**UNITE
      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, 2007


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 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  o




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





Large
                  accelerated filer o
              Accelerated
                  filer  o
              Non-accelerated
                  filer  x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange
      Act).        Yes o     
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
                atAugust  8,
                2007Common
                Stock ($2 par value)
            
            1,829,504




1




**FORM
      10-Q**


**CITIZENS
      FINANCIAL CORP.**


**Quarter
      Ended June 30, 2007**





INDEX





Page
                  No.Part
                  I.
              Financial
                  InformationItem
                  1.  Financial StatementsCondensed
                  Consolidated Balance Sheets June 30, 2007 and December
                  31, 2006
              
              3Condensed
                  Consolidated Statements of Income Three Months Ended
                  June 30, 2007 and June 30, 2006 and Six Months Ended June 30, 2007
                  and
                  June 30, 2006
              
              4Statements
                  of Comprehensive Income/Loss Three Months Ended June
                  30, 2007 and June 30, 2006 and Six Months Ended June 30, 2007 and
                  June 30,
                  2006
              
              5Condensed
                  Consolidated Statements of Changes in Shareholders'
                  Equity Six Months Ended June 30, 2007 and June 30,
                  2006
              
              6Condensed
                  Consolidated Statements of Cash Flows Six Months Ended
                  June 30, 2007 and June 30, 2006
              
              7Notes
                  to Condensed Consolidated Financial
                  Statements
              
              8-13Item
                  2.  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
              
              14-22Item
                  3.  Quantitative and Qualitative Disclosures
                  About Market Risk
              
              23Item
                  4.  Controls and Procedures
              
              23Part
                  II.
              Other
                  Information and Index to ExhibitsItems
                  1 through 6
              
              24Signatures
              
              25Certification
                  by Executive Officers Pursuant to Sections 302 and 906 of the
                  Sarbanes-Oxley Act of 2002




2
 *Index*




PART
      I ITEM I - FINANCIAL INFORMATION


CITIZENS
      FINANCIAL CORP.


CONDENSED
      CONSOLIDATED BALANCE SHEETS


(In
      thousands of dollars)





June
                30,
            
            
            December
                31,2007
            
            
            2006(Unaudited)
            
            
            *ASSETSCash
                and due from banks
            
            $
            4,599
            
            
            $
            6,065Interest
                bearing deposits with other banks
            
            
            769
            
            
            
            30Federal
                funds sold
            
            
            1,100
            
            
            
            -Securities
                available for sale, at fair value
            
            
            56,629
            
            
            
            59,745Loans,
                less allowance for loan losses of $2,103 and $1,873,
                respectively
            
            
            167,705
            
            
            
            166,218Premises
                and equipment, net
            
            
            4,226
            
            
            
            4,331Accrued
                interest receivable
            
            
            1,327
            
            
            
            1,393Other
                real estate
            
            
            1,242
            
            
            
            446Other
                assets
            
            
            4,807
            
            
            
            4,752Total
                Assets
            
            $
            242,404
            
            
            $
            242,980LIABILITIES
                AND SHAREHOLDERS' EQUITYDeposits:Noninterest
                bearing
            
            $
            25,572
            
            
            $
            27,103Interest
                bearing
            
            
            171,638
            
            
            
            169,440Total
                deposits
            
            
            197,210
            
            
            
            196,543Short-term
                borrowings
            
            
            18,915
            
            
            
            19,833Long-term
                borrowings
            
            
            2,978
            
            
            
            3,512Other
                liabilities
            
            
            2,852
            
            
            
            2,814Total
                liabilities
            
            
            221,955
            
            
            
            222,702Commitments
                and contingenciesSHAREHOLDERS'
                EQUITYCommon
                stock, $2.00 par value, authorized 4,500,000 issued
                2,250,000
            
            
            4,500
            
            
            
            4,500Retained
                earnings
            
            
            21,128
            
            
            
            20,843Accumulated
                other comprehensive income/(loss)
            
            
            (1,347
            )
            
            
            (1,233
            )Treasury
                stock at cost, 420,496 shares
            
            
            (3,832
            )
            
            
            (3,832
            )Total
                shareholders' equity
            
            
            20,449
            
            
            
            20,278Total
                Liabilities and Shareholders' Equity
            
            $
            242,404
            
            
            $
            242,980




*From
      audited financial statements.





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





3
 *Index*





CITIZENS
      FINANCIAL CORP.


CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME


(In
      thousands of dollars, except per share data)





Three
                Months Ended
            
            
            Six
                Months EndedJune
                30,
            
            
            June
                30,2007
            
            
            2006
            
            
            2007
            
            
            2006(Unaudited)
            
            
            (Unaudited)INTEREST
                INCOMEInterest
                and fees on loans
            
            $
            3,387
            
            
            $
            3,151
            
            
            $
            6,687
            
            
            $
            6,165Interest
                and dividends on securities:Taxable
            
            
            471
            
            
            
            512
            
            
            
            966
            
            
            
            1,058Tax-exempt
            
            
            128
            
            
            
            76
            
            
            
            232
            
            
            
            151Interest
                on interest bearing deposits with other banks
            
            
            25
            
            
            
            1
            
            
            
            46
            
            
            
            5Interest
                on federal funds sold
            
            
            4
            
            
            
            0
            
            
            
            9
            
            
            
            18Total
                interest income
            
            
            4,015
            
            
            
            3,740
            
            
            
            7,940
            
            
            
            7,397INTEREST
                EXPENSEInterest
                on deposits
            
            
            1,471
            
            
            
            1,136
            
            
            
            2,885
            
            
            
            2,169Interest
                on short-term borrowings
            
            
            167
            
            
            
            247
            
            
            
            333
            
            
            
            393Interest
                on long-term borrowings
            
            
            34
            
            
            
            44
            
            
            
            71
            
            
            
            92Total
                interest expense
            
            
            1,672
            
            
            
            1,427
            
            
            
            3,289
            
            
            
            2,654Net
                interest income
            
            
            2,343
            
            
            
            2,313
            
            
            
            4,651
            
            
            
            4,743Provision
                for loan losses
            
            
            449
            
            
            
            103
            
            
            
            656
            
            
            
            206Net interest income after provision for loan
                        losses
            
            
            1,894
            
            
            
            2,210
            
            
            
            3,995
            
            
            
            4,537NONINTEREST
                INCOMETrust
                department income
            
            
            57
            
            
            
            49
            
            
            
            111
            
            
            
            96Brokerage
                fees
            
            
            40
            
            
            
            33
            
            
            
            77
            
            
            
            64Service
                fees
            
            
            266
            
            
            
            219
            
            
            
            502
            
            
            
            409Insurance
                commissions
            
            
            9
            
            
            
            7
            
            
            
            9
            
            
            
            11Security
                losses
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (18
            )Secondary
                market loan fees
            
            
            40
            
            
            
            32
            
            
            
            66
            
            
            
            65Other
            
            
            63
            
            
            
            58
            
            
            
            151
            
            
            
            150Total
                noninterest income
            
            
            475
            
            
            
            398
            
            
            
            916
            
            
            
            777NONINTEREST
                EXPENSESalaries
                and employee benefits
            
            
            998
            
            
            
            948
            
            
            
            1,968
            
            
            
            1,885Net
                occupancy expense
            
            
            102
            
            
            
            91
            
            
            
            210
            
            
            
            181Equipment
                expense
            
            
            104
            
            
            
            116
            
            
            
            213
            
            
            
            237Data
                processing
            
            
            128
            
            
            
            82
            
            
            
            265
            
            
            
            306Director
                fees
            
            
            72
            
            
            
            66
            
            
            
            135
            
            
            
            130Postage
            
            
            42
            
            
            
            43
            
            
            
            84
            
            
            
            89Professional
                service fees
            
            
            74
            
            
            
            142
            
            
            
            140
            
            
            
            206Stationery
            
            
            31
            
            
            
            36
            
            
            
            75
            
            
            
            74Software
                expense
            
            
            48
            
            
            
            43
            
            
            
            84
            
            
            
            89Net
                cost of operation of other real estate
            
            
            131
            
            
            
            47
            
            
            
            182
            
            
            
            56Other
            
            
            283
            
            
            
            210
            
            
            
            552
            
            
            
            448Total
                noninterest expense
            
            
            2,013
            
            
            
            1,824
            
            
            
            3,908
            
            
            
            3,701Income
                before income taxes
            
            
            356
            
            
            
            784
            
            
            
            1,003
            
            
            
            1,613Income
                tax expense
            
            
            85
            
            
            
            250
            
            
            
            279
            
            
            
            509Net
                income
            
            $
            271
            
            
            $
            534
            
            
            $
            724
            
            
            $
            1,104Basic
                and fully diluted earnings per common share
            
            $
            0.15
            
            
            $
            0.29
            
            
            $
            0.40
            
            
            $
            0.60Weighted
                average shares outstanding
            
            
            1,829,504
            
            
            
            1,847,693
            
            
            
            1,829,504
            
            
            
            1,850,677Dividends
                per common share
            
            $
            0.12
            
            
            $
            0.12
            
            
            $
            0.24
            
            
            $
            0.24





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




4
 *Index*




CITIZENS
      FINANCIAL CORP.


STATEMENTS
      OF COMPREHENSIVE INCOME/LOSS


(In
      thousands of dollars)




Three
                Months Ended
            
            
            Six
                Months EndedJune
                30
            
            
            June
                302007
            
            
            2006
            
            
            2007
            
            
            2006(Unaudited)
            
            
            (Unaudited)Net
                income
            
            $
            271
            
            
            $
            534
            
            
            $
            724
            
            
            $
            1,104Other
                comprehensive income:Gross
                unrealized gains/(losses) arising during the period
            
            
            (369
            )
            
            
            (302
            )
            
            
            (184
            )
            
            
            (368
            )Adjustment
                for income tax benefit
            
            
            141
            
            
            
            115
            
            
            
            70
            
            
            
            140(228
            )
            
            
            (187
            )
            
            
            (114
            )
            
            
            (228
            )Less:  Reclassification
                adjustment for losses included in net income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            18Adjustment
                for income tax benefit
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (7
            )-
            
            
            
            -
            
            
            
            -
            
            
            
            11Other
                comprehensive income/(loss), net of tax
            
            
            (228
            )
            
            
            (187
            )
            
            
            (114
            )
            
            
            (217
            )Comprehensive
                income/(loss)
            
            $
            43
            
            
            $
            347
            
            
            $
            610
            
            
            $
            887





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





5
 *Index*





CITIZENS
      FINANCIAL CORP.


CONDENSED
      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


(In
      thousands of dollars)




Six
                Months Ended June 30, 2007 and 2006(unaudited)AccumulatedAdditional
            
            
            
            
            
            Other
            
            
            
            
            
            TotalCommon
                Stock
            
            
            Paid-in
            
            
            Retained
            
            
            Comprehensive
            
            
            Treasury
            
            
            Shareholders'Shares
            
            
            Amount
            
            
            Capital
            
            
            Earnings
            
            
            Income/(Loss)
            
            
            Stock
            
            
            EquityBalance,
                January 1, 2007
            
            
            2,250,000
            
            
            $
            4,500
            
            
            $
            -
            
            
            $
            20,843
            
            
            $
            (1,233
            )
            
            $
            (3,832
            )
            
            $
            20,278Net
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            724
            
            
            
            -
            
            
            
            -
            
            
            
            724Net
                change in unrealized gain/loss on securities
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (114
            )
            
            
            -
            
            
            
            (114
            )Cash
                dividends declared ($0.24 per share)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (439
            )
            
            
            -
            
            
            
            -
            
            
            
            (439
            )Balance
                June 30, 2007
            
            
            2,250,000
            
            
            $
            4,500
            
            
            $
            -
            
            
            $
            21,128
            
            
            $
            (1,347
            )
            
            $
            (3,832
            )
            
            $
            20,449Balance,
                January 1, 2006
            
            
            750,000
            
            
            $
            1,500
            
            
            $
            2,100
            
            
            $
            20,704
            
            
            $
            (1,316
            )
            
            $
            (3,375
            )
            
            $
            19,613Net
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,104
            
            
            
            -
            
            
            
            -
            
            
            
            1,104Net
                change in unrealized  gain/loss on securities
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (217
            )
            
            
            -
            
            
            
            (217
            )Cash
                dividends declared ($0.24 per share)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (443
            )
            
            
            -
            
            
            
            -
            
            
            
            (443
            )Purchase
                of Treasury Stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (164
            )
            
            
            (164
            )Stock
                split effected in the form of a 200% stock dividend
            
            
            1,500,000
            
            
            
            3,000
            
            
            
            (2,100
            )
            
            
            (900
            )
            
            
            -
            
            
            
            -
            
            
            
            -Balance
                June 30, 2006
            
            
            2,250,000
            
            
            $
            4,500
            
            
            $
            -
            
            
            $
            20,465
            
            
            $
            (1,533
            )
            
            $
            (3,539
            )
            
            $
            19,893





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





6
 *Index*





CITIZENS
      FINANCIAL CORP.


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
      thousands of dollars)


Six
                Months EndedJune
                30,2007
            
            
            2006Cash
                flows from operating activities:
            
            (Unaudited)Net
                Income
            
            $
            724
            
            
            $
            1,104Adjustments
                to reconcile net income to cash provided by operating
                activities:Provision
                for loan losses
            
            
            656
            
            
            
            206Depreciation
                and amortization
            
            
            162
            
            
            
            192Amortization
                on securities
            
            
            19
            
            
            
            38Loss
                on sale of securities
            
            
            -
            
            
            
            18Loss
                on sale of other real estate
            
            
            21
            
            
            
            17Provision
                for loss on other real estate
            
            
            112
            
            
            
            -Decrease
                in accrued interest receivable
            
            
            66
            
            
            
            49Decrease
                in other assets
            
            
            192
            
            
            
            19Increase
                in other liabilities
            
            
            38
            
            
            
            29Cash
                provided by operating activities
            
            
            1,990
            
            
            
            1,672Cash
                flows from investing activities:Principal
                payments, available for sale securities
            
            
            888
            
            
            
            1,003Proceeds
                from sales of available for sale securities
            
            
            274
            
            
            
            2,843Proceeds
                from maturities and calls, available for sale securities
            
            
            10,155
            
            
            
            7,500Purchases
                of available for sale securities
            
            
            (8,403
            )
            
            
            (3,738
            )Purchases
                of premises and equipment
            
            
            (50
            )
            
            
            (100
            )Proceeds
                from sale of other real estate
            
            
            144
            
            
            
            134Increase
                in loans
            
            
            (3,401
            )
            
            
            (11,970
            )Cash
                used in investing activities
            
            
            (393
            )
            
            
            (4,328
            )Cash
                flows from financing activities:Cash
                dividends paid
            
            
            (439
            )
            
            
            (443
            )Acquisition
                of treasury stock
            
            
            -
            
            
            
            (164
            )Increase/(decrease)
                in short-term borrowing
            
            
            (918
            )
            
            
            6,466Repayment
                of long-term borrowing
            
            
            (534
            )
            
            
            (863
            )Increase
                in time deposits
            
            
            1,202
            
            
            
            3,039Decrease
                in other deposits
            
            
            (535
            )
            
            
            (8,261
            )Cash
                used in financing activities
            
            
            (1,224
            )
            
            
            (226
            )Net
                increase/(decrease) in cash and cash equivalents
            
            
            373
            
            
            
            (2,882
            )Cash
                and cash equivalents at beginning of period
            
            
            6,095
            
            
            
            8,773Cash
                and cash equivalents at end of period
            
            $
            6,468
            
            
            $
            5,891Supplemental
                disclosure of cash flow information:Cash
                paid during the period for:Interest
            
            $
            3,274
            
            
            $
            2,607Income
                taxes
            
            
            470
            
            
            
            721Supplemental
                Schedule of Noncash Investing andFinancing
                Activities:Other
                real estate and other assets acquired in settlement of
                loans
            
            $
            1,257
            
            
            $
            58





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





7
 *Index*





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 Subsidiary
      ("Citizens", "the company" or “we”) conform to U.S. generally accepted
      accounting principles and to general policies within the financial services
      industry.  The preparation of financial statements in conformity with
      U.S. generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the period.  Actual results could differ from those
      estimates.





The
      condensed consolidated statements contained herein include the accounts of
      Citizens Financial Corp. and its wholly-owned subsidiary Citizens National
      Bank
      ("the bank").  All significant intercompany balances and transactions
      have been eliminated. The information contained in the financial statements
      is
      unaudited except where indicated.  In the opinion of management, all
      adjustments for a fair presentation of the results of the interim periods have
      been made.  All such adjustments were of a normal, recurring
      nature.  The results of operations for the three months ended June 30,
      2007 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' 2006 Annual Report to
      Shareholders and Form 10-K.








NOTE
      2
      - RECLASSIFICATIONS





Certain
      accounts in the condensed consolidated financial statements for 2006, 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, 2007 and December 31, 2006 are summarized as follows
      (in
      thousands):





June
                30, 2007Amortized
              Cost
            
            
            Unrealized
              Gains
            
            
            Unralized
                Losses
            
            
            Carrying
                      Value
                    (Estimated
                      Fair Value)**Available
                for sale:**U.S.
                Government agencies and corporations
            
            $
            34,088
            
            
            $
            -
            
            
            $
            341
            
            
            $
            33,747Mortgage
                backed securities-U.S. Government agencies and
                corporations
            
            
            7,559
            
            
            
            -
            
            
            
            172
            
            
            
            7,387Tax
                exempt state and political subdivisions
            
            
            14,862
            
            
            
            5
            
            
            
            287
            
            
            
            14,580Federal
                Reserve Bank stock
            
            
            108
            
            
            
            -
            
            
            
            -
            
            
            
            108Federal
                Home Loan Bank stock
            
            
            644
            
            
            
            -
            
            
            
            -
            
            
            
            644Community
                Financial Services Inc. stock
            
            
            163
            
            
            
            -
            
            
            
            -
            
            
            
            163Total
                securities available for sale
            
            $
            57,424
            
            
            $
            5
            
            
            $
            800
            
            
            $
            56,629


8
 *Index*




December,
                31, 2006*Amortized
              Cost
            
            
            Unrealized
              Gains
            
            
            Unralized
              Losses
            
            
            Carrying
                    Value
                  (Estimated
                    Fair Value)**Available
                for sale:**U.S.
                Government agencies and corporations
            
            $
            41,921
            
            
            $
            5
            
            
            $
            415
            
            
            $
            41,511Mortgage
                backed securities- U.S. Government agencies and
                corporations
            
            
            8,374
            
            
            
            -
            
            
            
            149
            
            
            
            8,225Tax
                exempt state and political subdivisions
            
            
            9,183
            
            
            
            16
            
            
            
            68
            
            
            
            9,131Federal
                Reserve Bank stock
            
            
            108
            
            
            
            -
            
            
            
            -
            
            
            
            108Federal
                Home Loan Bank stock
            
            
            770
            
            
            
            -
            
            
            
            -
            
            
            
            770Total
                securities available for sale
            
            $
            60,356
            
            
            $
            21
            
            
            $
            632
            
            
            $
            59,745





*
      From
      audited financial statements





The
      tables below provide summaries of securities available for sale which were
      in an
      unrealized loss position at June 30, 2007 and December 31, 2006.  As
      of June 30, 2007, these securities had a total fair value of $54,455,000 and
      carried unrealized losses of $800,000, or 1.5%.  Securities which have
      been in a continuous loss position for the past twelve months total
      $39,127,000.  The unrealized loss pertaining to these securities is
      $514,000 or 1.3%.  The majority of these losses are on securities
      issued by U.S. government agencies and corporations which carry the implied
      faith and credit of the U.S. Government.  The other losses are on
      municipal instruments.  With the exception of one municipal which is
      not rated, all of these instruments carry A ratings from the major credit rating
      agencies.  We believe that these unrealized losses are the result of
      changing interest rates and that, along with our intent and ability to hold
      these investments to maturity, provide strong evidence that we will fully
      recover our investment.  In addition, no losses have been recognized
      on the $54,092,000 of securities that carried unrealized losses at December
      31,
      2006.





June
                30, 2007Securities
                Available for SaleLess
                Than 12 Months
            
            
            12
                Months or More
            
            
            TotalFair
            
            
            Unrealized
            
            
            Fair
            
            
            Unrealized
            
            
            Fair
            
            
            UnrealizedValue
            
            
            Losses
            
            
            Value
            
            
            Losses
            
            
            Value
            
            
            LossesU.S.
                Government agencies and corporations
            
            $
            6,546
            
            
            $
            70
            
            
            $
            27,201
            
            
            $
            271
            
            
            $
            33,747
            
            
            $
            341Mortgage
                backed securities- U.S. Government agencies and
                corporations
            
            
            873
            
            
            
            16
            
            
            
            6,514
            
            
            
            156
            
            
            
            7,387
            
            
            
            172Tax
                exempt state and political subdivisions
            
            
            7,909
            
            
            
            200
            
            
            
            5,412
            
            
            
            87
            
            
            
            13,321
            
            
            
            287Total
                securities available for sale
            
            $
            15,328
            
            
            $
            286
            
            
            $
            39,127
            
            
            $
            514
            
            
            $
            54,455
            
            
            $
            800


9
 *Index*




December
                31, 2006*Securities
                Available for SaleLess
                Than 12 Months
            
            
            12
                Months or More
            
            
            TotalFair
            
            
            Unrealized
            
            
            Fair
            
            
            Unrealized
            
            
            Fair
            
            
            UnrealizedValue
            
            
            Losses
            
            
            Value
            
            
            Losses
            
            
            Value
            
            
            LossesU.S.
                Government agencies and corporations
            
            $
            5,332
            
            
            $
            13
            
            
            $
            33,264
            
            
            $
            401
            
            
            $
            38,596
            
            
            $
            414Mortgage
                backed securities- U.S. Government agencies and
                corporations
            
            
            2,783
            
            
            
            10
            
            
            
            5,327
            
            
            
            139
            
            
            
            8,110
            
            
            
            149Tax
                exempt state and political subdivisions
            
            
            3,441
            
            
            
            18
            
            
            
            3,945
            
            
            
            51
            
            
            
            7,386
            
            
            
            69Total
                securities available for sale
            
            $
            11,556
            
            
            $
            41
            
            
            $
            42,536
            
            
            $
            591
            
            
            $
            54,092
            
            
            $
            632




*From
      audited financial statements.





The
      maturities, amortized cost and estimated fair values of the bank's securities
      at
      June 30, 2007 are summarized as follows (in thousands):





Available
                for saleAmortized
            
            
            EstimatedCost
            
            
            Fair
                ValueDue
                within 1 year
            
            $
            19,248
            
            
            $
            19,092Due
                after 1 but within 5 years
            
            
            30,926
            
            
            
            30,469Due
                after 5 but within 10 years
            
            
            5,346
            
            
            
            5,197Due
              after 10 years
            
            
            989
            
            
            
            956Equity
                securities
            
            
            915
            
            
            
            915$
            57,424
            
            
            $
            56,629





Mortgage
      backed securities have remaining contractual maturities ranging from 1 month
      to
      13.75 years and are reflected in the maturity distribution schedule shown above
      based on their anticipated average life to maturity, which ranges from 0.12
      to
      4.65 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.  Similarly, the company purchased a $163,000 investment in
      equity securities of Community Financial Services Inc. in the second
      quarter.  Community Financial Services Inc. is the holding company of
      one of our correspondent banks, the Bankers Bank.  Like the other
      equity securities we hold, this stock can only be traded between member
      organizations.





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, 2007 and 2006 are
      as
      follows (in thousands):





Proceeds
                From
            
            
            Gross
                RealizedCalls
                and
            
            
            PrincipalSales
            
            
            Maturities
            
            
            Payments
            
            
            Gains
            
            
            Losses**June
                30, 2007:**Securities
                available for sale
            
            $
            274
            
            
            $
            10,155
            
            
            $
            888
            
            
            $
            -
            
            
            $
            -**June
                30, 2006:**Securities
                available for sale
            
            $
            2,843
            
            
            $
            7,500
            
            
            $
            1,003
            
            
            $
            -
            
            
            $
            18




At
      June
      30, 2007 and December 31, 2006 securities with an amortized cost of $31,269,696
      and $30,807,634, respectively, with estimated fair values of $30,887,601 and
      $30,448,915, respectively, were pledged to secure public deposits, securities
      sold under agreements to repurchase, and for other purposes required or
      permitted by law.





At
      June
      30, 2007 and December 31, 2006 our securities portfolio contained no
      concentrations within any specific industry or issuer.





10
 *Index*





NOTE
      4 -
LOANS





Total
      loans are summarized as follows (in thousands):





June 30, 2007
            
            
            December
                31, 2006*Commercial,
                financial and agricultural
            
            $
            27,302
            
            
            $
            26,969Real
                estate - construction
            
            
            9,006
            
            
            
            13,965Real
                estate – home equity
            
            
            7,591
            
            
            
            7,985Real
                estate – residential mortgage
            
            
            59,999
            
            
            
            61,401Real
                estate – commercial mortgage
            
            
            54,252
            
            
            
            45,579Installment
                loans
            
            
            10,691
            
            
            
            10,635Other
            
            
            1,078
            
            
            
            1,611Total
                loans
            
            
            169,919
            
            
            
            168,145Net
                deferred loan origination fees and costs
            
            
            (111
            )
            
            
            (54
            )Total
            
            
            169,808
            
            
            
            168,091Less
                allowance for loan losses
            
            
            2,103
            
            
            
            1,873Loans,
                net
            
            $
            167,705
            
            
            $
            166,218





*
      From
      audited financial statements





At
      June
      30, 2007 our recorded investment in impaired loans was
      $3,472,000.  The valuation allowance assigned to these loans totaled
      $1,133,000. Our average investment in the impaired loans was $3,448,000 during
      the quarter.  The amount of interest income recorded on them in the
      second quarter was $74,000 while the amount of interest collected was
      $63,000.





Impaired
      loans at December 31, 2006 were $5,148,000.





Loans
      in
      a nonaccrual status were $3,940,000 and $2,208,000 at June 30, 2007 and December
      31, 2006, respectively.








NOTE
      5 -
ALLOWANCE FOR LOAN LOSSES





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





Three
                Months Ended
            
            
            Six
                Months EndedJune
                30,
            
            
            June
                30,2007
            
            
            2006
            
            
            2007
            
            
            2006Balance
                at beginning of period
            
            $
            1,822
            
            
            $
            1,702
            
            
            $
            1,873
            
            
            $
            1,597Loans
                charged off:Commercial
                and industrial
            
            
            100
            
            
            
            24
            
            
            
            185
            
            
            
            24Real
                estate – res. mortgage
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Real
                estate – comm. mortgage
            
            
            75
            
            
            
            -
            
            
            
            242
            
            
            
            -Consumer
                and other
            
            
            5
            
            
            
            5
            
            
            
            24
            
            
            
            7Total
            
            
            180
            
            
            
            29
            
            
            
            451
            
            
            
            31Recoveries:Commercial
                and industrial
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Real
                estate – res. mortgage
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Real
                estate – comm. mortgage
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Consumer
                and other
            
            
            12
            
            
            
            2
            
            
            
            25
            
            
            
            6Total
                recoveries
            
            
            12
            
            
            
            2
            
            
            
            25
            
            
            
            6Net
                losses
            
            
            168
            
            
            
            27
            
            
            
            426
            
            
            
            25Provision
                for loan losses
            
            
            449
            
            
            
            103
            
            
            
            656
            
            
            
            206Balance
                at end of period
            
            $
            2,103
            
            
            $
            1,778
            
            
            $
            2,103
            
            
            $
            1,778





11
 *Index*





NOTE
      6 -
DEPOSITS





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





June 30, 2007
            
            
            December
                31, 2006*Interest
                bearing checking
            
            $
            44,653
            
            
            $
            41,768Money
                market accounts
            
            
            5,363
            
            
            
            5,979Savings
                accounts
            
            
            21,473
            
            
            
            22,746Certificates
                of deposit under $100,000
            
            
            60,451
            
            
            
            59,950Certificates
                of deposit of $100,000 or more
            
            
            39,698
            
            
            
            38,997Total
            
            $
            171,638
            
            
            $
            169,440





*
      From
      audited financial statements








NOTE
      7 -
BORROWINGS





The
      following table summarizes our borrowings by type (in thousands):





June 30, 2007
            
            
            December
                31, 2006*Short-term
                borrowings:Securities
                sold under agreements to repurchase
            
            $
            18,915
            
            
            $
            15,970Federal
                funds purchased
            
            
            -
            
            
            
            425Overnight
                advances from Federal Home Loan Bank of Pittsburgh (FHLB) line of
                credit
            
            
            -
            
            
            
            3,438Total
            
            $
            18,915
            
            
            $
            19,833Long-term
                borrowings:Advances
                from FHLB
            
            $
            2,978
            
            
            $
            3,512





*
      From
      audited financial statements








NOTE
      8 -
EMPLOYEE BENEFIT PLANS





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





Six
                Months Ended June 30,PensionBenefits
            
            
            OtherBenefits2007
            
            
            2006
            
            
            2007
            
            
            2006Service
                cost
            
            $
            58
            
            
            $
            56
            
            
            $
            10
            
            
            $
            12Interest
                cost
            
            
            144
            
            
            
            136
            
            
            
            14
            
            
            
            16Expected
                return on plan assets
            
            
            (165
            )
            
            
            (165
            )
            
            
            -
            
            
            
            -Net
                amortization and deferral
            
            
            40
            
            
            
            39
            
            
            
            4
            
            
            
            8Net
                periodic cost
            
            $
            77
            
            
            $
            66
            
            
            $
            28
            
            
            $
            36





In
      the
      first half of 2007 we contributed $32,000 to our pension plan.  During
      the remainder of 2007 we expect to contribute an additional
      $144,000.  A payment of $70,000 was made to the pension plan in
      2006.





NOTE
      9 -
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.





12
 *Index*





NOTE
      10 -
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, 2007
            
            
            
            December
                  31, 2006(in
                thousands)
            
            
            
            
            
            *Commitments
                to extend credit
            
            $
            22,591
            
            
            $
            22,054Standby
                letters of credit
            
            
            497
            
            
            
            462Total
            
            $
            23,088
            
            
            $
            22,516





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
      11 -
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, 2007 and 2006
      the weighted average number of shares outstanding were, 1,829,504 and 1,850,677,
      respectively.  During the periods ended June 30, 2007 and 2006 the
      company did not have any dilutive securities.








NOTE
      12 –
SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS





In
      September 2006, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS
      157).  SFAS 157 defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles, and expands
      disclosures about fair value measurements.  SFAS 157 does not require
      any new fair value measurements but may change current practice for some
      entities.  This Statement is effective for financial statements issued
      for fiscal years beginning after November 15, 2007 and interim periods within
      those years.  The company does not expect the implementation of SFAS
      157 to have a material impact on its consolidated financial
      statements.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(SFAS 159).  This statement permits entities to choose to measure many
      financial instruments and certain other items at fair value. The objective
      of
      this Statement is to improve financial reporting by providing entities with
      the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. The fair value option established by this Statement
      permits all entities to choose to measure eligible items at fair value at
      specified election dates. A business entity shall report unrealized gains and
      losses on items for which the fair value option has been elected in earnings
      at
      each subsequent reporting date. The fair value option may be applied instrument
      by instrument and is irrevocable. SFAS 159 is effective as of the beginning
      of
      an entity’s first fiscal year that begins after November 15,
      2007.  The company is in the process of evaluating the impact SFAS 159
      may have on its consolidated financial statements.





13
 *Index*





Part
      1 Item 2


MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF


FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS





INTRODUCTION





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





Description
      of Business





Citizens
      Financial Corp. is a $242 million Delaware corporation headquartered in Elkins,
      WV.  From there our wholly-owned subsidiary, Citizens National Bank of
      Elkins, provides loan, deposit, trust, brokerage and other banking and related
      services to customers in northcentral and eastern West Virginia and nearby
      areas
      through six branch offices.  We conduct no business other than the
      ownership of our subsidiary bank.





FORWARD
      LOOKING STATEMENTS





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





CRITICAL
      ACCOUNTING POLICIES





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





14
 *Index*





Some
      policies rely more heavily on the use of estimates, assumptions, and judgments
      than others and, therefore, have a greater possibility of producing results
      that
      could be materially different than originally reported.  Our most
      significant accounting policies, including an explanation of how assets and
      liabilities are valued, may be found in Note 1 to the consolidated financial
      statements in our 2006 Annual Report to Shareholders and Form 10-K.





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





OVERVIEW




Assets
      remained steady at $242 million for the first half of 2007.  Net loans
      increased only slightly by $1.5 million to $167.7 million from year-end as
      we
      continued to experience reduced loan demand during the second quarter of
      2007.  In response to this lower loan demand, we decreased our
      certificate of deposit offering rates at the beginning of 2007 in order to
      slow
      deposit growth and control increasing deposit costs.  We are pleased
      that as a result, deposits only increased by $667,000 for the first half of
      2007
      which allowed us to maintain an acceptable loan to deposit ratio and net
      interest margin relative to perceived risks.





The
      first
      six months of 2007 produced net income of $724,000 which was $380,000 or 34.4%
      less than the same period last year.  The decrease in earnings was
      largely attributable to an increase in our provision for loan losses of $450,000
      which primarily reflects the risk in one particular credit, as well as $126,000
      of increased costs associated with the operation, valuation, and disposition
      of
      other real estate acquired in satisfaction of loans.





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




RESULTS
      OF OPERATIONS





NET
      INTEREST INCOME





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





15
 *Index*




Net
      interest margin for the first six months of 2007 is 4.21%, slightly higher
      than
      our peer banks’ average margin of 4.10%, however, it is 16 basis points lower
      than our margin for the same period last year.  The margin compression
      we have experienced over the last year is primarily the result of our efforts
      to
      remain competitive in our markets with certificate of deposit
      rates.  In order to curb further compression in the short-term, we
      reduced offering rates on some of our certificates of deposit early in the
      first
      quarter.





Our
      net
      interest income for the first half of 2007 of $4,651,000 is down 1.9% from
      last
      year’s $4,743,000.  However, we experienced an increase in the second
      quarter with net interest income rising to $2,343,000, up 1.3% from last year’s
      $2,313,000.  We believe the increase for the second quarter was
      partially due to our efforts to control margin compression as described
      above.  We anticipate continuing this strategy as long as our
      liquidity needs and customer demands will permit.





As
      noted
      above, net interest income is comprised of two components, interest income
      and
      interest expense.  Both have risen significantly in 2007. Higher
      interest rates have had an impact on both components pushing the yield on our
      earning assets up 34 basis points to 7.10% while the cost of our interest
      bearing liabilities has risen 60 basis points to 3.43%.  At the same
      time, growth in our earning assets and interest bearing liabilities has also
      caused interest income and expense to rise; average earning assets of $229.5
      million are up $5.3 million while average interest bearing liabilities are
      up
      $3.8 million to $193.2 million.





While
      the
      direction of future interest rates cannot be known with certainty, many
      economists believe we are at the peak in the current rate
      cycle.  Rising, falling and even stable rates will all impact our
      future earnings.  A discussion of what those effects may be is
      presented later in this report.




PROVISION
      FOR LOAN LOSSES





The
      provision for loan losses is management’s estimate of the amount which must be
      charged against current earnings in order to maintain the allowance for loan
      losses at a level considered adequate to provide for losses which are inherent
      in the loan portfolio.  Because of this, the amount of the provision
      is subject to the estimation techniques and judgments involved in assessing
      the
      allowance which may cause the provision to increase or decrease in the
      future.  We determine the amount of the provision, as well as the
      adequacy of the allowance for loan losses, quarterly.





For
      the
      first half of 2007 the provision for loan losses increased by $450,000 to
      $656,000.  Similarly, the increase in the second quarter was up by
      $346,000 to $449,000.  The primary reason for the increase lies with
      the specific reserve for one commercial credit.  The reserve on this
      particular credit increased by $347,000 for the second quarter; additional
      information on this credit can be found in the Credit Quality and Allowance
      for
      Loan Losses section of this report.  Because the amount of the
      provision for loan losses is a function of our overall assessment of loan
      quality and the adequacy of the allowance for loan losses, which itself relies
      on significant use of judgment and estimates, the provision for loan losses
      expense may increase or decrease in the future.  Please refer to the
      Credit Quality and Allowance for Loan Losses section of this report where we
      further discuss the estimation methods and assumptions we use in analyzing
      the
      allowance and the quality of our loan portfolio.





16
 *Index*




NONINTEREST
        INCOME
 
 Noninterest
        income increased $139,000 or 17.9% to $916,000 for the first half of
        2007.  The largest component of noninterest income continues to be
        service fees which increased $93,000 to $502,000 as a result of higher overdraft
        fees, as well as increases in our ATM and debit card program fees. Our
        involvement in trust, brokerage and secondary market loan services all continue
        to be major contributors to noninterest income.  Collectively, our
        trust and brokerage programs have added $28,000 to the increase for the first
        half of 2007, while our secondary market loan services remained stable from
        last
        year.
 
 During
        the second quarter, noninterest income improved by $77,000 to
        $475,000.  The reasons for the quarterly improvement are very similar
        to year-to-date performance.
 
 NONINTEREST
        EXPENSE
 
 Noninterest
        expense includes all items of expense other than interest expense, the provision
        for loan losses, and income taxes.  Historically our level of
        noninterest expense has been higher than average, partly due to the relatively
        smaller branch facilities we operate.  Therefore, controlling
        noninterest expense is a key factor to achieving higher earnings.
 
 For
        the
        second quarter noninterest expense has increased $189,000 or 10.4% to
        $2,013,000.  This increase during the second quarter represents the
        majority of the increase for the first half of 2007 as noninterest expense
        was
        up $207,000 or 5.6% to $3,908,000. This increase is partially the result
        of a
        $83,000 increase in salaries and employee benefits as we hired a chief credit
        officer, retail banking manager, and credit analyst in 2006.  The
        salaries for all of these professionals were not present in the first half
        of
        2006.
 
 Costs
        associated with the operation, valuation, and disposition of other real estate
        acquired in satisfaction of loans also contributed $126,000 to the
        increase.  We currently have foreclosed properties valued at $1.2
        million and have a contract to sell one particular property in the third
        quarter, thereby eliminating $739,000 of this amount.  We also expect
        to sell substantially all of the other properties at a public auction scheduled
        during the third quarter.
 
 Other
        noninterest expense contributed $104,000 to the increase in total noninterest
        expense for the first half of 2007.  This increase
        was  primarily related to additional Delaware franchise tax, increased
        expenses due to regulatory burdens, and normal contributions we made to a
        local
        educational institution earlier in the year than has been typical. Total
        contributions for 2007 are expected to be representative of prior
        years.
 
 These
        increases were partially offset by a $66,000 decrease in professional services
        fees for 2007 as we had previously hired several consultants to help us improve
        operations in 2006.  However, with Section 404 of the Sarbanes-Oxley
        act becoming effective in 2007, we expect to see increasing professional
        fees in
        the last half 2007 as we hire a firm to help us in the implementation
        process.  Year-to-date data processing expense also decreased by
        $41,000 as we had incurred conversion charges early in 2006 as we migrated
        to a
        new data processor. For the second quarter data processing expense was up
        $46,000 from the same period last year.  The reason for this variance
        is primarily attributable to a 2006 reclassification to capitalize installation
        costs after the conversion to our new data processor.





17
 *Index*




INCOME
        TAXES
 
 Our
        provision for income taxes for the first half of 2007 of $279,000 includes
        both
        federal and state income taxes.  At this level taxes were 27.8% of
        pretax income.  Taxes for the second quarter of 2007 were
        $85,000.  Through six months of 2006 income tax expense totaled
        $509,000 or 31.6% of pretax income.  Except for income earned on loans
        to and bonds issued by municipalities and earnings on certain life insurance
        policies, all of our income is taxable.  The decrease in the tax rate
        in 2007 is primarily attributable to increased earnings on municipal bonds
        purchased in recent months.  We are not subject to the alternative
        minimum tax, however.
 
 FINANCIAL
        CONDITION
 
 LOAN
        PORTFOLIO
 
 Loan
        portfolio growth for the second quarter was indicative of loan growth for
        the
        first half of 2007 as the second quarter was up $787,000 while the year-to-date
        increase in our portfolio was only $1.5 million to $167.7
        million.  The limited growth we have experienced during 2007 is
        attributable to the economic climate in which we operate.  A slowdown
        in the housing market has impacted residential lending, while higher fuel
        prices
        have contributed to reduced activity in our local trucking, lumber, and tourism
        industries.
 
 Despite
        the overall reduced loan demand, commercial real estate loans have increased
        $8.7 million to $54.3 million year-to-date.  This was mainly the
        result of a $5 million transfer of construction to permanent financing, as
        well
        as three large loans.  Two of these involved our partnering with
        another community bank outside our market area in order to provide funding
        for
        two separate commercial real estate projects.  However, in the second
        quarter commercial real estate loans decreased by $1.5 million.  Other
        commercial loans are up $333,000 since year-end, recovering more than the
        $2
        million decrease in the first quarter.  The increase in this quarter
        is primarily from one loan.  Similarly, this loan was also a
        participation with the other community bank referred to above.  The
        majority of our commercial loans are secured by real property, regardless
        of
        whether repayment is linked to cash generated by the use or sale of the real
        estate.  In cases where repayment is linked to such use, the timing
        and stability of the cash flow, secondary sources of repayment, loan guarantees,
        and collateral valuations are all important considerations in granting the
        loan.
 
 Retail
        lending or lending to consumers for autos, homes, or other purposes, has
        been
        difficult for Citizens over the past several years.  Auto
        manufacturers and specialized mortgage lenders have become very aggressive
        in
        attracting consumers away from traditional banking institutions.  At
        $60 million, residential mortgage loans at June 30 were basically unchanged
        since the end of the first quarter. However, year-to-date residential mortgage
        lending has decreased $1.4 million.  Citizens has been successful in
        maintaining an auto loan promotion for most of this year in order to stabilize
        the installment loan portfolio at $10.7 million.  As a community bank,
        retail lending is vital to our success.  We recognize the value of
        diversifying our portfolio with additional retail lending, and we will continue
        to evaluate opportunities do so.




18
 *Index*





CREDIT
      QUALITY AND ALLOWANCE FOR LOAN LOSSES





After
      recognizing an increase in the level of our credit risk in 2006 we took
      aggressive actions to improve our ability to manage that risk.  Among
      them were the hiring of an experienced chief credit officer and credit analyst,
      assigning our most crucial credits to one of our senior lenders, adopting a
      new
      loan policy and grading system, improving our exception tracking, and
      outsourcing our loan review function.  Collectively and individually,
      these steps are and will continue to allow us to improve the quality of our
      loan
      portfolio.





We
      have
      developed detailed strategies to manage those loans which carry the greatest
      risk and monitor them continuously.  During 2007 we improved our
      position with regard to several such loans.  In some cases this
      involved foreclosing on the collateral securing the loan.  Such
      foreclosures approximated $1.2 million with the largest being some
      $920,000.  We currently have a contract to sell this particular
      property and expect that sale will be completed during the third
      quarter.  Three additional properties are expected to be auctioned at
      public sale in August.  All of our foreclosed properties, including
      the three properties to be sold at auction, are carried at their expected net
      realizable value. However, the sale proceeds from the auction of these
      properties are not reasonably estimable, and the sale may or may not result
      in
      additional losses.





At
      the
      time of foreclosure a property’s net realizable value is compared to the loans’
carrying value.  Any deficiency in net realizable value results in a
      charge-off being recorded.  This is the primary reason our net
      charge-offs increased to $426,000 during the first half of 2007 as compared
      to
      $25,000 for the first half of 2006.





By
      engaging in the foreclosure process we gained control of those assets which
      will
      ultimately provide a return of our investment.  It also reduced our
      level of past due loans.  Past due loans fell from $5.3 million at
      year-end to $2.8 million at the end of the first quarter.  The second
      quarter brought further reductions in past dues as we have increased collection
      efforts and improved monitoring processes.  Past dues fell to $1.9
      million at June 30.





Loans
      in
      nonaccrual status have increased $1.7 million to $3.9 million since
      year-end.  The majority of this increase can be traced to one
      particular credit carrying a balance of $2.7 million.  At the present
      time this loan is not past due, however, the business continues to have
      significant risk and we continue to monitor this situation closely.





Although
      our credit risk remains higher than desired, we believe the actions we are
      taking are appropriate and that the risk in our portfolio is being
      systematically reduced.  Attention to credit quality will continue to
      be our primary focus in 2007.





We
      determine the amount of our allowance quarterly by evaluating specific larger
      loans as well as pools of similar homogeneous loans.  Adjustments to
      pooled factors for various trends, economic conditions, changes in our credit
      management practices and abilities, and other factors may also be
      made.  By employing a disciplined methodology we arrive at an
      allowance for loan losses that we believe is adequate to provide for losses
      that
      are inherent in the loan portfolio.





19
 *Index*





As
      of
      June 30, our allowance was $2,103,000, or 1.24% of gross loans, compared to
      $1,873,000 at year-end.  Despite improving past due trends and our
      continued attention to credit quality, we found it necessary to increase our
      allowance estimate in the second quarter.  This was largely due to a
      $347,000 increase in the specific reserve associated with the $2.7 million
      nonaccrual credit described above. Even though this loan continues to remain
      current, the business risk associated with this borrower has increased, thereby
      causing us to revise our estimate of the inherent risk.





In
      many
      cases our security position helps limit our risk of loss and we believe we
      are
      well equipped to manage and resolve the risks contained in our
      portfolio.  Based on information available to us, we believe our
      analyses are comprehensive and our allowance is adequate as of the report date.
      However, there can be no assurance that changes to our allowance for loan losses
      will not be required in the future as a result of changes in the assumptions
      which underlie our estimations or changes in economic conditions or the
      conditions of individual borrowers.





SECURITIES
      PORTFOLIO AND FEDERAL FUNDS SOLD





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





During
      the first half of 2007 our securities portfolio decreased by $3.1 million to
      $56.6 million, while federal funds sold and interest bearing deposits with
      other
      banks increased from $30,000 to $1,869,000.  Maturing securities
      totaled $10.2 million for the first six months of 2007.  Of that
      amount, $9.3 million were federal agency bonds.  With the reduced loan
      demand we have experienced, and the relatively flat nature of the yield curve,
      the bank sought to reinvest much of these maturities in municipal instruments
      with higher yields and longer maturities.  These will help to extend
      the duration of the portfolio, improve the portfolio yield, and protect against
      the possibility of decreasing interest rates in the future. Of the $8.4 million
      in security purchases, $6.6 million were municipal instruments.  We
      also purchased a $163,000 investment in equity securities of Community Financial
      Services Inc., the holding company of one of our correspondent banks, The
      Bankers Bank.  We use many of the services The Bankers Bank offers and
      we believe this investment will not only provide a good return, but it will
      also
      help us continue to foster a good relationship with our
      correspondent.  The overall repricing characteristics of our balance
      sheet continue to remain short as the majority of our loans and deposits will
      reprice within the next three years, however, and the weighted average duration
      of the securities portfolio is 2.4 years.





With
      the
      changing interest rates a number of our securities have fair values which are
      less than their amortized book value, as illustrated in Note 3.  All
      of the issuers are of sound financial condition and carry good to exceptional
      credit ratings.  Based on this, as well as our ability and intent to
      hold the securities to maturity, we do not consider these investments to be
      other than temporarily impaired and no negative income consequences are foreseen
      as a result.





20
 *Index*




DEPOSITS
        AND OTHER FUNDING SOURCES
 
 Deposit
        levels remained generally stable during 2007 with the June 30 balance being
        $197.2 million nearly level with the previous quarter end, as well as
        year-end.  As mentioned earlier, increasing costs of acquiring and
        retaining deposits combined with reduced loan demand has caused the bank
        to
        strategically lower its offering rates on certificates of
        deposit.  This approach has helped to manage rising costs, as well as
        limit the influx of unnecessary funding.  Should our loan demand
        increase or our liquidity needs change in the future, we may amend this strategy
        in order to attract additional funding.  At the present time, however,
        we are pleased that our approach is helping to control costs.
 
 Noninterest
        bearing deposits decreased slightly for the year by $1.5 million to $25.6
        million, while interest bearing deposits improved by $2.2 million to $171.6
        million.  The increase in interest bearing deposits was primarily in
        interest bearing checking products.
 
 Historically
        our borrowings have consisted of repurchase agreements, Federal Home Loan
        Bank
        borrowings, and, when necessary, overnight borrowings such as federal funds
        purchased.  At June 30, 2007 we had total borrowings of $21.9 million
        compared to $23.3 million at December 31, 2006.  The $1.4 million
        decrease is mainly attributable to the reduced loan demand and the availability
        of excess liquidity in the form of overnight funds that have prevented us
        from
        being in an overnight borrowing position at June 30.  Our level and
        type of future borrowings will depend on the need to fund additional asset
        growth and the availability and cost of alternative funds, including deposits
        as
        described above.  In any event, ample sources of funding are available
        to us as explained later in this report.
 
 CAPITAL
        RESOURCES
 
 Our
        total
        capital of $20,449,000 or 8.4% of total assets is similar to our position
        at
        year-end when capital was $20,278,000 representing 8.3%.  We believe
        this level of capital, as well as our capital structure, is appropriate to
        support current and anticipated future operations.  Our risk based
        capital measures, which are established for all banks through the regulatory
        process, continue to easily exceed required levels.  We have no
        knowledge of any items or trends which are likely to materially impair our
        capital position.
 
 LIQUIDITY
 
 The
        objective of our liquidity management program is to ensure the continuous
        availability of funds to meet the withdrawal demands of customers, the credit
        needs of borrowers, and to provide for other operational
        needs.  Liquidity is provided by various sources including unpledged
        investment securities, federal funds sold, loan repayments, a stable and
        growing
        deposit base and, when necessary, external borrowings.
 
 We
        monitor liquidity on a regular basis by preparing projected balance sheets
        and
        analyzing our sources and uses of funds.  Historically, we have
        satisfied our liquidity needs through internal sources of funds with the
        exception of certain loans which have been funded by borrowing from the Federal
        Home Loan Bank of Pittsburgh.  Currently, we have access to
        approximately $104 million through various FHLB programs in addition to
        available borrowing facilities with other correspondent banks.
 
 Our
        liquidity demands were low during the first half of 2007 as we continued
        to
        experience reduced loan demand.  We expect to continue to satisfy our
        liquidity needs primarily through internal sources.




21
 *Index*





IMPACT
      OF INFLATION





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





However,
      inflation does affect noninterest expenses such as personnel costs and the
      cost
      of services and supplies we use.  We attempt to offset increasing
      costs by controlling the level of noninterest expenditures and increasing levels
      of noninterest income.  Because inflation rates have generally been
      low during the time covered by the accompanying consolidated financial
      statements, the impact of inflation on our earnings has not been
      significant.  In addition, in light of current Federal Reserve policy,
      and economic conditions, we do not expect inflation to significantly impact
      our
      financial position or results of operations in the foreseeable
      future.





22
 *Index*





**Part
      I Item 3**


**Quantitative
      and Qualitative Disclosures About Market Risk**





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





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





At
      June
      30, 2007, we measured the impact an immediate and sustained change in interest
      rates of 100, 200 and 300 basis points, applied to all of our earning assets
      and
      interest bearing liabilities, would have on our net interest income over the
      next twelve months.  These tests indicate that net interest income can
      be expected to change by no more than 2.4% for each 100 basis point change
      in
      interest rates.








**Part
      I Item 4**


**Controls
      and Procedures**





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





23
 *Index*





**PART
      II -  OTHER INFORMATION**







Item
                    1.
                Legal
                    Proceedings :  As of June 30, 2007 Citizens Financial Corp. was
                    involved in various legal proceedings which occur in the normal
                    course of
                    business. We believe all such litigation will be resolved without
                    materially affecting our financial position or results of
                    operations.  There are no other material proceedings known to be
                    threatened or contemplated against either Citizens Financial
                    Corp. or
                    Citizens National Bank.


Item
                1A.
            Risk
                Factors:  There have been no material changes in the Risk
                factors discussed in Item 1A of our December 31, 2006 Form
                10-K.




Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds:
                None.





Item
                3.
            Defaults
                upon Senior
                Securities:  None.





Item
                4.
            Submission
                of Matters to a Vote of Security Holders:  The annual
                meeting of shareholders of Citizens Financial Corp. was held on April
                21,
                2007.  The shareholders determined that the maximum number of
                directors would be fixed at ten and that directors William J. Brown,
                Edward L. Campbell, and Robert J. Schoonover will serve three year
                terms
                ending in April 2010.  Each of these directors was
                unopposed.





In
      addition to the foregoing nominees, the following seven (7) persons were serving
      as members of the Board of Directors as of the report date for terms to expire
      in the year indicated for each member:  Robert N. Alday (2009); Max L.
      Armentrout (2008); John F. Harris (2008); William T. Johnson Jr. (2008); Cyrus
      K. Kump (2009); L.T. Williams (2008); and John A. Yeager (2009).





Following
      quarter-end, Mr. John F. Harris officially retired from the board of directors
      on July 20, 2007.  Notice of his departure was filed on Form 8-K dated
      June 20, 2007.





Item
                5.
            Other
                Information:  None.




Item
                6.
            Exhibits: 
                The following exhibits are filed with this
                report:




Exhibit
                  No.
              
              Description
                  of Exhibit31.1
              
              Certification
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
                  Section 135031.2
              
              Certification
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
                  Section 135032.1
              
              Certification
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
                  Section 135032.2
              
              Certification
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
                  Section 1350




24
 *Index*




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:
            8/8/07
            
            
            /s/
                Robert J. SchoonoverRobert
                J. SchoonoverPresident
                andChief
                Executive OfficerDate:
            8/8/07
            
            
            /s/
                Thomas K. DerbyshireThomas
                K. DerbyshireVice
                President, Treasurer andPrincipal
                Financial Officer







25