##### 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, 2010
 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
  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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##### 



PART I. FINANCIAL INFORMATION
    
    
    Page(s)Item 1.    Financial Statements
    
    
    3 - 12Item 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13 - 18Item 3.    Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4.    Controls and Procedures
    
    
    19PART II. OTHER INFORMATIONItem 1.    Legal Proceedings
    
    
    20Item 1A.  Risk Factors
    
    
    20Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20 - 21Item 3.    Defaults Upon Senior Securities
    
    
    21Item 4.    [Reserved]
    
    
    21Item 5.    Other Information
    
    
    21Item 6.    Exhibits
    
    
    21Signatures
    
    
    22EX-31.1EX-31.2EX-32
  2




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June 30
    
    
    December 312010
    
    
    2009(Dollars in thousands, except par value)ASSETSCASH AND CASH EQUIVALENTSCash and due from banks
    
    
    $  10,342
    
    
    
    $  15,928Interest-bearing deposits in other banks
    
    
    10,360
    
    
    
    796Total cash and cash equivalents
    
    
    20,702
    
    
    
    16,724SECURITIESAvailable-for-sale, at fair value
    
    
    121,691
    
    
    
    105,792Held-to-maturity, at amortized cost, fair value of $516 in 2010 and $526 in 2009
    
    
    501
    
    
    
    502Restricted stock
    
    
    3,844
    
    
    
    3,844Total securities
    
    
    126,036
    
    
    
    110,138LOANS
    
    
    306,588
    
    
    
    324,484Less: Allowance for loan losses
    
    
    5,283
    
    
    
    4,433Net loans
    
    
    301,305
    
    
    
    320,051Premises and equipment, net
    
    
    6,869
    
    
    
    6,863Cash surrender value of life insurance
    
    
    11,104
    
    
    
    10,946Goodwill
    
    
    10,430
    
    
    
    10,430Core deposit intangible asset, net
    
    
    144
    
    
    
    173Accrued interest receivable
    
    
    1,953
    
    
    
    1,857Other real estate owned
    
    
    1,784
    
    
    
    2,330Other assets
    
    
    2,274
    
    
    
    2,476TOTAL ASSETS
    
    
    $482,601
    
    
    
    $481,988LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESDeposits:Demand, non-interest bearing
    
    
    $  52,817
    
    
    
    $  60,072Savings, NOW, and Money Market deposits
    
    
    164,653
    
    
    
    159,316Time
    
    
    144,367
    
    
    
    151,331Total deposits
    
    
    361,837
    
    
    
    370,719Federal funds purchased and securities sold under repurchase agreements
    
    
    25,906
    
    
    
    16,375Federal Home Loan Bank borrowings
    
    
    35,500
    
    
    
    35,500Dividends payable
    
    
    542
    
    
    
    549Other liabilities
    
    
    1,964
    
    
    
    2,718Total liabilities
    
    
    425,749
    
    
    
    425,861STOCKHOLDERS EQUITYCommon stock, $12.50 par value. Authorized 6,000,000 shares;
issued 1,914,109 shares
    
    
    23,926
    
    
    
    23,926Surplus
    
    
    179
    
    
    
    179Retained earnings
    
    
    38,876
    
    
    
    38,187Accumulated other comprehensive income
    
    
    1,616
    
    
    
    1,044Treasury stock, 221,808 shares in 2010 and 200,232 shares in 2009, at cost
    
    
    (7,745
    )
    
    
    (7,209
    )Total stockholders equity
    
    
    56,852
    
    
    
    56,127TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    
    $482,601
    
    
    
    $481,988
  3




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Three months endedJune 302010
    
    
    2009(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    
    $4,587
    
    
    
    $5,213Securities:Obligations of U.S. Government agencies and corporations
    
    
    662
    
    
    
    511Obligations of states and political subdivisions
    
    
    401
    
    
    
    226Other
    
    
    53
    
    
    
    52Interest on deposits due from banks
    
    
    6
    
    
    
    11Total interest income
    
    
    5,709
    
    
    
    6,013INTEREST EXPENSEDeposits
    
    
    954
    
    
    
    1,257Other borrowings
    
    
    345
    
    
    
    345Total interest expense
    
    
    1,299
    
    
    
    1,602Net interest income
    
    
    4,410
    
    
    
    4,411PROVISION FOR LOAN LOSSES
    
    
    600
    
    
    
    500Net interest income, after provision for loan losses
    
    
    3,810
    
    
    
    3,911NON-INTEREST INCOMEGain on sale of loans
    
    
    53
    
    
    
    178Gain on sale of securities
    
    
    8
    
    
    
    Trust income
    
    
    260
    
    
    
    231Service charges on deposit accounts
    
    
    354
    
    
    
    347Other
    
    
    212
    
    
    
    273Total non-interest income
    
    
    887
    
    
    
    1,029NON-INTEREST EXPENSESSalaries, wages, and employee benefits
    
    
    1,988
    
    
    
    1,918Occupancy of premises
    
    
    198
    
    
    
    193Amortization of core deposit intangible asset
    
    
    14
    
    
    
    14Other operating
    
    
    1,435
    
    
    
    1,638Total non-interest expenses
    
    
    3,635
    
    
    
    3,763Income before federal income taxes
    
    
    1,062
    
    
    
    1,177FEDERAL INCOME TAXES
    
    
    219
    
    
    
    304NET INCOME
    
    
    $   843
    
    
    
    $   873Net income per share, based on 1,697,081 shares in 2010 and 1,720,330 shares in 2009
    
    
    $  0.50
    
    
    
    $  0.51Dividends declared per share
    
    
    $  0.32
    
    
    
    $  0.32
  4




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Six months endedJune 302010
    
    
    2009(Dollars in thousands,except per share data)INTEREST INCOMELoans, including fees
    
    
    $ 9,214
    
    
    
    $10,409Securities:Obligations of U.S. Government agencies and corporations
    
    
    1,355
    
    
    
    1,051Obligations of states and political subdivisions
    
    
    768
    
    
    
    443Other
    
    
    109
    
    
    
    108Interest on deposits due from banks
    
    
    11
    
    
    
    16Total interest income
    
    
    11,457
    
    
    
    12,027INTEREST EXPENSEDeposits
    
    
    1,951
    
    
    
    2,518Other borrowings
    
    
    686
    
    
    
    729Total interest expense
    
    
    2,637
    
    
    
    3,247Net interest income
    
    
    8,820
    
    
    
    8,780PROVISION FOR LOAN LOSSES
    
    
    1,100
    
    
    
    1,100Net interest income, after provision for loan losses
    
    
    7,720
    
    
    
    7,680NON-INTEREST INCOMEGain on sale of loans
    
    
    83
    
    
    
    234Gain on sale of securities
    
    
    8
    
    
    
    Trust income
    
    
    515
    
    
    
    450Service charges on deposit accounts
    
    
    693
    
    
    
    711Other
    
    
    440
    
    
    
    487Total non-interest income
    
    
    1,739
    
    
    
    1,882NON-INTEREST EXPENSESSalaries, wages, and employee benefits
    
    
    3,983
    
    
    
    3,857Occupancy of premises
    
    
    424
    
    
    
    431Amortization of core deposit intangible asset
    
    
    28
    
    
    
    28Other operating
    
    
    2,763
    
    
    
    2,893Total non-interest expenses
    
    
    7,198
    
    
    
    7,209Income before federal income taxes
    
    
    2,261
    
    
    
    2,353FEDERAL INCOME TAXES
    
    
    486
    
    
    
    609NET INCOME
    
    
    $ 1,775
    
    
    
    $  1,744Net income per share, based on 1,702,518 shares in 2010 and 1,720,493 shares in 2009
    
    
    $   1.04
    
    
    
    $    1.01Dividends declared per share
    
    
    $   0.64
    
    
    
    $    0.64
  5




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Three months endedJune 302010
    
    
    2009(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    56,349
    
    
    $
    55,334Comprehensive Income:Net income
    
    
    843
    
    
    
    873Change in net unrealized gain on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    478
    
    
    
    33Total comprehensive income
    
    
    1,321
    
    
    
    906Purchase treasury shares, 10,817 in 2010 and none in 2009
    
    
    (277
    )
    
    
    Cash dividends declared, $.32 per share in 2010 and 2009
    
    
    (541
    )
    
    
    (551
    )BALANCE AT END OF PERIOD
    
    $
    56,852
    
    
    $
    55,689
  Six months endedJune 302010
    
    
    2009(Dollars in thousands,except per share data)BALANCE AT BEGINNING OF PERIOD
    
    $
    56,127
    
    
    $
    54,819Comprehensive Income:Net income
    
    
    1,775
    
    
    
    1,744Change in net unrealized gain on securities available-for-sale,
net of reclassification adjustments and related income taxes
    
    
    572
    
    
    
    241Total comprehensive income
    
    
    2,347
    
    
    
    1,985Purchase of treasury shares, 21,576 shares in 2010 and 528 shares in 2009
    
    
    (536
    )
    
    
    (13
    )Cash dividends declared, $.64 per share in 2010 and 2009
    
    
    (1,086
    )
    
    
    (1,102
    )BALANCE AT END OF PERIOD
    
    $
    56,852
    
    
    $
    55,689
  6




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Six months endedJune 302010
    
    
    2009(Dollars in thousands)NET CASH FLOW FROM OPERATING ACTIVITIES
    
    
    $   3,305
    
    
    
    $   3,324CASH FLOWS FROM INVESTING ACTIVITIESProceeds from maturities of securities
    
    
    10,855
    
    
    
    12,757Proceeds from sale of available-for-sale securities
    
    
    1,996
    
    
    
    Purchases of available-for-sale securities
    
    
    (28,314
    )
    
    
    (14,520
    )Net decrease in loans
    
    
    17,594
    
    
    
    14,207Additions to premises and equipment
    
    
    (407
    )
    
    
    (558
    )Proceeds from sales of property
    
    
    
    
    
    
    66Net cash from investing activities
    
    
    1,724
    
    
    
    11,952CASH FLOWS FROM FINANCING ACTIVITIESNet change in deposits
    
    
    (8,881
    )
    
    
    14,668Net change in federal funds purchased and securities sold
under agreements to repurchase
    
    
    9,531
    
    
    
    (5,321
    )Net change in borrowed funds
    
    
    
    
    
    
    (4,000
    )Cash dividends paid
    
    
    (1,093
    )
    
    
    (1,102
    )Purchase of treasury stock
    
    
    (536
    )
    
    
    (13
    )Payment of deferred compensation
    
    
    (72
    )
    
    
    (498
    )Net cash from financing activities
    
    
    (1,051
    )
    
    
    3,734NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    3,978
    
    
    
    19,010CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    16,724
    
    
    
    10,132CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    
    $ 20,702
    
    
    
    $ 29,142SUPPLEMENTAL DISCLOSURESCash paid during the year for:Interest
    
    
    $   1,902
    
    
    
    $   3,033Federal income taxes
    
    
    $      791
    
    
    
    $      585NON-CASH OPERATING ACTIVITY:Change in deferred income taxes on net unrealized gain on
available-for-sale securities
    
    
    $     (295
    )
    
    
    $     (124
    )NON-CASH INVESTING ACTIVITY:Change in net unrealized gain on available-for-sale securities
    
    
    $      142
    
    
    
    $      365NON-CASH OPERATING AND INVESTING ACTIVITY:Transfer of loans to other real estate owned
    
    
    $        52
    
    
    
    $      227
  7




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CROGHAN BANCSHARES, INC.
Notes to Consolidated Financial Statements
June 30, 2010
(Unaudited)
 NOTE 1  CONSOLIDATED FINANCIAL STATEMENTS
    NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS
  Fair Value Measurements
and Disclosures
 8




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, Disclosure about the Credit
Quality of Financing Receivables and the Allowance for Credit losses
 NOTE 3  FAIR VALUE OF FINANCIAL INSTRUMENTS
  June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Estimated fair
    
    
    Carrying
    
    
    Estimated fairamount
    
    
    value
    
    
    amount
    
    
    value(Dollars in thousands)FINANCIAL ASSETSCash and cash equivalents
    
    $
    20,702
    
    
    
    $  20,702
    
    
    $
    16,724
    
    
    
    $  16,724Securities
    
    
    126,036
    
    
    
    126,039
    
    
    
    110,138
    
    
    
    110,162Loans, net
    
    
    301,305
    
    
    
    300,961
    
    
    
    320,051
    
    
    
    320,047Total
    
    $
    448,043
    
    
    
    $447,702
    
    
    $
    446,913
    
    
    
    $446,933FINANCIAL LIABILITIESDeposits
    
    $
    361,837
    
    
    
    $362,965
    
    
    $
    370,719
    
    
    
    $372,312Federal funds purchased and
securities sold under
repurchase agreements
    
    
    25,906
    
    
    
    25,783
    
    
    
    16,375
    
    
    
    16,327Federal Home Loan Bank
borrowings
    
    
    35,500
    
    
    
    36,915
    
    
    
    35,500
    
    
    
    37,108Total
    
    $
    423,243
    
    
    
    $425,663
    
    
    $
    422,594
    
    
    
    $425,747
   9




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Cash and Cash Equivalents
  Securities
  Loans
  Deposit Liabilities
  Other Financial Instruments
   10




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NOTE 4  SECURITIES
  June 30, 2010
    
    
    December 31, 2009Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Faircost
    
    
    value
    
    
    cost
    
    
    valueObligations of U.S. Government
agencies and corporations
    
    $
    72,007
    
    
    $
    73,309
    
    
    $
    65,927
    
    
    $
    66,729Obligations of states and
political subdivisions
    
    
    46,885
    
    
    
    48,032
    
    
    
    37,933
    
    
    
    38,713Other
    
    
    350
    
    
    
    350
    
    
    
    350
    
    
    
    350Total available-for-sale
    
    
    119,242
    
    
    
    121,691
    
    
    
    104,210
    
    
    
    105,792Held-to-maturity  corporate
debt obligation
    
    
    501
    
    
    
    516
    
    
    
    502
    
    
    
    526Restricted stock
    
    
    3,844
    
    
    
    3,844
    
    
    
    3,844
    
    
    
    3,844Total
    
    $
    123,587
    
    
    $
    126,051
    
    
    $
    108,556
    
    
    $
    110,162
  June 30, 2010
    
    
    December 31, 2009Gross
    
    
    Gross
    
    
    Gross
    
    
    Grossunrealized gains
    
    
    unrealized losses
    
    
    unrealized gains
    
    
    unrealized lossesObligations of U.S. Government
agencies and corporations
    
    
    $1,724
    
    
    
    $422
    
    
    
    $1,153
    
    
    
    $351Obligations of states and
political subdivisions
    
    
    1,197
    
    
    
    50
    
    
    
    871
    
    
    
    91Total available-for-sale
    
    
    2,921
    
    
    
    472
    
    
    
    2,024
    
    
    
    442Held-to-maturity  corporate
debt obligation
    
    
    15
    
    
    
    
    
    
    
    24
    
    
    
    Total
    
    
    $2,936
    
    
    
    $472
    
    
    
    $2,048
    
    
    
    $442
 11




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NOTE 5  OTHER COMPREHENSIVE INCOME
  2010
    
    
    2009Unrealized gains on available-for-sale securities
    
    
    $2,449
    
    
    
    $1,078Tax effect
    
    
    833
    
    
    
    366Net-of-tax amount
    
    
    $1,616
    
    
    
    $   712
 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, 2010
    
    June 30, 2009(Dollars in thousands)Provision for loan losses charged to expense
    
    $
    1,100
    
    
    $
    1,100Net loan charge-offs
    
    
    250
    
    
    
    697Annualized net loan charge-offs as a percent
of average outstanding loans
    
    
    .16
    %
    
    
    .21
    %
 15




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June 30, 2010
    
    
    December 31, 2009(Dollars in thousands)Nonaccrual loans
    
    
    $  4,406
    
    
    
    $  5,903Loans contractually past due 90 days or more
and still accruing interest
    
    
    293
    
    
    
    45Restructured loans
    
    
    3,584
    
    
    
    3,191Potential problem loans, other than those past due
90 days or more, nonaccrual, or restructured
    
    
    23,700
    
    
    
    22,227Total potential problem and non-performing loans
    
    
    $31,983
    
    
    
    $31,366Allowance for loan losses
    
    
    $  5,283
    
    
    
    $  4,433Allowance for loan losses as a percent
of period-end loans
    
    
    1.72
    %
    
    
    1.37
    %
     16




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June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Potential problem loans not currently past due
    
    $
    19,182
    
    
    
    $16,453Potential problem loans past due one day or more but less than 10 days
    
    
    2,338
    
    
    
    186Potential problem loans past due 10 days or more but less than 30 days
    
    
    1,159
    
    
    
    4,833Potential problem loans past due 30 days or more but less than 60 days
    
    
    409
    
    
    
    528Potential problem loans past due 60 days or more but less than 90 days
    
    
    612
    
    
    
    227Total potential problem loans
    
    $
    23,700
    
    
    
    $22,227
   June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Collateralized by an interest in real property
    
    $
    23,010
    
    
    
    $21,622Collateralized by an interest in assets other than real property
    
    
    683
    
    
    
    600Unsecured
    
    
    7
    
    
    
    5Total potential problem loans
    
    $
    23,700
    
    
    
    $22,227
  NON-INTEREST INCOME
  17




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NON-INTEREST EXPENSES
   FEDERAL INCOME TAX EXPENSE
  LIQUIDITY AND CAPITAL RESOURCES
     18




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EVALUATION OF 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
  19




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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, 2010:
 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)04/01/10
through
    
    None
    
    None
    
    None
    
    
    74,93404/30/1005/01/10
through
    
    
    10,817
    
    
    $25.60
    
    
    
    10,817
    
    
    
    64,11705/31/1006/01/10
through
    
    None
    
    None
    
    None
    
    
    64,11706/30/10
 20




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##### Table of Contents



(1)
    
    An extension of Croghans stock repurchase program commencing February 1, 2010 and
ending August 1, 2010 was announced on January 28, 2010, in which up to 85,693 shares may
be repurchased (with 10,759 shares purchased in the first quarter of 2010, 6,012 shares
purchased on May 5, 2010, 2,705 shares purchased on May 12, 2010, and 2,100 shares
purchased on May 28, 2010). Another extension of Croghans stock repurchase program was
approved on July 13, 2010, in which up to 84,615 shares could be repurchased from August 1,
2010 to February 1, 2011.
 
   
  
   
  ExhibitNumber
    
    Description and Exhibit Location31.1
    
    
    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)
 21




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##### Table of Contents



CROGHAN BANCSHARES, INC.RegistrantDate: July 28, 2010
    By:
    /s/ Steven C. FutrellSteven C. Futrell, President and CEO(Principal Executive Officer) Date: July 28, 2010
    By:
    /s/  Kendall W. RiemanKendall W. Rieman, Treasurer(Principal Financial Officer) 22




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Location31.1
    
    
    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
 23