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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2008
 0-20159  (Commission File Number)
 CROGHAN BANCSHARES, INC.
  Ohio
    
    31-1073048(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)323 Croghan Street, Fremont, Ohio
    
    43420(Address of principal executive offices)
    
    (Zip Code)
 
  þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ




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##### 



Page(s)PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    3 - 9Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    10 - 14Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    14Item 4T.
    
    Controls and Procedures
    
    14PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    15Item 1A.
    
    Risk Factors
    
    15Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    15Item 3.
    
    Defaults Upon Senior Securities
    
    16Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    16Item 5.
    
    Other Information
    
    16Item 6.
    
    Exhibits
    
    16Exhibit 31.1  Rule 13a-14(a)/15d-14(a) Certification  Principal Executive Officer
    
    19Exhibit 31.2  Rule 13a-14(a)/15d-14(a) Certification  Principal Financial Officer
    
    20Exhibit 32  Section 1350 Certification  Principal Executive Officer and Principal
Financial Officer
    
    21Signatures
    
    
    
    17EX-31.1EX-31.2EX-32
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September 30
    
    
    December 312008
    
    
    2007(Dollars in thousands, except par value)ASSETSCASH AND CASH EQUIVALENTSCash and due from banks
    
    $
    11,766
    
    
    $
    14,072Interest-bearing deposits in other banks
    
    
    114
    
    
    
    5,977Federal funds sold
    
    
    185
    
    
    
    5,300Total cash and cash equivalents
    
    
    12,065
    
    
    
    25,349SECURITIESAvailable-for-sale, at fair value
    
    
    65,804
    
    
    
    47,344Held-to-maturity, at amortized cost, fair value of $522 in 2008 and $534 in 2007
    
    
    504
    
    
    
    506Restricted stock
    
    
    3,729
    
    
    
    3,629Total securities
    
    
    70,037
    
    
    
    51,479LOANS
    
    
    347,689
    
    
    
    350,514Less: Allowance for loan losses
    
    
    3,305
    
    
    
    3,358Net loans
    
    
    344,384
    
    
    
    347,156Premises and equipment, net
    
    
    7,425
    
    
    
    7,653Cash surrender value of life insurance
    
    
    10,500
    
    
    
    10,227Goodwill
    
    
    10,430
    
    
    
    10,430Core deposit intangible asset, net
    
    
    245
    
    
    
    288Accrued interest receivable
    
    
    2,035
    
    
    
    1,916Other assets
    
    
    869
    
    
    
    630TOTAL ASSETS
    
    $
    457,990
    
    
    $
    455,128LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESDeposits:Demand, non-interest bearing
    
    $
    49,700
    
    
    $
    52,957Savings, NOW and Money Market deposits
    
    
    151,376
    
    
    
    160,431Time
    
    
    151,857
    
    
    
    149,445Total deposits
    
    
    352,933
    
    
    
    362,833Federal funds purchased and securities sold under repurchase agreements
    
    
    13,078
    
    
    
    11,106Borrowed funds
    
    
    34,500
    
    
    
    24,500Dividends payable
    
    
    551
    
    
    
    541Other liabilities
    
    
    3,008
    
    
    
    2,860Total liabilities
    
    
    404,070
    
    
    
    401,840STOCKHOLDERS EQUITYCommon stock, $12.50 par value. Authorized 6,000,000 shares;
issued 1,914,109 shares
    
    
    23,926
    
    
    
    23,926Surplus
    
    
    179
    
    
    
    179Retained earnings
    
    
    36,742
    
    
    
    35,292Accumulated other comprehensive income
    
    
    73
    
    
    
    157Treasury stock, 191,836 shares in 2008 and 168,691 shares in 2007, at cost
    
    
    (7,000
    )
    
    
    (6,266
    )Total stockholders equity
    
    
    53,920
    
    
    
    53,288TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    457,990
    
    
    $
    455,128
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Three months endedSeptember 302008
    
    
    2007(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    5,690
    
    
    $
    6,329Securities:Obligations of U.S. Government agencies and corporations
    
    
    566
    
    
    
    304Obligations of states and political subdivisions
    
    
    200
    
    
    
    189Other
    
    
    61
    
    
    
    66Federal funds sold
    
    
    
    
    
    
    99Interest on deposits in other banks
    
    
    12
    
    
    
    Total interest income
    
    
    6,529
    
    
    
    6,987INTEREST EXPENSEDeposits
    
    
    1,607
    
    
    
    2,339Other borrowings
    
    
    368
    
    
    
    263Total interest expense
    
    
    1,975
    
    
    
    2,602Net interest income
    
    
    4,554
    
    
    
    4,385PROVISION FOR LOAN LOSSES
    
    
    300
    
    
    
    Net interest income, after provision for
loan losses
    
    
    4,254
    
    
    
    4,385NON-INTEREST INCOMETrust income
    
    
    231
    
    
    
    240Service charges on deposit accounts
    
    
    396
    
    
    
    428Gain on sale of securities
    
    
    16
    
    
    
    Other
    
    
    232
    
    
    
    233Total non-interest income
    
    
    875
    
    
    
    901NON-INTEREST EXPENSESSalaries, wages and employee benefits
    
    
    1,892
    
    
    
    1,775Occupancy of premises
    
    
    212
    
    
    
    212Amortization of core deposit intangible asset
    
    
    14
    
    
    
    14Other operating
    
    
    1,237
    
    
    
    1,149Total non-interest expenses
    
    
    3,355
    
    
    
    3,150Income before federal income taxes
    
    
    1,774
    
    
    
    2,136FEDERAL INCOME TAXES
    
    
    519
    
    
    
    649NET INCOME
    
    $
    1,255
    
    
    $
    1,487Net income per share, based on 1,725,996 shares in 2008 and 1,756,397 shares in 2007
    
    $
    0.73
    
    
    $
    0.85Dividends declared per share
    
    $
    0.32
    
    
    $
    0.31
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Nine months endedSeptember 302008
    
    
    2007(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    17,168
    
    
    $
    18,947Securities:Obligations of U.S. Government agencies and corporations
    
    
    1,486
    
    
    
    1,003Obligations of states and political subdivisions
    
    
    606
    
    
    
    578Other
    
    
    178
    
    
    
    202Federal funds sold
    
    
    71
    
    
    
    175Interest on deposits in other banks
    
    
    73
    
    
    
    Total interest income
    
    
    19,582
    
    
    
    20,905INTEREST EXPENSEDeposits
    
    
    5,325
    
    
    
    7,047Other borrowings
    
    
    1,040
    
    
    
    915Total interest expense
    
    
    6,365
    
    
    
    7,962Net interest income
    
    
    13,217
    
    
    
    12,943PROVISION FOR LOAN LOSSES
    
    
    1,150
    
    
    
    Net interest income, after provision for
loan losses
    
    
    12,067
    
    
    
    12,943NON-INTEREST INCOMETrust income
    
    
    655
    
    
    
    665Service charges on deposit accounts
    
    
    1,161
    
    
    
    1,122Gain on sale of securities
    
    
    16
    
    
    
    Other
    
    
    736
    
    
    
    692Total non-interest income
    
    
    2,568
    
    
    
    2,479NON-INTEREST EXPENSESSalaries, wages and employee benefits
    
    
    5,612
    
    
    
    5,378Occupancy of premises
    
    
    675
    
    
    
    620Amortization of core deposit intangible asset
    
    
    43
    
    
    
    43Other operating
    
    
    3,753
    
    
    
    3,462Total non-interest expenses
    
    
    10,083
    
    
    
    9,503Income before federal income taxes
    
    
    4,552
    
    
    
    5,919FEDERAL INCOME TAXES
    
    
    1,290
    
    
    
    1,771NET INCOME
    
    $
    3,262
    
    
    $
    4,148Net income per share, based on 1,736,273 shares in 2008 and 1,767,669 shares in 2007
    
    $
    1.88
    
    
    $
    2.35Dividends declared per share
    
    $
    0.96
    
    
    $
    0.93
  5




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Three months endedSeptember 302008
    
    
    2007(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    53,599
    
    
    $
    51,544Comprehensive Income:Net income
    
    
    1,255
    
    
    
    1,487Change in net unrealized gain (loss) on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    (184
    )
    
    
    285Total comprehensive income
    
    
    1,071
    
    
    
    1,772Purchase of 7,254 treasury shares in 2008 and 1,795 shares in 2007
    
    
    (199
    )
    
    
    (72
    )Cash dividends declared, $.32 per share in 2008 and $.31 per share in 2007
    
    
    (551
    )
    
    
    (544
    )BALANCE AT END OF PERIOD
    
    $
    53,920
    
    
    $
    52,700
 Nine months endedSeptember 302008
    
    
    2007(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    53,288
    
    
    $
    51,163Cumulative effect of change in accounting principle, net of tax
    
    
    (149
    )
    
    
    Comprehensive Income:Net income
    
    
    3,262
    
    
    
    4,148Change in net unrealized gain (loss) on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    (84
    )
    
    
    198Total comprehensive income
    
    
    3,178
    
    
    
    4,346Proceeds from issuance of treasury shares, 763 shares in 2007
    
    
    
    
    
    
    29Purchase of treasury shares, 23,145 shares in 2008 and 30,970 shares in 2007
    
    
    (734
    )
    
    
    (1,199
    )Cash dividends declared, $.96 per share in 2008 and $.93 per share in 2007
    
    
    (1,663
    )
    
    
    (1,639
    )BALANCE AT END OF PERIOD
    
    $
    53,920
    
    
    $
    52,700
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Nine months endedSeptember 302008
    
    
    2007(Dollars in thousands)NET CASH FLOW FROM OPERATING ACTIVITIES
    
    $
    4,761
    
    
    $
    4,726CASH FLOWS FROM INVESTING ACTIVITIESProceeds from maturities of securities
    
    
    8,508
    
    
    
    13,722Proceeds from sale of available-for-sale securities
    
    
    3,649
    
    
    
    Purchases of available-for-sale securities
    
    
    (30,782
    )
    
    
    (5,114
    )Net decrease in loans
    
    
    1,473
    
    
    
    11,432Additions to premises and equipment
    
    
    (528
    )
    
    
    (635
    )Net cash from investing activities
    
    
    (17,680
    )
    
    
    19,405CASH FLOWS FROM FINANCING ACTIVITIESNet change in deposits
    
    
    (9,900
    )
    
    
    (14,533
    )Net change in federal funds purchased and
securities sold under repurchase agreements
    
    
    1,972
    
    
    
    (3,729
    )Net change in borrowed funds
    
    
    10,000
    
    
    
    (2,900
    )Proceeds from issuance of treasury shares
    
    
    
    
    
    
    29Cash dividends paid
    
    
    (1,653
    )
    
    
    (1,631
    )Purchase of treasury stock
    
    
    (734
    )
    
    
    (1,199
    )Payment of deferred compensation
    
    
    (50
    )
    
    
    (11
    )Net cash from financing activities
    
    
    (365
    )
    
    
    (23,974
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (13,284
    )
    
    
    157CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    25,349
    
    
    
    11,843CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    12,065
    
    
    $
    12,000SUPPLEMENTAL DISCLOSURESCash paid during the year for:Interest
    
    $
    6,347
    
    
    $
    8,646Federal income taxes
    
    $
    1,440
    
    
    $
    1,825Transfer of loans to other real estate owned
    
    $
    117
    
    
    $
    89
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Level 1
    
    Quoted prices in active markets for identical assets or liabilities.Level 2
    
    Observable inputs other than Level 1 prices, such as quoted process for similar
assets or liabilities; quoted prices in active markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for substantially the full term of
the assets or liabilities.Level 3
    
    Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities.
 8




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        10




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Nine months ended
    
    Nine months endedSeptember 30, 2008
    
    September 30, 2007(Dollars in thousands)Provision for loan losses charged to expense
    
    $
    1,150
    
    
    $
    Net loan charge-offs
    
    
    1,202
    
    
    
    232Annualized net loan charge-offs as a percent
of average outstanding loans
    
    
    .47
    %
    
    
    .09
    %
  September 30, 2008
    
    
    December 31, 2007(Dollars in thousands)Nonaccrual loans
    
    
    $  2,263
    
    
    
    $  2,285Loans contractually past due 90 days or more
and still accruing interest
    
    
    203
    
    
    
    237Restructured loans
    
    
    
    
    
    
    Potential problem loans, other than those past due
90 days or more, nonaccrual, or restructured
    
    
    13,173
    
    
    
    9,405Total potential problem and non-performing loans
    
    
    $15,639
    
    
    
    $11,927Allowance for loan losses
    
    
    $  3,305
    
    
    
    $  3,358Allowance for loan losses as a percent
of period-end loans
    
    
    .95
    %
    
    
    .96
    %
   12




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September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Potential problem loans not currently past due
    
    
    $  8,270
    
    
    
    $4,888Potential problem loans past due one day or more but less than 10 days
    
    
    3,034
    
    
    
    2,006Potential problem loans past due 10 days or more but less than 30 days
    
    
    1,439
    
    
    
    1,215Potential problem loans past due 30 days or more but less than 60 days
    
    
    239
    
    
    
    985Potential problem loans past due 60 days or more but less than 90 days
    
    
    191
    
    
    
    311Total potential problem loans
    
    
    $13,173
    
    
    
    $9,405
  September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Collateralized by an interest in real property
    
    
    $11,658
    
    
    
    $6,790Collateralized by an interest in assets other than real property
    
    
    1,502
    
    
    
    2,590Unsecured
    
    
    13
    
    
    
    25Total potential problem loans
    
    
    $13,173
    
    
    
    $9,405
      13




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(a)
    
    information required to be disclosed by the Corporation in this Quarterly Report on Form 10-Q
and the other reports which the Corporation files or submits under the Exchange Act would be
accumulated and communicated to the Corporations management, including its principal executive
officer and principal financial officer, as appropriate to allow timely decisions regarding
required disclosure;(b)
    
    information required to be disclosed by the Corporation in this Quarterly Report on Form 10-Q
and the other reports which the Corporation files or submits under the Exchange Act would be
recorded, processed, summarized and reported within the time periods specified in the SECs rules
and forms; and
 14




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(c)
    
    the Corporations disclosure controls and procedures were effective as of the end of the period
covered by this Quarterly Report on Form 10-Q.
   
  
   
   
  (a)
    
    Not applicable(b)
    
    Not applicable(c)
    
    The table below includes certain information regarding Croghans repurchase of its common
shares during the quarterly period ended September 30, 2008:
 Total Number of
    
    Maximum NumberShares Purchased
    
    of Shares that MayTotal Number
    
    Average
    
    as Part of Publicly
    
    Yet Be Purchasedof Shares
    
    Price Paid
    
    Announced Plans
    
    Under the PlansPeriod
    
    Purchased
    
    per Share
    
    or Programs
    
    or Programs (1)07/01/08
through
07/31/08
    
    None
    
    None
    
    None
    
    
    71,37908/01/08
through
08/31/08
    
    
    7,254
    
    
    $
    27.57
    
    
    
    7,254
    
    
    
    79,22209/01/08
through
09/30/08
    
    None
    
    None
    
    None
    
    
    79,222
 15




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(1)
    
    A stock buyback program was announced on January 25, 2008 pursuant to which up to 87,270 common
shares of Croghan could be repurchased from February 1, 2008 through August 1, 2008 (with a total
of 15,891 shares being purchased under such program prior to its expiration). A stock buy back
program commencing August 1, 2008 and ending February 1, 2009 was approved on July 15, 2008 in
which up to 86,476 shares may be repurchased (with 5,000 shares purchased on August 13, 2008, 1,307
shares purchased on August 22, 2008, and 947 shares purchased on August 29, 2008). 
   
   
   
   
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CROGHAN BANCSHARES, INC.
RegistrantDate: October 28, 2008
    By:
    /s/  Steven C. FutrellSteven C. Futrell, President and CEO(Principal Executive Officer)Date: October 28, 2008
    By:
    /s/  Kendall W. RiemanKendall W. Rieman, Treasurer(Principal Financial Officer) 17




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Exhibit Number
    
    Description
    
    Exhibit Location31.1
    
    Rule 13a-14(a)/15d-14(a)
Certification  Principal Executive
Officer
    
    Filed herewith31.2
    
    Rule 13a-14(a)/15d-14(a)
Certification  Principal Financial
Officer
    
    Filed herewith32
    
    Section 1350 Certification 
Principal Executive Officer and
Principal Financial Officer
    
    Filed herewith
 18