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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 June 30, 2007
 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
  o o þ
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Page(s)PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    3  8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    9  13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    14Item 4.
    
    Controls and Procedures
    
    14PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    14Item 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
    
    17Exhibit 31.1  Rule 13a-14(a)/15d-14(a) Certification  Principal Executive Officer
    
    20Exhibit 31.2  Rule 13a-14(a)/15d-14(a) Certification  Principal Financial Officer
    
    21Exhibit 32  Section 1350 Certification  Principal Executive Officer and Principal
Financial Officer
    
    22Signatures
    
    18EX-31.1EX-31.2EX-32
 2




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June 30
    
    
    December 312007
    
    
    2006(Dollars in thousands, except par value)ASSETSCASH AND CASH EQUIVALENTSCash and due from banks
    
    $
    12,268
    
    
    
    11,843Federal Funds Sold
    
    
    1,500
    
    
    
    Total cash and cash equivalents
    
    
    13,768
    
    
    
    11,843SECURITIESAvailable-for-sale, at fair value
    
    
    50,061
    
    
    
    57,273Held-to-maturity, at amortized cost, fair value of $520 in 2007 and $1,031 in 2006
    
    
    506
    
    
    
    1,011Restricted stock
    
    
    3,629
    
    
    
    3,629Total securities
    
    
    54,196
    
    
    
    61,913LOANS
    
    
    347,450
    
    
    
    357,278Less: Allowance for loan losses
    
    
    3,474
    
    
    
    3,600Net loans
    
    
    343,976
    
    
    
    353,678Premises and equipment, net
    
    
    7,945
    
    
    
    7,904Cash surrender value of life insurance
    
    
    10,050
    
    
    
    9,872Goodwill
    
    
    10,430
    
    
    
    10,430Core deposit intangible asset, net
    
    
    317
    
    
    
    346Accrued interest receivable
    
    
    2,091
    
    
    
    2,271Other assets
    
    
    839
    
    
    
    601TOTAL ASSETS
    
    $
    443,612
    
    
    $
    458,858LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESDeposits:Demand, non-interest bearing
    
    $
    46,432
    
    
    $
    49,745Savings, NOW and Money Market deposits
    
    
    165,327
    
    
    
    160,224Time
    
    
    151,840
    
    
    
    161,225Total deposits
    
    
    363,599
    
    
    
    371,194Federal funds purchased and securities sold under repurchase agreements
    
    
    8,814
    
    
    
    15,388Borrowed funds
    
    
    16,900
    
    
    
    17,600Dividends payable
    
    
    545
    
    
    
    536Other liabilities
    
    
    2,210
    
    
    
    2,977Total liabilities
    
    
    392,068
    
    
    
    407,695STOCKHOLDERS EQUITYCommon stock, $12.50 par value. Authorized 6,000,000 shares;
issued 1,914,109 shares
    
    
    23,926
    
    
    
    23,926Surplus
    
    
    179
    
    
    
    171Retained earnings
    
    
    33,527
    
    
    
    31,961Accumulated other comprehensive loss
    
    
    (293
    )
    
    
    (206
    )Treasury stock, 156,815 shares in 2007 and 128,403 shares in 2006, at cost
    
    
    (5,795
    )
    
    
    (4,689
    )Total stockholders equity
    
    
    51,544
    
    
    
    51,163TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    443,612
    
    
    $
    458,858
  3




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Three months endedJune 302007
    
    
    2006(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    6,391
    
    
    $
    5,910Securities:Obligations of U.S. Government agencies and corporations
    
    
    335
    
    
    
    457Obligations of states and political subdivisions
    
    
    193
    
    
    
    229Other
    
    
    66
    
    
    
    62Federal funds sold
    
    
    32
    
    
    
    12Total interest income
    
    
    7,017
    
    
    
    6,670INTEREST EXPENSEDeposits
    
    
    2,347
    
    
    
    1,921Other borrowings
    
    
    300
    
    
    
    380Total interest expense
    
    
    2,647
    
    
    
    2,301Net interest income
    
    
    4,370
    
    
    
    4,369PROVISION FOR LOAN LOSSES
    
    
    
    
    
    
    15Net interest income, after provision for loan
losses
    
    
    4,370
    
    
    
    4,354NON-INTEREST INCOMETrust income
    
    
    217
    
    
    
    176Service charges on deposit accounts
    
    
    369
    
    
    
    352Gain on sale of securities
    
    
    
    
    
    
    1Other
    
    
    232
    
    
    
    229Total non-interest income
    
    
    818
    
    
    
    758NON-INTEREST EXPENSESSalaries, wages and employee benefits
    
    
    1,791
    
    
    
    1,731Occupancy of premises
    
    
    199
    
    
    
    185Amortization of core deposit intangible asset
    
    
    14
    
    
    
    15Other operating
    
    
    1,175
    
    
    
    1,139Total non-interest expenses
    
    
    3,179
    
    
    
    3,070Income before federal income taxes
    
    
    2,009
    
    
    
    2,042FEDERAL INCOME TAXES
    
    
    601
    
    
    
    605NET INCOME
    
    $
    1,408
    
    
    $
    1,437Net income per share, based on 1,766,112 shares in 2007 and 1,820,835 shares in 2006
    
    $
    0.80
    
    
    $
    0.79Dividends declared per share, based on 1,757,294 shares in 2007 and 1,814,475 shares in 2006
    
    $
    0.31
    
    
    $
    0.30
  4




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Six months endedJune 302007
    
    
    2006(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    $
    12,618
    
    
    $
    11,577Securities:Obligations of U.S. Government agencies and corporations
    
    
    699
    
    
    
    995Obligations of states and political subdivisions
    
    
    389
    
    
    
    463Other
    
    
    136
    
    
    
    124Federal funds sold
    
    
    76
    
    
    
    13Total interest income
    
    
    13,918
    
    
    
    13,172INTEREST EXPENSEDeposits
    
    
    4,708
    
    
    
    3,618Other borrowings
    
    
    652
    
    
    
    780Total interest expense
    
    
    5,360
    
    
    
    4,398Net interest income
    
    
    8,558
    
    
    
    8,774PROVISION FOR LOAN LOSSES
    
    
    
    
    
    
    50Net interest income, after provision for
loan losses
    
    
    8,558
    
    
    
    8,724NON-INTEREST INCOMETrust income
    
    
    425
    
    
    
    335Service charges on deposit accounts
    
    
    694
    
    
    
    676Gain on sale of securities
    
    
    
    
    
    
    1Other
    
    
    459
    
    
    
    449Total non-interest income
    
    
    1,578
    
    
    
    1,461NON-INTEREST EXPENSESSalaries, wages and employee benefits
    
    
    3,603
    
    
    
    3,535Occupancy of premises
    
    
    408
    
    
    
    386Amortization of core deposit intangible asset
    
    
    29
    
    
    
    29Other operating
    
    
    2,313
    
    
    
    2,187Total non-interest expenses
    
    
    6,353
    
    
    
    6,137Income before federal income taxes
    
    
    3,783
    
    
    
    4,048FEDERAL INCOME TAXES
    
    
    1,122
    
    
    
    1,193NET INCOME
    
    $
    2,661
    
    
    $
    2,855Net income per share, based on 1,773,398 shares in 2007
and 1,827,995 shares in 2006
    
    $
    1.50
    
    
    $
    1.56Dividends declared per share
    
    $
    0.62
    
    
    $
    0.60
  5




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Three months endedJune 302007
    
    
    2006(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    51,520
    
    
    $
    49,979Comprehensive Income:Net income
    
    
    1,408
    
    
    
    1,437Change in net unrealized gain (loss) on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    (173
    )
    
    
    (204
    )Total comprehensive income
    
    
    1,235
    
    
    
    1,233Proceeds from issuance of treasury shares, 253 shares in 2007 and 275 shares in 2006
    
    
    10
    
    
    
    10Purchase of 16,945 treasury shares in 2007 and 14,128 shares in 2006
    
    
    (676
    )
    
    
    (530
    )Cash dividends declared, $.31 per share in 2007 and $.30 per share in 2006
    
    
    (545
    )
    
    
    (544
    )BALANCE AT END OF PERIOD
    
    $
    51,544
    
    
    $
    50,148
 Six months endedJune 302007
    
    
    2006(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    51,163
    
    
    $
    49,931Comprehensive Income:Net income
    
    
    2,661
    
    
    
    2,855Change in net unrealized gain (loss) on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    (87
    )
    
    
    (433
    )Total comprehensive income
    
    
    2,574
    
    
    
    2,422Proceeds from issuance of treasury shares, 763 shares in 2007 and 877 shares in 2006
    
    
    29
    
    
    
    32Purchase of treasury shares, 29,175 shares in 2007 and 30,628 shares in 2006
    
    
    (1,127
    )
    
    
    (1,145
    )Cash dividends declared, $.62 per share in 2007 and $.60 per share in 2006
    
    
    (1,095
    )
    
    
    (1,092
    )BALANCE AT END OF PERIOD
    
    $
    51,544
    
    
    $
    50,148
  6




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Six months endedJune 302007
    
    
    2006(Dollars in thousands)NET CASH FLOW FROM OPERATING ACTIVITIES
    
    $
    2,384
    
    
    $
    3,124CASH FLOWS FROM INVESTING ACTIVITIESPurchases of available-for-sale securities
    
    
    
    
    
    
    (4,971
    )Proceeds from maturities of securities
    
    
    7,454
    
    
    
    14,657Proceeds from sales of available-for-sale securities
    
    
    
    
    
    
    1,326Net decrease (increase) in loans
    
    
    9,670
    
    
    
    (2,507
    )Additions to premises and equipment
    
    
    (509
    )
    
    
    (320
    )Net cash from investing activities
    
    
    16,615
    
    
    
    8,185CASH FLOWS FROM FINANCING ACTIVITIESNet change in deposits
    
    
    (7,595
    )
    
    
    (4,814
    )Net change in federal funds purchased and
securities sold under repurchase agreements
    
    
    (6,574
    )
    
    
    (855
    )Net change in borrowed funds
    
    
    (700
    )
    
    
    (2,750
    )Proceeds from issuance of treasury shares
    
    
    29
    
    
    
    32Cash dividends paid
    
    
    (1,086
    )
    
    
    (1,083
    )Purchase of treasury stock
    
    
    (1,127
    )
    
    
    (1,145
    )Payment of deferred compensation
    
    
    (21
    )
    
    
    (73
    )Net cash from financing activities
    
    
    (17,074
    )
    
    
    (10,688
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    1,925
    
    
    
    621CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    11,843
    
    
    
    12,338CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    13,768
    
    
    $
    12,959SUPPLEMENTAL DISCLOSURESCash paid during the year for:Interest
    
    $
    5,716
    
    
    $
    4,323Federal income taxes
    
    $
    1,380
    
    
    $
    980
  7




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8




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
        9




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10




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Six months ended
    
    Six months endedJune 30, 2007
    
    June 30, 2006(Dollars in thousands)Provision for loan losses charged to expense
    
    $
    
    
    
    $
    50Net loan charge-offs
    
    
    126
    
    
    
    191Annualized net loan charge-offs as a percent
of average outstanding loans
    
    
    .07
    %
    
    
    .11
    %
  June 30, 2007
    
    
    December 31, 2006(Dollars in thousands)Nonaccrual loans
    
    $
    3,131
    
    
    $
    3,795Loans contractually past due 90 days or more
and still accruing interest
    
    
    246
    
    
    
    716Restructured loans
    
    
    27
    
    
    
    Potential problem loans, other than those past due
90 days or more, nonaccrual, or restructured
    
    
    9,820
    
    
    
    8,199Total potential problem and non-performing loans
    
    $
    13,224
    
    
    $
    12,710Allowance for loan losses
    
    $
    3,474
    
    
    $
    3,600Allowance for loan losses as a percent
of period-end loans
    
    
    1.00
    %
    
    
    1.01
    %
  11




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June 30,
    
    
    December 31,2007
    
    
    2006(Dollars in thousands)Potential problem loans not currently past due
    
    $
    5,080
    
    
    $
    5,260Potential problem loans past due one day or more but less than 10 days
    
    
    2,438
    
    
    
    843Potential problem loans past due 10 days or more but less than 30 days
    
    
    704
    
    
    
    745Potential problem loans past due 30 days or more but less than 60 days
    
    
    561
    
    
    
    1,175Potential problem loans past due 60 days or more but less than 90 days
    
    
    1,037
    
    
    
    176Total potential problem loans
    
    $
    9,820
    
    
    $
    8,199
  June 30,
    
    
    December 31,2007
    
    
    2006(Dollars in thousands)Collateralized by an interest in real property
    
    $
    7,144
    
    
    $
    6,679Collateralized by an interest in assets other than real property
    
    
    2,657
    
    
    
    1,500Unsecured
    
    
    19
    
    
    
    20Total potential problem loans
    
    $
    9,820
    
    
    $
    8,199
    12




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13




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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 principal executive officer and principal
financial officer, 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 subsidiary 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.
   
  
   14




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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, 2007:
 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)04/01/07
through 04/30/07
    
    None
    
    None
    
    None
    
    
    77,05605/01/07
through 05/31/07
    
    
    16,945
    
    
    $
    39.91
    
    
    
    16,945
    
    
    
    60,11106/01/07
through 06/30/07
    
    None
    
    None
    
    None
    
    
    60,111
 
 (1)
    
    All share purchases were part of publicly announced programs and all were open-market
transactions.(2)
    
    A stock buy-back program commencing on February 4, 2007 and ending on August 4, 2007 was
approved on January 16, 2007 in which up to 89,286 shares could be repurchased (with 2,988
shares purchased on February 9, 2007; 1,800 shares purchased on February 21, 2007; 7,442
shares purchased on February 28, 2007; 5,403 shares purchased on May 9, 2007; 5,542 shares
purchased on May 17, 2007; 2,300 shares purchased on May 29, 2007; and 3,700 shares purchased
on May 31, 2007). A stock buy-back program commencing August 1, 2007 and ending February 1,
2008 was approved on July 17, 2007 in which up to 87,864 shares may be repurchased. 15




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(a)
    
    The annual meeting of shareholders of Croghan Bancshares, Inc. was held on May 8, 2007.(b)
    
    Proxies were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934.
At the annual meeting, Thomas W. McLaughlin was elected, as a director for a term expiring in
2009, and the following directors were elected for terms expiring in 2010: James E. Bowlus,
James R. Faist, Daniel W. Lease, and Allan E. Mehlow. The following Directors also remain in
office with terms expiring in 2008 and 2009: Michael D. Allen Sr., Steven C. Futrell, Claire
F. Johansen, Stephen A. Kemper, J. Terrence Wolfe, and Gary L. Zimmerman.(c)
    
    Matters voted upon at the annual meeting of shareholders:
  Nominee
    
    For
    
    WithheldThomas W. McLaughlin
    
    
    1,226,988
    
    
    
    68,899
  Nominee
    
    For
    
    WithheldJames E. Bowlus
    
    
    1,286,630
    
    
    
    9,257Nathan G. Danziger
    
    
    35,435
    
    
    
    0James R. Faist
    
    
    1,286,630
    
    
    
    9,257Daniel W. Lease
    
    
    1,286,630
    
    
    
    9,257Allan E. Mehlow
    
    
    1,251,195
    
    
    
    9,257
  For
    
    Against
    
    Abstain55,198
    
    
    867,756
    
    
    
    27,890
  For
    
    Against
    
    Abstain57,359
    
    
    868,496
    
    
    
    24,989
  For
    
    Against
    
    Abstain52,749
    
    
    874,075
    
    
    
    24,020
 
   16




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17




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CROGHAN BANCSHARES, INC.
               RegistrantDate: July 26, 2007
    By:
    /s/  Steven C. FutrellSteven C. Futrell, President and CEO(Principal Executive Officer)Date: July 26, 2007
    By:
    /s/  Kendall W. RiemanKendall W. Rieman, Treasurer(Principal Financial Officer) 18




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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
 19