8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) September 30, 2006

CITIZENS & NORTHERN CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania	0-16084	23-2451943
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
90-92 Main Street, Wellsboro, PA		16901
(Address of Principal Executive Office)		(Zip Code)

Registrant’s telephone number, including area code (570) 724-3411

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	ITEM 2.02. Results of Operations and Financial Condition
	ITEM 9.01. Financial Statements and Exhibits
Signatures
EX-99.1
EX-99.2

ITEM 2.02. Results of Operations and Financial Condition

Citizens & Northern Corporation announced the unaudited, consolidated financial results for Citizens & Northern Corporation and subsidiaries for the three-month and nine-month periods ended September 30, 2006. On October 12, 2006, Citizens & Northern Corporation issued a press release titled “C&N Announces Third Quarter 2006 Unaudited Financial Results,” a copy of which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. Also, Citizens & Northern Corporation’s “Quarterly Report,” a report that includes unaudited financial information, will be mailed to shareholders on or about October 20, 2006. A copy of the Quarterly Report is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.

ITEM 9.01. Financial Statements and Exhibits

(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.

Exhibit 99.1: Press Release issued by Citizens & Northern Corporation dated October 12, 2006, titled “C&N Announces Third Quarter 2006 Unaudited Financial Results.”

Exhibit 99.2: Quarterly Report, which includes unaudited financial information.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned, thereunto duly authorized.

	CITIZENS & NORTHERN CORPORATION
Date: 10/12/06	By:	/s/ Craig G. Litchfield
		Chairman, President and Chief Executive Officer

EX-99.1

Exhibit 99.1

	Contact: Yvonne Gill
October 12, 2006	570-724-0247
	yvonneg@cnbankpa.com

C&N ANNOUNCES THIRD QUARTER 2006 UNAUDITED FINANCIAL RESULTS

FOR IMMEDIATE RELEASE:

     WELLSBORO, PA — Citizens & Northern Corporation announced the unaudited, consolidated financial results for Citizens & Northern Corporation and subsidiaries for the nine-month and three-month periods ended September 30, 2006, which are highlighted below.

FINANCIAL HIGHLIGHTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006:

• Net Income of $9,277,000 for the nine months ended September 30, 2006 was 6.1% lower than net income reported for the first nine months of 2005 of $9,880,000. Net Income Per Share was $1.12 (Basic and Diluted) for the first nine months of 2006, as compared to $1.19 (Basic) and $1.18 (Diluted) for the first nine months of 2005.

• Return on Average Assets was 1.09% for the nine months ended September 30, 2006, as compared to 1.16% for the first nine months of 2005. Return on Average Equity was 9.49% for the nine months ended September 30, 2006, as compared to 9.95% for the nine months ended September 30, 2005.

• Cash Dividends declared by C&N increased 4.4% for the first nine months of 2006 over the same period in 2005, to $0.72 per share.

• Total assets amounted to $1,125,287,000 as of September 30, 2006, down 4.9% from September 30, 2005.

• Net loans increased 4.8%, to $668,348,000 at September 30, 2006 from $637,646,000 at September 30, 2005.

• Total deposits and repo sweep accounts increased 0.2%, to $784,001,000 at September 30, 2006 from $782,813,000 at September 30, 2005.

• Assets under management by C&N’s Trust and Financial Management Group increased 22.1%, to $494,234,000 at September 30, 2006 from $404,899,000 at September 30, 2005. The addition of new employer retirement accounts, as well as appreciation of the stock market, has contributed to growth in Trust and Financial Management volume.

• Tangible Equity/Tangible Assets Ratio was 11.17% at September 30, 2006.

     The net interest margin decreased $1,312,000, or 4.9%, in the nine months ended September 30, 2006 as compared to the same period in 2005. The yield curve has remained flat or inverted throughout most of 2006, limiting opportunities for banks to earn a positive spread from maintaining borrowed funds and holding investment securities. Accordingly, the Corporation has sold securities and repaid borrowings throughout much of 2006. The balance of available-for-sale securities was $80,578,000 lower at September 30, 2006 than one year earlier, and the September 30, 2006 balance of short-term and long-term borrowings was $54,179,000 lower than one year earlier.

     Noninterest expense increased $1,855,000 (8.6%) in the first nine months of 2006 over 2005. Much of the increase in noninterest expense in 2006 has been attributable to operations and start-up costs in new markets, including the First State Bank offices (Canisteo and South Hornell) in New York State, and the Jersey Shore and Old Lycoming Township offices in Pennsylvania.

     The provision for loan losses was $491,000 for the nine months ended September 30, 2006, down from $1,125,000 in the same period of 2005. In 2006, negotiations and workout of a few large, commercial loans were completed, resulting in charge-offs totaling approximately $500,000 less than the estimated allowances that had been previously established.

     Net realized gains from sales of securities amounted to $4,250,000 in the nine months ended September 30, 2006, an increase of $1,862,000 over the first nine months of 2005. Most of the gains realized in 2006 have been from sales of bank stocks.

FINANCIAL HIGHLIGHTS FOR THE THIRD QUARTER 2006:

• Net Income in the third quarter 2006 was $3,258,000, or $29,000 (0.9%) lower than third quarter 2005 net income, but $59,000 (1.8%) higher than the second quarter 2006. Net Income Per Share was $0.40 (Basic) and $0.39 (Diluted) in the third quarters of 2006 and 2005, and $0.39 (Basic and Diluted) in the second quarter 2006. The net interest margin totaled $8,319,000 in the third quarter 2006, down 9.03% from the third quarter 2005, mainly because of the impact of rising short-term interest rates on C&N’s cost of funds. Net securities gains for the third quarter 2006 amounted to $1,602,000, or $1,209,000 over the corresponding amount in the third quarter 2005. The income tax provision in the third quarter 2006 was $1,016,000, or 23.8% of pre-tax income, up from $722,000 or 18.0% of pre-tax income for the third quarter 2005. The higher tax rate in 2006 resulted from management’s decision to reduce the percentage of assets held in tax-exempt securities, in an effort to avoid or minimize payment of alternative minimum tax.

• Cash Dividends declared by C&N amounted to $0.24 per share for the third quarter 2006, the same as in the second quarter 2006 and up from $0.23 per share for the third quarter 2005.

     Citizens & Northern Corporation is the parent company of Citizens & Northern Bank and First State Bank. Citizens & Northern Bank is a local, independent community bank providing complete financial, investment and insurance services through 21 full service offices throughout Tioga, Bradford, Sullivan and Lycoming counties in Pennsylvania. First State Bank provides banking services through its offices in Canisteo and South Hornell, NY. C&N can be found on the worldwide web at www.cnbankpa.com. First State Bank can be found on the web at www.fsbcanisteo.com. The Company’s stock is listed on NASDAQ Capital Market Securities under the symbol CZNC.

EX-99.2

EXHIBIT 99.2

90-92 Main Street, P.O. Box 58
Wellsboro, PA 16901
Phone: (570) 724-3411 Fax: (570) 723-8097
E-Mail: cnemail@cnbankpa.com Web Page: http://www.cnbankpa.com
Stock Symbol: CZNC

Chartered 1864 FEDERAL DEPOSIT INSURANCE CORP

September 30, 2006 QUARTERLY REPORT

Dear Shareholder:

Fortunately, the increases in the Fed Funds rate have not continued through the third quarter. This is good news for your company, which has had its costs of funds increase substantially over the past two years. The interest rate curve continues to be flat or slightly inverted providing little opportunity to leverage our capital position with additions to our fixed income securities portfolio.

The operating results for the third quarter are a combination continued successes and diminishing interest rate spread and margin. Since 2005, net loans have grown 4.81% and we have reduced available-for-sale securities by nearly 18%. The loan increase is mostly responsible for the 6.25% ($2.8 million] increase in interest and dividend income. Deposits have not increased significantly and we have reduced borrowings by $54 million. Yet interest expense increased 22.3% [$4.1 million]. The result is a 4.9% [$1.3 million] reduction in the interest margin. We have been able to reduce our provision for loan losses due to the reconciliation of some larger problem credits and improved credit quality. Other income is growing and we were able to supplement operating income with some gains from our equity portfolios.

The Trust and Financial Management Group have increased assets-under-management by 22% to nearly a half a billion dollars. Increased income from that department is responsible for a significant portion of the increase in other income.

First State Bank celebrated a reopening of the expanded South Hornell office on October 4^th. The branch was expanded to house a fulltime consumer lender. We believe this move will help grow both loans and deposits for First State.

Craig G. Litchfield
Chairman, President & CEO
 

CITIZENS & NORTHERN CORPORATION
BOARD OF DIRECTORS

Craig G. Litchfield   Chairman of the Board

Dennis F. Beardslee	Leo F. Lambert
R. Robert DeCamp	Edward L. Learn
Jan E. Fisher	Edward H. Owlett, III
R. Bruce Haner	Leonard Simpson
Susan E. Hartley	James E. Towner
Karl W. Kroeck	Ann M. Tyler

CITIZENS & NORTHERN BANK
OFFICES

428 S. Main Street, ATHENS, PA 18810	570-888-2291
111 Main Street, DUSHORE, PA 18614	570-928-8124
Main Street, EAST SMITHFIELD, PA 18817	570-596-3131
104 Main Street, ELKLAND, PA 16920	814-258-5111
230-232 Railroad Street, JERSEY SHORE, PA 17740	570-398-4555
102 E. Main Street, KNOXVILLE, PA 16928	814-326-4151
Main Street, LAPORTE, PA 18626	570-946-4011
Main Street, LIBERTY, PA 16930	570-324-2331
1085 S. Main Street, MANSFIELD, PA 16933	570-662-1111
RR 2 Box 3036, MONROETON, PA 18832	570-265-2157
3461 Rte.405 Highway, MUNCY, PA 17756	570-546-6666
Thompson Street, RALSTON, PA 17763	570-995-5421
1827 Elmira Street, SAYRE, PA 18840	570-888-2220
2 E. Mountain Ave., SO. WILLIAMSPORT, PA 17702	570-601-3016
41 Main Street, TIOGA, PA 16946	570-835-5236
428 Main Street, TOWANDA, PA18848	570-265-6171
Court House Square, TROY, PA 16947	570-297-2159
90-92 Main Street, WELLSBORO, PA 16901	570-724-3411
130 Court Street, WILLIAMSPORT, PA 17701	570-320-0100
1510 Dewey Ave., WILLIAMSPORT, PA 17702	570-323-9305
Route 6, WYSOX, PA 18854	570-265-9148

TRUST & FINANCIAL MANAGEMENT GROUP

90-92 Main Street, Wellsboro, PA 16901	800-487-8784
428 Main Street, Towanda, PA 18848	888-987-8784
503 N. Elmira Street, Sayre, PA 18840	888-760-8192
3461 Rte 405 Highway, Muncy, PA 17756	570-546-6666
130 Court Street, Williamsport, PA 17701	570-601-6000
ACCOUNT SERVICES - 90-92 Main St., Wellsboro, PA 16901	800-726-2265
BANKCARD SERVICES - 10 Nichols St., Wellsboro PA 16901	800-676-6639
CASH MANAGEMENT / INTERNET BANKING — 10 Nichols St., Wellsboro, PA 16901	570-724-0266
www.cnbankpa.com
FUNDS MANAGEMENT — 10 Nichols St., Wellsboro, PA 16901	800-577-9397
www.fmt@cnbankpa.com
C&N FINANCIAL SERVICES CORPORATION — 90-92 Main Street, Wellsboro, PA	866-ASK-CNFS
www.cnfinancialservices.com

CANISTEO VALLEY CORPORATION

3 Main Street, Canisteo, NY 14823 607-698-4295

FIRST STATE BANK
OFFICES

3 Main Street, CANISTEO, NY 14823	607-698-4295
6250 County Route 64, HORNELL, NY 14843	607-324-4081
www.fsbcanisteo.com

CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Data) (Unaudited)

	3 MONTHS ENDED				9 MONTHS ENDED
	SEPT				SEPT
	2006		2005		2006		2005
	(Current)		(Prior Yr)		(Current)		(Prior Yr)
Interest and Dividend Income	$	16,152	$	15,571	$	47,999	$	45,172
Interest Expense		7,833		6,426		22,677		18,538
Interest Margin		8,319		9,145		25,322		26,634
Provision for Loan Losses		191		375		491		1,125
Interest Margin After Provision for Loan Losses		8,128		8,770		24,831		25,509
Other Income		2,184		2,149		5,910		5,741
Realized Gains on Securities, Net		1,602		393		4,250		2,388
Other Expenses		7,640		7,303		23,459		21,604
Income Before Income Tax Provision		4,274		4,009		11,532		12,034
Income Tax Provision		1,016		722		2,255		2,154
NET INCOME	$	3,258	$	3,287	$	9,277	$	9,880
PER SHARE DATA (**):
Net Income — Basic	$	0.40	$	0.40	$	1.12	$	1.19
Net Income — Diluted	$	0.39	$	0.39	$	1.12	$	1.18
Dividend Per Share	$	0.24	$	0.23	$	0.72	$	0.69
Number Shares Used in Computation — Basic		8,240,036		8,297,519		8,272,449		8,288,502
Number Shares Used in Computation — Diluted		8,261,940		8,365,924		8,299,886		8,353,004

CONSOLIDATED BALANCE SHEET
(In Thousands, Except Per Share Data) (Unaudited)

	SEPT. 30,		SEPT. 30,
	2006		2005
ASSETS
Cash & Due from Banks	$	21,373	$	31,833
Available-for-Sale Securities		368,481		449,059
Loans, Net		668,348		637,646
Intangible Assets		3,287		3,470
Other Assets		63,798		61,591
TOTAL ASSETS	$	1,125,287	$	1,183,599
LIABILITIES
Deposits	$	756,372	$	753,008
Repo Sweep Accounts		27,629		29,805
Total Deposits and Repo Sweeps		784,001		782,813
Borrowed Funds		204,320		258,499
Other Liabilities		7,235		10,819
TOTAL LIABILITIES		995,556		1,052,131
SHAREHOLDERS’ EQUITY
Shareholders’ Equity, Excluding Net Unrealized Gains/Losses on Available-for sale Securities		128,431		125,958
Net Unrealized Gains/Losses on Available- for-sale Securities (*)		1,300		5,510
TOTAL SHAREHOLDERS’ EQUITY		129,731		131,468
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	1,125,287	$	1,183,599

CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data)
(Unaudited)

	9 MONTHS ENDED						%
	SEPT.						INCREASE
	2006			2005			(DECREASE)
EARNINGS PERFORMANCE
Net Income	$	9,277		$	9,880			-6.10	%
Return on Average Assets		1.09	%		1.16	%		-6.03	%
Return on Average Assets, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***)		1.09	%		1.17	%		-6.84	%
Return on Average Equity		9.49	%		9.95	%		-4.62	%
Return on Average Equity, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***)		9.66	%		10.62	%		-9.04	%
BALANCE SHEET HIGHLIGHTS
Total Assets	$	1,125,287		$	1,183,599			-4.93	%
Available-for-Sale Securities		368,481			449,059			-17.94	%
Loans (Net)		668,348			637,646			4.81	%
Allowance for Loan Losses		8,095			7,643			5.91	%
Deposits and Repo Sweep Accounts		784,001			782,813			0.15	%
Trust Assets Under Management		494,234			404,899			22.06	%
SHAREHOLDERS’ VALUE (PER SHARE) (**)
Net Income — Basic	$	1.12		$	1.19			-5.88	%
Net Income — Diluted	$	1.12		$	1.18			-5.08	%
Dividends	$	0.72		$	0.69			4.35	%
Book Value	$	15.80		$	15.83			-0.19	%
Book Value, Excluding Unrealized Gains/Losses on Available-for- sale Securities (***)	$	15.65		$	15.17			3.16	%
Market Value (Last Trade)	$	22.43		$	26.70			-15.99	%
Market Value / Book Value		141.96	%		168.67	%		-15.84	%
Market Value / Book Value, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***)		143.32	%		176.01	%		-18.57	%
Price Earnings Multiple		15.02			16.83			-10.75	%
Dividend Yield		4.28	%		3.45	%		24.06	%
SAFETY AND SOUNDNESS
Tangible Equity / Tangible Assets, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***)		11.17	%		10.45	%		6.89	%
Nonperforming Assets / Total Assets		0.77	%		0.63	%		22.22	%
Allowance for Loan Losses / Total Loans		1.20	%		1.18	%		1.69	%
Risk Based Capital Ratio		18.22	%		17.44	%		4.47	%
AVERAGE BALANCES
Average Assets	$	1,137,968		$	1,136,432			0.14	%
Average Assets, Excluding Unrealized Gains/Losses on Available-for-sale Securities		1,134,580			1,123,609			0.98	%
Average Equity		130,279			132,356			-1.57	%
Average Equity, Excluding Unrealized Gains/Losses on Available-for-sale Securities		128,035			124,090			3.18	%

(*)	Net unrealized gains/losses on available-for-sale securities are presented as “Accumulated Other Comprehensive Income” in the annual and quarterly financial statements filed with the Securities and Exchange Commission.
(**)	For purposes of per share calculations, the market value and number of outstanding shares have been retroactively adjusted for the effects of 1% stock dividends issued in January of each year presented.
(***)	Generally accepted accounting principles (“GAAP”) require that available-for-sale securities be reported at fair value, with unrealized gains and losses excluded from earnings and reported separately through shareholders’ equity, net of tax. Management believes there is an inherent mismatch between the income statement and balance sheet related to unrealized gains/losses that may create a material inconsistency in the calculation of earnings-based ratios. Further, the amount of unrealized gains or losses may vary widely from period-to-period, depending on the financial markets as a whole and interest rate movements. Therefore, management has provided these “non-GAAP” ratios because we believe they provide meaningful information for evaluating the Corporation’s financial position and results of operations.