CITIZENS COMMUNITY BANCORP INC, 10KSB, 1999-03-31

CITIZENS COMMUNITY BANCORP INC
10KSB, 1999-03-31
STATE COMMERCIAL BANKS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1998
Commission File No. 000-22547

CITIZENS COMMUNITY BANCORP, INC.

A Florida Corporation (IRS Employer Identification No. 65-0614044)
650 East Elkcam Circle
Marco Island, Florida 34145
(941) 389-1800

Securities Registered Pursuant to Section 12(b)
of the Securities Exchange Act of 1934:

NONE

Securities Registered Pursuant to Section 12(g)
of the Securities Exchange Act of 1934:

COMMON STOCK
------------

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

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]

Revenues for the fiscal year ended December 31, 1998: $4,470,458

The aggregate market value of the common stock of the Registrant held by
nonaffiliates of the Registrant (2,508,742 shares) on February 28, 1999 was
approximately $25,087,420. As of such date, no organized trading market existed
for the common stock of the Registrant. The aggregate market value was computed
by reference to recent trading activity of the common stock of the Registrant at
$10.00 per share. For the purposes of this response, directors, officers and
holders of 5% or more of the Registrant's common stock are considered the
affiliates of the Registrant at that date.

The number of shares outstanding of the Registrant's Common Stock, as of March
5, 1999: 3,455,039 shares of $0.01 par value common stock.

DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------

1. Portions of Citizens' Annual Report. (Part II)

2. Portions of the Proxy Statement for the 1999 Annual Meeting of
Shareholders filed electronically with the Securities and
Exchange Commission on March 25, 1999. (Part III)

<PAGE>

TABLE OF CONTENTS

Consolidated--Citizens Community Bancorp, Inc. and Affiliates

NOTE: Certain information required by Form 10-KSB is incorporated by
reference from the 1998 Annual Report and 1999 Annual Meeting Proxy Statement as
indicated below. Only that information expressly incorporated by reference is
deemed filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>

PART I Page Number
-----------
<S> <C> <C>
Item 1 Business..................................................................... 3
Item 2 Properties................................................................... 8
Item 3 Legal Proceedings............................................................ 9
Item 4 Submission of Matters to a Vote of Security Holders.......................... 9

PART II
Item 5 Market for Common Equity and Related Stockholder Matters..................... 9(1)
Item 6 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 9(1)
Item 7 Financial Statements and Supplementary Data.................................. 9(1)
Item 8 Changes in and disagreements with Accountants on
Accounting and Financial Disclosure.......................................... 10

PART III
Item 9 Directors and Executive Officers of the Registrant:.......................... 10(2)
Item 10 Executive Compensation....................................................... 10(2)
Item 11 Security Ownership of Certain Beneficial Owners and Management............... 10(2)
Item 12 Certain Relationships and Related Transactions............................... 10

PART IV
Item 13 Exhibits, Financial Statement Schedules, and Reports on Form 8-K............. 11
</TABLE>

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

(1) These items are incorporated by reference from the Company's
1998 Annual Report pursuant to Instruction E 2 of Form 10-KSB.

(2) The material required by Items 9 through 11 is hereby
incorporated by reference from the Company's definitive proxy
statement pursuant to Instruction E 3 of Form 10-KSB.

<PAGE>

PART I

ITEM 1. - BUSINESS

Description

General

Citizens Community Bancorp, Inc. (the "Citizens") is a bank holding company
under the Federal Bank Holding Company Act of 1956, and owns 100% of the issued
and outstanding common stock of Citizens Community Bank of Florida, Marco
Island, Florida (the "Citizens Community"). Citizens was incorporated under the
laws of the State of Florida on May 22, 1995 to acquire 100 percent of the
shares to be issued by Citizens Community during its organizational stage and to
enhance Citizens Community's ability to serve its future customers' requirements
for financial services. Citizens provides flexibility for expansion of its'
banking business through acquisition of other financial institutions and
provision of additional banking-related services which a traditional commercial
bank may not provide under present laws.

Citizens Community is a state-chartered commercial bank, which opened for
business on March 8, 1996. Citizens Community offers a full range of
interest-bearing and noninterest-bearing accounts, including commercial and
retail checking accounts, negotiable order of withdrawal ("NOW") accounts, money
market accounts, individual retirement accounts, regular interest bearing
statement savings accounts, certificates of deposit, commercial loans, real
estate loans, home equity loans and consumer/installment loans. In addition,
Citizens Community provides such consumer services as U.S. Savings Bonds,
travelers checks, safe deposit boxes, bank by mail services, direct deposit
services, automatic teller services, and secondary mortgage loan origination
services.

Market Area

The primary service and assessment areas for Citizens Community encompasses the
entire city of Naples, Marco Island, Isle of Capri, and Goodland as well as the
rest of Collier County. There is strong competition among financial institutions
in this area. There are eight commercial banks and one savings and loan
headquartered within the primary service area of Citizens Community. There are
84 banking offices and 3 savings and loan offices, most of which are branches of
or are affiliated with major bank holding companies. Citizens Community operates
offices at 650 E. Elkcam Circle, Marco Island, Florida, ("Marco Office") which
opened for business in January, 1997; 5101 Tamiami Trail East, Naples, Florida,
("East Trail Office") which opened for business in June, 1997; and 2375 N.
Tamiami Trail, Naples, Florida, ("Moorings Office") which opened for business in
August, 1998. Citizens Community also operates a courier service throughout its
primary service area.

Citizens Community is in competition with existing area financial institutions
other than commercial banks and savings and loan associations, including
insurance companies, consumer finance companies, brokerage houses, credit unions
and other business entities which have over the years, engaged more and more in
providing services which have historically been traditional banking services.
Due to the growth of the Collier County area in general and Citizens Community's
primary service area in particular, it is anticipated that competition will
increase because of new entrants to the market.

Investments

As of December 31, 1998, investment securities and federal funds sold comprised
approximately 33.7% of Citizens' assets and net loans comprised approximately
54.7% of Citizens' assets. Citizens Community has invested primarily in
obligations of Agencies of the United States Government. Citizens Community
enters into Federal Funds transactions with its principal correspondent banks,
and acts as a seller of such funds.

Loan Portfolio

Citizens Community engages in a wide range of lending activities, primarily
focused on the origination of commercial and residential real estate secured
loans, commercial loans secured by non-real estate collateral and consumer
loans.

<PAGE>

Commercial lending is directed principally toward businesses whose demands for
funds fall within Citizens Community's legal lending limits and which are
potential deposit customers of the bank. This category of loans includes loans
made to individual, partnership or corporate borrowers, and obtained for a
variety of business purposes. Particular emphasis is placed on loans to small
and medium-sized businesses. Citizens Community's real estate loans consist of
commercial and residential first and second mortgage loans.

Citizens Community's consumer loans consist primarily of installment loans to
individuals for personal, family and household purposes, including automobile
and boat loans to individuals and pre-approved lines of credit. This category of
loans also includes term loans secured by second mortgages on the residences of
borrowers for a variety of purposes including home improvements, education and
other personal expenditures.

Citizens Community's general policy is not to accrue interest on loans
delinquent over ninety days unless fully secured and in the process of
collection. It is Citizens Community's policy that the accrued and unpaid
interest is reversed against current income and thereafter interest is
recognized only to the extent payments are received. It is Citizens Community's
policy that non-accrual loans are restored to accrual basis when interest and
principal payments are current and prospects for recovery are no longer in
doubt.

As of December 31, 1998, there were no loans where known information about
possible credit problems of borrowers caused management to have serious doubts
as to the ability of such borrowers to comply with the present loan repayment
terms.

The majority of Citizens' loans are secured by real estate in Collier County,
Florida, where Citizens Community and its branch offices are located.
Accordingly, the ultimate collectibility of a substantial portion of the loan
portfolio is susceptible to changes in market conditions in this County.

Loan Loss Reserves

In considering the adequacy of Citizens' allowance for loan losses, management
has considered that as of December 31, 1998, approximately 48% of outstanding
loans are in the commercial real estate loan category. Commercial loans are
generally considered by management as having greater risk than other categories
of loans in our loan portfolio. Management believes that the real estate
collateral securing its commercial real estate loan's reduces the risk of loss
inherently present in commercial loans.

Citizens' consumer loan portfolio at December 31, 1998 consisted primarily of
lines of credit and installment loans secured by automobiles, boats and other
consumer goods. Management believes that the risk associated with these types of
loans has been adequately provided for in the loan loss allowance.

Residential real estate mortgage loans constitute approximately 32% of
outstanding loans at December 31, 1998. Management considers these loans to have
minimal risk due to the fact that these loans represent conventional residential
real estate mortgages where the amount of the original loan does not exceed 80%
of the appraisal value of the collateral or is otherwise covered by private
mortgage insurance.

Citizens' Board of Directors monitors the loan portfolio monthly in order to
enable it to evaluate the adequacy of the allowance for loan losses. In addition
to reviews by regulatory agencies, the services of outside consultants have been
engaged to assist in the evaluation of credit quality and loan administration.
These professionals compliment the system implemented by Citizens which
identifies potential problem credits as early as possible, categorizes the
credits as to risk and includes a reporting process to monitor the progress of
the credits.

The allowance for loan losses represents the cumulative total of monthly
provisions for loan losses. The allowance for loan losses is established through
a provision for loan losses charged to expense. Loans will be charged off
against the allowance when management believes the collectibility of principal
is unlikely. The monthly provision for loan losses is based on management's
judgment, after considering known and inherent risks in the portfolio, past loss
experience of Citizens Community, adverse situations that may affect the
borrower's ability to repay, assumed values of the underlying collateral
securing the loans, the current and prospective financial condition of the
borrower, and the prevailing and anticipated economic condition of the local
market. Citizens Community charged off one loan in the amount of $6,500 against
the allowance for loan losses during the year ended December 31, 1998.

<PAGE>

Citizens Community maintains the allowance for loan losses at a level sufficient
to absorb all potential losses in the loan portfolio. The allowance for loan
losses is made up of two primary components: (i) amounts allocated to loans
based on collateral type and (ii) amounts allocated for loans reviewed on an
individual basis in accordance with a credit risk grading system.

Deposits

Citizens Community offers a wide range of interest-bearing and
noninterest-bearing accounts, including commercial and retail checking accounts,
negotiable order of withdrawal ("NOW") accounts, money market accounts,
individual retirement accounts, regular interest-bearing statement savings
accounts and certificates of deposit with fixed rates and a range of maturity
date options. The sources of deposits are residents, businesses and employees of
businesses within Citizens Community's market area, obtained through the
personal solicitation of Citizens Community's officers and directors, direct
mail solicitation and advertisements published in the local media. Citizens
Community pays competitive interest rates on time and savings deposits up to the
maximum permitted by law or regulation. In addition, Citizens Community has
implemented a service charge fee schedule competitive with other financial
institutions in Citizens Community's market area, covering such matters as
maintenance fees on checking accounts, per item processing fees, returned check
charges and the like.

Correspondent Banking

Citizens Community purchases correspondent services offered by larger banks,
including check collections, purchase or sale of Federal Funds, security
safekeeping, investment services, coin and currency supplies, overline and
liquidity loan participations and sales of loans to or participations with
correspondent banks. At December 31, 1998 Citizens had sold $19,181,000 in
Federal Funds.

Citizens Community sells loan participations without recourse to correspondent
banks with respect to loans which exceed Citizens Community's legal lending
limit which was approximately $1.6 million at December 31, 1998. Citizens
Community has established an internal lending limit which was $1.2 million at
December 31, 1998.

Data Processing

Citizens Community has a data processing servicing agreement with First National
Bank of Omaha, Nebraska. This servicing agreement provides for Citizens
Community to receive a full range of data processing services including an
automated general ledger, deposit accounting, commercial, real estate and
installment lending data processing, central information file ("CIF") and ATM
processing. The data processing servicing agreement provides for Citizens
Community to pay a monthly fee based on the type, kind and volume of data
processing services provided, priced at a stipulated rate schedule.

Employees

Citizens Community currently employs 33 full time and 8 part time persons,
including 13 officers. Citizens Community will hire additional persons as
needed.

Monetary Policies

The results of operations of Citizens and Citizens Community are affected by
credit policies of monetary authorities, particularly the Federal Reserve Board.
The instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. Government securities, changes in the discount
rate on member bank borrowings, changes in reserve requirements against member
bank deposits and limitations on interest rates which member banks may pay on
time and savings deposits. In view of changing conditions in the national
economy and in the money market, as well as the effect of action by monetary and
fiscal authorities, including the Federal Reserve Board, no prediction can be
made as to possible future changes in interest rates, deposit levels, loan
demand, or the business and earnings of Citizens Community.

<PAGE>

Supervision and Regulation

Citizens and Citizens Community operate in a highly regulated environment, and
their business activities are governed by statute, regulation and administrative
policies. The business activities of Citizens and Citizens Community are
supervised by a number of federal regulatory agencies, including the Federal
Reserve Board, the Florida Department of Banking and Finance ("Department") and
the Federal Deposit Insurance Corporation ("FDIC").

Citizens is regulated by the Federal Reserve Board under the Federal Bank
Holding Company Act, which requires every bank holding company to obtain the
prior approval of the Federal Reserve Board before acquiring more than 5% of the
voting shares of any bank or all or substantially all of the assets of a bank,
and before merging or consolidating with another bank holding company. The
Federal Reserve Board (pursuant to regulation and published policy statements)
has maintained that a bank holding company must serve as a source of financial
strength to its subsidiary banks. In adhering to the Federal Reserve Board
Policy, Citizens may be required to provide financial support for a subsidiary
bank at a time when, absent such Federal Reserve Board policy, Citizens may not
deem it advisable to provide such assistance.

A bank holding company is generally prohibited from acquiring control of any
company which is not a bank and from engaging in any business other than the
business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to be
so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies.

As a state bank, Citizens Community is subject to the supervision of the
Department, the FDIC and the Federal Reserve Board. With respect to expansion,
Citizens Community may establish branch offices anywhere within the State of
Florida. Citizens Community is also subject to the Florida banking and usury
laws restricting the amount of interest which it may charge in making loans or
other extensions of credit. In addition, Citizens Community, as a subsidiary of
Citizens, is subject to restrictions under federal law in dealing with Citizens
and other affiliates, if any. These restrictions apply to extensions of credit
to an affiliate, investments in the securities of an affiliate and the purchase
of assets from an affiliate.

Loans and extensions of credit by state banks are subject to legal lending
limitations. Under state law, a state bank may grant unsecured loans and
extensions of credit in an amount up to 15% of its unimpaired capital and
surplus to any person. In addition, a state bank may grant additional loans and
extensions of credit to the same person up to 10% of its unimpaired capital and
surplus, provided that the transactions are fully secured. This 10% limitation
is separate from, and in addition to, the 15% limitation for unsecured loans.
Loans and extensions of credit may exceed the general lending limit if they
qualify under one of several exceptions.

Both Citizens and Citizens Community are subject to regulatory capital
requirements imposed by the Federal Reserve Board, the FDIC and the Department.
Both the Federal Reserve Board and the FDIC have established risk-based capital
guidelines for bank holding companies and banks which make regulatory capital
requirements more sensitive to differences in risk profiles of various banking
organizations. The capital adequacy guidelines issued by the Federal Reserve
Board are applied to bank holding companies on a consolidated basis with the
banks owned by the holding company. The FDIC's risk capital guidelines apply
directly to state banks regardless of whether they are a subsidiary of a bank
holding company. Both agencies' requirements (which are substantially similar)
provide that banking organizations must have capital equivalent to 8% of
weighted risk assets. The risk weights assigned to assets are based primarily on
credit risks. Depending upon the riskiness of a particular asset, it is assigned
to a risk category. For example, securities with an unconditional guarantee by
the United States government are assigned to the lowest risk category. A risk
weight of 50% is assigned to loans secured by owner-occupied one to four family
residential mortgages. The aggregate amount of assets assigned to each risk
category is multiplied by the risk weight assigned to that category to determine
the weighted values, which are added together to determine total risk-weighted
assets. At December 31, 1998, Citizens' total risk-based capital and Tier 1
ratio were 15.34% and 14.36%, respectively. Both the Federal Reserve Board and
the FDIC have also implemented minimum capital leverage ratios to be used in
tandem with the risk-based guidelines in assessing the overall capital adequacy
of bank and bank holding companies. Under these rules, banking institutions are
required to maintain a ratio of 3% "Tier 1" capital to total assets (net of
goodwill). Tier 1 capital includes common stockholders equity, noncumulative
perpetual preferred stock and minority interests in the equity accounts of
consolidated subsidiaries.

<PAGE>

Both the risk-based capital guidelines and the leverage ratio are minimum
requirements, applicable only to top-rated banking institutions. Institutions
operating at or near these levels are expected to have well-diversified risk,
excellent asset quality, high liquidity, good earnings and in general, have to
be considered strong banking organizations, rated composite 1 under the CAMELS
rating system for banks or the BOPEC rating system for bank holding companies.
Institutions with lower ratings and institutions with high levels of risk or
experiencing or anticipating significant growth would be expected to maintain
ratios 100 to 200 basis points above the stated minimums.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (or FDICIA),
created five "capital categories" ("well capitalized, " "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized") which are defined in the Act and which are used
to determine the severity of corrective action the appropriate regulator may
take in the event an institution reaches a given level of undercapitalization.
For example, an institution which becomes "undercapitalized" must submit a
capital restoration plan to the appropriate regulator outlining the steps it
will take to become adequately capitalized. Upon approving the plan, the
regulator will monitor the institution's compliance. Before a capital
restoration plan will be approved, any entity controlling a bank (i.e., holding
companies) must guarantee compliance with the plan until the institution has
been adequately capitalized for four consecutive calendar quarters. The
liability of the holding company is limited to the lesser of five percent of the
institution's total assets or the amount which is necessary to bring the
institution into compliance with all capital standards. In addition,
"undercapitalized" institutions will be restricted from paying management fees,
dividends and other capital distributions, will be subject to certain asset
growth restrictions and will be required to obtain prior approval from the
appropriate regulator to open new branches or expand into new lines of business.
As an institution drops to lower capital levels, the extent of action to be
taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.

The FDICIA required each federal banking agency to prescribe for all insured
depository institutions and their holding companies standards relating to
internal controls, information systems and audit systems, loan documentation,
credit underwriting, interest rate risk exposure, asset growth, and
compensation, fees and benefits and such other operational and managerial
standards as the agency deems appropriate. In addition, the federal banking
regulatory agencies were required to prescribe by regulation standards
specifying: (i) maximum classified assets to capital ratios; (ii) minimum
earnings sufficient to absorb losses without impairing capital; (iii) to the
extent feasible, a minimum ratio of market value to book value for publicly
traded shares of depository institutions or the depository institution holding
companies; and (iv) such other standards relating to asset quality, earnings and
valuation as the agency deems appropriate. Finally, each federal banking agency
was required to prescribe standards for employment contracts and other
compensation arrangements of executive officers, employees, directors and
principal stockholders of insured depository institutions that would prohibit
compensation and benefits and other arrangements that are excessive or that
could lead to a material financial loss for the institution. If an insured
depository institution or its holding company fails to meet any of its standards
described above, it will be required to submit to the appropriate federal
banking agency a plan specifying the steps that will be taken to cure the
deficiency. If an institution fails to submit an acceptable plan or fails to
implement the plan, the appropriate federal banking agency will require the
institution or holding company, to correct the deficiency and until corrected,
may impose restrictions on the institution or the holding company including any
of the restrictions applicable under the prompt corrective action provisions of
the FDICIA. The Federal banking agencies final rule implementing the safety and
soundness provisions of the FDICIA was effective on August 9, 1995.

In response to the directive issued under the Act, the regulators have adopted
regulations which, among other things, prescribe the capital thresholds for each
of the five capital categories established by the Act. The following table
reflects the capital thresholds:

[TABLE FOLLOWS THIS PAGE]

<PAGE>

Total Risk - Tier 1 Risk - Tier 1
Based Capital Based Capital Leverage
Ratio Ratio Ratio
<S> <C> <C> <C>
Well capitalized (1) 10% 6% 5%
Adequately capitalized (1) 8% 4% 4%(2)
Undercapitalized (3) less than 8% less than 4% less than 4%
Significantly Undercapitalized (3) less than 6% less than 3% less than 3%
Critically Undercapitalized - - less than 2%
</TABLE>

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(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.

The Act also provided that banks must meet new safety and soundness standards.
In order to comply with the Act, the Federal Reserve Board, and the FDIC,
adopted a final Rule which institutes guidelines defining operational and
managerial standards relating to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth, director and officer
compensation, asset quality, earnings and stock valuation. Both the capital
standards and the safety and soundness standards which the Act implements were
designed to bolster and protect the deposit insurance fund.

As a state bank, Citizens Community is subject to examination and review by the
Department. Citizens Community submits to the Department quarterly reports of
condition, as well as such additional reports as may be required by the state
banking laws.

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
existing restrictions on interstate acquisitions of banks by bank holding
companies were repealed on September 29, 1995, such that Citizens and any other
bank holding company located in Florida would be able to acquire any
Florida-based bank, subject to certain deposit percentage and other
restrictions. The legislation also provides that, unless an individual state
elects beforehand either (i) to accelerate the effective date or (ii) to
prohibit out-of-state banks from operating interstate branches within its
territory, on or after June 1, 1997, adequately capitalized and managed bank
holding companies will be able to consolidate. De novo branching by an
out-of-state bank would be permitted only if it is expressly permitted by the
laws of the host state. The authority of a bank to establish and operate
branches within a state will continue to be subject to applicable state
branching laws. Florida permits interstate branching by acquisition, but not by
de novo branching.

As a bank holding company, Citizens is required to file with the Federal Reserve
Board an annual report of its operations at the end of each fiscal year and such
additional information as the Federal Reserve Board may require pursuant to the
Act. The Federal Reserve Board may also make examinations of Citizens and each
of its subsidiaries.

The scope of regulation and permissible activities of Citizens and Citizens
Community is subject to change by future federal and state legislation.

ITEM 2. - DESCRIPTION OF PROPERTY

The Marco Island facility, which is owned by Citizens Community, is a
one-story modern bank building consisting of 4,500 square feet. Citizens'
headquarters is also located in this facility. The East Trail Office, also
owned by Citizens Community, consists of a 2-story mixed use office
facility. The first floor, consisting of 3,900 square feet, is occupied by
Citizens Community. The Moorings Office consists of 3,864 square feet
located in a 3-story professional office condominium building. This space
is also owned by Citizens Community.

<PAGE>

ITEM 3. - LEGAL PROCEEDINGS

There are no material pending legal proceedings to which Citizens or Citizens
Community is a party or of which any of their properties are subject; nor are
there material proceedings known to Citizens to be contemplated by any
governmental authority; nor are there material proceedings known to Citizens,
pending or contemplated, in which any director, officer, affiliate or any
principal security holder of Citizens, or any associate of any of the foregoing
is a party or has an interest adverse to Citizens or Citizens Community.

ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.

PART II

ITEM 5. - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

During the period covered by this report and to date, there has been no
established public trading market for Citizens' Common Stock.

As of March 5, 1999, the approximate number of holders of record of Citizens'
Common Stock was 722.

To date, Citizens has not paid any cash dividends on its Common Stock. Citizens
paid an 8% stock dividend in January, 1999 to stockholders of record December
31, 1998. It is the present policy of the Board of Directors of Citizens to
reinvest earnings for such period of time as is necessary to ensure the success
of the operations of Citizens and of Citizens Community. There are no current
plans to initiate payment of cash dividends, and future dividend policy will
depend on Citizens Community's earnings, capital requirements, financial
condition and other factors considered relevant by the Board of Directors of
Citizens.

Citizens Community is restricted in its ability to pay dividends under Florida
banking laws and by regulations of the Federal Deposit Insurance Corporation.
Pursuant to Section 658.37, Florida Statutes, a state bank may not pay dividends
from its capital. All dividends must be paid out of net profits then on hand,
after charging off bad debts, depreciation, and other worthless assets. Payment
of dividends out of net profits is further limited by Federal regulation which
prohibits the payment of dividends if such payment would bring Citizens
Community's capital below required levels.

During the third quarter of 1998, Citizens sold 1,000,000 shares of common stock
in a registered offering for an aggregate of $7,500,000. Citizens incurred
$76,744 of expenses as related to the sale of stock, which were deducted from
the proceeds received.

ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS & FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Citizens hereby incorporates by reference the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 7 through 19 of the 1998 Annual Report to Shareholders for the year ended
December 31, 1998 filed as an Exhibit under Item 13 herein.

ITEM 7. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Citizens hereby incorporates by reference the Independent Auditors' Reports and
the Consolidated Financial Statements contained in the 1998 Annual Report to
Shareholders filed as an Exhibit under Item 13 herein.

<PAGE>

ITEM 8. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS - None

PART III

ITEM 9. - DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

Citizens hereby incorporates by reference the sections entitled "Election of
Directors" and "Board of Directors Meeting" contained at pages 2 through 7 of
the Proxy Statement filed electronically with the Securities and Exchange
Commission on March 25, 1999.

ITEM 10. - EXECUTIVE COMPENSATION

Citizens hereby incorporates by reference the section entitled "Executive
Compensation" contained at pages 7 through 10 of the Proxy Statement.

ITEM 11. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) Security Ownership of Certain Beneficial Owners

Citizens hereby incorporates by reference the section titled "Certain
Shareholders" on page 2 of the Proxy Statement.

(b) Security Ownership of Management

Citizens hereby incorporates by reference the section entitled "Election of
Directors" contained at pages 2 through 7 of the Proxy Statement.

Citizens is not aware of any arrangements, including any pledge by any person of
securities of Citizens, the operation of which may at a subsequent date result
in a change of control of Citizens.

ITEM 12. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Neither Citizens Community nor Citizens has engaged in any reportable
transactions, including loans, to Citizens Community's or Citizens' directors,
executive officers, their associates and members of the immediate families of
such directors and executive officers.

<PAGE>

ITEM 13. - EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits. The following exhibits are filed with or incorporated by reference
into this report. The exhibits which are marked by a single asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from
Citizens' Registration Statement on Form SB-2, as effective with the Securities
and Exchange Commission on December 7, 1995, Registration No. 33-98090. The
exhibits which are marked by a double asterisk (**) were previously filed as
part of, and are hereby incorporated by reference from Citizens' Registration
Statement on Form SB-2 as filed with the Securities and Exchange Commission on
March 12, 1998, Registration No. 333-47813. The exhibit numbers correspond to
the exhibit numbers in the referenced documents.

Exhibit No. Description of Exhibit
- ----------- ----------------------

*3.1 Amended and Restated Articles of Incorporation of Citizens

*3.2 By-laws of Citizens

*4.1 Specimen Common Stock Certificate

*4.2 Specimen Warrant Certificate

*4.4 Company's Warrant Plan

**10.1 Incentive Stock Option Plan for Key Officers and Employees

**10.2 1998 Directors Stock Option Plan

**10.3 Employment Contract with Michael A. Micallef, Jr.

22.1 Citizens' 1998 Annual Report

(b) Reports on Form 8-K. Citizens did not file a Form 8-K during the
-------------------- last quarter of 1998.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 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, Inc.

Dated: March 29, 1999 By: /s/Richard Storm, Jr.
-------------- -------------------------
Richard Storm, Jr.
Chairman of the Board and Chief Executive
Officer

Dated: March 26, 1999 By: /s/Gregory E. Smith
-------------- -----------------------
Gregory E. Smith
Sr. Vice President
(Chief Financial and Accounting Officer)

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:

March __, 1999
- -------------------
DIANE M. BEYER
Class I Director

/s/JOEL M. COX, SR. March 29, 1999
- -------------------
JOEL M. COX, SR.
Class I Director

March __, 1999
- -------------------
THOMAS B. GARRISON
Class II Director

/s/JAMES S. HAGEDORN March 29, 1999
- --------------------
JAMES S. HAGEDORN
Class I Director

March __, 1999
- -------------------
DENNIS J. LYNCH
Class II Director

March __, 1999
- -------------------
STEPHEN A. MCLAUGHLIN
Class III Director

<PAGE>

/s/LOUIS J. SMITH March 26, 1999
- -----------------
LOUIS J. SMITH
Class II Director

/s/RICHARD STORM, JR. March 27, 1999
- ---------------------
RICHARD STORM, JR.
Class III Director

/s/JOHN G. WOLF March 26, 1999
- ---------------
JOHN G. WOLF
Class III Director

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

Citizens' 1998 Annual Report is included as Exhibit 22.1 of this
filing.

<PAGE>

EXHIBIT 22.2

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

Citizen Community Bank's
1998 Annual Report

CCB, Inc.
Graphic logo omitted

1998 Annual Report

Graphic omitted

Building

Value

and a

Presence

Graphic omitted

<PAGE>

About Citizens Community Bancorp, Inc.

Citizens Community Bancorp, Inc. ("Citizens") is a one-bank holding
company, established on May 24, 1995. Citizens' two wholly-owned subsidiaries
are Citizens Community Bank of Florida ("Citizens Bank") and Citizens Financial
Corp. ("Citizens Financial"). Citizens Bank is a state-chartered commercial bank
which provides traditional community banking services through its three
full-service branch facilities strategically located in Marco Island and Naples,
Florida. Citizens offers a broad range of retail and commercial banking
services, including a variety of deposit accounts and loan products for
consumers and businesses. Citizens Financial is a mortgage origination company
operating in Southwest Florida. As part of its "customer first" pledge, Citizens
offers a courier service to commercial account customers.

At December 31, 1998, Citizens had $82.2 million in total consolidated
assets and $17.2 million in stockholders' equity.

Common Stock Prices and Dividends

Although there is no established public trading market for Citizens'
common stock, the brokerage firm of A.G. Edwards & Sons, Inc., facilitates
trades of Citizens' common stock in the over-the-counter market with other
brokerage firms. The stock was originally offered and sold in a public offering
in 1996 for $4.18 per share. The secondary offering was completed in 1998 at
$7.50 per share. Citizens has never paid cash dividends. An 8% stock dividend
was issued on January 19, 1999. Future dividends, if any, will be determined by
the Board of Directors.

As of March 5, 1999, Citizens has 722 holders of record of common
stock.

Special Note Regarding Forward-Looking Statements

This Annual Report contains certain forward-looking statements which
represent management's expectations or beliefs, including, but not limited to,
statements concerning the banking industry and the issuer's operations,
performance, financial condition and growth. For this purpose, any statements
contained in this Report that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"intend," "could," "should," "can," "estimate," or "continue" or the negative of
other variations thereof or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond management's control, and
actual results may differ materially depending on a variety of important
factors, including competition, general economic conditions, potential changes
in interest rates, and changes in the value of real estate securing loans, among
other things.

Table of Contents

Financial Highlights ..................................................... 1
Message to Shareholders .................................................. 2-3
Officers and Directors of Citizens ....................................... 4
Officers and Directors of Citizens Bank .................................. 5
Selected Financial Data .................................................. 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations .......................... 7-19
Consolidated Financial Statements......................................... 20-37
Independent Auditors' Report ............................................. 38
Corporate Information ..................................... Inside Back Cover

<PAGE>

Financial Highlights

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

Citizens Community Bancorp, Inc. and Subsidiaries

1998 1997
---- ----
At Year End:

Assets ............................... $ 82,226 $ 44,422
Loans, net ........................... 44,933 26,420
Securities ........................... 8,500 2,499
Deposits ............................. 63,990 36,938
Stockholders' equity ................. 17,225 6,771
Book value per share ................. 4.99 3.99
Share outstanding (1) ................ 3,455,039 1,697,354
Equity-to-assets ratio
Nonperforming
assets-to-total assets ratio........ 20.95% 15.24%
NIL NIL
For The Year:

Interest income ...................... 4,129 2,523
Net earnings ......................... 206 110
Basic earnings per share (1) ......... .08 .06
Diluted earning per share (1) ........ .08 .06
Return on average assets ............. .32% .30%
Return on average equity ............. 1.71% 1.72%
Average equity-to-average assets ..... 18.91% 17.47%
Noninterest expenses to average assets 3.04% 3.45%

Average Yield or Rate
During the Year
Ended
December 31,
------------

1998 1997
---- ----
Yields and Rates:

Loan portfolio ....................... 8.33% 9.32%
Securities ........................... 6.21 6.01
Other interest-earnings assets........ 5.40 5.50
All interest-earnings assets ......... 7.36 8.04
Total deposits ....................... 4.36 4.54
Interest-rate spread (2) ............. 3.00 3.50
Net interest margin (3) .............. 3.78 4.20
----

(1) All share amounts reflect the 2-for-1 stock split effective December
15, 1997 and the 8% stock dividend to stockholders of record on
December 31, 1998.

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

(3) Net interest income dividend by average interest-earning assets.

"Community"
is our Middle Name

<PAGE>

MESSAGE TO SHAREHOLDERS

Graphic of
Richard Storm,
Jr.
Chairman of the
Board, President
and Chief
Executive Officer
Omitted

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

The year 1998 represents the second full year of operations of Citizens
Community Bancorp, Inc. and Citizens Community Bank. Our focus for the past
year has been to continue to expand our loan and deposit base to achieve
levels which will produce certain economies of scale. Our significant
accomplishments for 1998 included continued strong growth in deposits and
loans, the raising of additional capital in our second offering to fund our
future growth and the opening of our third branch. We were also pleased to
pay shareholders an 8% stock dividend.

Financial Review

Earnings - Net income for 1998 was $205,854, which is 87% higher than
our income for 1997. On a per share basis, our earnings were $.08 per share for
1998 compared to $.06 per share for the prior year. The per share growth in
earnings was smaller than the absolute dollar growth due primarily to the
additional shares outstanding as a result of the stock sale we completed during
the summer of 1998. The per share earnings have also been adjusted to reflect
the 2-for-1 stock split which was effective December 1997 and the 8% stock
dividend which was granted in December 1998.

Growth - For the year ended December 31, 1998, the Company had $82.2
million in total consolidated assets. Total deposits reached $63.9 million, up
$27.1 million or 73% from the end of the prior year. Similarly, loans were $44.9
million at December 31, 1998, reflecting a growth of $18.5 million or 70% from
the prior year end. The growth in deposits and loans, coupled with our key
customer products, are important factors in building our core earnings. As we
enter 1999, both deposits and, in particular, loan growth will continue to be
our primary focus for improved profitability.

Stockholders' equity significantly increased in 1998 from $10.5 million
to $17.2 million at year end. The increase was primarily from the sale of the
additional shares of stock and the exercise of the warrants which expired in
June of 1998. The additional capital provides us with the leverage and strength
to grow with internally generated customer relationships and through potential
acquisitions of other financial service institutions as opportunities become
available.

In September 1998 we opened our third office at 2375 Tamiami Trail
North, which we refer to as our "Moorings Office". We continue to look for
opportunities to acquire or build branch sites that will expand our future
customer base and franchise value.

Personnel - Over the past year, our full-time and part-time employees
increased from 19 and 6, respectively, at December 31, 1997 to 36 and 8,
respectively, at the end of 1998. We have continued to build the executive
management team with the addition of three new members. Jeffrey Merwin joined
the bank as Executive Vice President and Chief Operating Officer in August 1998.
Jeff has ten years banking experience in South Florida and is responsible for
our branch and deposit operations.

<PAGE>

James Schaffer joined our team in October 1998, as Senior Vice President
and Senior Lender. Jim's 20 years of experience in commercial and real estate
lending will be instrumental in our plans to expand our loan production in the
local commercial real estate market.

In March 1999, Gregory Smith joined the Company as Senior Vice President
and Chief Financial Officer of Citizens Community Bancorp, Inc. and Senior Vice
President and Cashier of Citizens Community Bank. Greg is a certified public
accountant with 24 years of experience, most of which was in financial
institutions in the South Florida area. His prior merger and acquisition
experience will be an asset to us in of our future growth plans.

Our Strategy

As we continue to face the challenges of growth and building earnings
into 1999, we have also dedicated significant resources and attention to the
issue of the year 2000 ("Y2K") computer problem. Your management team and board
of directors have placed a high priority on insuring that all of the essential
functions of the Citizens Community Bank are compliant with the challenge and
certainty we all face with the arrival of the new millennium. We have made
significant progress and are confident that we are prepared to face this
challenge. We also need your help and support as shareholders and customers! All
businesses and individuals need to be prepared since some temporary disruptions
are likely. It is essential, however, that we do not overreact and cause a
problem that would otherwise be resolved without major disruptions.

Our foundation is stronger, our growth is continuing and new
opportunities are at hand. The community focus of our products, services, staff,
and directors are the cornerstone of our Company. More customers each day turn
away from the large, distant, and impersonal regional banks where customer
service is a thing of the past.

"Community" is our middle name! Our deposit products are extensive and
include the "Money Phone" telephone access to the deposit accounts and our
well-received courier service. For our loan customers, we have an experienced
staff to offer flexible structuring and fast approvals through either the
Citizens Community Bank or Citizens Financial Corporation, our mortgage
brokerage subsidiary specializing in commercial credits.

Please check our website at www.ccbank.com for copies of press
releases, updated stock price quotes and more. You may also find our link to
snap.com, a useful tool for monitoring your stock portfolio. We welcome your
e-mail questions or suggestions to help us serve you better.

We appreciate your continued support of our progress toward building
your future shareholder value.

/s/ Richard Storm, Jr.
Richard Storm, Jr.
Chairman of the Board
President and Chief Executive Officer

<PAGE>
Citizens Community Bancorp, Inc.

Standing left to right:

John G. Wolf
Stephen A. McLaughlin Graphic omitted
Louis J. Smith
Dennis J. Lynch

Sitting left to right:

Diane M. Beyer
Bruce G. Fedor (Officer)
Richard Storm, Jr.
James S. Hagedorn
Joel M. Cox, Sr.

DIRECTORS OFFICERS
--------- --------
<S> <C>
Diane M. Beyer Diane M. Beyer
Human Resource Consultant Assistant Secretary

Joel M. Cox, Sr. Robert J. David
V.P. - Cox Insurance Agency, Inc. Senior V.P.

Thomas B. Garrison Bruce G. Fedor
Information Systems Consultant V.P./General Counsel and Secretary

James S. Hagedorn Martina L. Hayward
Vice Chairman of the Board - Citizens Assistant V.P./Administration
President - Waterside Development Corporation
Stephen A. McLaughlin
Dennis J. Lynch Treasurer
President - Dennis J. Lynch and Associates
Michael A. Micallef, Jr.
Stephen A. McLaughlin Vice President
Senior V.P./Treasurer - Citizens
Gregory E. Smith
Louis J. Smith Senior V.P./Chief Financial Officer
Owner - Pat's Hallmark Shop
Richard Storm, Jr.
Richard Storm, Jr. Chairman of the Board/President &
Chairman of the Board/President & Chief Executive Officer
Chief Executive Officer - Citizens
President - Loanstar Capital, Inc.
President - Deer Run Properties, Inc.

John G. Wolf
Dentist
</TABLE>

<PAGE>

Citizens Community Bank of Florida

Standing left to right:

Richard Storm, Jr.
Michael A. Micallef, Jr. Graphic omitted
Robert A. Marks

Sitting left to right:

Jamie B. Greusel
Amos D. Watson
Gerald F. Warnken
Diane M. Beyer
James S. Hagedorn
Joel M. Cox, Sr.

DIRECTORS OFFICERS
--------- --------

<S> <C> <C>
Diane M. Beyer Jenni R. Davis Nancy A. Obrochta
Human Resource Consultant V.P./Branch Manager-Moorings Assistant V.P./Loan Operations
Manager
Joel M. Cox, Sr. Bruce G. Fedor
V.P. - Cox Insurance Agency, Inc. Vice President Patricia V. Paris
V.P./Branch Manager-East
Jamie B. Greusel David E. Klein Trail
Attorney Senior V.P. and Lending Officer
Melissa R. Prickett
James S. Hagedorn Jeffrey L. Merwin Assistant V.P./HR
President - Waterside Development Executive V.P./Chief Operating Director/Marketing
Corporation Officer/Compliance Officer Coordinator/Trainer
(Operations)
Robert A. Marks James F. Schaffer
V.P. Chairman of the Board - Citizens Bank Michael A. Micallef, Jr. Senior V.P./Sr. Lender
Retired-Regional Manager President and CEO
Metropolitan Life Insurance Co. Kim A. Shows
Jeffrey L. Miller Head Bookkeeper/Operations
Michael A. Micallef, Jr. Assistant V.P./Loan Officer Officer
President and CEO - Citizens Bank
Diana M. Newell Gregory E. Smith
Richard Storm, Jr. V.P./Branch Manager-Marco Senior V.P./Cashier
Chairman of the Board - Citizens Bank
President - Loanstar Capital, Inc.
President - Deer Run Properties, Inc.

Gerald F. Warnken
President - Caldwell Banker, McFadden &
Spowls

Amos D. Watson
Real Estate Developer/Investor
</TABLE>

<PAGE>

SELECTED FINANCIAL DATA

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

1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
At Year End:
Cash and cash equivalents..................................................... $ 24,663 12,211 8,042
Securities.................................................................... 8,500 2,499 2,240
Loans, net.................................................................... 44,933 26,420 12,116
All other assets.............................................................. 4,130 3,292 2,630
------ ------- ------

Total assets......................................................... $ 82,226 44,422 25,028
====== ====== ======

Deposit accounts.............................................................. 63,990 36,938 17,885
All other liabilities......................................................... 1,011 713 1,179
Stockholders' equity.......................................................... 17,225 6,771 5,964
------ ------ ------

Total liabilities and stockholders' equity........................... $ 82,226 44,422 25,028
====== ====== ======

For the Year:

Total interest income......................................................... 4,129 2,523 740
Total interest expense........................................................ 2,009 1,208 283
------ ------ -------

Net interest income........................................................... 2,120 1,315 457
Provision for loan losses..................................................... 162 153 145
------- ------- -------

Net interest income after provision for loan losses........................... 1,958 1,162 312
------ ------ -------

Noninterest income............................................................ 341 273 70
Noninterest expenses.......................................................... 1,935 1,260 915
------ ------ -------

Earnings (loss) before income tax credit...................................... 364 175 (533)
Income taxes (benefit)........................................................ 158 65 (191)
------ ------- -------

Net earnings (loss)........................................................... $ 206 110 (342)
====== ====== =======

Basic earnings (loss) per share (1)........................................... $ .08 .06 (.22)
======= ====== =======

Diluted earnings (loss) per share (1)......................................... .08 .06 (.22)
======= ====== =======

Ratios and Other Data:

Return on average assets...................................................... .32% .30% (2.71%)
Return on average equity...................................................... 1.71% 1.72% (10.35%)
Average equity to average assets.............................................. 18.91% 17.47% 26.16%
Interest-rate spread during the period........................................ 3.00% 3.50% 2.33%
Net yield on average interest-earning assets.................................. 7.36% 8.04% 6.61%
Noninterest expenses to average assets........................................ 3.04% 3.45% 7.24%
Ratio of average interest-earning assets to average
interest-bearing liabilities......................................... 1.22 1.18 1.69
Nonperforming loans and foreclosed real estate as a percentage of
total assets at end of year.......................................... NIL NIL NIL
Allowance for credit losses as a percentage
of total loans at end of year........................................ 1.02% 1.12% 1.18%
Total number of banking offices............................................... 3 2 1
Total shares outstanding at end of year (1)................................... 3,455,039 1,697,354 1,528,438
Book value per share at end of year........................................... $ 4.99 3.99 3.91
</TABLE>

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

(1) Share amounts reflect the two-for-one stock split effective December
15, 1997 and the 8% stock dividend to stockholders of record on
December 31, 1998.

<PAGE>

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

General

Citizens Community Bancorp, Inc. ("Citizens") owns 100% of the outstanding
common stock of Citizens Community Bank (the "Citizens Bank") and Citizens
Financial Corp. ("Citizens Financial") and Citizens Mortgage Corporation
(currently inactive) (Collectively the entities are referred to as the
"Company"). Citizens was organized simultaneously with Citizens Bank and its
primary business is the ownership and operation of Citizens Bank and Citizens
Financial. Citizens Bank is a Florida state-chartered commercial bank and its
deposits are insured by the Federal Deposit Insurance Corporation. Citizens Bank
opened for business on March 8, 1996, and provides community banking services,
through three banking offices, to businesses and individuals in Collier County,
Florida. Citizens Financial was formed and commenced business as a mortgage
broker in 1997.

Liquidity and Capital Resources

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

The Company's primary source of cash during the year ended December 31, 1998 was
from net deposit inflows of $27.1 million and the sale of common stock of $10.2
million. Cash was used primarily to originate loans and purchase securities. At
December 31, 1998, the Company had outstanding commitments to originate loans
totaling $9.1 million, commitments to borrowers for available lines of credit
totaling $6.7 million and time deposits maturing in the next year of $13.6
million. At December 31, 1998, Citizens Bank exceeded its regulatory liquidity
requirements.

Regulation and Legislation

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

Year 2000 Compliance

We are acutely aware of the many areas affected by the Year 2000 computer issue,
as addressed by the Federal Financial Institutions Examination Council ("FFIEC")
in its interagency statement which provided an outline for institutions to
effectively manage the Year 2000 challenges. A Year 2000 plan has been approved
by the Board of Directors which includes multiple phases, tasks to be completed,
and target dates for completion. Issues addressed therein include awareness,
assessment, renovation, validation, implementation, testing, and contingency
planning. See note 14 to the consolidated financial statements for more detailed
information.

<PAGE>

Credit Risk

Our primary business is providing deposit related services and making real
estate secured commercial, business and consumer loans. The lending activities
entail potential loan losses, the magnitude of which depend on a variety of
economic factors affecting borrowers which are beyond our control. We have
instituted underwriting guidelines and credit review procedures to protect the
Company from avoidable credit losses, some losses will inevitably occur. At
December 31, 1998 and 1997, the Company had no nonperforming assets or loans
which were delinquent 90 days or more or were nonperforming.

The following table presents information regarding total allowance for losses as
well as the allocation of such amounts to the various categories of loans
(dollars in thousands):
<TABLE>
<CAPTION>
At December 31,
1998 1997
---------------------------------------
Loans Loans
To To
Total Total
Amount Loans Amount Loans
------ ----- ------ -----

<S> <C> <C> <C> <C>
Commercial real estate loans............................ $ 315 48% $ 94 35%
Residential real estate loans........................... 51 32 42 27
Commercial loans........................................ 68 11 117 29
Consumer loans.......................................... 19 9 45 9
--- ---- ---- ----

Total allowance for loan losses......................... $ 453 100% $ 298 100%
=== === === ===

Allowance for credit losses as a percentage
of the total loans outstanding....................... 1.02% 1.12%
==== ====
</TABLE>

Loan Portfolio Composition

Commercial real estate loans and land loans comprise the largest group of loans
in our portfolio amounting to approximately $21.8 million, or 48% of the total
loan portfolio as of December 31, 1998. Commercial real estate loans consist of
approximately $19.4 million of loans secured by nonresidential property and
approximately $2.4 million of loans secured by undeveloped land.

Residential real estate loans comprise the second largest group of loans in our
loan portfolio, amounting to $14.6 million or 32% of the total loan portfolio as
of December 31, 1998, of which approximately 98% are first mortgage loans. As of
December 31, 1998, consumer loans and savings account loans, amounted to $3.8
million or 9% of the total loan portfolio.

The following table sets forth the loan portfolio composition:
<TABLE>
<CAPTION>
At December 31,
1998 1997
--------------------------------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
(In thousands)

<S> <C> <C> <C> <C>
Commercial real estate........................................ $ 21,820 48% $ 9,423 35%
Residential real estate....................................... 14,571 32 7,261 27
Commercial.................................................... 4,994 11 7,710 29
Consumer...................................................... 3,827 9 2,261 9
------- ---- ------ -----

45,212 100% 26,655 100%
=== ===

Add (subtract):
Deferred costs (fees), net.................................. 174 63
Allowance for loans losses.................................. (453) (298)
-------- -------

Loans, net.................................................... $ 44,933 $ 26,420
====== ======

</TABLE>

<PAGE>

Securities

The securities portfolio is comprised primarily of U.S. Government agency
securities. According to Financial Accounting Standards No. 115, the securities
portfolio must be categorized as either "held to maturity", "available for sale"
or "trading". Securities held to maturity represent those securities which the
Company has the positive intent and ability to hold to maturity. These
securities are carried at amortized cost and were comprised of U.S. Government
agency securities at December 31, 1998. Securities available for sale represent
those investments which may be sold for various reasons including changes in
interest rates and liquidity considerations. These securities are reported at
fair market value with unrealized gains and losses being reported as a separate
component of stockholders equity, net of income taxes. Trading securities are
held primarily for resale and are recorded at their fair values. Unrealized
gains or losses on trading securities are included immediately in earnings. At
December 31, 1998 and 1997, the Company had no securities categorized as
available for sale or trading.

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

<TABLE>
<CAPTION>
At December 31,
1998 1997
---- ----
(In thousands)
<S> <C> <C>
Securities held to maturity:
U.S. Treasury securities......................................................... $ - 250
U.S. Government agency securities................................................ 8,500 2,249
----- -----

$ 8,500 2,499
===== =====
</TABLE>

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

After One Year
One Year or Less to Five Years Total
---------------- ------------- -----
Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
December 31, 1998:
U.S. Government
agency securities.................. $ - - % $ 8,500 5.17% $ 8,500 5.17%
====== ===== ===== ==== ===== ====

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

Total.................................. $ 999 5.86% $ 1,500 6.00% $ 2,499 5.94%
=== ==== ===== ==== ===== ====
</TABLE>

<PAGE>

Regulatory Capital Requirements

All Banks are required to meet certain minimum regulatory capital requirements.
These capital requirements are intended to promote safety and soundness in the
banking industry and the requirement provide limits to the amount of assets a
bank may have in light of its capital structure.

Quantitative measures established by regulation to ensure capital adequacy
require Citizens Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). As of December 31, 1998, Citizens Bank meet all capital
adequacy requirements as set forth below:
<TABLE>
<CAPTION>

To Be Well
Capitalized
Minimum for Purposes
For Capital of Prompt and
Actual Adequacy Purposes: Corrective Action:
------ ------------------ ------------------
Amount % Amount % Amount %
------ - ------ - ------ -
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital (to Risk-
Weighted Assets)........... $ 6,808 15.34% $ 3,551 8.00% $ 4,439 10.0%
Tier I Capital (to Risk-
Weighted Assets)........... 6,375 14.36 1,776 4.00 2,663 6.00
Tier I Capital
(to Average Assets)........ 6,375 10.36 2,461 4.00 3,077 5.00

As of December 31, 1997:
Total Capital (to Risk-
Weighted Assets)........... $ 4,643 17.67% $ 2,102 8.00% $ 2,627 10.00%
Tier I Capital (to Risk-
Weighted Assets)........... 4,354 16.57 1,051 4.00 1,576 6.00
Tier I Capital
(to Average Assets)........ 4,354 10.67 1,633 4.00 2,041 5.00
</TABLE>

Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk arises primarily from interest-rate risk inherent in
its lending and deposit-taking activities. To that end, management actively
monitors and manages its interest-rate risk exposure. The measurement of market
risk associated with financial instruments is meaningful only when all related
and offsetting on- and off-balance-sheet transactions are aggregated, and the
resulting net positions are identified. Disclosures about the fair value of
financial instruments, which reflect changes in market prices and rates, can be
found in Note 6 of Notes to Consolidated Financial Statements.

Our primary objective in managing interest-rate risk is to maximize earnings and
minimize the potential adverse impact of changes in interest rates on Citizens
Bank's net interest income and capital, while adjusting the Company's
asset-liability structure to obtain the maximum yield-cost spread on that
structure. We rely primarily on our asset-liability structure to manage interest
rate risk. However, a sudden and substantial increase in interest rates may
adversely impact our earnings, to the extent that the interest earning assets
and interest-bearing liabilities do not change at the same speed, to the same
extent, or on the same basis. We do not engage in securities trading activities.

<PAGE>

Asset - Liability Structure

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

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

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

<PAGE>

The following table sets forth certain information relating to our
interest-earning assets and interest-bearing liabilities at December 31, 1998
that are estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):
<TABLE>
<CAPTION>

More
Than More
Three Than Six More
Months Months Than One
Three to Six to One Year to More Than
Months Months Year Five Years Five Years Total
------ ------ ---- ---------- ---------- -----
Mortgage, commercial and consumer loans (1):
<S> <C> <C> <C> <C> <C> <C>
Variable rate .................. $ 13,916 736 754 8,648 581 24,635
Fixed rate ..................... 742 635 605 16,530 2,065 20,577
-------- -------- -------- -------- -------- --------

Total loans ............... 14,658 1,371 1,359 25,178 2,646 45,212

Federal funds sold and securities
purchased under agreements
to resell ...................... 19,181 -- -- -- -- 19,181
Securities (2) ..................... -- -- -- 8,500 -- 8,500
-------- -------- -------- -------- -------- --------

Total rate-sensitive assets 33,839 1,371 1,359 33,678 2,646 72,893
-------- -------- -------- -------- -------- --------

Deposit accounts (3):
NOW deposits ................... 25,073 -- -- -- -- 25,073
Money-market deposits .......... 4,011 -- -- -- -- 4,011
Savings deposits ............... 8,235 -- -- -- -- 8,235
Time deposit ................... 2,676 2,374 8,538 6,718 -- 20,306
-------- -------- -------- -------- -------- --------

Total rate-sensitive
liabilities ........... 39,995 2,374 8,538 6,718 -- 57,625
======== ======== ======== ======== ======== ========

GAP repricing differences .......... $ (6,156) (1,003) (7,179) 26,960 2,646 15,268
======== ======== ======== ======== ======== ========

Cumulative GAP ..................... (6,156) (7,159) (14,338) 12,622 15,268
======== ======== ======== ======== ========

Cumulative GAP/total assets ........ (7.49%) (8.71%) (17.44%) 15.35% 18.57%
======== ======== ======== ======== ========
</TABLE>

(1) In preparing the table above, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust rather
than in the period in which the loans mature. Fixed-rate loans are
scheduled, including repayment, according to their maturities.

(2) Securities are scheduled through the maturity dates.

(3) Money-market, NOW, and savings deposits are regarded as ready
accessible withdrawable accounts. Time deposits are scheduled through
the maturity dates.

<PAGE>

The following table reflects the contractual principal repayments by period of
the Company's loan portfolio at December 31, 1998 (in thousands):
<TABLE>
<CAPTION>

Commercial
Real Residential
Years Ending Estate Commercial Mortgage Consumer
December 31, Loans Loans Loans Loans Total
------------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1999............................. $ 3,570 2,161 183 227 6,141
2000............................. 1,975 627 969 124 3,695
2001............................. 6,168 212 620 286 7,286
2002-2003........................ 7,132 1,197 361 205 8,895
2004-2005........................ 1,007 - - - 1,007
2006 and beyond.................. 1,969 797 12,438 2,984 18,188
------ ----- ------ ----- ------

Total............................ $ 21,821 4,994 14,571 3,826 45,212
====== ===== ====== ===== ======
</TABLE>

Of the $39.1 million of loans due after 1999, 67% of such loans have fixed
interest rates and 33% have adjustable interest rates.

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

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

To a limited extent, engaged in the sale of whole loans. The sale of fixed-rate
and variable loans have been utilized to provide liquidity and funding sources
for higher yielding loans.

The following table sets forth total loans originated, repaid and sold:

Year Ended December 31,
-----------------------
1998 1997
---- ----
(In thousands)
<S> <C> <C>
Originations:
Commercial loans................................................................ $ 2,964 756
Commercial real estate loans.................................................... 11,798 9,426
Residential mortgage loans...................................................... 10,785 13,897
Consumer loans.................................................................. 2,800 2,888
------ ------

Total loans originated...................................................... 28,347 26,967

Principal reductions............................................................... 9,225 7,887
Loans sold......................................................................... 565 4,687
------- ------

Increase in total loans............................................................ $ 18,557 14,393
====== ======
</TABLE>

<PAGE>

Deposits and Other Sources of Funds

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

Deposits. Deposits are attracted principally from our primary geographic market
areas in Collier County, Florida. We offer a broad selection of deposit
instruments including demand deposit accounts, NOW accounts, money- market
accounts, regular savings accounts, term certificate accounts and retirement
savings plans (such as IRA accounts). Certificate of deposit rates are set to
encourage longer maturities as cost and market conditions will allow. Deposit
account terms vary, with the primary differences being the minimum balance
required, the time period the funds must remain on deposit and the interest
rate. Deposit interest rates we set weekly based on a review of deposit flows
for the previous week, a survey of rates among competitors and other financial
institutions in Florida. Commercial banking relationships are emphasized in an
effort to increase demand deposits as a percentage of total deposits. We provide
a courier service to better serve its business customers.

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

At December 31,
---------------------------------------------------
1998 1997
---- ----
% of % of
Amount Deposits Amount Deposits
------ -------- ------ --------
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits.................. $ 6,365 9.95% $ 3,153 8.54%
NOW deposits......................................... 25,073 39.18 15,462 41.86
Money-market deposits................................ 4,011 6.27 1,302 3.52
Savings deposits..................................... 8,235 12.87 839 2.27
------- ------ -------- ------

Subtotal.................................... 43,684 68.27 20,756 56.19
------ ------ ------ ------

Time deposits:
2.00% - 3.99%............................... 265 .41 - -
4.00% - 4.99%............................... 3,093 4.83 1,101 2.98
5.00% - 5.99%............................... 11,952 18.68 8,221 22.26
6.00% - 6.99%............................... 4,996 7.81 6,860 18.57
------- ------- ------ ------

Total time deposits (1).............................. 20,306 31.73 16,182 43.81
------ ------ ------ ------

Total deposit........................................ $ 63,990 100.00% $ 36,938 100.00%
====== ====== ====== ======
</TABLE>
- ------------------------

(1) Includes individual retirement accounts ("IRAs") totaling $1,514,387
and $611,000 at December 31, 1998 and 1997, all of which are in the
form of time deposits.

Jumbo time deposits ($100,000 and over) mature as follows (in thousands):
<TABLE>
<CAPTION>
At December 31,
---------------
1998 1997
---- ----

<S> <C> <C>
Due three months or less........................................................... $ 825 872
Due over three months to six months................................................ 409 411
Due over six months to one year.................................................... 2,399 1,831
Due over one year.................................................................. 1,809 905
----- ------

$ 5,442 4,019
===== =====
</TABLE>

<PAGE>

Results of Operations

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

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

1998 1997 1996
-----------------------------------------------------------------------------------------
Interest Average Interest Average Interest Average
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate Balance Dividends Rate
------- --------- ---- ------- --------- ---- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans....................... $ 35,329 2,944 8.33% $ 20,537 1,914 9.32% $ 3,842 323 8.39%
Securities.................. 7,670 476 6.21 2,346 141 6.01 2,052 119 5.78
Other interest-earning
assets (1).............. 13,131 709 5.40 8,516 468 5.50 5,306 298 5.62
------ ------ ---- ------- ----- ------ --- ----

Total interest-earning
assets................ 56,130 4,129 7.36 31,399 2,523 8.04 11,200 740 6.61
----- ----- ---

Noninterest-earning assets....... 7,420 5,157 1,443
-------- ------ ------

Total assets............ $ 63,550 $ 36,556 $ 12,643
====== ====== ======

Interest-bearing liabilities:
Demand, money-market and
NOW deposits............ 24,316 827 3.40 14,195 517 3.64 4,087 148 3.62
Savings..................... 2,432 85 3.50 573 17 3.01 163 5 2.99
Time deposits............... 19,302 1,097 5.68 11,704 664 5.67 2,296 124 5.39
Other....................... - - - 125 10 8.00 66 6 9.42
------- -------- ------- ------ -------- -----

Total interest-bearing
liabilities........... 46,050 2,009 4.36 26,597 1,208 4.54 6,612 283 4.28
----- ----- ---

Noninterest-bearing liabilities.. 5,484 3,571 2,724
Stockholders' equity............. 12,016 6,388 3,307
------ ------ ------

Total liabilities and
stockholders' equity.. $ 63,550 $ 36,556 $ 12,643
====== ====== ======

Net interest/dividend income..... $ 2,120 $ 1,315 $ 457
===== ===== ===

Interest-rate spread (2)......... 3.00% 3.50% 2.33%
==== ==== ====

Net interest margin (3).......... 3.78% 4.20% 4.08%
==== ==== ====

Ratio of average interest-earning
assets to average interest-
bearing liabilities......... 1.22 1.18 1.69
==== ==== ====
</TABLE>

(1) Includes interest-bearing deposits and federal funds sold.
(2) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(3) Net interest margin is net interest income divided by average
interest-earning assets.

<PAGE>

Rate/Volume Analysis

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

Year Ended December 31,
1998 vs. 1997
--------------------------
Increase (Decrease) Due to
--------------------------
Rate/
Rate Volume Volume Total
---- ------ ------ -----
(In thousands)
<S> <C> <C> <C> <C>
Interest earning assets:
Loans.................................................................... $(203) 1,379 (146) 1,030
Securities............................................................... 5 320 10 335
Other interest-earning assets............................................ (9) 254 (4) 241
---- ------ ---- -----

Total.................................................................. (207) 1,953 (140) 1,606
--- ----- --- -----

Interest-bearing liabilities:
Deposits:
Demand, money-market and NOW deposits.................................. (34) 368 (24) 310
Savings................................................................ 3 56 9 68
Time deposits.......................................................... 1 430 2 433
Other.................................................................. - (10) - (10)
----- ----- ----- ------

Total.................................................................. (30) 844 (13) 801
--- ----- --- -----

Net change in net interest income............................................ $(177) 1,109 (127) 805
=== ===== === =====

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

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

Interest-bearing liabilities:
Deposits:
Demand, money-market and NOW deposits.................................. 1 366 2 369
Savings................................................................ - 12 - 12
Time deposits.......................................................... 7 507 26 540
Other.................................................................. (1) 6 (1) 4
--- ------ --- -------

Total.................................................................. 7 891 27 925
--- ----- --- ------

Net change in net interest income............................................ $ 27 707 124 858
== ====== === ======
</TABLE>

<PAGE>

Comparison of Years Ended December 31, 1998 and 1997

General. Net earnings for the year ended December 31, 1998 were $205,854 or
$.08 per basic and diluted share compared to net earnings $109,506 or $.06
per basic and diluted share for the year ended December 31, 1997. This
improvement in net operating results was primarily due to an increase in
net interest income and noninterest income, partially offset by an
increase in noninterest expenses, all as a result of growth of the
Company.

Interest Income and Expense. Interest income increased by $1.6 million from
$2.5 million for the year ended December 31, 1997 to $4.1 million for the
year ended December 31, 1998. Interest income on loans increased to $2.9
million from $1.9 million due an increase in the average loan portfolio
balance for the year ended December 31, 1998, partially offset by a
decrease in the weighted-average yield to 8.33% for 1998 from 9.32% for
1997. Interest on securities increased to $.5 million due to an increase
in the average securities balance in 1998, as well as an increase in the
average yield from 6.01% in 1997 to 6.21% in 1998. Interest on other
interest-earning assets increased to $.7 million primarily due to an
increase in average other interest-earning assets only partially offset by
a decrease in the weighted-average yield earned on those assets.

Interest expense increased to $2.0 million in 1998 from $1.2 million in
1997. Interest expense increased due to the growth in average deposits in
1998, partially offset by a decrease in the weighted-average rate paid on
deposits.

Provision for Loan Losses. The provision for loan losses was charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Company, industry standards, the amounts of
nonperforming loans, general economic conditions, particularly as they
relate to market areas, and other factors related to the collectibility of
the Company's loan portfolio. Management believes that the allowance for
loan losses of $453,211 is adequate at December 31, 1998.

Noninterest Income. Noninterest income increased from $273,102 in 1997 to
$341,397 in 1998 primarily due to higher service charges on deposit
accounts in 1998 compared to 1997.

Noninterest Expense. Total noninterest expense increased to $1.9 million for
the year ended December 31, 1998 compared to $1.3 million in 1997,
primarily due to increases in employee compensation and benefits and
occupancy and equipment expense resulting from the opening of additional
offices in 1997 and 1998. All other operating expenses also increased
primarily due to the overall growth of the Company.

Income Taxes. The income tax provision was $157,893 (an effective rate of
43.4%) for 1998 compared to a $66,000 (an effective rate of 37.6%) for
1997.

<PAGE>

Comparison of Years Ended December 31, 1997 and 1996

General. Net earnings for the year ended December 31, 1997 were $109,506 or
$.06 per basic and diluted share compared to a net loss $(342,295) or
$(.22) per basic and diluted share for the year ended December 31, 1996.
This improvement in net operating results was primarily due to an increase
in net interest income and noninterest income, partially offset by an
increase in noninterest expenses, all resulting from growth of Citizens
Bank.

Interest Income and Expense. Interest income increased by $1.8 million from
$.7 million for the year ended December 31, 1996 to $2.5 million for the
year ended December 31, 1997. Interest income on loans increased $1.6
million due an increase in the average loan portfolio balance, as well as
an increase in the weighted-average yield earned on loans in 1998.
Interest on securities increased $22,000 due to an increase in the average
securities balance in 1997, as well as an increase in the average yield
from 5.78% in 1996 to 6.01% in 1997. Interest on other interest-earning
assets increased $170,000 primarily due to an increase in the average
balance of other interest-earning assets in 1997.

Interest expense increased to $1.2 million in 1997 compared to $.3 million
in 1996. Interest expense increased due to an increase in the average
deposits as well as an increase in the weighted-average rate paid on
deposits for the year ended December 31, 1997 compared to 1996.

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

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

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

<PAGE>

Impact of Inflation and Changing Prices

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

Future Accounting Requirements

Financial Accounting Standards 133 - Accounting for Derivative Investments and
Hedging Activities requires companies to record derivatives on the balance sheet
as assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivatives and whether they qualify for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
The Company will be required to adopt this Statement January 1, 2000. This
Statement is not expected to have a material impact on the Company.

Selected Quarterly Results

Selected quarterly results of operations for the four quarters ended December 31
are as follows (in thousands, except share amounts:
<TABLE>
<CAPTION>

1998 1997
---------------------------------------- ---------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income............ $ 982 1,142 1,075 931 804 696 589 434
Interest expense........... 484 528 534 464 380 345 264 218
Net interest income 498 614 541 467 424 351 325 216
Provision for loan
losses.................. 54 37 15 56 15 36 42 60
Earnings before
income taxes............ 61 165 105 39 79 57 30 9
Net earnings............... 9 103 70 24 51 34 19 6
Basic earnings per
common share (1) - .03 .04 .01 .03 .02 .02 .01
Diluted earnings per
common share (1) - .03 .03 .01 .03 .02 .02 .01
Cash dividends declared
per common share - - - - - - - -

</TABLE>

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

(1) All per share information presented reflects the 1998 stock dividend
and the 1997 stock split.

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets
<TABLE>
<CAPTION>

At December 31,
---------------
1998 1997
---- ----
<S> <C> <C>
Assets

Cash and due from banks.............................................................. $ 5,481,992 3,153,577
Federal funds sold and securities purchased under agreements to resell............... 19,181,095 9,057,000
---------- ----------

Cash and cash equivalents.............................................. 24,663,087 12,210,577

Securities held to maturity.......................................................... 8,499,968 2,498,614
Restricted securities, Federal Home Loan Bank stock, at cost 127,100 -
Loans, net of allowance for loan losses of $453,211 and $298,000..................... 44,932,943 26,420,149
Premises and equipment, net.......................................................... 3,549,924 2,845,997
Accrued interest receivable and other assets......................................... 453,104 308,152
Deferred income taxes................................................................ - 138,043
---------------- ------------

Total assets........................................................... $ 82,226,126 44,421,532
========== ==========

Liabilities and Stockholders' Equity

Liabilities:
Demand deposits.................................................................. 6,365,180 3,153,135
Savings and NOW deposits......................................................... 33,307,881 16,300,813
Money-market deposits............................................................ 4,010,998 1,302,296
Time deposits.................................................................... 20,306,399 16,182,123
---------- ----------

Total deposits......................................................... 63,990,458 36,938,367

Official checks.................................................................. 697,458 473,521
Deferred income taxes............................................................ 19,850 -
Accrued interest payable and other liabilities................................... 293,832 238,886
----------- ------------

Total liabilities...................................................... 65,001,598 37,650,774
---------- ----------

Commitments and contingency (Note 6 and 14)

Stockholders' Equity:
Preferred stock, $.01 value; 2,000,000 shares authorized,
none issued or outstanding.................................................. - -
Common stock, $.01 par value; 8,000,000 shares authorized,
3,455,039 and 1,571,624 shares issued and outstanding....................... 34,550 15,716
Additional paid-in capital....................................................... 19,158,862 7,010,515
Accumulated deficit.............................................................. (1,968,884) (255,473)
---------- -----------

Total stockholders' equity............................................. 17,224,528 6,770,758
---------- ----------

Total liabilities and stockholders' equity............................. $ 82,226,126 44,421,532
========== ==========

</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations
<TABLE>
<CAPTION>

Year Ended December 31,
1998 1997 1996
---- ---- ----
Interest income:
<S> <C> <C> <C>
Loans............................................................... $ 2,943,598 1,913,828 322,538
Securities.......................................................... 476,060 140,545 118,531
Other interest-earning assets....................................... 709,403 468,404 298,727
---------- ---------- -------

Total interest income......................................... 4,129,061 2,522,777 739,796
--------- --------- -------

Interest expense:
Deposits............................................................ 2,009,177 1,197,823 276,691
Other............................................................... - 9,573 6,182
--------- --------- --------

Total interest expense........................................ 2,009,177 1,207,396 282,873
--------- --------- -------

Net interest income.................................................... 2,119,884 1,315,381 456,923

Provision for loan losses.............................................. 161,711 153,000 145,000
--------- ---------- -------

Net interest income after provision for loan losses........... 1,958,173 1,162,381 311,923
--------- --------- -------

Noninterest income:
Gain on sale of loans............................................... - 68,476 -
Service charges and fees............................................ 280,970 176,974 57,412
Other............................................................... 60,427 27,652 12,297
-------- ------- ------

Total noninterest income...................................... 341,397 273,102 69,709
---------- --------- -------

Noninterest expenses:
Compensation and benefits.......................................... 899,761 641,693 332,124
Occupancy and equipment............................................. 330,474 167,755 153,548
Advertising......................................................... 104,710 31,917 20,491
Organizational expenses............................................. - - 100,079
Professional fees................................................... 42,347 18,108 35,257
Office supplies..................................................... 68,767 30,120 68,982
Data processing..................................................... 77,744 62,195 33,765
Other............................................................... 412,020 308,232 170,681
------- ------- -------

Total noninterest expenses.................................... 1,935,823 1,260,020 914,927
--------- --------- -------

Earnings (loss) before income taxes (benefit).......................... 363,747 175,463 (533,295)

Income taxes (benefit)........................................ 157,893 65,957 (191,000)
---------- ---------- -------

Net earnings (loss).................................................... $ 205,854 109,506 (342,295)
========= ========= =======

Earnings (loss) per share:

Basic.........................................................$ .08 .06 (.22)
=========== =========== ==========

Diluted.......................................................$ .08 .06 (.22)
=========== =========== ==========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>

Common Stock
------------
Number Additional Total
Preferred of Paid-In Accumulated Stockholders'
Stock Shares Amount Capital Deficit Equity
----- ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995............... $ 21,000 - - - (22,684) (1,684)

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

Issuance of shares of common stock
$9.00 per share ...................... - 707,610 7,076 6,322,086 - 6,329,162

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

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

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

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

Issuance of common stock at $4.50 - 1,500 15 6,735 - 6,750

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

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

Sale of shares of common stock at
$7.50 per share ...................... - 1,000,000 10,000 7,413,256 - 7,423,256

Issuance of shares of common
stock to holders of warrants - 625,513 6,255 2,808,553 - 2,814,808

Stock options exercised.................... - 2,000 20 9,832 - 9,852

Stock dividend............................. - 255,902 2,559 1,916,706 (1,919,265) -

Net earnings............................... - - - - 205,854 205,854
----------- ------------- ----------------------- ---------- -----------

Balance at December 31, 1998...............$ - 3,455,039 34,550 19,158,862 (1,968,884) 17,224,528
=========== ========= ====== ========== ========= ==========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

Year Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)..................................................$ 205,854 109,506 (342,295)
Adjustments to reconcile net earnings (loss) to net cash provided
by (used in) operating activities:
Depreciation..................................................... 191,670 82,818 73,610
Provision for loan losses........................................ 161,711 153,000 145,000
Provision (credit) for deferred income taxes..................... 157,893 65,957 (191,000)
Amortization of loan fees, premiums and discounts................ (103,785) (148,005) (19,340)
(Increase) decrease in accrued interest receivable and
other assets.................................................. (144,952) (175,746) 14,592
Loans originated for sale........................................ (565,000) (4,687,283) -
Proceeds from sale of loans originated for sale 565,000 4,755,759 -
Gain on sale of loans............................................ - (68,476) -
Increase in accrued interest payable and other liabilities....... 54,946 165,352 24,503
-------- ---------- -------

Net cash provided by (used in) operating activities....... 523,337 252,882 (294,930)
------- ----------- ---------

Cash flows from investing activities:
Purchases of securities held to maturity............................. (13,499,095) (1,750,000) (5,220,309)
Purchase of Federal Home Loan Bank stock............................. (127,100) - -
Maturities of securities held to maturity............................ 7,500,000 1,500,000 3,000,000
Net increase in loans................................................ (18,572,979) (14,317,557) (12,261,552)
Purchase of premises and equipment................................... (895,597) (635,675) (1,163,961)
----------- ----------- ----------

Net cash used in investing activities..................... (25,594,771) (15,203,232) (15,645,822)
---------- ---------- ----------

Cash flows from financing activities:
Net increase in demand, savings, NOW and money-market
deposits......................................................... 22,927,815 9,301,625 11,454,619
Net increase in time deposits........................................ 4,124,276 9,751,638 6,430,485
Net increase (decrease) in official checks........................... 223,937 (106,182) 579,703
Repayment of advances from organizers................................ - - (239,000)
Redemption of preferred stock........................................ - - (21,000)
Sales of common stock................................................ 10,247,916 697,069 6,329,162
Repayment of mortgage payable........................................ - (525,000) (593,806)
--------------- ----------- -----------

Net cash provided by financing activities................ 37,523,944 19,119,150 23,940,163
---------- ---------- ----------

Net increase in cash and cash equivalents................................ 12,452,510 4,168,800 7,999,411

Cash and cash equivalents at beginning of year........................... 12,210,577 8,041,777 42,366
---------- ---------- ------------

Cash and cash equivalents at end of year.................................$ 24,663,087 12,210,577 8,041,777
========== ========== ==========

Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest.........................................................$ 1,952,818 1,093,507 233,273
========== ========== ==========

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

Noncash transactions-
Issuance of mortgage payable for acquisition of property.........$ - - 525,000
=============== ========== ===========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 1998 and 1997 and for each the Years In the Three-Year
Period Ended December 31, 1998

(1) Summary of Significant Accounting Policies

Organization. Citizens Community Bancorp, Inc. ("Citizens") was incorporated
on May 24, 1995. Citizens owns 100% of the outstanding common stock of
Citizens Community Bank of Florida ("Citizens Bank") Citizens Financial
Corp. ("Citizens Financial") and Citizens Mortgage Corporation
(currently inactive). Citizens was organized simultaneously with
Citizens Bank and its primary business is the ownership and operation of
Citizens Bank and Citizens Financial. Citizens Bank is a Florida
state-chartered commercial bank and its deposits are insured by the
Federal Deposit Insurance Corporation. Citizens Bank opened for business
on March 8, 1996 and provides community banking services to businesses
and individuals predominantly in Collier County, Florida. Collectively
the entities are referred to as the "Company." The Company operates
predominantly in one reportable industry segment: banking.

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

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

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

Loans Held for Sale. Mortgage loans originated and intended for sale in the
secondary market are carried at the lower of cost or estimated market
value in the aggregate. At December 31, 1998 and 1997, there were no
loans held for sale.

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

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

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

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

Premises and Equipment. Premises and equipment are stated at cost less
accumulated depreciation. Depreciation expense is computed on the
straight-line basis over the estimated useful life of each type of asset.

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

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

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

Advertising. The Company expenses all media advertising as incurred.

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

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

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

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

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

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

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

Earnings Per Share. Basic earnings per share is computed on the basis of the
weighted-average number of common shares outstanding. Diluted earnings
per share is computed based on the weighted-average number of shares
outstanding plus the effect of outstanding stock options, computed using
the treasury stock method.

Future Accounting Requirements. Financial Accounting Standards 133 -
Accounting for Derivative Investments and Hedging Activities requires
companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for
depending on the use of the derivatives and whether they qualify for
hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. The Company will be required to
adopt this Statement effective January 1, 2000. Management does not
anticipate that this Statement will have a material impact on the
Company.

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

Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
December 31, 1998:
<S> <C> <C> <C> <C>
U.S. Government agencies......... $ 8,499,968 2,565 - 8,502,533
========= ===== =========

December 31, 1997:
U.S. Treasuries.................. 249,786 56 - 249,842
U.S. Government agencies......... 2,248,828 - (1,410) 2,247,418
--------- ---------- ---------

$ 2,498,614 56 (1,410) 2,497,260
========= ======== ===== =========
</TABLE>

There were no sales of securities in 1998, 1997 or 1996.
(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(2) Securities Held to Maturity, Continued
The scheduled maturities of securities at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---- -----
<S> <C> <C>

Due in one or less.......................................................... $ - -
Due after one through five years............................................. 8,499,968 8,502,533
--------- ---------

$ 8,499,968 8,502,533
========= =========

(3) Loans
The components of loans are as follows:

At December 31,
---------------
1998 1997
---- ----

Commercial real estate.................................................... $ 21,820,359 9,422,955
Residential real estate................................................... 14,570,558 7,260,686
Commercial................................................................ 4,993,954 7,710,001
Consumer.................................................................. 3,827,444 2,261,622
---------- ----------

45,212,315 26,655,264

Add (Subtract):
Deferred costs (fees), net.............................................. 173,839 62,885
Allowance for loan losses............................................... (453,211) (298,000)
----------- -----------

Loans, net................................................................ $ 44,932,943 26,420,149
========== ==========

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

Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----

Beginning balance.............................................. $ 298,000 145,000 -
Loans charged-off.............................................. (6,500) - -
Provision for loan losses...................................... 161,711 153,000 145,000
------- ------- -------

$ 453,211 298,000 145,000
======= ======= =======
</TABLE>

The Company had no impaired loans in 1998, 1997 or 1996.

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

At December 31,
---------------
1998 1997
---- ----
<S> <C> <C>
Land.................................................................. $ 931,056 931,056
Bank premises......................................................... 2,092,525 1,581,383
Furniture, fixtures and equipment..................................... 807,727 442,775
---------- ---------

Total, at cost.................................................... 3,831,308 2,955,214

Less accumulated depreciation..................................... 281,384 109,217
---------- ----------

Premises and equipment, net....................................... $ 3,549,924 2,845,997
========= =========
</TABLE>

(5) Deposits
The aggregate amount of time deposits with a minimum denomination of
$100,000, was approximately $5,442,000 and $4,019,000 at December 31,
1997 and 1996, respectively.

A schedule of maturities of certificates of deposit follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ------
<S> <C> <C>
1999.............................................................. $ 13,588,264
2000.............................................................. 5,423,757
2001.............................................................. 1,090,695
2002.............................................................. -
2003 and thereafter............................................... 203,683
------------
$ 20,306,399
============
(continued)
</TABLE>

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

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

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

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

At December 31, 1998 At December 31, 1997
-------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents..................... $ 24,663 24,663 12,211 12,211

Securities held to maturity................... 8,500 8,503 2,499 2,497

Loans receivable.............................. 44,933 45,353 26,420 26,681

Accrued interest receivable................... 351 351 220 220

Financial liabilities:

Deposit liabilities........................... 63,990 64,252 36,938 37,053
</TABLE>

A summary of the amounts of the Company's financial instruments, which
approximates market value with off-balance sheet risk at December 31,
1998 follows (in thousands):
<TABLE>
<CAPTION>

<S> <C>
Unfunded loan commitments at variable rates............................. $ 9,110
=====

Available lines of credit............................................... $ 6,703
=====
</TABLE>

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

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

Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
Deferred:
<S> <C> <C> <C>
Federal.........................................................$ 134,815 56,317 (163,000)
State........................................................... 23,078 9,640 (28,000)
------- ------ -------

Total deferred provision (credit)............................$ 157,893 65,957 (191,000)
======= ====== =======
</TABLE>

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

1998 1997 1996
------------------------------------------------------------
% of % of % of
Pretax Pretax Pretax
Amount Earnings Amount Earnings Amount Loss
------ -------- ------ -------- ------ ----
Income tax expense (benefit) at statutory
<S> <C> <C> <C> <C> <C> <C>
Federal income tax rate............ $ 123,674 34.0% $ 59,657 34.0% $(181,320) (34.0)%
Increase (decreases) resulting from:
State taxes, net of federal tax
benefit........................ 15,231 4.2 6,362 3.6 (18,480) (3.4)
Other.............................. 18,988 5.2 (62) - 8,800 1.6
------- ---- -------- ------ --------- -----

$ 157,893 43.4% $ 65,957 37.6% $(191,000) (35.8%)
======= ==== ====== ==== ======= ====
</TABLE>

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

At December 31,
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses........................................... $ 58,867 -
Contributions....................................................... 2,111 1,451
Net operating loss carryforward..................................... - 154,500
Organization and start-up costs..................................... 23,536 33,753
------- -------

Total deferred tax asset.......................................... 84,514 189,704
------- -------

Deferred tax liabilities:
Depreciation........................................................ 46,117 25,522
Accrual to cash adjustment.......................................... 58,247 24,154
Allowance for loan losses........................................... - 1,985
---------- -------

Total deferred tax liabilities.................................... 104,364 51,661
------- -------

Net deferred income tax asset (liability)......................... $ (19,850) 138,043
======= =======
</TABLE>

(9) Stock Options
The Company has established two Stock Option plans, one for directors and
one for officers and employees. A total of 459,000 shares of common
stock has been reserved for the plans. At December 31, 1998, 92,159
shares remain available for grant.
<TABLE>
<CAPTION>

Range
of Per Weighted-
Number Share Average Aggregate
of Option Per Share Option
Shares Price Price Price
------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Outstanding at December 31, 1995.................... - $ - - -
Options granted..................................... 55,080 4.17 4.17 229,684
-------- ---------

Outstanding at December 31, 1996.................... 55,080 4.17 4.17 229,684
Options granted..................................... 135,000 4.17-5.56 4.80 648,090
Options terminated.................................. (13,600) 4.17 4.17 (56,700)
Options exercised................................... (8,640) 4.17 4.17 (36,000)
------- ---------

Outstanding at December 31, 1997.................... 167,840 4.17-5.56 4.68 785,074
Options granted..................................... 268,812 6.48-9.25 7.56 2,033,513
Options terminated.................................. (67,651) 4.67-9.26 5.46 (369,576)
Options exercised................................... (2,160) 4.67-5.21 4.59 (9,920)
-------- -----------

Outstanding at December 31, 1998.................... 366,841 $ 4.17-9.26 6.65 2,439,091
======= ========= ==== =========
</TABLE>

The weighted-average remaining contractual life of the outstanding stock
options at December 31, 1998 and 1997 was 100 months and 114 months,
respectively.

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

Year Ending

1999......................................... 133,079
2000......................................... 81,227
2001......................................... 62,327
2002......................................... 57,477
2003......................................... 32,731
-------

366,841
=======

FASB Statement 123 requires proforma information regarding net earnings and
earnings per share. This proforma information has been determined as if
the Company had accounted for its employee stock options under the fair
value method of that statement and is as follows:
<TABLE>
<CAPTION>

Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----

Net earnings (loss):
<S> <C> <C> <C>
As reported................................................$ 205,854 109,506 (342,295)
======= ======= =======

Proforma...................................................$ 106,098 97,605 (342,295)
======= ======= =======

Basic earnings (loss) per share:
As reported................................................$ .08 .06 (.22)
===================== ==========

Proforma ..................................................$ .04 .06 (.22)
===================== ==========

Diluted earnings (loss) per share:
As reported................................................$ .08 .06 (.22)
==================== ==========

Proforma...................................................$ .04 .06 (.22)
==================== ==========
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions:
<TABLE>
<CAPTION>

Year Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate........................................... 5% 6% 6%
Dividend yield.................................................... - % - % - %
Expected life in years............................................ 10 10 10
</TABLE>

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(10) Earnings Per Share ("EPS")
Thefollowing is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations.
<TABLE>
<CAPTION>

For the Year Ended December 31,
----------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------------------------------------------------------------------------------
Weighted- Per Weighted- Per Weighted- Per
Average Share Average Share Average Share
Earnings Shares Amount Earnings Shares Amount Earnings Shares Amount
-------- ------ ------ -------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net earnings
available to
common
stockholders...... $ 205,854 2,597,330 $ .08 $ 109,506 1,697,354 $ .06 $(342,295) 1,553,206 $(.22)
==== === ===

Effect of dilutive
securities-
Incremental shares
from assumed
exercise of
options .......... 44,602 - -
--------- --------------- ---------

Diluted EPS:
Net earnings
available to
common
stockholders
and assumed
conversions....... $ 205,854 2,641,932 $ .08 $ 109,506 1,697,354 $ .06 $(342,295) 1,553,206 $(.22)
======= ========= === ======= ========= === ======= ========= ===
</TABLE>

(11) Stockholders' Equity
The Board of Directors approved the split of the Company's common shares on
a two-for-one basis effective December 15, 1997 and to pay an 8% stock
dividend to stockholders of record on December 31, 1998. The stock was
issued on January 19, 1999. All share amounts reflect this split and
stock dividend.

Citizens Bank is subject to certain restrictions on the amount of dividends
that it may declare without prior regulatory approval. At December 31,
1998, Citizens Bank had no amounts available for dividends.

During 1998, the Company sold 1,000,000 shares of common stock for an
aggregate of $7,500,000. The Company incurred $76,744 of expenses as
related to the sale of stock, which were deducted from the proceeds
received.

During 1996, the Company sold 707,610 shares of common stock for an
aggregate of $6,368,490. The Company incurred $39,328 in offering
expenses relating to their public offering of the common stock and
warrants which were deducted from the proceeds received. During the
initial offering period, shares were offered in units with a unit
consisting of one share of common stock and one warrant. Each warrant
entitles the holder thereof to purchase one share of additional common
stock for $4.17 per share during the 24 month period ending June 16,
1998. There were 723,600 warrants issued and, as of December 31, 1998,
all warrants had been exercised or expired.

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(12) Profit Sharing Plan
During 1998, the Company began sponsoring a Section 401(k) profit sharing
plan. The profit sharing plan is available to all employees electing to
participate after meeting certain age and length of service
requirements. Expense related to the Company's contributions to the
profit sharing plan included in the accompanying's consolidated
statements of earnings was approximately $3,000 for the year ended
December 31, 1998.

(13) Regulatory Matters
Citizens and Citizens Bank are subject to various regulatory capital
requirements administered by various regulatory banking agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, Citizens Bank
must meet specific capital guidelines that involve quantitative
measures of Citizens Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. Citizens Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require Citizens Bank to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier I capital (as defined in the
regulations) to risk- weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1998, that the Company meets all capital
adequacy requirements to which it is subject.

As of December 31, 1998, the most recent notification from the regulatory
authorities categorized Citizens Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well capitalized Citizens 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 Citizens Bank's categorization.
Citizens Bank's actual capital amounts and percentages are also
presented in the table (dollars in thousands).
<TABLE>
<CAPTION>

To Be Well
Capitalized Under
Minimum the Provisions
For Capital of Prompt and
Actual Adequacy Purposes: Corrective Action
------ ------------------ -----------------
Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Total Capital (to Risk-
Weighted Assets).......... $ 6,808 15.34% $ 3,551 8.00% $ 4,439 10.00%
Tier I Capital (to Risk-
Weighted Assets).......... 6,375 14.36 1,776 4.00 2,663 6.00
Tier I Capital
(to Average Assets)....... 6,375 10.36 2,461 4.00 3,077 5.00

As of December 31, 1997:
Total Capital (to Risk-
Weighted Assets).......... $ 4,643 17.67% $ 2,102 8.00% $ 2,627 10.00%
Tier I Capital (to Risk-
Weighted Assets).......... 4,354 16.57 1,051 4.00 1,576 6.00
Tier I Capital
(to Average Assets)....... 4,354 10.67 1,633 4.00 2,041 5.00
</TABLE>

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

Condensed Balance Sheets
(In thousands)
At December 31,
---------------
1998 1997
---- ----
<S> <C> <C>
Assets
Cash............................................................................. $ 131 271
Securities purchased under agreements to resell.................................. 8,705 -
Loans receivable................................................................. 2,036 1,261
Investment in subsidiaries....................................................... 6,456 4,458
Premises and equipment, net...................................................... - 785
Other assets..................................................................... 12 -
------- -----

Total assets................................................................. $ 17,340 6,775
====== =====

Liabilities and Stockholders' Equity

Liabilities...................................................................... 115 4
Stockholders' equity............................................................. 17,225 6,771
------ -----

Total liabilities and stockholders' equity................................... $ 17,340 6,775
====== =====
</TABLE>

Condensed Statements of Operations
(In thousands)

Year Ended December 31,
1998 1997 1996
---- ---- ----

<S> <C> <C> <C>
Revenues.............................................................. $ 416 162 69
Expenses.............................................................. (106) (138) (78)
--- --- ---

Income (loss) before income (loss) of subsidiaries
and income taxes................................................ 310 24 (9)
Income (loss) of subsidiaries..................................... 11 94 (333)
---- ---- ---

Income before income taxes........................................ 321 118 (342)

Income taxes...................................................... 115 8 -
--- ---- ---

Net income (loss)................................................. $ 206 110 (342)
=== === ===
</TABLE>

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(13) Parent Company Only Financial Information, Continued

Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>

Net cash provided by operating activities.......................... 331 51 91
------- ------ -------

Cash flows from investing activities:
Securities purchased under agreements to resell........................ (8,705) - -
Purchase of property and equipment, net of transfer to subsidiary...... (467) (48) 446
Net increase in loans receivable....................................... (775) (600) (661)
------ ------ -------

Net cash (used in) provided by investing activities................ (9,947) (648) (215)
----- ------ ------

Cash flows from financing activities:
Repayment of mortgage note payable..................................... - (525) (594)
Net proceeds from issuance of common stock............................. 10,248 697 6,329
Retirement of preferred stock.......................................... - - (21)
Repayment of advances from organizers.................................. - - (239)
Investment in subsidiary............................................... (772) (617) (4,080)
------ ------ -----

Net cash provided by (used in) financing activities................ 9,476 (445) 1,395
------ ------- -----

Net (decrease) increase in cash............................................. (140) (1,042) 1,271

Cash and cash equivalents at beginning of the year.......................... 271 1,313 42
------- ----- ------

Cash and cash equivalents at end of year.................................... $ 131 271 1,313
====== ===== =====
</TABLE>

(14) Year 2000 Issues
The Company is acutely aware of the many areas affected by the Year 2000
computer issue and has formed a Year 2000 committee that is charged
with oversight of completing the Year 2000 project on a timely basis.
Citizens Bank also has a Year 2000 committee which is actively involved
in managing the Year 2000 computer challenges, following the guidance
provided by its regulatory bodies and documented in the interagency
statements issued by the Federal Financial Institutions Examination
Council ("FFIEC"). Citizens Bank has a Year 2000 Technology Plan,
approved by the Board of Directors, which includes multiple phases,
tasks to be completed and target dates for completion. Issues addressed
therein include awareness, assessment, renovation, validation,
implementation, testing and contingency planning.

(continued)

<PAGE>

CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

(14) Year 2000 Issues, Continued
Citizens Community Bank routinely upgrades and purchases technology advanced
software and hardware on a continual basis. All future purchases and
upgrades will be Year 2000 compliant. Citizens has determined that the
cost of making modifications to correct any Year 2000 issues will not
substantially affect reported operating results.

Citizens's main service provider considers the awareness phase of its Year
2000 Project to be substantially complete from an internal standpoint.
Their assessment phase of its Year 2000 Project is substantially
complete for internal mission critical systems.

The testing phase of Citizens's main service provider involves the testing
of various internal and external mission critical systems. The service
provider is into its testing phase of testing its internal and external
mission critical systems and services with Year 2000 date information.
The service provider plans to substantially complete testing of mission
critical systems and services by June 30, 1999.

Citizens also recognizes the importance of determining if its borrowers are
preparing for the Year 2000 problem in a timely manner to avoid
deterioration of the loan portfolio solely due to this issue.
Significant relationships have been identified and questionnaires have
been completed to assess the inherent risks. Deposit customers have
received statement stuffers and informational material in this regard.
Citizens plans to be prepared on a one-on-one basis with significant
borrowers who have been identified as having high Year 2000 risk
exposure. Citizens stresses the importance of determining that its
major depositors and borrowers are ready to face the Year 2000 problem
in order to avoid difficulties surrounding the issue. Citizens plans to
continue in its effects to be active in informing its customers of the
Year 2000 issue.

Citizens has developed a contingency plan relative to the Year 2000 issues
which addresses a "worst case scenario." The plan covers various
options for handling interruptions of the internal and external mission
critical systems and services. Citizens, for example, has developed
plans for meeting unusually high demands for cash generated by the
publicity surrounding the Year 2000 issue. The Contingency Plan will be
continuously monitored to incorporate and address various operational
elements as needed. Furthermore, Citizens's contingency plan covers
systems which can be handled manually on an interim basis. Should
outside service providers not be able to provide compliant systems,
Citizens will terminate those relationships and transfer to other
vendors.

<PAGE>

Independent Auditors' Report

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

We have audited the accompanying consolidated balance sheets of Citizens
Community Bancorp, Inc. and Subsidiaries (the "Company") at December 31, 1998
and 1997, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.

HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
January 29, 1999

<PAGE>

Corporate Information

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

The Annual Meeting of the Stockholders
Annual will be held at the Olde Marco Inn, 100
Meeting Palm Street, Marco Island, Florida 34145
at 10:00 a.m., April 20, 1999.

Citizens Community Bancorp, Inc. is subject
to the informational requirements of the
Securities Exchange Act of 1934, as
amended, and, in accordance therewith,
files electronically with the Securities
and Exchange Commission ("Commission")
Available through the Commission's Electronic Data
Information Gathering Analysis and Retrieval ("EDGAR")
system, reports, proxy statements and other
information which may also be inspected and
copied at the public reference facilities
maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and
3475 Lenox Road, N.E., Suite 1000, Atlanta,
GA 30326-1232. Copies of such material may
also be reviewed on the Commission's Web
Site, http://www.sec.gov.

Copies of Forms 10-KSB and 10-QSB, as filed
with the Securities and Exchange
Commission, may also be obtained by
stockholders, without charge, upon written
request to Mr. Gregory E. Smith - Senior
Vice President/Chief Financial Officer,
Citizens Community Bancorp, Inc., 650 East
Elkcam Circle, Marco Island, Florida 34145,
telephone number (941) 389-1800 Extension
280.

Transfer Agent Registrar and Transfer Company
and 10 Commerce Drive
Registrar Cranford, NJ 07016
(800) 368-5948

Igler & Dougherty, P.A.
Corporate Counsel 1501 Park Avenue East
Tallahassee, Florida 32301
(850) 878-2411

Hacker, Johnson, Cohen & Grieb, P.A.
Certified Public Accountants
Independent 500 North Westshore Boulevard
Auditors Suite 1000
Tampa, Florida 33609
(813) 286-2424

<PAGE>

Citizens Community Bancorp, Inc.

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

650 E. Elkcam Circle
Marco Island, Florida 34145
(941) 389-1800
www.ccbank.com

Reasons the community banks with us. . . . .

* A locally-owned community bank * Decisions made on
site * Personal service * Consistent customer-officer
relationships * Courier services for commercial accounts
* Convenient office hours
* Interest-bearing checking accounts

Citizens Community
Bank of Florida

650 E. Elkcam Circle
Main Office Marco Island, Florida
34145
(941) 389-1800

Moorings 2375 Tamiami Trial
Branch North
Naples, Florida 34103
(941) 430-1775

East Trail 5101 Tamiami Trail
Branch Naples, Florida 34113
(941) 775-0748

Logo graphic
omitted

<ARTICLE> 9

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,482
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 19,181
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 8,500
<INVESTMENTS-MARKET> 8,503
<LOANS> 45,386
<ALLOWANCE> 453
<TOTAL-ASSETS> 82,226
<DEPOSITS> 63,990
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,011
<LONG-TERM> 0
0
0
<COMMON> 35
<OTHER-SE> 17,190
<TOTAL-LIABILITIES-AND-EQUITY> 82,226
<INTEREST-LOAN> 2,944
<INTEREST-INVEST> 476
<INTEREST-OTHER> 709
<INTEREST-TOTAL> 4,129
<INTEREST-DEPOSIT> 2,009
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 2,120
<LOAN-LOSSES> 162
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,936
<INCOME-PRETAX> 364
<INCOME-PRE-EXTRAORDINARY> 364
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
<YIELD-ACTUAL> 4.08
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 298
<CHARGE-OFFS> 7
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 453
<ALLOWANCE-DOMESTIC> 453
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0

</TABLE>