
Attorneys

Dennis J. Lynch
Owner and President of Dennis J. Lynch and Associates, a
commercial real estate sales agency

Linda Sandlin
Realtor - REMAX

Richard Storm, Jr.
President Storm & Company
President Loanstar Capital

Robert Marks, CLU
Retired

                                       42