CITIZENS COMMUNITY BANCORP (Form: 10KSB, Received: 12/29/2004 13:03:02)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10–KSB

[ X ]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended September 30, 2004 OR

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0–23406

CITIZENS COMMUNITY BANCORP

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

United States (State or other jurisdiction of incorporation or organization)		20–0663325 (I.R.S. Employer Identification No.)

2174 EastRidge Center, Eau Claire, Wisconsin (Address of principal executive offices)		54701 (Zip Code)

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

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

Securities registered pursuant to Section 12(g)of the Act:

Common Stock, par value $0.01 per share

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

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

            The registrant's revenues for the fiscal year ended September 30, 2004 were $11.0 million.

            As of December 16, 2004, there were issued and outstanding 3,041,750 shares of the registrant's common stock.   The aggregate market value of the voting stock held by non–affiliates of the registrant on this date, computed by reference to the average of the closing price of such stock, was $10.24 million, based on 677,846 shares.   (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

DOCUMENTS INCORPORATED BY REFERENCE

            Part II of Form 10–KSB– Annual Report to Stockholders for the fiscal year ended September 30, 2004.

            Part III of Form 10–KSB – Portions of the Proxy Statement for the 2005 Annual Meeting of Stockholders.

            Transitional Small Business Disclosure Format (check one)            Yes                  No   X

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PART I

Item 1.             Description of Business

General

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

            Citizens Community Bancorp ("Citizens Community Bancorp" or the "Company") is incorporated under Federal law to hold all of the stock of Citizens Community Federal. Citizens Community Bancorp is a unitary savings and loan holding company and is subject to regulation by the Office of Thrift Supervision.  Citizens Community Bancorp has no significant assets other than all of the outstanding shares of common stock of Citizens Community Federal, the net proceeds of the Reorganization it kept and its loan to the Citizens Community Bancorp Employee Stock Ownership Plan.

            At September 30, 2004, the Company had total assets of $162.0 million, total deposits of $128.0 million and stockholders' equity of $19.6 million.   The Company and the Bank are examined and regulated by the Office of Thrift Supervision, its primary federal regulator.   The Company and the Bank are also regulated by the FDIC.   The Bank is required to have certain reserves set by the Federal Reserve Board and is a member of the Federal Home Loan Bank of Chicago, which is one of the 12 regional banks in the Federal Home Loan Bank System.

Forward Looking Statements

            This document, including information incorporated by reference, contains forward–looking statements about the Company and its subsidiaries which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995.   These forward–looking statements include, without limitation, statements with respect to anticipated future operating and financial performance, growth opportunities, interest rates, cost savings and funding advantages expected or anticipated to be realized by management.   Words such as "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify these forward–looking statements.   Forward–looking statements by the Company and its management are based on beliefs, plans, objectives, goals, expectations, anticipations, estimates and the intentions of management and are not guarantees of future performance.   The Company disclaims any obligation to update or revise any forward–looking statements based on the occurrence of future events, the receipt of new information, or otherwise. The important factors we discuss below, as well as other factors discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and identified in our filings with the SEC and those presented elsewhere by our management from time to time, could cause actual results to differ materially from those indicated by the forward–looking statements made in this document:

	•	the strength of the United States economy in general and the strength of the local economies in which we conduct operations;

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

	•	inflation, interest rate, market and monetary fluctuations;

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

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

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

	•	the impact of technological changes;

	•	acquisitions;

	•	changes in consumer spending and saving habits; and

	•	our success at managing the risks involved in the foregoing.

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

Market Area

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

            The local economy is historically based on manufacturing, but has moved to a more service–oriented economy in the last four decades.   Median household income and per capita income for our market area are below the state and national averages, reflecting the lack of urban nature of the market and availability of high paying white collar and technical jobs.   As of September 2004, our market area reported an unemployment rate of 4.8%, as compared to the national average of 5.4%.  Major employers in our market area include Chippewa Valley Technical College, Consumers Co–op Association, University of Wisconsin – Eau Claire and Taylor Corporation.

Competition

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

            The Bank attracts deposits through its branch office system.   Competition for those deposits is principally from other savings institutions, commercial banks and credit unions located in the same community, as well as mutual funds and other alternative investments.   The Bank competes for these deposits by offering superior service and a variety of deposit accounts at competitive rates.   Based on branch deposit data provided by the FDIC at September 30, 2004, the Bank's share of deposits was approximately 8.05% in Eau Claire County and less than 1.1% in all other market area counties.

Selected Consolidated Financial Information

            This information is incorporated by reference from pages 2 and 3 of the 2004 Annual Report to Stockholders attached hereto as Exhibit 13 ("Annual Report").

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Yields Earned and Rates Paid

            This information contained under the section captioned "Average Balance, Net Interest Income, Yield Earned and Rates Paid" is incorporated herein by reference from page 10 of the Annual Report.

Rate/Volume Analysis

            This information is incorporated by reference from page 11 of the Annual Report.

Average Balance, Interest and Average Yields and Rates

            This information contained under the section captioned "Average Balance, Net Interest Income, Yield Earned and Rates Paid" is incorporated herein by reference from page 10 of the Annual Report.

Lending Activities

             General.    The Bank's first mortgage loans carry a fixed rate of interest.   First mortgage loans generally are long–term and amortize on a monthly basis with principal and interest due each month.   A majority of the Bank's first mortgage loans also contain a payable on demand clause, which allows the Bank to call the loan due after a stated period, usually between two and five years from origination.  The Bank also has home equity loans in its portfolio, which have an interest rate that adjusts based on the prime rate.  At September 30, 2004, the net loan portfolio totaled $152.4 million, which constituted 94.1% of total assets.

            Mortgage loans up to $200,000 and consumer loans may be approved at various levels by loan officers and senior management.   The President may approve loans up to $2.2 million.   Loans outside our general underwriting guidelines must be approved by the board of directors.

            At September 30, 2004, the maximum amount which the Bank could have loaned to any one borrower and the borrower's related entities was approximately $2.2million.   The largest lending relationship to a single borrower or a group of related borrowers consisted of two loans to a single borrower with a total balance of $466,000. The loans were current as of September 30, 2004.

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Loan Portfolio Composition. The following table presents information concerning the composition of the Bank's loan portfolio in dollar amounts and in percentages (before deductions for loans in process, deferred fees and discounts and allowances for losses) as of the dates indicated.

			At September 30,
			2004		2003		2002		2001		2000
			Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent
			(Dollars in Thousands)
Real Estate Loans :
	First mortgages		$ 89,841	58.8%	$ 71,108	57.5%	$ 54,505	52.2%	$43,026	45.8%	$40,061	43.9%
	Second mortgages		5,398	3.5	4,661	3.8	5,687	5.4	1,638	1.7	1,780	2.0
	Multi–family and commercial		321	0.2	239	0.3	147	0.1	–––	–––	–––	–––
		Total real estate loans	95,560	62.5	76,008	61.6	60,339	57.7	44,664	47.5	41,841	45.9

Consumer Loans :
	Automobile		25,808	16.9	26,905	21.7	29,882	28.6	26,403	28.1	25,606	28.0
	Secured personal loans		27,607	18.0	17,028	13.8	10,615	10.2	18,738	20.0	19,298	21.1
	Unsecured personal loans		3,955	2.6	3,633	2.9	3,604	3.5	4,119	4.4	4,523	5.0
		Total consumer loans	57,370	37.5	47,566	38.4	44,101	42.3	49,260	52.5	49,427	54.1

Total loans			152,930	100.0%	123,574	100.0%	104,440	100.0%	93,924	100.0%	91,268	100.0%

Less :
	Allowance for loan losses		554		467		349		306		333

	Total loans receivable, net		$152,376		$123,107		$104,091		$93,618		$90,935

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The following table shows the composition of the Bank's loan portfolio by fixed– and adjustable–rate at the dates indicated.

				At September 30,
				2004		2003		2002		2001		2000
				Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent
				(Dollars in Thousands)
Fixed Rate Loans
	Real estate
		First mortgages ⁽¹⁾		$ 89.841	58.8%	$ 71,108	57.5%	$ 54,505	52.2%	$43,026	45.8%	$40,061	43.9%
		Second mortgages		4,772	3.1	4,099	3.3	5,303	5.1	1,148	1.2	1,304	1.4
		Multi–family and commercial		321	0.2	239	0.3	147	0.1	––	––	––	––
			Total real estate loans	94,934	62.1	75,446	61.1	59,955	57.4	44,174	47.0	41,365	45.3

	Consumer loans			57,370	37.5	47,566	38.5	44,101	42.2	49,260	52.5	49,427	54.2

			Total fixed rate loans	152,304	99.6	123,012	99.6	104,056	99.6	93,434	99.5	90,792	99.5

Adjustable Rate Loans
	Real estate
		First mortgages		––	––	––	––	––	––	––	––	––	––
		Second mortgages		626	0.4	562	0.4	384	0.4	490	0.5	476	0.5
		Multi–family and commercial		––	––	––	––	––	––	––	––	––	––
			Total real estate loans	626	0.4	562	0.4	384	0.4	490	0.5	476	0.5

	Consumer			––	––	––	––	––	––	––	––	––	––

			Total adjustable rate loans	626	0.4	562	0.4	384	0.4	490	0.5	476	0.5

	Total loans			152,930	100.0%	123,574	100.0%	104,440	100.0%	93,924	100.0%	91,268	100.0%

Less :
	Allowance for loan losses			554		467		349		306		333

	Total loans receivable, net			$152,376		$123,107		$104,091		$93,618		$ 90,935

__________________________________
(1) Includes $81.6 million in 2004, $66.4 million in 2003, $51.2 million in 2002, $47.3 million in 2001 and $39.3 million in 2000 of loans with a payable on demand clause.

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The following schedule illustrates the contractual maturity of the Bank's loan portfolio at September 30, 2004. Mortgages which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. The schedule does not reflect the effects of possible prepayments or enforcement of due–on–demand clauses.

	Real Estate						Consumer
	First Mortgage ⁽¹⁾		Second Mortgage		Multi–Family and Commercial		Automobile		Secured Personal		Unsecured Personal		Total
	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate	Amount	Weighted Average Rate
	(Dollars in Thousands)
Due During Years Ending September 30,

2005 ⁽²⁾	$ 40	7.90%	$ 364	6.56%	$ 63	5.75%	$ 128	8.60%	$ 523	4.45%	$2,195	12.60%	$ 3,313	10.31%
2006	3	6.19	–––	–––	14	7.94	754	8.37	430	6.70	485	9.44	1,686	8.24
2007	12	5.99	50	8.30	–––	–––	2,126	8.30	945	7.66	294	9.11	3,427	8.18
2008 – 2009	537	6.18	716	7.59	–––	–––	17,453	7.88	9,103	7.68	952	8.98	28,761	7.81
2010 – 2011	380	5.92	319	8.20	–––	–––	5,275	7.29	5,841	7.17	23	7.60	11,838	7.21
2012 – 2026	40,720	6.09	3,949	7.80	103	6.66	72	7.98	10,765	7.10	6	–––	55,615	6.41
2027 and after	48,149	6.42	–––	–––	141	7.25	–––	–––	–––	–––	–––	–––	48,290	6.42

	$89,841	6.27	$ 5,398	7.72	$ 321	6.80	$25,808	7.81	$27,607	7.27	$ 3,955	11.03	$152,930	6.88

⁽¹⁾    Includes $81.6 million of loans with a payable on demand clause.
⁽²⁾    Includes home equity lines of credit, credit card loans, loans having no stated maturity and overdraft loans.

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            The total amount of loans due after September 30, 2005 which have predetermined interest rates is $150 million, while the total amount of loans due after such date which have floating or adjustable interest rates is $0.

             First Mortgage Lending.    The Bank focuses its lending efforts primarily on the origination of loans secured by first mortgages on owner–occupied, one– to four–family residences in our market area.   At September 30, 2004, one– to four–family residential mortgage loans totaled $89.8 million, or 58.7% of the gross loan portfolio.

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

            The Bank currently originates most of its one– to four–family mortgage loans on a fixed–rate basis.   The Bank's pricing strategy for mortgage loans includes setting interest rates that are consistent with customer demands and the Bank's internal needs.   Our one– to four–family loans are not assumable.   Most mortgage loans include a payable on demand clause, which allows the loan to be called at any time after the demand date.   The demand date is set based on the loan to value ratio and other underwriting criteria, and is usually two to five years from the date of origination.   During the year ended September 30, 2004, the Bank originated $43.6 million of one– to four–family loans which included the payable on demand clause.   Fixed–rate loans secured by one– to four–family residences have contractual maturities of up to 30 years, and are generally fully amortizing, with payments due monthly.

             Second Mortgage Lending.    The Bank also offers second mortgage loans and home equity lines of credit.    Home equity lines of credit totaled $626,000 and comprised 0.4% of the gross loan portfolio at September 30, 2004.   These loans may be originated in amounts, together with the amount of the existing first mortgage, of up to 80% of the value of the property securing the loan.   A loan may go over 80% of the value of the property securing the loan if the Bank holds the first mortgage.   Home equity lines of credit are originated with an adjustable rate of interest, based on the prime rate of interest plus a margin, fixed for the first year and adjustable monthly thereafter.   Home equity lines of credit have up to a 10 year draw period and require the payment of 1.5% of the outstanding loan balance per month during the draw period, which amount may be reborrowed at any time during the draw period.   Once the draw period has lapsed, the payment is fixed based on the loan balance at that time.   At September 30, 2004, unfunded commitments on these lines of credit totaled $554,000.

            The Bank also offers second mortgage loans with a fixed rate of interest.   These loans may be amortized up to 15 years with a balloon payment at three, five or 10 years.   At September 30, 2004, fixed–rate second mortgage loans totaled $4.8 million, or 3.1% of the gross loan portfolio.

             Multi–family and Commercial Real Estate Lending.    As part of the acquisition of the Chippewa Falls branch on November 1, 2002, the Bank obtained a nominal amount of multi–family and commercial real estate loans.  Currently, the Bank has no plans to originate any new commercial or multi–family loans, but may consider doing so in future. At September 30, 2004, multi–family and commercial real estate loans totaled $321,000, or 0.2% of the loan portfolio.

            The Bank does not generally maintain an insurance escrow account for loans secured by multi–family and commercial real estate, although it may maintain a tax escrow account for these loans. In order to monitor the adequacy of cash flows on income–producing properties, the borrower is requested or required to provide periodic financial information.

            Loans secured by multi–family and commercial real estate properties are generally larger and involve a greater degree of credit risk than one– to four–family residential mortgage loans.  These loans typically involve larger balances to single borrowers or groups of related borrowers.  Because payments on loans secured by multi–family and commercial real estate properties are often dependent on the successful operation or management of the properties, repayment of such loans may be subject to adverse conditions in the real estate market or the economy.  If the cash flow from the project is reduced, or if leases are not obtained or renewed, the borrower's ability to repay the loan may be impaired.

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             Consumer Lending .   Consumer loans generally have shorter terms to maturity, which reduces the Bank's exposure to changes in interest rates, and carry higher rates of interest than do one– to four–family residential mortgage loans.   In addition, management believes that offering consumer loan products helps to expand and create stronger ties to our existing customer base by increasing the number of customer relationships and providing cross–marketing opportunities.   At September 30, 2004, consumer and other loans totaled $57.4 million, or 37.5% of the gross loan portfolio.   The Bank offers a variety of secured consumer loans, including new and used auto loans, boat and recreational vehicle loans, and loans secured by savings deposits, and also offers a limited amount of unsecured loans.   The Bank originates consumer and other loans primarily in its market areas.

            Auto loans totaled $25.8 million at September 30, 2004, or 16.9% of gross loans.   Auto loans may be written for up to five years for a new car and four years for a used car with fixed rates of interest.   Loan–to–value ratios are up to 100% of the sales price for new autos and 100% of the retail value on used autos, based on a valuation from official used car guides.   In addition, the Bank may, on occasion, originate auto secured loans in excess of 100% loan–to–value ratio based upon the credit quality of the borrower.

            Auto loans may also be originated through the Bank's indirect lending program.   Indirect auto loans are made using the same underwriting guidelines as auto loans originated directly by the Bank.

            The Bank also originates secured loans on an indirect basis through One Source, an indirect dealer program.   These secured consumer loans consist of loans for a wide variety of products, including automobiles, recreational vehicles, pianos, all terrain vehicles, televisions and sewing machines.   One Source is currently comprised of 200 active dealers with businesses located throughout the Bank's market area.   In some instances, the participating dealer may receive a premium rate for the amount over the Bank's initial interest rate.   The loans are generally originated with terms from 30 to 36 months and carry fixed rates of interest.   The Bank follows its internal underwriting guidelines in evaluating loans obtained through One Source including credit scoring to approve loans.   At September 30, 2004, the indirect lending portfolio totaled $23.6 million.

            The Bank also originates unsecured consumer loans consisting primarily of credit card loans totaling $886,000 at September 30, 2004, overdraft protection loans totaling $556,000 at September 30, 2004 and loans made through the Freedom Loan program.   The Freedom Loan program offers unsecured loans to consumers with a fixed rate of interest for a maximum term of 48 months for amounts not to exceed $20,000 per individual. At September 30, 2004, loans originated through the Freedom Loan program totaled $2.1 million.

            Consumer and other loans may entail greater risk than do one– to four–family residential mortgage loans, particularly in the case of consumer loans which are secured by rapidly depreciable assets, such as automobiles and recreational vehicles.   In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance.   As a result, consumer loan collections are dependent on the borrower's continuing financial stability and, thus, are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

Loan Originations and Repayments

            The Bank originates loans through marketing efforts and our existing and walk–in customers.   The ability to originate loans is dependent upon customer demand for loans in the Bank's market areas.   Demand is affected by competition and the interest rate environment.   Since becoming a savings bank, the Bank has significantly increased its origination of residential real estate loans.   During the past few years, the Bank, like many other financial institutions, has experienced significant prepayments on loans due to the low interest rate environment prevailing in the United States.   In periods of economic uncertainty, the ability of financial institutions, including the Bank, to originate or purchase large dollar volumes of real estate loans may be substantially reduced or restricted, with a resultant decrease in interest income.

            Since the Bank has not purchased or sold any loans, the Bank does not service any loans other then those the Bank originates.

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

			Year Ended September 30,
			2004	2003	2002
				(In Thousands)
Originations by type :
	Real estate ⁽¹⁾		$43,604	$48,369	$36,530
	Non–real estate – consumer		46,044	38,995	35,271
		Total loans originated	89,648	87,364	71,801

Repayments :
	Principal repayments		60,292	68,129	61,110
	Loans transferred to other real estate		–––	101	175
		Net increase (decrease)	$29,356	$19,134	$10,516

__________________________________
(1)	Real estate loans include loans with a payable on demand feature of $35.0 million in 2004, $42.2 million in 2003 and $31.7 million in 2002. Real estate loans also include home equity lines of credit of $203,000 in 2004, $163,000 in 2003 and $0 in 2002.

Asset Quality

             Procedures.    When a borrower fails to make a payment on a mortgage loan on or before the due date, a late notice is mailed five days after the due date.   When the loan is 10 days past due, a loan officer will begin contacting the borrower by phone.   This process will continue until satisfactory payment arrangements have been made.   If the loan becomes two payments and ten days past due, a notice of right–to–cure default is sent.   If the loan becomes over 90 days delinquent, a drive–by inspection is done while further attempts to contact the borrower by phone are made.   After the loan is 120 days past due, and acceptable arrangements have not been made, the Bank will generally refer the loan to legal counsel, with instructions to prepare a notice of intent to foreclose.   This notice allows the borrower up to 30 days to bring the loan current.   During this 30 day period, the Bank will still attempt to contact the borrower to implement satisfactory payment arrangements.   If the loan becomes 150 days past due and satisfactory arrangements have not been made, foreclosure will be instituted.

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

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

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

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

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Delinquent Loans. The following table sets forth our loan delinquencies by type, number and amount at September 30, 2004.

	Loans Delinquent For:
	60–89 Days		90 Days and Over		Total Delinquent Loans
	Number	Amount	Number	Amount	Number	Amount
	(Dollars in Thousands)

Real estate	2	$140	7	$300	9	$ 440

Consumer ⁽¹⁾	98	244	96	402	194	646

Total	100	$384	103	$702	203	$1,086
__________ (1) Includes credit card accounts.

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

	At September 30,
	2004	2003	2002	2001	2000
	(Dollars in Thousands)

Non–accruing loans:
One– to four–family	$ 300	$ 162	$ 51	$ ––	$ ––
Consumer ⁽¹⁾	397	400	483	404	396
Total	697	562	534	404	396

Foreclosed assets:
One– to four–family	––	––	73	––	––
Consumer	––	––	––	––	––
Total	––	––	73	––	––

Total non–performing assets	$ 697	$ 562	$ 607	$ 404	$ 396
Total as a percentage of total assets	0.43%	0.43%	0.53%	0.37%	0.40%
__________ (1) Includes credit card accounts.

For the years ended September 30, 2004 and 2003, gross interest income which would have been recorded had the non–accruing loans been current in accordance with their original terms amounted to $38,000 and $21,000, respectively. No amount was included in interest income on these loans for these periods.

Other Loans of Concern. In addition to the non–performing assets set forth in the table above, as of September 30, 2004, there was also an aggregate of $311,000 of loans with respect to which known information about the possible credit problems of the borrowers have caused management to have doubts as to the ability of the borrowers to comply with present loan repayment terms and which may result in the future inclusion of such items in the non–performing asset categories. These loans are not considered "classified" due to their delinquency status; however, they are identified as "watch" loans. They are not reserved for in the allowance for loan losses other than as part of the inherent portion. These loans have been considered in management's determination of the adequacy of our allowance for loan losses.

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

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

            In connection with the filing of our periodic reports with the Office of Thrift Supervision and in accordance with our classification of assets policy, we regularly review the problem assets in our portfolio to determine whether any assets require classification in accordance with applicable regulations.   On the basis of management's review of our assets, at September 30, 2004, the Bank had classified $568,000 of the loans in its portfolio as substandard, all of which was included in non–performing assets, $0 as doubtful and $0 as loss.   The total amount classified represented 2.9% of the Company's equity capital and 0.4% of assets at September 30, 2004.

             Provision for Loan Losses .   The Bank recorded a provision for loan losses for the year ended September 30, 2004 of $396,000, compared to $406,000 for the year ended September 30, 2003.   The provision for loan losses is charged to income to bring the allowance for loan losses to reflect probable incurred losses based on the factors discussed below under "Allowance for Loan Losses."   The provision for loan losses for the year ended September 30, 2004 was based on management's review of such factors which indicated that the allowance for loan losses reflected probable incurred losses in the loan portfolio as of the year ended September 30, 2004.

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

            At September 30, 2004, the allowance for loan losses was $554,000 or 0.36% of the total loan portfolio.   Assessing the allowance for loan losses is inherently subjective as it requires making material estimates, including the amount and timing of future cash flows expected to be received on impaired loans, that may be susceptible to significant change.   In the opinion of management, the allowance, when taken as a whole, reflects estimated probable loan losses in our loan portfolios.

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

	Year Ended September 30,
	2004	2003	2002	2001	2000
	(Dollars in Thousands)

Balance at beginning of period	$ 467	$ 349	$ 306	$ 333	$ 269

Charge–offs:
One– to four–family	–––	(16)	(2)	(13)	––
Consumer	(342)	(297)	(340)	(266)	(178)
Total charge–offs	(342)	(313)	(342)	(279)	(178)

Recoveries:
Consumer	33	25	10	22	40
Total recoveries	33	25	10	22	40

Net charge–offs	(309)	(288)	(332)	(257)	(138)
Other – obtained through acquisition	––	––	––	––	––
Additions charged to operations	396	406	375	230	202
Balance at end of period	$ 554	$ 467	$ 349	$ 306	$ 333

Ratio of allowance for loan losses to net loans outstanding at end of period	0.36%	0.38%	0.34%	0.33%	0.37%

Ratio of net charge–offs during the period to average loans outstanding during the period	0.22%	0.25%	0.33%	0.27%	0.16%

Ratio of net charge–offs during the period to average non–performing assets	49.05%	49.23%	65.61%	64.25%	35.48%

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

	At September 30,
	2004			2003			2002			2001			2000
	Amount of Loan Loss Allow– ance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans	Amount of Loan Loss Allow– ance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans	Amount of Loan Loss Allow– ance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans	Amount of Loan Loss Allow– ance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans	Amount of Loan Loss Allow– ance	Loan Amounts by Category	Percent of Loans in Each Category to Total Loans
	(Dollars in Thousands)

Real estate	$ 61	$ 95,560	62%	$ 9	$ 75,769	61%	$ 4	$ 60,192	58%	$ 4	$44,664	48%	$ 1	$41,841	46%
Consumer	490	57,370	38	433	47,805	39	340	44,248	42	293	49,260	52	309	49,427	54
Unallocated	3	––	––	25	––	––	5	––	––	9	––	––	23	––	––
Total	$554	$152,930	100%	$ 467	$123,574	100%	$349	$104,440	100%	$306	$93,924	100%	$333	$91,268	100%

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Investment Activities

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

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

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

            Our investment securities have historically consisted solely of certificates of deposit of insured savings institutions.   At September 30, 2004, we had no investment securities, except FHLB stock.

            The following table sets forth the composition of the Bank's investment securities and interest–bearing deposits at the dates indicated.

	At September 30,
	2004		2003		2002
	Book Value	% of Total	Book Value	% of Total	Book Value	% of Total
	(Dollars in Thousands)

Investment securities:
FHLB stock	$828	100.00%	$671	100.00%	$ 553	100.00%

Interest–bearing deposits with banks	$ ––	––%	$ ––	––%	$1,485	100.00%

Sources of Funds

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

             Deposits .    The Bank offers a variety of deposit accounts to both consumers and businesses having a wide range of interest rates and terms.   Deposits consist of savings accounts, money market deposit accounts and demand accounts and certificates of deposit.   The Bank solicits deposits primarily in its market areas and from financial institutions and has accepted a limited amount of brokered deposits.   At September 30, 2004, the Bank had $3.8 million of brokered deposits.   The Bank primarily relies on competitive pricing policies, marketing and customer service to attract and retain these deposits. The Bank from time to time participates in an auction for brokered deposits to assist in finding the lowest cost deposits possible. The Bank constantly searches for the most cost–effective source of funds, either through brokered deposits, or through marketing our own rates to protect our margin and maintain our sales culture.

            The flow of deposits is influenced significantly by general economic conditions, changes in money market and prevailing interest rates and competition.   The variety of deposit accounts we offer has allowed us to be competitive in obtaining funds and to respond with flexibility to changes in consumer demand.   We have become more susceptible

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to short–term fluctuations in deposit flows, as customers have become more interest rate conscious. We try to manage the pricing of our deposits in keeping with our asset/liability management, liquidity and profitability objectives, subject to competitive factors. Based on experience, management believes that the Bank's deposits are relatively stable sources of funds. Despite this stability, the ability to attract and maintain these deposits and the rates paid on them has been and will continue to be significantly affected by market conditions.

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

	Year Ended September 30,
	2004	2003	2002
	(Dollars in Thousands)

Opening balance	$114,963	$104,429	$ 98,128
Net deposits	10,208	7,358	2,442
Interest credited	2,805	3,176	3,859

Ending balance	$127,976	$114,963	$104,429

Net increase (decrease)	$ 13,013	$ 10,534	$ 6,301

Percent increase (decrease)	11.3%	10.1%	6.4%

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

			At September 30,
			2004		2003		2002
			Amount	Percent of Total	Amount	Percent of Total	Amount	Percent of Total
			(Dollars in Thousands)
Transaction Accounts and Savings Deposits :

	Demand accounts		$ 11,447	8.94%	$ 10,559	9.19%	$ 9,373	8.97%
	Savings accounts		15,420	12.05	15,096	13.13	13,634	13.06
	Money market accounts		23,629	18.46	15,849	13.79	11,556	11.07

		Total non–certificates	50,496	39.46	41,504	36.11	34,563	33.10

Certificates :

	6–12 month CDs		17,274	13.50	19,204	16.70	20,932	20.05
	17–18 month CDs		12,294	9.61	9,588	8.34	9,880	9.46
	24–48 month CDs		31,021	24.24	31,980	27.82	27,362	26.20
	Anniversary CDs		553	0.43	1,452	1.26	1,168	1.12
	Institutional CDs		8,908	6.96	2,794	2.43	2,771	2.65
	Borrowers CDs		28	0.02	8	0.01	2	––
	IRA		7,402	5.78	8,433	7.33	7,751	7.42

		Total certificates	77,480	60.54	73,459	63.89	69,866	66.90

Total Deposits			$127,976	100.00%	$114,963	100.00%	$104,429	100.00%

The Bank has been able to attract funds with a money market rate considerably below CD rates. Money Market Accounts have been a good source of funds that historically support our core deposits and protect our margin.

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The following table shows rate and maturity information for the Bank's certificates of deposit at September 30, 2004.

	0.00– 1.99%	2.00– 3.99%	4.00– 5.99%	6.00– 7.99%	Total	Percent of Total
	(Dollars in Thousands)
Certificate accounts maturing during the years ended:

September 30, 2005	$13,576	$20,536	$2,912	$ 974	$37,998	49.0%
September 30, 2006	1,245	22,534	2,217	8	26,004	33.6
September 30, 2007	––	7,913	2,768	––	10,681	13.8
September 30, 2008	––	1,934	864	––	2,798	3.6
Thereafter	––	––	––	––	––	–––

Total	$14,821	$52,917	$8,761	$ 982	$77,481	100.0%

Percent of total	19.1%	68.3%	11.3%	1.3%

The following table indicates the amount of Citizens Community Federal's certificates of deposit by time remaining until maturity as of September 30, 2004.

	Maturity
	3 Months or Less	Over 3 to 6 Months	Over 6 to 12 Months	Over 12 months	Total
	(In thousands)

Certificates of deposit less than $100,000	$10,684	$7,923	$11,308	$31,020	$60,935

Certificates of deposit of $100,000 or more	3,316	1,613	3,153	8,464	16,546
Total certificates of deposit	$14,000	$9,536	$14,461	$39,484	$77,481

             Borrowings .    Although deposits are our primary source of funds, the Bank may utilize borrowings when they are a less costly source of funds and can be invested at a positive interest rate spread, when it desires additional capacity to fund loan demand or when they meet asset/liability management goals.   Borrowings consist of advances from the Federal Home Loan Bank of Chicago.  See Note 7 of the Notes to Consolidated Financial Statements.

            The Bank may obtain advances from the Federal Home Loan Bank of Chicago upon the security of certain of our mortgage loans.   These advances may be made pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call features.   At September 30, 2004, the Bank had $13.5 million in Federal Home Loan Bank advances outstanding and the ability to borrow an additional $39.5 million.

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

	Year Ended September 30,
	2004	2003	2002
	(In Thousands)
Maximum Balance :
FHLB advances	13,500	$3,700	$ ––

Average Balance :
FHLB advances	8,600	$ 386	$ ––

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

	At September 30,
	2004	2003	2002
	(Dollars in Thousands)

FHLB advances	$13,500	$3,700	$ ––

Total borrowings	$13,500	$3,700	$ ––

Weighted average interest rate of FHLB advances	1.54%	1.39%	––%

Subsidiary and Other Activities

            As a federally chartered savings bank, the Bank is permitted by Office of Thrift Supervision regulations to invest up to 2% of assets, or $3.2 million at September 30, 2004, in the stock of, or unsecured loans to, service corporation subsidiaries.   The Bank may invest an additional 1% of our assets in service corporations where such additional funds are used for inner–city or community development purposes.   The Bank does not currently have any subsidiary service corporations.

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

            Legislation is introduced from time to time in the United States Congress that may affect the operations of Citizens Community Bancorp and Citizens Community Federal.   In addition, the regulations governing Citizens Community Bancorp and Citizens Community Federal may be amended from time to time by the Office of Thrift Supervision.   Any such legislation or regulatory changes in the future could adversely affect Citizens Community Bancorp or Citizens Community Federal.   No assurance can be given as to whether or in what form any such changes may occur.

General

            Citizens Community Federal, as a federally chartered savings institution, is subject to federal regulation and oversight by the Office of Thrift Supervision extending to all aspects of its operations. Citizens Community Federal also is subject to regulation and examination by the FDIC, which insures the deposits of Citizens Community Federal to the maximum extent permitted by law, and requirements established by the Federal Reserve Board. Federally chartered savings institutions are required to file periodic reports with the Office of Thrift Supervision and are subject to periodic examinations by the Office of Thrift Supervision and the FDIC.   The investment and lending authority of savings institutions are prescribed by federal laws and regulations, and such institutions are prohibited from engaging in any activities not permitted by such laws and regulations. Such regulation and supervision primarily is intended for the protection of depositors and not for the purpose of protecting stockholders.   This regulatory oversight will continue to apply to Citizens Community Federal following the reorganization.

            The Office of Thrift Supervision regularly examines Citizens Community Federal and prepares reports for the consideration of Citizens Community Federal's board of directors on any deficiencies that it may find in Citizens Community Federal's operations. The FDIC also has the authority to examine Citizens Community Federal in its role as the administrator of the Savings Association Insurance Fund.   The Bank's relationship with its depositors and borrowers also is regulated to a great extent by both Federal and state laws, especially in such matters as the ownership of savings accounts and the form and content of our mortgage requirements.   Any change in such regulations, whether

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by the FDIC, the Office of Thrift Supervision or Congress, could have a material adverse impact on Citizens Community Bancorp and Citizens Community Federal and their operations.

Citizens Community Bancorp

            Pursuant to regulations of the Office of Thrift Supervision and the terms of Citizens Community Bancorp's charter, the purpose and powers of Citizens Community Bancorp are to pursue any or all of the lawful objectives of a thrift holding company and to exercise any of the powers accorded to a thrift holding company.

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

Citizens Community Federal

            The Office of Thrift Supervision has extensive authority over the operations of savings institutions.   As part of this authority, we are required to file periodic reports with the Office of Thrift Supervision and we are subject to periodic examinations by the Office of Thrift Supervision and the FDIC.   When these examinations are conducted by the Office of Thrift Supervision and the FDIC, the examiners may require Citizens Community Federal to provide for higher general or specific loan loss reserves.   All savings institutions are subject to a semi–annual assessment, based upon the savings institution's total assets, to fund the operations of the Office of Thrift Supervision.

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

            In addition, the investment, lending and branching authority of Citizens Community Federal is prescribed by federal laws and it is prohibited from engaging in any activities not permitted by such laws.   For instance, no savings institution may invest in non–investment grade corporate debt securities.   In addition, the permissible level of investment by federal institutions in loans secured by non–residential real property may not exceed 400% of total capital, except with approval of the Office of Thrift Supervision.   Federal savings institutions are also generally authorized to branch nationwide.   Citizens Community Federal is in compliance with the noted restrictions.   As part of converting to a thrift charter, and this reorganization, we have filed a business plan with the Office of Thrift Supervision.   We are required to provide quarterly variance reports and prior notice to the Office of Thrift Supervision for any business plan deviation.   We are also required to obtain an independent audit on an annual basis.

            Citizens Community Federal's general permissible lending limit for loans–to–one–borrower is equal to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus).   At September 30, 2004, Citizens Community Federal's lending limit under this restriction was $2.2 million.   Citizens Community Federal is in compliance with the loans–to–one–borrower limitation.

            Generally, OTS regulations limit consumer lending to 35% of total assets.   Citizens Community Federal has, however, requested and obtained a waiver of that limit, up to 37%, until December 2005.   Citizens Community Federal intends to comply with these lending limitations, and the waiver requirements, and does not expect this compliance to have a material adverse effect on its operations or earnings.

            The Office of Thrift Supervision, as well as the other federal banking agencies, has adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, asset quality,

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earnings standards, internal controls and audit systems, interest rate risk exposure and compensation and other employee benefits.   Any institution which fails to comply with these standards must submit a compliance plan.

Insurance of Accounts and Regulation by the FDIC

            Citizens Community Federal is a member of the Savings Association Insurance Fund, which is administered by the FDIC.   Deposits are insured up to the applicable limits by the FDIC and such insurance is backed by the full faith and credit of the United States Government.   As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC–insured institutions.   It also may prohibit any FDIC–insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the Savings Association Insurance Fund or the Bank Insurance Fund.   The FDIC also has the authority to initiate enforcement actions against savings institutions, after giving the Office of Thrift Supervision an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

Regulatory Capital Requirements

            Federally insured savings institutions, such as Citizens Community Federal, are required to maintain a minimum level of regulatory capital.   The Office of Thrift Supervision has established capital standards, including a tangible capital requirement, a leverage ratio or core capital requirement and a risk–based capital requirement applicable to such savings institutions.   These capital requirements must be generally as stringent as the comparable capital requirements for national banks.   The Office of Thrift Supervision is also authorized to impose capital requirements in excess of these standards on a case–by–case basis.

            The capital regulations require tangible capital of at least 1.5% of adjusted total assets, as defined by regulation.   Tangible capital generally includes common stockholders' equity and retained earnings, and certain noncumulative perpetual preferred stock and related earnings.   In addition, generally all intangible assets, other than a limited amount of purchased mortgage servicing rights, and certain other items, must be deducted from tangible capital for calculating compliance with the requirement.   At September 30, 2004, Citizens Community Federal had $348,000 of intangible assets which were subject to these tests.

            At September 30, 2004, Citizens Community Federal had tangible capital of $14.9 million, or 9.20% of adjusted total assets, which is approximately $12.4 million above the minimum requirement of 1.5% of adjusted total assets in effect on that date.

            The capital standards also require core capital equal to at least 3.0% of adjusted total assets.   Core capital generally consists of tangible capital plus certain intangible assets, including a limited amount of purchased credit card relationships.   As a result of the prompt corrective action provisions discussed below, however, a savings institution must maintain a core capital ratio of at least 4.0% to be considered adequately capitalized unless its supervisory condition is such as to allow it to maintain a 3.0% ratio.   As a result of converting to the thrift charter, Citizens Community Federal is also required to maintain core capital of 8.0% until December 2004.

            At September 30, 2004, Citizens Community Federal had core capital equal to $14.9 million, or 9.20% of adjusted total assets, which is $8.4 million above the minimum requirement of 4.0% in effect on that date.

            The Office of Thrift Supervision also requires savings institutions to have total capital of at least 8.0% of risk–weighted assets.   Total capital consists of core capital, as defined above, and supplementary capital.   Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as core capital and general valuation loan and lease loss allowances up to a maximum of 1.25% of risk–weighted assets.   Supplementary capital may be used to satisfy the risk–based requirement only to the extent of core capital.   The Office of Thrift Supervision is also authorized to require a savings institution to maintain an additional amount of total capital to account for concentration of credit risk and the risk of non–traditional activities. At September 30, 2004, Citizens Community Federal had $411,000 of general loan loss reserves, which was less than 1.25% of risk–weighted assets.

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            In determining the amount of risk–weighted assets, all assets, including certain off–balance sheet items, will be multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent in the type of asset.   For example, the Office of Thrift Supervision has assigned a risk weight of 50% for prudently underwritten permanent one– to four–family first lien mortgage loans not more than 90 days delinquent and having a loan–to–value ratio of not more than 80% at origination unless insured to such ratio by an insurer approved by Fannie Mae or Freddie Mac.

            On September 30, 2004, Citizens Community Federal had total risk–based capital of $15.3 million and risk–weighted assets of $109.4 million; or total capital of 13.97% of risk–weighted assets.   This amount was $6.5 million above the 8.0% requirement in effect on that date.

            The Office of Thrift Supervision and the FDIC are authorized and, under certain circumstances, required to take certain actions against savings institutions that fail to meet their capital requirements.  The Office of Thrift Supervision is generally required to take action to restrict the activities of an "undercapitalized institution," which is an institution with less than either a 4% core capital ratio, a 4% Tier 1 risked–based capital ratio or an 8.0% risk–based capital ratio.  Any such institution must submit a capital restoration plan and until such plan is approved by the Office of Thrift Supervision may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions.  The Office of Thrift Supervision is authorized to impose the additional restrictions.

            Any savings institution that fails to comply with its capital plan or has Tier 1 risk–based or core capital ratios of less than 3.0% or a risk–based capital ratio of less than 6.0% and is considered "significantly undercapitalized" must be made subject to one or more additional specified actions and operating restrictions which may cover all aspects of its operations and may include a forced merger or acquisition of the institution.   An institution that becomes "critically undercapitalized" because it has a tangible capital ratio of 2.0% or less is subject to further mandatory restrictions on its activities in addition to those applicable to significantly undercapitalized institutions.   In addition, the Office of Thrift Supervision must appoint a receiver, or conservator with the concurrence of the FDIC, for a savings institution, with certain limited exceptions, within 90 days after it becomes critically undercapitalized.   The OTS may take other action as it determines, with the concurrence of the FDIC, would better achieve its objective, after documenting why.   If the OTS determines to take action other than appointing a conservator or receiver, a redetermination must be made not later than the end of the 90–day period beginning on the date the original determination is made.   If a redetermination is not made, then a conservator or receiver will, notwithstanding the above and with certain exceptions, be appointed.   In general, the OTS will appoint a receiver if the institution is critically undercapitalized on average during the calendar quarter beginning 270 days after the date on which the institution became critically undercapitalized.

            The Office of Thrift Supervision is also generally authorized to reclassify an institution into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

            The imposition by the Office of Thrift Supervision or the FDIC of any of these measures on Citizens Community Federal may have a substantial adverse effect on its operations and profitability.   At September 30, 2004, Citizens Community Federal was considered a "well–capitalized" institution.

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The table below sets forth the Bank's capital position relative to its FDIC capital requirements at September 30, 2004. The definitions of the terms used in the table are those provided in the capital regulations issued by the FDIC.

	At September 30, 2004
	Amount	Percent of Adjusted Total Assets ⁽¹⁾
	(Dollars in Thousands)

Tier 1 (leverage) capital	$14,870	9.2%
Tier 1 (leverage) capital requirement	6,469	4.0
Excess	$ 8,401	5.2%

Tier 1 risk adjusted capital	$14,870	13.6%
Tier 1 risk adjusted capital requirement	4,374	4.0
Excess	$10,496	9.6%

Total risk–based capital	$15,281	14.0%
Total risk–based capital requirement	8,749	8.0
Excess	$ 6,532	6.0%
___________________________ ⁽¹⁾ For the Tier 1 (leverage) capital calculations, percent of total average assets of $161.7 million. For the Tier 1 risk–based capital and total risk–based capital calculations, percent of total risk–weighted assets of $109.4 million.

Limitations on Dividends and Other Capital Distributions

            Office of Thrift Supervision regulations impose various restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash–out mergers and other transactions charged to the capital account.

            Generally, savings institutions, such as Citizens Community Federal, that before and after the proposed distribution remain well–capitalized, may make capital distributions during any calendar year equal to up to 100% of net income for the year–to–date plus retained net income for the two preceding years.  However, an institution deemed to be in need of more than normal supervision by the Office of Thrift Supervision may have its dividend authority restricted by the Office of Thrift Supervision.  Citizens Community Federal may pay dividends in accordance with this general authority.

            Savings institutions proposing to make any capital distribution need not submit written notice to the Office of Thrift Supervision prior to such distribution unless they are a subsidiary of a holding company or would not remain well–capitalized following the distribution. Savings institutions that do not, or would not meet their current minimum capital requirements following a proposed capital distribution or propose to exceed these net income limitations must obtain Office of Thrift Supervision approval prior to making such distribution.  The Office of Thrift Supervision may object to the distribution during that 30–day period based on safety and soundness concerns.

            When Citizens Community Bancorp pays dividends to its stockholders, it is also required to pay dividends to Citizens Community MHC, unless Citizens Community MHC elects to waive the receipt of dividends.  Any decision to waive dividends is subject to regulatory approval. Under Office of Thrift Supervision regulations, public stockholders would not be diluted for any dividends waived by Citizens Community MHC in the event Citizens Community MHC converts to stock form.

            During the year, Citizens Community Bancorp announced its first quarterly dividend of five cents per share. The cash dividend was payable on August 17, 2004 to shareholders of record as of the close of business on August 3, 2004. This represented the first quarterly dividend paid by Citizens Community Bancorp since its mutual–to–stock conversion in March 2004.

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            Following a determination by the OTS, Citizens Community MHC waived its right to receive cash dividends declared by its subsidiary, Citizens Community Bancorp, for the four quarterly periods ending June 30, 2004, September 30, 2004, December 31, 2004 and March 31, 2005.

            Citizens Community Bancorp is not subject to Office of Thrift Supervision regulatory restrictions on the payment of dividends.   However, dividends from Citizens Community Bancorp may depend, in part, upon receipt of dividends from Citizens Community Federal because Citizens Community Bancorp initially will have no source of income other than dividends from Citizens Community Federal and earnings from the investment of the net proceeds from the offering retained by Citizens Community Bancorp.   Office of Thrift Supervision regulations limit distributions from Citizens Community Federal to Citizens Community Bancorp.   In addition, Citizens Community Federal may not make a distribution that would constitute a return of capital during the three–year term of the business plan submitted in connection with the reorganization.   No insured depositary institution may make a capital distribution if, after making the distribution, the institution would be undercapitalized.

Liquidity

            All savings institutions, including Citizens Community Federal, are required to maintain sufficient liquidity to ensure a safe and sound operation.

Qualified Thrift Lender Test

            All savings institutions, including Citizens Community Federal, are required to meet a qualified thrift lender test to avoid certain restrictions on their operations.   This test requires a savings institution to have at least 65% of its portfolio assets, as defined by regulation, in qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis.   As an alternative, the savings institution may maintain 60% of its assets in those assets specified in Section 7701(a)(19) of the Internal Revenue Code.   Under either test, such assets primarily consist of residential housing related loans and investments.   At September 30, 2004, Citizens Community Federal met the test at 83.0%, and has always met the test since its effectiveness.

            Any savings institution that fails to meet the qualified thrift lender test must convert to a national bank charter, unless it requalifies as a qualified thrift lender and thereafter remains a qualified thrift lender.   If an institution does not requalify and converts to a national bank charter, it must remain Savings Association Insurance Fund–insured until the FDIC permits it to transfer to the Bank Insurance Fund.   If such an institution has not yet requalified or converted to a national bank, its new investments and activities are limited to those permissible for both a savings institution and a national bank, and it is limited to national bank branching rights in its home state.   In addition, the institution is immediately ineligible to receive any new Federal Home Loan Bank borrowings and is subject to national bank limits for payment of dividends.   If such an institution has not requalified or converted to a national bank within three years after the failure, it must divest of all investments and cease all activities not permissible for a national bank.   In addition, it must repay promptly any outstanding Federal Home Loan Bank borrowings, which may result in prepayment penalties.   If any institution that fails the qualified thrift lender test is controlled by a holding company, then within one year after the failure, the holding company must register as a bank holding company and become subject to all restrictions on bank holding companies.

Community Reinvestment Act

            Under the Community Reinvestment Act, every FDIC–insured institution has a continuing and affirmative obligation consistent with safe and sound banking practices to help meet the credit needs of its entire community, including low and moderate income neighborhoods.   The Community Reinvestment Act does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the Community Reinvestment Act.   The Community Reinvestment Act requires the Office of Thrift Supervision, in connection with the examination of Citizens Community Federal, to assess the institution's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications, such as a merger or the establishment of a branch, by Citizens Community Federal.   An unsatisfactory rating may be used as the basis for the denial of an application by the Office of Thrift Supervision.   Due to the heightened attention being given to the

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Community Reinvestment Act in the past few years, Citizens Community Federal may be required to devote additional funds for investment and lending in its local community.   Citizens Community Federal received a "satisfactory" rating during its most recent CRA examination.

Transactions with Affiliates

            Generally, transactions between a savings institution or its subsidiaries and its affiliates are required to be on terms as favorable to the institution as transactions with non–affiliates.   In addition, certain of these transactions, such as loans to an affiliate, are restricted to a percentage of the institution's capital.   Affiliates of Citizens Community Federal include Citizens Community Bancorp and any company which is under common control with Citizens Community Federal.   In addition, a savings institution may not lend to any affiliate engaged in activities not permissible for a bank holding company or acquire the securities of most affiliates. The Office of Thrift Supervision has the discretion to treat subsidiaries of savings institutions as affiliates on a case by case basis.

            On April 1, 2003, the Federal Reserve's Regulation W, which comprehensively amends sections 23A and 23B, became effective.   The Federal Reserve Act and Regulation W are applicable to savings associations such as Citizens Community Federal.   The Regulation unifies and updates staff interpretations issued over the years, incorporates several new interpretative proposals (such as to clarify when transactions with an unrelated third party will be attributed to an affiliate), and addresses new issues arising as a result of the expanded scope of nonbanking activities engaged in by banks and bank holding companies in recent years and authorized for financial holding companies under the Gramm–Leach–Bliley Act.   In addition, the Office of Thrift Supervision regulations prohibit a savings institution from lending to any of its affiliates that is engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary.

            Certain transactions with directors, officers or controlling persons are also subject to conflict of interest regulations enforced by the Office of Thrift Supervision.   These conflict of interest regulations and other statutes also impose restrictions on loans to such persons and their related interests.   Among other things, such loans must generally be made on terms substantially the same as for loans to unaffiliated individuals.

            At September 30, 2003, there was an outstanding option issued in 1995 to Mr. David Westrate, one of our directors, entitling him to purchase land owned by Citizens Community Federal.  This option was exercised in December 2003, and the closing was completed on July 24, 2004.  The terms of the option, at the time it was entered into, were believed by the Board to be at least as favorable to Citizens Community Federal as they would have been if negotiated with an unaffiliated party.

Federal Securities Law

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

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

Federal Reserve System

            The Federal Reserve Board requires all depositary institutions to maintain non–interest bearing reserves at specified levels against their transaction accounts, primarily checking, NOW and Super NOW checking accounts.   At September 30, 2004, Citizens Community Federal was in compliance with these reserve requirements.   The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy liquidity requirements that may be imposed by the Office of Thrift Supervision.

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            Savings institutions are authorized to borrow from the Federal Reserve Bank "discount window," but Federal Reserve Board regulations require institutions to exhaust other reasonable alternative sources of funds, including Federal Home Loan Bank borrowings, before borrowing from the Federal Reserve Bank.

Federal Home Loan Bank System

            Citizens Community Federal is a member of the Federal Home Loan Bank of Chicago, which is one of 12 regional Federal Home Loan Banks, that administers the home financing credit function of savings institutions.   Each Federal Home Loan Bank serves as a reserve or central bank for its members within its assigned region.   It is funded primarily from proceeds derived from the sale of consolidated obligations of the Federal Home Loan Bank System.   It makes loans or advances to members in accordance with policies and procedures, established by the board of directors of the Federal Home Loan Bank, which are subject to the oversight of the Federal Housing Finance Board.   All advances from the Federal Home Loan Bank are required to be fully secured by sufficient collateral as determined by the Federal Home Loan Bank.   In addition, all long–term advances are required to provide funds for residential home financing.

            As a member, Citizens Community Federal is required to purchase and maintain stock in the Federal Home Loan Bank of Chicago.   At September 30, 2004, Citizens Community Federal had $828,000 in Federal Home Loan Bank stock, which was in compliance with this requirement.

            Under federal law the Federal Home Loan Banks are required to provide funds for the resolution of troubled savings institutions and to contribute to low– and moderately priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low– and moderate–income housing projects.   These contributions have affected adversely the level of Federal Home Loan Bank dividends paid and could continue to do so in the future.   These contributions could also have an adverse effect on the value of Federal Home Loan Bank stock in the future.   A reduction in value of Citizens Community Federal's Federal Home Loan Bank stock may result in a corresponding reduction in Citizens Community Federal's capital.

            For the year ended September 30, 2004, dividends paid by the Federal Home Loan Bank of Chicago to Citizens Community Federal totaled $44,700, as compared to $41,800 for the year ended September 30, 2003.

TAXATION
Federal Taxation

            General .   Citizens Community Bancorp and Citizens Community Federal will be subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to Citizens Community Bancorp or Citizens Community Federal. Citizens Community Federal's federal income tax returns have never been audited.   Prior to December 10, 2001, Citizens Community Federal was a credit union, not generally subject to corporate income tax.

            Citizens Community Bancorp will file a consolidated federal income tax return with Citizens Community Federal for the year ended September 30, 2004.

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

State Taxation

            Citizens Community Bancorp and Citizens Community Federal are subject to the Wisconsin corporate franchise (income) tax which is assessed at the rate of 7.9%. For this purpose, Wisconsin taxable income generally means federal taxable income subject to certain modifications provided for in the Wisconsin law.

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Employees

            At September 30, 2004, the Bank had a total of 62 full–time employees and 55 part–time employees.   Employees are not represented by any collective bargaining group.   Management considers its employee relations to be good.

Item 2.             Description of Properties

Properties

            At September 30, 2004, the Bank had nine full service offices.   The Bank leases the space in which its administrative offices are located.   At September 30, 2004, the Bank owned all but three of its branch offices.   The net book value of investment in premises, equipment and leaseholds, excluding computer equipment, was approximately $2.1 million at September 30, 2004. All of our branch offices are designed for banking purposes and are suitable for current operations.

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

Location	Owned or Leased	Lease Expiration Date	Net Book Value at September 30, 2004 (Dollars in Thousands)
ADMINISTRATIVE OFFICE 2174 EastRidge Center Eau Claire, WI 54701	Leased	April 30, 2006	N/A

BRANCH OFFICES:

Westside Branch 2125 Cameron Street Eau Claire, WI 54703	Owned	N/A	$313,869

East Branch 1028 N. Hillcrest Parkway Altoona, WI 54720	Owned	N/A	$363,700

Fairfax Branch 219 Fairfax Street Altoona, WI 54720	Owned	N/A	$853,784

Mondovi Branch 695 E. Main Street Mondovi, WI 54755	Leased	June 30, 2005	N/A

Rice Lake Branch 2462 S. Main Street Rice Lake, WI 54868	Leased	April 30, 2007	N/A

Chippewa Falls Branch 427 W. Prairie View Road Chippewa Falls, WI 54729	Owned	N/A	$281,482

Baraboo Branch S2423 Highway 12 Baraboo, WI 53913	Owned ⁽¹⁾	N/A	$ 3,838

Black River Falls Branch W9036 Highway 54 E. Black River Falls, WI 54615	Owned ⁽¹⁾	N/A	$ 29,575

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Location	Owned or Leased	Lease Expiration Date	Net Book Value at September 30, 2004 (Dollars in Thousands)

Mankato Branch ⁽²⁾ 1410 Madison Avenue Mankato, MN 56001	Leased	October 30, 2010	N/A

Oakdale Branch ⁽³⁾ 7035 10 ^th Street North Oakdale, MN 55128	Leased	September 30, 2014	N/A

______________
(1)   The building is owned and the land is leased.
(2)   Location acquired as of November 2003.
(3)   Branch opened October 1, 2004.

            Management believes that the current facilities are adequate to meet the present and immediately foreseeable needs of Citizens Community Federal and Citizens Community Bancorp.

            The Bank currently utilizes FIServ–Galaxy Plus, an in–house data processing system.   The net book value of the data processing and computer equipment utilized by the Bank at September 30, 2004 was $139,000.

Item 3.             Legal Proceedings

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

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

            No matters were submitted to a vote of security holders during the quarter ended September 30, 2004.

PART II

Item 5.             Market for the Registrant's Common Equity and Related Stockholder Matters

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

Item 6.             Management's Discussion and Analysis

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

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Item 7. Financial Statements

Report From Independent Registered Accounting Firm*

	(a)	Consolidated Balance Sheets as of September 30, 2004 and 2003*
	(b)	Consolidated Statements of Income for the Years Ended September 30, 2004 and 2003*
	(c)	Consolidated Statements of Changes in Stockholders' Equity For the Years Ended September 30, 2004 and 2003*
	(d)	Consolidated Statements of Cash Flows For the Years Ended September 30, 2004 and 2003*
	(e)	Notes to Consolidated Financial Statements*
	____________
	*	Contained in the Annual Report filed as an exhibit hereto and incorporated herein by reference. All schedules have been omitted as the required information is either inapplicable or contained in the Consolidated Financial Statements or related Notes contained in the Annual Report.

Item 8.             Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

            No disclosure under this item is required.

Item 8A.                 Controls and Procedures

             (a)              Evaluation of Disclosure Controls and Procedures

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

            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, 2005. Due to the ongoing evaluation and testing of our internal controls, there can be no assurance that if any control deficiencies are identified they will be remediated before the end of the 2005 fiscal year, or that there may not be significant deficiencies or material weaknesses that would be required to be reported. In addition, we expect the evaluation process and any required remediation, if applicable, to increase our accounting, legal and other costs and divert management resources from core business operations.

Item 8B.                     Other Information

            There was no information required to be disclosed by the Company in a Current Report on Form 8–K during the quarter ended September 30, 2004 that was not so disclosed.

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PART III

Item 9.            Directors, Executive Officers, Promoters and Control Persons; Compliance with
                         Section 16(a) of the Exchange Act

Directors

            Information concerning the Directors of the Company is incorporated herein by reference from the definitive proxy statement for the annual meeting of stockholders to be held in February, 2005, a copy of which will be filed not later than 120 days after the close of the fiscal year.

Executive Officers

            Information concerning the Executive Officers of the Company is incorporated herein by reference from the definitive proxy statement for the annual meeting of shareholders to be held in February, 2005, except for information contained under the heading "Report of the Audit Committee," a copy of which will be filed not later than 120 days after the close of the fiscal year.

Section 16(a) Compliance

            Section 16(a) of the Securities Exchange Act of 1934 requires that the Company's directors and executive officers, and persons who own more than 10% of the Company's Common Stock, file with the SEC initial reports of ownership and reports of changes in ownership of the Company's Common Stock.   Officers, directors and greater than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.   To the Company's knowledge no late reports occurred during the fiscal year ended September 30, 2004.   All other Section 16(a) filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners were complied with.

Code of Ethics

            The Company's code of conduct, adopted on November 18, 2004, is applicable to its principal executive officer, principal financial officer and principal accounting officer (as well as all other employees), does meet the definition of "code of ethics" set forth in Item 406 of SEC Regulation S–K. A copy of this document is available free of charge by contacting Johnny Thompson, our Investor Relations Officer, at (715) 836–9994. A copy of the Company's Code of Ethics is being filed with the SEC as Exhibit 14 to this Annual Report on Form 10–KSB.

Item 10.                Executive Compensation

            Information concerning executive compensation is incorporated herein by reference from the definitive proxy statement for the annual meeting of shareholders to be held in February, 2005, except for information contained under the heading "Report of the Audit Committee," a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 11.                Security Ownership of Certain Beneficial Owners and Management

            Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the definitive proxy statement for the annual meeting of shareholders to be held in February, 2005, except for information contained under the heading "Report of the Audit Committee," a copy of which will be filed not later than 120 days after the close of the fiscal year.

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Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options warrants and rights	Weighted–average exercise price of outstanding options warrants and rights	Number of Securities remaining available for future issuance under equity compensation plans

Equity Compensation Plans Approved By Security Holders	–––	–––	–––
Equity Compensation Plans Not Approved By Security Holders	–––	–––	–––

Item 12.             Certain Relationships and Related Transactions

            Information concerning certain relationships and related transactions is incorporated herein by reference from the definitive proxy statement for the annual meeting of shareholders to be held in February, 2005, except for information contained under the heading "Report of the Audit Committee," a copy of which will be filed not later than 120 days after the close of the fiscal year.

Item 13.             Exhibits

Regulation S–B Exhibit Number	Document				Reference to Prior Filing or Exhibit Number Attached Hereto
3(i)	Certificate of Incorporation of the Registrant				*
3(ii)	Amended Bylaws of the Registrant				3.2
10	Material contracts:
		(a)	Registrant's 2004 Stock Option Plan		10.a
		(b)	Registrant's 2004 Recognition and Retention Plan		10.b
		(c)	Employment Agreements:
			(i)	James G. Cooley	*
			(ii)	Johnny W. Thompson	*
			(iii)	John D. Zettler	*
			(iv)	Timothy J. Cruciani	*
			(v)	Rebecca Johnson	*
		(e)	Tax Allocation Agreement		10.e
11	Statement Regarding Computation of Per Share Earnings				Not Required
13	2004 Annual Report to Stockholders				13
14	Code of Conduct and Ethics				14
21	Subsidiaries of the Registrant				21
23	Consent of Auditors				Not Required
31	Rule 13a–14(a)/15d–14(a) Certifications				31
32	Section 1350 Certifications				32

_______________________

*	Filed as exhibit to the Company's Form SB–2 registration statement filed on December 29, 2003 (File No. 333–111588) pursuant to Section 5 of the Securities Act of 1933. All of such previously filed documents are hereby incorporated herein by reference in accordance with Item 601 of Regulation S–K.

	(b)	Reports on Form 8–K
		1.	A current report on Form 8–K was filed with the Securities and Exchange Commission on July 27, 2004, regarding the quarterly earnings release for the period ended June 30, 2004.

Item 14. Principal Accountant Fees and Services

Information concerning fees and services by our principal accountants is incorporated herein by reference from our definitive Proxy Statement for the 2004 Annual Meeting of Stockholders, a copy of which will be filed not later than 120 days after the close of the fiscal year.

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SIGNATURES

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

		CITIZENS COMMUNITY BANCORP

Date:	December 29, 2004	By:	/s/ James G. Cooley James G. Cooley President ( Duly Authorized Representative )

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

By:	/s/ Richard McHugh Richard McHugh Chairman of the Board	December 29, 2004

By:	/s/ James G. Cooley James G. Cooley President, Chief Executive Officer and Director ( Principal Executive Officer )	December 29, 2004

By:	/s/ Thomas C. Kempen Thomas C. Kempen Vice Chairman of the Board	December 29, 2004

By:	/s/ Brian R. Schilling Brian R. Schilling Director and Treasurer	December 29, 2004

By:	/s/ Adonis E. Talmage Adonis E. Talmage Director and Secretary	December 29, 2004

By:	/s/ David B. Westrate David B. Westrate Director	December 29, 2004

By:	/s/ John D. Zettler John D. Zettler Chief Financial Officer (Principal Financial Officer)	December 29, 2004

Index to Exhibits

Regulation S–B Exhibit Number	Document
3.2	Amended Bylaws of the Registrant

10.e	Tax Allocation Agreement

13	2004 Annual Report to Stockholders

14	Code of Conduct and Ethics

21	Subsidiaries of the Registrant

31	Rule 13a–14(a)/15d–14(a) Certifications

32	Section 1350 Certifications

End.

EXHIBIT 3.2

BYLAWS
OF
CITIZENS COMMUNITY BANCORP

ARTICLE I HOME OFFICE
              The home office of Citizens Community Bancorp (the "MHC subsidiary holding company") shall be in the City of Eau Claire, in the State of Wisconsin.

ARTICLE II SHAREHOLDERS
             Section 1.   Place of Meetings.    All annual and special meetings of shareholders shall be held at the home office of the MHC subsidiary holding company or at such other convenient place as the board of directors may determine.

             Section 2.   Annual Meeting.    A meeting of the shareholders of the MHC subsidiary holding company for the election of directors and for the transaction of any other business of the MHC subsidiary holding company shall be held annually within 150 days after the end of the MHC subsidiary holding company's fiscal year.

             Section 3.   Special Meetings.     Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by the regulations of the Office of Thrift Supervision ("Office"), may be called at any time by the chairman of the board, the president, or a majority of the board of directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request of the holders of not less than one-tenth of all of the outstanding capital stock of the MHC subsidiary holding company entitled to vote at the meeting. Such written request shall state the purpose or purposes of the meeting and shall be delivered to the home office of the MHC subsidiary holding company addressed to the chairman of the board, the president, or the secretary.

             Section 4.   Conduct of Meetings.    Annual and special meetings shall be conducted in accordance with the most current edition of Robert's Rules of Order unless otherwise prescribed by regulations of the Office or these bylaws or the board of directors adopts another written procedure for the conduct of meetings.   The board of directors shall designate, when present, either the chairman of the board or president to preside at such meetings.

             Section 5.   Notice of Meetings.    Written notice stating the place, day, and hour of the meeting and the purpose(s) for which the meeting is called shall be delivered not fewer than 20 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, or the secretary, or the directors calling the

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meeting, to each shareholder of record entitled to vote at such meeting.   If mailed, such notice shall be deemed to be delivered when deposited in the mail, addressed to the shareholder at the address as it appears on the stock transfer books or records of the MHC subsidiary holding company as of the record date prescribed in Section 6 of this Article II with postage prepaid. When any shareholders' meeting, either annual or special, is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the time and place of any meeting adjourned for less than 30 days or of the business to be transacted at the meeting, other than an announcement at the meeting at which such adjournment is taken.   Compliance with the provisions of this Section 5 shall not be applicable for so long as the MHC subsidiary holding company is a wholly-owned institution.

             Section 6.   Fixing of Record Date.    For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors shall fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall be not more than 60 days and, in case of a meeting of shareholders, not fewer than 10 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken.   When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof.

             Section 7.   Voting Lists.    At least 20 days before each meeting of the shareholders, the officer or agent having charge of the stock transfer books for shares of the MHC subsidiary holding company shall make a complete list of the shareholders of record entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. This list of shareholders shall be kept on file at the home office of the MHC subsidiary holding company and shall be subject to inspection by any shareholder of record or the shareholder's agent at any time during usual business hours for a period of 20 days prior to such meeting.   Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to inspection by any shareholder of record or any shareholder's agent during the entire time of the meeting.   The original stock transfer book shall constitute prima facie evidence of the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders.   In lieu of making the shareholder list available for inspection by shareholders as provided in this paragraph, the board of directors may elect to follow the procedures prescribed in § 552.6(d) of the Office's regulations as now or hereafter in effect.   Compliance with the provisions of this Section 7 shall not be applicable for so long as the MHC subsidiary holding company is a wholly-owned institution.

             Section 8.   Quorum.    A majority of the outstanding shares of the MHC subsidiary holding company entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. If less than a majority of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.   The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to constitute less than a quorum.   If a quorum is present, the affirmative vote of the majority of the

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shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number of shareholders voting together or voting by classes is required by law or the charter.   Directors, however, are elected by a plurality of the votes cast at an election of directors.

             Section 9.   Proxies.    At all meetings of shareholders, a shareholder may vote in person or by proxy executed in writing by the shareholder or by his or her duly authorized attorney in fact.   Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the shareholder.   A proxy may designate as holder a corporation, partnership or company as prescribed in § 552.6(f) of the Office's regulations, or other person. Proxies solicited on behalf of the management shall be voted as directed by the shareholder or, in the absence of such direction, as determined by a majority of the board of directors.   No proxy shall be valid more than eleven months from the date of its execution except for a proxy coupled with an interest.

             Section 10. Voting of Shares in the Name of Two or More Persons. When ownership stands in the name of two or more persons, in the absence of written directions to the MHC subsidiary holding company to the contrary, at any meeting of the shareholders of the MHC subsidiary holding company any one or more of such shareholders may cast, in person or by proxy, all votes to which such ownership is entitled.   In the event an attempt is made to cast conflicting votes, in person or by proxy, by the several persons in whose names shares of stock stand, the vote or votes to which those persons are entitled shall be cast as directed by a majority of those holding such and present in person or by proxy at such meeting, but no votes shall be cast for such stock if a majority cannot agree.

             Section 11.   Voting of Shares by Certain Holders.    Shares standing in the name of another corporation may be voted by any officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine.   Shares held by an administrator, executor, guardian, or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name.   Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name.   Shares held in trust in an IRA or Keogh Account, however, may be voted by the MHC subsidiary holding company if no other instructions are received.   Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer into his or her name if authority to do so is contained in an appropriate order of the court or other public authority by which such receiver was appointed.

            A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

            Neither treasury shares of its own stock held by the MHC subsidiary holding company nor shares held by another corporation, if a majority of the shares entitled to vote for the election of directors of such other corporation are held by the MHC subsidiary holding company, shall be

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voted at any meeting or counted in determining the total number of outstanding shares at any given time for purposes of any meeting.

             Section 12.   Inspectors of Election.    In advance of any meeting of shareholders, the board of directors may appoint any person other than nominees for office as inspectors of election to act at such meeting or any adjournment.   The number of inspectors shall be either one or three. Any such appointment shall not be altered at the meeting. If inspectors of election are not so appointed, the chairman of the board or the president may, or on the request of not fewer than 10 percent of the votes represented at the meeting shall, make such appointment at the meeting. If appointed at the meeting, the majority of the votes present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors in advance of the meeting or at the meeting by the chairman of the board or the president.

            Unless otherwise prescribed by regulations of the Office, the duties of such inspectors shall include:   determining the number of shares and the voting power of each share, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity and effect of proxies; receiving votes, ballots, or consents; hearing and determining all challenges and questions in any way arising in connection with the rights to vote; counting and tabulating all votes or consents; determining the result; and such acts as may be proper to conduct the election or vote with fairness to all shareholders.

             Section 13.   Nominating Committee.    The board of directors shall act as a nominating committee for selecting the management nominees for election as directors.   Except in the case of nominee substituted as a result of the death or other incapacity of a management nominee, the nominating committee shall deliver written nominations to the secretary at least 20 days prior to the date of the annual meeting.   Upon delivery, such nominations shall be posted in a conspicuous place in each office of the MHC subsidiary holding company.   No nominations for directors except those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in writing and delivered to the secretary of the MHC subsidiary holding company at least five days prior to the date of the annual meeting.   Upon delivery, such nominations shall be posted in a conspicuous place in each office of the MHC subsidiary holding company.   Ballots bearing the names of all persons nominated by the nominating committee and by shareholders shall be provided for use at the annual meeting.   However, if the nominating committee shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon.

             Section 14.   New Business.    Any new business to be taken up at the annual meeting shall be stated in writing and filed with the secretary of the MHC subsidiary holding company at least five days before the date of the annual meeting, and all business so stated, proposed, and filed shall be considered at the annual meeting; but no other proposal shall be acted upon at the annual meeting.   Any shareholder may make any other proposal at the annual meeting and the same may be discussed and considered, but unless stated in writing and filed with the secretary at least five days before the meeting, such proposal shall be laid over for action at an adjourned, special, or annual meeting of the shareholders taking place 30 days or more thereafter.   This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of

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officers, directors, and committees; but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated and filed as herein provided.

             Section 15.   Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action that may be taken at a meeting of shareholders, may be taken without a meeting if consent in writing, setting forth the action so taken, shall be given by all of the shareholders entitled to vote with respect to the subject matter.

ARTICLE III
BOARD OF DIRECTORS
             Section 1.   General Powers.    The business and affairs of the MHC subsidiary holding company shall be under the direction of its board of directors.   The board of directors shall annually elect a chairman of the board and a president from among its members and shall designate, when present, either the chairman of the board or the president to preside at its meetings.

             Section 2.   Number and Term.    The board of directors shall consist of six members, and shall be divided into three classes as nearly equal in number as possible. The members of each class shall be elected for a term of three years and until their successors are elected and qualified. One class shall be elected by ballot annually.   Directors may be elected for a term of office to expire earlier than the third succeeding annual meeting of stockholders after their election if necessary to balance the classes of directors.

             Section 3.   Regular Meetings.    A regular meeting of the board of directors shall be held without other notice than this bylaw following the annual meeting of shareholders.   The board of directors may provide, by resolution, the time and place, for the holding of additional regular meetings without other notice than such resolution.   Directors may participate in a meeting by means of a conference telephone or similar communications device through which all persons participating can hear each other at the same time.   Participation by such means shall constitute presence in person for all purposes.

             Section 4.   Qualification.    Each director shall at all times be the beneficial owner of not less than 100 shares of capital stock of the MHC subsidiary holding company unless the MHC subsidiary holding company is a wholly owned subsidiary of a holding company.

             Section 5.   Special Meetings.    Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president, or one-third of the directors.   The persons authorized to call special meetings of the board of directors may fix any place, within the MHC subsidiary holding company's normal business area, as the place for holding any special meeting of the board of directors called by such persons.

            Members of the board of directors may participate in special meetings by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear and speak to each other.   Such participation shall constitute presence in person for all purposes.

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             Section 6.   Notice.    Written notice of any special meeting shall be given to each director at least 24 hours prior thereto when delivered personally or by telegram or at least five days prior thereto when delivered by mail at the address at which the director is most likely to be reached.   Such notice shall be deemed to be delivered when deposited in the mail so addressed, with postage prepaid if mailed, when delivered to the telegraph company if sent by telegram, or when the MHC subsidiary holding company receives notice of delivery if electronically transmitted.   Any director may waive notice of any meeting by a writing filed with the secretary.   The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.   Neither the business to be transacted at, nor the purpose of, any meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.

             Section 7.   Quorum.    A majority of the number of directors fixed by Section 2 of this Article III shall constitute a quorum for the transaction of business at any meeting of the board of directors; but if less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time.   Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 5 of this Article III.

             Section 8.   Manner of Acting.    The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless a greater number is prescribed by regulation of the Office or by these bylaws.

             Section 9.   Action Without a Meeting.    Any action required or permitted to be taken by the board of directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors.

             Section 10.   Resignation.    Any director may resign at any time by sending a written notice of such resignation to the home office of the MHC subsidiary holding company addressed to the chairman of the board or the president.   Unless otherwise specified, such resignation shall take effect upon receipt by the chairman of the board or the president.   More than three consecutive absences from regular meetings of the board of directors, unless excused by resolution of the board of directors, shall automatically constitute a resignation, effective when such resignation is accepted by the board of directors.

             Section 11.   Vacancies.    Any vacancy occurring on the board of directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the board of directors.   A director elected to fill a vacancy shall be elected to serve only until the next election of directors by the shareholders.   Any directorship to be filled by reason of an increase in the number of directors may be filled by election by the board of directors for a term of office continuing only until the next election of directors by the shareholders.

             Section 12.   Compensation.    Directors, as such, may receive a stated salary for their services.   By resolution of the board of directors, a reasonable fixed sum, and reasonable expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the board of directors.   Members of either standing or special committees may be allowed such compensation for attendance at committee meetings as the board of directors may determine.

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             Section 13.   Presumption of Assent.    A director of the MHC subsidiary holding company who is present at a meeting of the board of directors at which action on any MHC subsidiary holding company matter is taken shall be presumed to have assented to the action taken unless his or her dissent or abstention shall be entered in the minutes of the meeting or unless he or she shall file a written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the MHC subsidiary holding company within five days after the date a copy of the minutes of the meeting is received.   Such right to dissent shall not apply to a director who voted in favor of such action.

             Section 14.   Removal of Directors.    At a meeting of shareholders called expressly for that purpose, any director may be removed only for cause by a vote of the holders of a majority of the shares then entitled to vote at an election of directors.   Whenever the holders of the shares of any class are entitled to elect one or more directors by the provisions of the charter or supplemental sections thereto, the provisions of this section shall apply, in respect to the removal of a director or directors so elected, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole.

ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
             Section 1.   Appointment.    The board of directors, by resolution adopted by a majority of the full board, may designate the chief executive officer and two or more of the other directors to constitute an executive committee.   The designation of any committee pursuant to this Article IV and the delegation of authority shall not operate to relieve the board of directors, or any director, of any responsibility imposed by law or regulation.

             Section 2.   Authority.    The executive committee, when the board of directors is not in session, shall have and may exercise all of the authority of the board of directors except to the extent, if any, that such authority shall be limited by the resolution appointing the executive committee; and except also that the executive committee shall not have the authority of the board of directors with reference to:   the declaration of dividends; the amendment of the charter or bylaws of the MHC subsidiary holding company, or recommending to the shareholders a plan of merger, consolidation, or conversion; the sale, lease, or other disposition of all or substantially all of the property and assets of the MHC subsidiary holding company otherwise than in the usual and regular course of its business; a voluntary dissolution of the MHC subsidiary holding company; a revocation of any of the foregoing; or the approval of a transaction in which any member of the executive committee, directly or indirectly, has any material beneficial interest.

             Section 3.   Tenure.    Subject to the provisions of Section 8 of this Article IV, each member of the executive committee shall hold office until the next regular annual meeting of the board of directors following his or her designation and until a successor is designated as a member of the executive committee.

             Section 4.   Meetings.    Regular meetings of the executive committee may be held without notice at such times and places as the executive committee may fix from time to time by

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resolution.   Special meetings of the executive committee may be called by any member thereof upon not less than one day's notice stating the place, date, and hour of the meeting, which notice may be written or oral.   Any member of the executive committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person.   The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting.

             Section 5.   Quorum.    A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present.

             Section 6.   Action Without a Meeting.    Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the executive committee.

             Section 7.   Vacancies.    Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full board of directors.

             Section 8.   Resignations and Removal.    Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full board of directors.   Any member of the executive committee may resign from the executive committee at any time by giving written notice to the president or secretary of the MHC subsidiary holding company.   Unless otherwise specified, such resignation shall take effect upon its receipt; the acceptance of such resignation shall not be necessary to make it effective.

             Section 9.   Procedure.    The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these bylaws.   It shall keep regular minutes of its proceedings and report the same to the board of directors for its information at the meeting held next after the proceedings shall have occurred.

             Section 10.   Other Committees.    The board of directors may by resolution establish an audit, loan or other committee composed of directors as they may determine to be necessary or appropriate for the conduct of the business of the MHC subsidiary holding company and may prescribe the duties, constitution and procedures thereof.

ARTICLE V
OFFICERS
             Section 1.   Positions.    The officers of the MHC subsidiary holding company shall be a president, one or more vice presidents, a secretary, and a treasurer or comptroller, each of whom shall be elected by the board of directors.   The board of directors may also designate the chairman of the board as an officer.   The offices of the secretary and treasurer or comptroller may be held by the same person and a vice president may also be either the secretary or the treasurer or comptroller.   The board of directors may designate one or more vice presidents as executive vice president or senior vice president.   The board of directors may also elect or authorize the

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appointment of such other officers as the business of the MHC subsidiary holding company may require.   The officers shall have such authority and perform such duties as the board of directors may from time to time authorize or determine.   In the absence of action by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices.

             Section 2.   Election and Term of Office.    The officers of the MHC subsidiary holding company shall be elected annually at the first meeting of the board of directors held after each annual meeting of the shareholders.   If the election of officers is not held at such meeting, such election shall be held as soon thereafter as possible.   Each officer shall hold office until a successor has been duly elected and qualified or until the officer's death, resignation, or removal in the manner hereinafter provided.   Election or appointment of an officer, employee or agent shall not of itself create contractual rights.   The board of directors may authorize the MHC subsidiary holding company to enter into an employment contract with any officer in accordance with regulations of the Office; but no such contract shall impair the right of the board of directors to remove any officer at any time in accordance with Section 3 of this Article V.

             Section 3.   Removal.    Any officer may be removed by the board of directors whenever in its judgment the best interests of the MHC subsidiary holding company will be served thereby, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the person so removed.

             Section 4.   Vacancies.    A vacancy in any office because of death, resignation, removal, disqualification, or otherwise may be filled by the board of directors for the unexpired portion of the term.

             Section 5.   Remuneration.    The remuneration of the officers shall be fixed from time to time by the board of directors.

ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
             Section 1.   Contracts.    To the extent permitted by regulations of the Office, and except as otherwise prescribed by these bylaws with respect to certificates for shares, the board of directors may authorize any officer, employee, or agent of the MHC subsidiary holding company to enter into any contract or execute and deliver any instrument in the name of and on behalf of the MHC subsidiary holding company.   Such authority may be general or confined to specific instances.

             Section 2.   Loans.    No loans shall be contracted on behalf of the MHC subsidiary holding company and no evidence of indebtedness shall be issued in its name unless authorized by the board of directors.   Such authority may be general or confined to specific instances.

             Section 3.   Checks, Drafts, Etc.    All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the MHC subsidiary holding company shall be signed by one or more officers, employees or agents of the MHC

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subsidiary holding company in such manner as shall from time to time be determined by the board of directors.

             Section 4.   Deposits.    All funds of the MHC subsidiary holding company not otherwise employed shall be deposited from time to time to the credit of the MHC subsidiary holding company in any duly authorized depositories as the board of directors may select.

ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
             Section 1.   Certificates for Shares.    Certificates representing shares of capital stock of the MHC subsidiary holding company shall be in such form as shall be determined by the board of directors and approved by the Office.   Such certificates shall be signed by the chief executive officer or by any other officer of the MHC subsidiary holding company authorized by the board of directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof.   The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the MHC subsidiary holding company itself or one of its employees.   Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified.   The name and address of the person to whom the shares are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the MHC subsidiary holding company.   All certificates surrendered to the MHC subsidiary holding company for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares has been surrendered and cancelled, except that in the case of a lost or destroyed certificate, a new certificate may be issued upon such terms and indemnity to the MHC subsidiary holding company as the board of directors may prescribe.

             Section 2.   Transfer of Shares.    Transfer of shares of capital stock of the MHC subsidiary holding company shall be made only on its stock transfer books.   Authority for such transfer shall be given only by the holder of record or by his or her legal representative, who shall furnish proper evidence of such authority, or by his or her attorney authorized by a duly executed power of attorney and filed with the MHC subsidiary holding company.   Such transfer shall be made only on surrender for cancellation of the certificate for such shares.   The person in whose name shares of capital stock stand on the books of the MHC subsidiary holding company shall be deemed by the MHC subsidiary holding company to be the owner for all purposes.

ARTICLE VIII
FISCAL YEAR; APPOINTMENT OF ACCOUNTANTS
            The fiscal year of the MHC subsidiary holding company shall end on September 30 of each year.   The appointment of accountants shall be subject to annual ratification by the shareholders.

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ARTICLE IX
DIVIDENDS
            Subject to the terms of the MHC subsidiary holding company's charter and the regulations and orders of the Office, the board of directors may, from time to time, declare, and the MHC subsidiary holding company may pay, dividends on its outstanding shares of capital stock.

ARTICLE X
CORPORATE SEAL
            The board of directors shall provide a corporate seal which shall be two concentric circles between which shall be the name of the MHC subsidiary holding company.   The year of incorporation or an emblem may appear in the center.

ARTICLE XI
AMENDMENTS
            These bylaws may be amended in a manner consistent with regulations of the Office and shall be effective after:   (i) approval of the amendment by a majority vote of the authorized board of directors, or by a majority vote of the votes cast by the shareholders of the MHC subsidiary holding company at any legal meeting, and (ii) receipt of any applicable regulatory approval.   When the MHC subsidiary holding company fails to meet its quorum requirements, solely due to vacancies on the board, then the affirmative vote of a majority of the sitting board will be required to amend the bylaws.

11 End.

EXHIBIT 10.e

TAX SHARING AGREEMENT
              THIS AGREEMENT made as of July 15, 2004, by and between Citizens Community Bancorp, ("Holding Company"), and Citizens Community Federal, a federally chartered banking corporation ("Subsidiary").

              WHEREAS, Holding Company owns greater than eighty percent (80%) of the issued and outstanding shares of capital stock of Subsidiary and proposes to include Subsidiary in filing a consolidated Federal income tax return; and,

              WHEREAS, Holding Company and Subsidiary (collectively, the "Group") desire to establish a method for allocating the consolidated Federal income tax liability of the Group among its members and for reimbursing Holding Company for the payment of such tax liability;

              NOW, THEREFORE, Holding Company and Subsidiary agree as follows:

Consolidated Return Election .   If at any time and from time to time Holding Company so elects, Subsidiary will join in the filing of a consolidated Federal income tax return for the current taxable year and for any subsequent taxable period for which the Group is required or permitted to file such a return.   Subsidiary agrees to file such consents, elections and other documents and take such other actions as may be necessary or appropriate to carry out the purpose of this Section 1.   Any period for which Subsidiary is included in a consolidated Federal income tax return filed by Holding Company is referred to in this Agreement as "Subsidiary Consolidated Return Year."   Holding Company agrees that it will prepare and file in a timely manner all Federal and other income tax returns required to be filed on behalf of the Group and will pay the taxes shown to be due thereon.

Subsidiary Liability to Holding Company for Subsidiary Consolidated Return Years.    Promptly following the determination of the consolidated federal income tax liability of the Group, Subsidiary shall pay to Holding Company the amount (if any) of federal income taxes for which the Subsidiary would have been liable for that year, computed as though Subsidiary had filed a separate return for such Subsidiary Consolidated Return Year on Subsidiary's tax basis of accounting.   In the event the computation of Subsidiary's Federal income tax liability under this Section 2 shall reflect that the Subsidiary incurred a loss for any year and that the Subsidiary would be due a Federal income tax refund as a result of a loss, carryback, or any other provisions of the Internal Revenue Service Code of 1986, as amended, then within three (3) days of the determination of Subsidiary's separate Federal income tax liability, Holding Company shall pay to Subsidiary an amount equal to the refund which would have been due Subsidiary, including any amounts paid under Section 3; provided, however, that in no event shall Holding Company be required to make any payment hereunder in excess of the aggregate of all payments made by Subsidiary to Holding Company hereunder.

Interim Estimated Payments.    During each Subsidiary Consolidated Return Year, Subsidiary shall advance to Holding Company amounts necessary to reimburse Holding Company for that portion of any estimated federal income tax payments attributable to the inclusion of Subsidiary in the Group, determined in accordance with Section 2.   Such advancements shall be made on the dates on which Subsidiary would have been required to make such estimated income tax payments if it had filed a Federal income tax return as a separate entity.   Any amounts so paid in any year shall operate to reduce the amount payable to Holding Company following the end of such year pursuant to Section 2, and any balance resulting from such reduction shall be refunded by Holding Company to Subsidiary within three (3) days of the determination of Subsidiary's separate Federal income tax liability in accordance with Section 2.

Tax Adjustments.    In the event of any adjustment to the tax returns of Holding Company and Subsidiary as filed (by reason of an amended return, claim for refund, audit adjustment, administrative or judicial process), the liability of Holding Company and Subsidiary under Sections 2 and 3 shall be re-determined to give effect to any such adjustment as if it had been made as part of the original computation of tax liability, and payments between Holding Company and Subsidiary shall be made within three (3) days after any such payments are made or refunds are received, or, in the case of contested proceedings, within three (3) days after a final determination of the contest.

Subsidiaries.    All subsidiaries of Holding Company and Subsidiary who are eligible to file a consolidated Federal income tax return shall be subject to this Agreement.   If at any time the Holding Company acquires or creates one or more subsidiary corporations that are includable corporations of the Group, they shall be subject to this Agreement and all references to Holding Company herein shall thereafter be interpreted to refer to Holding Company and such subsidiaries as a group.

Deferred Tax Benefit .   In no event shall Subsidiary or Holding Company transfer cash to the other by reason of any deferred tax benefit of deferred tax liability.

Intent and Interpretation .   The liability of Subsidiary as established under this Agreement shall be computed in a manner consistent with the provisions of Section 1.1552-1(a)(1) of the Regulations.   The intent of this Agreement is that the Subsidiary should make Holding Company whole, without more, by reimbursing Holding Company only to the extent of Subsidiary's actual amount Federal income tax expenditure incurred by reason of inclusion of Subsidiary in the Group.   Any ambiguity in the interpretation hereof shall be resolved, with a view to effectuating such intent, in favor of the Holding Company.

Successors.    This Agreement shall be binding on and inure to the benefit of any successor, by merger, acquisition of assets or otherwise, to any of the parties hereto (including but not limited to any successor of Holding Company or Subsidiary succeeding to the tax attributes of either under Section 381 of the Internal Revenue Code), to the same extent as if such successor had been an original party to the Agreement.

IN WITNESS WHEREOF, Holding Company and Subsidiary have executed this Agreement by authorized officers thereof as of the date first written above.

	CITIZENS COMMUNITY BANCORP
	By:	/s/ John D. Zettler
	CITIZENS COMMUNITY FEDERAL
	By:	/s/ John D. Zettler

2 End.

EXHIBIT 13

TABLE OF CONTENTS

	Chairman's Message	1
	Selected Consolidated Financial Information	2
	Management's Discussion and Analysis of Financial
	Condition and Results of Operations	4
	Consolidated Financial Statements	20
	Stockholder Information	48
	Corporate Information	49

FROM YOUR CHAIRMAN

Dear Fellow Stockholders,

            The year 2004 marked the establishment of Citizens Community Bancorp – an entity composed from the past and designed for the future.

            Established in March 2004, Citizens Community Bancorp serves as the mid–tier holding company for Citizens Community Federal, a federal savings association with a long history of providing personalized financial services.

            Over the years, Citizens Community Federal has developed two extraordinary strengths: fiscal management and customer service. Yet it had become clear that in order to preserve those strengths for the future, the bank had to invest in its ability to grow. The reorganization that was completed this year helped structure our business in a form that – for the first time – enabled us to access capital markets. Since then, Citizens has experienced growth that is exciting, profitable and long–term.

            For the year ended September 30, 2004, Citizens Community Bancorp's total assets increased by $31.6 million, or 24.2%, to $162.0 million while earnings increased $239,048, from $597,497 to $836,545.

            Importantly, stockholder's equity increased $8.6 million to $19.6 million at September 30, 2004. The increase for the period was largely a result of $7.9 million of net capital raised in the stock offering which was part of this year's reorganization.

            In short, well–managed growth is a significant part of Citizens' plans for ensuring long–term financial strength. While we recognize the need to pursue a path of growth, we will remain committed to the strengths that got us here – strengths that are rooted in meeting the needs of the customers we serve each and every day. By remaining faithful to those strengths, we believe we are well positioned to meet the needs of customers and stockholders alike.

/s/ Richard McHugh
Richard McHugh
Chairman

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SELECTED CONSOLIDATED FINANCIAL INFORMATION
The summary information presented below under "Selected Financial Condition Data" and "Selected Operations Data" for, and as of the end of, each of the years ended September 30 is derived from our audited financial statements. The following information is only a summary and you should read it in conjunction with our financial statements and notes beginning on page 20.

	September 30,
	2004	2003	2002	2001	2000
	(In Thousands)
Selected Financial Condition Data :
Total assets	$161,980	$130,400	$115,257	$108,083	$98,750
Loans receivable, net	152,376	123,107	104,091	93,618	90,935
Interest–bearing certificates
of deposit	--	--	1,485	6,931	720
Deposits	127,976	114,963	104,429	98,128	89,336
Total borrowings	13,500	3,700	--	--	--
Retained earnings	19,606	10,991	10,393	9,729	9,169

		Year Ended September 30,
		2004	2003	2002	2001	2000
		(In Thousands)
Selected Operations Data :
Total interest income		$9,619	$8,880	$8,493	$8,822	$8,123
Total interest expense		2,889	3,178	3,859	4,844	4,148
	Net interest income	6,730	5,702	4,634	3,978	3,976
Provision for loan losses		396	406	375	230	202
Net interest income after provision for loan
	losses	6,334	5,296	4,259	3,748	3,774
Fees and service charges		1,038	1,009	821	782	660
Gain (loss) on sales of loans, mortgage–backed
	securities and investment securities	--	--	--	--	--
Other non–interest income		331	323	286	218	273
Total non–interest income		1,369	1,332	1,107	1,000	933
Total non–interest expense		6,323	5,641	4,675	4,189	3,928
Income before taxes		1,380	987	691	559	779
Income tax provision ⁽¹⁾		543	390	27	--	--
Net income		$ 837	$ 597	$ 664	$ 559	$ 779

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Selected Financial Ratios and Other Data

		September 30,
		2004	2003	2002	2001	2000
Performance Ratios
Return on assets (ratio of net income to average total assets)		0.57%	0.49%	0.60%	0.54%	0.79%
Return on assets, net of tax ⁽¹⁾		0.57%	0.49%	0.37%	0.33%	0.48%
Return on equity (ratio of net income to average
	equity)	5.47%	5.59%	6.61%	5.92%	8.87%
Return on equity, net of tax ⁽¹⁾		5.47%	5.59%	4.15%	3.58%	5.36%
Interest rate spread information
	Average during period	4.50%	4.82%	4.30%	3.99%	4.25%
	End of period	4.59%	4.80%	4.74%	3.88%	4.43%
Net interest margin		4.70%	4.90%	4.39%	4.14%	4.38%
Ratio of operating expense to average total assets		4.33%	4.59%	4.19%	4.05%	4.00%
Ratio of average interest-bearing assets to
	average interest bearing liabilities	1.10%	1.05%	1.03%	1.03%	1.11%

Quality Ratios
Non–performing assets to total assets at end
	of period	0.43%	0.43%	0.53%	0.37%	0.40%
Allowance for loan losses to non–performing
	loans	79.51%	82.92%	65.36%	75.74%	84.09%
Allowance for loan losses to net loans		0.36%	0.38%	0.34%	0.33%	0.37%

Capital Ratios
Equity to total assets at end of period		12.10%	8.43%	9.02%	9.00%	9.29%
Average equity to average assets		10.46%	8.70%	9.01%	9.14%	8.93%

Other Data
Number of full-service offices		10 ⁽²⁾	8	7	6	6

_________________

(1)

Until its conversion to a federally chartered mutual savings bank on December 10, 2001, Citizens Community Federal was a credit union, exempt from federal and state income taxes. Had Citizens Community Federal been subject to federal and state income taxes for the fiscal years ended September 30, 2002, 2001, 2000 and 1999, income tax expense would have been approximately $273,000, $221,000, $308,000 and $260,000, respectively, and net income would have been approximately $418,000, $338,000, $471,000 and $399,000, respectively.

(2)

Includes Oakdale, Minnesota Branch, which opened on October 1, 2004.

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

            Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest–earning assets, consisting primarily of loans, investment securities and interest–bearing deposits with other financial institutions, and the interest we pay on our interest–bearing liabilities, consisting primarily of savings accounts, money market accounts, time deposits and borrowings. Our results of operations are also affected by our provision for loan losses, noninterest income and noninterest expense. Noninterest income consists primarily of service charges on deposit accounts, insurance commissions and loan fees and service charges. Noninterest expense includes salaries and employee benefits, occupancy, equipment, data processing costs and deposit insurance premiums. Our results of operations may also be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

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 operations 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.

Evolution of Business Strategy

            Citizens Community Bancorp (the "Company") is a federally chartered holding company formed on March 29, 2004, for the purpose of acquiring all of the common stock of Citizens Community Federal (the "Bank") concurrent with its reorganization and stock issuance plan. The reorganization was consummated on March 29, 2004. In connection with the reorganization, the Company sold 978,650 shares of its common stock, par value of $0.01 per share, in a subscription offering, and issued 2,063,100 shares to Citizens Community MHC ("CCMHC"), raising

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approximately $8.9 million net of costs. The Company is a majority owned subsidiary of CCMHC, a federally chartered mutual holding company.

            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 for 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 commence making commercial loans.

            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. Rather than building additional electronic means for our customers to conduct banking, we have structured operations around a branch system that is staffed with knowledgeable and well–equipped employees. A key to ensuring a high level of quality customer service is our ongoing commitment to training all levels of our staff.

            Our current business strategy is to operate as a well–capitalized, profitable, community–oriented savings bank dedicated to providing quality customer service. We intend to continue to be primarily a one– to four–family and consumer lender. Subject to capital requirements and our ability to continue to grow in a reasonable and prudent manner, we may open additional branches as opportunities arise. There can be no assurances that we will successfully implement our strategy.

Comparison of Operating Results for the Years Ended September 30, 2004 and September 30, 2003

            General . The Company's results of operations depend primarily on the level of its net interest margin, its provision for loan losses, its non–interest income and its operating expenses. Net interest income depends on the volume of and rate associated with interest earning assets and interest–bearing liabilities which result in net interest margin. Net income increased 40.0% to $837,000 for the year ended September 30, 2004 from $597,000 for the year ended September 30, 2003. The growth of net income at the Bank was primarily a result of an increase in interest income due to an increase in loan activity and steady net interest margin and interest spread.

            Interest Income. Total interest income increased by $791,000 or 9.0% to $9.6 million for the year ended September 30, 2004. The primary factor for the increase in interest income was the $29.3 million increase in the balance of loans receivable from $123.1 million for the year ended September 30, 2003 to $152.4 million for the year ended September 30, 2004. The increase was the result of loan originations exceeding repayments due to strong demand and continued lower interest rates in fiscal 2004. The yield on loans receivable decreased to 6.90%, from 7.69% reflecting the

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decrease in market rates of interest. The increase in loan demand was a result of strong internal marketing and the addition of the Mankato, Minnesota branch.

            Interest Expense. Total interest expense decreased $288,000 or 9.1% to $2.9 million for the year ended September 30, 2004, from $3.2 million for the year ended September 30, 2003. The decrease in interest expense resulted primarily from a decrease in interest expense on deposit accounts. Interest expense on deposits decreased $400,000 or 12.6%, to $2.8 million for the year ended September 30, 2004, from $3.2 million for fiscal 2003. The decrease resulted from a 67 basis point decrease in the average cost of deposits to 2.22% from 2.89%, reflecting generally lower market rate of interest in fiscal 2004, partially offset by an increase in average deposits outstanding. The cost of borrowed funds increased from $2,000 for the year ended September 30, 2003, to $114,000 for the year ended September 30, 2004, an increase of $112,000. The increase was primarily a result of utilization of advances from the Federal Home Loan Bank of Chicago to fund increased loan demand as management sought the most cost–effective source of funds. The use of borrowed funds helped to keep deposit yields lower than would have been necessary to attract the additional funding for loan demand.

             Net Interest Income. Net interest income increased 18.0% to $6.7 million for the year ended September 30, 2004, from $5.7 million for the year ended September 30, 2003. The average interest spread for fiscal 2004 was unchanged from the average spread for 2003 of 4.82%. The average interest rate margin increased 22 basis points to 4.50% from 4.72%. The net interest spread and net interest margin performance was a result of an increase in average loans receivable and the decrease in interest expense offsetting the decrease in average loan yield. We anticipate the decline in the cost of funds, as well as the yield on loans receivable, to slow and then rise slowly in anticipation of a slow upward interest rate environment in the year ahead.

            Provision for Loan Losses. We establish provisions for loan losses, which are charged to operations, at a level management believes will 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.

            In fiscal 2004, we recorded a provision for loan losses of $396,000, compared to $406,000 in 2003. 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. The allowance for loan losses as a percentage of loans receivable decreased to .36% at September 30, 2004, from .38% at September 30, 2003. The level of the allowance is based on estimates and the ultimate losses may vary from the estimates. Non–performing assets were approximately $697,000 at September 30, 2004, as compared to $562,000 at September 30, 2003. The primary cause of the increase was a one– to four–family real estate mortgage loan in the amount of $88,831 that became delinquent. The loan is secured by a first mortgage on a single family home appraised at $140,000. No loss from this loan is anticipated.

            Management assesses the allowance for loan losses on a quarterly 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. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to

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recognize additional provisions based on their judgment of information available to them at the time of their examination. The allowance for loan losses as of September 30, 2004 is maintained at a level that represents management's best estimate of probable losses inherent in the loan portfolio, and such losses were both probable and reasonably estimable.

            Non–Interest Income. Total non–interest income for the year ended September 30, 2004 increased $36,000 from fiscal 2003. The increase came primarily from additional fee income generated through product lines that were added during the calendar year 2003 for closing fees, form fees and GAP insurance. Management anticipates the addition in fee income provided by the new lines to continue in the future.

            Non–Interest Expense. Total non–interest expense for the year ended September 30, 2004 increased 12.1% to $6.3 million from $5.6 million for the year ended September 30, 2003. Salary increases represented 53.7% of the period increase. The increase was primarily due to normal salary increases and the additional staffing and operational expenses affiliated with the Mankato branch which was acquired on November 1, 2003. The Mankato branch currently has four full–time–equivalent employees.

            Income Tax Expense. Income tax expense increased to $543,000, or 39.5% of income before income taxes for the year ended September 30, 2004, from $390,000, or 39.5% of income before income taxes for the year ended September 30, 2003. The increase was due to the increase in income before taxes.

Comparison of Operating Results for the Years Ended September 30, 2003 and September 30, 2002

             General. Net income decreased $67,000, or 10.1%, to $597,000 for the year ended September 30, 2003 from $665,000 for the year ended September 30, 2002. The decrease in net income resulted primarily from an increase in noninterest expense, an increase in income tax expense and an increase in the provision for loan losses, partially offset by an increase in net interest income and an increase in noninterest income. Had we not been exempt from income tax due to our credit union status during a portion of fiscal 2002, and not received a tax benefit for the year ended September 30, 2002, our net income for fiscal 2002 would have been $418,000, or 30.0% less than fiscal 2003.

             Interest Income. Total interest income increased by $350,000, or 4.1%, to $8.8 million for the year ended September 30, 2003 from $8.5 million for the year ended September 30, 2002. The primary factor for the increase in interest income was the $14.7 million increase in the average balance of loans receivable from $98.9 million for the year ended September 30, 2002 to $113.6 million for the year ended September 30, 2003. The increase was the result of loan originations exceeding repayments due to strong demand, reflecting generally lower interest rates in fiscal 2003. The average yield on loans receivable decreased to 7.69% from 8.32%, reflecting decreased market rates of interest.

            Interest income from interest–bearing deposits decreased $87,000, or 85.3%, to $15,000 for the year ended September 30, 2003 from $102,000 for the year ended September 30, 2002. The decrease resulted from a decrease in the average balance to $743,000 from $2.3 million, which was due to the maturity of our certificates of deposit in other financial institutions and the utilization of the proceeds to fund new loan originations.

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             Interest Expense. Total interest expense decreased $682,000, or 17.7%, to $3.2 million for the year ended September 30, 2003 from $3.9 million for the year ended September 30, 2002. The decrease in interest expense resulted primarily from a decrease in interest expense on deposit accounts. Interest expense on deposits decreased $684,000, or 17.7%, to $3.2 million for the year ended September 30, 2003 from $3.9 million for fiscal 2002. The decrease resulted from a 92 basis point decrease in the average cost of deposits to 2.89% from 3.81%, reflecting generally lower market rates of interest in fiscal 2003.

            Net Interest Income. Net interest income increased by $1.1 million, or 23.1%, to $5.7 million for the year ended September 30, 2003 from $4.6 million for fiscal 2002. The net interest rate spread and the net interest margin increased during the period, reflecting lower levels of rates paid on deposits and a change in asset mix due to increased loan demand, which was partially funded with proceeds from the maturity of lower yielding certificates of deposit in other financial institutions. The net interest spread increased 38 basis points to 4.72% from 4.34% while the net interest margin increased 43 basis points to 4.87% from 4.44%.

             Provision for Loan Losses. We establish provisions for loan losses, which are charged to operations, at a level management believes will 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. In fiscal 2003, we recorded a provision for loan losses of $406,000, compared to $375,000 in 2002, to reflect an 18.3% increase in gross loans, including a 30.5% increase in first mortgages on residential real estate. New loan volume increased to $87.4 million in 2003 from $71.8 million in 2002, consisting of the same types of loans in both years.

            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. The allowance for loan losses as a percentage of loans outstanding increased to .38% at September 30, 2003 from .33% at September 30, 2002. The level of the allowance is based on estimates and the ultimate losses may vary from the estimates. Nonperforming assets were approximately $562,000 and $607,000 at September 30, 2003 and 2002, respectively.

            Management assesses the allowance for loan losses on a quarterly 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. In addition, various regulatory agencies, as an integral part of 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. The allowance for loan losses as of September 30, 2003 is maintained at a level that represents management's best estimate of inherent losses in the loan portfolio, and such losses were both probable and reasonably estimable.

             Noninterest Income. Noninterest income increased $225,000, or 20.3%, to $1.3 million for the year ended September 30, 2003 from $1.1 million for fiscal 2002, as a result of increases in customer service fees of $126,000 on deposit accounts, due primarily to growth in demand accounts, and loan fees of $62,000, due to increased lending activity. Loan fees and service charges consist of credit card fees, loan closing and document fees, and late charges.

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             Noninterest Expense. Noninterest expense increased $967,000, or 20.7%, to $5.6 million for the year ended September 30, 2003 from $4.7 million for the year ended September 30, 2002. This increase was primarily the result of an $859,000 increase in salaries and employee benefits due to additional loan personnel to support increased loan demand and the acquisition of a new branch. Occupancy expense also increased $249,000 as we added additional branches. These increases were partially offset by a $202,000 reduction in other expenses, due to one–time charges associated with the charter change during fiscal 2002 not recurring in fiscal 2003.

             Income Tax Expense. Income tax expense increased to $390,000, or 39.5%, of income before income taxes for the year ended September 30, 2003 from $27,000, or 3.8%, of income before income taxes for the year ended September 30, 2002. The primary difference between the federal statutory rate of 34% and the bank's effective tax rate of 39.5% is state income tax. As a credit union, no income tax expense was recorded due to our not–for–profit status. Upon conversion to a thrift charter in December 2001, we recorded a tax benefit of $194,000 as a result of a change in tax status and in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Had we been a thrift for all of fiscal 2002, our income tax expense would have been $273,000 in fiscal 2002, for an effective tax rate of 39.5%.

Comparison of Financial Condition at September 30, 2004 and September 30, 2003

            Total Assets. Total assets of the Company as of September 30. 2004 were $162.0 million as compared to $130.4 million as of September 30, 2003, an increase of 24.2%. Assets increased primarily as a result of an increase in loan receivables. One contributing factor to the increase was the purchase of the branch in Mankato, Minnesota on November 1, 2003, which included $701,000 in loans and $24,000 in equipment.

            Loans Receivable. Loan demand was strong in 2004.   Total loans, net of allowance for loan losses, increased by 23.8 % from $123.1 million as of September 30, 2003 to $152.4 million as of September 30, 2004. Loan demand was strong in 2004 as a result of internal marketing efforts and the addition of the Mankato branch. Management expects continued strong loan demand in 2005 as a result of our continuing internal marketing and the addition of the Oakdale, Minnesota branch October 1, 2004. At September 30, 2004, the loan portfolio included $95.4 million, or 62.4% of loans secured by real estate, $57.4 million or 37.5% of consumer loans, and commercial loans of $115,000, or less than 1% of total loans. At September 30, 2003 the mix of loan portfolio included real estate loans of $76.0 million or 61.5% of total loans, consumer loans of $47.6 million or 38.5% of total loans and commercial loans of $26,000, less than 1% of total loans.

            Deposits. Deposits as of September 30, 2004 were $128.0 million, compared to $115.0 million as of September 30, 2003, an increase of $13.0 million, or 11.3%. The majority of the deposit growth came from the purchase of the Mankato branch described previously. Management continues to seek deposit growth when rates are favorable in a particular market location.

            Borrowed Funds. Federal Home Loan Bank advances increased from $3.7 million at September 30, 2003 to $13.5 million on September 30, 2004, as the need to borrow funds to support loan demand increased. Management will continue to balance best use of deposit growth vs. borrowed funds in 2005.

            Stockholders' Equity. Stockholders' equity at September 30, 2004 was $19.6 million compared to $11.0 million at September 30, 2003, as a result of the net proceeds from the sale of the stock and net income of $837,000.

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

The following table presents for the periods indicated the total dollar amount of interest income from average interest–earning assets and the resultant yields, as well as the interest expense on average interest–bearing liabilities, expressed both in dollars and rates. Also presented is the weighted average yield on interest–earning assets, rates paid on interest–bearing liabilities and the resultant spread at September 30, 2004. No tax equivalent adjustments were made. All average balances were calculated using beginning and end of year balances, which would not result in materially different rates from those calculated using average monthly or daily balances. Non–accruing loans have been included in the table as loans carrying a zero yield.

	At September 30,	Year Ended September 30,
	2004	2004			2003			2002
	Average Yield/ Cost	Average Outstanding Balance	Interest Earned/ Paid	Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Yield/ Rate
		(Dollars in Thousands)
Interest-Earning Assets:
Cash equivalents	1.02%	$ 4,133	$ 30	0.73%	$ 1,159	$ 41	3.54%	$ 2,705	$ 131	4.84%
Loans receivable ⁽¹⁾	6.78	138,252	9,545	6.90	113,599	8,732	7.69	98,854	8,224	8.32
Certificates of deposit	--	--	--	--	743	15	2.02	2,278	102	4.48
FHLB stock	6.00	749	45	6.01	612	41	6.70	276	22	7.97
Total interest–earning assets	6.75	143,134	9,620	6.72	116,113	8,829	7.60	104,113	8,479	8.14

Interest–Bearing Liabilities:
Savings accounts	0.79	14,020	115	0.82	13,601	115	0.85	12,551	160	1.27
Demand accounts ⁽²⁾	0.27	11,003	31	0.28	9,966	30	0.30	9,251	32	0.35
Money market accounts	1.82	19,739	389	1.97	13,703	216	1.58	11,082	250	2.26
CDs	2.86	67,553	1,969	2.91	63,571	2,451	3.86	60,279	3,006	4.99
IRAs	3.04	9,156	302	3.30	8,857	363	4.10	8,206	411	5.01
FHLB advances	1.54	8,600	83	0.97	383	2	0.52	––	––	––
Total interest–bearing liabilities	2.16	130,071	$2,889	2.22	110,081	3,177	2.89	101,369	3,859	3.81

Net interest income			$6,731			$5,652			$4,620
Net interest rate spread	4.59%			4.50%			4.72%			4.34%
Net interest margin ⁽³⁾				4.70%			4.87%			4.44%
Average interest–earning assets to
average interest–bearing liabilities			1.10x			1.05x			1.03x

_________________
⁽¹⁾    Calculated net of loan fees ($(1) in 2004, $50 in 2003 and $13 in 2002), loan discounts, loans in process and allowance for losses on loans.
⁽²⁾    Includes $4.5 million, $3.7 million and $3.3 million of non–interest–bearing demand deposits at September 30, 2004, 2003 and 2002, respectively.
⁽³⁾    Net interest income divided by interest–earning assets.

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Rate/Volume Analysis

The following table presents the dollar amount of changes in interest income and interest expense for major components of interest–earning assets and interest–bearing liabilities. For each category of interest–earning assets and interest–bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in volume multiplied by the old rate, and (2) changes in rate, which are changes in rate multiplied by the old volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

			Year Ended September 30,
			2004 vs. 2003
			Increase (Decrease) Due to		Total Increase
			Volume	Rate	(Decrease)
			(In Thousands)
Interest–earning assets:
	Loans receivable ⁽¹⁾		$1,767	$ (954)	$ 813
	Other		42	(64)	(22)

		Total interest–earning assets	$1,809	$(1,018)	$ 791

Interest–bearing liabilities:
	Savings accounts		$ 3	$ (3)	$ ––
	Demand accounts		3	(2)	1
	Money market accounts		110	63	173
	IRA accounts		146	(628)	(482)
	Certificates of deposit		12	(73)	(61)
	FHLB advances		78	3	81

		Total interest–bearing liabilities	$ 353	$ (641)	(288)

Net interest income					$1,079

            ______________
            (1)   Calculated net of loan fees of $(1) in 2004 and $50 in 2003.

Liquidity and Commitments

            We are required to have enough investments that qualify as liquid assets in order to maintain sufficient liquidity to ensure a safe and sound operation. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained. At September 30, 2004, our liquidity ratio, which is our liquid assets as a percentage of net withdrawable savings deposits with a maturity of one year or less and current borrowings was 7.1%.

            Citizens Community Federal's liquidity, represented by cash and cash equivalents, is a product of its operating, investing and financing activities. Citizens Community Federal's primary

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sources of funds are deposits, amortization, prepayments and maturities of outstanding loans and other short–term investments and funds provided from operations. While scheduled payments from the amortization of loans and maturing short–term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. In addition, Citizens Community Federal invests excess funds in short–term interest–earning assets, which provide liquidity to meet lending requirements. Citizens Community Federal also generates cash through borrowings. Citizens Community Federal utilizes Federal Home Loan Bank advances to leverage its capital base and provide funds for its lending and investment activities, and to enhance its interest rate risk management.

            Liquidity management is both a daily and long–term function of business management. Excess liquidity is generally invested in short–term investments such as overnight deposits or certificates of deposit in other financial institutions. On a longer term basis, Citizens Community Federal maintains a strategy of investing in various lending products as described in greater detail under "Business of Citizens Community Federal – Lending Activities." Citizens Community Federal uses its sources of funds primarily to meet its ongoing commitments, to pay maturing certificates of deposit and savings withdrawals, and to fund loan commitments. At September 30, 2004, the total approved loan origination commitments outstanding amounted to $445,000. At the same date, unused lines of credit were $5.1 million. Certificates of deposit scheduled to mature in one year or less at September 30, 2004, totaled $38.0 million. Although the average cost of deposits has decreased throughout fiscal 2004, management's policy is to maintain deposit rates at levels that are competitive with other local financial institutions. Based on the competitive rates and on historical experience, management believes that a significant portion of maturing deposits will remain with Citizens Community Federal. In addition, the Bank has the ability as of September 30, 2004 to borrow an additional $39.5 million from the Federal Home Loan Bank of Chicago as a funding source to meet commitments and for liquidity purposes.

Capital

            Consistent with its goals to operate a sound and profitable financial organization, Citizens Community Federal actively seeks to maintain a "well capitalized" institution in accordance with regulatory standards. Total equity was $15.2 million at September 30, 2004, or 9.4% of total assets on that date. As of September 30, 2004, Citizens Community Federal exceeded all capital requirements of the Office of Thrift Supervision. Citizens Community Federal's regulatory capital ratios at September 30, 2004 were as follows: core capital 9.2%; Tier I risk–based capital, 13.6%; and total risk–based capital, 14.0%. The regulatory capital requirements to be considered well capitalized are 5.0%, 6.0% and 10.0%, respectively. As a result of converting to the thrift charter, Citizens Community Federal is also required to maintain core capital of at least 8.0% until December 2004.

Impact of Inflation

            The consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

            Our primary assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest

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rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturities structures of our assets and liabilities are critical to the maintenance of acceptable performance levels.

            The principal effect of inflation, as distinct from levels of interest rates, on earnings is in the area of noninterest expense. Such expense items as employee compensation, employee benefits and occupancy and equipment costs may be subject to increases as a result of inflation. An additional effect of inflation is the possible increase in the dollar value of the collateral securing loans that we have made. We are unable to determine the extent, if any, to which properties securing our loans have appreciated in dollar value due to inflation.

Recent Accounting Pronouncements

            The Financial Accounting Standard Board ("FASB") recently issued the following accounting standards related to the financial services industry:

            The FASB issued Statement of Financial Accounting Standards No. 148, " Accounting for Stock–Based Compensation–Transition and Disclosure ," which is effective for fiscal years beginning after December 15, 2003. This statement amends SFAS No. 123, " Accounting for Stock–Based Compensation, " to provide alternative methods of transition for companies that voluntarily change to the fair value based method of accounting for stock–based employee compensation. It also requires prominent disclosure about the effects on reported net income of an entity's accounting policy decisions with respect to stock–based employee compensation. Implementation of this statement is not expected to have a material impact on our financial position or results of operations.

            The FASB issued Statement of Financial Accounting Standards No. 149, " Amendment of Statement 133 on Derivative Instruments and Hedging Activities. " This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under Statement of Financial Accounting Standards Board Statement No. 133, " Accounting for Derivative Instruments and Hedging Activities ." This statement is effective for certain contracts entered into or modified after June 30, 2003, and for certain hedging relationships designated after June 30, 2003. Implementation of this statement did not have a material impact on our financial position or results of operations because we currently do not have any derivative instruments or engage in any hedging activities.

            The FASB issued Statement of Financial Accounting Standards No. 150, " Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity ." This Statement established standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. Implementation of this statement did not have a material effect on our financial position or results of operations.

            In November 2002, the FASB issued interpretation No. 45, " Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, " (FIN 45). This interpretation elaborates on the disclosures to be made by a guarantor in its interim

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and annual financial statements about its obligations under certain guarantees that it has issued. The interpretation also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions for FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosures required by FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The requirements of FIN 45 did not have a material impact on our results of operations, financial position, or liquidity.

            The FASB issued Interpretation No. 46, " Consolidation of Variable Interest Entities ." This interpretation defined a variable interest entity as a corporation, partnership, trust, or any other legal structure used for the business purpose that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. This interpretation will require a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual return. The provisions of this interpretation are required to be applied immediately to variable interest entities created after January 31, 2003. We do not have any variable interest entities and, accordingly, the implementation of this interpretation did not result in any impact on our financial position or results of operations.

Quantitative and Qualitative Disclosures About Market Risk

             Our Risk When Interest Rates Change. The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

             How We Measure Our Risk of Interest Rate Changes. As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor our interest rate risk. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities, and their sensitivity to actual or potential changes in market interest rates.

            In order to manage the potential for adverse effects of material and prolonged increases in interest rates on our results of operations, we adopted asset and liability management policies to better align the maturities and repricing terms of our interest–earning assets and interest–bearing liabilities. These policies are implemented by the asset and liability management committee. The asset and liability management committee is comprised of members of senior management. The asset and liability management committee establishes guidelines for and monitors the volume and mix of assets and funding sources taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The objectives are to manage assets and funding sources to produce results that are consistent with liquidity, capital adequacy, growth, risk and profitability goals. The asset and liability management committee generally meets on a weekly basis to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to net present value of portfolio equity analysis. At each meeting, the asset and liability management committee recommends strategy

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changes, as appropriate, based on this review. The committee is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the board of directors on a monthly basis.

In order to manage our assets and liabilities and achieve the desired liquidity, credit quality, interest rate risk, profitability and capital targets, we have focused our strategies on:

	•	originating first mortgage loans, with a clause allowing for payment on demand after a stated period of time,
	•	originating shorter–term consumer loans,
	•	originating prime–based home equity lines of credit,
	•	managing our deposits to establish stable deposit relationships,
	•	using FHLB advances to align maturities and repricing terms, and
	•	attempting to limit the percentage of long term fixed–rate loans in our portfolio which do not contain a payable on demand clause.

At times, depending on the level of general interest rates, the relationship between long– and short–term interest rates, market conditions and competitive factors, the asset and liability management committee may determine to increase Citizens Community Federal's interest rate risk position somewhat in order to maintain its net interest margin.

            In light of our performance in 2004, our strategies have proved to be effective. Credit quality continued to be positive with delinquency and charge–off ratios remaining low. Interest rate risk, defined by net portfolio value, continued to show minimal risk. By continuing to use our Payment On Demand clauses on our first mortgage loan originations, less than five percent of the Bank's assets were represented by long–term, fixed–rate first mortgage loans. The Bank's profitability increased significantly compared to the previous year with capital levels remaining on target.

            As part of its procedures, the asset and liability management committee regularly reviews interest rate risk by forecasting the impact of alternative interest rate environments on net interest income and market value of portfolio equity. Market value of portfolio equity is defined as the net present value of an institution's existing assets, liabilities and off–balance sheet instruments, and evaluating such impacts against the maximum potential changes in net interest income and market value of portfolio equity that are authorized by the board of directors of Citizens Community Federal.

            The following table sets forth, at September 30, 2004, an analysis of Citizen Community Federal's interest rate risk as measured by the estimated changes in NPV resulting from instantaneous and sustained parallel shifts in the yield curve (±300 basis points, measured in 100 basis point increments). As of September 30, 2004, due to the current level of interest rates, the Office of Thrift Supervision no longer provides NPV estimates for decreases in interest rates greater than 100 basis points.

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Change in Interest Rates in Basis Points ("bp") (Rate Shock in Rates) ⁽¹⁾
	Net Portfolio Value			Net Portfolio Value as % of Present Value of Assets
	Amount	Change	Change	NPV Ratio	Change
	(Dollars in Thousands)
+300 bp	$16,692	$(1,765)	(10)%	10.35%	(78)bp
+200 bp	17,333	(1,124)	(6)	10.64	(49)
+100 bp	17,968	(489)	(3)	10.93	(20)
0 bp	18,457	–––	–––	11.13	–––
–100 bp	18,531	74	(0)	11.11	(2)
–200 bp	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾
–300 bp	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾

	___________
	⁽¹⁾	Assumes an instantaneous uniform change in interest rates at all maturities.
	⁽²⁾	Not meaningful because some market rates would compute to a rate less than zero.

For comparative purposes, the table below sets forth, at September 30, 2003, an analysis of the Bank's interest rate risk as measured by the estimated changes in NPV resulting from instantaneous and sustained parallel shifts in the yield curve (±300 basis points, measured in 100 basis point increments).

Change in Interest Rates in Basis Points ("bp") (Rate Shock in Rates) ⁽¹⁾
	Net Portfolio Value			Net Portfolio Value as % of Present Value of Assets
	Amount	Change	Change	NPV Ratio	Change
	(Dollars in Thousands)
+300 bp	$13,806	$(405)	(3)%	10.41%	(8)bp
+200 bp	14,050	(160)	(1)	10.52	2
+100 bp	14,207	(3)	–––	10.56	6
0 bp	14,211	–––	–––	10.49	–––
–100 bp	13,976	(234)	(2)	10.27	(22)
–200 bp	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾
–300 bp	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾	n/m ⁽²⁾

	___________
	⁽¹⁾	Assumes an instantaneous uniform change in interest rates at all maturities.
	⁽²⁾	Not meaningful because some market rates would compute to a rate less than zero.

The Office of Thrift Supervision uses certain assumptions in assessing the interest rate risk of savings associations. These assumptions relate to interest rates, loan prepayment rates, deposit decay rates, and the market values of certain assets under differing interest rate scenarios, among others.

The assumptions used by management to evaluate the vulnerability of Citizens Community Federal's operations to changes in interest rates in the table above are utilized in, and set forth under, the gap table below. Although management finds these assumptions reasonable, the interest rate sensitivity of Citizens Community Federal's assets and liabilities and the estimated effects of changes in interest rates on Citizens Community Federal's net interest income and market value of portfolio equity indicated in the above table could vary substantially if different assumptions were used or actual experience differs from such assumptions.

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The following table summarizes the anticipated maturities or repricing of Citizens Community Federal's interest–earning assets and interest–bearing liabilities at September 30, 2004, based on the information and assumptions set forth below.

	Six Months or Less	Over Six Months to One Year	Over One to Three Years	Over Three to Five Years	Over Five Years	Total
	(Dollars in Thousands)

Real estate mortgage loans	$16,924	$13,605	$34,771	$16,481	$13,666	$ 95,447
Consumer loans	29,998	18,656	8,150	680	––	57,484
Cash equivalents	5,242	––	––	––	––	5,242
Total interest–earning assets	52,164	32,261	42,921	17,161	13,666	158,173

Savings accounts	1,542	1,542	11,843	473	20	15,420
Demand and money market	6,714	6,716	10,075	2,519	4,590	30,614
Certificates of deposit	23,535	14,461	36,687	2,798	––	77,481
FHLB advances	13,500	––	––	––	––	13,500
Total interest–bearing liabilities	45,291	22,719	58,605	5,790	4,610	137,015

Interest–earning assets less interest–bearing liabilities	$ 6,873	$ 9,542	$(15,684)	$11,371	$ 9,056	$ 21,158

Cumulative interest rate sensitivity gap	$ 6,873	$16,415	$ 731	$12,102	$21,158	$ 21,158

Cumulative interest rate gap as a percentage of assets at September 30, 2004	4.24%	10.13%	0.45%	7.47%	13.06%	13.06%

Cumulative interest rate gap as a percentage of interest–earning assets at September 30, 2004	4.35%	10.38%	0.46%	7.65%	13.38%	13.38%

            The difference between repricing assets and liabilities for a specific period is referred to as the GAP. An excess of repriceable assets over liabilities is referred to as a positive gap. An excess of repriceable liabilities over assets is referred to as a negative gap. The cumulative gap is the summation of the gap for all periods to the end of the period for which the cumulative gap is being measured.

            Assets and liabilities scheduled to reprice are included in the period in which the rate is next scheduled to adjust rather than in the period in which the assets or liabilities are due. Fixed–rate loans are included in the periods in which they are scheduled to be repaid, based on scheduled amortization, as adjusted to take into account estimated prepayments based on OTS prepayment tables. No effect is given to the payable on demand clause in certain mortgage loans originated by Citizens Community Federal.

            As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, a limited amount of our assets have features which restrict changes in interest rates on a short–term basis and over the life of the asset. Further, if

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interest rates change, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table.

Critical Accounting Policies

There are certain accounting policies that we have established which require us to use our judgment. The only critical accounting policy, in addition to the policies included in Note 1, "Summary of Significant Accounting Policies," to the Financial Statements, is as follows:

Allowance for Loan Losses. Establishing the amount of the allowance for loan losses requires the use of our judgment. We evaluate our assets at least quarterly, and review their risk components as part of that evaluation. If we misjudge a major component and experience a loss, it will likely affect our earnings. In addition, by the very nature of the determination of the allowance, developments as to particular loans can affect year–to–year provision amounts. We consistently challenge ourselves in the review of the risk components to identify any changes in trends and their cause.

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WIPFLI LLP
Independent Auditors Report

Board of Directors
Citizens Community Bancorp
Altoona, Wisconsin

We have audited the accompanying consolidated balance sheets of Citizens Community Bancorp and Subsidiary as of September 30, 2004 and 2003, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 Citizens Community Bancorp and Subsidiary as of September 30, 2004 and 2003, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

/s/ Wipfli LLP

Wipfli LLP

October 22, 2004
Eau Claire, Wisconsin

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Citizens Community Bancorp and Subsidiary
Consolidated Balance Sheets
September 30, 2004 and 2003

*Assets*	2004	2003

Cash and cash equivalents	$4,768,007	$3,074,024

Loans receivable	152,930,540	123,573,894
Allowance for loan losses	(554,210)	(466,527)

Loans receivable, net	152,376,330	123,107,367

Office properties and equipment – Net	2,198,809	2,342,738
Federal Home Loan Bank stock	827,700	671,000
Accrued interest receivable	466,399	397,058
Intangible assets	348,486	155,687
Other assets	994,065	652,009

TOTAL ASSETS	$161,979,796	$130,399,883


*Liabilities and Stockholders' Equity*

Liabilities:
Deposits	$127,976,262	$114,962,864
Federal Home Loan Bank advances	13,500,000	3,700,000
Other liabilities	897,611	746,083

Total liabilities	142,373,873	119,408,947

Preferred stock – Par Value $.01: Authorized – 1,000,000 shares Issued and outstanding – 0 shares
Common stock – Par value $.01: Authorized – 5,000,000 shares Issued and outstanding – 3,041,750 shares	30,418	0
Additional paid–in capital	9,029,696	0
Retained earnings	11,678,549	10,990,936
Unearned ESOP shares	(1,132,740)	0

Total stockholders' equity	19,605,923	10,990,936

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$161,979,796	$130,399,883

See accompanying notes to consolidated financial statements.

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Citizens Community Bancorp and Subsidiary
Consolidated Statements of Income
Years Ended September 30, 2004 and 2003

	2004	2003


Interest and dividend income:
Interest and fees on loans	$9,544,179	$8,782,650
Other interest and dividend income	75,309	97,658


Total interest and dividend income	9,619,488	8,880,308
Interest expense	2,889,307	3,177,793


Net interest income	6,730,181	5,702,515
Provision for loan losses	395,997	405,530


Net interest income after provision for loan losses	6,334,184	5,296,985


Noninterest income:
Service charges on deposit accounts	784,318	772,816
Insurance commissions	308,835	278,756
Loan fees and service charges	258,784	236,412
Other	16,720	44,294


Total noninterest income	1,368,657	1,332,278


Noninterest expense:
Salaries and related benefits	3,986,524	3,620,887
Occupancy – Net	629,849	552,444
Office	546,510	512,498
Data processing	301,503	275,874
Other	858,582	679,962


Total noninterest expense	6,322,968	5,641,665


Income before provision for income taxes	1,379,873	987,598
Provision for income taxes	543,328	390,101


Net income	$836,545	$597,497

See accompanying notes to consolidated financial statements.

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Citizens Community Bancorp and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
Years Ended September 30, 2004 and 2003

	Shares	Common Stock	Capital Surplus	Retained Earnings	Unearned ESOP Shares	Totals


Balances – September 30, 2002	0	$ 0	$ 0	$10,393,439	$ 0	$10,393,439

Comprehensive income – Net income	0	0	0	597,497	0	597,497


Balances – September 30, 2003	0	0	0	10,990,936	0	10,990,936

Comprehensive income – Net income	0	0	0	836,545	0	836,545
Sale of common stock	978,650	9,787	9,038,403	0	0	9,048,190
119,236 shares of common stock acquired by ESOP	0	0	0	0	(1,192,360)	(1,192,360)
Committed ESOP shares	0	0	0	0	59,620	59,620
Appreciation in fair value of ESOP shares charged
to expense	0	0	11,924	0	0	11,924
Capitalization of CCMHC	2,063,100	20,631	(20,631)	(100,000)	0	(100,000)
Cash Dividends ($.05 per share)	0	0	0	(48,932)	0	(48,932)


Balances – September 30, 2004	3,041,750	$30,418	$9,029,696	$11,678,549	$(1,132,740)	$19,605,923

See accompanying notes to consolidated financial statements.

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Citizens Community Bancorp and Subsidiary
Consolidated Statements of Cash Flows
Years Ended September 30, 2004 and 2003

	2004	2003


Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net income	$836,545	$597,497


Adjustments to reconcile net income to net cash provided by operating activities:
Provision for depreciation	256,162	261,030
Provision for loan losses	395,997	405,530
Amortization of core deposit intangible	24,330	10,133
Provision for deferred income taxes	(124,000)	(49,130)
Federal Home Loan Bank stock dividends	(44,700)	(41,800)
ESOP contribution expense in excess of shares released	11,924	0
Increase in accrued interest receivable and other assets	(286,784)	(208,234)
Increase in other liabilities	128,022	311,360


Total adjustments	360,951	688,889


Net cash provided by operating activities	1,197,496	1,286,386


Cash flows from investing activities:
Net decrease in certificates of deposit in other financial institutions	0	1,485,000
Purchase of Federal Home Loan Bank stock	(112,000)	(75,800)
Net increase in loans	(28,959,211)	(19,422,395)
Capital expenditures	(87,885)	(368,650)
Cash received for branch acquisition	6,970,198	0


Net cash used in investing activities	(22,188,898)	(18,381,845)


Cash from financing activities:
Borrowings	9,800,000	3,700,000
Increase in deposits	5,118,868	10,534,362
Proceeds from sale of common stock	9,048,189	0
Formation of CCMHC	(100,000)	0
Loan to ESOP for purchase of common stock	(1,192,360)	0
Reduction in unallocated shares held by ESOP	59,620	0
Cash dividends paid	(48,932)	0


Net cash provided by financing activities	22,685,385	14,234,362

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Citizens Community Bancorp and Subsidiary

Consolidated Statements of Cash Flows (Continued)
Years Ended September 30, 2004 and 2003

	2004	2003


Net increase (decrease) in cash and cash equivalents	$1,693,983	$(2,861,097)
Cash and cash equivalents at beginning	3,074,024	5,935,121


Cash and cash equivalents at end	$4,768,007	$3,074,024


Supplemental cash flow information:
Cash paid during the year for:
Interest on deposits	$2,897,762	$3,230,125
Income taxes	686,406	504,000

Noncash investing and financing activities:
Loans transferred to foreclosed properties	0	101,054

Supplemental schedule of noncash investing and financing activities:

In November 2003, the Company purchased certain assets and assumed the deposits of the Mankato branch of Alliance Bank. In conjunction with the acquisition, the Company received $6,970,198 and the following assets and liabilities:

Loans	$705,751
Other assets	241,756


Assets acquired	$947,507


Deposits assumed	$7,894,530
Other liabilities	23,175


Liabilities assumed	$7,917,705

See accompanying notes to consolidated financial statements.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies

	Nature of Operations

	Citizens Community Bancorp (the "Company") is a federally chartered holding company formed on March 29, 2004, for the purpose of acquiring all of the common stock of Citizens Community Federal (the "Bank") concurrent with its reorganization and stock issuance plan. The reorganization was consummated on March 29, 2004. In connection with the reorganization, the Company sold 978,650 shares of its common stock, par value $0.01 per share, in a subscription offering, and issued 2,063,100 shares to Citizens Community MHC (CCMHC), raising approximately $8.9 million, net of costs. The Company is a majority–owned subsidiary of CCMHC, a federally chartered mutual holding company.

	The Bank is a federally chartered stock savings bank. It operates its business from several banking offices located in Wisconsin and Minnesota. The Bank is engaged in the business of attracting deposits from the general public and investing those deposits in residential and consumer loans.

	Principles of Consolidation

	The consolidated financial statements include the accounts of Citizens Community Bancorp and its wholly–owned subsidiary, Citizens Community Federal. All significant intercompany balances and transactions have been eliminated. The accounting and reporting policies of the Company conform to generally accepted accounting principles (GAAP) and to the practices within the banking industry.

	Use of Estimates in Preparation of Financial Statements

	The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies (Continued)

	Cash and Cash Equivalents
	For purposes of reporting cash flows, cash and cash equivalents include cash due from banks and interest–bearing deposits with original maturities of three months or less.
	Interest and Fees on Loans
	Interest on loans is credited to income over the contractual life of the loans based on the principal amount outstanding using the interest method. Accrual of interest is discontinued when a loan becomes over 90 days delinquent. Uncollectible interest previously accrued is charged off or an allowance is established by means of a charge to interest income. Income is subsequently recognized only to the extent cash payments are received until all past due interest and principal have been collected, in which case the loan is returned to accrual status.
	Loan origination fees are credited to income when received, as capitalization and amortization of the fees and related costs would not have a material effect on the overall consolidated financial statements. Premiums paid for origination of loans by dealers and merchants are deferred and recognized as an adjustment to interest income using the interest method over the contractual life of the loans.
	Allowance for Loan Losses
	The allowance for loan losses is established through a provision for loan losses charged to expense. Loan losses are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.
	The Bank considers loans secured by real estate and all consumer loans to be large groups of smaller–balance homogeneous loans. Each portfolio of smaller–balance, homogeneous loans is 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 on 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.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies (Continued)

	Allowance for Loan Losses (Continued)
	Management also considers overall portfolio indicators including historical credit losses, delinquent, nonperforming and classified loans, and trends in volumes and terms of loans, an evaluation of overall credit quality and the credit process, including lending policies and procedures, and economic, geographical, and other environmental factors and regulatory guidance.
	In managements 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.
	Foreclosed Properties
	Assets acquired by foreclosure or in lieu of foreclosure are held for sale and are initially recorded at fair value less estimated costs to sell. Costs relating to the development and improvement of property are capitalized; holding costs are charged to expense.
	Valuations are periodically performed by management and a charge to income is recorded if the carrying value of a property exceeds its fair value less estimated selling costs.
	Office Properties Equipment
	Office properties and equipment are stated at cost. Maintenance and repair costs are charged to expense as incurred. Gains or losses on disposition of office properties and equipment are reflected in income. Depreciation is computed principally on the straight–line method and is based on the estimated useful lives of the assets, varying from 1 0 to 40 years for buildings and 3 to 10 years for equipment.
	Federal Home Loan Bank Stock
	The Bank owns stock in the Federal Home Loan Bank (FHLB). FHLB stock is carried at cost which approximates fair value. The Bank is required to hold the stock as a member of the FHLB system and transfer of the stock is substantially restricted. The stock is pledged as collateral for outstanding FHLB advances.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies (Continued)

	Intangible Assets
	Intangible assets attributable to the value of core deposits are stated at cost less accumulated amortization. Core deposit intangible assets are amortized over their estimated useful lives, generally 15 years, and are reviewed if facts and circumstances indicate that they may be impaired.
	Advertising Costs
	Advertising costs are expensed as incurred.
	Income Taxes
	Deferred income taxes have been provided under the liability method. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities as measured by the current enacted tax rates which will be in effect when these differences are expected to reverse. Provision (credit) for deferred taxes is the result of changes in the deferred tax assets and liabilities.
	Earnings Per Share
	When presented, basic earnings per share (EPS) is computed by dividing income available to common stockholders by the weighted–average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Because the formation of the Company was completed on March 29, 2004, per share earnings is not meaningful and is therefore not presented.
	Off–Balance–Sheet Financial Instruments
	In the ordinary course of business, the Bank has entered into off–balance–sheet financial instruments consisting of commitments to extend credit and commitments under credit card arrangements. Such financial instruments are recorded in the financial statements when they become payable.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies (Continued)

	Reclassifications
	Certain prior year balances have been reclassified to conform to the current year presentation.
	Recent Accounting Pronouncements
	The Financial Accounting Standards Board (FASB) recently issued the following accounting standards related to the financial services industry:
	The FASB issued Statement of Accounting Standards No. 148, Accounting for Stock–Based Compensation– Transaction and Disclosure, which is effective for fiscal years beginning after December 15, 2003. This statement amends SFAS No. 123, Accounting for Stock–Based Compensation, to provide alternative methods of transition for companies that voluntarily change to the fair value based method of accounting for stock–based employee compensation. It also requires prominent disclosure about the effects on reported net income of an entitys accounting policy decisions with respect to stock–based employee compensation. Implementation of this statement is not expected to have a material impact on our financial position or results of operations.
	The FASB issued Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under Statement of Financial Accounting Standards Board Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement is effective for certain contracts entered into or modified after June 30, 2003, and for certain hedging relationships designated after June 30, 2003. Implementation of this statement did not have a material impact on our financial position or results of operations because we currently do not have any derivative instruments or engage in any hedging activities.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies (Continued)

	Recent Accounting Pronouncements (Continued)
	The FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. This statement established standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. Implementation of this statement did not have a material effect on our financial position or results of operations.
	In November 2002, the FASB issued interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees of Indebtedness of Others, (FIN #45). This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. The interpretation also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions for FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosures required by FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The requirements of FIN 45 did not have a material impact on our results of operations, financial position, or liquidity.
	The FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities. This interpretation defined a variable interest entity as a corporation, partnership, trust, or any other legal structure used for business purpose that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. This interpretation will require a variable interest entity to be consolidated by a bank if that bank is subject to a majority of the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys residual return. The provisions of this interpretation are required to be applied immediately to variable interest entities created after January 31, 2003.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 1	Summary of Significant Accounting Policies (Continued)

	Recent Accounting Pronouncements (Continued)
	We do not have any variable interest entities and, accordingly, the implementation of this interpretation did not result in any impact on our financial position or results of operations.
Note 2	Cash and Cash Equivalents
	In the normal course of business, the Bank maintains cash and due from bank balances with correspondent banks which routinely exceed insured amounts. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. The Bank monitors the financial condition of correspondent banks and believes credit risk is minimal.
Note 3	Loans
	The composition of loans at September 30 follows:
		2004	2003


	Real estate loans:
	First mortgages – 1– to 4–family	$89,841,081	$71,107,826
	Multi–family and commercial	320,616	239,019
	Second mortgages	5,398,362	4,661,006


	Total real estate loans	95,560,059	76,007,851


	Consumer loans:
	Automobile	25,808,371	26,904,864
	Secured personal	27,607,256	17,028,311
	Unsecured personal	3,954,854	3,632,868


	Total consumer loans	57,370,481	47,566,043


	Gross loans	152,930,540	123,573,894
	Less – Allowance for loan losses	554,210	466,527


	Loans receivable, net	$152,376,330	$123,107,367

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 3	Loans (Continued)

	The aggregate amount of nonperforming loans was $697,072 and $561,680 at September 30, 2004 and 2003, respectively. Nonperforming loans are those which are contractually past due more than 90 days as to interest or principal payments, on a nonaccrual of interest status, or loans the terms of which have been renegotiated to provide a reduction or deferral of interest or principal. If interest on those loans had been accrued, such income would have been $37,608 and $21,044 in 2004 and 2003, respectively. No loans were considered impaired in 2004 or 2003.
	Directors, officers, principal stockholders, and employees of the Company, including their families and firms in which they are principal owners, are considered to be related parties. Substantially all loans to directors and executive officers were made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others and, in the opinion of management, did not involve more than the normal risk of collectibility or present other unfavorable features.
	Directors, executive officers, principal stockholders and their affiliates of the Company had aggregate borrowings (direct and indirect) from the Bank totaling approximately $79,500 and $54,926 at September 30, 2004 and 2003, respectively.
	An analysis of the activity in the allowance for loan losses for the years ended September 30, follows:
		2004	2003


	Balance at beginning	$466,527	$349,448
	Provisions charged to operating expense	395,997	405,530
	Loans charged off	(341,437)	(312,953)
	Recoveries on loans	33,123	24,502


	Balance at end	$554,210	$466,527

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 4	Office Properties and Equipment

	Office properties and equipment at September 30, consists of the following:

		2004	2003


	Land	$ 467,727	$ 470,726
	Buildings	1,873,663	1,868,359
	Furniture, equipment, and vehicles	1,878,932	1,803,570


	Subtotals	4,220,322	4,142,655
	Less – Accumulated depreciation	2,021,513	1,799,917


	Office properties and equipment – Net	$2,198,809	$2,342,738


	Depreciation charged to operating expense totaled $256,162 and $261,030 for the years ended September 30, 2004 and 2003, respectively.

Note 5	Intangible Assets

	The carrying amount of the core deposit intangible for the years ended September 30, 2004 and 2003, is as follows:


		2004	2003


	Balance – September 30	$155,687	$ 0
	Capitalized	217,129	165,820
	Amortization	(24,330)	(10,133)


	Balance – September 30	$348,486	$155,687


	Estimated future amortization expense for amortizing core deposit intangible is $25,000 annually.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 6	Deposits

	The composition of deposits at September 30 follows:

		2004	2003


	Non–interest–bearing demand deposits	$ 4,460,849	$ 3,698,265
	Interest–bearing demand deposits	6,985,799	6,859,587
	Savings accounts	15,420,505	15,095,714
	Money market accounts	23,628,315	15,849,611
	Certificate accounts	77,480,794	73,459,687


	Total deposits	$127,976,262	$114,962,864


	Interest expense on deposits for the years ended September 30 was as follows:

		2004	2003


	Interest–bearing demand deposits	$ 31,392	$ 30,079
	Savings accounts	114,972	114,851
	Money market accounts	388,939	216,472
	Certificate accounts	2,269,407	2,814,276


	Totals	$2,804,710	$3,175,678


	The aggregate amount of time deposit accounts with individual balances greater than $100,000 was $16,546,579 and $14,173,564 at September 30, 2004 and 2003, respectively.
	At September 30, 2004, the scheduled maturities of certificate accounts are as follows:
	2005		$37,996,376
	2006		26,004,349
	2007		10,681,967
	2008		2,798,102


	Total		$77,480,794

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 7	Federal Home Loan Bank Advances

	At September 30, 2004 and 2003, respectively, the Company had $13,500,000 and $3,700,000 in Federal Home Loan Bank variable interest rate daily advances, currently at 2.21%. These advances are secured by a blanket lien consisting principally of 1– to 4–family real estate loans totaling in excess of $89,000,000. At September 30, 2004, the unused portion of this open line of credit totaled approximately $39,894,000. Interest expense was $82,532 and $2,115 in 2004 and 2003, respectively.
	The Company owns stock in the Federal Home Loan Bank totaling $827,700 and $671,000 at September 30, 2004 and 2003, respectively. The stock is recorded at cost, which approximates fair value. The Company is required to hold the stock as a member of the Federal Home Loan Bank system, and transfer of the stock is substantially restricted.
Note 8	Income Taxes

	The components of the provision for income taxes are as follows:

		2004	2003


	Current tax expense:
	Federal	$525,604	$345,242
	State	141,724	93,989


	Total current	667,328	439,231


	Deferred tax expense (benefit):
	Federal	(99,200)	(39,330)
	State	(24,800)	(9,800)


	Total deferred	(124,000)	(49,130)


	Total provision for income taxes	$543,328	$390,101

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 8	Income Taxes (Continued)

	Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities, net of a valuation allowance for deferred tax assets not likely to be realized. The major components of net deferred tax assets at September 30 are as follows:

		2004	2003


	Deferred tax assets:
	Mutual savings bank conversion costs	$ 44,000	$ 65,200
	Supplemental retirement plan	274,000	165,600
	Net ESOP plan	8,500	0

	Deferred tax assets	326,500	230,800

	Deferred tax liabilities:
	Office properties and equipment	(42,705)	(23,200)
	Allowance for loan losses	(94,000)	(159,705)
	Federal Home Loan Bank stock	(43,200)	(25,300)

	Deferred tax liabilities	(179,905)	(208,205)

	Net deferred tax asset	$146,595	$22,595

A summary of the source of differences between income taxes at the federal statutory rate and the provision for income taxes for the years ended September 30 follows:

	2004		2003
	Amount	Percent of Pretax Income	Amount	Percent of Pretax Income


Tax expense at statutory rate	$469,157	34.0	$335,783	34.0
Increase in taxes resulting from:
State income tax	74,171	5.4	54,318	5.5


Provision for income taxes	$543,328	39.4	$390,101	39.5

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 9	Retirement Plans

	401(k) Plan
	The Company sponsors a 401(k) profit sharing plan that covers substantially all employees. Employees may make pretax voluntary contributions to the plan which are matched in part by the Company. Employer matching contributions to the plan were $58,036 and $48,173 for 2004 and 2003, respectively.
	Supplemental Executive and Director Retirement Plan
	On August 1, 2002, the Company adopted a Supplemental Executive and Directors Retirement Plan (SERP). The SERP is an unfunded, noncontributory plan under which the Company will pay supplemental pension benefits to certain key employees and directors upon retirement. Benefits are based on a formula which includes participants past and future earnings and years of service with the Company. Prior service costs associated with plan adoption are amortized to expense over the remaining working life of each participant.
	Actuarial assumptions include assumed discount rates of six and seven percent at September 30, 2004 and 2003, respectively, on benefit obligations and annual salary increases of five percent.
	The accumulated benefit obligation was $1,734,481 and $1,358,031 and the accrued benefit cost was $685,883 and $414,066 at September 30, 2004 and 2003, respectively. The accrued benefit cost is included in the balance sheet caption "Other Liabilities."
	The components of net periodic benefit cost are as follows:
		2004	2003


	Beginning SERP accrued benefit cost	$414,066	$ 60,083


	Service cost	56,569	110,032
	Interest cost	95,235	81,753
	Amortization of prior service cost	120,013	162,198


	Net periodic benefit cost	271,817	353,983


	Ending SERP accrued benefit cost	$685,883	$414,066

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 9	Retirement Plans (Continued)

	Employee Stock Ownership Plan
	The Board of Directors approved an Employee Stock Ownership Plan (ESOP) that became effective March 29, 2004. The Plan is designed to provide eligible employees the advantage of ownership of Company stock. Employees are eligible to participate in the Plan after reaching age twenty–one, completing one year of service, and working at least one thousand hours of consecutive service during the year. Contributions are allocated to eligible participants on the basis of compensation.
	The ESOP borrowed $1,192,360 from the Company to finance the purchase of 119,236 shares in connection with the initial public offering. The loan is payable in annual installments over ten years at an annual interest rate equal to 5%. The loan can be prepaid without penalty. Loan payments are principally funded by cash contributions from the Company, subject to federal tax law limits.
	Shares used as collateral to secure the loan are released and available for allocation to eligible employees as the principal and interest on the loan is paid. Employees become fully vested in their ESOP account after five years of service. Dividends on unallocated shares are generally applied towards payment of the loan. ESOP shares committed to be released are considered outstanding in determining earnings per share.
	Contribution expense to the ESOP is based on the fair value (average stock price) of the shares scheduled to be released and totaled $71,544 in 2004. One–tenth of the shares are scheduled to be released each year. The cost of all unallocated shares held by the ESOP has been reflected in the consolidated balance sheets as a contra equity amount.
	The ESOP shares as of September 30, 2004, were as follows:

	Allocated	$ 0
	Committed to be released	5,962
	Unallocated	113,274


	Total shares held by ESOP	119,236


	Estimated fair value of unallocated shares held	$1,386,474

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 10	Leases

	The Bank leases its administrative and data processing center located in Eau Claire, Wisconsin. The lease, which is for 10 years expiring in 2006, is classified as an operating lease. Monthly rent of $6,638 is fixed throughout the lease term and includes utilities and property taxes. The Bank has two five–year renewal options on the lease. The Mondovi and Rice Lake branches and the Eau Claire training center are also rented under operating leases expiring in 2007. The Mankato branch is rented under an operating lease expiring in 2010.
	Total rental expense for all operating leases was $197,477 and $148,598 for the years ended September 30, 2004 and 2003, respectively.
	Future minimum lease payments by year and in the aggregate under the original terms of the noncancelable operating leases consist of the following:

	2005	$237,168
	2006	188,519
	2007	129,711
	2008	120,788
	2009	123,988


	Total	$800,174

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 11	Commitments and Contingencies

	Financial Instruments with 0ff–Balance–Sheet Risk
	The Company's financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of business and which involve elements of credit risk, interest rate risk, and liquidity risk. These commitments and contingent liabilities are commitments to extend credit. A summary of the Company's commitments and contingent liabilities at September 30 is as follows:
		2004	2003


	Commitments to extend credit – Fixed rate (5.50% – 6.50% in 2004; 6.5% – 8.5% in 2003)	$ 445,000	$ 221,616
	Unused lines of credit:
	Real estate equity advance plan (REAP)	553,994	468,115
	Kwik cash and lines of credit	1,656,257	1,637,361
	MasterCard and VISA credit cards	2,874,447	3,123,780


	Totals	$5,529,698	$5,450,872


	Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. A portion of the commitments is expected to be drawn upon, thus representing future cash requirements. Management evaluates each customers creditworthiness on a case–by–case basis. The amount of collateral obtained upon extension of credit is based on managements credit evaluation of the customer. Collateral held varies but may include real estate and personal property. Substantial amounts of unsecured personal loans are granted by the Company. However, ongoing credit evaluations of customers are performed.
	Concentration of Credit Risk
	The majority of the Company's loans and commitments have been granted to customers in the Company's local market area. The concentrations of credit by type are set forth in Note 3. Management believes the diversity of the area economy will prevent significant losses in the event of an economic downturn.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 11	Commitments and Contingencies (Continued)

	Contingencies
	In the normal course of business, the Company occasionally becomes involved in various legal proceedings. In the opinion of management, any liability from such proceedings would not have a material adverse effect on the business or financial condition of the Company.
Note 12	Capital Requirements

	The Bank is subject to various regulatory capital requirements administered by the federal agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off–balance–sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
	Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital to risk–weighted assets and of Tier I capital to average assets. It is managements opinion as of September 30, 2004, that the Bank meets all capital adequacy requirements.
	As of September 30, 2004, the most recent notification from the Office of Thrift Supervision categorized the Bank as well–capitalized under the regulatory framework for prompt corrective action. To be categorized as well–capitalized, the Bank must maintain minimum 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.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 12	Capital Requirements (Continued)

	The Bank's actual and regulatory capital amounts and ratios are presented in the following table:

	Actual		For Capital Adequacy Purposes		To Be Well– Capitalized Under Prompt Corrective Action Provisions
	Amount	Ratio	Amount	Ratio	Amount	Ratio


September 30, 2004

Total capital (to risk–weighted assets)	$15,281,000	14.0%	$8,749,000	≥ 8.0%	$10,936,000	≥ 10.0%
Tier 1 capital (to risk–weighted assets)	14,870,000	13.6%	4,374,480	≥ 4.0%	6,562,000	≥ 6.0%
Tier 1 capital (to adjusted total assets)	14,870,000	9.2%	6,469,000	≥ 4.0%	8,086,000	≥ 5.0%
Tangible capital (to tangible assets)	14,870,000	9.2%	2,426,000	≥ 1.5%	N/A	N/A

September 30, 2003

Total capital (to risk–weighted assets)	$11,458,000	12.9%	$7,129,280	≥ 8.0%	$8,911,600	≥ 10.0%
Tier 1 capital (to risk–weighted assets)	11,135,000	12.5%	3,564,640	≥ 4.0%	5,346,960	≥ 6.0%
Tier 1 capital (to adjusted total assets)	11,135,000	8.6%	5,215,760	≥ 4.0%	6,519,700	≥ 5.0%
Tangible capital (to tangible assets)	11,135,000	8.5%	1,954,000	≥ 1.5%	N/A	N/A

Note 13	Fair Values of Financial Instruments

	Current accounting standards require that the Company disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions for the Company's financial instruments are summarized below.
	Cash and Cash Equivalents
	The carrying values approximate the fair values for these assets.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 13	Fair Values of Financial Instruments (Continued)

	Loans
	Fair value is estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as residential mortgage and consumer. The fair value of loans is calculated by discounting scheduled cash flows using discount rates reflecting the credit and interest rate risk inherent in the loan.
	The methodology in determining fair value of nonaccrual loans is to average them into the blended interest rate at 0% interest. This has the effect of decreasing the carrying amount below the risk–free rate amount and therefore discounts the estimated fair value.
	Impaired loans are measured at the estimated fair value of the expected future cash flows at the loans effective interest rate or the fair value of the collateral for loans which are collateral dependent. Therefore, the carrying values of impaired loans approximate the estimated fair values for these assets.
	Federal Home Loan Bank Stock
	Fair value for the Federal Home Loan Bank stock is based on its redeemable (carrying) value, as the market for this stock is restricted.
	Deposits
	The fair value of deposits with no stated maturity, such as demand deposits, savings accounts, and money market accounts, is the amount payable on demand at the reporting date. The fair value of certificate accounts is calculated by using discounted cash flows applying interest rates currently being offered on similar certificates.
	Federal Home Loan Bank Advances
	The fair value of FHLB advances is estimated using discounted cash flows based on the Bank's current incremental borrowing rates for similar borrowing arrangements.
	Off–Balance–Sheet Instruments
	The fair value of commitments would be estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the current interest rates, and the present creditworthiness of the customers. Since this amount is immaterial, no amounts for fair value are presented.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 13	Fair Value of Financial Instruments (Continued)

	The carrying amount and estimated fair value of financial instruments at September 30 were as follows:
		2004		2003
		Carrying Amount	Estimated Fair Value	Carrying Amount	Estimated Fair Value


	Financial assets:
	Cash and cash equivalents	$ 4,768,007	$ 4,768,007	$ 3,074,024	$ 3,074,024
	Loans receivable	152,376,330	155,494,000	123,107,367	125,062,000
	FHLB stock	827,700	827,700	671,000	671,000
	Accrued interest receivable	466,399	466,399	397,058	397,058

	Financial liabilities:
	Deposits	127,976,262	128,227,000	114,962,864	116,204,000
	FHLB advances	13,500,000	13,500,000	3,700,000	3,700,000
	Accrued interest payable	3,503	3,503	12,868	12,868

	Limitations
	Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on–and off–balance–sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include premises and equipment, other assets, and other liabilities. In addition, the tax ramifications related to the realization of the unrealized gains or losses can have a significant effect on fair value estimates and have not been considered in the estimates.

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 14	Branch Acquisition

	In November 2003, the Company purchased certain assets and assumed the liabilities of the Mankato, Minnesota, branch of Alliance Bank. The Company assumed $7.9 million of deposit liabilities in exchange for $6.9 million of cash and $700,000 of loans and recognized a core deposit intangible of approximately $200,000.

Note 15	Condensed Parent Company Only Financial Statements

	The following condensed balance sheet as of September 30, 2004, and condensed statements of income and cash flows for the year then ended for Citizens Community Bancorp should be read in conjunction with the consolidated financial statements and the notes thereto. As explained in Note 1, Citizens Community Bancorp was formed March 29, 2004. Therefore, comparative financial statements are not presented.

	Balance Sheet September 30, 2004

	*Assets*


	Cash and cash equivalents	$3,239,230
	Investment in subsidiary	15,218,787
	Note receivable – ESOP	1,147,906


	TOTAL ASSETS	$19,605,923


	*Stockholders' Equity*


	TOTAL STOCKHOLDERS' EQUITY	$19,605,923

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 15

Condensed Parent Company Only Financial Statements (Continued)

	Statement of Income Year ended September 30, 2004

	Income:
	Interest and dividends	$ 61,081


	Total income	61,081

	Expenses – Other	28,874


	Income before provision for income taxes and equity in undistributed net income of subsidiary	32,207

	Provision for income taxes	11,000


	Income before equity in undistributed net income of subsidiary	21,207

	Equity in undistributed net income of subsidiary	815,338


	Net income	$836,545

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Citizens Community Bancorp and Subsidiary

Notes to Consolidated Financial Statements

Note 15

Condensed Parent Company Only Financial Statements (Continued)

Statement of Cash Flows Year ended September 30, 2004

Increase (decrease) in cash and cash equivalents:
		Cash flows from operating activities:
			Net income	$ 836,545
			Adjustments to reconcile net income to net cash provided by operating activities – Equity in undistributed income of subsidiary	(815,338)


	Net cash provided by operating activities			21,207


	Cash flows from investing activities:
		Investment in subsidiary		(4,533,328)
		Loan to ESOP		(1,192,360)
		Principal received on ESOP loan		44,454


	Net cash used in investing activities			(5,681,234)


	Cash flows from financing activities:
		Sale of common stock		9,048,189
		Formation of CCMHC		(100,000)
		Cash dividends paid		(48,932)


	Net cash provided by financing activities			8,899,257


Net increase in cash and cash equivalents				3,239,230
Cash and cash equivalents at beginning				0


Cash and cash equivalents at end				$3,239,230


Supplemental cash flow information:
	Cash paid during the year for income taxes			$ 11,000

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CITIZENS COMMUNITY BANCORP STOCKHOLDER INFORMATION
ANNUAL MEETING

The Annual Meeting of Stockholders of Citizens Community Bancorp will be held at the Company's offices in Banbury Place, Building D–02, Suite 319, 800 Wisconsin Street, Eau Claire, Wisconsin, 54703, on February 4, 2005, at 4:00 p.m. local time.

STOCK LISTING

Citizens Community Bancorp common stock is traded on the OTC Bulletin Board under the symbol "CZWI.OB."

PRICE RANGE OF COMMON STOCK

	HIGH	LOW	DIVIDENDS
FISCAL 2004
Second Quarter	$13.50	$12.10	$ ––
Third Quarter	$13.25	$11.25	$0.05
Fourth Quarter	$12.75	$11.80	$0.05

The stock price information set forth in the table above was provided by the Yahoo Finance System. The common stock began trading on March 30, 2004. The closing price of Citizens Community Bancorp common stock on December 10, 2004 was $15.10.

At December 10, 2004 there were 3,041,750 shares of Citizens Community Bancorp common stock outstanding (including unallocated ESOP shares) and there were 388 holders of record.

Our cash dividend payout policy is continually reviewed by management and the Board of Directors. The Company intends to continue its policy of paying quarterly dividends; however, these payments will depend upon a number of factors, including capital requirements, regulatory limitations, the Company's financial condition, results of operations and the Bank's ability to pay dividends to the Company. The Company relies significantly upon such dividends from the Bank to accumulate earnings for payment of cash dividends to the shareholders.

STOCKHOLDERS AND GENERAL INQUIRIES		TRANSFER AGENT
Citizens Community Bancorp files an annual report to the Securities and Exchange Commission on Form 10–KSB and three quarterly reports on Form 10–QSB. Copies of these forms are available by request. Requests, as well as inquiries from stockholders, analysts and others seeking information about Citizens Community Bancorp should be directed to Johnny W. Thompson, Senior Vice President and Chief Administrative Officer, at 2174 Eastridge Center, Eau Claire, WI 54701, telephone (715) 836–9994.		Stockholders should direct inquiries concerning their stock, change of name, address or ownership; report lost certificates or consolidate accounts to the Company's transfer agent at 1–800–368–5948 or write: Registrar and Transfer Co. 10 Commerce Drive Cranford, NJ 07016 1–(800) 368–5948
Johnny W. Thompson Citizens Community Bancorp 2174 Eastridge Center Eau Claire, Wisconsin 54701 (715) 836–9994 www.citizenscommunityfederal.net

ANNUAL AND OTHER REPORTS

A copy of Citizens Community Bancorp's Annual Report on Form 10–KSB for the year ended September 30, 2004, as filed with the Securities and Exchange Commission, may be obtained without charge by contacting Johnny W. Thompson, Citizens Community Bancorp, 2174 Eastridge Center, Eau Claire, Wisconsin 54701.

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CITIZENS COMMUNITY BANCORP
CORPORATE INFORMATION

Citizens Community Bancorp Board of Directors		Citizens Community Federal Officers
Richard McHugh, Chairman Thomas C. Kempen, Vice Chairman Brian R. Schilling Donna E. Talmage David B. Westrate James G. Cooley		James G. Cooley, President and Chief Executive Officer John D. Zettler, Chief Financial Officer Timothy J. Cruciani, Chief Vice President – Operations Johnny W. Thompson, Senior Vice President/Chief Administrative Officer Rebecca Johnson, Vice President MIC/Accounting
Citizens Community Federal Locations:
Administrative Office 2174 Eastridge Center Eau Claire, WI 54701 Branch Offices : Westside Branch 2125 Cameron Street Eau Claire, WI 54703 East Branch 1028 N. Hillcrest Parkway Altoona, WI 54720 Fairfax Branch 219 Fairfax Street Altoona, WI 54720 Mondovi Branch 695 E. Main Street Mondovi, WI 54755		Rice Lake Branch 2462 S. Main Street Rice Lake, WI 54868 Chippewa Falls Branch 427 W. Prairie View Road Chippewa Falls, WI 54729 Baraboo Branch S2423 Highway 12 Baraboo, WI 53913 Black River Falls Branch W9036 Highway 54 E. Black River Falls, WI 54615 Mankato Branch 1410 Madison Avenue Mankato, MN 56001 Oakdale Branch 7035 10 ^th Street North Oakdale, MN 55128

Independent Auditors Wipfli, LLP 515 W. Prairie View Road Chippewa Falls, WI 54729		Special Counsel Silver, Freedman & Taff, L.L.P. 1700 Wisconsin Avenue, N.W. Washington, D.C. 20007

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EXHIBIT 14

CITIZENS COMMUNITY BANCORP

CODE OF BUSINESS CONDUCT AND ETHICS

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PART I OVERVIEW Purpose of the Code
This Code of Business Conduct and Ethics ("Code") is intended to deter wrongdoing and promote:

Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

Full, fair, accurate, timely and understandable disclosure in documents the Corporation files with, or submits to, the SEC and in all public communications made by the Corporation;

Compliance with applicable governmental laws, rules and regulations;

Prompt internal reporting to designated persons of violations of the Code; and

Accountability for adherence to the Code.

Application of the Code
The Code applies to all Citizens Community Bancorp (the "Corporation") directors and employees, including subsidiary and affiliate employees.   The Code applies to all employee decisions and activities within the scope of employment, or when representing the Corporation in any capacity.   A copy of the Code will be given to new employees.   Following review of the Code, new employees will be asked to sign a written confirmation that they have reviewed the Code in its entirety, and agree to adhere to its provisions.   Existing employees will be asked to review the Code annually.   All Corporation officers and directors should be familiar with the requirements of the Code, and should encourage employees to apply the Code to their daily activities and decisions, and to seek guidance from the appropriate individuals when additional information or explanation is needed.
Copies of the Code may be obtained from several sources, including the Corporation's website, your immediate supervisor or any management official.
Obtaining Guidance
If you need additional explanation regarding a particular provision of the Code, or if you need guidance in a specific situation, including whether a conflict or potential conflict of interest may exist, please contact your immediate supervisor.   If you are uncomfortable speaking to your immediate supervisor, or if you require additional guidance after having consulted with your supervisor, you are encouraged to contact the following individual:
Timothy J. Cruciani 2174 Eastridge Center Eau Claire, Wisconsin    54701 office: (715) 836-9994 ext. 118 cell: (715) 828-3822 e-mail: TCruc@citizenscommunityfederal.net

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Reporting Violations of the Code
Any known or suspected violation of the Code, including actions or failures to act, must be promptly reported to your supervisor or the person listed above.   This includes violations or possible violations involving you, another employee (including officers) or a director.   Any violation of law, rule or regulation applicable to the Corporation and/or corporate policy is also a violation of this Code.   Violations of the Code may result in disciplinary action including, in severe situations, immediate termination of employment.
Concerns regarding questionable accounting, internal accounting controls or auditing matters may be directed to Dave Westrate at (715) 828-1178 by leaving a confidential message.
All concerns or complaints will be promptly investigated and appropriate action taken.   Results of the investigation will be documented in a report to the Board of Directors in order to ensure a fair process is utilized in determining whether a violation of the Code has occurred.   No person expressing concerns or complaints will be subject to any disciplinary or other adverse action by the Corporation absent a knowingly false report.   All concerns or complaints may be made anonymously and will remain confidential.   Please provide sufficient information to allow us to properly investigate your concerns.   The Corporation will retain a record of all concerns and complaints, and the results of its investigations, for five years.
PART II PRINCIPLES AND STANDARDS OF CONDUCT
One of the most valued assets of the Corporation is its reputation for integrity as determined by the personal conduct of its directors, officers and staff, and how that conduct may be perceived by the public.   The ethical management of both personal and business affairs is most important to all directors and employees in order to avoid situations that might lead to a conflict, or even suspicion of a conflict, between personal interest and responsibility to the Corporation.   Your position should never be used directly or indirectly for private gain, for advancement of personal interests or to obtain favors or benefits for oneself, customers, or suppliers.
The following is a statement of policy regarding standards of conduct expected from directors and employees of the Corporation and its affiliates in their treatment of confidential information, personal investments, gifts and fees, and outside activities.
Confidential and Insider Information
Confidentiality is a fundamental principle of the financial services business.   In the course of performing your duties, you may acquire confidential information.   Confidential information includes all non-public information that might be of use to competitors or harmful to the Corporation or its customers, if disclosed.   Confidential information, in any form, obtained through business or personal contacts with customers, prospective customers, suppliers, or other employees shall be used solely for the Corporation's purposes.   Information reflecting favorably or adversely upon the current or future value of any business enterprise should not be used in any manner for personal gain or for

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advantage to a third party. This information must not be revealed to unauthorized persons or discussed with others within the Corporation unless their duties require this information. The use of confidential information submitted to us through any source about one customer to further the private interests of another customer is unethical and may be illegal.
Some specific examples of confidential information include:

The identity of customers and potential customers and their personal, business and financial information;

Non-public business and financial information of the Corporation; personal information regarding any employee of the Corporation;

Personal or non-public business information regarding any supplier, vendor or agent of the Corporation;

Information related to, including the identity of, potential candidates for mergers and acquisitions;

Information regarding the Corporation's sales strategies, plans or proposals;

Information related to computer software programs, whether proprietary or standard;

Information related to documentation systems, information databases, customized hardware or other information systems and technological developments;

Manuals, processes, policies, procedures, compositions, opinion letters, ideas, innovations, inventions, formulas and other proprietary information belonging to the Corporation or related to the Corporation's activities;

Security information, including without limitation, policies and procedures, passwords, personal identification numbers (PINs) and electronic access keys;

Communications by, to and from regulatory agencies; and

Certain communications with or from attorneys for the Corporation, whether internal or external.

This caution on confidential information does not preclude releasing certain customer information when authorized by the customer or to the government when appropriate. The guidance of the Chief Executive Officer should be sought in all such cases. Disclosure of confidential information to attorneys, accountants and other professionals working on behalf of the Corporation, as well as regulatory examiners, may also be appropriate.
Personal Investments and Financial Affairs
Directors and employees of the Corporation, like any other individuals, may make personal investments in corporate stock, real estate, etc. Such investments, however, shall not be made as a result of confidential information that is also material inside information obtained through your position with the Corporation. Particular care should be taken with original or new stock issues. Confidential information about the Corporation and its customers and suppliers acquired by directors and employees in the course of their duties is to be used solely for the Corporation's purposes, and not as a basis for personal investment by directors and employees or their immediate families. In making personal investments, all directors and employees should be guided by a keen awareness of potential conflict. In addition, personal investments should not influence a director's or employee's judgment or action in the conduct of the Corporation's business.

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It is expected that all directors and employees will conduct their personal financial affairs in a manner that will not reflect adversely upon the Corporation or on their personal standing in the community.
Material Inside Information
Generally, material inside information is defined as any information that is confidential in nature, and that a reasonable investor would likely consider important in deciding whether to buy, sell, or hold the Corporation's stock. The following types of information, if not generally known or publicly disclosed, should be considered material inside information and treated according to the provisions of this Code:

Proposals or plans for mergers and acquisitions;

Earnings estimates or results, whether for the month, quarter or year;

Changes in dividends;

Significant new product innovation, development or implementation;

Major litigation, adverse regulatory proceeding or material threat of either event;

Significant operational issues, including changes in non-performing assets;

Significant expansion of operations, whether geographic or otherwise, or the curtailment of current or future planned operations; and

Any other information which, if known, would likely influence the decisions of investors.

Gifts and Fees
It is illegal for anyone to offer or promise anything of value to an employee, officer, director or agent of a financial institution with the intent to influence or reward the person in connection with any business or transaction of the financial institution. It is also illegal for an employee, officer, director or agent of a financial institution to solicit or accept anything of value from any person intending to be influenced or rewarded in connection with any business or transaction of the financial institution.
No employee or director of the Corporation shall accept anything of value from a customer of the Corporation or a vendor to the Corporation other than the following:

Gifts based on a family relationship or gifts of a reasonable value based on a personal relationship where that relationship is the obvious motivating factor for the gift;

Advertising or promotional material with a value of less than $100;

Gifts with a value of less than $100 related to commonly recognized events such as a promotion, religious holiday, wedding or retirement;

Acceptance of customary hospitality (business luncheons, dinners, golf outings, ball games, etc.) where it is directly related to Corporation activities and provided that the expense would be paid for by the Corporation if not paid for by another party. Any entertainment beyond that scope or of a frequent nature (more than twice a year by the same party) must be pre-authorized by the Chief Executive Officer;

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Discounts or rebates on merchandise or services that do not exceed those available to other customers of the merchant; or

Awards for recognition of service or accomplishment from civic, charitable, educational or religious organizations.

If an employee or director receives or anticipates receiving a benefit from a Corporation customer or vendor and is unsure whether acceptance of the gift is in compliance with this policy, a written disclosure should be made to the Chief Executive Officer.   The Board of Directors may approve the acceptance of the benefit if the acceptance is otherwise consistent with this policy.
Directors, employees and their immediate families should never borrow personally from customers or suppliers unless these entities are engaged directly in the lending business, and then only under normal conditions with respect to interest rates, terms, security, and repayment programs that are available to any borrower.
Outside Activities
Outside activities that might constitute a conflict of interest or interfere with performance, or compromise a director's or employee's position, are to be avoided.   Employee activities such as full-time outside employment; the rendering of investment, legal or accounting services; membership on corporate boards of directors; seeking of an elective political position; or appointment to government bodies should be reviewed and approved by the Chief Executive Officer prior to such undertakings.   As in the past, we continue to encourage active participation on the part of directors, officers and employees in service clubs and organizations fostering the betterment of the community, and the active use of various social memberships in maintaining a proper image of our organization within the community.
Compliance with Laws, Rules and Regulations
All directors and employees of the Corporation are required to comply with the requirements of this Code, all policies of the Corporation and applicable laws, rules and regulations.   Directors and employees must also comply with the procedures implementing and effectuating the Corporation's policies.   Failure to comply with the Corporation's policies and procedures may result in disciplinary action including, in severe situations, immediate termination of employment.
Accounting Practices
All employees are expected to observe and comply with generally accepted accounting principles, the system of internal controls and disclosure controls and procedures established by the Corporation requiring that corporate books and records accurately and fairly reflect in reasonable detail the financial condition and results of operations of the Corporation.   Corporation policies are intended to promote full, fair, accurate, timely and understandable disclosure in reports and documents filed with or submitted to the SEC and in the Corporation's public statements.   In furtherance of these requirements, employees must practice the following:

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No false, misleading or artificial entries shall be made on corporate books, records and reports for any reason.

No undisclosed or unrecorded corporate funds or assets shall be established for any purpose.

No payments from corporate funds or other assets shall be approved or be made with the intention or understanding that any part of such payment will be used for any purpose other than that described by the documents supporting the payment. All payments must be supported with appropriately approved purchase orders, invoices or receipts, expense reports or other customary documents, all in accordance with established policy.

PART III ADMINISTRATION AND WAIVERS
Administration
This Code will be administered and monitored by Timothy J. Cruciani. General questions and requests for additional information on this Code should be directed to him at the telephone number or e-mail address in Part I.
Waivers
Any requests for waivers of the Code for employees who are not executive officers should be directed through your supervisor to the Chief Executive Officer. Requests for waivers for directors and executive officers should be directed to the Board of Directors through the Corporate Secretary. Only a majority of the Board of Directors may waive the applicability of the Code for a director or executive officer. Any waiver granted to directors or executive officers, including the principal accounting officer, and the reasons for granting the waiver, and any change in the Code applicable to directors and executive officers, including the principal accounting officer, must be promptly disclosed to the public as required by law or the Nasdaq Stock Market.

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EXHIBIT 21

Parent	Subsidiary	Percentage of Ownership	State of Incorporation or Organization

Citizens Community, MHC	Citizens Community Bancorp	100%	United States

Citizens Community Bancorp	Citizens Community Federal	100%	United States

Citizens Community Federal	N/A		United States

EXHIBIT 31.1

CERTIFICATION

I, James G. Cooley, certify that:

1)	I have reviewed this annual report on Form 10–KSB of Citizens Community Bancorp;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
	c)	disclosed in this report any changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5)	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date:

December 29, 2004

By:

/s/ James G. Cooley

James G. Cooley
President and Chief Executive Officer
( Principal Executive Officer )

EXHIBIT 31.2

CERTIFICATION

I, John D. Zettler, certify that:

1)	I have reviewed this annual report on Form 10–KSB of Citizens Community Bancorp;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
	c)	disclosed in this report any changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5)	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date:

December 29, 2004

By:

/s/ John D. Zettler

John D. Zettler
Chief Financial Officer
( Principal Financial Officer )

EXHIBIT 32

CERTIFICATION

In connection with the Annual Report of Citizens Community Bancorp (the "Company") on Form 10–KSB for the fiscal year ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James G. Cooley, President and Chief Executive Officer of the Company and I, John D. Zettler, Chief Financial Officer of the Company, certify, in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

	1)	The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and
	2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of the dates and for the periods presented in the financial statements included in such Report.

Date:	December 29, 2004		By:	James G. Cooley President and Chief Executive Officer ( Principal Executive Officer )
Date:	December 29, 2004		By:	John D. Zettler Chief Financial Officer ( Principal Financial Officer )