<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   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, 2001
                              ------------------------------------------------

Commission file number 2-96144
                       -------

                           CITIZENS FINANCIAL CORP.
-----------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


                       Delaware                        55-0666598
-----------------------------------------------------------------------------
            (State or other jurisdiction of        (I.R.S. Employer
            incorporation or organization)       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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

                                               Outstanding at
                   Class                       June 30, 2001
                   -----                     -----------------

       Common Stock ($2.00 par value)             650,612


                        This report contains 23 pages.

                                       1
<PAGE>

                                   FORM 10-Q
                           CITIZENS FINANCIAL CORP.
                          Quarter Ended June 30, 2001


                                     INDEX
<TABLE>
<CAPTION>
                                                                Page No.
                                                                --------
<S>                                                             <C>
Part I.   Financial Information

           Condensed Consolidated Balance Sheets
            June 30, 2001 and December 31, 2000................   3

           Condensed Consolidated Statements of Income
            Three Months Ended
            June 30, 2001 and June 30, 2000
            and Six Months Ended
            June 30, 2001 and June 30, 2000....................   4

           Statements of Comprehensive Income
            Three Months Ended
            June 30, 2001 and June 30, 2000
            and Six Months Ended
            June 30, 2001 and June 30, 2000....................   5

           Condensed Consolidated Statements of
            Changes in Shareholders' Equity
            Six Months Ended
            June 30, 2001 and June 30, 2000....................   6

           Condensed Consolidated Statements of
            Cash Flows
            Six Months Ended
            June 30, 2001 and June 30, 2000....................   7

           Notes to Condensed Consolidated
            Financial Statements...............................   8

           Management's Discussion and Analysis
            of Financial Condition and Results
            of Operations......................................  13

Part II.  Other Information and Index to Exhibits..............  20

           Signatures..........................................  21
</TABLE>

                                       2
<PAGE>

                        PART I - FINANCIAL INFORMATION
                           CITIZENS FINANCIAL CORP.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                           (In thousands of dollars)



                                                  June 30,   December 31,
                                                    2001        2000
                                                 ---------  ------------
                                                 (Unaudited)       *
ASSETS
------
Cash and due from banks                           $  3,777       $  4,540
Securities available for sale                       42,235         42,338
Loans, less allowance for loan losses of
 $1,266 and $1,151, respectively                   104,513        101,033
Premises and equipment                               2,701          2,356
Accrued interest receivable                          1,132          1,215
Other assets                                         1,796          2,050
                                                  --------       --------
    Total Assets                                  $156,154       $153,532
                                                  ========       ========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits:
  Noninterest bearing                             $ 16,380       $ 16,694
  Interest bearing                                 108,288        104,825
                                                  --------       --------
    Total deposits                                 124,668        121,519
Short-term borrowings                               10,684         12,367
Long-term borrowings                                   828            868
Other liabilities                                    1,435          1,388
                                                  --------       --------
    Total liabilities                              137,615        136,142
                                                  --------       --------

Commitments and contingencies

SHAREHOLDERS' EQUITY
--------------------

Common stock, $2.00 par value, authorized
    2,250,000 shares, issued 750,000 shares          1,500          1,500
Additional paid in capital                           2,100          2,100
Retained earnings                                   16,414         15,831
Accumulated other comprehensive income                 550            (16)
Treasury stock at cost 99,388 shares                (2,025)        (2,025)
                                                  --------       --------
     Total shareholders' equity                     18,539         17,390
                                                  --------       --------
     Total Liabilities and Shareholders' Equity   $156,154       $153,532
                                                  ========       ========
*From audited financial statements.

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

                                       3
<PAGE>

                           CITIZENS FINANCIAL CORP.
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               (In thousands of dollars, except per share data)

                                      Three Months Ended     Six Months Ended
                                           June 30,              June 30,
                                      ------------------     -----------------
                                      2001          2000     2001         2000
                                          (Unaudited)           (Unaudited)
INTEREST INCOME
---------------

Interest and fees on loans          $  2,323        $2,037   $4,640     $3,955
Interest and dividends on
 securities:
  Taxable                                555           586    1,152      1,127
  Tax-exempt                              62            90      127        176
Interest on federal funds sold             8             7       11         20
                                    --------     --------- --------   --------
  Total interest income                2,948         2,720    5,930      5,278
                                    --------     --------- --------   --------

INTEREST EXPENSE
----------------

Interest on deposits                   1,065           903    2,140      1,773
Interest on short-term borrowings        104            58      222        116
Interest on long-term borrowings          11            86       23        142
                                    --------     --------- --------   --------
  Total interest expense               1,180         1,047    2,385      2,031
                                    --------     --------- --------   --------
  Net interest income                  1,768         1,673    3,545      3,247
Provision for loan losses                 88            45      172         90
                                    --------     --------- --------   --------
  Net interest income after
    provision for loan losses          1,680         1,628    3,373      3,157
                                    --------     --------- --------   --------

NONINTEREST INCOME
------------------

Trust department income                   47            38       91         79
Brokerage fees                            49            29       96         43
Service fees                             137           106      268        189
Insurance commissions                     17             2       25         10
Security gains/(losses)                    0             0        1         (3)
Other                                     23            62       78        105
                                    --------     --------- --------   --------
  Total noninterest income               273           237      559        423
                                    --------     --------- --------   --------

NONINTEREST EXPENSE
-------------------

Salaries and employee benefits           677           609    1,367      1,182
Net occupancy expense                     65            49      127         93
Equipment rentals, depreciation
  and maintenance                         97            78      194        153
Data processing                           88            85      198        176
Postage                                   33            22       66         46
Legal and professional                    44            44       87         88
Other                                    270           276      518        551
                                    --------     --------- --------   --------
  Total noninterest expense            1,274         1,163    2,557      2,289
                                    --------     --------- --------   --------

Income before income taxes               679           702    1,375      1,291
Income tax expense                       202           210      467        389
                                    --------     --------- --------   --------
Net income                          $    477     $     492 $    908   $    902
                                    ========     ========= ========   ========

Basic earnings per common share     $    .73     $     .75 $   1.40   $   1.38
                                    ========     ========= ========   ========

Weighted average shares outstanding  650,612       652,112  650,612    652,888
Dividends per common share          $    .25     $     .20 $    .50   $    .40
                                    ========     ========= ========   ========

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

                                       4
<PAGE>

                            CITIZENS FINANCIAL CORP.
                       STATEMENTS OF COMPREHENSIVE INCOME
                           (In thousands of dollars)

<TABLE>
<CAPTION>
                                               Three Months Ended      Six Months Ended
                                                    June 30                 June 30
                                               ------------------      -----------------
                                               2001          2000      2001         2000
                                                  (Unaudited)             (Unaudited)
<S>                                            <C>           <C>       <C>         <C>
Net income                                     $ 477         $ 492     $   908     $  902
Other comprehensive income:
 Gross unrealized gains/(losses)
   arising during the period                     159            77         859        (98)
 Adjustment for income tax
   (expense)/benefit                             (54)          (26)       (292)        33
                                               -----         -----     -------     ------
                                                 105            51         567        (65)

Less:  Reclassification adjustment
 for (gains)/losses included in
 net income                                        0             0          (1)         3
Adjustment for income tax
 expense/(benefit)                                 0             0           0         (1)
                                               -----         -----     -------     ------
                                                   0             0          (1)         2
Other comprehensive income,
  net of tax                                     105            51         566        (63)
                                               -----         -----     -------     ------

Comprehensive income                           $ 582         $ 543     $ 1,474     $  839
                                               =====         =====     =======     ======
</TABLE>

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

                                       5
<PAGE>

                           CITIZENS FINANCIAL CORP.
     CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                           (In thousands of dollars)

<TABLE>
<CAPTION>
                                        Six Months Ended June 30, 2001 and 2000
                                       ------------------------------------------
                                                    (Unaudited)
                                                                                Accumulated               Total
                                                       Additional                  Other                  Share-
                                    Common Stock        Paid In     Retained   Comprehensive   Treasury   holders'
                                 -----------------
                                 Shares     Amount      Capital     Earnings      Income        Stock     Equity
-------------------------------------------------------------------------------------------------------------=-----
<S>                              <C>        <C>        <C>          <C>        <C>             <C>        <C>
Balance, January 1, 2000          750,000    $1,500     $2,100      $14,723       $(525)       $(1,844)   $15,954
Net income                                                              902                                   902
Net change in unrealized gain/
  (loss) on securities                                                              (63)                      (63)
Cash dividends declared
  ($.40 per share)                                                     (261)                                 (261)
Purchase of 3,720 shares
  of treasury stock                                                                               (135)      (135)
                                  ---------------------------------------------------------------------------------
Balance, June 30, 2000            750,000    $1,500     $2,100      $15,364       $(588)       $(1,979)   $16,397
                                  =================================================================================


Balance, January 1, 2001          750,000    $1,500     $2,100      $15,831       $ (16)       $(2,025)   $17,390
Net income                                                              908                                   908
Net change in unrealized gain/
  (loss) on securities                                                              566                       566
Cash dividends declared
  ($.50 per share)                                                     (325)                                 (325)
                                  ---------------------------------------------------------------------------------
Balance, June 30, 2001            750,000    $1,500     $2,100      $16,414       $ 550        $(2,025)   $18,539
                                  =================================================================================
</TABLE>

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

                                       6
<PAGE>

                            CITIZENS FINANCIAL CORP.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In thousands of dollars)

<TABLE>
<CAPTION>
                                                           Six Months Ended
                                                               June 30,
                                                          -------------------
                                                             2001       2000
                                                              (Unaudited)
<S>                                                       <C>       <C>
Cash flows from operating activities:
  Net Income                                              $   908   $    902
  Adjustments to reconcile net income to
  cash provided by operating activities:
    Provision for loan losses                                 172         90
    Depreciation and amortization                             150        102
    Amortization and accretion on securities                  (21)        10
    (Gain)/loss on sale of securities                          (1)         3
    (Gain)/loss on sale of assets                              (4)        30
    (Increase)/decrease in accrued interest receivable         83       (164)
    (Increase)/decrease in other assets                       199       (194)
    Increase/(decrease) in other liabilities                 (244)       293
                                                          -------   --------
      Cash provided by operating activities                 1,242      1,072
                                                          -------   --------

Cash flows from investing activities:
  Proceeds from principal payments received
    on securities available for sale                          140        114
  Proceeds from maturities and calls of
    securities available for sale                           7,610      3,120
  Proceeds from sales of securities
    available for sale                                        506      1,496
  Purchases of securities available for sale               (7,274)    (7,720)
  Purchases of premises and equipment                        (496)      (345)
  Increase in loans                                        (3,682)    (8,589)
  Proceeds from sale of other real estate                      90          0
                                                          -------   --------
     Cash used by investing activities                     (3,106)   (11,924)
                                                          -------   --------

Cash flows from financing activities:
  Cash dividends paid                                        (325)      (261)
  Acquisition of treasury stock                                 0       (135)
  Increase/(decrease) in short-term borrowing                 (40)     4,278
  Decrease in long-term borrowing                          (1,683)    (3,181)
  Increase in time deposits                                 3,496      4,116
  Increase/(decrease) in other deposits                      (347)     4,986
                                                          -------   --------
Cash provided by financing activities                       1,101      9,803
                                                          -------   --------

Net increase/(decrease) in cash and cash equivalents         (763)    (1,049)

Cash and cash equivalents at beginning of period            4,540      5,699
                                                          -------   --------

Cash and cash equivalents at end of period                $ 3,777   $  4,650
                                                          =======   ========

Cash paid during the period for:
  Interest                                                $ 2,388   $  2,042
  Income Taxes                                            $   452   $    379

Other real estate and other assets
  acquired in settlement of loans                         $    30   $    134
</TABLE>

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

                                       7
<PAGE>

                    CITIZENS FINANCIAL CORP. AND SUBSIDIARY
              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 Unites 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
amounts reported in the financial statements and accompanying notes.  Actual
results could differ from these estimates.

     The condensed consolidated financial statements 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, 2001 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' 2000 Annual Report to
Shareholders and Form 10-K.

NOTE 2 - RECLASSIFICATIONS
         -----------------

     Certain accounts in the condensed consolidated financial statements for
2000, as previously presented, have been reclassified to conform with current
year classifications.

                                       8
<PAGE>

NOTE 3 - SECURITIES
         ----------

     The amortized cost, unrealized gains, unrealized losses and estimated fair
values of securities at June 30, 2001 and December 31, 2000 are summarized as
follows (in thousands):

<TABLE>
<CAPTION>
                                                         June 30, 2001
                                ---------------------------------------------------------------
                                                                                        Carrying
                                                                                         Value
                                                                                       (Estimated
                                         Amortized      Unrealized      Unrealized        Fair
                                           Cost           Gains          Losses          Value)
------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>              <C>
Available for sale:
U.S. Government agencies
 and corporations.............         $   19,434        $    360      $      0     $  19,794
Mortgage backed securities-
 U.S. Government agencies
 and corporations.............              1,024               1             0         1,025
Corporate debt securities.....             14,904             408            18        15,294
State and political
 subdivisions.................              5,308              82             0         5,390
Federal Reserve Bank stock....                108               0             0           108
Federal Home Loan Bank stock..                624               0             0           624
                                       ----------        --------      --------     ---------
 Total securities available
  for sale....................         $   41,402        $    851      $     18     $  42,235
                                       ==========        ========      ========     =========
</TABLE>


<TABLE>
<CAPTION>
                                                   December 31, 2000*
                                ----------------------------------------------------------------
                                                                                       Carrying
                                                                                         Value
                                                                                       (Estimated
                                         Amortized      Unrealized      Unrealized        Fair
                                           Cost           Gains          Losses          Value)
                                         -------------------------------------------------------
                                                                    *
------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>              <C>
Available for sale:
U.S. Government agencies
  and corporations..................     $20,232          $107             $ 81          $20,258
Mortgage-backed securities -
  U.S. Government
  agencies and corporations.........       1,166             0               23            1,143
Corporate debt securities...........      14,895           148              193           14,850
State and political subdivisions ...       5,336            33               14            5,355
Federal Reserve Bank stock..........         108             0                0              108
Federal Home Loan Bank stock........         624             0                0              624
                                         -------          ----             ----          -------
Total securities available for
  sale..............................     $42,361          $288             $311          $42,338
                                         =======          ====             ====          =======
</TABLE>


*From audited financial statements.

     The maturities, amortized cost and estimated fair values of the Bank's
securities at June 30, 2001 are summarized as follows (in thousands):

                                                     Available for sale
                                                     ------------------
                                                Amortized           Estimated
                                                   Cost            Fair Value
                                                ---------          ----------
Due within 1 year                               $ 8,831             $ 8,905
Due after 1 but within 5 years                   30,959              31,708
Due after 5 but within 10 years                     880                 890
Due after 10 years                                    0                   0
Equity securities                                   732                 732
                                                --------            -------
                                                $41,402             $42,235
                                                ========            =======

                                       9
<PAGE>

     Mortgage backed securities have remaining contractual maturities ranging
from 3 to 4 years and are reflected in the maturity distribution schedule shown
above based on their anticipated average life to maturity, which ranges from 2
to 3 years.  The Company's equity securities are required to be held for
membership in the Federal Reserve and Federal Home Loan Bank; memberships which
are expected to continue indefinitely.

     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, 2001 and 2000
are as follows (in thousands):

<TABLE>
<CAPTION>
                                         Proceeds From              Gross Realized
                                 -------------------------------   -----------------
                                          Calls and   Principal
                                  Sales   Maturities  Payments     Gains      Losses
                                 -------------------------------   -----------------
<S>                              <C>      <C>         <C>          <C>        <C>
June 30, 2001:
Securities available for sale    $  506   $   7,610   $    140     $   1      $   0
                                 ======   =========   ========     =====      =====
June 30, 2000:
Securities available for sale    $1,496   $   3,120   $    114     $   0      $   3
                                 ======   =========   ========     =====      =====
</TABLE>


     At June 30, 2001 and December 31, 2000 securities carried at $6,565,000 and
$5,846,000 respectively, with estimated fair values of $6,698,000 and $5,869,000
respectively, were pledged to secure public deposits and for other purposes
required or permitted by law.

     At June 30, 2001, the company has a concentration within its corporate debt
securities classification which included obligations of financial services
industry companies having an approximate amortized cost of $4,736,000 and an
estimated fair value of $4,878,000.  There were no concentrations with any one
issuer.


                                       10
<PAGE>

NOTE 4 - LOANS
         -----

     Total loans are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                              June 30, 2001     December 31, 2000
                                              --------------    ------------------
                                                (Unaudited)             *
<S>                                           <C>               <C>
Commercial, financial and agricultural           $ 15,822            $ 14,631
Real estate - construction                          2,951               2,032
Real estate - mortgage                             70,158              70,065
Installment loans to individuals                   15,685              14,402
Other                                               1,222               1,151
                                                 --------            --------
  Total loans                                     105,838             102,281
Net deferred loan origination costs                   (54)                (61)
Less unearned income                                   (5)                (36)
                                                 --------            --------
  Total loans net of unearned income and
    net deferred loan origination costs           105,779             102,184
Less allowance for loan losses                     (1,266)             (1,151)
                                                 --------            --------
  Loans, net                                     $104,513            $101,033
                                                 ========            ========

</TABLE>

NOTE 5 - ALLOWANCE FOR LOAN LOSSES
         -------------------------

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

<TABLE>
<CAPTION>
                                        Three Months Ended   Six Months Ended
                                              June 30,           June 30,
                                         -----------------   ----------------
                                           2001      2000      2001    2000
<S>                                     <C>        <C>       <C>       <C>
Balance at beginning of period           $1,203    $1,063    $1,151    $1,011
Loans charged off:
  Commercial and industrial                   1         0         2         0
  Real estate - mortgage                      0        33         0        34
  Consumer and other                         28        13        67        32
                                         ------    ------    ------    ------
    Total                                    29        46        69        66
                                         ------    ------    ------    ------

Recoveries:
  Commercial and industrial                   0         4         3        22
  Real estate - mortgage                      0         0         0         1
  Consumer and other                          4         4         9        12
                                         ------    ------    ------    ------
    Total recoveries                          4         8        12        35
                                         ------    ------    ------    ------

Net (recoveries) losses                      25        38        57        31

Provision for loan losses                    88        45       172        90
                                         ------    ------    ------    ------
Balance at end of period                 $1,266    $1,070    $1,266    $1,070
                                         ======    ======    ======    ======
</TABLE>

*From audited financial statements.

                                       11
<PAGE>

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 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 extend of involvement the Bank has in particular classes of
financial instruments.

Financial instruments whose contract      June 30, 2001     December 31, 2000
amounts represent credit risk              (unaudited)              *
       (in thousands)
------------------------------------      -------------     ------------------
Commitments to extend credit                  $18,165             $16,544
Standby letters of credit                         517                 167
                                              -------             -------
  Total                                       $18,682             $16,711
                                              =======             =======

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

     Earnings per share is based on the weighted average number of shares
outstanding during the period.  For the six month periods ended June 30, 2001
and 2000 the weighted average number of shares were 650,612 and 652,888,
respectively. The weighted average number of shares outstanding during the three
month periods then ended were 650,612 and 652,112, respectively.

NOTE 9 - NEW ACCOUNTING STANDARDS
         ------------------------

     In July 2001, the Financial Accounting Standards Board issued Statement No.
141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible
Assets, which are required to be adopted by the Company at the beginning of
2002. SFAS No. 141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001.  Goodwill and certain
intangible assets will remain on the balance sheet and not be amortized.  On an
annual basis, and when there is reason to suspect that their values have been
diminished or impaired, these assets must be tested for impairment, and write-
downs may be necessary.  The Company has not determined the impact, if any, that
this statement will have on its consolidated financial position or results of
operations.

     SFAS No. 142 changes the accounting for goodwill from an amortization
method to an impairment-only approach. Amortization of goodwill, including
goodwill recorded in past business combinations, will cease upon adoption of
this statement. The Company is required to implement SFAS No. 142 on January 1,
2002 and it has not determined the impact, if any, that this statement will have
on its consolidated financial position or results of operations.



                                       12
<PAGE>

                    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 Subsidiaries for the periods indicated.  This discussion and analysis should
be read in conjunction with the Company's 2000 Annual Report to Shareholders and
Form 10-K. Since 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.  Such forward
looking information may involve uncertainties including those associated with
interest rate and general economic environments, regulations, competitive
changes, and other risks. The Company does not undertake to update any such
forward looking statements that may be made.  When provided, forward looking
information is intended to assist readers in understanding anticipated future
operations and are included pursuant to applicable safe harbor provisions of the
Private Securities Litigation Reform Act of 1995; actual results may differ.
Amounts and percentages used in this discussion have been rounded.

RESULTS OF OPERATIONS
---------------------

EARNINGS SUMMARY
----------------

     Net income for the second quarter of 2001 was $477,000, slightly less than
second quarter 2000 income of $492,000.  On a year-to-date basis net income
increased from $902,000 in 2000 to $908,000 in 2001.  Similarly, earnings per
share for the six month period increased by $.02 to $1.40 while dividends per
share increased by $.10 to $.50.  Balance sheet growth caused return on average
assets to fall from 1.30% to 1.19% and return on average equity decreased from
11.18% to 10.16%.  Details concerning the Company's results of operations are
discussed in the following sections of this report.

NET INTEREST INCOME
-------------------

     Net interest income represents the primary component of Citizens' 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. The Bank attempts 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.

     Net interest income for the second quarter of 2001 of $1,768,000 was
$95,000, or 5.7%, more than in the same period of 2000. This reflects a $10
million increase in average earning assets. The yield on those assets was 8.16%
during the quarter, nearly identical to the yield of 8.15% realized in the
second quarter of 2000. However, the cost of interest bearing liabilities for
the quarter of 4.01% is up from 3.83% in the same period last year as a result
of last year's rising interest rates, particularly on certificates of deposit.
This higher cost of funds caused the quarterly net interest margin, on a tax
equivalent basis, to fall 13 basis points to 4.94%, a level still well above
peer averages.

                                       13
<PAGE>

     For the year-to-date period, net interest income of $3,545,000 was
$298,000, or 9.2%, more than in the same period of last year. This increase
primarily reflects a positive volume variance with average earning assets for
the period rising $11.8 million. A 24 basis point increase in the yield on
earning assets to 8.31% also contributed to the increase in net interest income.
These positive influences were offset by an increase in the cost of funds of 33
basis points to 4.10%. As a result, tax equivalent net interest margin for the
first half of 2001 of 5.01% was 2 basis points less than in the first half of
last year.

     As is noted above, changes in interest rates do affect net interest income.
The rising interest rate environment of 2000 has now become a falling interest
rate environment in 2001.  This change, and its expected impact on the Company's
earnings in the foreseeable future, is discussed in the liquidity and interest
rate sensitivity section of this report.

NONINTEREST INCOME
------------------

     The Bank continues to make improvements in the area of noninterest income,
which includes all revenues not included in interest and fee income relating to
earning assets.  Total noninterest income for the second quarter of 2001 of
$273,000 is up 15.2%, or $36,000, when compared to the same quarter of last
year.  Year-to-date results show an even larger increase, $136,000 or 32.2%.  In
part this is due to the Bank's expanded branch network with two new branches
having been opened since May, 2000.  During the first six months of 2001 these
two branches contributed $60,000 of noninterest income, mostly service fees.
Service fees at the Bank's other branches have also risen as a result of higher
overdraft charges.

     In addition to service fees, the Bank's trust and brokerage operations have
also shown improvement in 2001.  For the first half of the year trust revenues
have risen 15.2% to $91,000.  Income from brokerage services, now in its third
year, of $96,000 is more than double the first half 2000 level of $43,000.  This
improvement is the result of increased annuity sales as well as the continued
development of the customer base.

     Other noninterest income has shown a decrease from $105,000 in the first
half of 2000 to $78,000 in the first half of the current year.  This is largely
due to the receipt of $30,000 during the second quarter of 2000 when the
insurance carrier used for one of the Bank's employee benefit plans converted
from a mutual company to a stock company.

NONINTEREST EXPENSE
-------------------

     Noninterest expense includes all items of expense other than interest
expense, the provision for loan losses, and income taxes. Noninterest expenses
for the quarterly and year-to-date periods have increased $111,000 and $268,000,
respectively. These increases are directly related to the opening of the two new
branch facilities. Noninterest expenses related to these two branches totaled
$169,000 during the second quarter and $326,000 during the first half of 2001.

     The largest increase in noninterest expense during the second quarter of
2001 was in personnel costs, which rose $68,000, or 11.2%.  This reflects a
$72,000 increase in salaries, a $12,000 increase in group insurance costs and a
$16,000 decrease in pension costs.  Net occupancy expense and equipment expenses
increased by $16,000 and $19,000, respectively, mostly

                                       14
<PAGE>

due to depreciation related to the newer facilities while postage expense
increased with a larger customer base. Other types of expense, including data
processing, legal and professional, and other noninterest expense, were
relatively unchanged.

     On a year-to-date basis, the most significant contribution to the increase
in noninterest expense was again personnel, up $185,000.  With the exception of
other noninterest expense, the remaining components of noninterest expense all
increased as a result of the branching activity. Other noninterest expense in
2000 exceeded the current year level due to higher costs related to holding and
selling foreclosed property.

INCOME TAXES
------------

     The Company's provisions for income taxes during the second quarters of
2001 and 2000 were $202,000 and $210,000, respectively.  Included in these
figures are both federal and state income taxes.  For the year-to-date period
total income tax expense was $467,000 in 2001 and $389,000 in 2000. These
figures represent effective tax rates of 34.0% and 30.1% in 2001 and 2000,
respectively.  The Company was not subject to the federal alternative minimum
tax during any of the periods covered by this report.

FINANCIAL CONDITION
-------------------

SUMMARY
-------

     Total assets of $156,154,000 at June 30, 2001 were up from $153,532,000 at
year end 2000 and primarily reflect a $3,149,000 increase in deposits. Average
assets for the quarter were $154,980,000.  A further discussion of the Bank's
major balance sheet categories, as well as liquidity, interest rate sensitivity,
and the impact of inflation, follows.

LOAN PORTFOLIO
--------------

     The Company's loan portfolio has experienced steady, but not rapid, growth
during the first half of 2001, particularly during the second quarter.  Total
loans at June 30, 2001 of $105,838,000 were $3,557,000, or 3.5%, more than at
year-end 2000.  The majority of this growth has occurred at the Company's two
newest branches.  As a result gross loans were 84.9% of deposits at June 30,
2001.

     At $70,158,000, mortgage lending continues to represent the Company's
largest loan portfolio. However, the greatest growth during the first half of
the year came in the consumer and commercial loan portfolios. Consumer lending
increased $1,284,000, or 8.9%, to $15,685,000. Commercial lending increased
$1,191,000, or 8.1%, to $15,822,000.

     Although the recent series of interest rate cuts have lowered the yield on
the Company's prime based and floating rate loan portfolios, management is
hopeful they will help the economy regain strength and permit the Bank to
maintain a stable loan portfolio.

ALLOWANCE FOR LOAN LOSSES
-------------------------

     Management maintains an allowance for possible loan losses at a level it
considers adequate to provide for losses that can be reasonably anticipated.
This is done by a process of continual review of the loan

                                       15
<PAGE>

portfolio, specific loans, and various factors which may impact them.

     The June 30, 2001 allowance for loan losses of $1,266,000 was 1.20% of
gross loans. During the first six months of the year the Bank experienced
$57,000 in net charge-offs while making provisions for loan losses of $172,000.

     Company policy requires those loans which are past due 90 days or more be
placed on nonaccrual status unless they are both well secured and in the process
of collection.  As shown in the following table, such loans have increased to
$159,000 representing .15% of the total portfolio, lower than the peer average
 .21%.

               Summary of Past Due Loans and Nonperforming Assets
              --------------------------------------------------
                                (in thousands)

<TABLE>
<CAPTION>
                                               June 30            December 31
                                        --------------------      ------------
                                        2001            2000          2000
                                            (Unaudited)                *
<S>                                     <C>             <C>       <C>
Loans past due 90 or more days
 still accruing interest                $ 159           $   8        $  22
                                        =====           =====        =====

Nonperforming assets:
 Nonaccruing loans                      $ 122           $ 111        $ 181
 Other Real Estate Owned                  498             321          555
                                        -----           -----        -----
                                        $ 620           $ 432        $ 736
                                        =====           =====        =====
</TABLE>

* From the Company's Form 10-K filing dated December 31, 2000

     The balance in other real estate owned includes $468,000 of covered
transactions. Such items were explained in the Company's March 31, 2001 Form 10-
Q.  As of June 30, 2001, all such transactions are current and management is not
aware of any trends or uncertainties involving the loan portfolio which are
likely to materially impair credit quality, capital, or earnings.

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.

     The composition and characteristics of the portfolio did not undergo any
significant changes during the first half of the year. The portfolio continues
to be comprised primarily of U.S. Agency and investment grade corporate debt
instruments with lesser holdings of municipal and government agency mortgage
backed instruments as well as Federal Home Loan Bank and Federal Reserve stock.
Despite the lower yields now available in these type of fixed rate debt
securities, the Bank plans to continue its approach of using them to employ a
laddered maturity of five years or less believing this approach helps minimize
interest rate risk. Typically this approach would also ensure a steady stream of
liquidity. However, due to pledging requirements, maturing securities will
provide only limited liquidity in the year 2001. Liquidity issues are discussed
elsewhere in this report.

     The most significant change in the securities portfolio during the first
six months of the year involved the impact of lower interest rates on

                                       16
<PAGE>

its fair value. Because the portfolio is comprised of fixed rate instruments,
the fair value of the portfolio increased and is now $833,000 in excess of its
amortized cost.

     The Bank generally tries to minimize its involvement in the overnight
federal funds sold market, instead relying on the continually maturing
securities portfolio to provide the liquidity needed to fund loans or meet
deposit withdraw demands. Nonetheless, at any given time the execution of
specific investing or funding strategies, or normal fluctuation in deposit and
loan balances, may require the Bank to sell, or buy, funds on an overnight
basis. No federal funds were sold at either June 30, 2001 or December 31, 2000
although average federal funds sold for the period were $480,000.

DEPOSITS AND OTHER FUNDING SOURCES
----------------------------------

     Total deposits at June 30, 2001 of $124,668,000 are $3,149,000 more than at
December 31, 2000 and include $2,094,000 in deposit growth from the Bank's two
newest locations. This growth occurred in interest bearing checking accounts,
money market accounts, and certificates of deposit despite recent interest rate
cuts. Most of the growth was in certificates of deposit, up $3,496,000, or 6.3%.
The largest decrease came in corporate savings accounts. These accounts, which
were $8,841,000 at year-end, fluctuate daily based on the customers daily cash
needs and totaled $8,076,000 at June 30, 2001. The average balance in these
accounts for the six month period was $9,037,000.

     With deposit growth closely tracking loan growth during the first half of
the year, the Company has not increased its use of borrowed funds. In fact,
total borrowings at June 30, 2001 of $11,512,000 are down from $13,235,000 at
year-end 2000. The majority of the Bank's borrowings are in the form of
repurchase agreements with several local entities. Two of these, carrying
balances of $4,505,000, matured on June 30, 2001. The Bank was successful in
renewing each of these agreements, one of which carries a one year term and the
other carrying a two year term. At June 30, 2001, the Company also had overnight
borrowings of $1,874,000; average overnight borrowings for the first half of the
year were $524,000. No changes have occurred in the Company's long-term
borrowing arrangements.

CAPITAL RESOURCES
-----------------

     The Company continues to maintain a very strong capital base. At
$18,539,000, total capital was 11.9% of assets at June 30, 2001. This total was
$1,149,000 higher than at December 31, 2000 primarily as a result of an increase
in the value of the available for sale securities portfolio. Changes to the
capital accounts are detailed in the Statements of Changes in Shareholders'
Equity presented earlier in the report.

     The Federal Reserve's risk-based capital guidelines provide for the
relative weighting of both on-balance-sheet and off-balance-sheet items based on
their degree of risk. The Company continues to exceed all regulatory capital
requirements as shown in the table below:

                                       17
<PAGE>

                        Minimum Capital Standard Ratios
--------------------------------------------------------------------------------
                                                 Citizens           Regulatory
                                               Financial Corp.     Requirements
--------------------------------------------------------------------------------

Total capital to risk weighted assets             16.77%                8.0%
Tier I capital to risk weighted assets            15.65%                4.0%
Tier I capital to adjusted total assets           11.49%                3.0%

LIQUIDITY AND INTEREST RATE SENSITIVITY
---------------------------------------

          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.  In addition, external sources of
liquidity are also available from correspondent banks.

          The Company's liquidity position has been enhanced by the growth of
its deposit base and the renewal of several repurchase agreements and, as a
result, the need to borrow from correspondent banks has been minimal.
Projections for the next twelve months indicate this is likely to continue to be
the case.  The Company has not, and does not expect to, raise funds through
brokered deposits, wholesale certificates of deposit, internet services, or
other nontraditional sources.

          The objective of the Company's interest rate sensitivity management
program, also known as asset/liability management, 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.

          Following the rising interest rate environment of 2000, the Company's
yield on interest earning assets and cost of interest bearing liabilities are
now higher than they were one year ago.  More recently, however, falling
interest rates have reduced the yield on earning assets.  In order to offset
this the Company reduced the rate it pays on savings, money market and interest
bearing checking accounts in May, 2001, thus helping to preserve its strong net
interest margin.

          As of June 30, 2001, the Company's one year gap is negative 5.13% of
total assets.  This indicates that more liabilities than assets are subject to
repricing over the next year.  Traditional theory indicates that in a falling
interest rate environment this could result in increased earnings. However, gap
analysis is a static measure and does not consider future changes in volume of
rate sensitive assets or liabilities or the possibility that interest rates of
various products may not change by the same amount or at the same time.
Therefore, certain assumptions must be made in constructing the gap.

          The Company also utilizes interest rate shock testing to manage
interest rate risk.  Such tests project net interest income given an immediate
and sustained change in interest rates applied to all interest earning assets
and interest sensitive liabilities.  Although such tests

                                       18
<PAGE>

contain some of the same shortcomings as gap analysis, they are very useful in
defining boundaries of interest rate risk exposure. As of June 30, 2001, these
tests project that an immediate and sustained increase in rates of 200 basis
points would cause net interest income to fall 6.48%. Conversely, a 200 basis
point decrease in rates is estimated to cause net interest income to increase
3.97%. These measures are within management's parameters.

          In addition to these tests, the Bank also uses simulation models to
monitor interest rate risk and prepare income projections.

IMPACT ON 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 the Company's 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 the
Company's 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 the Company's performance than the effect of inflation.

                                       19
<PAGE>

                         PART II -  OTHER INFORMATION


Item 1.  Legal Proceedings:
         -----------------

         As of June 30, 2001 Citizens Financial Corp. was not involved in any
     material legal proceedings.  The Bank is currently 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 the financial
     position or results of operations. In addition, there are no material
     proceedings known to be threatened or contemplated against the Company or
     the Bank.

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 21, 2001. The shareholders determined that the maximum number of
     directors would be fixed at nine and that directors Brown, Campbell and
     Schoonover will serve three year terms ending in April, 2004. Each of these
     directors were unopposed.

          In addition to the foregoing nominees, the following six (6) persons
     presently are serving as members of the Board of Directors, for terms to
     expire in the year indicated for each member:  Robert N. Alday (2003); Max
     L. Armentrout (2002); Raymond L. Fair (2002); John F. Harris (2002); Cyrus
     K. Kump (2003); and L. T. Williams (2002).


Item 5.   Other Information:     None.
          -----------------

Item 6.   Exhibits and Reports on Form 8-K:
          --------------------------------

          (a)  Exhibits:  22 Notice of Annual Meeting of Stockholders,
                          page 22

          (b)  Reports on Form 8-K:  None

                                       20
<PAGE>

                                  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:  8/2/01                               /s/ Robert J. Schoonover
                                           -------------------------------
                                           Robert J. Schoonover
                                           President
                                           Chief Executive Officer



Date:  8/2/01                               /s/ Thomas K. Derbyshire
                                           -------------------------------
                                           Thomas K. Derbyshire
                                           Treasurer
                                           Principal Financial Officer

                                       21