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, 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 o
    
    Accelerated filer o
    
    Non-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 - 10Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    11 - 16Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    16Item 4T.
    
    Controls and Procedures
    
    
    16PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    16Item 1A.
    
    Risk Factors
    
    
    17Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3.
    
    Defaults Upon Senior Securities
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    18Item 5.
    
    Other Information
    
    
    18Item 6.
    
    Exhibits
    
    
    18Exhibit 31.1 - Rule 13a-14(a)/15d-14(a) Certification  Principal Executive Officer
    
    
    21Exhibit 31.2 - Rule 13a-14(a)/15d-14(a) Certification  Principal Financial Officer
    
    
    22Exhibit 32 - Section 1350 Certification  Principal Executive Officer and Principal
Financial Officer
    
    
    23Signatures
    
    
    19
  2




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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.
 3




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4




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5




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June 30
    
    
    December 312008
    
    
    2007(Dollars in thousands, except par value)ASSETSCASH AND CASH EQUIVALENTSCash and due from banks
    
    $
    11,949
    
    
    $
    14,072Interest-bearing deposits in other banks
    
    
    8
    
    
    
    5,977Federal funds sold
    
    
    
    
    
    
    5,300Total cash and cash equivalents
    
    
    11,957
    
    
    
    25,349SECURITIESAvailable-for-sale, at fair value
    
    
    66,930
    
    
    
    47,344Held-to-maturity, at amortized cost, fair value of $522 in 2008 and $534 in 2007
    
    
    505
    
    
    
    506Restricted stock
    
    
    3,695
    
    
    
    3,629Total securities
    
    
    71,130
    
    
    
    51,479LOANS
    
    
    341,773
    
    
    
    350,514Less: Allowance for loan losses
    
    
    3,177
    
    
    
    3,358Net loans
    
    
    338,596
    
    
    
    347,156Premises and equipment, net
    
    
    7,445
    
    
    
    7,653Cash surrender value of life insurance
    
    
    10,409
    
    
    
    10,227Goodwill
    
    
    10,430
    
    
    
    10,430Core deposit intangible asset, net
    
    
    259
    
    
    
    288Accrued interest receivable
    
    
    1,816
    
    
    
    1,916Other assets
    
    
    884
    
    
    
    630TOTAL ASSETS
    
    $
    452,926
    
    
    $
    455,128LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESDeposits:Demand, non-interest bearing
    
    $
    51,225
    
    
    $
    52,957Savings, NOW and Money Market deposits
    
    
    155,291
    
    
    
    160,431Time
    
    
    150,268
    
    
    
    149,445Total deposits
    
    
    356,784
    
    
    
    362,833Federal funds purchased and securities sold under repurchase agreements
    
    
    9,632
    
    
    
    11,106Borrowed funds
    
    
    29,500
    
    
    
    24,500Dividends payable
    
    
    553
    
    
    
    541Other liabilities
    
    
    2,858
    
    
    
    2,860Total liabilities
    
    
    399,327
    
    
    
    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
    
    
    36,038
    
    
    
    35,292Accumulated other comprehensive income
    
    
    257
    
    
    
    157Treasury stock, 184,582 shares in 2008 and 168,691 shares in 2007, at cost
    
    
    (6,801
    )
    
    
    (6,266
    )Total stockholders equity
    
    
    53,599
    
    
    
    53,288TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    452,926
    
    
    $
    455,128
  6




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Three months endedJune 302008
    
    
    2007(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    5,602
    
    
    $
    6,391Securities:Obligations of U.S. Government agencies and corporations
    
    
    538
    
    
    
    335Obligations of states and political subdivisions
    
    
    216
    
    
    
    193Other
    
    
    57
    
    
    
    66Federal funds sold
    
    
    5
    
    
    
    32Total interest income
    
    
    6,418
    
    
    
    7,017INTEREST EXPENSEDeposits
    
    
    1,712
    
    
    
    2,347Other borrowings
    
    
    330
    
    
    
    300Total interest expense
    
    
    2,042
    
    
    
    2,647Net interest income
    
    
    4,376
    
    
    
    4,370PROVISION FOR LOAN LOSSES
    
    
    200
    
    
    
    0Net interest income, after provision for loan losses
    
    
    4,176
    
    
    
    4,370NON-INTEREST INCOMETrust income
    
    
    214
    
    
    
    217Service charges on deposit accounts
    
    
    387
    
    
    
    369Other
    
    
    266
    
    
    
    232Total non-interest income
    
    
    867
    
    
    
    818NON-INTEREST EXPENSESSalaries, wages and employee benefits
    
    
    1,884
    
    
    
    1,791Occupancy of premises
    
    
    229
    
    
    
    199Amortization of core deposit intangible asset
    
    
    15
    
    
    
    14Other operating
    
    
    1,241
    
    
    
    1,175Total non-interest expenses
    
    
    3,369
    
    
    
    3,179Income before federal income taxes
    
    
    1,674
    
    
    
    2,009FEDERAL INCOME TAXES
    
    
    479
    
    
    
    601NET INCOME
    
    $
    1,195
    
    
    $
    1,408Net income per share, based on 1,737,557 shares in 2008 and 1,766,112 shares in 2007
    
    $
    0.68
    
    
    $
    0.80Dividends declared per share
    
    $
    0.32
    
    
    $
    0.31
  7




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Six months endedJune 302008
    
    
    2007(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    11,478
    
    
    $
    12,618Securities:Obligations of U.S. Government agencies and corporations
    
    
    920
    
    
    
    699Obligations of states and political subdivisions
    
    
    406
    
    
    
    389Other
    
    
    117
    
    
    
    136Federal funds sold
    
    
    71
    
    
    
    76Total interest income
    
    
    12,992
    
    
    
    13,918INTEREST EXPENSEDeposits
    
    
    3,718
    
    
    
    4,708Other borrowings
    
    
    672
    
    
    
    652Total interest expense
    
    
    4,390
    
    
    
    5,360Net interest income
    
    
    8,602
    
    
    
    8,558PROVISION FOR LOAN LOSSES
    
    
    850
    
    
    
    0Net interest income, after provision for loan losses
    
    
    7,752
    
    
    
    8,558NON-INTEREST INCOMETrust income
    
    
    424
    
    
    
    425Service charges on deposit accounts
    
    
    765
    
    
    
    694Other
    
    
    565
    
    
    
    459Total non-interest income
    
    
    1,754
    
    
    
    1,578NON-INTEREST EXPENSESSalaries, wages and employee benefits
    
    
    3,720
    
    
    
    3,603Occupancy of premises
    
    
    463
    
    
    
    408Amortization of core deposit intangible asset
    
    
    29
    
    
    
    29Other operating
    
    
    2,516
    
    
    
    2,313Total non-interest expenses
    
    
    6,728
    
    
    
    6,353Income before federal income taxes
    
    
    2,778
    
    
    
    3,783FEDERAL INCOME TAXES
    
    
    771
    
    
    
    1,122NET INCOME
    
    $
    2,007
    
    
    $
    2,661Net income per share, based on 1,741,488 shares in 2008 and 1,773,398 shares in 2007
    
    $
    1.15
    
    
    $
    1.50Dividends declared per share
    
    $
    0.64
    
    
    $
    0.62
  8




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Three months endedJune 302008
    
    
    2007(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    53,832
    
    
    $
    51,520Comprehensive Income:Net income
    
    
    1,195
    
    
    
    1,408Change in net unrealized gain on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    (340
    )
    
    
    (173
    )Total comprehensive income
    
    
    855
    
    
    
    1,235Proceeds from issuance of treasury shares, 253 shares in 2007
    
    
    
    
    
    
    10Purchase of 15,891 treasury shares in 2008 and 16,945 shares in 2007
    
    
    (535
    )
    
    
    (676
    )Cash dividends declared, $.32 per share in 2008 and $.31 per share in 2007
    
    
    (553
    )
    
    
    (545
    )BALANCE AT END OF PERIOD
    
    $
    53,599
    
    
    $
    51,544
  Six months endedJune 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
    
    
    2,007
    
    
    
    2,661Change in net unrealized gain on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    100
    
    
    
    (87
    )Total comprehensive income
    
    
    2,107
    
    
    
    2,574Proceeds from issuance of treasury shares, 763 shares in 2007
    
    
    
    
    
    
    29Purchase of treasury shares, 15,891 shares in 2008 and 29,175 shares in 2007
    
    
    (535
    )
    
    
    (1,127
    )Cash dividends declared, $.64 per share in 2008 and $.62 per share in 2007
    
    
    (1,112
    )
    
    
    (1,095
    )BALANCE AT END OF PERIOD
    
    $
    53,599
    
    
    $
    51,544
  9




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Six months endedJune 302008
    
    
    2007(Dollars in thousands)NET CASH FLOW FROM OPERATING ACTIVITIES
    
    $
    2,935
    
    
    $
    2,384CASH FLOWS FROM INVESTING ACTIVITIESProceeds from maturities of securities
    
    
    6,395
    
    
    
    7,454Purchases of available-for-sale securities
    
    
    (25,860
    )
    
    
    Net decrease in loans
    
    
    7,647
    
    
    
    9,670Additions to premises and equipment
    
    
    (301
    )
    
    
    (509
    )Net cash from investing activities
    
    
    (12,119
    )
    
    
    16,615CASH FLOWS FROM FINANCING ACTIVITIESNet change in deposits
    
    
    (6,049
    )
    
    
    (7,595
    )Net change in federal funds purchased and securities sold under repurchase agreements
    
    
    (1,474
    )
    
    
    (6,574
    )Net change in borrowed funds
    
    
    5,000
    
    
    
    (700
    )Proceeds from issuance of treasury shares
    
    
    
    
    
    
    29Cash dividends paid
    
    
    (1,100
    )
    
    
    (1,086
    )Purchase of treasury stock
    
    
    (535
    )
    
    
    (1,127
    )Payment of deferred compensation
    
    
    (50
    )
    
    
    (21
    )Net cash from financing activities
    
    
    (4,208
    )
    
    
    (17,074
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (13,392
    )
    
    
    1,925CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    25,349
    
    
    
    11,843CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    
    11,957
    
    
    
    13,768SUPPLEMENTAL DISCLOSURESCash paid during the year for:Interest
    
    
    4,553
    
    
    
    5,716Federal income taxes
    
    
    710
    
    
    
    1,380
  10




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
     11




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12




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Six months ended
    
    Six months endedJune 30, 2008
    
    June 30, 2007(Dollars in thousands)Provision for loan losses charged to expense
    
    $
    850
    
    
    $
    Net loan charge-offs
    
    
    1,031
    
    
    
    126Annualized net loan charge-offs as a percent
of average outstanding loans
    
    
    .30
    %
    
    
    .07
    %
  June 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Nonaccrual loans
    
    $
    1,480
    
    
    $
    2,285Loans contractually past due 90 days or more
and still accruing interest
    
    
    336
    
    
    
    237Restructured loans
    
    
    
    
    
    
    Potential problem loans, other than those past due
90 days or more, nonaccrual, or restructured
    
    
    11,899
    
    
    
    9,405Total potential problem and non-performing loans
    
    $
    13,715
    
    
    $
    11,927Allowance for loan losses
    
    $
    3,177
    
    
    $
    3,358Allowance for loan losses as a percent
of period-end loans
    
    
    .93
    %
    
    
    .96
    %
  13




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June 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Potential problem loans not currently past due
    
    $
    7,344
    
    
    $
    4,888Potential problem loans past due one day or more but less than 10 days
    
    
    1,430
    
    
    
    2,006Potential problem loans past due 10 days or more but less than 30 days
    
    
    492
    
    
    
    1,215Potential problem loans past due 30 days or more but less than 60 days
    
    
    1,055
    
    
    
    985Potential problem loans past due 60 days or more but less than 90 days
    
    
    1,578
    
    
    
    311Total potential problem loans
    
    $
    11,899
    
    
    $
    9,405
  June 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Collateralized by an interest in real property
    
    $
    10,259
    
    
    $
    6,790Collateralized by an interest in assets other than real property
    
    
    1,625
    
    
    
    2,590Unsecured
    
    
    15
    
    
    
    25Total potential problem loans
    
    $
    11,899
    
    
    $
    9,405
 14




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15




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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(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.
   
  
   16




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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, 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)04/01/08through
    
    None
    
    None
    
    None
    
    87,27004/30/0805/01/08through
    
    15,891
    
    $33.64
    
    15,891
    
    71,37905/31/0806/01/08through
    
    None
    
    None
    
    None
    
    71,37906/30/08
 
 (1)
    
    A stock buyback program was announced on January 25, 2008 pursuant to which up to 87,270
common shares of Croghan may be repurchased from February 1, 2008 through August 1, 2008 (with
5,433 shares purchased on May 8, 2008, 726 shares purchased on May 19, 2008, 7,732 shares
purchased on May 20, 2008; and 2,000 shares purchased on May 29, 2008). 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. 
   17




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(a)
    
    The annual meeting of shareholders of Croghan Bancshares, Inc. was held on May 13, 2008.(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 2011:
Steven C. Futrell, Claire F. Johansen, and Gary L. Zimmerman. The following Directors also
remain in office with terms expiring in 2009 and 2010: Michael D. Allen Sr., James E.
Bowlus, James R. Faist, Stephen A. Kemper, Daniel W. Lease, Thomas W. McLaughlin, and Allan
E. Mehlow.(c)
    
    Matters voted upon at the annual meeting of shareholders:
 (1)
    
    Election of three directors for terms expiring in 2011:
 Nominee
    
    For
    
    WithheldNathan G. Danziger
    
    
    23,566
    
    
    
    0Steven C. Futrell
    
    
    1,439,889
    
    
    
    39,372Claire F. Johansen
    
    
    1,414,865
    
    
    
    40,830Gary L. Zimmerman
    
    
    1,451,847
    
    
    
    27,414
 
   
  
 18




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CROGHAN BANCSHARES, INC.
               RegistrantDate: July 28, 2008
    By:
    /s/  Steven C. FutrellSteven C. Futrell, President and CEO(Principal Executive Officer)Date: July 28, 2008
    By:
    /s/  Kendall W. RiemanKendall W. Rieman, Treasurer(Principal Financial Officer) 19




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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
 20