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**UNITED STATES
SECURITIES AND EXCHANGE COMMISSION**
Washington, D.C. 20549

**FORM 10-QSB**

**(Mark One)**

/X/  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended **June 30, 2006**

/  /  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ________ to __________
Commission file number 000-50585

**CITIZENS COMMUNITY BANCORP**

---

|**United States**(State or other jurisdiction of incorporation or organization)         | **20-0663325**(IRS Employer Identification Number)
|--------------------------------------------------------------------------------------- | --------------------------------------------------
|                                                                                       
|**2174 EastRidge Center, Eau Claire, WI 54701**(Address of principal executive offices)
|                                                                                       
|**715-836-9994**Issuer's telephone number)                                             
|                                                                                       
|(Former name, former address and former fiscal year, if changed since last report)     

Check whether the issuer (1) filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.     Yes    /X/       No    /   /

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

**APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE YEARS**

Check whether the registrant filed all documents and reports required to be filed by Section 12,  13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.     Yes    /   /       No    /   /

**APPLICABLE ONLY TO CORPORATE ISSUERS**

State the number of shares outstanding of each issuer's classes of common equity, as of the latest practicable date:

**At July 31, 2006,  there were 3,724,628 shares of the issuers' common stock outstanding**

---

Transitional Small Business Disclosure Format (Check one):   Yes /  /      No  /X/

|SEC2334 (1-04) | **Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.**
|-------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Part I -- FINANCIAL INFORMATION | PageNumber
|------------------------------- | ----------
|                                | Item 1.   
|                                |           
|                                |           
|                                |           
|                                |           
|                                |           
|                                | Item2.    
|                                | Item 3.   
|Part II -- OTHER INFORMATION    | 17        
|SIGNATURES                      | 18        
|EXHIBITS                        | 19        

2

---

|Assets                                                           | June 30, 2006  | September 30, 2005
|---------------------------------------------------------------- | -------------- | ------------------
|                                                                
|Cash and cash equivalents                                        | $    1,963,890 | $    9,265,477    
|Other interest-bearing deposits                                  | 1,055,733      | 1,444,233         
|Securities available-for-sale (at fair value)                    | 803,535        | 2,088,349         
|Federal Home Loan Bank stock                                     | 2,310,000      | 2,094,900         
|Loans Receivable                                                 | 247,940,308    | 218,733,884       
|Allowance for Loan Losses                                        | (807,809)      | (803,218)         
|Loans receivable - Net                                           | 247,132,499    | 217,930,666       
|Office properties and equipment - Net                            | 3,579,225      | 2,922,884         
|Accrued interest receivable - Loans                              | 781,233        | 612,644           
|Intangible assets                                                | 1,904,780      | 2,130,949         
|Goodwill                                                         | 5,465,619      | 5,465,619         
|Other assets                                                     | 1,923,009      | 1,751,770         
|TOTAL ASSETS                                                     | $266,919,523   | $245,707,491      
|                                                                
|Liabilities and Equity                                           | June 30, 2006  | September 30, 2005
|Liabilities:                                                     |                |                   
|Deposits                                                         | $188,728,215   | $177,469,100      
|Federal Home Loan Bank Advances                                  | 46,200,000     | 36,200,000        
|Other Liabilities                                                | 2,067,554      | 2,484,991         
|Total Liabilites                                                 | 236,995,769    | 216,154,091       
|                                                                
|Stockholders' Equity:                                            |                |                   
|Common Stock - 3,747,319 Shares issued                           | 37,473         | 37,473            
|Additional Paid-in Capital                                       | 18,805,233     | 18,779,709        
|Retained Earnings                                                | 12,726,988     | 12,536,512        
|Unearned ESOP Shares                                             | (924,000)      | (1,013,460)       
|Unearned Compensation                                            | (358,384)      | (389,169)         
|Accumulated other comprehensive loss                             | (22,968)       | (3,654)           
|Treasury Stock at cost, - 22,691 and 26,251 shares, respectively | (340,582)      | (394,011)         
|Total Stockholders' Equity                                       | 29,923,754     | 29,553,400        
|TOTAL LIABILITIES AND EQUITY                                     | $266,919,523   | $245,707,491      

3

---

|                                                    | Three Months Ended | Nine Months Ended
|--------------------------------------------------- | ------------------ | -----------------
|                                                    | June 30, 2006      | June 30, 2005    
|Interest and Dividend Income:                       |                   
|Interest and fees on loans                          | $3,941,410         | $2,891,496       
|Other interest and dividend income                  | 69,615             | 24,474           
|Total interest and dividend income                  | 4,011,025          | 2,915,970        
|Interest expense:                                   |                    |                  
|Interest on deposits                                | 1,348,386          | 810,231          
|Notes Payable Interest                              | 535,223            | 210,756          
|Total interest expense                              | 1,883,609          | 1,020,987        
|Net Interest Income                                 | 2,127,416          | 1,894,983        
|Provision for loan losses                           | 62,620             | 103,200          
|Net interest income after provision for loan
losses | 2,064,796          | 1,791,783        
|                                                   
|Noninterest Income:                                
|Service charges on deposit accounts                 | 263,943            | 195,017          
|Insurance commissions                               | 102,856            | 77,298           
|Loan fees and service charges                       | 102,434            | 83,134           
|Securities Gains                                    | 0                  | 0                
|Other                                               | 3,588              | 67,484           
|Total Noninterest Income                            | 472,821            | 422,933          
|                                                   
|Noninterest expense:                               
|Salaries and related benefits                       | 1,428,145          | 1,127,902        
|Occupancy - Net                                     | 278,034            | 179,692          
|Office                                              | 184,292            | 148,719          
|Data processing                                     | 102,503            | 66,284           
|Other                                               | 401,141            | 255,955          
|Total noninterest expense                           | 2,394,115          | 1,778,552        
|                                                   
|Income before provision for income tax              | 143,502            | 436,164          
|Provision for income taxes                          | 59,410             | 163,655          
|                                                   
|Net income                                          | $     84,092       | $    272,509     
|                                                   
|Per Share Information:                             
|Basic Earnings                                      | $0.02              | $0.09            
|Diluted Earnings                                    | $0.02              | $0.09            
|Dividends Paid                                      | $0.05              | $0.05            

4

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|Nine Months Ended June 30, 2006                                                  | Shares        | CommonStock | AdditionalPaid-InCapital | RetainedEarnings | UnearnedESOPShares | UnearnedCompensation | AccumulatedOtherComprehensiveLoss          | TreasuryStock  | Total          
|-------------------------------------------------------------------------------- | ------------- | ----------- | ------------------------ | ---------------- | ------------------ | -------------------- | ------------------------------------------ | -------------- | ---------------
|                                                                                 |              
|Balance - Beginning of Period                                                    | 3,747,319     | $37,473     | $18,779,709              | $12,536,512      | ($1,013,460)       | ($389,169)           | ($3,654)                                   | ($394,011)     | $29,553,400    
|Comprehensive Income:                                                            |              
|Net Income                                                                       |               |             |                          | 333,685          |                    |                      |                                            |                | 333,685        
|Net Unrealized Loss on
  Available for Sale Securities                           |               |             |                          |                  |                    |                      | (19,313)                                   |                | (19,313)       
|Total Comprehensive Income                                                       |               |             |                          |                  |                    |                      |                                            |                | 314,372        
|                                                                                
|Committed ESOP Shares                                                            |               |             |                          |                  | 89,460             |                      |                                            |                | 89,460         
|Appreciation in fair value of ESOP  shares charged to expense                    | 36,967        |             |                          |                  |                    |                      | 36,967                                    
|Common Stock awarded for Recognition
  and Retention Plan - 3,576
Shares         | (11,443)      |             |                          | (42,197)         |                    | 53,640               | 0                                         
|16 Shares of Common Stock Purchased
  from Employee 401K Retirement Plan         |               |             |                          |                  | (211)              | (211)               
|Amortization of Restricted Stock                                                 |               |             |                          |                  |                    | 72,982               |                                            |                | 72,982         
|Cash Dividends ($0.15 per share)                                                 |               |             |                          | (143,216)        |                    |                      |                                            |                | (143,216)      
|Balance - End of Period                                                          | **3,747,319** | **$37,473** | **$18,805,233**          | **$12,726,981**  | **($924,000)**     | **($358,384)**       | **($22,967)**                              | **($340,582)** | **$29,923,754**
|                                                                                 |              
|Nine Months Ended June 30, 2005                                                  | Shares        | CommonStock | AdditionalPaid-InCapital | RetainedEarnings | UnearnedESOPShares | UnearnedCompensation | AccumulatedOtherComprehensiveIncome (Loss) | TreasuryStock  | Total          
|                                                                                 |              
|Balance - Beginning of period                                                    | 3,041,750     | $30,418     | $9,029,696               | $11,678,549      | ($1,132,740)       | $0                   |                                            | $0             | **$19,605,923**
|****Comprehensive Income:                                                       
|Net Income                                                                       |               |             |                          | 856,499          |                    |                      |                                            |                | 856,499        
|Other Comprehensive Income                                                       |               |             |                          | 0                |                    |                      |                                            |                | 0              
|Total Comprehensive Income                                                       |               |             |                          | **856,499**      | ****               |                      |                                            |                | **856,499**    
|                                                                                
|59,618 Shares of Common Stock purchased for
  Recognition and Retention Plan**** | ****          |             |                          | (894,866)        | (894,866)         
|Committed ESOP shares                                                            |               |             | 34,919                   |                  | 89,460             |                      |                                            |                | 124,379        
|33,386 Shares of Common Stock Awarded for
  Recognition and Retention Plan       | (52,082)      |             |                          | (449,042)        |                    | 501,124              | 0                                         
|19 Shares of Common Stock Purchased from
  Employee 401K Retirement Plan         |               |             |                          |                  | (269)              | (269)               
|Amortization of Restricted Stock                                                 |               |             |                          |                  |                    | 37,420               |                                            |                | 37,420         
|Cash dividends ($0.15 per share)                                                 |               |             |                          | (145,487)        |                    |                      |                                            |                | (145,487)      
|Balance - End of Period                                                          | **3,041,750** | **$30,418** | **$9,012,533**           | **$12,389,561**  | **($1,043,280)**   | **($411,622)**       | **$0**                                     | **($394,011)** | **$19,583,599**

5

---

|                                                            | June 30, 2006 | June 30, 2005
|----------------------------------------------------------- | ------------- | -------------
|Increase (decrease) in cash and cash equivalents:           |              
|Cash flows from operating activities:                       |              
|Cash flows from operating activities:                       |               |              
|Net Income                                                  | $333,685      | $856,499     
|Adjustments to reconcile net income to net cash provided    |               |              
|by operating activities:                                    |               |              
|Provision for depreciation                                  | 296,564       | 187,575      
|Provision for loan losses                                   | 171,071       | 305,336      
|Amortization of core deposit intangible                     | 226,169       | 19,147       
|Amortization of purchase accounting adjustments             | (57,681)      | 0            
|Amortization of Restricted Stock                            | 72,982        | 37,420       
|Federal Home Loan Bank stock dividends                      | (16,480)      | (36,900)     
|ESOP contribution expense in excess of shares released      | 36,967        | 34,919       
|Increase in accrued interest receivable and other assets    | (282,147)     | (499,969)    
|Increase (decrease) in other liabilities                    | (417,437)     | 443,498      
|Total adjustments                                           | 30,008        | 491,026      
|Net cash provided by operating activities                   | 363,693       | 1,347,525    
|Cash flows from investing activities:                       |               |              
|Proceeds from maturities of other interest bearing deposits | 388,500       | 0            
|Proceeds from sale of securities available-for-sale         | 1,265,501     | 0            
|Purchase of Federal Home Loan Bank stock                    | (198,620)     | (810,400)    
|Net increase in loans                                       | (29,372,904)  | (29,505,434) 
|Capital expenditures                                        | (952,905)     | (195,321)    
|Net cash used in investing activities                       | (28,870,428)  | (30,511,155) 
|Cash flows from financing activities:                       |               |              
|Increase in Borrowings                                      | 10,000,000    | 20,000,000   
|Increase in deposits                                        | 11,259,115    | 9,523,736    
|Purchase common stock                                       | (211)         | (895,135)    
|Reduction in unallocated shares held by ESOP                | 89,460        | 89,460       
|Cash dividends paid                                         | (143,216)     | (145,487)    
|Net cash provided by financing activities                   | 21,205,148    | 28,572,574   
|Net decrease in cash and cash equivalents                   | (7,301,587)   | (591,056)    
|Cash and cash equivalents at beginning                      | 9,265,477     | 4,768,007    
|Cash and cash equivalents at end                            | $1,963,890    | $4,176,951   

6

---

The financial statements of Citizens Community Federal (the "Bank") included herein have been
included by Citizens Community Bancorp (the "Company") pursuant to the rules and regulations
of the Securities and Exchange Commission.  The Company is a successor to Citizens Community
Federal as a result of a regulatory restructuring into the mutual holding company form, which was
effective on March 29, 2004.  The restructuring included the capitalization of the Company, the
sale of 978,650 shares of its common stock, including 119,236 shares to the Company's employee
stock ownership plan (ESOP), the issuance of 2,063,100 shares to the Citizens Community MHC
and the acquisition by the Company of all of the shares of Citizens Community Federal.  The
ESOP borrowed $1,192,360 from the Company to purchase its shares of the Company's stock.

Proceeds from the stock offering, net of the ESOP loan of $1,192,360, totaled $7,974,296.
$4,533,328 was used to purchase 100% (3,041,750 shares) of Citizens Community Federal's stock
and $3,340,968 was retained by the Company for short-term investments and general corporate
purposes.  The restructuring included a series of transactions by which the corporate structure of
Citizens Community Federal was converted from a mutual savings bank to the mutual holding
company form of ownership.  Upon completion, Citizens Community Federal became a federal
stock savings bank subsidiary of Citizens Community Bancorp.  Citizens Community Bancorp is a
majority-owned subsidiary of Citizens Community MHC.  Members of Citizens Community
Federal became members of Citizens Community MHC and continue to have the same voting
rights in Citizens Community MHC after the restructuring as they had in Citizens Community
Federal.  After the stock offering, Citizens Community MHC owned 67.83% or 2,063,100 shares
of the common stock of Citizens Community Bancorp and the remaining 32.17% of the stock was
sold to the public.

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

The consolidated income of the Company is principally from the income of the Bank.  The Bank
originates residential and consumer loans and accepts deposits from customers primarily in
Wisconsin, Minnesota and Michigan.  The Bank acquired a branch in Mankato, Minnesota in
November of 2003, opened a new branch office in Oakdale, Minnesota on October 1, 2004, and
acquired Community Plus Savings Bank's Lake Orion and Rochester Hills, Michigan branches on
July 1, 2005.  The Bank is subject to competition from other financial institutions and non-financial institutions providing financial products.  Additionally, the Bank is subject to the
regulations of certain regulatory agencies and undergoes periodic examination by those regulatory
agencies.

7

---

NOTE 2 - PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, Citizens Community Federal.  All significant inter-company accounts
and transactions have been eliminated.

The accompanying unaudited consolidated financial statements of Citizens Community Bancorp
have been prepared in accordance with accounting principles generally accepted in the United
States for interim financial information and with the instructions to Form 10-QSB.  Accordingly,
they do not include all of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.  In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary for the fair
presentation have been included.  Operating results for the three and nine months ended June 30,
2006 are not necessarily indicative of the results that may be expected for the year ending
September 30, 2006.  Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United
States have been condensed or omitted.

**NOTE  3 - STOCK AWARD PLANS**

In February 2005, the Recognition and Retention Plan was approved by the Company's
shareholders.  The plan provides for the grant of up to 59,618 shares.  As of June 30, 2006, 36,962
restricted shares had been granted under this plan.  Restricted shares are issued at no cost to the
employee and have a five-year vesting period.  The fair value of the restricted shares on the date of
issue was $13.45 per share for 33,386 shares and $11.80 for 3,576 shares.  Compensation expense
related to these awards was $24,562 for the three months ended June 30, 2006, and  $72,981 for
the nine months ended June 30, 2006.

In February 2005, the 2004 Stock Option and Incentive Plan was approved by the Company's
shareholders.  The plan provides for the grant of nonqualified and incentive stock options, and
stock appreciation rights.  The total number of shares available for future grants at June 30, 2006 under the plan was 149,046.  At June 30, 2006, 105,827 options had been granted under this
plan at a weighted average exercise price of $13.45 per share.  Options vest over a five-year
period.  Unexercised nonqualified stock options expire in 15 years and unexercised incentive stock
options expire in 10 years.  None of the options granted were vested, exercised, or forfeited during
the period and all options granted remain outstanding at June 30, 2006.

**NOTE 4  - STOCK-BASED COMPENSATION**

The Company accounts for stock-based employee compensation using the intrinsic value method
prescribed under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related Interpretations.  Accordingly, the Company records compensation expense
if the quoted market price on the date of grant exceeds the exercise price.  Compensation expense
for stock options is calculated as the number of options granted multiplied by the amount the
market price exceeds the exercise price.  For options with a vesting period, the expense, if
applicable, is recognized over the vesting period.  Compensation expense is recognized immediately
for options that are fully vested on the date of grant.  The Company has not recognized any stock
option related employee compensation expense during the three months or nine months ended June
30, 2006.

8

---

If the Company had elected to recognize compensation expense for its employee stock-based
compensation plans based on the fair values at the grant dates, consistent with the methodology
prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation", net earnings and
earnings per share would have been reported as follows:  (See also Note 6 (New Accounting
Pronouncements No. 123(R) )

|                                                                                                                                                           | Three months ended | Nine months ended
|---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | -----------------
|                                                                                                                                                           | 06/30/06           | 06/30/05         
|                                                                                                                                                          
|Net  income - as reported                                                                                                                                  | $84,092            | $272,509         
|Deduct:  Total stock-based employee compensation   Expense determined under a fair value based method   For all awards granted, net of related tax effects | $16,716            | $16,716          
|Proforma net income                                                                                                                                        | $67,376            | $255,793         
|Basic earnings per share -  as reported                                                                                                                    | $   0.02           | $   0.09         
|Proforma  basic earnings per share                                                                                                                         | $   0.02           | $   0.09         
|Diluted Earnings Per Share - as reported                                                                                                                   | $   0.02           | $   0.09         
|Pro forma  diluted earnings per share                                                                                                                      | $   0.02           | $   0.09         

For purposes of the pro forma disclosures above, the weighted average fair value per stock option
granted was $3.66. The fair value was estimated using the Black-Scholes option-pricing model
with the following weighted average assumptions: (1) annual volatility factor of 16%, (2) risk-free
interest rate of 4.16%, (3) expected dividend yield of 1.5% and (4) expected option term of ten
years.

**NOTE 5 - EARNINGS PER SHARE**

Basic and diluted earnings per share represent income available to common shareholders divided by
the weighted-average number of common shares outstanding during the period, excluding
unallocated shares of the Employee Stock Ownership Plan (ESOP).  The weighted average number
of shares outstanding was 3,631,234 for the three months ended June 30, 2006, and 3,627,049 for
the nine months ended June 30, 2006.  Basic and diluted earnings per share of $0.02 were reported
for the three months ended June 30, 2006, compared to $0.09 per share reported for the three-month period ended June 30, 2005. Basic and diluted earnings per share of $0.09 were reported for
the nine-month period ended June 30, 2006, compared to $0.29 for the prior nine-month period.
(Dividends paid represent the dividends paid on the 955,959 outstanding public shares).

**NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS**

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS 123(R),
"Share-Based Payments."  This Statement is a revision to SFAS 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees."  SFAS 123(R) requires the recognition of the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value of the award.  The
cost will be recognized over the period during which an employee is required to provide service in
exchange for the award.  No compensation cost is recognized for equity instruments for which
employees are not required to render any service.  The Statement is effective for the Company
beginning October 1, 2006.  While the Company is still in the process of evaluating the effect of
SFAS No. 123(R) on the financial statements, Note 4 does disclose the effect SFAS No. 123(R)
would have had on earnings if it had been adopted in prior periods.  Since the statement will be
adopted using the modified-prospective method, the effect the adoption will have on the financial
statements can be materially impacted by the number of options granted in future periods.

9

---

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections - a
replacement of APB Opinion No. 20 and SFAS No. 3."  SFAS No. 154 requires changes in
accounting principles to be retrospectively applied to the prior periods presented in the financial
statements, unless it is impracticable to determine either the period--specific effects or the
cumulative effect of the change.  SFAS No. 154 is effective for accounting changes and error
corrections that are made in fiscal years beginning after December 15, 2005.  The Company does
not expect SFAS No. 154 to have a material impact on the Company's financial position or results
of operations.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements No. 133 and 140."  SFAS No. 155 amends
FASB Statements No. 133, "Accounting for Derivative Instruments and Hedging Activities," and
No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities."  SFAS No. 155 resolves issues addressed in Statement 133 Implementation Issue No.
D1, "Application of Statement 133 to Beneficial Interests in Securitized Financial Assets."  The
Statement is effective for all financial instruments acquired or issued after the beginning of an
entity's first fiscal year that begins after September 15, 2006.  The Company does not expect
SFAS No. 155 to have a material impact on the Company's financial position or results of
operation.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets
an amendment of FASB Statement No. 140."  SFAS No. 156 amends FASB Statement No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
with respect to the accounting for separately recognized servicing assets and servicing liabilities.
Statement No. 156 is effective as of the beginning of an entity's first fiscal year that begins after
September 15, 2006.  The Company does not expect SFAS No. 156 to have a material impact on
the Company's financial position or results of operation.

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS

GENERAL

Citizens Community Bancorp (the "Company") was capitalized as a result of an initial public
offering related to the mutual holding company reorganization as explained in Note 1 to the
unaudited consolidated financial statements, effective March 29, 2004.  The Company is the mid-tier holding company for Citizens Community Federal.  The Company is chartered under federal
law and owns 100% of the stock of Citizens Community Federal (the "Bank").  The Company
directs Citizens Community Federal's business activities.

The following discussion focuses on the consolidated financial condition of the Company and the
Bank as of June 30, 2006 and the consolidated results of operations for the three and nine months
ended June 30, 2006, compared to the same period in 2005.  This discussion should be read in
conjunction with the interim condensed consolidated financial statements and notes thereto included
with this report.

10

---

Historically, we were a federal credit union.  We accepted deposits and made loans to members,
who were the people who lived, worked or worshiped in the Wisconsin counties of Chippewa and
Eau Claire, and parts of Pepin, Buffalo and Trempealeau.  In addition, this included businesses and
other entities located in these counties, and members and employees of the Hocak Nation.  In
December 2001, we converted to a federal mutual savings bank in order to better serve our
customers and the local community through the broader lending ability of a federal savings bank,
and to expand our customer base beyond the limited field of membership permitted to credit
unions.  As a federal savings bank, we have expanded authority in structuring residential mortgage
and consumer loans, and the ability to make commercial loans, although the Bank does not
currently have any immediate plans to expand our commercial lending.

We have utilized this expanded lending authority to significantly increase our ability to market one-to four-family residential lending.  Most of these loans are originated through our internal
marketing efforts and our existing and walk-in customers.  We typically do not rely on real estate
brokers and builders to help us generate loan originations.

In order to differentiate ourselves from our competitors, we have stressed the use of personalized
branch-oriented customer service.  With operations structured around a branch system staffed with
knowledgeable and well-equipped employees, our on-going commitment to training at all levels of
our staff remains a key to the Company's success.

On July 1, 2005, Citizens Community Federal successfully completed a merger with Michigan-based, Community Plus - a federally chartered mutual savings bank headquartered in Rochester
Hills with an additional branch location in Lake Orion, Michigan.  As a result of the merger
705,569 additional shares of common stock of Citizens Community Bancorp were issued to
Citizens Community MHC, and Community Plus's members became members of Citizens
Community MHC.

On April 20, 2006, the Board of Directors of Citizens Community MHC adopted a Plan of
Conversion and Reorganization whereby the Mutual Holding Company will offer for sale to
depositors and others in a subscription and community offering the 74.3% stock interest it
currently holds in Citizens Community Bancorp.  The proposed Plan of Conversion and
Reorganization is subject to approval by the Office of Thrift Supervision, the shareholders of
Citizens Community Bancorp and the members of the mutual holding company.

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CRITICAL ACCOUNTING POLICIES

Allowance for Loan Losses.  The allowance for loan losses is established through a provision for
loan losses charged to expense.  Loans are charged against the allowance for loan losses when
management believes the collectibility of the principal is unlikely. The Bank considers loans
secured by real estate and all consumer loans to be large groups of smaller-balance homogeneous
loans that are collectively evaluated for impairment.  The allowance for credit losses attributed to
these loans is established via a process that estimates the probable losses inherent in the portfolio,
based upon various analyses.  These include historical delinquency and credit loss experience and
the current aging of the portfolio, together with analyses that reflect current trends and conditions.
Management also considers overall portfolio indicators including historical credit losses,
delinquent, non-performing and classified loans, and trends in volumes and term of loans, an
evaluation of overall credit quality and the credit process, including lending policies and
procedures, and economic, geographical, and other environmental factors.  In management's
judgment, the allowance for loan losses is maintained at a level that represents its best estimate of
probable losses relating to specifically identified loans, as well as probable losses inherent in the
balance of the loan portfolio.

Financial Condition

*Total Assets*.  Total assets of the Company as of June 30, 2006 were $266.9 million, compared to
$245.7 million as of September 30, 2005, an increase of  $21.2 million, or 8.6%.  Assets increased
primarily as a result of an increase in loans receivable.  Contributing to the increase in loans was
the continued growth of the Mankato and Oakdale, Minnesota branches.

*Cash and Cash Equivalents.*  Cash and cash equivalents decreased from $9.3 million on September
30, 2005 to $2.0 million on June 30, 2006.  The decrease was a result of using cash to fund loan
growth in the period.

***Loans Receivable.*****Loans increased by $29.2 million, or 13.4%, from $218.7 million as of
September 30, 2005 to $247.9 million as of June 30, 2006.  At June 30, 2006, the loan portfolio
was comprised of $158.1 million of loans secured by real estate, or 63.8% of total loans, $89.8
million of consumer loans, or 36.2% of total loans, and commercial loans of $47,000, less than 1%
of total loans.

At September 30, 2005, the loan portfolio mix included real estate loans of $144.5 million or
66.1% of total loans, consumer loans of $74.2 million or 33.9% of total loans and commercial
loans of $75,000, less than 1% of total loans. As noted above, a contributing factor to the loans
receivable increase was the loan production at the Mankato and Oakdale, Minnesota branches.  At
June 30, 2006 loans receivable in portfolio generated from our Mankato and Oakdale branches
totaled $18.0 million and $18.4 million respectively, compared to $11.2 million at Mankato and
$11.6 million at Oakdale as of September 30, 2005.

***Allowance for Loan Losses.*****The following table is an analysis of the activity in the allowance for
loan losses for the three-and nine-month periods ended June 30, 2006 and June 30, 2005.

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|                     | Three months ended | Nine months ended
|-------------------- | ------------------ | -----------------
|                     | June 30, 2006      | June 30, 2005    
|Balance at Beginning | $807,766           | $641,343         

***Office Properties and Equipment.*****Total investment in office properties and equipment was $2.9
million on September 30, 2005, and $3.6 million on June 30, 2006, an increase of $700,000 or 24.1%.
The increase came primarily from the purchase of computer equipment and software totaling
$800,000.  On September 9, 2005, the Company entered into a series of purchase agreements and
software user agreements with Information Technology, Inc. for computer equipment and software.
The purchase was completed in March of 2006.

*********Deposits.*****Deposits as of June 30, 2006 were $188.7 million, compared to $177.5 million as of
September 30, 2005, an increase of $11.3 million, or 6.4%. The majority of the deposit growth came
from the two Minnesota branch offices, as management sought the most cost-effective markets to
attract deposits.

***Borrowed Funds.*****Federal Home Loan Bank advances increased from $36.2 million on September
30, 2005 to $46.2 million on June 30, 2006, as the need to fund strong loan demand increased.

***Liquidity and Asset / Liability Management.*****The Company must maintain an adequate liquidity
position in order to respond to the short-term demand for funds caused by withdrawals from deposit
accounts, increased loan demand and extensions of credit and for payments of operating expenses.
Maintaining this position of adequate liquidity is accomplished through the management of a
combination of liquid assets; those which can be converted into cash and access to additional sources
of funds. Primarily, liquid assets of the Company are cash and cash equivalents, other interest bearing
deposits, investments held that are available for sale and maturing loans.  Advances from the Federal
Home Loan Bank system represent the Company's primary source of immediate additional liquidity,
and are maintained at a level necessary to fulfill needs.  Assets and liabilities are maintained to provide
the proper balance between liquidity, safety and profitability. This monitoring process is done on a
continuing basis. The Company manages its interest rate sensitive assets and liabilities on a regular
basis to lessen the impact of interest rate changes. As part of managing liquidity, the Company
monitors its maturing deposits and loans, loan to deposit ratio, competitors' rates and the cost of
borrowing funds versus the ability to attract deposits.  The Company manages its rate sensitivity
position to avoid wide swings in margins and to minimize risk. The Company's management believes
its liquidity sources are adequate to meet its operating needs. The Company's earnings were negatively
impacted by the flat yield curve during the three-and nine-month periods ended June 30, 2006.  The
flat yield curve contributed to a reduction in interest spread as interest rates on deposits continued to
rise at a faster rate than interest rates on loans.

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***Off-Balance Sheet Liabilities***.  The Company has financial instruments with off-balance sheet risk.
These instruments include unused commitments for credit cards, lines of credit, overdraft protection
and home equity lines of credit, as well as commitments to extend credit.  As of June 30, 2006, the
Company has $8.5 million in unused commitments compared to $8.1 million in unused commitments
as of September 30, 2005.

***Capital Resources.***Capital ratios applicable to the Bank as of June 30, 2006 and September 30,
2005 were as follows:

|Capital Ratios                           
|-----------------------------------------
|                                         
|                                         
|As of June 30, 2006 (Unaudited)          
|Total capital (to risk weighted assets)  
|Tier 1 capital (to risk weighted assets) 
|Tier 1 capital (to adjusted total assets)
|Tangible capital (to tangible assets)    
|As of September 30, 2005                 
|Total capital (to risk weighted assets)  
|Tier 1 capital (to risk weighted assets) 
|Tier 1 capital (to adjusted total assets)
|Tangible capital (to tangible assets)    

Management intends to maintain capital levels in the well-capitalized category established by
regulatory authorities.  The Bank was categorized as "well-capitalized" under the regulatory
framework for capital adequacy as of June 30, 2006 and September 30, 2005.

**Results of Operations**

*Overview.*For the quarter ended June 30, 2006, the Company continued to see strong loan demand
with a leveling off of the rapid deposit growth from the first quarter of fiscal 2006, as management
utilized borrowed funds to help fund the loan demand.  Loan quality remained good with low
delinquency levels resulting in a lower provision for loan loss.  Interest rates on deposits continued
to increase at a slightly faster pace than the rates on loans, but this increase was less evident than
in the first six months of fiscal 2006. The Company incurred increased operating expenses during
the current periods, primarily associated with the two Michigan offices acquired July 1, 2005. The
Company anticipates continued strong loan growth and fee income that should help offset the
decline in rate spread going forward.

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***Net Income.***For the three months ended June 30, 2006, the Company reported net income of
$84,092, a decrease of 69.1%, compared to net income of $272,509 for the three months ended
June 30, 2005.  Net income was $333,686 for the nine months ended June 30, 2006, as compared
to net income of $856,499 for the same period in 2005.  The decrease for both periods was
primarily a result of income generated in the prior period from the January 12, 2005 merger of
PULSE-EFT and Discover Financial Services, and an increase in operating costs in the current
periods associated with the two Michigan offices acquired July 1, 2005, located in Rochester Hills
and Lake Orion.  The Company was a stockholder and member of PULSE-EFT.  As a result of the
merger, the Company received a total of $448,029 in pre-tax income in the second and third
quarters of fiscal 2005 from this one-time event.  Both net interest margin and interest spread
decreased from 4.31% and 4.28%, respectively, for the three months ended June 30, 2005 to
3.57% and 3.08% respectively, for the current three-month period; and net interest margin and
interest spread decreased from 4.53% and 4.10%, respectively, for the prior nine-month period to
3.72% and 3.28%, respectively, for the current nine-month period. The decrease in both net interest
margin and interest spread were a result of the increase in short-term interest rates and the flat
yield curve that existed during the periods.

***Total Interest Income.***Total interest income increased by $1.1 million for the three-month period
ended June 30, 2006, to $4.0 million from $2.9 million for the same period in 2005.  Total interest
income increased by $3.2 million for the nine-month period ended June 30, 2006, to $11.5 million
from $8.3 million for the nine-month period ended June 30, 2006. The increase for both periods
was a result of an increase in the average balance of loans receivable attributed to strong loan
demand.  The yield on loans receivable decreased in both periods, from 6.58% for the three-month
period ended June 30, 2005, to 6.54% for the three-month period ended June 30, 2006, and from
6.62% for the nine-month period ended June 30, 2005, to 6.49% for the nine-month period ended
June 30, 2006, reflecting the payments and payoffs on higher yielding loans being replaced by new
loans with lower interest rates, primarily early in the year.

***Total Interest Expense.***   Total interest expense increased $863,000 to $1.9 million for the quarter
ended June 30, 2006 from $1.0 million for the quarter ended June 30, 2005.  Total interest expense
increased $2.3 million to $5.0 million for the nine-month period ended June 30, 2006, compared to
$2.7 million for the prior nine-month period.  The increase for both periods was a result of an
increase in the average balance of deposits and FHLB advances, and an increase in the average rate
paid on both deposits and FHLB advances.  The average cost of interest-bearing liabilities
increased from 2.62% for the quarter ended June 30, 2005 to 3.52% for the quarter ended June 30,
2006.  The average cost of interest-bearing liabilities increased from 2.35% for the nine-month
period ended June 30, 2005 to 3.23% for the current nine-month period.

***Net Interest Income.***Net interest income before provision for loan losses increased by $232,433
for the three-month period ended June 30, 2006, to $2.1 million compared to $1.9 million for the
same period in 2005.  Net interest income increased by $867,499 for the nine-month period ended
June 30, 2006, from $5.6 million to $6.5 million.  The increase in net interest income for both
periods was due to an increase in the average balance of loans receivable, partially offset by a
decrease in average loan yield and an increase in interest expense due to an increase in the average
balance of deposits and FHLB advances and an increase in the average rate paid on interest-bearing liabilities.

15

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***Provision for Loan Losses.***We establish the provision for loan losses, which is charged to
operations, at a level management believes will adjust the allowance for loan losses to reflect
probable incurred credit losses in the loan portfolio.  In evaluating the level of the allowance for
loan losses, management considers the types of loans and the amount of loans in the loan portfolio,
historical loss experience, adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral, and prevailing economic conditions.  Based on our
evaluation of these factors, we made provisions of $62,620 and $103,200 for the three months
ended June 30, 2006 and June 30, 2005, respectively.  For the nine-month period ended June 30,
2006, we made provisions of $171,071 compared to provisions of $305,366 for the prior nine-month period even though non-performing assets increased to approximately $1,169,000 at June
30, 2006, as compared to $701,000 at September 30, 2005. Non-performing assets were .44% of
total assets as of June 30, 2006 as compared to 0.29% of total assets as of September 30, 2005.
The primary cause of the increase in non-performing assets was a result of two borrowers
defaulting on 1-4 family mortgage loans, and the subsequent foreclosure action that resulted in
both properties becoming real estate owned during the period ending June 30, 2006.  The
properties are valued at $376,000 and minimal loss is anticipated.  This evaluation is inherently
subjective, as it requires estimates that are susceptible to significant revision as more information
becomes available, or as future events change*.*  We used the same methodology and generally
similar assumptions in assessing the loan allowance for both periods.

The level of the allowance is based on estimates and the ultimate losses may vary from the
estimates. Management assesses the allowance for loan losses on a monthly basis and makes
provisions for loan losses as necessary in order to maintain the allowance.  While management uses
available information to recognize losses on loans, future loan loss provisions may be necessary
based on changes in economic conditions or changes in individual account conditions.  In addition,
various regulatory agencies, as an integral part in their examination process, periodically review
the allowance for loan losses and may require us to recognize additional provisions based on their
judgment of information available to them at the time of their examination.

***Non-Interest Income*.**Non-interest income increased to $472,821 for the period ended June 30,
2006, compared to $422,933 for the same period in 2005.  For the nine-month period ended June
30, 2006, non-interest income decreased to $1,343,012 from $1,531,433 for the nine-month period
ended June 30, 2005. Insurance income and loan fees increased for both periods.  The decrease in
non-interest income for the nine-month period ending June 30, 2006 came primarily as a result of
non-recurring income generated in the prior period from the January 12, 2005 merger of PULSE-EFT and Discover Financial Services, for which the Company received a total of $448,029 in the
second and third quarters of fiscal 2005.

***Non-Interest Expense.***Non-interest expense increased from $1.8 million to $2.4 million for the
three months ended June 30, 2006.  Non-interest expense increased from $5.5 million for the nine-month period ended June 30, 2005 to $7.1 million for the same period in 2006.  The increase was
due primarily to the additional operating costs associated with the two Michigan offices acquired
July 1, 2005, located in Rochester Hills and Lake Orion.  In addition, there were non-recurring
costs in the current nine-month period associated with the February 2006 computer conversion due
to considerable time and effort involved with the project.  The cost of overtime, training, travel
expenses, customer mailings and form replacement totaled approximately $50,000 during the
current nine-month period ended June 30, 2006.

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***Forward-Looking Statements.*****This report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended.  We intend such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained in the Private
Securities Reform Act of 1995, and are including this statement for purposes of these safe harbor
provisions.  "Forward-looking statements", which are based on certain assumptions and describe
future plans, strategies and expectations of Citizens Community Bancorp may be identified by the
use of words such as "believe," "expect," "anticipate," "should," "planned," "estimated," and
"potential".  Examples of forward-looking statements include, but are not limited to, estimates with
respect to our financial condition, results of operation and business that are subject to various
factors which could cause actual results to differ materially from these estimates and most other
statements that are not historical in nature.  These factors include, but are not limited to, general
and local economic conditions, changes in interest rates, deposit flows, demand for mortgage,
consumer and other loans, real estate values, competition, changes in accounting principles,
policies, or guidelines, changes in legislation or regulation, and other economic, competitive,
governmental, regulatory and technological factors affecting our operations, pricing, products and
services. These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements.  Further information
concerning Citizens Community Bancorp and its business, including additional factors that could
materially affect our financial results, is included in our filings with the Securities and Exchange
Commission.

ITEM 3.  CONTROLS AND PROCEDURES

An evaluation of the Company's disclosure controls and procedures (as defined in Section 13(a)-15(e) under the Securities Exchange Act of 1934 (the "Act") as of June 30, 2006 was carried out
under the supervision and with the participation of the Chief Executive Officer and Chief Financial
Officer and several other members of our senior management.  The Chief Executive Officer and
Chief Financial Officer concluded that as of June 30, 2006, the Company's disclosure controls and
procedures were effective in ensuring that the information required to be disclosed by the Company
in the reports the Company files or submits under the Act is (i) accumulated and communicated to
management (including the Chief Executive Officer and Chief Financial Officer) in a timely
manner, and (ii) recorded, processed, summarized and reported within the time periods specified in
the SEC's rules and forms.  There have been no changes in our internal controls over financial
reporting (as defined in Rule 13a-15(f) under the Act) that occurred during the quarter ended June
30, 2006 that have materially affected, or are reasonably likely to materially effect, our internal
controls over financial reporting.

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

17

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Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and annually
report on their systems of internal control over financial reporting.  In addition, our independent
accountants must report on management's evaluation.  We are in the process of evaluating,
documenting and testing our system of internal control over financial reporting to provide the basis
for our report that will, for the first time, be a required part of our annual report on Form 10-KSB
for the fiscal year ending September 30, 2007.  Due to the ongoing evaluation and testing of our
internal controls, there can be no assurance that if any control deficiencies are identified they will
be re-mediated before the end of the 2007 fiscal year, or that there may not be significant
deficiencies or material weaknesses that would be required to be reported.  In addition, we expect
the evaluation process and any required remediation, if applicable, to increase our accounting, legal
and other costs and divert management resources from core business operations.

**PART II - OTHER INFORMATION**

***Item 1.*   LEGAL PROCEEDINGS**

In the normal course of business, the Company occasionally becomes involved in various legal
proceedings.  In the opinion of management, any liability from such proceedings would not have a
material adverse effect on the business or financial condition of the Company.

***Item 2.*   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

The following table summarizes our share repurchase activity during the three months ended June 30,
2006.

|Period                                   | TotalNumber ofSharesPurchased | AveragePrice Paidper Share | Total Number ofShares Purchased asPart of PubliclyAnnounced Plans | Maximum Numberof Shares That MayYet be PurchasedUnder the Plan
|---------------------------------------- | ----------------------------- | -------------------------- | ----------------------------------------------------------------- | --------------------------------------------------------------
|                                        
|April 1, 2006 through
    April 30, 2006 | NA                            | NA                         | NA                                                                | NA                                                            
|May 1, 2006 through
    May 31, 2006     | NA                            | NA                         | NA                                                                | NA                                                            
|June 1, 2006 through
    June 30, 2006   | NA                            | NA                         | NA                                                                | NA                                                            
|                                         |                              
|Total                                    | NA                            | NA                         | NA                                                                | NA                                                            

***Item 3*.   DEFAULTS UPON SENIOR SECURITIES**

Not applicable.

***Item 4.*   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

Not applicable.

*Item 5.*   OTHER INFORMATION

Not applicable
Item 6.   EXHIBITS

| | (a) | Exhibits 
31.1    Rule 13a-15(e) Certification of the Company's President and Chief Executive Officer
31.2    Rule 13a-15(e) Certification of the Company's Chief Financial Officer
32.0    Certification
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|      |                 |  | CITIZENS COMMUNITY BANCORP
|----- | --------------- |  | --------------------------
|Date: | August 11, 2006 |  | By:                       
|Date: | August 11, 2006 |  | By:                       

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