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) December 31, 2006

CITIZENS & NORTHERN CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania	0-16084	23-2451943
(State or other jurisdiction of	(Commission	(I.R.S. Employer
incorporation)	File Number)	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)

TABLE OF CONTENTS

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 annual periods ended December 31, 2006. On January 12, 2007, Citizens & Northern Corporation issued a press release titled “C&N Announces Fourth 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 January 22, 2007. 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 January 12, 2007, titled “C&N Announces Fourth 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: 1/12/07	By:	/s/ Craig G. Litchfield Chairman, President and Chief Executive Officer

EX-99.1

Exhibit 99.1

	Contact: Yvonne Gill
January 12, 2007	570-724-0247
	yvonneg@cnbankpa.com

C&N ANNOUNCES FOURTH 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 annual and three-month periods ended December 31, 2006, which are highlighted below.

FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2006:

• Net Income totaled $11,986,000 in 2006, which was 7.7% lower than Net Income reported in 2005 of $12,984,000. Net Income Per Share was $1.44 (Basic) and $1.43 (Diluted) in 2006, as compared to $1.55 (Basic) and $1.54 (Diluted) in 2005.

• Return on Average Assets was 1.06% for 2006, as compared to 1.13% for 2005. Return on Average Equity was 9.18% for 2006, as compared to 9.80% for 2005.

• Cash Dividends declared by C&N increased 3.2% in 2006 over 2005, to $0.96 per share.

• Total assets amounted to $1,127,368,000 as of December 31, 2006, down 3.1% from December 31, 2005.

• Net loans increased 5.3%, to $679,300,000 at December 31, 2006 from $644,938,000 at December 31, 2005.

• Total deposits and repo sweep accounts increased 0.6%, to $789,607,000 at December 31, 2006 from $784,799,000 at December 31, 2005.

• Assets under management by C&N’s Trust and Financial Management Group increased 23.8%, to $517,775,000 at December 31, 2006 from $418,259,000 at December 31, 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 11.27% at December 31, 2006.

     The net interest margin decreased $1,733,000, or 4.9%, in 2006 as compared to 2005. The yield curve was flat or inverted throughout 2006, causing interest rates paid on liabilities (mainly deposits and borrowings) to increase more than the rates of interest earned on loans and investment securities. Further, the flat or inverted yield curve resulted in limited opportunities to earn a positive spread from maintaining borrowed funds and holding investment securities. Accordingly, C&N sold securities and repaid borrowings throughout much of 2006. The balance of available-for-sale securities was $70,633,000 lower at December 31, 2006 than one year earlier, and the December 31, 2006 balance of short-term and long-term borrowings was $40,023,000 lower than one year earlier.

     Noninterest expense increased $2,652,000 (9.2%) in 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.

     Gains related to sales of credit card loans totaled $340,000 in 2006 and $1,906,000 in 2005. In the fourth quarter 2005, C&N sold the Citizens & Northern Bank credit card receivables, and recorded a gain of $1,906,000. After the sale, C&N continued to provide servicing of credit cards for a portion of 2006, and was subject to possible losses associated with credit card receivables sold with recourse. In the fourth quarter 2006, the C&N recorded an additional gain of $325,000 for the difference between the initial estimates of post-sale servicing expenses and recourse losses, and the actual amounts incurred. Also in 2006, C&N sold First State Bank’s credit card portfolio for a gain of $15,000.

     Net realized gains from sales of securities amounted to $5,046,000 in 2006, an increase of $3,244,000 over 2005. Most of the gains realized in 2006 have been from sales of bank stocks. Also, in the fourth quarter 2005, C&N had net losses from sales of securities of $586,000. The fourth quarter 2005 losses were mainly from sales of debt securities that were purchased in 2003 and 2004, when market yields were lower than in 2005.

     The provision for loan losses was $672,000 in 2006, down from $2,026,000 in 2005. In 2006, negotiations and workout of a few large, commercial loans were completed, resulting in charge-offs that were significantly less than the estimated allowances that had been previously established.

FINANCIAL HIGHLIGHTS FOR THE FOURTH QUARTER 2006:

• Net Income in the fourth quarter 2006 was $2,694,000, or $410,000 (13.2%) lower than fourth quarter 2005 net income. Net Income Per Share was $0.32 (Basic and Diluted) in the fourth quarter 2006, as compared to $0.37 (Basic and Diluted) in the fourth quarter 2005. The net interest margin totaled $8,366,000 in the fourth quarter 2006, down 4.8% from the fourth quarter 2005, mainly because of the impact of rising short-term interest rates on C&N’s cost of funds. Gains related to sales of credit card loans totaled $340,000 in the fourth quarter 2006, as compared to $1,906,000 in the fourth quarter 2005, as described above. Noninterest expense totaled $8,155,000 in the fourth quarter, up 10.8% from fourth quarter 2005 noninterest expense of $7,358,000. Net securities gains for the fourth quarter 2006 amounted to $796,000, as compared to net security losses of $586,000 in the fourth quarter 2005. Cash Dividends declared by C&N amounted to $0.24 per share for the fourth quarter 2006, the same as in the fourth quarter 2005.

• Net Income in the fourth quarter 2006 was $579,000 (17.7%) lower than third quarter 2006 net income of $3,273,000. Net securities gains for the fourth quarter 2006 were $806,000 lower than in the previous quarter. Noninterest expense increased $515,000 in the fourth quarter 2006 over the previous quarter, in part because of increases in year-end accruals for compensation and benefit costs.

     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

December 31, 2006 QUARTERLY REPORT

Dear Shareholder:

The big news for this quarter was the announcement of the signing of a definitive merger agreement with Citizens Bancorp of Coudersport. The combination of the two banks is an exciting prospect for both organizations. The extension of C&N’s footprint to the west is a natural and appropriate next step. We believe that the addition of Charles Updegraff and his strong and experienced management group to C&N’s team will result in increased opportunities for the combined organization. We expect this transaction to close in the second quarter of 2007.

The historically long (over 2 years) flat and inverted yield curve continues to challenge our ability to achieve earnings growth. Although we have successfully grown our loan portfolio (helped significantly by our entry into the Lycoming County market) by 5.3% since the end of 2005, we have shrunk the investment portfolio by nearly 17%. The result is a 3% reduction in total assets. Interest and dividend income has increased by 5.5%, but interest expense has grown by 19.9%. The net result is a reduction of 4.89% in our main net revenue source. Until the investment yield curve returns to a normal positive slope, we will continue to emphasize growth in loans to increase revenues.

Our Trust and Financial Management Group has grown Assets Under Management by over 23.8% since the end of 2005, and increased their revenue by 15.3%. We are focused on this area of non-interest revenue in an effort to reduce our reliance on the net interest margin. We believe the prospects for growth in this area are encouraging.

Thank you for your continued support.

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
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					12 MONTHS ENDED
	DECEMBER					DECEMBER
	2006		2005			2006		2005
	(Current)		(Prior Yr)			(Current)		(Prior Yr)
Interest and Dividend Income	$	16,477	$	15,936		$	64,476	$	61,108
Interest Expense		8,111		7,149			30,788		25,687
Interest Margin		8,366		8,787			33,688		35,421
Provision for Loan Losses		181		901			672		2,026
Interest Margin After Provision for Loan Losses		8,185		7,886			33,016		33,395
Other Income		2,045		1,895			7,970		7,636
Realized Gains (Losses) on Securities, Net		796		(586	)		5,046		1,802
Gain from Sale of Credit Card Loans		340		1,906			340		1,906
Other Expenses		8,155		7,358			31,614		28,962
Income Before Income Tax Provision		3,211		3,743			14,758		15,777
Income Tax Provision		517		639			2,772		2,793
NET INCOME	$	2,694	$	3,104		$	11,986	$	12,984
PER SHARE DATA (**):
Net Income — Basic	$	0.32	$	0.37		$	1.44	$	1.55
Net Income — Diluted	$	0.32	$	0.37		$	1.43	$	1.54
Dividend Per Share	$	0.24	$	0.24		$	0.96	$	0.93
Number Shares Used in Computation — Basic		8,291,435		8,385,961			8,339,104		8,375,062
Number Shares Used in Computation — Diluted		8,311,656		8,426,980			8,364,778		8,433,847

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

	DEC. 31,			DEC. 31,
	2006			2005
ASSETS
Cash & Due from Banks	$	27,159		$	26,446
Available-for-Sale Securities		356,665			427,298
Loans, Net		679,300			644,938
Intangible Assets		3,145			3,383
Other Assets		61,099			60,889
TOTAL ASSETS	$	1,127,368		$	1,162,954
LIABILITIES
Deposits	$	760,349		$	757,065
Repo Sweep Accounts		29,258			27,734
Total Deposits and Repo Sweeps		789,607			784,799
Borrowed Funds		199,182			239,205
Other Liabilities		8,691			6,982
TOTAL LIABILITIES		997,480			1,030,986
SHAREHOLDERS’ EQUITY
Shareholders’ Equity, Excluding Accumulated Other Comprehensive Income/Loss		129,275			127,270
Accumulated Other Comprehensive Income/ Loss:
Net Unrealized Gain/Loss on Available-for-sale Securities		1,794			4,698
Defined Benefit Plans Adjustment, Net (*)		(1,181	)		—
TOTAL SHAREHOLDERS’ EQUITY		129,888			131,968
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	1,127,368		$	1,162,954

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

	12 MONTHS ENDED						%
	DECEMBER						INCREASE
	2006			2005			(DECREASE)
EARNINGS PERFORMANCE
Net Income	$	11,986		$	12,984			-7.69	%
Return on Average Assets		1.06	%		1.13	%		-6.19	%
Return on Average Equity		9.18	%		9.80	%		-6.33	%
BALANCE SHEET HIGHLIGHTS
Total Assets	$	1,127,368		$	1,162,954			-3.06	%
Available-for-Sale Securities		356,665			427,298			-16.53	%
Loans (Net)		679,300			644,938			5.33	%
Allowance for Loan Losses		8,201			8,361			-1.91	%
Deposits and Repo Sweep Accounts		789,607			784,799			0.61	%
Trust Assets Under Management		517,775			418,259			23.79	%
SHAREHOLDERS’ VALUE (PER SHARE) (**)
Net Income — Basic	$	1.44		$	1.55			-7.10	%
Net Income — Diluted	$	1.43		$	1.54			-7.14	%
Dividends	$	0.96		$	0.93			3.23	%
Book Value	$	15.66		$	15.74			-0.51	%
Market Value (Last Trade)	$	22.00		$	25.63			-14.16	%
Market Value / Book Value		140.49	%		162.83	%		-13.72	%
Price Earnings Multiple		15.28			16.54			-7.62	%
Dividend Yield		4.36	%		3.63	%		20.11	%
SAFETY AND SOUNDNESS
Tangible Equity / Tangible Assets		11.27	%		11.09	%		1.62	%
Nonperforming Assets / Total Assets		0.75	%		0.55	%		36.36	%
Allowance for Loan Losses / Total Loans		1.19	%		1.28	%		-7.03	%
Risk Based Capital Ratio		18.18	%		18.19	%		-0.05	%
AVERAGE BALANCES
Average Assets	$	1,135,000		$	1,144,619			-0.84	%
Average Equity		130,542			132,465			-1.45	%

(*)	Effective December 31, 2006, Statement of Financial Accounting Standards No. 158 requires gains or losses, prior service costs or credits, and transition assets or obligations as of the end of the period that have not yet been included in net periodic benefit cost be recognized as accumulated other comprehensive income or loss, net of tax.
(**)	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 2006 and 2005.