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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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

For the
quarterly period ended March 31, 2006

Commission file number 2-96144



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CITIZENS FINANCIAL CORP.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 55-0666598                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|213 Third Street, Elkins, West Virginia  |  | 26241     
|(Address of principal executive offices) |  | (Zip Code)

(304) 636-4095

(Registrants telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)



---

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

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

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

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



|                            |  |                              
|--------------------------- |  | -----------------------------
|Class                       |  | Outstanding at April 30, 2006
|Common Stock ($2 par value) |  | 1,845,562                    

This report contains 45 pages.



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##### Table of Contents

FORM 10-Q

CITIZENS FINANCIAL CORP.

Quarter Ended March 31, 2006

INDEX



|         |  |                                                                                                                          |  |         
|-------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | --------
|         |  |                                                                                                                          |  | Page No.
|Part I.  |  | Financial Information                                                                                                    |  |         
|         |  |                                                                                                                         
|         |  | Item 1.
Financial Statements                                                                                             |  |         
|         |  |                                                                                                                         
|         |  | Condensed Consolidated Balance SheetsMarch 31, 2006 and December 31, 2005                                                |  | 3       
|         |  |                                                                                                                         
|         |  | Condensed Consolidated Statements of IncomeThree Months Ended March 31, 2006 and March 31, 2005                          |  | 4       
|         |  |                                                                                                                         
|         |  | Statements of Comprehensive Income/LossThree Months Ended March 31, 2006 and March 31, 2005                              |  | 5       
|         |  |                                                                                                                         
|         |  | Condensed Consolidated Statements of Changes in Shareholders EquityThree Months Ended March 31, 2006 and March 31, 2005 |  | 6       
|         |  |                                                                                                                         
|         |  | Condensed Consolidated Statements of Cash FlowsThree Months Ended March 31, 2006 and March 31, 2005                      |  | 7       
|         |  |                                                                                                                         
|         |  | Notes to Condensed Consolidated Financial Statements                                                                     |  | 8 - 14  
|         |  |                                                                                                                         
|         |  | Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 14 - 20 
|         |  |                                                                                                                         
|         |  | Item 3.
Quantitative and Qualitative Disclosures About Market Risk                                                       |  | 20      
|         |  |                                                                                                                         
|         |  | Item 4.
Controls and Procedures                                                                                          |  | 20      
|         |  |                                                                                                                         
|Part II. |  | Other Information and Index to Exhibits                                                                                  |  |         
|         |  |                                                                                                                         
|         |  | Items 1 through 6                                                                                                        |  | 21      
|         |  |                                                                                                                         
|         |  | Signatures                                                                                                               |  | 22      
|         |  |                                                                                                                         
|         |  | Amendment to Articles of Incorporation                                                                                   |  | 23      
|         |  |                                                                                                                         
|         |  | Amendment to Bylaws                                                                                                      |  | 36      
|         |  |                                                                                                                         
|         |  | Certification by Executive Officers Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002                   |  | 42      



2



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PART I ITEM I - FINANCIAL INFORMATION

CITIZENS FINANCIAL CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)



|                                                                                                              |  |               |         |   |              |   |         |  
|------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------ | - | ------- | -
|                                                                                                              |  | March 31,2006 |         |   | Dec. 31,2005 |  
|                                                                                                              |  | (Unaudited)   |         |   | *            |  
|ASSETS                                                                                                        |  |               |         |   |              |   |         |  
|                                                                                                              |  |              
|Cash and due from banks                                                                                       |  | $             | 5,787   |   |              | $ | 6,770   |  
|Federal funds sold                                                                                            |  |               | 37      |   |              |   | 2,003   |  
|Securities available for sale, at fair value                                                                  |  |               | 64,433  |   |              |   | 66,854  |  
|Loans, less allowance for loan losses of $1,702 and $1,597, respectively                                      |  |               | 156,595 |   |              |   | 152,136 |  
|Premises and equipment, net                                                                                   |  |               | 4,166   |   |              |   | 4,192   |  
|Accrued interest receivable                                                                                   |  |               | 1,419   |   |              |   | 1,321   |  
|Other assets                                                                                                  |  |               | 4,822   |   |              |   | 4,914   |  
|                                                                                                              |  |               |         |   |              |   |         |  
|Total Assets                                                                                                  |  | $             | 237,259 |   |              | $ | 238,190 |  
|                                                                                                              |  |               |         |   |              |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                          |  |               |         |   |              |   |         |  
|                                                                                                              |  |              
|Deposits:                                                                                                     |  |               |         |   |              |   |         |  
|Noninterest bearing                                                                                           |  | $             | 26,175  |   |              | $ | 28,648  |  
|Interest bearing                                                                                              |  |               | 159,504 |   |              |   | 161,838 |  
|                                                                                                              |  |               |         |   |              |   |         |  
|Total deposits                                                                                                |  |               | 185,679 |   |              |   | 190,486 |  
|Short-term borrowings                                                                                         |  |               | 24,187  |   |              |   | 20,512  |  
|Long-term borrowings                                                                                          |  |               | 4,629   |   |              |   | 5,145   |  
|Other liabilities                                                                                             |  |               | 2,833   |   |              |   | 2,434   |  
|                                                                                                              |  |               |         |   |              |   |         |  
|Total liabilities                                                                                             |  |               | 217,328 |   |              |   | 218,577 |  
|                                                                                                              |  |               |         |   |              |   |         |  
|Commitments and contingencies                                                                                 |  |               |         |   |              |   |         |  
|                                                                                                              |  |              
|SHAREHOLDERS EQUITY                                                                                          |  |               |         |   |              |   |         |  
|                                                                                                              |  |              
|Common stock, $2.00 par value, authorized 2,250,000 shares, issued 2,250,000 and 750,000 Shares, respectively |  |               | 4,500   |   |              |   | 1,500   |  
|Additional paid-in capital                                                                                    |  |               |        |   |              |   | 2,100   |  
|Retained earnings                                                                                             |  |               | 20,152  |   |              |   | 20,704  |  
|Accumulated other comprehensive income/(loss)                                                                 |  |               | (1,346  | ) |              |   | (1,316  | )
|Treasury stock at cost, 396,036 and 132,012 Shares, respectively                                              |  |               | (3,375  | ) |              |   | (3,375  | )
|                                                                                                              |  |               |         |   |              |   |         |  
|Total shareholders equity                                                                                    |  |               | 19,931  |   |              |   | 19,613  |  
|                                                                                                              |  |               |         |   |              |   |         |  
|Total Liabilities and Shareholders Equity                                                                    |  | $             | 237,259 |   |              | $ | 238,190 |  
|                                                                                                              |  |               |         |   |              |   |         |  

---

|* | From audited financial statements.
|- | ----------------------------------

The accompanying notes are an
integral part of these financial statements.



3



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##### Table of Contents

CITIZENS FINANCIAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of dollars, except per share data)





|                                                    |  |                              |           |   |      |   |          
|--------------------------------------------------- |  | ---------------------------- | --------- | - | ---- | - | ---------
|                                                    |  | Three Months Ended March 31,
|                                                    |  | 2006                         |           |   | 2005
|                                                    |  | (Unaudited)                 
|INTEREST INCOME                                     |  |                              |           |   |      |   |          
|                                                    |  |                             
|Interest and fees on loans                          |  | $                            | 3,014     |   |      | $ | 2,465    
|Interest and dividends on securities:               |  |                              |           |   |      |   |          
|Taxable                                             |  |                              | 546       |   |      |   | 392      
|Tax-exempt                                          |  |                              | 75        |   |      |   | 82       
|Interest on federal funds sold                      |  |                              | 22        |   |      |   | 26       
|                                                    |  |                              |           |   |      |   |          
|Total interest income                               |  |                              | 3,657     |   |      |   | 2,965    
|                                                    |  |                              |           |   |      |   |          
|INTEREST EXPENSE                                    |  |                              |           |   |      |   |          
|                                                    |  |                             
|Interest on deposits                                |  |                              | 1,033     |   |      |   | 691      
|Interest on short-term borrowing                    |  |                              | 146       |   |      |   | 90       
|Interest on long-term borrowing                     |  |                              | 48        |   |      |   | 25       
|                                                    |  |                              |           |   |      |   |          
|Total interest expense                              |  |                              | 1,227     |   |      |   | 806      
|                                                    |  |                              |           |   |      |   |          
|Net interest income                                 |  |                              | 2,430     |   |      |   | 2,159    
|Provision for loan losses                           |  |                              | 103       |   |      |   | 103      
|                                                    |  |                              |           |   |      |   |          
|Net interest income after provision for loan losses |  |                              | 2,327     |   |      |   | 2,056    
|                                                    |  |                              |           |   |      |   |          
|NONINTEREST INCOME                                  |  |                              |           |   |      |   |          
|                                                    |  |                             
|Trust department income                             |  |                              | 47        |   |      |   | 51       
|Brokerage fees                                      |  |                              | 31        |   |      |   | 22       
|Service fees                                        |  |                              | 190       |   |      |   | 171      
|Insurance commissions                               |  |                              | 4         |   |      |   | 1        
|Security gains/(losses)                             |  |                              | (18       | ) |      |   |         
|Secondary market loan fees                          |  |                              | 33        |   |      |   | 14       
|Other                                               |  |                              | 92        |   |      |   | 64       
|                                                    |  |                              |           |   |      |   |          
|Total noninterest income                            |  |                              | 379       |   |      |   | 323      
|                                                    |  |                              |           |   |      |   |          
|NONINTEREST EXPENSE                                 |  |                              |           |   |      |   |          
|                                                    |  |                             
|Salaries and employee benefits                      |  |                              | 937       |   |      |   | 968      
|Net occupancy expense                               |  |                              | 90        |   |      |   | 85       
|Equipment expense                                   |  |                              | 121       |   |      |   | 118      
|Data processing                                     |  |                              | 224       |   |      |   | 166      
|Director fees                                       |  |                              | 64        |   |      |   | 56       
|Postage                                             |  |                              | 46        |   |      |   | 44       
|Professional service fees                           |  |                              | 64        |   |      |   | 59       
|Stationery                                          |  |                              | 38        |   |      |   | 40       
|Software expense                                    |  |                              | 46        |   |      |   | 66       
|Other                                               |  |                              | 247       |   |      |   | 229      
|                                                    |  |                              |           |   |      |   |          
|Total noninterest expenses                          |  |                              | 1,877     |   |      |   | 1,831    
|                                                    |  |                              |           |   |      |   |          
|Income before income taxes                          |  |                              | 829       |   |      |   | 548      
|Income tax expense                                  |  |                              | 259       |   |      |   | 173      
|                                                    |  |                              |           |   |      |   |          
|Net income                                          |  | $                            | 570       |   |      | $ | 375      
|                                                    |  |                              |           |   |      |   |          
|Basic and fully diluted earnings per common share*  |  | $                            | 0.31      |   |      | $ | 0.20     
|                                                    |  |                              |           |   |      |   |          
|Weighted average shares outstanding*                |  |                              | 1,853,964 |   |      |   | 1,871,739
|                                                    |  |                             
|Dividends per common share*                         |  | $                            | 0.12      |   |      | $ | 0.10     
|                                                    |  |                              |           |   |      |   |          

---

|* | Restated to reflect stock split in the form of a 200% stock dividend.
|- | ---------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.



4



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CITIZENS FINANCIAL CORP.

STATEMENTS OF COMPREHENSIVE INCOME/LOSS

(In thousands of dollars)



|                                                                            |  |                            |     |   |      |   |      |  
|--------------------------------------------------------------------------- |  | -------------------------- | --- | - | ---- | - | ---- | -
|                                                                            |  | Three Months EndedMarch 31 |    
|                                                                            |  | 2006                       |     |   | 2005 |  
|                                                                            |  | (Unaudited)                |    
|Net income                                                                  |  | $                          | 570 |   |      | $ | 375  |  
|                                                                            |  |                           
|Other comprehensive income:                                                 |  |                            |     |   |      |   |      |  
|Gross unrealized gains/(losses) arising during the period                   |  |                            | (66 | ) |      |   | (696 | )
|Adjustment for income tax (expense)/benefit                                 |  |                            | 25  |   |      |   | 264  |  
|                                                                            |  |                            |     |   |      |   |      |  
|                                                                            |  |                            | (41 | ) |      |   | (432 | )
|                                                                            |  |                           
|Less: Reclassification adjustment for (gains)/losses included in net income |  |                            | 18  |   |      |   |     |  
|Adjustment for income tax expense/(benefit)                                 |  |                            | (7  | ) |      |   |     |  
|                                                                            |  |                            |     |   |      |   |      |  
|                                                                            |  |                            | 11  |   |      |   |     |  
|                                                                            |  |                           
|Other comprehensive income/(loss), net of tax                               |  |                            | (30 | ) |      |   | (432 | )
|                                                                            |  |                            |     |   |      |   |      |  
|Comprehensive income/(loss)                                                 |  | $                          | 540 |   |      | $ | (57  | )
|                                                                            |  |                            |     |   |      |   |      |  

---

The accompanying notes are an integral part of these
financial statements.



5



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##### Table of Contents

CITIZENS FINANCIAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

(In thousands of dollars)





|                                                          |  |                                                        |  |                          |       |  |                  |        |   |                                            |   |        |               |  |   |                             |   |  |   |        |   |  |   |        |  
|--------------------------------------------------------- |  | ------------------------------------------------------ |  | ------------------------ | ----- |  | ---------------- | ------ | - | ------------------------------------------ | - | ------ | ------------- |  | - | --------------------------- | - |  | - | ------ | - |  | - | ------ | -
|                                                          |  | Three Months Ended March 31, 2006 and
2005 (unaudited) | 
|                                                          |  | Common Stock                                           |  | AdditionalPaid-inCapital |       |  | RetainedEarnings |        |   | AccumulatedOtherComprehensiveIncome/(Loss) |   |        | TreasuryStock |  |   | Total Share-holders Equity |  
|                                                          |  | Shares                                                 |  | Amount                   |       |  |                  |        |  
|Balance, January 1, 2006                                  |  | 750,000                                                |  | $                        | 1,500 |  | $                | 2,100  |   |                                            | $ | 20,704 |               |  | $ | (1,316                      | ) |  | $ | (3,375 | ) |  | $ | 19,613 |  
|Net income                                                |  |                                                       |  |                          |      |  |                  |       |   |                                            |   | 570    |               |  |   |                            |   |  |   |       |   |  |   | 570    |  
|Net change in unrealized gain/loss on securities          |  |                                                       |  |                          |      |  |                  |       |   |                                            |   |       |               |  |   | (30                         | ) |  |   |       |   |  |   | (30    | )
|Cash dividends declared ($.12 per share)                  |  |                                                       |  |                          |      |  |                  |       |   |                                            |   | (222   | )             |  |   |                            |   |  |   |       |   |  |   | (222   | )
|Stock split effected in the form of a 200% stock dividend |  | 1,500,000                                              |  |                          | 3,000 |  |                  | (2,100 | ) |                                            |   | (900   | )             |  |   |                            |   |  |   |       |   |  |   |       |  
|                                                          |  |                                                        |  |                          |       |  |                  |        |   |                                            |   |        |               |  |   |                             |   |  |   |        |   |  |   |        |  
|Balance March 31, 2006                                    |  | 2,250,000                                              |  | $                        | 4,500 |  | $                |       |   |                                            | $ | 20,152 |               |  | $ | (1,346                      | ) |  | $ | (3,375 | ) |  | $ | 19,931 |  
|                                                          |  |                                                        |  |                          |       |  |                  |        |   |                                            |   |        |               |  |   |                             |   |  |   |        |   |  |   |        |  
|Balance, January 1, 2005                                  |  | 750,000                                                |  | $                        | 1,500 |  | $                | 2,100  |   |                                            | $ | 19,650 |               |  | $ | 58                          |   |  | $ | (3,085 | ) |  | $ | 20,223 |  
|Net income                                                |  |                                                       |  |                          |      |  |                  |       |   |                                            |   | 375    |               |  |   |                            |   |  |   |       |   |  |   | 375    |  
|Net change in unrealized gain/loss on securities          |  |                                                       |  |                          |      |  |                  |       |   |                                            |   |       |               |  |   | (432                        | ) |  |   |       |   |  |   | (432   | )
|Cash dividends declared ($.10 per share)                  |  |                                                       |  |                          |      |  |                  |       |   |                                            |   | (187   | )             |  |   |                            |   |  |   |       |   |  |   | (187   | )
|                                                          |  |                                                        |  |                          |       |  |                  |        |   |                                            |   |        |               |  |   |                             |   |  |   |        |   |  |   |        |  
|Balance March 31, 2005                                    |  | 750,000                                                |  | $                        | 1,500 |  | $                | 2,100  |   |                                            | $ | 19,838 |               |  | $ | (374                        | ) |  | $ | (3,085 | ) |  | $ | 19,979 |  
|                                                          |  |                                                        |  |                          |       |  |                  |        |   |                                            |   |        |               |  |   |                             |   |  |   |        |   |  |   |        |  

---

The accompanying
notes are an integral part of these financial statements.



6



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##### Table of Contents

CITIZENS FINANCIAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars)



|                                                                              |  |                             |        |   |      |   |        |  
|----------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                              |  | Three Months EndedMarch 31, |       
|                                                                              |  | 2006                        |        |   | 2005 |  
|                                                                              |  | (Unaudited)                 |       
|Cash flows from operating activities:                                         |  |                             |        |   |      |   |        |  
|Net Income                                                                    |  | $                           | 570    |   |      | $ | 375    |  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                             |        |   |      |   |        |  
|Provision for loan losses                                                     |  |                             | 103    |   |      |   | 103    |  
|Depreciation and amortization                                                 |  |                             | 101    |   |      |   | 98     |  
|Amortization on securities                                                    |  |                             | 22     |   |      |   | 55     |  
|Loss on sale of securities                                                    |  |                             | 18     |   |      |   |       |  
|Loss on sale of OREO                                                          |  |                             | 4      |   |      |   |       |  
|Increase in accrued interest receivable                                       |  |                             | (98    | ) |      |   | (28    | )
|Decrease in other assets                                                      |  |                             | 142    |   |      |   | 55     |  
|Increase in other liabilities                                                 |  |                             | 353    |   |      |   | 482    |  
|                                                                              |  |                             |        |   |      |   |        |  
|Cash provided by operating activities                                         |  |                             | 1,215  |   |      |   | 1,140  |  
|                                                                              |  |                             |        |   |      |   |        |  
|Cash flows from investing activities:                                         |  |                             |        |   |      |   |        |  
|Principal payments on available for sale securities                           |  |                             | 385    |   |      |   | 454    |  
|Proceeds from sales of available for sale securities                          |  |                             | 2,493  |   |      |   | 279    |  
|Proceeds from maturities and calls, available for sale securities             |  |                             | 2,500  |   |      |   | 1,815  |  
|Purchases of available for sale securities                                    |  |                             | (3,045 | ) |      |   | (7,819 | )
|Purchases of premises and equipment                                           |  |                             | (71    | ) |      |   | (81    | )
|Proceeds from sale of other real estate owned                                 |  |                             | 64     |   |      |   |       |  
|(Increase)/decrease in loans                                                  |  |                             | (4,620 | ) |      |   | 2,113  |  
|                                                                              |  |                             |        |   |      |   |        |  
|Cash used in investing activities                                             |  |                             | (2,294 | ) |      |   | (3,239 | )
|                                                                              |  |                             |        |   |      |   |        |  
|Cash flows from financing activities:                                         |  |                             |        |   |      |   |        |  
|Cash dividends paid                                                           |  |                             | (222   | ) |      |   | (187   | )
|Increase/(decrease) in short-term borrowing                                   |  |                             | 3,675  |   |      |   | (3,065 | )
|Repayment of long-term borrowing                                              |  |                             | (516   | ) |      |   | (684   | )
|Increase in time deposits                                                     |  |                             | 973    |   |      |   | 4,476  |  
|Increase/(decrease) in other deposits                                         |  |                             | (5,780 | ) |      |   | 1,202  |  
|                                                                              |  |                             |        |   |      |   |        |  
|Cash used in financing activities                                             |  |                             | (1,870 | ) |      |   | (1,742 | )
|                                                                              |  |                             |        |   |      |   |        |  
|Net decrease in cash and cash equivalents                                     |  |                             | (2,949 | ) |      |   | (357   | )
|Cash and cash equivalents at beginning of period                              |  |                             | 8,773  |   |      |   | 5,476  |  
|                                                                              |  |                             |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                    |  | $                           | 5,824  |   |      | $ | 5,119  |  
|                                                                              |  |                             |        |   |      |   |        |  
|Supplemental disclosure of cash flow information:                             |  |                             |        |   |      |   |        |  
|Cash paid during the period for:                                              |  |                             |        |   |      |   |        |  
|Interest                                                                      |  | $                           | 1,220  |   |      | $ | 785    |  
|Income taxes                                                                  |  | $                           | 112    |   |      | $ | 22     |  

---

The accompanying
notes are an integral part of these financial statements.



7



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##### Table of Contents

CITIZENS FINANCIAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The accounting and reporting policies of Citizens Financial Corp. and Subsidiaries (Citizens, the company or we) conform to accounting principles generally accepted in the United
States of America and to general policies within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 period.
Actual results could differ from those estimates.

The condensed consolidated statements contained herein include the accounts of Citizens
Financial Corp. and its wholly-owned subsidiary Citizens National Bank (the bank). All significant intercompany balances and transactions have been eliminated. The information contained in the financial statements is unaudited except
where indicated. In the opinion of management, all adjustments for a fair presentation of the results of the interim periods have been made. All such adjustments were of a normal, recurring nature. The results of operations for the three months
ended March 31, 2006 are not necessarily indicative of the results to be expected for the full year. The financial statements and notes included herein should be read in conjunction with those included in Citizens 2005 Annual Report to
Shareholders and Form 10-K.

NOTE 2 - DECLARATION OF STOCK SPLIT

On March 7, 2006 Citizens board of directors declared a stock split which was paid on April 14, 2006 in the form of a 200% stock dividend to
shareholders of record April 3, 2006. The primary reason for doing so was to reduce the share price of the stock in an effort to improve its liquidity. Citizens stock, which is neither widely held or widely traded, is an over the counter
bulletin board stock with the symbol CIWV.OB.

Distribution of this stock dividend required the use of all authorized shares. On
April 22, 2006 the shareholders authorized an additional 2,250,000 shares for future use.

NOTE 3 -
RECLASSIFICATIONS

Certain accounts in the condensed consolidated financial statements for 2005, as previously presented, have been
reclassified to conform with current year classifications.

NOTE 4 - SECURITIES

The amortized cost, unrealized gains, unrealized losses and estimated fair values of securities at March 31, 2006 and December 31, 2005 are
summarized as follows (in thousands):



|                                                                      |  |                |        |                 |   |                  |  |                                   |       |  |   |       
|--------------------------------------------------------------------- |  | -------------- | ------ | --------------- | - | ---------------- |  | --------------------------------- | ----- |  | - | ------
|                                                                      |  | March 31, 2006
|                                                                      |  | AmortizedCost  |        | UnrealizedGains |   | UnrealizedLosses |  | CarryingValue(EstimatedFairValue)
|                                                                      |  | (Unaudited)   
|Available for sale:                                                   |  |                |        |                 |   |                  |  |                                   |       |  |   |       
|U.S. Government agencies and corporations                             |  | $              | 46,554 |                 | $ |                 |  | $                                 | 727   |  | $ | 45,827
|Mortgage backed securities- U.S. Government agencies and corporations |  |                | 8,731  |                 |   |                 |  |                                   | 218   |  |   | 8,513 
|Corporate debt securities                                             |  |                | 762    |                 |   |                 |  |                                   | 13    |  |   | 749   
|Tax exempt state and political subdivisions                           |  |                | 8,636  |                 |   | 25               |  |                                   | 83    |  |   | 8,578 
|Federal Reserve Bank stock                                            |  |                | 108    |                 |   |                 |  |                                   |      |  |   | 108   
|Federal Home Loan Bank stock                                          |  |                | 658    |                 |   |                 |  |                                   |      |  |   | 658   
|                                                                      |  |                |        |                 |   |                  |  |                                   |       |  |   |       
|Total securities available for sale                                   |  | $              | 65,449 |                 | $ | 25               |  | $                                 | 1,041 |  | $ | 64,433
|                                                                      |  |                |        |                 |   |                  |  |                                   |       |  |   |       



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|                                                                      |  |                    |        |                 |   |                  |  |                                   |       |  |   |       
|--------------------------------------------------------------------- |  | ------------------ | ------ | --------------- | - | ---------------- |  | --------------------------------- | ----- |  | - | ------
|                                                                      |  | December 31, 2005*
|                                                                      |  | AmortizedCost      |        | UnrealizedGains |   | UnrealizedLosses |  | CarryingValue(EstimatedFairValue)
|Available for sale:                                                   |  |                    |        |                 |   |                  |  |                                   |       |  |   |       
|U.S. Government agencies and corporations                             |  | $                  | 50,561 |                 | $ | 4                |  | $                                 | 719   |  | $ | 49,846
|Mortgage backed securities- U.S. Government agencies and corporations |  |                    | 7,005  |                 |   | 1                |  |                                   | 203   |  |   | 6,803 
|Corporate debt securities                                             |  |                    | 1,271  |                 |   |                 |  |                                   | 20    |  |   | 1,251 
|Tax exempt state and political subdivisions                           |  |                    | 8,280  |                 |   | 35               |  |                                   | 65    |  |   | 8,250 
|Federal Reserve Bank stock                                            |  |                    | 108    |                 |   |                 |  |                                   |      |  |   | 108   
|Federal Home Loan Bank stock                                          |  |                    | 596    |                 |   |                 |  |                                   |      |  |   | 596   
|                                                                      |  |                    |        |                 |   |                  |  |                                   |       |  |   |       
|Total securities available for sale                                   |  | $                  | 67,821 |                 | $ | 40               |  | $                                 | 1,007 |  | $ | 66,854
|                                                                      |  |                    |        |                 |   |                  |  |                                   |       |  |   |       

---

|* | From audited financial statements
|- | ---------------------------------

The tables below
provide summaries of securities available for sale which were in an unrealized loss position at March 31, 2006 and December 31, 2005. As of March 31, 2006, these securities had a total fair value of $61,309,000 and carried unrealized
losses of $1,041,000, or 1.70%. Securities which have been in a continuous loss position for the past twelve months total $33,626,000. The unrealized loss pertaining to these securities is $810,000 or 2.41%. The majority of these losses are on
securities issued by U.S. government agencies and corporations which carry the implied faith and credit of the U.S. Government. The other losses are on corporate and municipal instruments. With the exception of one municipal which is not rated, all
of these instruments carry A ratings from the major credit rating agencies. We believe that these unrealized losses are the result of changing interest rates and that with our intent and ability to hold these investments to maturity provide strong
evidence that we will fully recover our investment. In addition, no losses have been recognized on the $58,796,000 of securities that carried unrealized losses at December 31, 2005.



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|                                                                      |  |                                                  |        |                   |   |           |  |                  |        |            |   |                  |  |   |        |  |   |      
|--------------------------------------------------------------------- |  | ------------------------------------------------ | ------ | ----------------- | - | --------- |  | ---------------- | ------ | ---------- | - | ---------------- |  | - | ------ |  | - | -----
|                                                                      |  | March 31, 2006 Securities Available for Sale    
|                                                                      |  | Less Than 12 Months                              |        | 12 Months or More |   | Total    
|                                                                      |  | FairValue                                        |        | UnrealizedLosses  |   | FairValue |  | UnrealizedLosses |        | Fair Value |   | UnrealizedLosses
|U.S. Government agencies and corporations                             |  | $                                                | 19,626 |                   | $ | 143       |  | $                | 26,201 |            | $ | 585              |  | $ | 45,827 |  | $ | 728  
|Mortgage backed securities- U.S. Government agencies and corporations |  |                                                  | 3,581  |                   |   | 43        |  |                  | 4,819  |            |   | 174              |  |   | 8,400  |  |   | 217  
|Corporate debt securities                                             |  |                                                  |       |                   |   |          |  |                  | 749    |            |   | 13               |  |   | 749    |  |   | 13   
|Tax exempt state and political subdivisions                           |  |                                                  | 4,476  |                   |   | 45        |  |                  | 1,857  |            |   | 38               |  |   | 6,333  |  |   | 83   
|                                                                      |  |                                                  |        |                   |   |           |  |                  |        |            |   |                  |  |   |        |  |   |      
|Total securities available for sale                                   |  | $                                                | 27,683 |                   | $ | 231       |  | $                | 33,626 |            | $ | 810              |  | $ | 61,309 |  | $ | 1,041
|                                                                      |  |                                                  |        |                   |   |           |  |                  |        |            |   |                  |  |   |        |  |   |      
|                                                                      | 
|                                                                      |  | December 31, 2005* Securities Available for Sale
|                                                                      |  | Less Than 12 Months                              |        | 12 Months or More |   | Total    
|                                                                      |  | FairValue                                        |        | UnrealizedLosses  |   | FairValue |  | UnrealizedLosses |        | Fair Value |   | UnrealizedLosses
|U.S. Government agencies and corporations                             |  | $                                                | 26,649 |                   | $ | 258       |  | $                | 19,810 |            | $ | 461              |  | $ | 46,459 |  | $ | 719  
|Mortgage backed securities- U.S. Government agencies and corporations |  |                                                  | 3,283  |                   |   | 72        |  |                  | 3,397  |            |   | 132              |  |   | 6,680  |  |   | 204  
|Corporate debt securities                                             |  |                                                  |       |                   |   |          |  |                  | 1,251  |            |   | 19               |  |   | 1,251  |  |   | 19   
|Tax exempt state and political subdivisions                           |  |                                                  | 3,454  |                   |   | 42        |  |                  | 952    |            |   | 23               |  |   | 4,406  |  |   | 65   
|                                                                      |  |                                                  |        |                   |   |           |  |                  |        |            |   |                  |  |   |        |  |   |      
|Total securities available for sale                                   |  | $                                                | 33,386 |                   | $ | 372       |  | $                | 25,410 |            | $ | 635              |  | $ | 58,796 |  | $ | 1,007
|                                                                      |  |                                                  |        |                   |   |           |  |                  |        |            |   |                  |  |   |        |  |   |      

---

|* | From audited financial statements.
|- | ----------------------------------

The maturities, amortized cost and
estimated fair values of the banks securities at March 31, 2006 are summarized as follows (in thousands):



|                                |  |                    |        |                     |   |       
|------------------------------- |  | ------------------ | ------ | ------------------- | - | ------
|                                |  | Available for sale
|                                |  | AmortizedCost      |        | EstimatedFair Value
|Due within 1 year               |  | $                  | 18,028 |                     | $ | 17,884
|                                |  |                   
|Due after 1 but within 5 years  |  |                    | 45,700 |                     |   | 44,841
|Due after 5 but within 10 years |  |                    | 955    |                     |   | 942   
|Equity securities               |  |                    | 766    |                     |   | 766   
|                                |  |                    |        |                     |   |       
|                                |  | $                  | 65,449 |                     | $ | 64,433
|                                |  |                    |        |                     |   |       

Mortgage backed securities have remaining contractual maturities ranging from 9 months to 15 years
and are reflected in the maturity distribution schedule shown above based on their anticipated average life to maturity, which ranges from 0.68 to 8.37 years. The companys equity securities are required to be held for membership in the Federal
Reserve and Federal Home Loan Bank and are shown at cost since they may only be sold to the respective issuer or another member at par.

The proceeds from sales, calls and maturities of securities, including principal payments received on mortgage backed securities, and the related gross gains and losses realized for the three month periods ended March 31, 2006 and 2005
are as follows (in thousands):



|                              |  |               |       |                     |   |                   |  |       |     |        |   |   |  |   |   
|----------------------------- |  | ------------- | ----- | ------------------- | - | ----------------- |  | ----- | --- | ------ | - | - |  | - | --
|                              |  | Proceeds From |       | Gross Realized     
|                              |  | Sales         |       | Calls andMaturities |   | PrincipalPayments |  | Gains |     | Losses
|March 31, 2006:               |  |               |       |                     |   |                   |  |       |     |        |   |   |  |   |   
|Securities available for sale |  | $             | 2,493 |                     | $ | 2,500             |  | $     | 385 |        | $ |  |  | $ | 18
|                              |  |               |       |                     |   |                   |  |       |     |        |   |   |  |   |   
|March 31, 2005:               |  |               |       |                     |   |                   |  |       |     |        |   |   |  |   |   
|Securities available for sale |  | $             | 279   |                     | $ | 1,815             |  | $     | 454 |        | $ |  |  | $ |  
|                              |  |               |       |                     |   |                   |  |       |     |        |   |   |  |   |   



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At March 31, 2006 and December 31, 2005 securities with an amortized cost of $28,645,000 and
$28,427,000, respectively, with estimated fair values of $28,123,000 and $27,983,000, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase, and for other purposes required or permitted by law.

At March 31, 2006 and December 31, 2005 our securities portfolio contained no concentrations within any specific industry or
issuer.

NOTE 5 - LOANS

Total loans are summarized as follows (in thousands):



|                                             |  |               |         |   |                  |   |         |  
|-------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                             |  | March 31,2006 |         |   | December 31,2005 |  
|                                             |  | (Unaudited)   |         |   | *                |  
|Commercial, financial and agricultural       |  | $             | 26,961  |   |                  | $ | 26,589  |  
|Real estate - construction                   |  |               | 10,926  |   |                  |   | 10,559  |  
|Real estate - home equity                    |  |               | 8,526   |   |                  |   | 8,796   |  
|Real estate - residential mortgage           |  |               | 55,776  |   |                  |   | 55,128  |  
|Real estate - commercial mortgage            |  |               | 44,006  |   |                  |   | 40,944  |  
|Installment loans                            |  |               | 9,402   |   |                  |   | 9,726   |  
|Other                                        |  |               | 2,747   |   |                  |   | 2,051   |  
|                                             |  |               |         |   |                  |   |         |  
|Total loans                                  |  |               | 158,344 |   |                  |   | 153,793 |  
|Net deferred loan origination fees and costs |  |               | (47     | ) |                  |   | (56     | )
|Unearned income                              |  |               |        |   |                  |   | (4      | )
|                                             |  |               |         |   |                  |   |         |  
|Total                                        |  |               | 158,297 |   |                  |   | 153,733 |  
|Less allowance for loan losses               |  |               | 1,702   |   |                  |   | 1,597   |  
|                                             |  |               |         |   |                  |   |         |  
|Loans, net                                   |  | $             | 156,595 |   |                  | $ | 152,136 |  
|                                             |  |               |         |   |                  |   |         |  

---

|* | From audited financial statements
|- | ---------------------------------

At March 31, 2006
our recorded investment in impaired loans was $4,523,000. The valuation allowance assigned to these loans totaled $663,000. Our average investment in the impaired loans was $4,576,000 during the quarter. The amount of interest income recorded on
them in the first quarter was $96,000 while the amount of interest collected was $43,000.

Impaired loans at
December 31, 2005 were $3,650,000.

Loans in a nonaccrual status were $0 and $58,000 at March 31, 2006 and December 31,
2005, respectively.

NOTE 6 - ALLOWANCE FOR LOAN LOSSES

Analyses of the allowance for loan losses are presented below (in thousands):



|                               |  |                             |       |   |      |   |      
|------------------------------ |  | --------------------------- | ----- | - | ---- | - | -----
|                               |  | Three Months EndedMarch 31,
|                               |  | 2006                        |       |   | 2005
|Balance at beginning of period |  | $                           | 1,597 |   |      | $ | 1,378
|                               |  |                             |       |   |      |   |      
|Loans charged off:             |  |                             |       |   |      |   |      
|Commercial and industrial      |  |                             |      |   |      |   |     
|Real estate - mortgage         |  |                             |      |   |      |   |     
|Consumer and other             |  |                             | 2     |   |      |   | 43   
|                               |  |                             |       |   |      |   |      
|Total                          |  |                             | 2     |   |      |   | 43   
|                               |  |                             |       |   |      |   |      
|Recoveries:                    |  |                             |       |   |      |   |      
|Commercial and industrial      |  |                             |      |   |      |   |     
|Real estate - mortgage         |  |                             |      |   |      |   | 1    
|Consumer and other             |  |                             | 4     |   |      |   | 8    
|                               |  |                             |       |   |      |   |      
|Total recoveries               |  |                             | 4     |   |      |   | 9    
|                               |  |                             |       |   |      |   |      
|Net (recoveries)/losses        |  |                             | (2    | ) |      |   | 34   
|                               |  |                            
|Provision for loan losses      |  |                             | 103   |   |      |   | 103  
|                               |  |                             |       |   |      |   |      
|Balance at end of period       |  | $                           | 1,702 |   |      | $ | 1,447
|                               |  |                             |       |   |      |   |      



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NOTE 7 - DEPOSITS

The following is a summary of interest bearing deposits by type (in thousands):



|                                            |  |               |         |                  |   |        
|------------------------------------------- |  | ------------- | ------- | ---------------- | - | -------
|                                            |  | March 31,2006 |         | December 31,2005
|                                            |  | (Unaudited)   |         | *               
|Interest bearing checking                   |  | $             | 42,206  |                  | $ | 44,668 
|Money market accounts                       |  |               | 6,718   |                  |   | 7,645  
|Savings accounts                            |  |               | 24,770  |                  |   | 24,688 
|Certificates of deposit under $100,000      |  |               | 52,510  |                  |   | 52,579 
|Certificates of deposit of $100,000 or more |  |               | 33,300  |                  |   | 32,258 
|                                            |  |               |         |                  |   |        
|Total                                       |  | $             | 159,504 |                  | $ | 161,838
|                                            |  |               |         |                  |   |        

---

|* | From audited financial statements
|- | ---------------------------------

NOTE
8 - BORROWINGS

Short-term borrowings consist of securities sold under agreements to repurchase (repurchase agreements), overnight
advances under a line of credit with the Federal Home Loan Bank of Pittsburgh (FHLB), and federal funds purchased from correspondent banks. At March 31, 2006 repurchase agreements totaled $19,260,000 while overnight advances from FHLB were
$2,127,000 and federal funds purchased were $2,800,000. No such overnight advances were outstanding at December 31, 2005.

Long-term
borrowings are also obtained from the FHLB and are used to finance specific lending activities.

NOTE 9 - EMPLOYEE
BENEFIT PLANS

The components of net periodic benefit cost of our pension and other benefit plans are presented below (in thousands):



|                               |  |                             |     |                |      |   |      |  |      |    |  |   |   
|------------------------------ |  | --------------------------- | --- | -------------- | ---- | - | ---- |  | ---- | -- |  | - | --
|                               |  | Three Months EndedMarch 31,
|                               |  | Pension Benefits            |     | Other Benefits
|                               |  | 2006                        |     |                | 2005 |   | 2006 |  | 2005
|Service cost                   |  | $                           | 29  |                |      | $ | 3    |  | $    | 6  |  | $ | 6 
|Interest cost                  |  |                             | 66  |                |      |   | 7    |  |      | 8  |  |   | 8 
|Expected return on plan assets |  |                             | (82 | )              |      |   | 11   |  |      |   |  |   |  
|Net amortization and deferral  |  |                             | 18  |                |      |   |     |  |      | 4  |  |   | 4 
|                               |  |                             |     |                |      |   |      |  |      |    |  |   |   
|Net periodic cost              |  | $                           | 31  |                |      | $ | 21   |  | $    | 18 |  | $ | 18
|                               |  |                             |     |                |      |   |      |  |      |    |  |   |   

Pension data for the year 2006, as presented above, is based on available preliminary actuarial
data. An updated actuarial report is expected to be received during the second quarter. Net periodic expense, or benefit as the case may be, will be adjusted at that time. No payments have been made to the plan for any period covered by this report.
However, an estimated payment of $70,000 will be made prior to July 15, 2006 for the 2004 plan year.



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NOTE 10 - COMMITMENTS AND CONTINGENCIES

The company is not aware of any commitments or contingencies which may reasonably be expected to have a material impact on operating results, liquidity or
capital resources. Known commitments and contingencies include the maintenance of reserve balances with the Federal Reserve, commitments to extend credit, and various legal actions arising in the normal course of business. You may refer to Item 1 of
Part II of this filing for more information on legal procedings.

NOTE 11 - FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK

The subsidiary bank 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 include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the bank has in particular classes of financial instruments.



|                                                                                  |  |                          |        |                     |   |       
|--------------------------------------------------------------------------------- |  | ------------------------ | ------ | ------------------- | - | ------
|Financial instruments whose contract amounts represent credit risk (in thousands) |  | March 31,2006(unaudited) |        | December 31, 2005 *
|Commitments to extend credit                                                      |  | $                        | 25,630 |                     | $ | 26,920
|Standby letters of credit                                                         |  |                          | 293    |                     |   | 559   
|                                                                                  |  |                          |        |                     |   |       
|Total                                                                             |  | $                        | 25,923 |                     | $ | 27,479
|                                                                                  |  |                          |        |                     |   |       

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



---

|* | From audited financial statements.
|- | ----------------------------------

NOTE
12 - EARNINGS PER SHARE

Basic earnings per share is based on the weighted average number of shares outstanding during the period.
For the three months ended March 31, 2006 and 2005 the weighted average number of shares outstanding were, 1,853,964 and 1,871,739, respectively, after adjusting for the stock split effected in the form of a 200% stock dividend. During the
periods ended March 31, 2006 and 2005 the company did not have any dilutive securities.

NOTE 13 - SIGNIFICANT NEW
ACCOUNTING PRONOUNCEMENTS

In March 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 156,
Accounting for Servicing of Financial Assets an amendment of FASB Statement 140 (Statement 156). Statement 156 amends Statement 140 with respect to separately recognized servicing assets and liabilities. Statement 156 requires an entity
to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract and requires all servicing assets and liabilities to be initially measured at fair value, if
practicable. Statement 156 also permits entities to subsequently measure servicing assets and liabilities using an amortization method or fair value measurement method. Under the amortization method, servicing assets and liabilities are amortized in
proportion to and over the estimated period of servicing. Under the fair value measurement method, servicing assets are measured at fair value at each reporting date and changes in fair value are reported in net income for the period the change
occurs.

Adoption of Statement 156 is required as of the beginning of fiscal years beginning subsequent to September 15, 2006. Earlier adoption is
permitted as of the beginning of an entitys fiscal year, provided the entity has not yet issued financial statements, including interim financial statements.



13



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##### Table of Contents

The company does not expect the adoption of Statement 156 at the beginning of 2007 to
have a material impact.

Part 1 Item 2

MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The following discussion and analysis presents the significant changes in financial
condition and results of operations of Citizens Financial Corp. and its subsidiary, Citizens National Bank of Elkins for the periods indicated. It should be read in conjunction with the consolidated financial statements and accompanying notes
thereto, which are included elsewhere in this document. Readers are also encouraged to obtain our Annual Report on Form 10-K for additional information. You may obtain our Form 10-K through various internet sites including www.cnbelkins.com.

Description of Business

Citizens Financial Corp. is a $237 million Delaware corporation headquartered in Elkins, WV. From there our wholly-owned subsidiary, Citizens National Bank of Elkins, provides loan, deposit, trust, brokerage and other
banking and banking related services to customers in northcentral and eastern West Virginia and nearby areas through six branch offices. We conduct no business other than the ownership of our bank subsidiary.

FORWARD LOOKING STATEMENTS

This report contains forward looking statements which reflect our current expectations based on information available to us. These forward looking statements involve uncertainties related to the general economic conditions in our nation and
other broad based issues such as interest rates and regulations as well as to other factors which may be more specific to our own operations. Examples of such factors may include our ability to attract and retain key personnel, implementing new
technological systems, providing new products to meet changing customer and competitive demands, our ability to successfully manage growth strategies, controlling costs, maintaining our net interest margin, maintaining good credit quality, and
others. Forward looking statements can be identified by words such as may, will, expect, anticipate, believe, estimate, plans, intends, or similar words.
We do not attempt to update any forward looking statements. When provided, we intend forward looking information to assist readers in understanding anticipated future operations and we include them pursuant to applicable safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Although we believe the expectations reflected in our forward looking statements are reasonable, actual results could differ materially.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with U.S.



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##### Table of Contents

generally accepted accounting principals and follow general practices within the financial services industry. Application
of these principles requires us to make estimates, assumptions, and judgments that affect the amounts reported in our financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of
the date of the financial statements and could change as new information becomes available. Consequently, later financial statements could reflect different estimates, assumptions, and judgments.

Some policies rely more heavily on the use of estimates, assumptions, and judgments than others and, therefore, have a greater possibility of producing
results that could be materially different than originally reported. Our most significant accounting policies, including an explanation of how assets and liabilities are valued, may be found in Note 1 to the consolidated financial statements in our
2005 Annual Report to Shareholders and Form 10-K.

The allowance for loan losses represents our estimate of probable credit losses inherent
in the loan portfolio. Determining the amount of the allowance requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, the estimated amount of losses in pools of
homogeneous loans, and the effect of various economic and business factors, all of which may be subject to significant change. Due to these uncertainties, as well as the sensitivity of our financial statements to the assumptions and estimates needed
to determine the allowance, we have identified the determination of the allowance for loan losses as a critical accounting estimate. As such, it could be subject to revision as new information becomes available. Should this occur, changes to the
provision for loan losses, which may increase or decrease future earnings, may be necessary. A discussion of the methods we use to determine our allowance for loan losses is presented later in this report.

OVERVIEW

Although
asset growth was not achieved in the first quarter, changes in our balance sheet mix, higher noninterest income and good expense control all resulted in improved earnings. Net income of $570,000 easily exceeded last years $375,000 as did our
return on average assets, up from .70% to .97%.

Total assets dipped slightly this quarter from $238.2 million to $237.3 million but net
loans increased by $4,459,000 to $156.6 million. This loan growth was funded by reducing our holdings of lower yielding fed funds sold and investment securities. As expected, deposits decreased during the quarter falling $4,807,000 to $185.7
million. In part, this reflects higher than usual balances in noninterest bearing checking accounts at year-end. Our lower deposit level was offset by an increase in overnight borrowings, which we expect to be reduced in the near future as a balance
between funding sources and uses is established.

A more detailed discussion of the factors impacting our results of operations and
financial condition follows. Amounts and percentages used in that discussion have been rounded.

RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income is the primary component of our earnings. It is the difference between interest and fee income generated by interest earning assets and interest expense incurred to carry interest bearing
liabilities. Net interest income is affected by changes in balance sheet composition and interest rates. We attempt to maximize net interest income by determining the optimal product mix in light of current and expected yields on assets, cost of
funds and economic conditions while maintaining an acceptable degree of risk.



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As was the case in 2005, short term interest rates rose in the first quarter as the Federal Reserve
continued to raise the fed funds target rate. Two such increases occurred in the first quarter bringing the fed funds rate to 4.75% and the prime rate to 7.75%. Throughout this process the yield curve has been relatively flat and, at times,
inverted, making it difficult for banks to improve their net interest margins. For us, the first quarter net interest margin of 4.50% was 11 basis points higher than in the first quarter of 2005.

As our income statement shows, net interest income rose by $271,000 to $2,430,000 in the quarter. On a tax equivalent basis net interest income for the
quarter totaled $2,488,000. Interest income increased $692,000 to $3,657,000 due to both a $20.2 million increase in our earning asset base and a 72 basis point improvement in our yield. Interest expense also increased by $421,000 to $1,227,000
during the quarter reflecting a $18.3 million rise in our interest bearing liabilities and a 74 basis point increase in their cost.

While
the direction of future interest rates cannot be known with certainty, many economists believe we are now approaching the end of a rising rate cycle. Whether rates continue to rise, plateau, or fall will have an impact on our future earnings. A
discussion of what those effects may be is presented later in this report.

PROVISION FOR LOAN LOSSES

The provision for loan losses is managements estimate of the amount which must be charged against current earnings in order to maintain the
allowance for loan losses at a level considered adequate to provide for losses that can be reasonably anticipated based on quarterly evaluations of the loan portfolio. Our provision for loan losses was $103,000 in the first quarter of both 2005 and
2006. Because the amount of the provision for loan losses is a function of our overall assessment of loan quality and the adequacy of the allowance for loan losses, which itself relies on significant use of judgment and estimates, the provision for
loan losses expense may increase or decrease in the future. Please refer to the Credit Quality and Allowance for Loan Losses section of this report where we further discuss the estimation methods and assumptions we use in analyzing the allowance and
the quality of our loan portfolio.

NONINTEREST INCOME

Noninterest income for the quarter of $379,000 increased $56,000, or 17.3%, from the first quarter of 2005. Approximately one-half of our noninterest
income is derived from service fees on deposit accounts. For the quarter, service fees totaled $190,000, up $19,000 due to an increase in overdraft fees. In addition, higher safe deposit box and check cashing fees caused other noninterest income to
increase from $64,000 to $92,000 while fees from our secondary market loan program and brokerage program increased $19,000 and $9,000, respectively.

Also included in noninterest income in 2006 are security losses of $18,000. These losses were incurred when we sold selected bonds in order to move out on the yield curve to lock in favorable yields and protect
against the possibility of falling interest rates. These higher yields will also allow us to recover the loss incurred by the end of the third quarter and provide income in excess of what would have been earned by holding the old bonds to their
maturity.

NONINTEREST EXPENSE

Noninterest expense includes all items of expense other than interest expense, the provision for loan losses, and income taxes. Historically our level of noninterest expense has been higher than average, partly due to
the relatively smaller branch facilities we operate. Therefore, controlling noninterest expense is a key factor to achieving higher earnings and has become a major objective of management in 2006.



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After rising an average of 9.3% during the last five years, noninterest expense increased just 2.5%, or
$46,000 in the first quarter. The current increase is largely the result of one time conversion charges of approximately $81,000 related to our decision to change data processors. On an ongoing basis this change could save us as much as $200,000
annually. Other nonrecurring costs incurred during the quarter totaled $27,000. Absent these items total noninterest expense would have fallen by $62,000.

Although this indicates a significant improvement in expense control has occurred, there are still a number of factors which could negatively impact noninterest expense in the future. For example, salaries and
benefits could rise if medical claims under our partially self-insured group medical plan increase. We are also in the process of seeking an experienced commercial lender to strengthen our staff. Professional fees are also likely to increase as we
have professionally outsourced our internal audit function and engaged consultants to analyze some of our operating procedures as they relate to our strategic plans. Finally, we may again incur costs related to compliance with the Sarbanes Oxley
Act. Currently we will be required to comply with Section 404 of the Act as of year-end 2007.

INCOME TAXES

Our provision for income taxes during the first quarter of $259,000 includes both federal and state income taxes and is $86,000 more
than in the first quarter of 2005. Except for income earned on loans to and bonds issued by municipalities and the income on certain life insurance policies, all of our income is taxable. The exclusions have not made us subject to alternative
minimum tax provision, however.

FINANCIAL CONDITION

LOAN PORTFOLIO

Our
loan portfolio increased $4,551,000, or 3%, to $158,344,000 in the first quarter. Approximately $3.1 million of this growth was in commercial real estate lending. Smaller increases were also seen in the residential mortgage, construction, commercial
and other portfolios as well.

Demand for loans has not changed significantly despite the continued rise in interest rates. Rates on our
commercial loans are typically tied to the prime rate which has continued its upward path. Most of our commercial loans are secured by real estate whether or not repayment is linked to cash generated by the use or sale of the real property. In cases
where repayment is linked to such use the timing and stability of the cash flow, secondary sources of repayment, loan guarantees and collateral valuations are all important considerations in granting the loan. Development in and around nearby ski
resorts and recreation areas continues to be a significant factor in our lending activity as are other traditional industries such as lumbering.

Lending to consumers for autos, homes, or for other purposes, has been difficult for Citizens over the past several years as auto manufacturers and certain mortgage lending concerns became very aggressive. Recent auto loan promotions have
helped us recapture some of this market which we believe is consistent with our community banking roots.

CREDIT
QUALITY AND ALLOWANCE FOR LOAN LOSSES

We maintain our allowance for loan losses at a level we consider adequate to provide for losses
that we believe to be inherent in the loan portfolio. This determination is based on quarterly evaluations in which a specific analysis and a pooled analysis are computed. The specific analysis is used to individually assign an allowance to larger
balance, nonhomogenous loans; typically commercial loans. The pooled analysis is used to quantify the loss on pools of smaller balance, homogenous loans such as residential mortgages and consumer loans. The pooled



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analysis considers such factors as historical loss experience, delinquency levels, current and anticipated economic
conditions, concentrations of credit and changes in lending policies and staff. Because these analyses determine the adequacy of the allowance for loan losses they also determine the provision for loans losses that must be charged to earnings.

At March 31, 2006, our allowance for loan losses was $1,702,000, or 1.07% of gross loans; an amount we believe is adequate based on
our analysis. This includes $663,000 for losses assigned to loans specifically analyzed. The remainder of the allowance is assigned to pooled losses and includes $328,000 for loan concentrations in the automobile dealer, lumber and related trucking,
and hotel/motel industries.

Impaired and past due loans were both high as of quarter end. Total impaired loans were $4,579,000 while total
past dues were $6,304,000 including $3,476,000 which were past due 90 days or more. This is due to two specific credits totaling $3,556,000. One of these loans involves a business for which a buy-sell agreement is being executed. The other involves
a business which is in the process of restructuring its operations. In both situations we believe we are well collateralized although an allowance of $391,000 has been established for them after considering probable cash flows which may be expected
in the event of foreclosure.

During the first quarter of the year we experienced net recoveries of $2,000 and we believe our analysis is
comprehensive and our allowance is adequate. However, there can be no assurance that additional provisions for loan losses will not be required in the future as a result of changes in the assumptions which underlie our estimates and judgments,
changes in economic conditions, or to the circumstances of particular borrowers.

SECURITIES PORTFOLIO AND FEDERAL
FUNDS SOLD

Funds which are not needed to satisfy loan demand or operating needs are invested in securities as a means of improving
earnings while also providing liquidity and balancing interest sensitivity concerns. The securities we purchase are limited to U.S. government agency issues, including mortgage backed issues of U.S. agencies, obligations of state and political
subdivisions and investment grade corporate debt. All of our securities are classified as available for sale. The Board of Directors is informed of all securities transactions each month and a series of policy statements limit the amount of credit
and interest rate risk we may take.

During the first quarter our securities portfolio decreased from $66,854,000 to $64,433,000 while our
fed funds sold balance fell from $2,003,000 to just $37,000. These decreases, which total $4.4 million, were made in order to fund loan growth. We also executed a bond swap during the quarter involving the simultaneous purchase and sale of
approximately $2.5 million of securities. The impact of these transactions on income was discussed earlier. However, the primary reason for doing this bond swap was to reduce our potential exposure to falling interest rates as many economists now
believe we may be nearing the high point in an interest rate cycle. The purchases made in this swap carry a weighted average life of 5.2 years. The overall maturity and repricing characteristics of our balance sheet remain short, however, and the
weighted average life of the securities portfolio is 2.07 years. Further bond swaps of this nature are not planned as the likely impact on income would not be acceptable.

DEPOSITS AND OTHER FUNDING SOURCES

After very strong growth in 2005 we expected our deposit base to level off or even fall in 2006. During the first quarter our deposit base did in fact decrease by $4,807,000 to $185,679,000.

Noninterest bearing deposits fell by $2,473,000 although the year-end balance was about $1.2 million in excess of typical fourth quarter levels. Interest



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bearing deposits fell $2,334,000 to $159,504,000, mostly in interest bearing checking accounts. As of year-end we had
identified approximately $8 million of what we believed were temporary deposits. While these funds remain subject to withdrawal, we now believe that the withdrawal may be delayed as the owners business plans are evolving. In the event such a
withdrawal does occur, however, we have ample sources of liquidity to continue operations without incurring a significant earnings impact.

One such alternative source of funding comes in the form of borrowed money. Historically our borrowings have consisted of repurchase agreements, Federal Home Loan Bank borrowings, and, when necessary, overnight borrowings such as fed funds
purchased. Total borrowings of $28,816,000 at March 31, 2006 were $3,159,000 more than at year-end as we used short-term borrowings to offset the decrease in deposits. While it is impossible to forecast future events with certainty, we expect
our need for such borrowings to be reduced as the year progresses.

CAPITAL RESOURCES

Our total capital of $19,931,000 is 8.4% of assets and is little changed from year-end when capital was $19,613,000 or 8.2% of assets. In addition, our
risk based capital measures, which are established for all banks through the regulatory process, continue to easily exceed required levels. We have no knowledge of any items or trends which are likely to materially impair our capital position

The major item related to our capital position which occurred during the quarter actually had no impact on the total capital base. On
March 7, 2006, we declared a stock split in the form of a 200% stock dividend. This dividend was distributed to shareholders on April 14, 2006 and has been reflected in the accompanying financial statements. You may refer to Note 2 for
more information on this dividend.

LIQUIDITY

The objective of our liquidity management program is to ensure the continuous availability of funds to meet the withdrawal demands of customers, the
credit needs of borrowers, and to provide for other operational needs. Liquidity is provided by various sources including unpledged investment securities, federal funds sold, loan repayments, a stable and growing deposit base and, when necessary,
external borrowings.

We monitor liquidity on a regular basis by preparing projected balance sheets and analyzing our sources and uses of
funds. Historically, we have satisfied our liquidity needs through internal sources of funds with the exception of certain loans which have been funded by borrowing funds from the Federal Home Loan Bank of Pittsburgh. Currently, we have access to
approximately $98 million through various FHLB programs.

We expect to continue to satisfy our liquidity needs primarily through internal
sources with the exception of some larger commercial loans where borrowing preserves liquidity while achieving satisfactory net interest margins.

IMPACT OF INFLATION

The consolidated financial statements and related data included in this report
were prepared in accordance with accounting principles generally accepted in the United States of America, which require our financial position and results of operations to be measured in terms of historical dollars except for the available for sale
securities portfolio. Consequently, the relative value of money generally is not considered. Nearly all of our assets and liabilities are monetary in nature and, as a result, interest rates and competition in the market area tend to have a more
significant impact on our performance than the effect of inflation.

However, inflation does affect noninterest expenses such as personnel
costs and the cost of services and supplies we use. We attempt to offset increasing



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costs by controlling the level of noninterest expenditures and increasing levels of noninterest income. Because inflation
rates have generally been low during the time covered by the accompanying consolidated financial statements, the impact of inflation on our earnings has not been significant.

Part I Item 3

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates
and equity prices. Our primary market risk is interest rate risk which results from timing differences in the repricing of assets, liabilities and off-balance-sheet instruments. Some amount of interest rate risk is inherent and appropriate in
banking. We attempt to control interest rate risk through our asset/liability committee which is comprised of members of senior management and other management personnel.

Several techniques are used to manage our interest rate risk. On a weekly basis we examine our loan and deposit rates relative to those of our competitors and to our goals. We compute our repricing gap monthly to
provide general guidance as to the impact rising or falling interest rates may have on earnings. However, interest rate shock testing and simulation modeling, which are prepared quarterly, are our primary interest rate risk management tools.

At March 31, 2006, we measured the impact an immediate and sustained change in interest rates of 100, 200 and 300 basis points,
applied to all of our earning assets and interest bearing liabilities, would have on our net interest income over the next twelve months. These tests indicate that net interest income can be expected to change by no more than 2.3% for each 100 basis
point change in interest rates.

Part I Item 4

Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, the company, under the supervision and with the participation of management,
including the chief executive officer and principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, the chief executive officer and principal financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the company which is required to be included in
our periodic SEC filings. Subsequent to the date of that evaluation, there have been no significant changes in our internal controls or in other factors that could significantly offset internal controls, nor were any corrective actions required with
regard to significant deficiencies or material weaknesses.



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PART II - OTHER INFORMATION



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 1.  |  | Legal Proceedings:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | 
|         |  | As of March 31,2006 Citizens Financial Corp. is involved in various legal proceedings which occur in the normal course of business. Citizens National Bank is a defendant in one such case in
which the plaintiff claims the bank was negligent in its handling of a deposit account. The ownership of that account is currently in dispute with both the plaintiff and another party claiming to have legal ownership. This case is scheduled to be
tried in June, 2006 absent any prior settlement. The account in question approximated $82,000 with approximately $6,000 currently remaining in the account. Those remaining funds have been frozen pending the outcome of the case. That outcome is not
known at this time although the bank and its insurer are vigorously defending the claims against it. As of March 31,2006 the bank has accrued a loss contingency of $27,000 relating to this matter.
|         | 
|Item 1A. |  | Risk Factors: Although there have been no material changes in the risk factors discussed in Item 1A of our December 31, 2005 Form 10-K, the stock dividend referred to elsewhere in this
report may improve the liquidity of our stock. Historically, the stock has not been highly liquid and transactions in the stock have been limited.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         | 
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|         | 
|Item 3.  |  | Defaults upon Senior Securities: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | 
|Item 5.  |  | Other Information: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         | 
|Item 6.  |  | Exhibits and Reports on Form 8-K:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

(a) Exhibits: The following exhibits are filed with this report:



|            |  |                                                                                                
|----------- |  | -----------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                         
|3 (i)       |  | Articles of Incorporation                                                                      
|            | 
|3 (ii)      |  | Bylaws                                                                                         
|            | 
|31.1        |  | Certification Pursuant to Section 302 of the Sarbanes-18 U.S.C. Section 1350 Oxley Act of 2002,
|            | 
|31.2        |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|            | 
|32.1        |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|            | 
|32.2        |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350



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SIGNATURES

Pursuant to the requirements 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 FINANCIAL CORP.                                 
|              | 
|Date: 5/10/06 |  | /s/ Robert J. Schoonover                                 
|              |  | Robert J. Schoonover                                     
|              |  | President                                                
|              |  | Chief Executive Officer                                  
|              | 
|Date: 5/10/06 |  | /s/ Thomas K. Derbyshire                                 
|              |  | Thomas K. Derbyshire                                     
|              |  | Vice President, Treasurer and Principal Financial
Officer



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