CITIZENS COMMUNITY BANCORP, INC.

                               1996 ANNUAL REPORT


<PAGE>




                               1996 ANNUAL REPORT




Contents                                                             Page

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

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

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

Message from the Chairman and President.............................  3

Selected Financial Data.............................................  4

Management's Discussion and Analysis of Financial Condition
         and Results of Operations..................................  5-12

Consolidated Financial Statements...................................  13-27

Independent Auditors' Report........................................  28

Officers and Directors..............................................  29


















<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")  (collectively  the "Company").
The Holding  Company  was  organized  simultaneously  with the Bank and its only
business  is the  ownership  and  operation  of the Bank.  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.  The Company has adopted a fiscal year ending  December 31. At December
31,  1996,  the Company  operated  one retail  banking  office in Marco  Island,
Florida and had total  assets of $25 million and total  stockholders'  equity of
$5.96 million.


                               GENERAL INFORMATION


Annual                              Meeting   The   Annual    Meeting   of   the
                                    Stockholders  will be held at the Old  Marco
                                    Inn  located  at  100  Palm  Street,   Marco
                                    Island, Florida at 4:00 P.M., Tuesday, April
                                    29, 1997.

Form 10-K                           A copy of the Form  10-K,  as filed with the
                                    Securities and Exchange  Commission,  may be
                                    obtained by stockholders without charge upon
                                    written   request   to   the   Director   of
                                    Stockholder  Relations,  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
                                    Certified   Public   Accountants  500  North
                                    Westshore Boulevard Tampa, Florida 33609

                        COMMON STOCK PRICES AND DIVIDENDS


The  Company's  common stock is not actively  traded but was recently  sold in a
public offering for $9.00 per share.  The Company has never paid cash dividends.
Future dividends, if any, will be determined by the Board of Directors.

As of February 28, 1997, the Company had 617 holders of record of common stock.




                                        1

<PAGE>



                        CONSOLIDATED FINANCIAL HIGHLIGHTS

                 At December 31, 1996 or For the Year Then Ended
                (Dollars in thousands, except per share figures)


At Year End:

         Assets..................................................        $25,027
         Loans, net..............................................        $12,116
         Securities..............................................        $ 2,240
         Deposits................................................        $17,885
         Stockholders' equity....................................        $ 5,964
         Book value per share....................................        $  8.43
         Shares outstanding......................................        707,610
         Equity-to-assets ratio..................................         23.83%
         Nonperforming assets-to-total assets ratio..............          NIL

For The Year:

         Interest income.........................................          740
         Net loss................................................         (342)
         Loss per share..........................................         (.51)
         Return on average assets................................        (2.71)%
         Return on average equity................................       (10.35)%
         Average equity-to-average assets ratio..................        26.16%
         Noninterest expenses to average assets..................         7.24


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

         Loan portfolio..........................................       8.39%
         Securities..............................................        5.78
         Other interest-earnings assets..........................        5.62
         All interest-earnings assets............................        6.61
         Deposits and borrowings.................................        4.28
         Interest-rate spread (1)................................        2.33
         Net yield on average interest earning assets (2)........        4.08

-----------------

(1)      Average yield on all interest-earning  assets less average rate paid on
         all interest-bearing liabilities.

(2)      Net interest income divided by average interest-earning assets.

(3)      Information  for 1995 is not  presented  because the Company was in its
         organization  stage and it is not  meaningful  in  relation to the 1996
         information.


                                        2

<PAGE>




                     MESSAGE FROM THE CHAIRMAN AND PRESIDENT






                                        3

<PAGE>



                             SELECTED FINANCIAL DATA

                 At December 31, 1996 or for the Year then Ended
                (Dollars in thousands, except per share figures)




At Year End:
Cash and cash equivalents                              $   8,042
Securities                                                 2,240
Loans, net                                                12,116
All other assets                                           2,630
                                                       ---------

Total assets                                           $  25,028
                                                       =========

Deposit accounts                                          17,885
All other liabilities                                      1,179
Stockholders' equity                                       5,964
                                                       ---------

Total liabilities and stockholders' equity             $  25,028
                                                       =========

For the Year:

Total interest income                                        740
Total interest expense                                       283
                                                       ---------

Net interest income                                          457
Provision for loan losses                                    145
                                                       ---------

Net interest income after provision for loan losses          312
                                                       ---------

Noninterest income                                            70
Noninterest expenses                                         915
                                                       ---------

Loss before income tax credit                               (533)
Income tax credit                                           (191)
                                                       ---------

Net loss                                               $    (342)
                                                       =========

Net loss per share                                     $    (.51)
                                                       =========

Weighted-average number of shares outstanding            665,812
                                                       =========

Ratios and Other Data:

Return on average assets                                   (2.71)%
Return on average equity                                  (10.35)%
Average equity to average assets                           26.16%
Interest-rate spread during the period                      2.86%
Net yield on average interest-earning assets                7.14%
Noninterest expenses to average assets                      7.24%
Ratio of average interest-earning assets to average
interest-bearing liabilities                                1.57
Nonperforming loans and foreclosed real estate
as a percentage of total assets at end of year               NIL
Allowance for credit losses as a percentage
of total loans at end of year                               1.18%
Total number of banking offices                                1
Total shares outstanding at end of year                  707,610
Book value per share at end of year                    $    8.43

(1)      Information  for 1995 is not  presented  because the Company was in its
         organization  stage and it is not  meaningful  in  relation to the 1996
         information.



                                        4

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations

                          Year Ended December 31, 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")  (collectively the "Company").  The Holding
Company was organized  simultaneously with the Bank and its only business is the
ownership  and  operation  of the Bank.  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.

Regulation and Legislation

As a  state-chartered  commercial  bank,  the  Company 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.

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
guidelines  and credit review  procedures to protect the Company from  avoidable
credit  losses,   some  losses  will  inevitably   occur.  The  Company  had  no
nonperforming assets at December 31, 1996, and has no charge-off experience.

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):

                               At December 31, 1996
                               --------------------
                                   Loans to Total
                                   --------------
                                   Amount  Loans
                                   ------  -----

Commercial real estate loans       $ 62      31%
Residential real estate loans        22      36
Commercial loans                     55      31
Consumer loans                        6       2
                                   ----    ----

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

The allowance for credit losses represented 1.18% of the total loans outstanding
at December 31, 1996.


                                        5

<PAGE>




The following  table sets forth the  composition of the Company's loan portfolio
at December 31, 1996:

                                                  % of
                                      Amount      Total
                                      ------      -----
                                  (in thousands)

Commercial real estate                $3,758        31%
Residential real estate                4,384        36
Commercial                             3,815        31
Consumer                                 305         2
                                      ------    ------

                                      12,262       100%
                                                   ===

Less:
     Deferred fees                        (1)
     Allowance for credit losses        (145)
                                    --------

     Loans, net                     $ 12,116
                                    ========

Liquidity and Capital Resources

The Company's primary source of cash during the year ended December 31, 1996 was
from the proceeds  from the sale of common stock of $6.3 million and net deposit
inflows  of $17.9  million.  Cash  was used  primarily  to  purchase  investment
securities, to originate loans and to fund construction of a permanent building.
At December 31, 1996, the Company had outstanding commitments to originate loans
totaling $1.8 million.  At December 31, 1996,  the Bank exceeded its  regulatory
liquidity requirements.

The following  table sets forth the carrying  value of the Company's  securities
portfolio:

                                 At December 31,
                                      1996
                                 (in thousands)
Securities held to maturity:
U.S. Treasury securities             $1,743
U.S. Government agency securities       497
                                     ------
                                    $ 2,240
                                    =======

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
                                  -----      -----    -----      -----      -----        -----

<S>                              <C>          <C>   <C>          <C>       <C>           <C>
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>

                                        6

<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.


                                               Year Ended December 31, 1996
                                               ----------------------------
                                                          Interest    Average
                                               Average      and        Yield/
                                               Balance   Dividends     Rate
                                               -------   ---------     ----
Interest-earning assets:
     Loans                                     $ 3,842         323       8.39%
     Securities                                  2,052         119       5.78
     Other interest-earning assets               5,306         298       5.62
                                                 -----         ---       ----


         Total interest-earning assets          11,200         740       6.61
                                                               ----

Noninterest-earning assets                       1,443
                                                 -----

         Total assets                          $12,643
                                                ======

Interest-bearing liabilities:
     Demand, money market and NOW deposits       4,087         148       3.62
     Savings                                       163           5       2.99
     Certificates of deposit                     2,296         124       5.39
     Other                                          66           6       9.42
                                                ------        ----

         Total interest-bearing liabilities      6,612         283       4.28
                                                               ----

Noninterest-bearing liabilities                  2,724

Stockholders' equity                             3,307
                                                 ----

         Total liabilities and
          stockholders' equity                 $12,643
                                                ======

Net interest/dividend income                               $   457
                                                               ====

Interest-rate spread                                                     2.33%
                                                                         ====

Net interest margin                                                      4.08%
                                                                         ====

Ratio of average interest-earning
     assets to average
     interest-bearing liabilities                 1.57
                                                  ====


                                        7

<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, 1996, that the Bank
meets all capital adequacy requirements to which it is subject.

<TABLE>
<CAPTION>

                                                                                                                For Well
                                                                                     For Capital              Capitalized
                                                             Actual               Adequacy Purposes:            Purposes
                                                             ------               ------------------            --------
                                                      Amount        Ratio        Amount         Ratio        Amount     Ratio
                                                      ------        -----        ------         -----        ------     -----
                                                                                 (dollars in thousands)
     As of December 31, 1996:
         Total capital (to Risk
<S>                                                  <C>            <C>          <C>              <C>         <C>       <C>
         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>

                         Asset and Liability Management

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 RSA/RSL.  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).


                                        8

<PAGE>




The  following  table sets forth certain  information  relating to the Company's
interest-earning  assets and  interest-bearing  liabilities at December 31, 1996
that are estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):
<TABLE>
<CAPTION>

                                                            More          More
                                                  One      than One     than Five
                                                  Year     Year and     Years and     Over
                                                  or      Less than     Less than      Ten
                                                  Less    Five Years    Ten Years     Years         Total
                                                  ----    ----------    ---------     -----         -----

<S>                                          <C>              <C>          <C>            <C>      <C>
Mortgage and commercial loans (1):
    Commercial loans                         $     65         2,655        1,095         --         3,815
    Commercial real estate loans                  566         2,677          515         --         3,758
    Residential mortgage loans                  3,056         1,201           52          75        4,384
    Consumer loans                                 16           273           16         --           305
                                             --------      --------     --------     --------    --------

         Total loans                            3,703         6,806        1,678          75      12,262
                                             --------      --------     --------     --------    --------

Federal funds sold                              6,688          --           --           --         6,688
Securities (2)                                    744         1,496         --           --         2,240
                                             --------      --------     --------     --------    --------

         Total rate-sensitive assets         $ 11,135         8,302        1,678          75       21,190
                                             ========      ========     ========     ========    ========

Deposit accounts (3):
    Money market deposits                         418          --           --           --           418
    NOW deposits                                8,311          --           --           --         8,311
    Savings deposits                              360          --           --           --           360
    Certificates of deposit                     3,116         3,314         --           --         6,430
                                             --------      --------     --------     --------    --------

         Total rate-sensitive liabilities      12,205         3,314         --           --        15,519
                                             ========      ========     ========     ========    ========

GAP (repricing differences)                    (1,070)        4,988        1,678          75        5,671
                                              --------     --------     --------     --------    --------

Cumulative GAP                                 (1,070)        3,918        5,596       5,671
                                              --------     --------     --------    --------

Cumulative GAP/total assets                      (4.3)%       15.7%        22.4%       22.7%
                                              ========     ========     ========    ========
</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. All other time deposits are scheduled
         through the maturity dates.






                                        9

<PAGE>



The following table reflects the contractual  principal  repayments by period of
the Company's loan portfolio at December 31, 1996 (in thousands):


                                          Commercial
                              Residential  Real
     Years Ending  Commercial  Mortgage   Estate    Consumer
     December 31,     Loans     Loans      Loans      Loans   Total
     ------------     -----     -----      -----      -----   -----

     1997             $1,738     1,326       566        16     3,646
     1998                 64        87      --         103       254
     1999                272       412      --          23       707
     2000-2001         1,026       605     2,227       147     4,005
     2002-2003           645      --         450        16     1,111
     2004 & beyond        70     1,954       515      --       2,539
                      ------    ------    ------    ------    ------

     Total            $3,815     4,384     3,758       305    12,262
                      ======    ======    ======    ======    ======

Of the $8.6  million  of loans due after  1997,  95% of such  loans  have  fixed
interest rates and 5% have adjustable interest rates.

The following table sets forth total loans originated and repaid during 1996:

                                             Year Ended
                                             December 31,
                                             ------------
                                                 1996
                                                 ----
                                             (in thousands)

Originations:
         Commercial loans                      $ 3,855
         Commercial real estate loans            3,797
         Residential mortgage loans              4,384
         Consumer loans                            305
                                               -------

                  Total loans originated        12,341

         Principal reductions                       79
                                               -------

         Increase (decrease) in total loans    $12,262
                                               =======


                                                    10

<PAGE>




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

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

Demand deposits                      $ 2,366        13.23%
NOW deposits                           8,311        46.47
Money market deposits                    418         2.34
Savings deposits                         360         2.01
                                     -------       ------

         Subtotal                     11,455        64.05

Certificate of deposits:
         4.00% - 4.99%                   447         2.50
         5.00% - 5.99%                 4,966        27.77
         6.00% - 6.99%                 1,017         5.68
                                     -------       ------

Total certificates of deposit (1)      6,430        35.95
                                     -------       ------

Total deposit                        $17,885       100.0%
                                     =======      ======



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

The following table presents by various interest rates categories the amounts of
certificates  of deposit at December  31, 1996 which  mature  during the periods
indicated (in thousands):


                                            Year Ending December 31,
                                            ------------------------
                                  1997      1998   1999    2000   2001    Total
                                  ----      ----   ----    ----   ----    -----

4.00% - 4.99%                    $  447      --      -      --      -       447
5.00% - 5.99%                     2,568     2,386    -        12    -     4,966
6.00% - 6.99%                       100       917    -      --      -     1,017
                                 ------    ------    -    ------    -    ------

Total certificates of deposit    $3,115     3,303    -        12    -     6,430
                                 ======     =====   ====     ====  ====   ======

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

                                     December 31,
                                     ------------
                                         1996
                                         ----

Due three months or less               $ --
Due over three months to six months       507
Due over six months to one year           260
Due over one year                         700
                                       ------

                                       $1,467
                                       ======


                                       11

<PAGE>




                              Results of Operations

Year Ended December 31, 1996

General. Net loss for the year ended  December 31, 1996 was $(342,295) or $(.51)
         per share.  During the year ended  December  31,  1996 the Bank had not
         achieved the average asset size necessary to operate profitably.

Interest Income and  Expense.  Interest  income  totalled  $739,796 for the year
         ended December 31, 1996.  Interest income earned on loans was $322,538.
         The average loan portfolio balance for the year ended December 31, 1996
         was $3.8 million and the weighted average yield was 8.4%.

         Interest on securities was $118,531.  The average investment securities
         portfolio  was $2.1  million  with a  weighted  average  yield of 5.8%.
         Interest on federal funds sold and deposits in banks totalled $298,727.
         The average  balance of these  assets was $4.5  million with a weighted
         average yield of 6.7%.

         Interest expense on deposit accounts  amounted to $276,691 for the year
         ended  December  31, 1996.  The  weighted  average cost of deposits was
         4.23%.

Provisionfor Loan Losses.  The  provision for loan losses is charged to earnings
         to  bring  the  total  allowance  to  a  level  deemed  appropriate  by
         management  and is based upon the volume and type of lending  conducted
         by the Company,  industry standards,  the amount of nonperforming loans
         and 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.  The  provision  for the year ended
         December 31, 1996 was $145,000.

Other    Expense.  Other expense  totalled  $914,927 for the year ended December
         31, 1996.  Compensation  and  benefits  was the  largest,  amounting to
         $332,124.

Income   Taxes.  The Company  recognized  a credit for income taxes as well as a
         deferred tax asset because  management  believes it is more likely than
         not the Company will be able to generate  taxable  income in the future
         to offset these amounts.



                                       12

<PAGE>

<TABLE>
<CAPTION>


                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

                                 Balance Sheets




                                                                                At December 31,
                                                                                ---------------
                                                                           1996               1995
                                                                           ----               ----
<S>                                                                     <C>                   <C>
    Assets

Cash and due from banks                                                 $  1,353,777           42,366
Federal funds sold                                                         6,688,000             --
                                                                        ------------     ------------

              Total cash and cash equivalents                              8,041,777           42,366

Securities held to maturity                                                2,240,290             --
Loans, net of allowance for loan losses of $145,000                       12,115,911             --
Premises and equipment, net                                                2,293,140          677,789
Accrued interest receivable and other asset                                  132,406          146,998
Deferred income taxes                                                        204,000           13,000
                                                                        ------------     ------------

              Total assets                                              $ 25,027,524          880,153
                                                                        ============     ============

    Liabilities and Stockholders' Equity

Liabilities:
    Demand deposits                                                        2,366,487             --
    Savings and NOW deposits                                               8,670,357             --
    Money market deposits                                                    417,775             --
    Time deposits                                                          6,430,485             --
                                                                        ------------     ------------

              Total deposits                                              17,885,104             --

    Official checks                                                          579,703             --
    Due to organizers                                                           --            239,000
    Mortgage payable                                                         525,000          593,806
    Accrued interest payable and other liabilities                            73,534           49,031
                                                                                         ------------

              Total liabilities                                           19,063,341          881,837
                                                                        ------------     ------------

Commitments (Note 7)

Stockholders' Equity:
    Preferred stock, $.01 value, 2,000,000 shares authorized,
         none and 210 shares issued and outstanding in 1996 and 1995            --             21,000
    Common stock, $.01 par value 8,000,000 shares authorized
         707,610 shares issued and outstanding                                 7,076             --
    Additional paid-in capital                                             6,322,086             --
    Accumulated deficit                                                     (364,979)         (22,684)
                                                                        ------------     ------------

              Total stockholders' equity (deficit)                         5,964,183           (1,684)
                                                                        ------------     ------------

              Total liabilities and stockholders' equity (deficit)      $ 25,027,524          880,153
                                                                        ============          =======


See Accompanying Notes to Consolidated Financial Statements.

                                       13
</TABLE>

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statements of Operations


                                                                   Period From
                                                                   May 24, 1995
                                                                 (Incorporation)
                                                     Year Ended         to
                                                     December 31,   December 31,
                                                     ------------   ------------
                                                        1996            1995
                                                        ----            ----
Interest income:
    Loans                                               $ 322,538          --
    Securities                                            118,531          --
    Federal funds sold                                    254,864          --
    Deposits in banks                                      43,863          --
                                                        ---------     ---------

              Total interest income                       739,796          --
                                                        ---------     ---------

Interest expense:
    Deposits                                              276,691          --
    Mortgage                                                6,182         5,796
                                                        ---------     ---------

              Total interest expense                      282,873         5,796
                                                        ---------     ---------

Net interest income (expense)                             456,923        (5,796)

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

              Net interest income (expense)
               after provision for loan losses            311,923        (5,796)
                                                        ---------     ---------

Noninterest income:
    Other service charges and fees                         57,412          --
Other                                                      12,297          --
                                                        ---------     ---------

              Total noninterest income                     69,709          --
                                                        ---------     ---------

Noninterest expense:
    Compensation and  benefits                            332,124        19,940
    Occupancy and equipment                               153,548           732
    Advertising                                            20,491          --
    Organizational expenses                               100,079          --
    Professional fees                                      35,257          --
    Office supplies                                        68,982          --
    Data processing                                        33,765          --
    Other                                                 170,681         9,216
                                                        ---------     ---------

              Total noninterest expens                    914,927        29,888
                                                        ---------     ---------

Loss before income tax benefit                           (533,295)      (35,684)

              Income tax benefit                         (191,000)      (13,000)
                                                        ---------     ---------

Net loss                                                $(342,295)      (22,684)
                                                        =========     =========

              Loss per share                            $    (.51)         --
                                                        =========     =========

Weighted-average number of common shares outstanding      665,812          --
                                                        =========     =========












See Accompanying Notes to Consolidated Financial Statements.

                                       14

<PAGE>
<TABLE>
<CAPTION>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

           Consolidated Statements of Changes in Stockholders' Equity




                                                                             Additional               Total
                                  Preferred         Common       Paid-In    Accumulated           Stockholders'
                                   Stock            Stock        Capital      Deficit                 Equity


<S>                              <C>                 <C>       <C>            <C>                    <C>
Balance, May 24, 1995            $                    --            --            --                    --

Sale of preferred stock              21,000           --            --            --                    21,000

Net loss                               --             --            --         (22,684)                (22,684)
                                 ----------     ----------    ----------    ----------              ----------

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 net of
         $39,328 of offering
         costs                         --            7,076     6,322,086          --                 6,329,162

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

Balance December 31, 1996        $     --            7,076     6,322,086      (364,979)              5,964,183
                                 ==========     ==========    ==========    ==========              ==========

See Accompanying Notes to Consolidated Financial Statements.

                                       15
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                                                                                   Period From
                                                                                   May 24, 1995
                                                                                 (Incorporation)
                                                                  Year Ended            to
                                                                December 31,      December 31,
                                                                ------------      ------------
                                                                   1996               1995
                                                                   ----               ----
<S>                                                          <C>                   <C>
Cash flows from operating activities:
    Net loss                                                 $   (342,295)         (22,684)
    Adjustments to reconcile net loss to net cash used in
      operating activities:
         Depreciation                                              73,610             --
         Provision for loan losses                                145,000             --
         Credit for deferred income taxes                        (191,000)         (13,000)
         Amortization of loan fees,
          premiums and discounts                                  (19,340)            --
         Increase in accrued interest
          receivable and other assets                              14,592         (117,191)
         Increase in accrued interest
          payable and other liabilities                            24,503           49,031
                                                             ------------     ------------

                  Net cash used in operating activities          (294,930)        (103,844)
                                                             ------------     ------------

Cash flows from investing activities:
    Purchase of securities held to maturity                    (5,220,309)            --
    Maturities of securities held to maturity                   3,000,000             --
    Net increase in loans                                     (12,261,552)            --
    Purchase of premises and equipment                         (1,163,961)         (74,462)
                                                             ------------     ------------

                  Net cash used in investing activities       (15,645,822)         (74,462)
                                                             ------------     ------------

Cash flows from financing activities:
    Net increase in noninterest-bearing demand,
         savings and NOW deposits                              11,454,619             --
    Net increase in time deposits                               6,430,485             --
    Net increase in official checks                               579,703             --
    Advances from organizers                                         --            239,000
    Repayment of advances from organizers                        (239,000)            --
    Stock offering costs                                             --            (39,328)
    Issuance of preferred stock                                      --             21,000
    Redemption of preferred stock                                 (21,000)            --
    Sale of common stock                                        6,329,162             --
    Payment of mortgage payable                                  (593,806)            --
                                                             ------------     ------------

                  Net cash provided by
                    financing activities                       23,940,163          220,672
                                                             ------------     ------------

Net increase in cash and cash equivalents                       7,999,411           42,366

Cash and cash equivalents at beginning of period                   42,366             --
                                                             ------------     ------------

Cash and cash equivalents at end of period                   $  8,041,777           42,366
                                                             ============     ============

Supplemental disclosure of cash flow information:
     Cash paid during the year for:
         Interest                                            $    233,273            5,796
                                                             ============     ============

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

    Noncash transactions-
         Issuance of mortgage payable
          for acquisition of property                        $    525,000          593,806
                                                             ============     ============


See Accompanying Notes to Consolidated Financial Statements.

                                       16
</TABLE>

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

               For the Year Ended December 31, 1996 and the Period
             from May 24, 1995 (incorporation) to December 31, 1995


(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")
     (collectively   the   "Company").   The  Holding   Company  was   organized
     simultaneously  with the Bank and its only  business is the  ownership  and
     operation  of the Bank.  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.  The
     Company has adopted a fiscal year ending December 31.

Basisof Presentation.  The accompanying consolidated financial statements of the
     Company  include  the  accounts of the  Holding  Company and the Bank.  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.

Cash and Cash Equivalents.  For purposes of the presentation in the statement of
     cash flows, cash and cash equivalents are defined as those amounts included
     in the  accompanying  balance sheet  captions  "cash and due from banks and
     federal funds sold."

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 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.

                                                                     (continued)




                                       17

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(1)  Summary of Significant Accounting Policies, Continued

LoansReceivable,  Continued.  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.

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.

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.

Advances  from   Organizers.   Certain   of  the   Company's   organizers   made
     noninterest-bearing advances of $239,000 to the Company. These amounts were
     used to fund organizational and other costs incurred by the Holding Company
     and the Bank.  The advances  were repaid to the  organizers  on February 7,
     1996 from the proceeds of the Company's common stock offering.

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.

Loss Per  Share.  Loss  per  share is  calculated  by  dividing  net loss by the
     weighted  average number of shares of common stock  outstanding  during the
     year.

                                                                     (continued)






                                       18

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(2)  Debt Securities
    Debt  securities  have been  classified  in the balance  sheet  according to
    management's intent. The carrying amount of securities and their approximate
    fair values at December 31, 1996 are as follows:
<TABLE>
<CAPTION>


                                   Amortized      Unrealized     Unrealized     Fair
                                   Cost           Gains          Losses         Value
                                   ----           -----          ------         -----
<S>                              <C>               <C>            <C>       <C>
Held to Maturity:
     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 debt securities in 1996.

    The  scheduled  maturities  of debt  securities  at December 31, 1996 are as
follows:

                                         Held to Maturity
                                         ----------------
                                      Amortized        Fair
                                       Cost            Value
                                       ----            -----

Due in one or less                  $  744,088       736,918
Due after one through five years     1,496,202     1,506,111
                                    ----------    ----------

                                    $2,240,290     2,243,029
                                    ==========    ==========

(3)  Loans
    The components of loans in the balance sheet are as follows:

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

Commercial real estate           $  3,757,335
Residential real estate             4,384,301
Commercial                          3,814,584
Consumer                              305,332
                                 ------------

                                   12,261,552

Less:
  Deferred fees                          (641)
  Allowance for credit losses        (145,000)
                                 ------------

Loans, net                       $ 12,115,911
                                 ============

                                                                     (continued)




                                       19

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(3)  Loans, Continued
    An analysis of the change in the allowance for loan losses follows:

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

Beginning balance              $   --
Provision for credit losses     145,000
Charge-offs                        --
Recoveries                         --
                               --------

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

    The Company had no impaired loans in 1996.

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


                                          At December 31,
                                          ---------------
                                        1996           1995
                                        ----           ----

Land                                 $  931,056       677,789
Bank premises                           536,576          --
Construction in progress                696,276          --
Furniture, fixtures and equipment       163,566          --
                                     ----------    ----------

    Total, at cost                    2,327,474       677,789

    Less accumulated depreciation        34,334          --
                                     ----------    ----------

    Premises and equipment, net      $2,293,140       677,789
                                     ==========    ==========

                                                                     (continued)



                                       20

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued



(5)  Deposits
    Time deposits included the following amounts:

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

Certificates of Deposit $100,000 and over    $1,467,284
Certificates of Deposit under $100,000        4,963,201
                                             ----------

                                             $6,430,485
                                             ==========

    A schedule of maturities of certificates of deposit follows:

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

          1997           $3,115,611
          1998            3,303,280
          2000               11,594
                         ----------

                         $6,430,485
                         ==========

(6)  Mortgage Payable

The  Company has a note payable  collateralized by a mortgage on a future branch
     site.  The note  bears  interest  at 8% and is  payable  based on a 20 year
     amortization with a balloon payment due 2001.

(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.

                                                                     (continued)

                                       21

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(7) Financial Instruments, Continued
    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.

    A summary of the notional  amounts of the Company's  financial  instruments,
    with off balance sheet risk at December 31, 1996 follows:

Unfunded loan commitments at variable rates    $1,760,000
                                               ==========

Available lines of credit                      $   58,000
                                               ==========

(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 benefit consisted of the following:

                                 Year Ended December 31,
                                 -----------------------
                                   1996          1995
                                   ----          ----
Deferred:
    Federal                     $(163,000)      (11,000)
    Stat                          (28,000)       (2,000)
                                ---------     ---------

       Total deferred benefi    $(191,000)      (13,000)
                                =========     =========

    The income tax benefit is  different  than that  computed  by  applying  the
    federal  statutory  rate  of 34% in  1996,  as  indicated  in the  following
    analysis:
<TABLE>
<CAPTION>

                                                       1996                    1995
                                                       ----                    ----
                                                               % of                     % of
                                                               Pretax                   Pretax
                                                 Amount         Loss        Amount      Loss
                                                 ------         ----        ------      ----
<S>                                            <C>             <C>      <C>             <C>
Income tax benefit at statutory Federal
    income tax rate                            $(181,320)      (34.0)%  $ (12,132)      (34.0)%
Increase (decreases) resulting from
    State taxes, net of federal tax benefit      (18,480)       (3.4)      (1,300)       (3.6)
    Other                                          8,800         1.6          432         1.2
                                               ---------        ----      ---------      ----

                                               $(191,000)      (35.8)%  $ (13,000)      (36.4)%
                                               =========        ====      =========      ====
</TABLE>

                                                                     (continued)




                                       22

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              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.

                                      At December 31,
                                      ---------------
                                  1996            1995
                                  ----            ----

Deferred tax asset:
    Allowance for credit losse    $ 45,000        --
    Contribution                     1,000        --
    Net operating loss             158,000      13,000
                                  --------    --------

      Gross deferred tax asset     204,000      13,000

    Less valuation allowance          --          --
                                  --------    --------

      Net deferred tax asset      $204,000      13,000
                                  ========    ========

    At December 31, 1996, the Company had net operating loss  carryforwards  for
    federal and state income tax purposes as follows:

              Year Expires

               2010           $ 36,000
               2011            386,000
                              --------

                              $422,000
                              ========

(10)  Incentive Stock Option Plan

The  Company  established  an  Incentive  Stock  Option  plan for  officers  and
     employees  and  reserved  100,000  shares of common  stock for the plan and
     during  1996,  the  Company  granted  stock  options  to its  officers  and
     employees to purchase  15,500 shares of the Company's  common stock.  Under
     the President's employment contract, the Company also granted stock options
     to purchase 10,000 shares.

                                     Average               Aggregate
                                    Per Share    Number of   Option
                                      Price       Shares     Price
                                      -----       ------     -----

Outstanding at December 31, 1995        --          --          --
Options granted                        9.00       25,500    $229,500
                                                  ------    --------

Outstanding at December 31, 1996       9.00       25,500    $229,500
                                       ====       ======    ========

                                                                     (continued)


                                       23

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(10)Incentive  Stock Option Plan,  Continued  These options are  exercisable  as
    follows:

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

                     1997       $  7,100
                     1998          9,100
                     1999          3,100
                     2000          3,100
                     2001          3,100
                                   ------

                                  25,500
                                  ======

The  Company  uses  Statement  of  Financial   Accounting   Standards  No.  123,
     "Accounting  for Stock-Based  Compensation,"  which  establishes  financial
     accounting and reporting  standards for stock-based  employee  compensation
     plans. As permitted by this  Statement,  the Company has elected to utilize
     the intrinsic value method of accounting defined in APB Opinion No. 25. Due
     to the exercise price of the options  approximating the market value of the
     common  stock  at the  date of  grant,  no  compensation  expense  has been
     recognized in the consolidated statements of operations.

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 in 1996:


                                                       1996
Weighted-average grant-date fair value of options
      issued during the year                         $95,137
                                                      ======

    The proforma  results and the actual results are the same because no options
vested in 1996.

(11)  Stockholders' Equity

The  Company is subject to certain  restrictions on the amount of dividends that
     it may declare without prior regulatory approval.

As   of December 31, 1996,  the Company has sold 707,610  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.

                                                                     (continued)

                                       24

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(11)  Stockholders' Equity, Continued

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  1/2 of one share of  additional
     common stock for $9.00 per share during the 24 month period  following  the
     effective date of registration of the shares. As of December 31, 1996 there
     were 670,000 warrants outstanding entitling the holders to purchase 335,000
     shares of the Company's stock. No warrants have been exercised.

The  Company is offering  common stock to depositors of the Bank. Each depositor
     who opens a deposit  account  with a balance of $1,000 or more may purchase
     up to 500  shares of common  stock at $9.00 per share.  This offer  expires
     March 8, 1997.

(12) Regulatory Matters

The  Holding  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 judgements 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, 1996,
     that the Company  meets all capital  adequacy  requirements  to which it is
     subject.

As   of December  31, 1996,  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>

                                                                                    For Well
                                                           For Capital            Capitalized
                                      Actual            Adequacy Purposes:          Purposes:
                                      ------            ------------------          ---------
                               Amount       Ratio      Amount       Ratio       Amount      Ratio
                               ------       -----      ------       -----       ------      -----
<S>                            <C>          <C>        <C>          <C>         <C>         <C>
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

                                                                     (continued)
</TABLE>

                                       25

<PAGE>



                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(13)  Parent Company Only Financial Information

The  Holding Company's financial  information is as follows at December 31, 1996
     and 1995 and for the year ended  December  31, 1996 and for the period from
     May 24, 1995 (incorporation) to December 31, 1995:

                            Condensed Balance Sheets
                                 (In thousands)
                                                        At December 31,
                                                       1996         1995
 Assets

    Cash                                              $ 1,313          42
    Loans receivable                                      661        --
    Investment in subsidiary                            3,747        --
    Premises and equipment, net                           754         678
    Other assets                                           23         160
                                                      -------     -------

        Total assets                                  $ 6,498         880
                                                      =======     =======

Liabilities and Stockholders' Equity

    Mortgage payable                                      525         594
    Advances from organizers                             --           239
    Liabilities                                             9          49
    Stockholders' equity                                5,964          (2)
                                                      -------     -------

        Total liabilities and stockholders' equity    $ 6,498         880
                                                      =======     =======

             Condensed Statements of Operations
                       (In thousands)
                                                         1996        1995
                                                      -------     -------

    Revenues                                          $    69        --
    Expenses                                              (78)        (23)
                                                      -------     -------

        Loss before loss of subsidiary                     (9)        (23)
        Loss of subsidiary                               (333)       --
                                                      -------     -------

        Net loss                                      $  (342)        (23)
                                                      =======     =======

                                                                     (continued)



                                       26

<PAGE>


                 CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARY

              Notes to Consolidated Financial Statements, Continued


(13)  Parent Company Only Financial Information, Continued

<TABLE>
<CAPTION>

                       Condensed Statements of Cash Flows
                                 (In thousands)

                                                                         1996         1995
                                                                         ----         ----
<S>                                                                   <C>             <C>
Cash flows from operating activities:
     Net loss                                                         $  (342)        (23)
     Adjustments to reconcile net loss to net cash from
       operating activities:
         Equity in undistributed loss of subsidiaries                     333        --
         Net (increase) decrease in other assets                          137        (130)
         (Decrease) increase in other liabilities                         (40)         49
         Depreciation                                                       3        --
                                                                      -------     -------

         Net cash provided by (used in) operating activities               91        (104)
                                                                      -------     -------
Cash flows from investing activities-
     Purchase of property and equipment, net of disposals                 446         (75)
     Net increase in loans receivable                                    (661)       --
     Repayment of mortgage note payable                                  (594)       --
                                                                      -------     -------

         Net cash used in investing activities                           (809)        (75)
                                                                      -------     -------
Cash flows from financing activities:
     Net proceeds from issuance of common stock                         6,329        --
     Sale of (retire) preferred stock                                     (21)         21
     Advances from organizers                                            --           239
     Stock offering costs                                                --           (39)
     Repayment of advances from organizers                               (239)       --
     Investment in subsidiary                                          (4,080)       --
                                                                      -------     -------
         Net cash (used in) provided by financing activities            1,989         221
                                                                      -------     -------
Net (decrease) increase in cash and cash equivalents                    1,271          42
Cash and cash equivalents at beginning of the year                         42        --
                                                                                  -------

Cash and cash equivalents at end of year                              $ 1,313          42
                                                                      =======     =======



                                       27
</TABLE>

<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 Subsidiary (the "Company") at December 31, 1996 and
1995, and the related statements of operations, changes in stockholders' equity,
and cash flows for the year ended  December 31, 1996 and for the period from May
24, 1995  (incorporation)  to December 31, 1995. 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, 1996 and 1995, and the results of its operations and its cash flows
for the year  ended  December  31,  1996 and for the  period  from May 24,  1995
(incorporation)  to December 31, 1995, in  conformity  with  generally  accepted
accounting principles.





HACKER, JOHNSON, COHEN & GRIEB
Tampa, Florida
February 12, 1997





                                       28
<PAGE>



                             DIRECTORS AND OFFICERS

CITIZENS COMMUNITY BANCORP, INC.

OFFICERS

Richard Storm, Jr.
Chairman and Chief Executive Officer

Joel M. Cox, Sr.
Vice Chairman

W. Terrell Upson
President

Stephen A. McLaughlin
Secretary - Treasurer and
Chief Financial Officer

DIRECTORS

Richard Storm, Jr.
Chairman and Chief Executive Officer

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

W. Terrell Upson
President

Stephen A. McLaughlin
Secretary-Treasurer and
Chief Financial Officer

James S. Hagedorn
Vice Chairman and Chief Executive
Officer of Citizens
Community Bank

Diane M. Beyer
Humane Resources Consultant

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

Paul Janssens-Lens
Co-Founder and President of
Soft-Art, Inc. and President
and Owner of Appletree Management
Corporation

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

Heidi I. Mayerhofer
Co-owner and Manager of
Konrads Seafood and Grille
Room



CITIZENS COMMUNITY BANK OF FLORIDA

OFFICERS

Joel M. Cox, Sr.
Chairman

James S. Hagedorn
Vice Chairman and Chief Executive Officer

W. Terrell Upson
President and Chief Lending Officer

Stephen A. McLaughlin
Vice President-Administration,
Secretary to the Board

Susanne Bartlett
Vice President-Cashier

DIRECTORS

Joel M. Cox, Sr.
Chairman

James S. Hagedorn
Vice Chairman

Stephen A. McLaughlin
Secretary to the Board

W. Terrell Upson

Diane M. Beyer

Thomas B. Garrison

Paul Janssens-Lens

Dennis J. Lynch

Heidi I. Mayerhofer

Richard Storm, Jr.

                                       29

<PAGE>


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