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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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



For the quarterly period ended June 30, 2003



Commission file number 2-96144



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CITIZENS FINANCIAL CORP.

(Exact name of registrant as specified in its
charter)



|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 an accelerated filer (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 June 30, 2003
|--------------------------- |  | ----------------------------
|Common Stock ($2 par value) |  | 645,523                     



This report contains
27 pages.



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##### Table of Contents

FORM 10-Q

CITIZENS FINANCIAL CORP.

Quarter Ended June 30, 2003



INDEX



|         |  |                                         |  |                                                                                                                                                     |  | Page No.
|-------- |  | --------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|Part I.  |  | Financial Information                   |  |                                                                                                                                                    
|         |  |                                         | 
|         |  | Item 1.                                 |  | Financial Statements                                                                                                                                |  |         
|         |  |                                         | 
|         |  |                                         |  | Condensed Consolidated Balance Sheets June 30, 2003 and December 31, 2002                                                                           |  | 3       
|         |  |                                         | 
|         |  |                                         |  | Condensed Consolidated Statements of Income Three Months Ended June 30, 2003 and June 30, 2002 and Six Months Ended June 30, 2003 and June 30, 2002 |  | 4, 5    
|         |  |                                         | 
|         |  |                                         |  | Statements of Comprehensive Income Three Months Ended June 30, 2003 and June 30, 2002 and Six Months Ended June 30, 2003 and June 30, 2002          |  | 6       
|         |  |                                         | 
|         |  |                                         |  | Condensed Consolidated Statements of Changes in Shareholders Equity Six Months Ended June 30, 2003 and June 30, 2002                               |  | 7       
|         |  |                                         | 
|         |  |                                         |  | Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2003 and June 30, 2002                                                    |  | 8       
|         |  |                                         | 
|         |  |                                         |  | Notes to Condensed Consolidated Financial Statements                                                                                                |  | 9-12    
|         |  |                                         | 
|         |  | Item 2.                                 |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                               |  | 13-19   
|         |  |                                         | 
|         |  | Item 3.                                 |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                          |  | 20      
|         |  |                                         | 
|         |  | Item 4.                                 |  | Controls and Procedures                                                                                                                             |  | 21      
|         |  |                                        
|Part II. |  | Other Information and Index to Exhibits |  |                                                                                                                                                    
|         |  |                                        
|         |  | Items 1 through 6                       |  | 22                                                                                                                                                 
|         |  |                                        
|         |  | Signatures                              |  | 23                                                                                                                                                 



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PART I ITEM IFINANCIAL INFORMATION

CITIZENS FINANCIAL CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)



|                                                                                  |  | June 30, 2003 |         |   | Dec. 31, 2002 |  
|--------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------- | -
|                                                                                  |  | (Unaudited)   |         |   | *             |  
|ASSETS                                                                            |  |               |         |   |               |  
|                                                                                  |  |              
|Cash and due from banks                                                           |  | $             | 5,070   |   |               | $
|Federal funds sold                                                                |  |               | 3,500   |   |               |  
|Securities available for sale                                                     |  |               | 57,269  |   |               |  
|Loans, less allowance for loan losses of $1,444 and $1,386, respectively          |  |               | 122,462 |   |               |  
|Premises and equipment                                                            |  |               | 3,063   |   |               |  
|Accrued interest receivable                                                       |  |               | 1,125   |   |               |  
|Other assets                                                                      |  |               | 3,897   |   |               |  
|                                                                                  |  |               |         |   |               |  
|Total Assets                                                                      |  | $             | 196,386 |   |               | $
|                                                                                  |  |               |         |   |               |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                              |  |               |         |   |               |  
|                                                                                  |  |              
|Deposits:                                                                         |  |               |         |   |               |  
|Noninterest bearing                                                               |  | $             | 19,396  |   |               | $
|Interest bearing                                                                  |  |               | 138,982 |   |               |  
|                                                                                  |  |               |         |   |               |  
|Total deposits                                                                    |  |               | 158,378 |   |               |  
|Short-term borrowings                                                             |  |               | 10,511  |   |               |  
|Long-term borrowings                                                              |  |               | 4,227   |   |               |  
|Other liabilities                                                                 |  |               | 2,043   |   |               |  
|                                                                                  |  |               |         |   |               |  
|Total liabilities                                                                 |  |               | 175,159 |   |               |  
|                                                                                  |  |               |         |   |               |  
|Commitments and contingencies                                                     |  |               |         |   |               |  
|                                                                                  |  |              
|SHAREHOLDERS EQUITY                                                              |  |               |         |   |               |  
|                                                                                  |  |              
|Common stock, $2.00 par value, authorized 2,250,000 shares, issued 750,000 shares |  |               | 1,500   |   |               |  
|Additional paid in capital                                                        |  |               | 2,100   |   |               |  
|Retained earnings                                                                 |  |               | 18,528  |   |               |  
|Accumulated other comprehensive income                                            |  |               | 1,287   |   |               |  
|Treasury stock at cost, 104,477 and 103,477 shares, respectively                  |  |               | (2,188  | ) |               |  
|                                                                                  |  |               |         |   |               |  
|Total shareholders equity                                                        |  |               | 21,227  |   |               |  
|                                                                                  |  |               |         |   |               |  
|Total Liabilities and Shareholders Equity                                        |  | $             | 196,386 |   |               | $
|                                                                                  |  |               |         |   |               |  

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



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



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CITIZENS FINANCIAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of dollars, except per share data)



|                                                    |  | Three Months Ended June 30, |       | Six Months EndedJune 30,
|--------------------------------------------------- |  | --------------------------- | ----- | ------------------------
|                                                    |  | 2003                        |       | 2002                    
|                                                    |  | (Unaudited)                 |       | (Unaudited)             
|INTEREST INCOME                                     |  |                             |       |                         
|                                                    |  |                             |       |                         
|Interest and fees on loans                          |  | $                           | 2,276 |                         
|Interest and dividends on securities:               |  |                             |       |                         
|Taxable                                             |  |                             | 499   |                         
|Tax-exempt                                          |  |                             | 88    |                         
|Interest on federal funds sold                      |  |                             | 5     |                         
|                                                    |  |                             |       |                         
|Total interest income                               |  |                             | 2,868 |                         
|                                                    |  |                             |       |                         
|INTEREST EXPENSE                                    |  |                             |       |                         
|                                                    |  |                             |       |                         
|Interest on deposits                                |  |                             | 717   |                         
|Interest on short-term borrowings                   |  |                             | 62    |                         
|Interest on long-term borrowings                    |  |                             | 33    |                         
|                                                    |  |                             |       |                         
|Total interest expense                              |  |                             | 812   |                         
|                                                    |  |                             |       |                         
|Net interest income                                 |  |                             | 2,056 |                         
|Provision for loan losses                           |  |                             | 81    |                         
|                                                    |  |                             |       |                         
|Net interest income after provision for loan losses |  |                             | 1,975 |                         
|                                                    |  |                             |       |                         
|NONINTEREST INCOME                                  |  |                             |       |                         
|                                                    |  |                             |       |                         
|Trust department income                             |  |                             | 43    |                         
|Brokerage fees                                      |  |                             | 2     |                         
|Service fees                                        |  |                             | 169   |                         
|Insurance commissions                               |  |                             | 11    |                         
|Security gains/(losses)                             |  |                             | 0     |                         
|Secondary market loan fees                          |  |                             | 29    |                         
|Other                                               |  |                             | 46    |                         
|                                                    |  |                             |       |                         
|Total noninterest income                            |  |                             | 300   |                         
|                                                    |  |                             |       |                         
|NONINTEREST EXPENSE                                 |  |                             |       |                         
|                                                    |  |                             |       |                         
|Salaries and employee benefits                      |  |                             | 845   |                         
|Net occupancy expense                               |  |                             | 56    |                         
|Equipment rentals, depreciation and maintenance     |  |                             | 106   |                         
|Data processing                                     |  |                             | 121   |                         
|Director fees                                       |  |                             | 55    |                         
|Postage                                             |  |                             | 39    |                         
|Professional service fees                           |  |                             | 31    |                         
|Stationery                                          |  |                             | 37    |                         
|Other                                               |  |                             | 255   |                         
|                                                    |  |                             |       |                         
|Total noninterest expense                           |  |                             | 1,545 |                         
|                                                    |  |                             |       |                         
|Income before income taxes                          |  |                             | 730   |                         
|Income tax expense                                  |  |                             | 238   |                         
|                                                    |  |                             |       |                         
|Net income                                          |  | $                           | 492   |                         
|                                                    |  |                             |       |                         



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



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|Basic and fully diluted earnings per common share |  | $ | .76     |  | $ | .67     |  | $ | 1.55    |  | $ | 1.31   
|------------------------------------------------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | -------
|                                                  |  |   |         |  |   |         |  |   |         |  |   |        
|Weighted average shares outstanding               |  |   | 645,831 |  |   | 648,378 |  |   | 646,085 |  |   | 648,624
|                                                  |  |   |         | 
|Dividends per common share                        |  | $ | .30     |  | $ | .25     |  | $ | .60     |  | $ | .50    
|                                                  |  |   |         |  |   |         |  |   |         |  |   |        



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



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CITIZENS FINANCIAL CORP.

STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of dollars)



|                                                                            |  | Three Months EndedJune 30 |      |   | Six Months EndedJune 30 |  
|--------------------------------------------------------------------------- |  | ------------------------- | ---- | - | ----------------------- | -
|                                                                            |  | 2003                      |      |   | 2002                    |  
|                                                                            |  | (Unaudited)               |      |   | (Unaudited)             |  
|Net income                                                                  |  | $                         | 492  |   |                         | $
|Other comprehensive income:                                                 |  |                           |      |   |                         |  
|Gross unrealized gains/(losses) arising during the period                   |  |                           | 304  |   |                         |  
|Adjustment for income tax (expense)/benefit                                 |  |                           | (115 | ) |                         |  
|                                                                            |  |                           |      |   |                         |  
|                                                                            |  |                           | 189  |   |                         |  
|                                                                            |  |                           |      |  
|Less: Reclassification adjustment for (gains)/losses included in net income |  |                           | 0    |   |                         |  
|Adjustment for income tax expense/(benefit)                                 |  |                           | 0    |   |                         |  
|                                                                            |  |                           |      |   |                         |  
|                                                                            |  |                           | 0    |   |                         |  
|                                                                            |  |                           |      |  
|Other comprehensive income, net of tax                                      |  |                           | 189  |   |                         |  
|                                                                            |  |                           |      |   |                         |  
|Comprehensive income                                                        |  | $                         | 681  |   |                         | $
|                                                                            |  |                           |      |   |                         |  



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



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CITIZENS FINANCIAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

(In thousands of dollars)



|                                            |  | Six Months Ended June 30, 2003 and 2002 | 
|------------------------------------------- |  | --------------------------------------- | 
|                                            |  | (unaudited)                             | 
|                                            |  | Common Stock                            | 
|                                            |  | Shares                                  | 
|Balance, January 1, 2002                    |  | 750,000                                 | 
|Net income                                  |  |                                         | 
|Net change in unrealized gain on securities |  |                                         | 
|Cash dividends declared ($.50 per share)    |  |                                         | 
|Purchase of 1,000 shares of treasury stock  |  |                                         | 
|                                            |  |                                         | 
|Balance June 30, 2002                       |  | 750,000                                 | 
|                                            |  |                                         | 
|Balance, January 1, 2003                    |  | 750,000                                 | 
|Net income                                  |  |                                         | 
|Net change in unrealized gain on securities |  |                                         | 
|Cash dividends declared ($.60 per share)    |  |                                         | 
|Purchase of 1,000 shares of treasury stock  |  |                                         | 
|                                            |  |                                         | 
|Balance June 30, 2003                       |  | 750,000                                 | 
|                                            |  |                                         | 



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



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CITIZENS FINANCIAL CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars)



|                                                                              |  | Six Months EndedJune 30, |        
|----------------------------------------------------------------------------- |  | ------------------------ | -------
|                                                                              |  | 2003                     |        
|                                                                              |  | (Unaudited)              |        
|Cash flows from operating activities:                                         |  |                          |        
|Net Income                                                                    |  | $                        | 1,003  
|Adjustments to reconcile net income to cash provided by operating activities: |  |                          |        
|Provision for loan losses                                                     |  |                          | 162    
|Depreciation and amortization                                                 |  |                          | 177    
|Amortization and (accretion) on securities                                    |  |                          | 117    
|(Gain)/loss on disposal of equipment                                          |  |                          | 1      
|(Gain)/loss on sale of securities                                             |  |                          | 0      
|(Gain)/loss on sale of OREO                                                   |  |                          | (1     
|(Increase)/decrease in accrued interest receivable                            |  |                          | 36     
|(Increase)/decrease in other assets                                           |  |                          | (6     
|Increase/(decrease) in other liabilities                                      |  |                          | 235    
|                                                                              |  |                          |        
|Cash provided by operating activities                                         |  |                          | 1,724  
|                                                                              |  |                          |        
|Cash flows from investing activities:                                         |  |                          |        
|Principal payments, available for sale securities                             |  |                          | 2,607  
|Proceeds from sales of available for sale securities                          |  |                          | 134    
|Proceeds from maturities and calls, available for sale securities             |  |                          | 6,015  
|Purchases of available for sale securities                                    |  |                          | (11,854
|Purchases of premises and equipment                                           |  |                          | (89    
|(Increase)/decrease in loans                                                  |  |                          | (7,455 
|Proceeds from sale of other real estate owned                                 |  |                          | 20     
|                                                                              |  |                          |        
|Cash used in investing activities                                             |  |                          | (10,622
|                                                                              |  |                          |        
|Cash flows from financing activities:                                         |  |                          |        
|Cash dividends paid                                                           |  |                          | (387   
|Acquisition of treasury stock                                                 |  |                          | (37    
|Increase/(decrease) in short-term borrowing                                   |  |                          | 116    
|Acquisition of long-term borrowing                                            |  |                          | 3,000  
|Repayment of long-term borrowing                                              |  |                          | (651   
|Increase/(decrease) in time deposits                                          |  |                          | 3,248  
|Increase/(decrease) in other deposits                                         |  |                          | 7,390  
|                                                                              |  |                          |        
|Cash provided by financing activities                                         |  |                          | 12,679 
|                                                                              |  |                          |        
|Net increase in cash and cash equivalents                                     |  |                          | 3,781  
|Cash and cash equivalents at beginning of period                              |  |                          | 4,789  
|                                                                              |  |                          |        
|Cash and cash equivalents at end of period                                    |  | $                        | 8,570  
|                                                                              |  |                          |        
|Supplemental disclosure of cash flow information:                             |  |                          |        
|Cash paid during the period for:                                              |  |                          |        
|Interest                                                                      |  | $                        | 1,681  
|Income taxes                                                                  |  | $                        | 498    
|Supplemental Schedule of Noncash Investing and Financing Activities:          |  |                          |        
|Other real estate and other assets acquired in settlement of loans            |  | $                        | 19     



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



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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 or the company) 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 subsidiaries Citizens National Bank (the bank) and Citizens Financial Services, LLC. 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 six months ended June 30, 2003 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 2002 Annual Report to Shareholders and Form 10-K.



NOTE 2RECLASSIFICATIONS



Certain accounts in the condensed consolidated financial statements for 2002, as previously presented, have been reclassified to conform with current year
classifications.



NOTE
3SECURITIES



The amortized cost, unrealized
gains, unrealized losses and estimated fair values of securities at June 30, 2003 and December 31, 2002 are summarized as follows (in thousands):



|                                            |  | June 30, 2003
|------------------------------------------- |  | -------------
|                                            |  | AmortizedCost
|                                            |  | (Unaudited)  
|Available for sale:                         |  |              
|U.S. Government agencies and corporations   |  | $            
|Mortgage backed securities                 |  |              
|U.S. Government agencies and corporations   |  |              
|Corporate debt securities                   |  |              
|Tax exempt state and political subdivisions |  |              



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|Federal Reserve Bank stock          |  |   | 108    |  |   |      |  |   |  |  |   | 108   
|----------------------------------- |  | - | ------ |  | - | ----- |  | - | - |  | - | ------
|Federal Home Loan Bank stock        |  |   | 635    |  |   |      |  |   |  |  |   | 635   
|                                    |  |   |        |  |   |       |  |   |   |  |   |       
|Total securities available for sale |  | $ | 55,194 |  | $ | 2,075 |  | $ |  |  | $ | 57,269
|                                    |  |   |        |  |   |       |  |   |   |  |   |       



|                                            |  | December 31, 2002*
|------------------------------------------- |  | ------------------
|                                            |  | AmortizedCost     
|                                            |  | *                 
|Available for sale:                         |  |                   
|U.S. Government agencies and corporations   |  | $                 
|Mortgage-backed securities                 |  |                   
|U.S. Government agencies and corporations   |  |                   
|Corporate debt securities                   |  |                   
|Tax exempt state and political subdivisions |  |                   
|Federal Reserve Bank stock                  |  |                   
|Federal Home Loan Bank stock                |  |                   
|                                            |  |                   
|Total securities available for sale         |  | $                 
|                                            |  |                   



The maturities,
amortized cost and estimated fair values of the banks securities at June 30, 2003 are summarized as follows (in thousands):



|                                |  | Available for sale
|------------------------------- |  | ------------------
|                                |  | AmortizedCost     
|Due within 1 year               |  | $                 
|Due after 1 but within 5 years  |  |                   
|Due after 5 but within 10 years |  |                   
|Due after 10 years              |  |                   
|Equity securities               |  |                   
|                                |  |                   
|                                |  | $                 
|                                |  |                   



Mortgage backed
securities have remaining contractual maturities ranging from 4 months to 18 years and are reflected in the maturity distribution schedule shown above based on their anticipated average life to maturity, which ranges from .71 to 4.77 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 six month periods ended June 30, 2003 and 2002 are as follows (in thousands):



|                              |  | Proceeds From |     | Gross Realized     
|----------------------------- |  | ------------- | --- | -------------------
|                              |  | Sales         |     | Calls andMaturities
|June 30, 2003:                |  |               |     |                    
|Securities available for sale |  | $             | 134 |                    
|                              |  |               |     |                    
|June 30, 2002:                |  |               |     |                    
|Securities available for sale |  | $             | 0   |                    
|                              |  |               |     |                    



At June 30, 2003 and
December 31, 2002 securities with an amortized cost of $20,506,000 and $19,210,000, respectively, with estimated fair values of $21,566,000 and $20,171,000, respectively, were pledged to secure public deposits, securities sold under agreements to
repurchase, and for other purposes required or permitted by law.



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At June 30, 2003, the company had a concentration within its corporate debt securities classification
which included obligations of financial services industry companies with global operations having an approximate amortized cost of $2,784,000 and an estimated fair value of $2,922,000. There were no concentrations with any one issuer.

---

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



NOTE 4LOANS



Total loans are summarized as follows (in thousands):



|                                                                           |  | June 30, 2003 |         |   | December 31, 2002 |  
|-------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | -
|                                                                           |  | (Unaudited)   |         |   | *                 |  
|Commercial, financial and agricultural                                     |  | $             | 23,850  |   |                   | $
|Real estateconstruction                                                   |  |               | 3,526   |   |                   |  
|Real estatemortgage                                                       |  |               | 81,483  |   |                   |  
|Installment loans                                                          |  |               | 12,822  |   |                   |  
|Other                                                                      |  |               | 2,298   |   |                   |  
|                                                                           |  |               |         |   |                   |  
|Total loans                                                                |  |               | 123,979 |   |                   |  
|Net deferred loan origination costs                                        |  |               | (70     | ) |                   |  
|Less unearned income                                                       |  |               | (3      | ) |                   |  
|                                                                           |  |               |         |   |                   |  
|Total loans net of unearned income and net deferred loan origination costs |  |               | 123,906 |   |                   |  
|Less allowance for loan losses                                             |  |               | 1,444   |   |                   |  
|                                                                           |  |               |         |   |                   |  
|Loans, net                                                                 |  | $             | 122,462 |   |                   | $
|                                                                           |  |               |         |   |                   |  

---

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



NOTE 5ALLOWANCE FOR LOAN LOSSES



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



|                               |  | Three Months EndedJune 30, |       | Six Months EndedJune 30,
|------------------------------ |  | -------------------------- | ----- | ------------------------
|                               |  | 2003                       |       | 2002                    
|Balance at beginning of period |  | $                          | 1,449 |                         
|                               |  |                            |       |                         
|Loans charged off:             |  |                            |       |                         
|Commercial and industrial      |  |                            | 5     |                         
|Real estatemortgage           |  |                            | 0     |                         
|Consumer and other             |  |                            | 84    |                         
|                               |  |                            |       |                         
|Total                          |  |                            | 89    |                         
|                               |  |                            |       |                         
|Recoveries:                    |  |                            |       |                         
|Commercial and industrial      |  |                            | 0     |                         
|Real estatemortgage           |  |                            | 0     |                         
|Consumer and other             |  |                            | 3     |                         
|                               |  |                            |       |                         
|Total recoveries               |  |                            | 3     |                         
|                               |  |                            |       |                         
|Net losses                     |  |                            | 86    |                         
|Provision for loan losses      |  |                            | 81    |                         
|                               |  |                            |       |                         
|Balance at end of period       |  | $                          | 1,444 |                         
|                               |  |                            |       |                         



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NOTE 6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, various legal actions arising in the
normal course of business and commitments to extend credit.



NOTE 7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 |  | June 30, 2003 |        | December 31, 2002
|------------------------------------------------------------------ |  | ------------- | ------ | -----------------
|(in thousands)                                                     |  | (unaudited)   |        | *                
|Commitments to extend credit                                       |  | $             | 32,333 |                  
|Standby letters of credit                                          |  |               | 531    |                  
|                                                                   |  |               |        |                  
|Total                                                              |  | $             | 32,864 |                  
|                                                                   |  |               |        |                  



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 8EARNINGS PER SHARE



Basic earnings per share is based on the weighted average number of shares outstanding during the period. For the six months ended June 30, 2003 and 2002
the weighted average number of shares were 646,085 and 648,624, respectively. The weighted average number of shares outstanding during the three month period then ended were 645,831 and $648,378. During the periods ended June 30, 2003 and 2002 the
company did not have any dilutive securities.



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Part 1 Item 2

MANAGEMENTS DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion and analysis presents the significant changes in financial condition and the results of operations of Citizens Financial Corp.
and its subsidiaries, Citizens National Bank of Elkins, and Citizens Financial Services, LLC, for the periods indicated. Because the primary business activities of Citizens Financial Corp. are conducted through the bank, this discussion focuses
primarily on the financial condition and operations of the bank. This discussion may contain forward looking statements based on managements current expectations. This forward looking information involves uncertainties including those
associated with interest rates, the general economic environment, regulations, competitive changes, and other risks. Forward looking statements can be identified by words such as may, will, expect,
anticipate, believe, estimate, plans, intends, or similar words. The company does not undertake 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. Actual results may differ materially. Amounts and
percentages used in this discussion have been rounded.



RESULTS OF OPERATIONS



EARNINGS SUMMARY



Net income for the second
quarter of 2003 of $492,000 was $57,000 more than in the second quarter of 2002 while year-to-date net income of $1,003,000 was $151,000 more than in the first half of last year. These increases are primarily the result of lower interest expense.
For the year-to-date period, earnings per share was $1.55 in 2003 and $1.31 in 2002 and return on average assets increased to 1.09% from 1.02%. Additional details concerning our results of operations are discussed in the following sections of this
report.



NET INTEREST
INCOME



Net interest income represents 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.



For the second quarter of 2003 net interest income
totaled $2,056,000, up $210,000 from $1,846,000 in the second quarter of last year. For the full six month period, net interest income improved $419,000 to $4,063,000. In both cases the improvement is the result of lower interest expense. As a
result, our net interest margin for the first half of the year improved 10 basis points to 4.84% which is well above peer group averages.



With interest rates showing a steady decline throughout our economy over the past year, management reduced the rates paid on deposit accounts. This
reduced the cost of interest bearing liabilities from 3.13% in the



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first half of 2002 to 2.20% in the first half of this year. This was enough to produce the savings in interest expense cited above despite a $14.7 million
increase in interest bearing balances. Specifically, the estimated annual savings from lower funding costs was $1.3 million while the increase in the volume of funds is estimated to have increased expense by just $412,000 annually.



These two effects, known as the rate variance and volume variance,
respectively, also impact interest income. The yield earned on interest earning assets in the first half of 2003 was 6.67%, down from 7.31% in the first half of last year. This is estimated to have cost the bank approximately $1.1 million on an
annualized basis. However, unlike the deposit side, this is offset by a $15.5 million rise in earning assets which added approximately $1.1 million to interest income. Thus, the rate variance and volume variance essentially cancelled each other out
and interest income remained nearly unchanged. Additional information concerning interest rate sensitivity and the possible impact changing interest rates may have on earnings is provided 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. The
provision was $81,000 for the second quarter of 2003 and $63,000 for the second quarter last year. On a year-to-date basis the provision totaled $162,000 and $126,000, respectively. The factors which we consider in establishing the provision for
loan losses, and in analyzing the allowance for loan losses, are discussed later in this report under the Allowance for Loan Losses section.



NONINTEREST INCOME



Noninterest income, which includes all revenues other than interest and fee income related to earning assets, totaled $300,000 in the second quarter of
2003 and $327,000 in the second quarter of 2002. For the full six months, however, noninterest income is up $25,000 to $629,000.



Service fees are the largest component of noninterest income and have improved for both the quarterly and year-to-date periods due to higher overdraft and
ATM fees. Trust income, the next largest component, totals $133,000 for the year so far compared to $139,000 last year. Trust income is somewhat dependent on the settlement of estates and can fluctuate from quarter to quarter as a result. Through
June 30, however, trust income is slightly over our budgeted amount.



Fees from our secondary market mortgage program are down from last year on both a quarterly and year-to-date basis. This is due to a restructuring of the fee splitting arrangement between the bank and mortgage originators. Demand for this
product remains strong, however. Brokerage fees are also down, due to a drop in demand as many customers remain hesitant to invest following several years of volatile investment returns. We have also had to replace our broker several times since the
beginning of 2002 which has hindered our ability to develop this business. Although income from these two programs may be cyclical depending on the state of the economy and interest rates, we expect both to provide positive benefits to our
shareholders and customers over the long-term.



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Other noninterest income, which includes items such as safe deposit box rent and wire transfer fees, has
risen from last year primarily due to income from insurance contracts which the bank purchased in August, 2002 to fund a nonqualified postretirement benefit program for directors and certain officers. This income totaled $36,000 in the first half of
2003 and $18,000 in the second quarter. A detailed discussion of this plan was provided in Note 10 to our 2002 Form 10-K and annual report to shareholders.



NONINTEREST EXPENSE



Noninterest expense includes all items of expense other than interest expense, the provision for loan losses, and income taxes. Noninterest expense for
the second quarter of the year increased $121,000 to $1,545,000 while the year-to-date increase of $217,000 brings total noninterest expense to $3,028,000. In both cases the majority of the increase may be traced to employee costs.



Although officer salary adjustments are made each April, total salaries have
increased just $5,000 for the quarter and $10,000 for the six month period. Much larger increases are found in the cost of benefit programs. Group insurance costs, including our self-funded medical program, have risen $44,000 for the quarter and
$103,000 for the six months through June 30. Also, expenses accrued under the nonqualified postretirement benefit plan noted earlier were $53,000 for the quarter and $89,000 for the year so far. No such expenses were recorded in the first half of
last year.



The remaining noninterest expense items have been
well controlled rising just $9,000 year-to-date and $30,000 in the second quarter. The larger quarterly figure is mostly the result of two nonrecurring items. First, costs absorbed by the bank in the promotion of home equity lines of credit
approximated $11,000 while another $11,000 expense was recorded as our investment in the ProServ insurance agency was written off.



Although rainy weather has delayed the construction of a new branch and the upgrading of another, these projects will cause noninterest expense to rise as
they are carried out. These increases are not expected to materially reduce earnings barring any unforeseen developments, however.



INCOME TAXES



The provision for income tax expense includes both federal and state income taxes. Total income tax expense for the second quarters of 2003 and 2002 was
$238,000 and $251,000, respectively. For the year-to-date periods income taxes totaled $499,000 and $459,000. We have not been subject to the federal alternative minimum tax during the periods covered by this report and do not expect to be subject
to it in the foreseeable future.



FINANCIAL CONDITION



SUMMARY



Although the economy within our
marketplace shows limited expansion, Citizens continues to grow as a result of the branching activity we undertook in the last two years and, we believe, the uncertainty and aversion to risk being felt by many consumers. Total assets at June 30,
2003 of $196,386,000 are up nearly $14 million since year-end while gross loans and deposits have increased $7.3 million and $10.6 million,



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respectively. A further discussion of our major balance sheet categories, as well as liquidity and the impact of inflation, follows.



LOAN PORTFOLIO



Total loans at June 30, 2003 of $123,979,000 are $7,311,000, or 6.3%, more
than at year-end. Much of this growth has occurred in commercial lending which is up $3,031,000. While this reflects the origination of several larger loans, several others have also been paid off to take advantage of financing opportunities
elsewhere. Overall, the demand for commercial loans has been stronger than for other types of loan products. This is further illustrated when examining the mortgage portfolio, which includes both residential and nonresidential mortgages. With total
mortgage loans having grown by $3.5 million this year, commercial mortgages alone are up $2.0 million. Residential lending, meanwhile increased approximately $1.5 million largely due to the promotion of home equity loans during the second quarter.



Our other major loan portfolio involves consumer lending.
Competition for consumer loans, and particularly auto loans, has been intense and, as a result, the consumer portfolio has decreased $835,000, or 6.1%, since year-end. While we expect the level of competition to continue to be high, we are planning
to pursue auto loans through a special program during the third quarter. This program is expected to enhance consumer loan volume and income without reducing credit quality by illustrating to qualified buyers the advantages of our loan programs
relative to other financing alternatives.



ALLOWANCE FOR LOAN LOSSES



The allowance for
loan losses is maintained at a level we consider adequate to provide for losses that can be reasonably anticipated based on quarterly evaluations of the loan portfolio. This evaluation considers the potential loss in specifically identified loans
and homogeneous pools of loans as well as other factors such as delinquency levels, historical loss experience, current and anticipated economic conditions, concentrations of credit, changes in lending policies or staff, and other factors. As noted
previously, this analysis ultimately determines the amount which is expensed as provision for loan losses.



Loans specifically analyzed include larger balance loans and those included on the banks watch list as a result of possible weaknesses regarding
collectability, performance or the adequacy of collateral as identified by the banks internal loan review function. For these loans, specific loss estimates are made. Loans not specifically analyzed are grouped into pools with a separate pool
existing for each of the banks different loan portfolios such as real estate, commercial and consumer. Losses are estimated for each pool by considering the banks own loss history over the previous 5 years as well as the loss history of
the banks peer group. Finally, losses are assigned to those other factors identified in the previous paragraph. The total of these losses are then compared to the allowance for loan loss balance and adjustments to the balance are made as
necessary.



As of June 30, 2003, our allowance for loan losses
of $1,444,000 was believed to be adequate when judged against the loss estimates developed from our quarterly evaluations. This allowance was 1.16% of gross loans.



Although gross loans have increased by $7.3 million since year-end,



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management does not believe the overall quality of the loan portfolio has changed significantly. Past due loans remain below 2% and nonaccuring loans are now
just $30,000 compared to $148,0000 at March 31, 2003. Net charge-offs for the six months have also fallen from $217,000 last year to $104,000 this year. We believe we have addressed all of the relevant risk factors in our analysis and are not aware
of any credit issues which are likely to have a significant negative impact on future earnings, capital or liquidity.



SECURITIES PORTFOLIO AND FEDERAL FUNDS SOLD



The banks securities portfolio uses funds not needed to satisfy loan demand to improve earnings while at the same time
providing liquidity and balancing interest sensitivity concerns. All securities are classified as available for sale. During the first six months of 2003 total securities increased $3,050,000 to $57,269,000 because the increase in deposit funds has
exceeded the increase in loans.



With yields on investment
securities at historically low levels, the average life of the portfolio has been kept short, at 2.22 years, in order to reduce interest rate risk. And, as we have in the past, we continue to maintain very high credit quality within the securities
portfolio by purchasing only U.S. government agency securities, bank qualified municipal debt, government agency mortgage backed securities and investment grade corporate debt. We do not anticipate any changes to these practices in the foreseeable
future. Additional information on the securities portfolio including data on the composition and maturity patterns of the securities, may be found in Note 3.



While we attempt to stay fully invested in loans or securities, some involvement in overnight federal funds is inevitable. Our average balance in federal
funds sold for the first half of 2003 was $1.6 million. The average federal funds purchased balance, on the other hand, was $473,000. As of June 30, 2003 we had $3,500,000 in federal funds sold and no federal funds purchased. We maintained a larger
than usual federal funds sold position at mid-year in the event one or more of our repurchase agreements carrying June 30 maturities were not renewed. Because these funds were maintained the federal funds were reduced subsequent to quarter-end by
purchasing additional securities.



DEPOSITS
AND OTHER FUNDING SOURCES



Total deposits increased $10.6
million during the first half of the year to $158,378,000. With noninterest bearing deposits being generally steady throughout the year so far, this growth has centered on several types of interest bearing deposits. We believe this is a reflection
of customers continuing desire for safety over yield despite the recent improvements in the equity markets.



The accounts generating the most growth include savings accounts, up $3.0 million; NOW accounts, up $1.1 million; and money market accounts, up $2.8
million. In addition, certificates of deposit have grown by $2.8 million. This is largely due to the success of our 3 year certificate which provides the customer with the ability to add to the certificate at any time, as well as limited rights to
make a penalty free withdrawal or bump up the interest rate. We have found these features appeal to a variety of customers both large and small and believe it provides us with a stable source of mid-term funding at an attractive cost.



Our short-term borrowings continue to be made up of overnight funds



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purchased and repurchase agreements with several local entities. Each repurchase agreement is subject to daily balance changes depending on the cash needs of
the customer. At June 30, 2003 the balance of these accounts was $10,511,000 compared to $10,395,000 at year-end. Their average balance during the six months was $9,761,000. As noted previously, we recently renewed repurchase agreements with a June
30 maturity date.



Long-term borrowings are comprised of
various borrowings with the Federal Home Loan Bank of Pittsburgh. The outstanding balance of $4,227,000 is $2,349,000 more than at year-end as we borrowed an additional $3,000,000 at a fixed interest rate of 2.27% for a term of 3 years in order to
fund a commercial loan. This loan is also expected to be outstanding for approximately 3 years. Although we have no plans to acquire additional debt, the benefits of doing so to fund favorable lending arrangements will continue to be considered.



CAPITAL RESOURCES



We continue to maintain a strong capital base of $21,227,000 or, 10.8% of
total assets at June 30, 2003. We also continue to exceed all regulatory capital requirements as shown in the following table:



Minimum Capital Standard Ratios



|                                        |  | CitizensFinancial Corp. |   |  | RegulatoryRequirements |  
|--------------------------------------- |  | ----------------------- | - |  | ---------------------- | -
|Total capital to risk weighted assets   |  | 15.86                   | % |  | 8.00                   | %
|Tier I capital to risk weighted assets  |  | 14.78                   | % |  | 4.00                   | %
|Tier I capital to adjusted total assets |  | 10.36                   | % |  | 4.00                   | %



Changes to our capital
during the first six months of 2003 are detailed in the Statement of Changes in Shareholders Equity. We are not aware of any items which are expected to materially impair or alter our capital in the future.



LIQUIDITY



The objective of the companys 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 internal sources including unpledged investment
securities, federal funds sold, loan repayments and the ability to maintain a stable or growing deposit base.



We monitor our liquidity on a continuous basis and prepare formal liquidity forecasts quarterly utilizing anticipated loan and deposit levels over the
next twelve months. Based on these forecasts, management expects to be able to satisfy demands for liquidity primarily from internal sources although certain larger loan projects may be funded through borrowings. The use of such external funding
would improve the ability to generate liquidity through maturing investment securities and provide greater flexibility in balance sheet management but are not necessary to satisfying our liquidity requirements as forecasted.



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



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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 do attempt to offset such increases 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 the our earnings has not been significant.



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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 control interest rate risk through our interest rate sensitivity management program, also known as asset/liability management. The objective of this program is to maximize net interest income while minimizing the
risk of adverse effects from changing interest rates. This is done by controlling the mix and maturities of interest sensitive assets and liabilities. The bank has established an asset/liability committee for this purpose. The bank uses several
techniques to monitor and control interest rate risk including gap analysis, interest rate shock testing and other forms of simulation modeling.



Gap analysis measures the amount of interest earning assets and interest bearing liabilities that could reprice in a given time period. When more assets
could reprice the gap is said to be positive. This is normally beneficial when interest rates rise. When more liabilities can reprice, the gap is negative which is usually good as interest rates fall. Normally, the size of the gap is expressed as a
percent of total assets.



At June 30, 2003, our gap over
the next twelve months was -2.12% of total assets. This is well below our +/- 10% guideline and indicates the bank is well positioned from an interest rate risk standpoint. Although some further reductions in interest rates are possible, rates are
already at historically low levels and, in the long-term, rates are more likely to rise than fall. Because our gap is negative this indicates earnings would suffer should rates rise. So, our gap, while small, indicates we do face some interest risk,
but at a level which is acceptable to management.



Gap theory,
however, requires that a number of assumptions be made, including the assumption that interest rates on all of our products change at the same time and by the same amount. Because this is not usually true, we also employ rate shock analysis and
simulation modeling to monitor and control interest rate risk.



Rate shock tests project net interest income given an immediate and sustained change applied to all interest sensitive assets and liabilities. Although this implies some of the same weaknesses as gap, rate shock tests do help define
boundaries of interest rate risk. Typically, we conduct rate shock tests on a quarterly basis assuming rates change by +/- 100, 200 and 300 basis points. Because some of our products now have rates that cannot decrease by as much as 100, 200 or 300
basis points, the results indicate changes which are slightly outside the normal parameters set by management. Another technique we use to manage interest rate risk, known as simulation modeling, allows us to change both interest rates and asset and
liability volumes in any variety of ways. In this manner we can project interest rate risk under many different assumptions including those we consider most likely. As of June 30, 2003, these models indicate our interest rate risk is within levels
acceptable to us. Nonetheless, management continues to attempt to reduce interest rate risk by attracting longer term sources of funds such as 36 month certificates of deposit and the selective use of borrowed funds to support certain loan projects
as discussed earlier.



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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 the 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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##### Table of Contents

PART IIOTHER INFORMATION



Item 1. Legal Proceedings:



As
of June 30, 2003 Citizens Financial Corp. was not involved in any material legal proceedings. We are involved in various legal proceedings which occur in the normal course of business. After consultation with legal counsel, management believes that
all such litigation will be resolved without materially effecting our financial position or results of operations. In addition, there are no material proceedings known to be threatened or contemplated against Citizens Financial Corp. or any of its
subsidiaries.



Item 2. Changes in
Securities: None.



Item 3. Defaults
upon Senior Securities: None.



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



The annual meeting of shareholders of Citizens Financial Corp. was held on April 26, 2003. The shareholders determined that the maximum number of directors would be fixed at ten and that directors Alday, Kump and
Yeager will serve three year terms ending in April, 2006. Each of these directors were unopposed.



In addition to the foregoing nominees, the following seven persons presently are serving as members of the Board of Directors, for terms
to expire in the year indicated for each member: Max L. Armentrout (2005); William J. Brown (2004); Edward L. Campbell (2004); Raymond L. Fair (2005); John F. Harris (2005); Robert J. Schoonover (2004); and L. T. Williams (2005).



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                                                                         
|----------- |  | -----------------------------------------------------------------------------------------------
|            | 
|31.1        |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
|            | 
|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



| | (b) |  | Reports on Form 8-K: None
| | --- |  | -------------------------



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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: August 13, 2003 |  |  |  |                         
|                      |  |  |  |                         
|                      |  |  | 
|Date: August 13, 2003 |  |  |  |                         
|                      |  |  |  |                         



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