##### Table of Contents



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 June 30, 2009
 0-20159
 
 (Commission File Number)
 CROGHAN BANCSHARES, INC.
 
  Ohio
    
    31-1073048(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)323 Croghan Street, Fremont, Ohio
    
    43420(Address of principal executive offices)
    
    (Zip Code)
 
 þ o
 o o
 Rule 12b-2
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
 o þ




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##### 



Page(s)PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    3 12Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    13 19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    19Item 4T. Controls and Procedures
    
    20PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    21Item 1A. Risk Factors
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    21Item 3. Defaults Upon Senior Securities
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    22Item 5. Other Information
    
    22Item 6. Exhibits
    
    23Signatures
    
    24EX-31.1EX-31.2EX-32
  2




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June 30
    
    
    December 312009
    
    
    2008(Dollars in thousands, except par value)ASSETSCASH AND CASH EQUIVALENTSCash and due from banks
    
    $
    11,529
    
    
    $
    10,100Interest-bearing deposits in other banks
    
    
    17,613
    
    
    
    32Total cash and cash equivalents
    
    
    29,142
    
    
    
    10,132SECURITIESAvailable-for-sale, at fair value
    
    
    70,800
    
    
    
    68,748Held-to-maturity, at amortized cost, fair value of $533 in 2009 and $512 in 2008
    
    
    503
    
    
    
    504Restricted stock
    
    
    3,729
    
    
    
    3,729Total securities
    
    
    75,032
    
    
    
    72,981LOANS
    
    
    334,296
    
    
    
    349,433Less: Allowance for loan losses
    
    
    3,689
    
    
    
    3,287Net loans
    
    
    330,607
    
    
    
    346,146Premises and equipment, net
    
    
    7,235
    
    
    
    7,181Cash surrender value of life insurance
    
    
    10,788
    
    
    
    10,601Goodwill
    
    
    10,430
    
    
    
    10,430Core deposit intangible asset, net
    
    
    202
    
    
    
    230Accrued interest receivable
    
    
    1,738
    
    
    
    1,874Other assets
    
    
    1,376
    
    
    
    901TOTAL ASSETS
    
    $
    466,550
    
    
    $
    460,476LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESDeposits:Demand, non-interest bearing
    
    $
    53,990
    
    
    $
    49,820Savings, NOW, and Money Market deposits
    
    
    149,697
    
    
    
    143,922Time
    
    
    156,058
    
    
    
    151,335Total deposits
    
    
    359,745
    
    
    
    345,077Federal funds purchased and securities sold under repurchase agreements
    
    
    12,030
    
    
    
    17,351Federal Home Loan Bank borrowings
    
    
    35,500
    
    
    
    39,500Dividends payable
    
    
    551
    
    
    
    551Other liabilities
    
    
    3,035
    
    
    
    3,178Total liabilities
    
    
    410,861
    
    
    
    405,657STOCKHOLDERS EQUITYCommon
stock, $12.50 par value. Authorized 6,000,000 shares; issued 1,914,109 shares
    
    
    23,926
    
    
    
    23,926Surplus
    
    
    179
    
    
    
    179Retained earnings
    
    
    37,923
    
    
    
    37,281Accumulated other comprehensive income
    
    
    712
    
    
    
    471Treasury stock, 193,779 shares in 2009 and 193,251 shares in 2008, at cost
    
    
    (7,051
    )
    
    
    (7,038
    )Total stockholders equity
    
    
    55,689
    
    
    
    54,819TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    466,550
    
    
    $
    460,476
  3




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Three months endedJune 302009
    
    
    2008(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    5,213
    
    
    $
    5,602Securities:Obligations of U.S. Government agencies and corporations
    
    
    511
    
    
    
    538Obligations of states and political subdivisions
    
    
    226
    
    
    
    216Other
    
    
    52
    
    
    
    57Federal funds sold
    
    
    
    
    
    
    5Interest on deposits due from banks
    
    
    11
    
    
    
    6Total interest income
    
    
    6,013
    
    
    
    6,424INTEREST EXPENSEDeposits
    
    
    1,257
    
    
    
    1,712Other borrowings
    
    
    345
    
    
    
    330Total interest expense
    
    
    1,602
    
    
    
    2,042Net interest income
    
    
    4,411
    
    
    
    4,382PROVISION FOR LOAN LOSSES
    
    
    500
    
    
    
    200Net interest income, after provision for loan losses
    
    
    3,911
    
    
    
    4,182NON-INTEREST INCOMEGain on sale of loans
    
    
    178
    
    
    
    Trust income
    
    
    231
    
    
    
    214Service charges on deposit accounts
    
    
    347
    
    
    
    387Other
    
    
    273
    
    
    
    260Total non-interest income
    
    
    1,029
    
    
    
    861NON-INTEREST EXPENSESSalaries, wages, and employee benefits
    
    
    1,918
    
    
    
    1,884Occupancy of premises
    
    
    193
    
    
    
    229Amortization of core deposit intangible asset
    
    
    14
    
    
    
    15Other operating
    
    
    1,638
    
    
    
    1,241Total non-interest expenses
    
    
    3,763
    
    
    
    3,369Income before federal income taxes
    
    
    1,177
    
    
    
    1,674FEDERAL INCOME TAXES
    
    
    304
    
    
    
    479NET INCOME
    
    $
    873
    
    
    $
    1,195Net income per share, based on 1,720,330 shares in 2009 and 1,737,557 shares in 2008
    
    $
    0.51
    
    
    $
    0.68Dividends declared per share
    
    $
    0.32
    
    
    $
    0.32
  4




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Six months endedJune 302009
    
    
    2008(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    10,409
    
    
    $
    11,478Securities:Obligations of U.S. Government agencies and corporations
    
    
    1,051
    
    
    
    920Obligations of states and political subdivisions
    
    
    443
    
    
    
    406Other
    
    
    108
    
    
    
    117Federal funds sold
    
    
    
    
    
    
    71Interest on deposits due from banks
    
    
    16
    
    
    
    63Total interest income
    
    
    12,027
    
    
    
    13,055INTEREST EXPENSEDeposits
    
    
    2,518
    
    
    
    3,718Other borrowings
    
    
    729
    
    
    
    672Total interest expense
    
    
    3,247
    
    
    
    4,390Net interest income
    
    
    8,780
    
    
    
    8,665PROVISION FOR LOAN LOSSES
    
    
    1,100
    
    
    
    850Net interest income, after provision for loan losses
    
    
    7,680
    
    
    
    7,815NON-INTEREST INCOMEGain on sale of loans
    
    
    234
    
    
    
    Trust income
    
    
    450
    
    
    
    424Service charges on deposit accounts
    
    
    711
    
    
    
    765Other
    
    
    487
    
    
    
    502Total non-interest income
    
    
    1,882
    
    
    
    1,691NON-INTEREST EXPENSESSalaries,
wages, and employee benefits
    
    
    3,857
    
    
    
    3,720Occupancy of premises
    
    
    431
    
    
    
    463Amortization of core deposit intangible asset
    
    
    28
    
    
    
    29Other operating
    
    
    2,893
    
    
    
    2,516Total non-interest expenses
    
    
    7,209
    
    
    
    6,728Income before federal income taxes
    
    
    2,353
    
    
    
    2,778FEDERAL INCOME TAXES
    
    
    609
    
    
    
    771NET INCOME
    
    $
    1,744
    
    
    $
    2,007Net income per share, based on 1,720,493 shares in 2009 and 1,741,488 shares in 2008
    
    $
    1.01
    
    
    $
    1.15Dividends declared per share
    
    $
    0.64
    
    
    $
    0.64
  5




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Three months endedJune 302009
    
    
    2008(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    55,334
    
    
    $
    53,832Comprehensive Income:Net income
    
    
    873
    
    
    
    1,195Change in net unrealized gain on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    33
    
    
    
    (340
    )Total comprehensive income
    
    
    906
    
    
    
    855Purchase of 15,891 treasury shares in 2008
    
    
    
    
    
    
    (535
    )Cash dividends declared, $.32 per share in 2009 and 2008
    
    
    (551
    )
    
    
    (553
    )BALANCE AT END OF PERIOD
    
    $
    55,689
    
    
    $
    53,599
  Six months endedJune 302009
    
    
    2008(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    54,819
    
    
    $
    53,288Cumulative effect of change in accounting principle, net of tax
    
    
    
    
    
    
    (149
    )Comprehensive Income:Net income
    
    
    1,744
    
    
    
    2,007Change in net unrealized gain on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    241
    
    
    
    100Total comprehensive income
    
    
    1,985
    
    
    
    2,107Purchase of treasury shares, 528 shares in 2009 and 15,891 shares in 2008
    
    
    (13
    )
    
    
    (535
    )Cash dividends declared, $.64 per share in 2009 and 2008
    
    
    (1,102
    )
    
    
    (1,112
    )BALANCE AT END OF PERIOD
    
    $
    55,689
    
    
    $
    53,599
  6




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Six months endedJune 302009
    
    
    2008(Dollars in thousands)NET CASH FLOW FROM OPERATING ACTIVITIES
    
    $
    3,324
    
    
    $
    2,935CASH FLOWS FROM INVESTING ACTIVITIESProceeds from maturities of securities
    
    
    12,757
    
    
    
    6,395Purchases of available-for-sale securities
    
    
    (14,520
    )
    
    
    (25,860
    )Net decrease in loans
    
    
    14,207
    
    
    
    7,647Additions to premises and equipment
    
    
    (558
    )
    
    
    (301
    )Proceeds from sales of property
    
    
    66
    
    
    
    Net cash from investing activities
    
    
    11,952
    
    
    
    (12,119
    )CASH FLOWS FROM FINANCING ACTIVITIESNet change in deposits
    
    
    14,668
    
    
    
    (6,049
    )Net change in federal funds purchased and securities soldunder agreements to repurchase
    
    
    (5,321
    )
    
    
    (1,474
    )Net change in borrowed funds
    
    
    (4,000
    )
    
    
    5,000Cash dividends paid
    
    
    (1,102
    )
    
    
    (1,100
    )Purchase of treasury stock
    
    
    (13
    )
    
    
    (535
    )Payment of deferred compensation
    
    
    (498
    )
    
    
    (50
    )Net cash from financing activities
    
    
    3,734
    
    
    
    (4,208
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    19,010
    
    
    
    (13,392
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    10,132
    
    
    
    25,349CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    29,142
    
    
    $
    11,957SUPPLEMENTAL DISCLOSURESCash paid during the year for:Interest
    
    $
    3,033
    
    
    $
    4,553Federal income taxes
    
    $
    585
    
    
    $
    710Non-cash investing activity  transfer of loans to other real estate owned
    
    $
    200
    
    
    $
    
  7




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CROGHAN BANCSHARES, INC.
Notes to Consolidated Financial Statements
June 30, 2009
(Unaudited)
 NOTE 1  CONSOLIDATED FINANCIAL STATEMENTS
    NOTE 2  NEW ACCOUNTING PRONOUCEMENTS
  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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June 30, 2009
    
    
    December 31, 2008Carrying
    
    
    Estimated Fair
    
    
    Carrying
    
    
    Estimated Fairamount
    
    
    value
    
    
    amount
    
    
    value(Dollars in thousands)FINANCIAL ASSETSCash and cash equivalents
    
    $
    29,142
    
    
    $
    29,142
    
    
    $
    10,132
    
    
    $
    10,132Securities
    
    
    75,032
    
    
    
    75,040
    
    
    
    72,981
    
    
    
    72,989Loans, net
    
    
    330,607
    
    
    
    333,766
    
    
    
    346,146
    
    
    
    354,065Total
    
    $
    434,781
    
    
    $
    437,948
    
    
    $
    429,259
    
    
    $
    437,186FINANCIAL LIABILITIESDeposits
    
    $
    359,745
    
    
    $
    361,661
    
    
    $
    345,077
    
    
    $
    346,575Federal funds purchased and
securities sold under
repurchase agreements
    
    
    12,030
    
    
    
    12,717
    
    
    
    17,351
    
    
    
    16,575Federal Home Loan Bank
borrowings
    
    
    35,500
    
    
    
    36,885
    
    
    
    39,500
    
    
    
    41,036Total
    
    $
    407,275
    
    
    $
    411,263
    
    
    $
    401,928
    
    
    $
    404,186
   11




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NOTE 3  RECLASSIFICATIONS
  12




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"
  PERFORMANCE SUMMARY
   13




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FINANCIAL POSITION
         14




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NET INTEREST INCOME
  PROVISION FOR LOAN LOSSES AND THE ALLOWANCE FOR LOAN LOSSES
   Six months ended
    
    Six months endedJune 30, 2009
    
    June 30, 2008(Dollars in thousands)Provision for loan losses charged to expense
    
    $
    1,100
    
    
    $
    850Net loan charge-offs
    
    
    697
    
    
    
    1,031Annualized net loan charge-offs as a percent
of average outstanding loans
    
    
    .21
    %
    
    
    .30
    %
 15




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June 30,
 2009
    
    
    December
 31, 2008(Dollars in thousands)Nonaccrual loans
    
    
    $3,851
    
    
    
    $1,845Loans contractually past due 90 days or more
and still accruing interest
    
    
    1,115
    
    
    
    334Restructured loans
    
    
    
    
    
    
    Potential problem loans, other than those past due
90 days or more, nonaccrual, or restructured
    
    
    10,240
    
    
    
    13,140Total potential problem and non-performing loans
    
    
    $15,206
    
    
    
    $15,319Allowance for loan losses
    
    
    $3,689
    
    
    
    $3,287Allowance for loan losses as a percent
of period-end loans
    
    
    1.10
    %
    
    
    .94
    %
    16




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June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Potential problem loans not currently past due
    
    
    $4,551
    
    
    
    $10,139Potential problem loans past due one day or more but less than 10 days
    
    
    2,147
    
    
    
    2,193Potential problem loans past due 10 days or more but less than 30 days
    
    
    1,736
    
    
    
    487Potential problem loans past due 30 days or more but less than 60 days
    
    
    254
    
    
    
    224Potential problem loans past due 60 days or more but less than 90 days
    
    
    1,552
    
    
    
    97Total potential problem loans
    
    $
    10,240
    
    
    
    $13,140
   June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Collateralized by an interest in real property
    
    $
    10,049
    
    
    
    $12,381Collateralized by an interest in assets other than real property
    
    
    182
    
    
    
    747Unsecured
    
    
    9
    
    
    
    12Total potential problem loans
    
    $
    10,240
    
    
    
    $13,140
  17




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NON-INTEREST INCOME
  NON-INTEREST EXPENSES
   FEDERAL INCOME TAX EXPENSE
  18




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LIQUIDITY AND CAPITAL RESOURCES
     
   19




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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
  (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(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.
 CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  20




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(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 June 30, 2009:
 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)04/01/09through
    
    None
    
    None
    
    None
    
    
    85,51504/30/0905/01/09through
    
    None
    
    None
    
    None
    
    
    85,51505/31/0906/01/09through
    
    None
    
    None
    
    None
    
    
    85,51506/30/09
 
 (1)
    
    An extension of Croghans stock repurchase program commencing February 1, 2009 and ending
August 1, 2009 was announced on January 30, 2009, in which up to 86,043 shares may be
repurchased (with 528 shares purchased on February 26, 2009). Another extension of Croghans
stock repurchase program was approved on July 14, 2009, in which up to 86,016 shares could be
repurchased from August 1, 2009 to February 1, 2010. 21




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(a)
    
    The annual meeting of shareholders of Croghan Bancshares, Inc. was held on May 12, 2009.(b)
    
    Proxies were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934.
At the annual meeting, the following directors were elected for terms expiring in 2012:
Michael D. Allen Sr., Stephen A. Kemper, and Thomas W. McLaughlin. The following Directors
also remain in office with terms expiring in the years indicated: James E. Bowlus (2010),
James R. Faist (2010), Steven C. Futrell (2011), Claire F. Johansen (2011), Daniel W. Lease
(2010), Allan E. Mehlow (2010), and Gary L. Zimmerman (2011).(c)
    
    Matters voted upon at the annual meeting of shareholders:
 (1)
    
    Election of three directors for terms expiring in 2012:
 Nominee
    
    For
    
    WithheldMichael D. Allen Sr.
    
    
    1,375,585
    
    
    
    7,349Nathan G. Danziger
    
    
    8,789
    
    
    
    0Stephen A. Kemper
    
    
    1,328,381
    
    
    
    39,372Thomas W. McLaughlin
    
    
    1,367,487
    
    
    
    15,447
 
   22




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ExhibitNumber
    
    Description and Exhibit Location3.1(a)
    
    Amended Articles of Incorporation of Croghan Bancshares, Inc.
(incorporated herein by reference to Exhibit 3(i) to the
Registrants Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1997 (File No. 0-20159))3.1(b)
    
    Certificate of Amendment to Articles of Incorporation of Croghan
Bancshares, Inc. as filed with the Ohio Secretary of State on May
12, 2006 (incorporated herein by reference to Exhibit 3.1(b) to
the Registrants Annual Report on Form 10-K for the fiscal year
ended December 31, 2007 (File No. 0-20159))3.2
    
    Amended Code of Regulations of Croghan Bancshares, Inc.
(incorporated herein by reference to Exhibit 3(ii) to the
Registrants Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2000 (File No. 0-20159))31.1
    
    Rule 13a-14(a)/15d-14(a) Certification  Principal Executive
Officer (included with this filing)31.2
    
    Rule 13a-14(a)/15d-14(a) Certification  Principal Financial
Officer (included with this filing)32
    
    Section 1350 Certification  Principal Executive Officer and
Principal Financial Officer (included with this filing)
 23




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CROGHAN BANCSHARES, INC.RegistrantDate: July 28, 2009
    By:
    /s/  Steven C. FutrellSteven C. Futrell, President and CEO(Principal Executive Officer)Date: July 28, 2009
    By:
    /s/  Kendall W. RiemanKendall W. Rieman, Treasurer(Principal Financial Officer) 24




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Location3.1(a)
    
    Amended Articles of
Incorporation of Croghan
Bancshares, Inc.
    
    Incorporated herein by reference
to Exhibit 3(i) to the
Registrants Quarterly Report on
Form 10-Q for the quarterly
period ended June 30, 1997 (File
No. 0-20159)3.1(b)
    
    Certificate of Amendment to
Articles of Incorporation
of Croghan Bancshares, Inc.
as filed with the Ohio
Secretary of State on May
12, 2006
    
    Incorporated herein by reference
to Exhibit 3.1(b) to the
Registrants Annual Report on
Form 10-K for the fiscal year
ended December 31, 2007 (File
No. 0-20159)3.2
    
    Amended Code of Regulations
of Croghan Bancshares, Inc.
    
    Incorporated herein by reference
to Exhibit 3(ii) to the
Registrants Quarterly Report on
Form 10-Q for the quarterly
period ended June 30, 2000 (File
No. 0-20159)31.1
    
    Rule 13a-14(a)/15d-14(a)
Certification  Principal
Executive Officer
    
    Included with this filing31.2
    
    Rule 13a-14(a)/15d-14(a)
Certification  Principal
Financial Officer
    
    Included with this filing32
    
    Section 1350 Certification
 Principal Executive
Officer and Principal
Financial Officer
    
    Included with this filing
 25