##### 



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, 2005
 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)
 (419) 332-7301
  þ o
 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 - 15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    15Item 4. Controls and Procedures
    
    15 - 16PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    16Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    16 - 17Item 3. Defaults Upon Senior Securities
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    17Item 5. Other Information
    
    17Item 6. Exhibits
    
    17Exhibit 31.1  Rule 13a-14(a)/15d-14(a) CEOs Certification
    
    19Exhibit 31.2  Rule 13a-14(a)/15d-14(a) Treasurers Certification
    
    20Exhibit 32.1  Section 1350 CEOs Certification
    
    21Exhibit 32.2  Section 1350 Treasurers Certification
    
    22Signatures
    
    18
 2




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##### 



June 30
    
    
    December 312005
    
    
    2004(Dollars in thousands, except par value)ASSETSCASH AND CASH EQUIVALENTSCash and due from banks
    
    $
    12,267
    
    
    $
    11,587Federal funds sold
    
    
    
    
    
    
    Total cash and cash equivalents
    
    
    12,267
    
    
    
    11,587SECURITIESAvailable-for-sale, at fair value
    
    
    67,344
    
    
    
    57,109Held-to-maturity,
at amortized cost, fair value of $1,072 in 2005 and $1,595 in 2004
    
    
    1,031
    
    
    
    1,538Restricted stock
    
    
    3,432
    
    
    
    2,676Total securities
    
    
    71,807
    
    
    
    61,323LOANS
    
    
    342,737
    
    
    
    322,489Less: Allowance for loan losses
    
    
    3,407
    
    
    
    3,431Net loans
    
    
    339,330
    
    
    
    319,058Premises and equipment, net
    
    
    7,774
    
    
    
    7,166Cash surrender value of life insurance
    
    
    9,384
    
    
    
    9,229Goodwill
    
    
    10,263
    
    
    
    6,113Other intangible asset, net
    
    
    432
    
    
    
    Accrued interest receivable
    
    
    2,108
    
    
    
    1,929Other assets
    
    
    1,060
    
    
    
    829TOTAL ASSETS
    
    $
    454,425
    
    
    $
    417,234LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESDeposits:Demand, non-interest bearing
    
    $
    42,864
    
    
    $
    43,658Savings, NOW and Money Market deposits
    
    
    155,436
    
    
    
    147,582Time
    
    
    166,341
    
    
    
    134,853Total deposits
    
    
    364,641
    
    
    
    326,093Federal funds purchased and securities sold under repurchase agreements
    
    
    7,990
    
    
    
    9,794Borrowed funds
    
    
    27,800
    
    
    
    28,950Dividends payable
    
    
    546
    
    
    
    530Other liabilities
    
    
    3,188
    
    
    
    2,951Total liabilities
    
    
    404,165
    
    
    
    368,318STOCKHOLDERS EQUITYCommon stock, $12.50 par value. Authorized 3,000,000 shares; issued 1,914,109 shares
    
    
    23,926
    
    
    
    23,926Surplus
    
    
    143
    
    
    
    133Retained earnings
    
    
    26,987
    
    
    
    25,091Accumulated other comprehensive income (loss)
    
    
    281
    
    
    
    375Treasury stock, 32,910 shares in 2005 and 20,336 shares in 2004, at cost
    
    
    (1,077
    )
    
    
    (609
    )Total stockholders equity
    
    
    50,260
    
    
    
    48,916TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    454,425
    
    
    $
    417,234
  3




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##### 



Three months endedJune 302005
    
    
    2004(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    5,553
    
    
    $
    4,877Securities:Obligations of U.S. Government agencies and corporations
    
    
    385
    
    
    
    270Obligations of states and political subdivisions
    
    
    231
    
    
    
    166Other
    
    
    65
    
    
    
    47Federal funds sold
    
    
    41
    
    
    
    Total interest income
    
    
    6,275
    
    
    
    5,360INTEREST EXPENSEDeposits
    
    
    1,460
    
    
    
    1,117Other borrowings
    
    
    325
    
    
    
    277Total interest expense
    
    
    1,785
    
    
    
    1,394Net interest income
    
    
    4,490
    
    
    
    3,966PROVISION FOR LOAN LOSSES
    
    
    
    
    
    
    115Net interest income, after provision for loan losses
    
    
    4,490
    
    
    
    3,851NON-INTEREST INCOMETrust income
    
    
    145
    
    
    
    139Service charges on deposit accounts
    
    
    347
    
    
    
    309Gain (loss) on sale of securities
    
    
    (19
    )
    
    
    28Other
    
    
    231
    
    
    
    258Total non-interest income
    
    
    704
    
    
    
    734NON-INTEREST EXPENSESSalaries, wages and employee benefits
    
    
    1,703
    
    
    
    1,470Additional provision for supplemental retirement benefits
    
    
    
    
    
    
    412Occupancy of premises
    
    
    177
    
    
    
    159Amortization of other intangible asset
    
    
    14
    
    
    
    Other operating
    
    
    1,152
    
    
    
    1,003Total non-interest expenses
    
    
    3,046
    
    
    
    3,044Income before federal income taxes
    
    
    2,148
    
    
    
    1,541FEDERAL INCOME TAXES
    
    
    627
    
    
    
    441NET INCOME
    
    $
    1,521
    
    
    $
    1,100Net income per share, based on 1,886,017 shares in 2005 and 1,897,846 shares in 2004
    
    $
    0.81
    
    
    $
    0.58Dividends declared, based on 1,881,199 shares in 2005 and 1,898,072 shares in 2004
    
    $
    0.29
    
    
    $
    0.28
  4




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##### 



Six months endedJune 302005
    
    
    2004(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    11,023
    
    
    $
    9,616Securities:Obligations of U.S. Government agencies and corporations
    
    
    770
    
    
    
    616Obligations of states and political subdivisions
    
    
    454
    
    
    
    331Other
    
    
    124
    
    
    
    100Federal funds sold
    
    
    52
    
    
    
    Total interest income
    
    
    12,423
    
    
    
    10,663INTEREST EXPENSEDeposits
    
    
    2,808
    
    
    
    2,247Other borrowings
    
    
    645
    
    
    
    576Total interest expense
    
    
    3,453
    
    
    
    2,823Net interest income
    
    
    8,970
    
    
    
    7,840PROVISION FOR LOAN LOSSES
    
    
    90
    
    
    
    245Net interest income, after provision for loan losses
    
    
    8,880
    
    
    
    7,595NON-INTEREST INCOMETrust income
    
    
    291
    
    
    
    273Service charges on deposit accounts
    
    
    660
    
    
    
    607Gain (loss) on sale of securities
    
    
    (61
    )
    
    
    93Other
    
    
    471
    
    
    
    477Total non-interest income
    
    
    1,361
    
    
    
    1,450NON-INTEREST EXPENSESSalaries, wages and employee benefits
    
    
    3,414
    
    
    
    2,987Additional provision for supplemental retirement benefits
    
    
    
    
    
    
    412Occupancy of premises
    
    
    366
    
    
    
    323Amortization of other intangible asset
    
    
    29
    
    
    
    Other operating
    
    
    2,208
    
    
    
    1,823Total non-interest expenses
    
    
    6,017
    
    
    
    5,545Income before federal income taxes
    
    
    4,224
    
    
    
    3,500FEDERAL INCOME TAXES
    
    
    1,233
    
    
    
    1,029NET INCOME
    
    $
    2,991
    
    
    $
    2,471Net income per share, based on 1,889,474 shares in 2005 and 1,898,131 shares in 2004
    
    $
    1.58
    
    
    $
    1.30Dividends declared, based on 1,881,199 shares in 2005 and 1,898,072 shares in 2004
    
    $
    0.58
    
    
    $
    0.56
  5




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Three months endedJune 302005
    
    
    2004(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    49,197
    
    
    $
    47,061Comprehensive Income:Net income
    
    
    1,521
    
    
    
    1,100Change in net unrealized gain (loss) on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    471
    
    
    
    (690
    )Total comprehensive income
    
    
    1,992
    
    
    
    410Issuance of treasury shares, 334 shares in 2005 and 376 shares in 2004
    
    
    12
    
    
    
    13Purchase of 10,848 treasury shares
    
    
    (395
    )
    
    
    Cash dividends declared, $.29 per share in 2005 and $.28 per share in 2004
    
    
    (546
    )
    
    
    (531
    )BALANCE AT END OF PERIOD
    
    $
    50,260
    
    
    $
    46,953
 Six months endedJune 302005
    
    
    2004(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    48,916
    
    
    $
    46,196Comprehensive Income:Net income
    
    
    2,991
    
    
    
    2,471Change in net unrealized gain (loss) on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    (94
    )
    
    
    (591
    )Total comprehensive income
    
    
    2,897
    
    
    
    1,880Issuance of treasury shares, 898 shares in 2005 and 518 shares in 2004
    
    
    33
    
    
    
    17Purchase of treasury shares, 13,472 shares in 2005 and 2,200 shares in 2004
    
    
    (491
    )
    
    
    (78
    )Cash dividends declared, $.58 per share in 2005 and $.56 per share in 2004
    
    
    (1,095
    )
    
    
    (1,062
    )BALANCE AT END OF PERIOD
    
    $
    50,260
    
    
    $
    46,953
  6




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Six months endedJune 302005
    
    
    2004(Dollars in thousands)NET CASH FLOW FROM OPERATING ACTIVITIES
    
    $
    3,788
    
    
    $
    3,631CASH FLOWS FROM INVESTING ACTIVITIESPurchase of The Custar State Bank, net of $2,357 cash and cash equivalents acquired
    
    
    (11,682
    )
    
    
    Purchases of available-for-sale securities
    
    
    (9,060
    )
    
    
    (17,943
    )Purchases of restricted stock
    
    
    (305
    )
    
    
    Proceeds from maturities of securities
    
    
    4,720
    
    
    
    12,417Proceeds from sales of available-for-sale securities
    
    
    10,209
    
    
    
    3,512Net decrease (increase) in loans
    
    
    10,387
    
    
    
    (10,071
    )Additions to premises and equipment
    
    
    (564
    )
    
    
    (779
    )Net cash from investing activities
    
    
    3,705
    
    
    
    (12,864
    )CASH FLOWS FROM FINANCING ACTIVITIESNet change in deposits
    
    
    (2,262
    )
    
    
    9,443Net change in federal funds purchased and securities sold under repurchase agreements
    
    
    (1,804
    )
    
    
    2,467Net change in borrowed funds
    
    
    (1,150
    )
    
    
    (1,050
    )Proceeds from issuance of treasury shares
    
    
    33
    
    
    
    17Cash dividends paid
    
    
    (1,079
    )
    
    
    (1,063
    )Purchase of treasury stock
    
    
    (491
    )
    
    
    (78
    )Payment of deferred compensation
    
    
    (60
    )
    
    
    (30
    )Net cash from financing activities
    
    
    (6,813
    )
    
    
    9,706NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    680
    
    
    
    473CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    11,587
    
    
    
    10,984CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    12,267
    
    
    $
    11,457SUPPLEMENTAL DISCLOSURESCash paid during the year for:Interest
    
    $
    3,335
    
    
    $
    2,885Federal income taxes
    
    $
    1,114
    
    
    $
    780
  7




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8




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9




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ITEM 2.     MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        10




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11




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Six months ended
    Six months endedJune 30, 2005
    June 30, 2004(Dollars in thousands)Provision for loan losses charged to expense
    
    $
    90
    
    
    $
    245Net loan charge-offs
    
    
    355
    
    
    
    320Net loan charge-offs as a percent of
average outstanding loans
    
    
    .10
    %
    
    
    .10
    %
 12




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June 30, 2005
    
    
    December 31, 2004(Dollars in thousands)Nonaccrual loans
    
    $
    739
    
    
    $
    933Loans contractually past due 90 days or more
and still accruing interest
    
    
    764
    
    
    
    459Restructured loans
    
    
    
    
    
    
    Potential problem loans, other than those past due
90 days or more, nonaccrual, or restructured
    
    
    14,010
    
    
    
    15,393Total potential problem and non-performing loans
    
    $
    15,513
    
    
    $
    16,785Allowance for loan losses
    
    $
    3,407
    
    
    $
    3,431Allowance for loan losses as a percent
of period-end loans
    
    
    .99
    %
    
    
    1.06
    %
    June 30,
    
    
    December 31,2005
    
    
    2004(Dollars in thousands)Potential problem loans not currently past due
    
    $
    10,090
    
    
    $
    7,897Potential problem loans past due one day or more but less than 10 days
    
    
    2,450
    
    
    
    5,732Potential problem loans past due 10 days or more but less than 30 days
    
    
    783
    
    
    
    691Potential problem loans past due 30 days or more but less than 60 days
    
    
    272
    
    
    
    477Potential problem loans past due 60 days or more but less than 90 days
    
    
    415
    
    
    
    596Total potential problem loans
    
    $
    14,010
    
    
    $
    15,393
 13




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June 30,
    
    
    December 31,2005
    
    
    2004(Dollars in thousands)Collateralized by an interest in real property
    
    $
    10,936
    
    
    $
    10,968Collateralized by an interest in assets other than real property
    
    
    3,023
    
    
    
    4,331Unsecured
    
    
    51
    
    
    
    94Total potential problem loans
    
    $
    14,010
    
    
    $
    15,393
        14
               ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 4. CONTROLS AND PROCEDURES
   15




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(a)
    
    information required to be disclosed by Croghan in this Quarterly Report on Form 10-Q and the
other reports which Croghan files or submits under the Exchange Act would be accumulated and
communicated to Croghans management, including its chief executive officer and treasurer, as
appropriate, to allow timely decisions regarding required disclosure;(b)
    
    information required to be disclosed by Croghan in this Quarterly Report on Form 10-Q and the
other reports which Croghan 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)
    
    Croghans disclosure controls and procedures are effective as of the end of the period
covered by this Quarterly Report on Form 10-Q to ensure that material information relating to
Croghan and its consolidated subsidiaries is made known to them, particularly during the
period for which our periodic reports, including this Quarterly Report on Form 10-Q, are being
prepared.
     ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 (a)
    
    None(b)
    
    None(c)
    
    The table below includes certain information regarding Croghans purchase of Croghan common
shares during the quarterly period ended June 30, 2005:
 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 (1)
    
    per Share
    
    or Programs
    
    or Programs (2)04/01/05
through
04/30/05
    
    None
    
    None
    
    None
    
    
    92,06405/01/05
through
05/31/05
    
    
    10,848
    
    
    $
    36.47
    
    
    
    10,848
    
    
    
    81,21606/01/05
through
06/30/05
    
    None
    
    None
    
    None
    
    
    81,216
 16




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(1)
    
    All share purchases were part of publicly announced plans and all were open-market
transactions.(2)
    
    A stock buy-back program commencing February 1, 2005 and ending on August 1, 2005 was
announced on January 19, 2005 in which up to 94,688 shares could be repurchased (6,600 shares
were purchased on May 5, 2005 and 4,248 shares were purchased on May 26, 2005). A stock
buy-back program commencing on August 1, 2005 and ending on February 1, 2006 was announced on
July 15, 2005 in which up to 94,059 shares may be repurchased.
   (a)
    
    The annual meeting of shareholders of Croghan Bancshares, Inc. was held on May 10, 2005.(b)
    
    Proxies were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934.
The following directors were elected for terms expiring in 2008: Steven C. Futrell, J.
Terrence Wolfe, and Gary L. Zimmerman. The following Directors also remain in office with
terms expiring in 2006 and 2007: Michael D. Allen, Sr., James E. Bowlus, Claire F. Johansen,
John P. Keller, Stephen A. Kemper, Daniel W. Lease, Allan E. Mehlow, and Claude E. Young.(c)
    
    Matters voted upon at the annual meeting of shareholders:
 (1)
    
    Election of Directors
 Nominee
    
    For
    
    WithheldNathan G. Danziger
    
    
    17,232
    
    
    
    0Steven C. Futrell
    
    
    1,381,531
    
    
    
    27,550J. Terrence Wolfe
    
    
    1,380,227
    
    
    
    28,854Gary L. Zimmerman
    
    
    1,375,281
    
    
    
    33,800
 (2)
    
    Shareholder proposal urging the Board of Directors to take
the steps necessary to declassify the Board
 For
    
    Against
    
    Abstain97,288
    
    
    
    1,031,667
    
    
    
    45,687
 (3)
    
    Shareholder proposal urging the Board of Directors to adopt a
policy to elect an independent Chairman of the Board
 For
    
    Against
    
    Abstain94,336
    
    
    
    1,035,870
    
    
    
    44,436
 (4)
    

    Shareholder proposal urging the Board of Directors to
establish a performance-based senior executive compensation system
 For
    
    Against
    
    Abstain90,658
    
    
    
    1,034,410
    
    
    
    49,574
   
 17




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##### 



Date:
    
    July 26, 2005
    
    /s/ Steven C. FutrellSteven C. Futrell, President & CEO
 Date:
    
    July 26, 2005
    
    /s/ Allan E. MehlowAllan E. Mehlow, Treasurer
 18