UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549fc

FORM 10-QSB

(Mark One)

x Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2006

¨ Transition report under Section 13 or l5(d) of the Exchange Act

For the transition period from              to             

Commission file number 000-52111

Seneca-Cayuga Bancorp, Inc.

(Exact name of registrant as specified in its charter)

United States of America	16-1601243
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

19 Cayuga Street, Seneca Falls, NY 13148

(Address of Principal Executive Offices)

(315) 568-5855

(Registrant’s telephone number, including area code)

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

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

State the number of shares outstanding of each class of issuer’s classes of common stock as of the last practicable date:

Class	Outstanding at July 31, 2006
Common Stock, par value $.01	1,072,225

Transitional Small Business Disclosure Format (Check one):    ¨  Yes    x  No

TABLE OF CONTENTS

Part I – Financial Information
Item 1	Financial Statements (unaudited)
	Consolidated Statements of Financial Condition as of June 30, 2006 and December 31, 2005	3
	Consolidated Statements of Operations for the Three Months Ended June 30, 2006 and 2005	4
	Consolidated Statements of Operations for the Six Months Ended June 30, 2006 and 2005	5
	Consolidated Statements of Shareholder’s Equity for the Six Months Ended June 30, 2006 and 2005	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005	7
	Notes to Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Results of Operations and Financial Condition	10
Item 3	Controls and Procedures	18
Part II – Other Information
Item 1	Legal Proceedings	18
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3	Defaults Upon Senior Securities	19
Item 4	Submission of Matters to a Vote of Security Holders	19
Item 5	Other Information	19
Item 6	Exhibits	19
Signatures		19
Index to Exhibits		20

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Seneca-Cayuga Bancorp, Inc.

Consolidated Statements of Financial Condition (Unaudited)

(Dollars in thousands, except per share data)

	June 30, 2006			December 31, 2005
Assets
Cash and due from banks	$	3,131		$	3,023
Interest-bearing deposits in banks		12,865			395
Cash and cash equivalents		15,996			3,418
Securities available for sale		26,046			30,372
Securities held to maturity (fair value 2006 - $24,328 and 2005 - $26,817)		25,339			27,311
Loans held for sale		—			66
Loans receivable, net of allowance for loan losses (2006 - $407 and 2005 - $371)		81,978			79,205
Federal Home Loan Bank of New York stock, at cost		1,422			1,490
Premises and equipment, net		4,542			4,691
Bank-owned life insurance		2,164			2,128
Prepaid pension expense		1,176			1,162
Intangible assets, net and goodwill		423			435
Accrued interest receivable		662			634
Other assets		1,634			1,038
Total assets	$	161,382		$	151,950
Liabilities and Shareholder’s Equity
Liabilities
Non-interest bearing deposits	$	8,224		$	8,203
Interest-bearing deposits		107,194			104,712
Total deposits		115,418			112,915
Short-term borrowings		4,000			8,750
Long-term debt		18,906			18,478
Advances from borrowers for taxes and insurance		658			585
Official checks		834			779
Other liabilities		11,516			331
Total liabilities		151,332			141,838
Commitments and contingencies
Shareholder’s Equity
Preferred stock, $.01 par value, 1,000,000 shares authorized, zero shares issued and outstanding		—			—
Common stock, $.01 par value, 9,000,000 shares authorized, 1,000 shares issued and outstanding		—			—
Additional paid-in-capital		80			80
Retained earnings		10,526			10,523
Accumulated other comprehensive loss		(556	)		(491	)
Total shareholder’s equity		10,050			10,112
Total liabilities and shareholder’s equity	$	161,382		$	151,950

See accompanying notes to unaudited consolidated financial statements.

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Seneca-Cayuga Bancorp, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands)

	For the three months ended June 30,
	2006			2005
Interest and dividend income:
Loans, including fees	$	1,269		$	1,097
Debt securities:
Mortgage-backed		516			618
Taxable		25			16
Tax-exempt		2			4
Other		83			36
Total interest and dividend income		1,895			1,771
Interest expense:
Deposits		738			655
Short-term borrowings		47			23
Long-term debt		173			152
Total interest expense		958			830
Net interest income		937			941
Provision for loan losses		25			22
Net interest income after provision for loan losses		912			919
Non-interest income:
Banking fees and service charges		254			239
Insurance commissions		165			176
Mortgage banking income, net		25			37
Other		29			11
Total non-interest income		473			463
Non-interest expense:
Compensation and benefits		769			758
Occupancy and equipment expenses		252			251
Service charges		101			87
Professional fees		70			46
Advertising		93			103
Directors fees		32			32
Supplies		19			15
Telephone and postage		36			39
Amortization of intangible assets		6			8
Other		35			56
Total non-interest expense		1,413			1,395
Loss before income taxes (benefit)		(28	)		(13	)
Income tax benefit		(15	)		(9	)
Net loss	$	(13	)	$	(4	)

See accompanying notes to unaudited consolidated financial statements.

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Seneca-Cayuga Bancorp, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands)

	For the six months ended June 30,
	2006			2005
Interest and dividend income:
Loans, including fees	$	2,517		$	2,189
Debt securities:
Mortgage-backed		1,042			1,245
Taxable		51			42
Tax-exempt		5			8
Other		126			62
Total interest and dividend income		3,741			3,546
Interest expense:
Deposits		1,445			1,262
Short-term borrowings		123			54
Long-term debt		336			307
Total interest expense		1,904			1,623
Net interest income		1,837			1,923
Provision for loan losses		50			50
Net interest income after provision for loan losses		1,787			1,873
Non-interest income:
Banking fees and service charges		501			447
Insurance commissions		379			447
Mortgage banking income, net		43			73
Gain on sale of securities available for sale		51			—
Other		51			28
Total non-interest income		1,025			995
Non-interest expense:
Compensation and benefits		1,515			1,518
Occupancy and equipment expenses		504			509
Service charges		199			166
Professional fees		128			107
Advertising		186			214
Directors fees		63			65
Supplies		38			31
Telephone and postage		85			68
Amortization of intangible assets		12			16
Other		88			131
Total non-interest expense		2,818			2,825
(Loss) income before income taxes (benefit)		(6	)		43
Income tax (benefit) expense		(9	)		7
Net income	$	3		$	36

See accompanying notes to unaudited consolidated financial statements.

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Seneca-Cayuga Bancorp, Inc.

Consolidated Statements of Shareholder’s Equity (Unaudited)

For Six Months Ended June 30, 2006 and 2005

(In thousands)

	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Total Shareholder’s Equity
Balance, January 1, 2005	$	—	$	80	$	10,450	$	(26	)	$	10,504
Comprehensive loss:
Net income		—		—		36		—			36
Unrealized holding losses (net of $56 tax benefit)		—		—		—		(88	)		(88	)
Total comprehensive loss											(50	)
Balance, June 30, 2005	$	—	$	80	$	10,486	$	(114	)	$	10,452
Balance, January 1, 2006	$	—	$	80	$	10,523	$	(491	)	$	10,112
Comprehensive loss:
Net income		—		—		3		—			3
Unrealized holding losses (net of $41 tax benefit)		—		—		—		(65	)		(65	)
Total comprehensive loss											(62	)
Balance, June 30, 2006	$	—	$	80	$	10,526	$	(556	)	$	10,050

See accompanying notes to unaudited consolidated financial statements.

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Seneca-Cayuga Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	For six months ended June 30,
	2006			2005
Cash flows from operating activities:
Net income	$	3		$	36
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of premiums, net of accretion of discounts		7			8
Gains on sale of securities		(51	)		—
Loans originated for sale		(3,369	)		(2,523	)
Proceeds from sale of loans		3,428			2,550
Losses (gains) on sale of loans		8			(26	)
Provision for loan losses		50			50
Depreciation and amortization		230			253
Net gains on sale of foreclosed property and assets		(18	)		(8	)
Income from bank-owned life insurance		(36	)		(27	)
Increase in prepaid pension expense		(14	)		(243	)
Amortization of intangible assets		12			16
Increase in accrued interest receivable		(28	)		(32	)
Increase in other assets		(556	)		(75	)
Increase in official checks and other liabilities		165			438
Net cash (used for) provided by operating activities		(169	)		417
Cash flows from investing activities:
Principal repayments on mortgage-backed securities held-to-maturity		1,926			1,820
Proceeds from sale of securities available for sale		1,061			—
Maturities and calls of securities held-to-maturity		44			795
Principal repayments on mortgage-backed securities available for sale		3,240			3,716
Purchases of securities held-to-maturity		—			(2,553	)
Purchases of securities available for sale		(35	)		(18	)
Net increase in loans		(2,866	)		(2,023	)
Purchases of Federal Home Loan Bank stock		(590	)		(215	)
Proceeds from sale of Federal Home Loan Bank stock		658			505
Capitalized additions to foreclosed property		(7	)		—
Sale of foreclosed assets		68			78
Purchases of premises and equipment		(81	)		(66	)
Net cash provided by investing activities		3,418			2,039
Cash flows from financing activities:
Increase in deposits		2,503			2,967
Net decrease in short-term borrowings		(4,750	)		(4,150	)
Proceeds from long-term debt		4,000			—
Repayment of long-term debt		(3,572	)		(1,242	)
Increase in advance payments by borrowers for taxes and insurance		73			65
Stock subscriptions received		11,075			—
Net cash provided by (used for) financing activities		9,329			(2,360	)
Net change in cash and cash equivalents		12,578			96
Cash and cash equivalents at beginning of period		3,418			3,135
Cash and cash equivalents at end of period	$	15,996		$	3,231
Supplementary information:
Interest paid	$	1,893		$	1,681
Income taxes paid		—			17
Net loans transferred to foreclosed real estate		43			163

See accompanying notes to unaudited consolidated financial statements.

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Seneca-Cayuga Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Seneca-Cayuga Bancorp, Inc. and its wholly owned subsidiary (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and the instructions for Form 10-QSB. Accordingly, they do not include all of the information and footnotes necessary for a complete presentation of consolidated financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included.

The unaudited consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the years ended December 31, 2005 and 2004, included in its Registration Statement on Form SB-2 dated May 15, 2006.

In July 2006, the Company completed its stock offering, issuing 2,380,500 shares of common stock and selling 45% of the shares issued to the public. See footnote 4 “Stock Issuance Plan” for further discussion.

Operating results for the three and six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.

The consolidated financial statements at June 30, 2006 and for the three and six months ended June 30, 2006 and 2005 include the accounts of the Company, Seneca Falls Savings Bank (the “Bank”) and the Bank’s wholly-owned subsidiary, Seneca-Cayuga Personal Services, LLC. All intercompany balances and transactions have been eliminated in consolidation.

2. Pension Benefits

The composition of net periodic benefit plan cost for the three and six months ended June 30 is as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2006			2005			2006			2005
	(in thousands)
Service cost	$	39		$	32		$	78		$	64
Interest cost		44			41			88			82
Expected return on assets		(74	)		(63	)		(148	)		(126	)
Amortization of unrecognized loss		12			12			24			24
Amortization of past service liability		2			2			4			4
Net periodic pension expense	$	23		$	24		$	46		$	48

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2005, that it expected to contribute $67,000 to its pension plan in 2006. The contribution is expected to be increased to $292,000 in order to reduce the estimated unfunded current liability as of September 30, 2006 to zero. As of June 30, 2006, $60,000 had been contributed to the pension plan.

3. Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the statement of financial condition, such items, along with net income, are components of comprehensive income (loss).

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Seneca-Cayuga Bancorp, Inc.

Notes to Unaudited Consolidated Financial Statements

The components of other comprehensive income (loss) and related tax effects for the three and six months ended June 30 are as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2006			2005			2006			2005
	(in thousands)
Gross change in unrealized losses on securities available for sale	$	(59	)	$	21		$	(55	)	$	(144	)
Reclassification adjustment for gains included in net income		—			—			(51	)		—
		(59	)		21			(106	)		(144	)
Tax expense (benefit)		23			(9	)		41			(56	)
Other comprehensive (loss) income	$	(36	)	$	12		$	(65	)	$	(88	)

4. Stock Issuance Plan

In July 2006, the Company completed its stock offering of 45% of the aggregate total voting stock of the Company pursuant to the laws of the United States of America and the rules and regulations of the Office of Thrift Supervision (“OTS”) issuing 2,380,500 shares of common stock, of which 1,071,225 shares were sold at $10 per share raising net proceeds of $10.0 million. The stock was offered to eligible account holders, tax-qualified employee plans and to the public. After the offering, 55% of the Company’s outstanding common stock, or 1,309,275 shares, is owned by The Seneca Falls Savings Bank, MHC. The offering closed on July 10, 2006. The stock subscription rights are included other liabilities at June 30, 2006.

Costs of $727,000 associated with the Stock Offering were deducted from the proceeds from the sale of stock.

5. New Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS 155”). SFAS 155 amends FASB Statement No. 133 and FASB Statement No. 140, and improves the financial reporting of certain hybrid financial instruments by requiring more consistent accounting that eliminates exemptions and provides a means to simplify the accounting for these instruments. Specifically, SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. The Company is required to adopt the provisions of SFAS 155, as applicable, beginning in 2007. Management does not believe the adoption of SFAS 155 will have a material impact on the Company’s consolidated financial position and results of operations.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets -An Amendment of FASB Statement No. 140” (“SFAS 156”). SFAS 156 requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. The statement permits, but does not require, the subsequent measurement of servicing assets and servicing liabilities at fair value. SFAS 156 is effective for the Company beginning in 2007. Management does not believe that the adoption of SFAS 156 will have a significant effect on its consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that companies recognize in their financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective for years beginning after December 15, 2006, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. Management does not believe that the adoption of FIN 48 will have a significant effect on its consolidated financial statements.

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Seneca-Cayuga Bancorp, Inc.

Item 2 – Management’s Discussion and Analysis of Results of Operations and Financial Condition

General

Throughout the Management’s Discussion and Analysis (“MD&A”) the term, “the Company”, refers to the consolidated entity of Seneca-Cayuga Bancorp, Inc. (“Holding Company”), Seneca Falls Savings Bank and Seneca-Cayuga Personal Services, LLC. Seneca-Cayuga Personal Services, LLC is a wholly owned subsidiary of Seneca Falls Savings Bank. At June 30, 2006, The Seneca Falls Savings Bank, MHC, the Company’s mutual holding company parent, whose activities are not included in the MD&A, held 100% of the Company’s common stock.

Forward-Looking Statements

This Quarterly Report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties, including, among other things, changes in economic conditions including real estate values in the Company’s market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans in the Company’s market areas and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company wishes to advise readers that the factors listed above could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not undertake, and specifically declines any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Critical Accounting Policies

The most significant accounting policies followed by the Company are presented in Note 2 to the consolidated financial statements (“the Consolidated Financial Statements”) included in the Holding Company’s Prospectus filed pursuant to Rule 424(b) on May 26, 2006. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the consolidated financial statements and how those values are determined. We have identified the accounting of our allowance for loan losses as our critical accounting policy.

Our allowance for loan losses is the amount estimated by management as necessary to cover credit losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses which is charged against income. In determining the allowance for loan losses, management makes significant estimates. The methodology for determining the allowance for loan losses is considered a critical accounting policy by management due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses.

As a substantial amount of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans and discounted cash flow valuations of properties are critical in determining the amount of the allowance required for specific loans. Assumptions for appraisals and discounted cash flow valuations are instrumental in determining the value of properties. Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property securing a loan and the related allowance determined. The assumptions supporting such appraisals and discounted cash flow valuations are carefully reviewed by management to determine that the resulting values reasonably reflect amounts realizable on the related loans.

Management performs a quarterly evaluation of the adequacy of the allowance for loan losses. We consider a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates by management that may be susceptible to significant change based on changes in economic and real estate market conditions.

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Seneca-Cayuga Bancorp, Inc.

The evaluation has a specific and general component. The specific component relates to loans that are delinquent or otherwise identified as a problem loan through the application of our loan review process and our loan grading system. All such loans are evaluated individually, with principal consideration given to the value of the collateral securing the loan. Specific allowances are established as required by this analysis. The general component is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general component of the allowance for loan losses.

Actual loan losses may be significantly more than the allowances we have established which could have a material negative effect on our financial results.

Overview

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets, consisting primarily of loans, investment securities (including mortgage-backed and other securities) and other interest-earning assets primarily cash and interest bearing deposits, and the interest paid on our interest-bearing liabilities, consisting primarily of savings accounts, money market accounts, transaction accounts, certificates of deposit, long- and short-term borrowings and Federal Home Loan Bank advances. Our results of operations also are affected by our provisions for loan losses, noninterest income and noninterest expense. Noninterest income currently consists primarily of deposit account fees, insurance agency commissions, dividends on mutual funds, increases in cash value-insurance, gains and losses on the sale of securities and miscellaneous other income. Noninterest expense currently consists primarily of compensation and employee benefits, occupancy and equipment expenses, advertising and marketing, service charges, professional fees, directors’ fees, supplies, and other operating expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

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Seneca-Cayuga Bancorp, Inc.

Analysis of Net Interest Income

The following tables set forth average balance sheets, average yields and costs, and certain other information at the date and for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income.

	For the Three Months Ended June 30,
	2006							2005
	Average Balance		Interest			Yield/ Cost		Average Balance		Interest			Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	81,155	$	1,269		6.25	%	$	69,603	$	1,097		6.30	%
Mortgage-backed securities		46,609		516		4.43	%		59,196		618		4.18	%
Other interest-earning assets		9,498		110		4.63	%		8,306		56		2.70	%
Total interest-earning assets		137,262		1,895		5.52	%		137,105		1,771		5.17	%
Noninterest-earning assets		15,048							12,197
Total assets	$	152,310						$	149,302
Liabilities and equity:
Interest bearing liabilities:
Interest-bearing demand deposits and escrow	$	7,175	$	11		.61	%	$	5,148	$	9		.70	%
Money market accounts		7,399		35		1.89	%		8,327		27		1.30	%
Savings accounts		50,510		269		2.13	%		54,441		293		2.15	%
Certificates of deposit		42,668		423		3.97	%		38,894		326		3.35	%
Total interest-bearing deposits		107,752		738		2.74	%		106,810		655		2.45	%
Borrowings		23,367		220		3.77	%		22,630		175		3.09	%
Total interest-bearing liabilities		131,119		958		2.92	%		129,440		830		2.56	%
Other noninterest-bearing liabilities		11,140							9,341
Total liabilities		142,259							138,781
Equity		10,051							10,521
Total liabilities and equity	$	152,310						$	149,302
Net interest income			$	937						$	941
Interest rate spread						2.60	%						2.60	%
Net interest-earning assets	$	6,143						$	7,665
Net interest margin						2.73	%						2.75	%
Average interest-earning assets to average interest-bearing liabilities				104.69	%						105.92	%

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Seneca-Cayuga Bancorp, Inc.

	For the Six Months Ended June 30,
	2006							2005
	Average Balance		Interest			Yield/ Cost		Average Balance		Interest			Yield/ Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	80,528	$	2,517		6.25	%	$	69,091	$	2,189		6.34	%
Mortgage-backed securities		47,881		1,042		4.35	%		59,665		1,245		4.17	%
Other interest-earning assets		8,802		182		4.14	%		8,619		112		2.60	%
Total interest-earning assets		137,211		3,741		5.45	%		137,375		3,546		5.16	%
Noninterest-earning assets		14,471							12,122
Total assets	$	151,682						$	149,497
Liabilities and equity:
Interest bearing liabilities:
Interest-bearing demand deposits and escrow	$	6,764	$	19		.56	%	$	4,735	$	16		.68	%
Money market accounts		7,558		68		1.80	%		8,605		53		1.23	%
Savings accounts		50,459		533		2.11	%		52,586		539		2.05	%
Certificates of deposit		42,214		825		3.91	%		39,908		654		3.28	%
Total interest-bearing deposits		106,995		1,445		2.70	%		105,834		1,262		2.38	%
Borrowings		24,502		459		3.75	%		24,038		361		3.00	%
Total interest-bearing liabilities		131,497		1,904		2.90	%		129,872		1,623		2.50	%
Other noninterest-bearing liabilities		10,074							9,040
Total liabilities		141,571							138,912
Equity		10,111							10,585
Total liabilities and equity	$	151,682						$	149,497
Net interest income			$	1,837						$	1,923
Interest rate spread						2.55	%						2.66	%
Net interest-earning assets	$	5,714						$	7,503
Net interest margin						2.68	%						2.80	%
Average interest-earning assets to average interest-bearing liabilities				104.35	%						105.78	%

Results of Operations for the Three Months Ended June 30, 2006 and 2005

General. Net loss increased $9,000, or 225.0%, to $13,000 for the three months ended June 30, 2006 compared to $4,000 for the same period in the prior year. The increase was attributable to a $4,000 decrease in net interest income, a $3,000 increase in the provision for loan losses and an $18,000 increase in non-interest expense, offset partially by a $10,000 increase in non-interest income and to a $6,000 increase in our income tax benefit.

Net Interest Income. Net interest income decreased $4,000, or 0.4%, to $937,000 for the three months ended June 30, 2006 from $941,000 for the three months ended June 30, 2005 due to a slight decline in margin because the cost of interest-bearing liabilities increased 36 basis points while the yield on interest-earning assets increased 35 basis points.

Interest Income. Interest income increased $124,000 or 7.0%, and was $1.9 million for the three months ended June 30, 2006 as compared to $1.8 million for the three months ended June 30, 2005. The average interest-earning assets increased $157,000, or 0.1%, to $137.3 million at June 30, 2006 from $137.1 million at June 30, 2005. The increase in interest income resulted primarily from an increase of $172,000, or 15.7%, in interest and fee income from loans due to a higher level of average loans driven by higher volumes of mortgage and other consumer loan originations and $54,000, or 96.4%, in other interest-earning assets, offset partially by a decrease of $102,000, or 16.5%, in interest earned from mortgage-backed securities because payments received from mortgage-backed securities were used to reduce borrowings. Other interest-earning assets include proceeds from the Holding Company’s stock offering, which were invested in short-term cash deposits. The yield earned on interest-earning

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Seneca-Cayuga Bancorp, Inc.

assets increased 35 basis points, or 6.8%, to 5.52% for the three months ended June 30, 2006 from 5.17% for the three months ended June 30, 2005, reflecting the modest movement in long-term rates despite significant increases in short-term rates over the last year.

Interest Expense. Interest expense increased $128,000, or 15.4%, to $958,000 for the three months ended June 30, 2006 from $830,000 for the three months ended June 30, 2005. The increase in interest expense resulted from an increase of $1.7 million, or 1.3%, in the average balance of interest-bearing liabilities to $131.1 million for the three months ended June 30, 2006 from $129.4 million for the three months ended June 30, 2005, and an increase of 36 basis points, or 14.1%, in the average cost of interest-bearing liabilities to 2.92% for the three months ended at June 30, 2006 from 2.56% for the three months ended June 30, 2005. Interest expense increased for money market accounts, certificates of deposits and borrowings, which is the result of a general increase in interest rates for instruments maturing in five years or less. The cost of interest-bearing demand deposits and escrow and savings accounts did not change significantly between the two periods as the rates paid are not as sensitive to changes in the general rate environment.

Provision for Loan Losses. The provision for loan losses was $25,000 for the three months ended June 30, 2006 as compared to $22,000 for the three months ended June 30, 2005. Loans in non-accrual status that were included in loans receivable totaled $356,000 as of June 30, 2006 as compared to $428,000 at December 31, 2005. The allowance for loan losses as of June 30, 2006 and December 31, 2005 represented 0.49% and 0.47% of total loans, respectively.

Non-Interest Income. Non-interest income increased $10,000, or 2.2%, to $473,000 for the three months ended June 30, 2006 from $463,000 for the three months ended June 30, 2005. The increase was primarily the result of a $15,000 increase in bank fees and service charges, driven by higher volumes of account activity, an $8,000 increase in income from bank owned life insurance and new rental income of $7,000, obtained from property purchased for potential future branching, offset partially by a $11,000 decrease in insurance commissions, driven by premium reductions in automobile and home insurance, and a $12,000 decrease in mortgage banking income, which is the result of less gains being recognized on loans sold.

Non-Interest Expense. Non-interest expense increased $18,000, or 1.3%, and was $1.4 million for the three months ended June 30, 2006 and 2005. The increase was the result of an $11,000 increase in compensation and benefits primarily due to an increase in benefits, a $14,000 increase in service charges assessed by correspondent banks and third party items processing and a $24,000 increase in professional fees, which are due to higher costs incurred as a newly registered public company, offset by a $10,000 reduction in advertising and a $21,000 reduction in other operating expenses.

Income Taxes. Income tax benefit increased $6,000, or 115.4%, for the three months ended June 30, 2006 from $9,000 for the three months ended June 30, 2005. The effective tax benefit rate as 53.6% for the three months ended June 30, 2006 as compared to 69.2% for the same period in 2005. The effective tax benefit rate is relatively high in comparison to the statutory federal rate of 34% primarily because the Company’s non-taxable income derived from changes in the cash value of bank-owned life insurance policies is a greater percentage of the loss before income taxes.

Results of Operations for the Six Months Ended June 30, 2006 and 2005

General. Net income decreased $33,000, or 91.7%, to $3,000 for the six months ended June 30, 2006 compared to $36,000 for the same period in the prior year. The decrease was attributable to an $86,000 decrease in net interest income, offset partially by increases in non-interest income and decreases in non-interest expense and income taxes.

Net Interest Income. Net interest income decreased $86,000, or 4.5%, to $1.8 million for the six months ended June 30, 2006 from $1.9 million for the six months ended June 30, 2005. The decrease was attributable to a 40 basis point increase in the cost of interest-bearing liabilities, offset partially by a 29 basis point increase in yields earned on interest-earning assets which was largely due to a flat yield curve environment.

Interest Income. Interest income increased $195,000 or 5.5%, and was $3.7 million for the six months ended June 30, 2006 as compared to $3.5 million for the six months ended June 30, 2005. Our average interest-earning assets

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Seneca-Cayuga Bancorp, Inc.

decreased $164,000, or 0.1%, to $137.2 million at June 30, 2006 from $137.4 million at June 30, 2005. The increase in interest income resulted primarily from an increase of $328,000, or 15.0%, in interest and fee income from loans and $70,000, or 62.5%, in other interest-earning assets, offset partially by a decrease of $203,000, or 16.3%, in interest earned from mortgage-backed securities. Other interest-earning assets include proceeds from the Holding Company’s stock offering, which were invested in short-term cash deposits. The yield earned on interest-earning assets increased 29 basis points, or 5.6%, to 5.45% for the six months ended June 30, 2006 from 5.17% for the six months ended June 30, 2005, reflecting the modest movement in long-term rates despite significant increases in short-term rates over the last year.

Interest Expense. Interest expense increased $281,000, or 17.3%, to $1.9 million for the six months ended June 30, 2006 from $1.6 million for the six months ended June 30, 2005. The increase in interest expense resulted from an increase of $1.6 million, or 1.3%, in the average balance of interest-bearing liabilities to $131.5 million for the six months ended June 30, 2006 from $129.9 million for the six months ended June 30, 2005, and an increase of 40 basis points, or 16.0%, in the average cost of interest-bearing liabilities to 2.90% for the six months ended at June 30, 2006 from 2.50% for the six months ended June 30, 2005. Interest expense increased the most for money market accounts, certificates of deposits and borrowings, which is the result of a general increase in interest rates for instruments maturing in five years or less. The cost of interest-bearing demand deposits and escrow and savings accounts did not change significantly between the two periods as the rates paid are not as sensitive to changes in the general rate environment.

Provision for Loan Losses. The provision for loan losses was $50,000 for the six months ended June 30, 2006 and 2005.

Non-Interest Income. Non-interest income increased $30,000, or 3.0%, to $1.0 million for the six months ended June 30, 2006 from $995,000 for the six months ended June 30, 2005. The increase was primarily the result of a $54,000 increase in bank fees and service charges, driven by higher volumes of account activity, an $11,000 increase in income from bank owned life insurance and new rental income of $13,000, obtained from property purchased for potential future branching, offset partially by a $68,000 decrease in insurance commissions, driven by a reduction in contingent income received and premium reductions in automobile and home insurance, and a $30,000 decrease in mortgage banking income, which is the result of less gains being recognized on loans sold.

Non-Interest Expense. Non-interest expense decreased $7,000, or 0.2%, and was $2.8 million for the six months ended June 30, 2006 and 2005. The decrease was the result of a $28,000 reduction in advertising, a $22,000 decline in fees incurred for collections and to repossess and maintain collateral and a decrease of $28,000 in other non-interest expense, partially offset by a $33,000 increase in service charges assessed by correspondent banks and third party items processing, a $17,000 increase in telephone and postage and a $21,000 increase in professional fees.

Income Taxes. Income taxes decreased $16,000, or 228.6%, to a $9,000 benefit for the six months ended June 30, 2006 from an expense of $7,000 for the six months ended June 30, 2005. The effective tax rate differs from the statutory federal rate of 34% primarily because the Company’s non-taxable income derived from changes in the cash value of bank-owned life insurance policies is a greater percentage of income before tax.

Comparison of Financial Condition at June 30, 2006 and December 31, 2005

Assets. Total assets increased by $9.4 million, or 6.2%, to $161.4 million at June 30, 2006 from $152.0 million at December 31, 2005 primarily due to increases in cash and cash equivalents and loans, offset by decreases in securities. Asset growth was funded by subscription funds from the Holding Company’s stock offering, and to a lesser extent deposit growth.

Cash and cash equivalents. Cash and cash equivalents increased by $12.6 million, or 368.0% to $16.0 million at June 30, 2006 from $3.4 million at December 31, 2005, primarily due to subscription funds from the public offering, which were held in escrow until the shares were issued in July 2006.

Loans Receivable. Loans receivable, including loans held for sale, increased by $2.7 million, or 3.4%, to $82.0 million at June 30, 2006 from $79.3 million at December 31, 2005. The increase in loans receivable was the primarily the result of automobile loan originations and, to a lesser extent, mortgages and other loans to consumers.

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Seneca-Cayuga Bancorp, Inc.

Securities. Securities decreased by $6.3 million, or 10.9%, to $51.4 million at June 30, 2006 from $57.7 million at December 31, 2005. The decrease is primarily attributable to the sale of $1.1 million of a mutual fund investment and principal payments received from our mortgage-backed securities.

Deposits. Deposits increased by $2.5 million, or 2.2%, to $115.4 million at June 30, 2006 from $112.9 million at December 31, 2005. Most of the growth in deposits represented checking accounts and time deposits, offset partially by a decrease in money market accounts.

Other liabilities. Other liabilities increased by $11.2 million to $11.5 million at June 30, 2006 from $331,000 at December 31, 2005. The increase was primarily attributable to the receipt of stock subscriptions totaling $11.1 million.

Borrowings. Borrowings decreased by $4.3 million, or 15.9%, to $22.9 million at June 30, 2006 from $27.2 million at December 31, 2005. Short-term borrowings were repaid primarily from mortgage-backed securities and other principal repayments received during the quarter.

Shareholder’s Equity. Total shareholder’s equity decreased $62,000, or 0.6%, and was $10.1 million at June 30, 2006 and December 31, 2005. The net decrease was a result of net income of $3,000 for the six months ended June 30, 2006 offset by a $65,000 increase in accumulated other comprehensive loss. Subsequent to the end of the quarter, the shareholders’ equity increased by $10.2 million as a result of the completion of the stock offering.

Nonperforming Assets

The table below is a summary of the Company’s non-performing assets at the dates indicated:

	June 30, 2006			December 31, 2005
	(in thousands)
Non-accrual loans:
Real estate mortgages:
One- to-four-family	$	317		$	383
Multi-family		—			—
Non-residential		—			—
Construction		—			—
Commercial		—			—
Home equity		40			39
Consumer		—			6
Total non-accrual loans	$	357		$	428
Foreclosed assets, net		—			1
Total non-performing assets	$	357		$	429
Ratios:
Non-performing loans to total loans		0.43	%		0.54	%
Non-performing loans to total assets		0.22	%		0.28	%
Non-performing assets to total assets		0.22	%		0.28	%

At June 30, 2006, there were no other loans or other assets that were not disclosed in the table, where known information about the possible credit problems of borrowers caused us to have serious doubts as to the ability of the borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans in the future.

Liquidity and Capital Resources

Liquidity management involves the Company’s ability to generate cash or otherwise obtain funds at reasonable rates to support asset growth and reduce assets to meet deposit withdrawals, to maintain reserve requirements, and to

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Seneca-Cayuga Bancorp, Inc.

otherwise operate the Company on an ongoing basis. The Company’s primary sources of funds consist of deposits, scheduled amortization and prepayments of loans and mortgage-backed securities, maturities of investments, interest-bearing deposits at other financial institutions and funds provided from operations. Loan repayments and maturing investment securities are a relatively predictable source of funds. However, deposit flows, calls of investment securities, and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions, and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds.

The Company has an agreement with the Federal Home Loan Bank that allows it to borrow up to $44.3 million. At June 30, 2006, the Company had outstanding advances and amortizing notes totaling $22.9 million. The Company also has a repurchase agreement with a correspondent bank providing an additional $10 million in liquidity, which is secured by the Company’s mortgage-backed securities. There were no advances outstanding under the repurchase agreement at June 30, 2006.

A significant decrease in deposits in the future could result in the Company having to seek other sources of funds for liquidity purposes. Such sources could include, but are not limited to, additional borrowings, trust preferred security offerings, brokered deposits, negotiated time deposits, the sale of “available-for-sale” investment securities, the sale of securitized loans, or the sale of whole loans. Such actions could result in higher interest expense costs and/or losses on the sale of securities or loans.

At June 30, 2006, the Company had loan commitments to borrowers of approximately $2.8 million and unused lines of credit of approximately $4.4 million. For the second quarter ended June 30, 2006, the Company originated loans of $7.0 million, as compared to $6.5 million of loans originated in the first quarter of March 31, 2005. Proceeds from loans sold during the second quarter ended June 30, 2006 were $1.3 million as compared to $2.1 million for the first quarter of March 31, 2005. There were no letters of credit outstanding at June 30, 2006.

Time deposit accounts scheduled to mature within one year were $30.7 million at June 30, 2006. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of these time deposits will remain with the Company. We are committed to maintaining a strong liquidity position; therefore, the Company monitors its liquidity position on a daily basis. The Company anticipates that it will have sufficient funds to meet its current funding commitments. The marginal cost of new funding however, whether from deposits or borrowings from the Federal Home Loan Bank, will be carefully considered as the Company monitors its liquidity needs. Therefore, in order to minimize its costs of funds, the Company may consider additional borrowings from the Federal Home Loan Bank in the future.

In July 2006, the Company completed its stock offering, which was oversubscribed by $2.0 million. Refunds were mailed to investors in July.

At June 30, 2006, the Seneca Falls Savings Bank (“Bank”) exceeded each of the applicable regulatory capital requirements. The Bank’s leverage (Tier 1) capital at June 30, 2006 was $9.4 million, or 6.11% of adjusted assets. In order to be classified as “well-capitalized” by the FDIC, the Bank is required to have Tier 1 capital of $7.7 million, or 5.00% of adjusted assets. To be classified as a well-capitalized bank by the FDIC, the Bank must also have a total risk-based capital ratio of 10.0%. At June 30, 2006, the Bank had a total risk-based capital ratio of 11.49%.

The Holding Company has conducted a stock offering of 45.0% of the aggregate total voting stock of the Holding Company pursuant to the laws of the United States of America and the rules and regulations of the Office of Thrift Supervision (“OTS”). The stock was offered to eligible account holders, tax-qualified employee plans and to the public. After the offering, 55% of the Holding Company’s outstanding common stock will be owned by The Seneca Falls Savings Bank, MHC.

The effective date of our Registration Statement on Form SB-2 filed with the Securities and Exchange Commission (File No. 333-132759) was May 15, 2006. Our offering commenced on May 15, 2006 and closed on July 10, 2006. Keefe, Bruyette & Woods was our marketing agent for the offering.

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Seneca-Cayuga Bancorp, Inc.

The class of securities registered with the Commission was common stock, $0.01 par value. We sold 1,071,225 shares, the “adjusted maximum” approved by the OTS. The net proceeds from the offering were $10.0 million, which is net of $727,000 of costs associated with the Stock Offering.

Item 3 – Controls and Procedures

The Company has adopted disclosure controls and procedures designed to facilitate the Company’s financial reporting. The disclosure controls currently consist of communications between the Chief Executive Officer, Chief Financial Officer and each department head to identify any new transactions, events, trends or contingencies which may be material to the Company’s operations. In addition, the Company’s Chief Executive Officer, Chief Financial Officer, Audit Committee and independent accountants meet on a quarterly basis and discuss the Company’s material accounting policies. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of these disclosure controls as of the end of the period covered by this report and found them to be adequate.

The Company maintains internal control over financial reporting. There have not been any significant changes in such internal control over financial reporting in the last quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

Item 1 – Legal Proceedings

At June 30, 2006, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) On February 27, 2006, the Company’s Board of Directors adopted a Plan of Stock Issuance (the “Plan”). On March 28, 2006 the Company filed a Registration Statement on Form SB-2 with the Securities and Exchange Commission (File No. 333-132759) with respect to the shares to be offered and sold pursuant to the Plan. The Company registered for offer and sale 1,071,225 shares of common stock, par value $0.10 per share, at a sales price of $10.00 per share. The registration statement was declared effective by the Securities and Exchange Commission on May 15, 2006.

Keefe, Bruyette & Woods was engaged to assist in the marketing of the common stock. For its services, Keefe, Bruyette & Woods received a fee of $100,000. In addition, Keefe, Bruyette & Woods was reimbursed for certain expenses, including attorney fees.

The stock offering, which was completed on July 10, 2006, resulted in gross proceeds of $10.7 million through the sale of 1,071,225 shares at a price of $10.00 per share. Expenses related to the offering were approximately $681,000 including the expenses paid to Keefe, Bruyette & Woods. No other underwriting discounts, commissions or finders fees were paid in connection with the offering. Net proceeds of the offering were approximately $10.0 million.

The Company lent approximately $933,000 to the ESOP of the Bank in connection with the stock offering. In addition to the funds used for the ESOP loan, approximately $500,000 of the net proceeds of the offering was retained by the Company, and the remainder of the net proceeds was contributed to the Bank. All of such proceeds have been invested in short-term investments.

(c) There were no issuer purchases of equity securities during the quarter ended March 31, 2006.

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Seneca-Cayuga Bancorp, Inc.

Item 3 – Defaults Upon Senior Securities

Not applicable.

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

Not applicable.

Item 5 – Other Information

Not applicable.

Item 6 – Exhibits

Exhibit No.	Description
14	Code of Ethics
31.1	Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive Officer
31.2	Rule 13a-14(a) / 15d-14(a) Certification of the Chief Financial Officer
32.1	Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer

SIGNATURES

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

Seneca-Cayuga Bancorp, Inc.
Date: August 3, 2006	/s/ Robert E. Kernan, Jr.
	Robert E. Kernan, Jr. President and Chief Executive Officer
Date: August 3, 2006	/s/ Menzo D. Case
	Menzo D. Case Executive Vice President and Chief Financial Officer

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Seneca-Cayuga Bancorp, Inc.

Index to Exhibits

Exhibit No.	Description
14	Code of Ethics
31.1	Rule 13a-14(a) / 15d-14(a) Certification of the Chief Executive Officer
31.2	Rule 13a-14(a) / 15d-14(a) Certification of the Chief Financial Officer
32.1	Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer

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