================================================================================


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


                                    FORM 10-Q


       X     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2004

                                       or

             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934
             For the transition period from __________ to __________



                         Commission file number 0-20148


                         CITIZENS FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)


       Kentucky                                          61-1187135
(State of Incorporation)                    (I.R.S. Employer Identification No.)


               12910 Shelbyville Road, Louisville, Kentucky 40243
                    (Address of principal executive offices)

                                 (502) 244-2420
                         (Registrant's telephone number)


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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
determined  in Rule  12b-2 of the  Securities  Exchange Act of 1934).  Yes ~~~~~
No ~~X~~

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date: Class A Stock - 1,677,628 as of
August 10, 2004.

The date of this Report is August 11, 2004.

================================================================================


<PAGE>


Part I - Financial Information;  Item 1 - Financial Statements


<TABLE>
<CAPTION>
                                            Citizens Financial Corporation and Subsidiaries
                                            Condensed Consolidated Statements of Operations
                                                              (Unaudited)




Six Months Ended June 30                                                               2004                 2003
------------------------------------------------------------------------ -------------------- --------------------
Revenues:
<S>                                                                            <C>                  <C>
   Premiums and other considerations                                           $ 14,900,716         $ 18,323,113
   Premiums ceded                                                                  (632,872)            (532,602)
------------------------------------------------------------------------ -------------------- --------------------
      Net premiums earned                                                        14,267,844           17,790,511

   Net investment income                                                          3,339,977            2,751,839

   Net realized investment gains (losses)                                           289,757             (164,728)

   Other income                                                                      95,351              112,076
------------------------------------------------------------------------ -------------------- --------------------
Total Revenues                                                                   17,992,929           20,489,698

Policy Benefits and Expenses:
   Policyholder benefits                                                         11,298,072           10,682,128
   Policyholder benefits ceded                                                     (541,006)            (555,852)
------------------------------------------------------------------------ -------------------- --------------------
      Net benefits                                                               10,757,066           10,126,276

   Increase in net benefit reserves                                               1,237,438            3,956,813

   Interest credited on policyholder deposits                                       338,432              345,572

   Commissions                                                                    2,540,636            3,388,237

   General expenses                                                               3,764,740            3,425,195

   Interest expense                                                                 177,826              189,609

   Policy acquisition costs deferred                                               (634,455)          (1,137,316)
   Amortization of deferred policy acquisition costs
      and value of insurance acquired                                               806,132              989,370
------------------------------------------------------------------------ -------------------- --------------------
Total Policy Benefits and Expenses                                               18,987,815           21,283,756
------------------------------------------------------------------------ -------------------- --------------------
Loss before income tax                                                             (994,886)            (794,058)
Income tax benefit                                                                  (12,604)            (141,000)
------------------------------------------------------------------------ -------------------- --------------------
Net Loss                                                                        $  (982,282)         $  (653,058)
------------------------------------------------------------------------ -------------------- --------------------

Net Loss per Common Share, basic and diluted                                        $ (0.58)             $ (0.39)
------------------------------------------------------------------------ -------------------- --------------------
<FN>

See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


Part I - Financial Information;  Item 1 - Financial Statements


<TABLE>
<CAPTION>
                                            Citizens Financial Corporation and Subsidiaries
                                            Condensed Consolidated Statements of Operations
                                                              (Unaudited)




Three Months Ended June 30                                                             2004                 2003
------------------------------------------------------------------------ -------------------- --------------------
Revenues:
<S>                                                                             <C>                  <C>
   Premiums and other considerations                                            $ 7,506,098          $ 9,084,178
   Premiums ceded                                                                  (310,822)            (271,307)
------------------------------------------------------------------------ -------------------- --------------------
      Net premiums earned                                                         7,195,276            8,812,871

   Net investment income                                                          1,716,296            1,377,850

   Net realized investment gains                                                     61,571              111,435

   Other income                                                                      48,762               55,723
------------------------------------------------------------------------ -------------------- --------------------
Total Revenues                                                                    9,021,905           10,357,879

Policy Benefits and Expenses:

   Policyholder benefits                                                          5,746,093            5,424,917
   Policyholder benefits ceded                                                     (273,574)            (321,841)
------------------------------------------------------------------------ -------------------- --------------------
      Net benefits                                                                5,472,519            5,103,076

   Increase in net benefit reserves                                                 788,757            2,274,626

   Interest credited on policyholder deposits                                       183,404              180,687

   Commissions                                                                    1,217,065            1,694,569

   General expenses                                                               2,014,904            1,613,123

   Interest expense                                                                  87,238               97,401

   Policy acquisition costs deferred                                               (285,687)            (557,774)
   Amortization of deferred policy acquisition costs
      and value of insurance acquired                                               392,736              339,911
------------------------------------------------------------------------ -------------------- --------------------
Total Policy Benefits and Expenses                                                9,870,936           10,745,619
------------------------------------------------------------------------ -------------------- --------------------
Loss before income tax                                                             (849,031)            (387,740)
Income tax (benefit)                                                                 23,644              (68,000)
------------------------------------------------------------------------ -------------------- --------------------
Net Loss                                                                        $  (872,675)         $  (319,740)
------------------------------------------------------------------------ -------------------- --------------------

Net Loss per Common Share, basic and diluted                                        $ (0.52)             $ (0.19)
------------------------------------------------------------------------ -------------------- --------------------
<FN>

See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


Part I; Item 1  (continued)


<TABLE>
<CAPTION>
                                            Citizens Financial Corporation and Subsidiaries
                                       Condensed Consolidated Statements of Financial Condition




                                                                                     June 30,        December 31,
                                                                                         2004                2003
------------------------------------------------------------------------ -------------------- --------------------
ASSETS                                                                             (Unaudited)
<S>                                                                             <C>                  <C>
Investments:
   Securities available for sale, at fair value:
      Fixed maturities (amortized cost of $104,345,690
      and $104,768,393 in 2004 and 2003, respectively)                       $  104,147,222         $ 108,640,262
      Equity securities (cost of $13,481,909 and
      $8,061,783 in 2004 and 2003, respectively)                                 16,372,069            11,336,964

   Investment real estate                                                         3,067,389            3,162,223

   Policy loans                                                                   4,454,320            4,409,301

   Short-term investments                                                           642,748              642,748
------------------------------------------------------------------------ -------------------- --------------------

Total Investments                                                               128,683,748          128,191,498

Cash and cash equivalents                                                         3,741,831            8,588,896

Accrued investment income                                                         1,752,425            1,685,776

Reinsurance recoverable                                                           2,696,948            2,834,222

Premiums receivable                                                                 241,885              256,140

Property and equipment                                                            1,538,537            2,640,579

Deferred policy acquisition costs                                                10,471,919           10,325,660

Value of insurance acquired                                                       2,910,684            3,119,609

Goodwill                                                                            755,782              755,782

Federal income tax receivable                                                           ---              421,676

Other assets                                                                        232,118               60,494
------------------------------------------------------------------------ -------------------- --------------------
Total Assets                                                                  $ 153,025,877         $ 158,880,332
------------------------------------------------------------------------ -------------------- --------------------
<FN>

See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


Part I; Item 1  (continued)


<TABLE>
<CAPTION>

                                            Citizens Financial Corporation and Subsidiaries
                                       Condensed Consolidated Statements of Financial Condition




                                                                                    June 30,     December 31,
                                                                                        2004                 2003
------------------------------------------------------------------------ -------------------- --------------------
LIABILITIES AND SHAREHOLDERS' EQUITY                                               (Unaudited)
<S>                                                                             <C>                <C>
Liabilities:
Policy Liabilities:
   Future policy benefits                                                     $ 110,507,549      $ 109,383,695

   Policyholder deposits                                                         15,338,670         15,530,824

   Policy and contract claims                                                     1,781,614          1,663,249

   Unearned premiums                                                                258,153            249,572

   Other                                                                            228,149            310,464
------------------------------------------------------------------------ -------------------- --------------------
Total Policy Liabilities                                                        128,114,135        127,137,804

Note payable - bank                                                               3,475,002          4,133,335

Note payable - related party                                                      3,000,000          3,000,000

Accrued expenses and other liabilities                                            1,356,512          1,805,934

Deferred federal income tax                                                          48,651          1,969,850
------------------------------------------------------------------------ -------------------- --------------------
Total Liabilities                                                               135,994,300        138,046,923

Commitments and Contingencies

Shareholders' Equity:
   Common stock, 6,000,000 shares authorized;
      1,685,228 and 1,685,228 shares issued and outstanding
      in 2004 and 2003, respectively                                              1,685,228          1,685,228

   Additional paid-in capital                                                     7,170,321          7,170,321

   Accumulated other comprehensive income                                         1,775,939          4,595,473

   Retained earnings                                                              6,400,089          7,382,387
------------------------------------------------------------------------ -------------------- --------------------
Total Shareholders' Equity                                                       17,031,577         20,833,409
------------------------------------------------------------------------ -------------------- --------------------
Total Liabilities and Shareholders' Equity                                    $ 153,025,877      $ 158,880,332
------------------------------------------------------------------------ -------------------- --------------------
<FN>

See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


Part I; Item 1  (continued)

<TABLE>
<CAPTION>
                                            Citizens Financial Corporation and Subsidiaries
                                            Condensed Consolidated Statements of Cash Flows
                                                              (Unaudited)




Six Months Ended June 30                                                               2004                  2003
------------------------------------------------------------------------ -------------------- --------------------

Cash Flows from Operations:
<S>                                                                            <C>                  <C>
Net loss                                                                       $   (982,282)        $   (653,058)
Adjustments to reconcile net loss to cash from operations:
   Increase in benefit reserves                                                   1,132,435            3,831,180

   Increase (decrease) in claim liabilities                                         118,365              (85,452)

   Decrease (increase) in reinsurance recoverable                                   137,274               (4,571)

   Interest credited on policyholder deposits                                       315,996              345,572

   Provision for amortization and depreciation, net of deferrals                    297,977              188,922
   Amortization of premium and accretion of discount on
      securities purchased, net                                                      14,044               60,313

   Net realized investment (gains) losses                                          (289,757)             164,728

   Increase in accrued investment income                                            (66,649)            (136,771)

   Change in other assets and liabilities                                          (644,459)             (20,630)

   Decrease (increase) in deferred federal income tax liability                       1,541             (141,000)

   Increase in federal income taxes receivable                                      (48,582)             (60,000)
------------------------------------------------------------------------ -------------------- --------------------
Net Cash provided by (used in) Operations                                           (14,097)           3,489,233

Cash Flows from Investment Activities:
Cost of securities acquired                                                     (23,427,698)         (33,376,076)
Investments sold or matured                                                      19,016,146           31,113,919
Investment management fees                                                         (355,241)              (4,597)
Additions to real estate                                                                 --              (17,670)
(Additions) reductions to property and equipment, net                             1,012,810               (5,071)
Other investing activities, net                                                      87,497              (79,433)
------------------------------------------------------------------------ -------------------- --------------------
Net Cash used in Investment Activities                                           (3,666,486)          (2,368,928)

Cash Flows from Financing Activities:
Policyholder deposits                                                               276,968              308,623
Policyholder withdrawals                                                           (785,117)            (833,851)
Payments on notes payable - bank                                                   (658,333)            (987,500)
Repurchase of common stock                                                         --                     (7,759)
------------------------------------------------------------------------ -------------------- --------------------
Net Cash used in Financing Activities                                            (1,166,482)          (1,520,487)

------------------------------------------------------------------------ -------------------- --------------------
Net Decrease in Cash and Cash Equivalents                                        (4,847,065)            (400,182)
Cash and Cash Equivalents at Beginning of Period                                  8,588,896            6,699,171
------------------------------------------------------------------------ -------------------- --------------------
------------------------------------------------------------------------ -------------------- --------------------
Cash and Cash Equivalents at End of Period                                       $3,741,831          $ 6,298,989
------------------------------------------------------------------------ -------------------- --------------------
<FN>

See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


Part I; Item 1  (continued)


                 Citizens Financial Corporation and Subsidiaries
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)



Note 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with the  instructions  to Form 10-Q in conformity  with
accounting  principles generally accepted in the United States. The accompanying
unaudited  condensed  financial  statements reflect all adjustments that are, in
the opinion of management,  necessary to a fair  presentation of the results for
the interim periods.  All such adjustments are of a normal recurring nature. For
further  information,  refer to the  December  31, 2003  consolidated  financial
statements and footnotes included in the Company's annual report on Form 10-K.


Note 2 - COMPREHENSIVE INCOME

The components of comprehensive income (loss), net of related tax, for the three
and six month periods ended June 30, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                                  ------------------------------- -------------------------------
                                                   Three Months Ended June 30,      Six Months Ended June 30,
                                                  --------------- --------------- --------------- ---------------
COMPREHENSIVE INCOME:                                  2004            2003            2004            2003
------------------------------------------------- --------------- --------------- --------------- ---------------

<S>                                               <C>             <C>             <C>             <C>
  Net Loss                                        $    (872,675)  $    (319,740)  $    (982,282)  $   (653,058)

  Net unrealized gains (losses) on securities        (4,191,038)      2,420,849      (2,819,534)     2,839,083
------------------------------------------------- --------------- --------------- --------------- ---------------
  Comprehensive Income (Loss)                     $  (5,063,713)  $   2,101,109   $  (3,801,816)  $  2,186,025
------------------------------------------------- --------------- --------------- --------------- ---------------
</TABLE>


Note 3 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company's  derivatives  outstanding  at June 30, 2004 include  approximately
$227,000 of embedded  options on  convertible  bonds and $(90,000) of other open
option positions.  Hedge accounting is not used for these securities and changes
in market value are reported currently as realized gains or losses.


Note 4 - NET REALIZED INVESTMENT GAINS (LOSSES), NET OF EXPENSES

The Company  recorded  pretax  reductions to the carrying value of available for
sale securities totaling $101,000 and $135,000 for the six months ended June 30,
2004 and 2003, respectively, relating to declines in value which were considered
by management to be other than temporary.  These amounts are included along with
other net realized gains (losses).  Until the Company  terminated its investment
management  agreements  on January 31,  2004,  the Company  also netted  certain
direct,  incremental  investment management fees against net realized investment
gains  and  losses  presented  in  the  Condensed  Consolidated   Statements  of
Operations.  Such costs are based directly on or, are primarily  associated with
capital gains.  Costs netted against realized  investment gains and losses total
$46,000  and  $225,000  for the  six  months  ended  June  30,  2004  and  2003,
respectively.


Note 5 - INCOME TAXES

Current taxes are provided based on estimates of the projected  effective annual
tax rate.  Deferred  taxes  reflect  the net  effects of  temporary  differences
between the carrying amount of assets and  liabilities  for financial  reporting
purposes and the amounts used for income tax  purposes.  Income  before  federal
income  taxes  differs  from taxable  income  principally  due to the small life
insurance company tax deduction and dividends-received tax deductions.



<PAGE>


Part I; Item 1  (continued)


Note 6 - SEGMENT INFORMATION

The Company's  operations  are managed along five  principal  insurance  product
lines: Home Service Life, Broker Life,  Preneed Life,  Dental, and Other Health.
Products in all five lines are sold through independent agency operations.  Home
Service Life consists  primarily of traditional life insurance  coverage sold in
amounts  of  $10,000  and under to middle  and lower  income  individuals.  This
distribution  channel is characterized by a significant  amount of agent contact
with customers  throughout the year. Broker Life product sales consist primarily
of simplified issue and graded-benefit policies in amounts of $10,000 and under.
Other products in this segment,  which are not aggressively  marketed,  include:
group life, universal life, annuities and participating life coverages.  Preneed
Life products are sold to individuals in connection with prearrangement of their
funeral and  include  single  premium  and  multi-pay  policies  with  coverages
generally in amounts of $10,000 and less.  These  policies are generally sold to
older individuals at increased premium rates. Dental products are term coverages
generally  sold to small and  intermediate  size employer  groups.  Other Health
products  include various  accident and health coverages sold to individuals and
employer groups.  Segment  information as of June 30, 2004 and 2003, and for the
periods then ended is as follows:

<TABLE>
<CAPTION>
                                                  ------------------------------- -------------------------------
                                                   Three Months Ended June 30,      Six Months Ended June 30,
                                                  --------------- --------------- --------------- ---------------
REVENUE:                                               2004            2003            2004            2003
------------------------------------------------- --------------- --------------- --------------- ---------------

<S>                                                  <C>            <C>             <C>             <C>
  Home Service Life                                  $ 2,345,217    $  2,259,771    $  4,586,813    $  4,547,712
  Broker Life                                          3,388,451       1,367,436       2,992,999       2,831,642
  Preneed Life                                           635,017       4,193,478       5,017,029       8,335,085
  Dental                                               2,318,403       2,090,956       4,507,041       4,238,216
  Other Health                                           273,246         334,803         599,290         701,771
------------------------------------------------- --------------- --------------- --------------- ---------------
  Segment Totals                                       8,960,334      10,246,444      17,703,172      20,654,426
  Net realized investment gains (losses)                  61,571         111,435         289,757        (164,728)
------------------------------------------------- --------------- --------------- --------------- ---------------
  Total Revenue                                       $9,021,905    $ 10,357,879    $ 17,992,929    $ 20,489,698
------------------------------------------------- --------------- --------------- --------------- ---------------
</TABLE>


Below are the net  investment  income  amounts which are included in the revenue
totals above.

<TABLE>
<CAPTION>
                                                  ------------------------------- -------------------------------
                                                   Three Months Ended June 30,      Six Months Ended June 30,
                                                  --------------- --------------- --------------- ---------------
NET INVESTMENT INCOME:                                 2004            2003            2004            2003
------------------------------------------------- --------------- --------------- --------------- ---------------

<S>                                                 <C>               <C>            <C>              <C>
  Home Service Life                                 $    466,654      $  377,689     $   894,163      $  774,031
  Broker Life                                            643,110         511,544       1,206,983       1,052,651
  Preneed Life                                           576,522         466,522       1,180,701         876,356
  Dental                                                   9,354           5,096          17,698          11,733
  Other Health                                            20,656          16,999          40,432          37,068
------------------------------------------------- --------------- --------------- --------------- ---------------
  Segment Totals                                     $ 1,716,296      $1,377,850     $ 3,339,977      $2,751,839
------------------------------------------------- --------------- --------------- --------------- ---------------
</TABLE>



<PAGE>


Part I; Item 1  (continued)


The Company evaluates performance based on several factors, of which the primary
financial measure is segment profit.  Segment profit represents pretax earnings,
except net realized investment gains (losses) and interest expense are excluded.
A significant  portion of the Company's  realized  investment gains (losses) are
generated from investments in equity securities. The equities portfolio averaged
(on a cost basis) approximately $11,964,000 and $9,066,000 during the six months
ended June 30, 2004 and 2003, respectively.

<TABLE>
<CAPTION>
                                                  ------------------------------- -------------------------------
                                                   Three Months Ended June 30,      Six Months Ended June 30,
                                                  --------------- --------------- --------------- ---------------
SEGMENT PROFIT (LOSS):                                 2004            2003            2004            2003
------------------------------------------------- --------------- --------------- --------------- ---------------

<S>                                                  <C>              <C>              <C>             <C>
  Home Service Life                                  $    55,612      $  (35,157)      $ (61,497)      $  86,710
  Broker Life                                           (321,048)       (240,873)       (466,630)       (175,664)
  Preneed Life                                          (213,085)       (257,999)       (290,225)       (379,411)
  Dental                                                (246,349)         63,984        (172,393)        205,896
  Other Health                                           (98,494)         68,271        (116,072)       (177,252)
------------------------------------------------- --------------- --------------- --------------- ---------------
  Segment Totals                                        (823,364)       (401,774)     (1,106,817)       (439,721)

  Net realized investment gains (losses)                  61,571         111,435         289,757        (164,728)
  Interest expense                                        87,238          97,401         177,826         189,609
------------------------------------------------- --------------- --------------- --------------- ---------------
  Loss before Federal Income Tax                      $ (849,031)    $  (387,740)    $  (994,886)    $  (794,058)
------------------------------------------------- --------------- --------------- --------------- ---------------
</TABLE>


Depreciation  and  amortization  amounts below consist of  depreciation  expense
along with  amortization of the value of insurance  acquired and deferred policy
acquisition costs.

<TABLE>
<CAPTION>
                                                  ------------------------------- -------------------------------
                                                   Three Months Ended June 30,      Six Months Ended June 30,
                                                  --------------- --------------- --------------- ---------------
DEPRECIATION AND AMORTIZATION:                         2004            2003            2004            2003
------------------------------------------------- --------------- --------------- --------------- ---------------

<S>                                                    <C>            <C>              <C>            <C>
  Home Service Life                                    $ 100,117      $  175,994       $ 234,077      $  351,978
  Broker Life                                            114,977          86,170         198,182         285,707
  Preneed Life                                           196,953         131,698         426,358         450,373
  Dental                                                  11,817          14,231          27,970          28,525
  Other Health                                            24,147           3,506          47,107          16,162
------------------------------------------------- --------------- --------------- --------------- ---------------
  Segment Totals                                       $ 448,011      $  411,599       $ 933,694      $1,132,745
------------------------------------------------- --------------- --------------- --------------- ---------------
</TABLE>

Segment asset totals are determined based on policy  liabilities  outstanding in
each segment.

                                              ----------------- ----------------
                                                  June 30,       December 31,
ASSETS:                                             2004             2003
--------------------------------------------- ----------------- ----------------

Home Service Life                               $ 40,146,974       $41,312,914
Broker Life                                       53,129,025        54,585,019
Preneed Life                                      57,200,594        60,100,723
Dental                                               816,325           930,279
Other Health                                       1,732,959         1,951,397
--------------------------------------------- ----------------- ----------------
Segment Totals                                  $153,025,877      $158,880,332
--------------------------------------------- ----------------- ----------------



<PAGE>

Part I; Item 1  (continued)


Note 7 - LITIGATION

United Liberty, which the Company acquired in 1998, is defending an action in an
Ohio state court brought by two policyholders in 2000. The Complaint refers to a
particular  class of life  insurance  policies that United Liberty issued over a
period of years ending  around 1971. It alleges that United  Liberty's  dividend
payments on these  policies  from 1993  through 1999 were less than the required
amount. It does not specify the amount of the alleged underpayment but implies a
maximum of about  $850,000.  The  plaintiffs  also allege that United Liberty is
liable to pay punitive damages,  also in an unspecified amount, for breach of an
implied covenant of good faith and fair dealing to the plaintiffs in relation to
the dividends.  The action has been certified as a class action on behalf of all
policyholders  who were Ohio residents and whose policies were still in force in
1993. United Liberty has denied the material allegations of the Complaint and is
defending the action  vigorously.  United Liberty has filed a motion for summary
judgment,  which has been fully  briefed  and argued and awaits  decision by the
Court.  Efforts  to  settle  the  action,  including  mediation,  have  not been
successful.  The Company  expects that the Court will decide pending  motions in
the third quarter,  which may dispose of all issues in the case or set the stage
for trial.  At this stage,  the Company  remains unable to determine  whether an
unfavorable  outcome of this  action is likely to occur or whether the chance of
such an outcome is remote and therefore does not have a basis for estimating the
potential loss, if any, that may ultimately result.

Since 2001,  Citizens  Security has been defending an action in an Alabama state
court brought by an alleged  policyholder in which a former independent agent is
also a defendant.  The action was  described in Note 7 to Part I, Item 1, of the
Company's  Form 10-Q for the quarterly  period ended March 31, 2004. The parties
settled this action in early August 2004. For strategic reasons related to other
potential  claims,  the Company has not  disclosed  the specific  amount paid in
settlement.  It is  included  under  "Policyholder  benefits"  in the  Condensed
Consolidated  Statements of  Operations  for the three and six months ended June
30, 2004 in "Policy and contract claims" in the Condensed Consolidated Statement
of Financial Condition.

In addition,  the Company is party to other legal,  actions in the normal course
of business.  Management  believes that recorded claims liabilities are adequate
to ensure that these other actions will be resolved without  material  financial
impact on the Company.


Note 8 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Effective  January 1, 2004,  the Company  adopted  Statement  of Position  03-1,
"Accounting and Reporting by Insurance  Enterprises  for certain  Nontraditional
Long-Duration Contracts and for Separate Accounts (SOP 03-1)." The provisions of
SOP 03-1 did not have a material impact on the Company's financial statements.


<PAGE>


Part I;  Item 2 - Management's Discussion and Analysis

EXECUTIVE SUMMARY

The Company's  management  continuously  monitors the performance and outlook of
the Company by  analyzing  several  indicators  that they judge to be  critical.
Some,  but not  necessarily  all, of the  indicators of  particular  interest to
management are:

         o  The general economic environment
         o  Trend of premium volume
         o  Lapse rates
         o  Mortality and morbidity rates
         o  Trend of general expense levels
         o  Asset and Shareholders' Equity growth
         o  General interest rate movements
         o  Investment yields
         o  Diversity  (e.g. by  industry)  and mix (e.g. between  fixed  income
             securities and equity securities) of our portfolios
         o  Segment performance and trends

OPERATIONS.  Net  premiums  and  other  considerations  decreased  approximately
$1,618,000, or 18.4% during the three months ended June 30, 2004 compared to the
three months ended June 30, 2003 and decreased approximately  $3,523,000 for the
first six months of 2004  compared  to the first six months of 2003.  Below is a
summary of net premiums  earned by segment,  for the three and six month periods
ended June 30, 2004, along with the change from the same periods of 2003.
<TABLE>
<CAPTION>

                                      ------------------------------ -------------------------------
                                       Three Months Ended June 30,     Six Months Ended June 30,
                                      -------------- --------------- --------------- ---------------
NET PREMIUMS EARNED                       Total          Change          Total           Change
------------------------------------- -------------- --------------- --------------- ---------------
<S>                                     <C>              <C>            <C>             <C>
  Home Service Life                     $ 1,865,307      $   (1,507)    $ 3,667,124     $   (75,033)

  Broker Life                               730,065        (105,148)      1,778,591          42,472

  Preneed Life                            2,039,119      (1,668,954)      3,775,586      (3,647,451)

  Dental                                  2,308,784         223,130       4,488,839         262,834

  Other Health                              252,001         (65,116)        557,704        (105,489)
------------------------------------- -------------- --------------- --------------- ---------------

  Segment Totals                        $ 7,195,276    $ (1,617,595)    $14,267,844     $(3,522,667)
------------------------------------- -------------- --------------- --------------- ---------------
</TABLE>

Preneed Life premiums  declined  $3,647,000 or 49% during the first half of 2004
compared  to the same  period  in 2003 as the  result  of the  Company  lowering
crediting  rates related to face amount growth,  lowering  commission  rates and
changing  the focus of our  marketing  efforts in the second  half of 2003.  The
Company is in the process of redirecting  the focus of our marketing  efforts to
the  Home  Service,   Broker  and  Dental  segments  in  an  effort  to  improve
profitability  in those  segments.  During 2004,  Dental premiums were favorably
impacted by additional broker relationships, increasing participation of certain
groups and normal  inflationary  premium  increases.  The Other  Health  segment
products are not being actively  marketed.  All other segments  experienced only
modest changes in premium from the first half of 2003.

The  increase in net benefit  reserves  decreased  $2,700,000  or 69% during the
first half of 2004  compared  to the same  period in 2003  primarily  due to the
decrease in Preneed policies issued and in force during the period. The decrease
in net benefit  reserves in the second quarter was $1,486,000 or 65% compared to
the second quarter of 2003.

Pretax loss  increased  approximately  $201,000  to $995,000  for the six months
ended June 30, 2004, primarily due to unfavorable mortality and Dental morbidity
rates, settlement of a lawsuit and increased general expenses,  partially offset
by an increase in realized  investment  gains of $454,000 and an increase in net
investment income of $588,000. Net investment income increased 21% for the first
half of 2004  compared  to the same  period of 2003,  in spite of a  decline  in
invested assets, due to a decrease in cash and cash equivalents and an increased

<PAGE>

yield on the Company's fixed  maturities  portfolio  resulting from investing in
longer term fixed maturity  securities.  Net realized investment gains increased
to  $290,000  for the first six  months  of 2004 from net  investment  losses of
$165,000  for the same period in 2003,  as the  Company  took  advantage  of the
stronger  equities  markes of the past twelve  months.  Net  benefits  increased
$631,000  or 6% during the first six months of 2004 from the same period in 2003
due  primarily  to adverse  mortality  rates in Broker and the Preneed  segments
along with  adverse  morbidity  in the  Dental  segment.  Commissions  decreased
$848,000  or 25% for the six months  ended June 30,  2004  compared  to the same
period in 2003 due to a lowering in commission  rates in the second half of 2003
on the  Preneed  premium  and the  decrease in that  premium.  General  expenses
increased  $340,000,  or 9.9%  for the  first  half of 2004  due to the  Company
continuing to incur costs associated with outside  consultants who were employed
to review  profitability  of the Company's life products in the current interest
rate environment and perform other actuarial calculations and analysis, the cost
of  a  severance  agreement  settlement  and  the  costs  of  a  market  conduct
examination  conducted by the Office of Insurance of the  Company's  domiciliary
state.  Policy  acquisition costs deferred decreased $503,000 or 44% for the six
months ended June 30, 2004 compared to the same period in 2003  principally  due
to the  substantial  decline  in first  year  Preneed  premiums  during the same
period.  Pretax Segment loss (excluding  realized  investment gains (losses) and
interest expense) for the first six months of 2004 was approximately  $1,107,000
compared  to  $440,000  for the first  six  months  of 2003.  This is  primarily
attributable  to the  factors  described  above  relative  to  revenue  changes,
mortality and morbidity rates,  increased general expenses and the settlement of
one of the lawsuits discussed in Note 7 to the Condensed  Consolidated Financial
Statements.  Below are the approximate,  annualized pretax investment income and
total return yields for the six months ended June 30, 2004 and 2003.

                                             ----------------- -----------------
Six Months Ended June 30                               2004              2003
-------------------------------------------- ----------------- -----------------

  Investment Income                              $ 3,339,977       $ 2,751,831
  Realized and Unrealized Gains (Losses)          (4,165,601)        4,276,072
-------------------------------------------- ----------------- -----------------
  Total Return                                    $( 825,624)      $ 7,027,911
-------------------------------------------- ----------------- -----------------

  Average Cash and Investments                  $136,572,241      $128,685,929

  Investment Income Yield - Annualized                  4.89%             4.28%
  Total Return - Annualized                            (1.21)%           10.92%

The income tax  benefit  of $13,000 is at a lower  effective  rate on the pretax
operating loss,  excluding net realized  investment gains,  (1.0%) than the full
year rate for 2003 of 5.2% due to the  Company  not having any  ability to carry
back any  additional  net  operating  losses for tax purposes  and  management's
judgment  that it is not likely the full tax  benefit  will be  realized  in the
foreseeable future.

FINANCIAL POSITION.  Shareholders' equity totaled approximately  $17,032,000 and
$20,833,000 at June 30, 2004 and December 31, 2003, respectively. These balances
reflect an approximate 18.2% decrease for the six months ended June 30, 2004. As
described  above,  the   comprehensive   income  (loss)  totaled   approximately
$(3,802,000)  and  $2,186,000  for the six months  ended June 30, 2004 and 2003,
respectively.  A  significant  portion  of the  comprehensive  income  (loss) is
attributable  to changes in the value of the Company's fixed maturity and equity
portfolios.  Equity  securities  comprised  approximately  10.7% and 7.1% of the
Company's total assets as of June 30, 2004 and December 31, 2003,  respectively.
Accordingly,  as also described below, the Company's  financial  position can be
significantly  affected by movements in the equities  markets.  Equity portfolio
positions increased  $5,420,000 on a cost basis and $5,035,000 on a market value
basis,  during the first six months of 2004. Fixed maturity portfolio  positions
decreased  $423,000 on an amortized  cost basis and $4,493,000 on a market value
basis  during  the  same  period.  This  difference  resulted  primarily  from a
significant  decrease in bond prices during the period. Cash and cash equivalent
positions decreased  approximately  $1,559,000 during the quarter ended June 30,
2004.

Equity markets continue to be highly volatile and were unfavorable in the second
quarter  of 2004.  Interest  yields on fixed  maturity  investments  held in our
portfolio  are  continuing  to  slowly  increase.  The  significant  decline  in
short-term  rates  continues  to  adversely  impact  the  Company's   investment
portfolio yield and operating earnings. The 2004 environment described continues
to generate a relatively  high level of qualitative  investment  risk.  However,
measures of  quantitative  risk per unit of investment  are not believed to have
changed significantly from those previously disclosed in the Company's 2003 Form
10-K.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not participate in any off-balance sheet arrangements.

<PAGE>

CASH FLOW AND LIQUIDITY. Cash flow from operations totaled $(14,000) for the six
months  ended June 30, 2004  compared to  $3,489,000  for the same period in the
prior year. The decrease in the positive cash flow is primarily  attributable to
the decline in Preneed Life business which was growing during the second quarter
of 2003 and adverse  mortality and morbidity  rates. The $3,666,000 of cash used
in  investing  activities  for the six  months  ended  June  30,  2004  resulted
primarily  from  investing a large  portion of cash held at the beginning of the
year, partially offset by proceeds from the sale of the Company's interest in an
aircraft.  The $1,166,000 of cash used in financing  activities during the first
six months of 2004 is primarily  attributable to bank loan principal  repayments
along with  annuity and  Universal  Life account  withdrawals.  Due to continued
earnings  pressure from low yields on investments  and cash  equivalents and the
declining Preneed premiums,  the Company is completing a strategic review of its
products  and  operations.  A  key  element  of  this  initiative  is  improving
profitability  of the  Preneed,  Home  Service,  and  Broker  Life  segments  by
increasing  premiums  in the Home  Service  and Broker  segments,  strengthening
underwriting  practices,  modifying  commissions,  and where possible,  lowering
interest  crediting or policy  growth rates.  Regarding the currently  scheduled
debt  repayments,  the Company  believes its available funds will be adequate to
service 2004 debt  obligations  and,  with other  available  assets,  management
believes it will be adequate  to service  debt  obligations  through  2005.  The
Company sold its interest in an aircraft to SMC Advisors Inc., a related entity,
in April  2004,  generating  $971,000  in  additional  cash.  In  addition,  the
Company's  Chairman has expressed  potential  willingness to loan the Company an
additional $2,000,000 if necessary, which could service debt obligations through
the majority of 2007.  For the quarter ended June 30, 2004,  the Company did not
meet one of its bank debt covenants (debt to earnings ratio), however the lender
has waived this violation for the quarter and for several previous quarters.  In
return for the waiver the  Company's  Chairman  has  personally  guaranteed  the
outstanding bank debt.


FORWARD-LOOKING INFORMATION.

All statements,  trend analyses and other  information  contained in this report
relative  to markets  for the  Company's  products  and trends in the  Company's
operations or financial  results,  as well as other  statements  including words
such as "anticipate",  "believe",  "plan", "estimate",  "expect",  "intend", and
other  similar  expressions,  constitute  forward-looking  statements  under the
Private  Securities   Litigation  Reform  Act  of  1995.  These  forward-looking
statements  are  subject to known and  unknown  risks,  uncertainties  and other
factors  which may cause actual  results to be materially  different  from those
contemplated by the  forward-looking  statements.  Such factors  include,  among
other things:

|X|      the market value of  the Company's investments, including  stock market
         performance and prevailing interest rate levels;
|X|      customer and agent response to new products, distribution channels  and
         marketing  initiatives, including  exposure to  unrecoverable  advanced
         commissions;
|X|      mortality,  morbidity, lapse rates, and other factors  which may affect
         the profitability of the Company's insurance products;
|X|      regulatory  changes or actions,  including those relating to regulation
         of insurance products and insurance companies;
|X|      ratings  assigned to the  Company and its  subsidiaries  by independent
         rating  organizations  which the Company  believes are important to the
         sale of its products;
|X|      general economic conditions and increasing competition which may affect
         the Company's ability to sell its products;
|X|      the  Company's  ability  to  achieve  anticipated  levels of  operating
         efficiencies and meet cash requirements based upon  projected liquidity
         sources;
|X|      unanticipated adverse litigation outcomes; and
|X|      changes in the Federal income tax laws and  regulations that may affect
         the relative tax advantages of some of the Company's products.

There can be no  assurance  that other  factors  not  currently  anticipated  by
management will not also materially and adversely  affect the Company's  results
of operations.
<PAGE>

Part I; Item 3 - Quantitative and Qualitative Disclosures about Market Risk


Quantitative  and Qualitative  Risk. The primary changes in quantitative  market
risks during the six months ended June 30, 2004 are  discussed in Part I, Item 2
above.






Part I;  Item 4 - Controls and Procedures


EVALUATION OF DISCLOSURE  CONTROLS AND PROCEDURES.  Within the past 90 days, the
Company conducted an evaluation of its disclosure controls and procedures,  with
the supervision and  participation of its Chief Executive  Officer and Principal
Financial Officer.  The Company does not expect that its disclosure controls and
procedures will prevent all error and fraud.  Such a control  system,  no matter
how well  conceived and  operated,  can provide only  reasonable,  not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must balance the constraint of prudent resource  expenditure
with a judgmental evaluation of risks and benefits.  Based on this evaluation of
disclosure  controls and procedures,  the Company's Chief Executive  Officer and
Principal  Financial  Officer have  concluded  that such controls and procedures
provide reasonable  assurance that material  information required to be included
in the  Company's  periodic  SEC reports is made known on a timely  basis to the
Company's principal executive and financial officers.

CHANGES IN  INTERNAL  CONTROLS.  There have been no  significant  changes in the
Company's internal controls or changes in other factors that could significantly
affect  these  controls  subsequent  to their  evaluation,  nor has the  Company
implemented  any  corrective  actions  regarding  significant   deficiencies  or
material weaknesses in internal controls.


<PAGE>


Part II - Other Information



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

         The 2004  annual meeting  of shareholders  of the  Company was  held on
         June  30,  2004.   At  the  meeting,  five  incumbent   directors  were
         re-elected  and one new  director was  elected  to serve until the 2005
         annual meeting of  shareholders.  The names of the directors and shares
         of the Company's Class A Stock voted for each were as follows:

Candidate                                       Votes
-------------------------------------      -----------------

John H. Harralson, Jr.                         1,365,211
Frank T. Kiley                                 1,358,826
George A. Turk *                               1,354,973
Thomas G. Ward                                 1,368,211
Darrell R. Wells                               1,365,711
Margaret A. Wells                              1,365,511
* new director


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



         a).    Exhibit 10.16           Form   of   Indemnification    Agreement
                                        between  the  Company and its Directors,
                                        Executive  Officers  and  Certain  Other
                                        Officers
                Exhibit 10.17           Aircraft Interest Purchase Agreement
                Exhibit 11              Statement  re: computation  of per share
                                        earnings.
                Exhibit 31.1            Rule  13a-14(a)/15d-14(a)  Certification
                                        --Principal Executive Officer
                Exhibit 31.2            Rule  13a-14(a)/15d-14(a)  Certification
                                        --Principal Financial Officer
                Exhibit 32.1            Section  1350 Certification  --Principal
                                        Executive Officer
                Exhibit 32.2            Section  1350 Certification  --Principal
                                        Financial Officer

          b).  Reports on Form 8-K:     On May 17, 2004 the Company filed a Form
                                        8-K  to furnish, pursuant  to Item 12, a
                                        press  release disclosing  the Company's
                                        earnings for the first quarter of 2004.

                                        On July 1, 2004 the Company filed a Form
                                        8-K  to  furnish,  pursuant to  Item 12,
                                        remarks by the Company's Chief Executive
                                        Officer  at the  Company's  2004  Annual
                                        Meeting.
<PAGE>

                                   SIGNATURES


In accordance with the  requirements of the Securities and Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                       CITIZENS FINANCIAL CORPORATION

                                BY:    /s/ Darrell R. Wells
                                       -----------------------------------------
                                       Darrell R. Wells
                                       President and Chief Executive Officer
                                BY:    /s/ Len E. Schweitzer
                                       -----------------------------------------
                                       Len E. Schweitzer
                                       Treasurer and Principal Financial Officer

Date:  August 11, 2004