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 September 30, 2012

0-20159

(Commission File Number)

 

 

CROGHAN BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

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)

(419) 332-7301

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨   (Do not check if a smaller reporting company)    Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ¨     No   x

The Registrant had 1,673,380 common shares, par value $12.50 per share, outstanding as of October 26, 2012.

This document contains 41 pages. The Exhibit Index is on page 38 immediately preceding the filed exhibits.

 

 

 


Table of Contents

CROGHAN BANCSHARES, INC.

Index

 

PART I. FINANCIAL INFORMATION    Page(s)
Item 1.  

Financial Statements

   3 - 28
Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   28 - 33
Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

   34
Item 4.  

Controls and Procedures

   34
PART II. OTHER INFORMATION   
Item 1.  

Legal Proceedings

   34
Item 1A.  

Risk Factors

   35
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

   35
Item 3.  

Defaults Upon Senior Securities

   35
Item 4.  

Mine Safety Disclosures

   35
Item 5.  

Other Information

   35
Item 6.  

Exhibits

   36
Signatures    37

 

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CROGHAN BANCSHARES, INC.

Consolidated Balance Sheets (Unaudited)

 

ASSETS    September 30
2012
    December 31
2011
 
CASH AND CASH EQUIVALENTS   

(Dollars in thousands,

except par value)

 

Cash and due from banks

   $ 9,016     $ 21,787  

Interest-bearing deposits in other banks

     232       38,306  
  

 

 

   

 

 

 

Total cash and cash equivalents

     9,248       60,093  
  

 

 

   

 

 

 

SECURITIES

    

Available-for-sale, at fair value

     249,241       225,282  

Restricted stock

     4,174       3,844  
  

 

 

   

 

 

 

Total securities

     253,415       229,126  
  

 

 

   

 

 

 

LOANS

     316,521       301,965  

Less: Allowance for loan losses

     4,343       4,778  
  

 

 

   

 

 

 

Net loans

     312,178       297,187  
  

 

 

   

 

 

 

Premises and equipment, net

     7,655       8,215  

Cash surrender value of life insurance

     11,029       10,766  

Goodwill

     14,629       14,675  

Core deposit intangible asset, net

     1,027       1,327  

Accrued interest receivable

     2,986       2,485  

Other real estate owned

     1,362       1,877  

Other assets

     2,670       3,900  
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 616,199     $ 629,651  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

LIABILITIES

    

Deposits:

    

Demand, non-interest bearing

   $ 89,223     $ 77,056  

Savings, NOW, and Money Market deposits

     245,712       231,182  

Time

     172,142       193,599  
  

 

 

   

 

 

 

Total deposits

     507,077       501,837  

Federal funds purchased and securities sold under repurchase agreements

     19,126       40,861  

Borrowed funds

     17,973       18,500  

Dividends payable

     535       535  

Other liabilities

     4,722       5,035  
  

 

 

   

 

 

 

Total liabilities

     549,433       566,768  
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

    

Common stock, $12.50 par value. Authorized 6,000,000 shares; issued 1,914,109 shares

     23,926       23,926  

Surplus

     248       179  

Retained earnings

     44,645       42,662  

Accumulated other comprehensive income

     6,172       4,341  

Treasury stock, 240,729 shares in 2012 and 2011, at cost

     (8,225     (8,225
  

 

 

   

 

 

 

Total stockholders’ equity

     66,766       62,883  
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 616,199     $ 629,651  
  

 

 

   

 

 

 

See notes to consolidated financial statements.

 

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CROGHAN BANCSHARES, INC.

Consolidated Statements of Operations (Unaudited)

 

     Three months ended
September 30
 
     2012      2011  
    

(Dollars in thousands,

except per share data)

 

INTEREST INCOME

     

Loans, including fees

   $ 4,280      $ 4,313  

Securities:

     

Obligations of U.S. Government agencies and corporations

     198        649  

Obligations of states and political subdivisions

     757        571  

Other

     51        45  

Interest on deposits in other banks

     4        5  
  

 

 

    

 

 

 

Total interest income

     5,290        5,583  
  

 

 

    

 

 

 

INTEREST EXPENSE

     

Deposits

     532        583  

Other borrowings

     190        176  
  

 

 

    

 

 

 

Total interest expense

     722        759  
  

 

 

    

 

 

 

Net interest income

     4,568        4,824  

PROVISION FOR LOAN LOSSES

     150        (100
  

 

 

    

 

 

 

Net interest income, after provision for loan losses

     4,418        4,924  
  

 

 

    

 

 

 

NON-INTEREST INCOME

     

Gain on sale of securities

     0         149   

Gain on sale of loans

     62        25  

Loss on write down of securities

     0         (283

Trust income

     300        260  

Service charges on deposit accounts

     448        386  

Other

     272        251  
  

 

 

    

 

 

 

Total non-interest income

     1,082        788  
  

 

 

    

 

 

 

NON-INTEREST EXPENSES

     

Salaries, wages, and employee benefits

     2,129        2,058  

Occupancy of premises

     235        216  

Amortization of core deposit intangible asset

     100        14  

Other operating

     1,466        1,408  
  

 

 

    

 

 

 

Total non-interest expenses

     3,930        3,696  
  

 

 

    

 

 

 

Income before federal income taxes

     1,570        2,016  

FEDERAL INCOME TAXES

     286        475  
  

 

 

    

 

 

 

NET INCOME

   $ 1,284      $ 1,541  
  

 

 

    

 

 

 

Net income per share, based on 1,673,380 shares in 2012 and 2011

   $ 0.77      $ 0.92  
  

 

 

    

 

 

 

Dividends declared per share

   $ 0.32      $ 0.32  
  

 

 

    

 

 

 

See notes to consolidated financial statements.

 

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CROGHAN BANCSHARES, INC.

Consolidated Statements of Operations (Unaudited)

 

     Nine months ended
September 30
 
     2012      2011  
     (Dollars in thousands,
except per share data)
 

INTEREST INCOME

     

Loans, including fees

   $ 12,579      $ 12,564  

Securities:

     

Obligations of U.S. Government agencies and corporations

     937        2,002  

Obligations of states and political subdivisions

     2,233        1,641  

Other

     145        144  

Interest on deposits in other banks

     17        11  
  

 

 

    

 

 

 

Total interest income

     15,911        16,362  
  

 

 

    

 

 

 

INTEREST EXPENSE

     

Deposits

     1,853        1,991  

Other borrowings

     581        587  
  

 

 

    

 

 

 

Total interest expense

     2,434        2,578  
  

 

 

    

 

 

 

Net interest income

     13,477        13,784  

PROVISION FOR LOAN LOSSES

     325        300  
  

 

 

    

 

 

 

Net interest income, after provision for loan losses

     13,152        13,484  
  

 

 

    

 

 

 

NON-INTEREST INCOME

     

Gain on sale of securities

     311        149   

Gain on sale of loans

     98        94  

Loss on write down of securities

     0         (394

Trust income

     815        841  

Service charges on deposit accounts

     1,310        1,052  

Other

     784        710  
  

 

 

    

 

 

 

Total non-interest income

     3,318        2,452  
  

 

 

    

 

 

 

NON-INTEREST EXPENSES

     

Salaries, wages, and employee benefits

     6,413        6,159  

Occupancy of premises

     724        658  

Amortization of core deposit intangible asset

     300        43  

Other operating

     4,702        4,159  
  

 

 

    

 

 

 

Total non-interest expenses

     12,139        11,019  
  

 

 

    

 

 

 

Income before federal income taxes

     4,331        4,917  

FEDERAL INCOME TAXES

     742        1,069  
  

 

 

    

 

 

 

NET INCOME

   $ 3,589      $ 3,848  
  

 

 

    

 

 

 

Net income per share, based on 1,673,380 shares in 2012 and 1,673,907 shares in 2011

   $ 2.15      $ 2.30  
  

 

 

    

 

 

 

Dividends declared per share

   $ 0.96      $ 0.96  
  

 

 

    

 

 

 

See notes to consolidated financial statements.

 

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CROGHAN BANCSHARES, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

 

     Three months ended
September 30
 
     2012     2011  
     (Dollars in thousands)  

NET INCOME

   $ 1,284     $ 1,541  

Other comprehensive income

    

Unrealized gains (losses) on securities:

    

Unrealized holding gains during period

     1,737       1,782  

Reclassification adjustments for (gains) losses included in net income

     0        134   
  

 

 

   

 

 

 

Other comprehensive income, before income taxes

     1,737       1,916  
  

 

 

   

 

 

 

Less: Income tax expense related to other comprehensive income

     590       652  
  

 

 

   

 

 

 

Other comprehensive income

     1,147       1,264  
  

 

 

   

 

 

 

Total comprehensive income

   $ 2,431     $ 2,805  
  

 

 

   

 

 

 
     Nine months ended
September 30
 
     2012     2011  
     (Dollars in thousands)  

NET INCOME

   $ 3,589     $ 3,848  

Other comprehensive income

    

Unrealized gains (losses) on securities:

    

Unrealized holding gains during period

     3,085       4,478  

Reclassification adjustments for (gains) losses included in net income

     (311     245   
  

 

 

   

 

 

 

Other comprehensive income, before income taxes

     2,774       4,723  
  

 

 

   

 

 

 

Less: Income tax expense related to other comprehensive income

     943       1,606  
  

 

 

   

 

 

 

Other comprehensive income

     1,831       3,117  
  

 

 

   

 

 

 

Total comprehensive income

   $ 5,420     $ 6,965  
  

 

 

   

 

 

 

See notes to consolidated financial statements.

 

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CROGHAN BANCSHARES, INC.

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

 

     Three months ended
September 30
 
     2012     2011  
     (Dollars in thousands,
except per share data)
 

BALANCE AT BEGINNING OF PERIOD

   $ 64,859     $ 59,527  

Comprehensive Income:

    

Net income

     1,284       1,541  

Change in net unrealized gain on securities available-for-sale, net of reclassification adjustments and related income taxes

     1,147       1,264  
  

 

 

   

 

 

 

Total comprehensive income

     2,431       2,805  

Stock based compensation

     11        0   

Cash dividends declared, $.32 per share in 2012 and 2011

     (535     (535
  

 

 

   

 

 

 

BALANCE AT END OF PERIOD

   $ 66,766     $ 61,797  
  

 

 

   

 

 

 
     Nine months ended
September 30
 
     2012     2011  
     (Dollars in thousands,
except per share data)
 

BALANCE AT BEGINNING OF PERIOD

   $ 62,883     $ 56,513  

Comprehensive Income:

    

Net income

     3,589       3,848  

Change in net unrealized gain on securities available-for-sale, net of reclassification adjustments and related income taxes

     1,831       3,117  
  

 

 

   

 

 

 

Total comprehensive income

     5,420       6,965  

Purchase of 3,000 treasury shares in 2011

     0        (76

Stock based compensation

     68        0   

Cash dividends declared, $.96 per share in 2012 and 2011

     (1,605     (1,605
  

 

 

   

 

 

 

BALANCE AT END OF PERIOD

   $ 66,766     $ 61,797  
  

 

 

   

 

 

 

See notes to consolidated financial statements.

 

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CROGHAN BANCSHARES, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

     Nine months ended
September 30
 
     2012     2011  
     (Dollars in thousands)  

NET CASH FLOW FROM OPERATING ACTIVITIES

   $ 10,896     $ 6,973  
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

    

Proceeds from maturities of available-for-sale securities

     61,263       26,312  

Purchases of available-for-sale securities

     (94,762     (58,991

Purchases of restricted stock

     (330     0   

Proceeds from sale of available-for-sale securities

     7,858       4,005  

Final settlement payment for branch acquisition

     (1,026     0   

Net (increase) decrease in loans

     (15,528     14,486  

Additions to premises and equipment

     (177     (386
  

 

 

   

 

 

 

Net cash (used in) investing activities

     (42,702     (14,574
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Net change in deposits

     4,828       16,761  

Net change in federal funds purchased and securities sold under repurchase agreements

     (21,735     1,291  

Net change in borrowed funds

     (527     (13,000

Cash dividends paid

     (1,605     (1,606

Purchase of treasury stock

     0        (76
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (19,039     3,370  
  

 

 

   

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

     (50,845     (4,231

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

     60,093       21,856  
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

   $ 9,248     $ 17,625  
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES

    

Cash paid during the year for:

    

Interest

   $ 2,415     $ 2,808  
  

 

 

   

 

 

 

Federal income taxes

   $ 250      $ 490   
  

 

 

   

 

 

 

NON-CASH OPERATING ACTIVITY:

    

Change in deferred income taxes on net unrealized gain on available-for-sale securities

   $ (943   $ (1,606
  

 

 

   

 

 

 

NON-CASH INVESTING ACTIVITY:

    

Change in net unrealized gain on available-for-sale securities

   $ 2,774     $ 4,723  
  

 

 

   

 

 

 

NON-CASH OPERATING AND INVESTING ACTIVITY:

    

Transfer of loans to other real estate owned

   $ 1,023     $ 1,393  
  

 

 

   

 

 

 

See notes to consolidated financial statements.

 

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CROGHAN BANCSHARES, INC.

Notes to Consolidated Financial Statements

September 30, 2012

(Unaudited)

NOTE 1 - Consolidated Financial Statements

The consolidated financial statements of Croghan Bancshares, Inc. (“Croghan” or the “Corporation”) and its wholly-owned subsidiary, The Croghan Colonial Bank (the “Bank”), have been prepared without audit. In the opinion of management, all adjustments (including normal recurring adjustments) necessary to present fairly the Corporation’s consolidated financial position, results of operations and changes in cash flows have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been omitted. The Corporation’s Annual Report to Shareholders for the year ended December 31, 2011 (the “2011 Annual Report”), contains consolidated financial statements and related footnote disclosures which should be read in conjunction with the accompanying consolidated financial statements. The results of operations for the period ended September 30, 2012, are not necessarily indicative of the operating results for the full year.

Management evaluated subsequent events through October 26, 2012, the date the financial statements were issued. Events or transactions occurring after September 30, 2012, but prior to when the consolidated financial statements were issued, that provided additional evidence about conditions that existed at September 30, 2012, have been recognized in the consolidated financial statements for the period ended September 30, 2012. Events or transactions that provided evidence about conditions that arose before the consolidated financial statements were issued, but did not exist at September 30, 2012, have not been recognized in the consolidated financial statements for the period ended September 30, 2012.

 

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NOTE 2 – NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, The Financial Accounting Standards Board (FASB) issued ASU 2011-04, Fair Value Measurement, amending ASC Topic 820 which eliminates terminology differences between U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS) on the measurement of fair value and related fair value disclosures. While largely consistent with existing fair value measurement principles and disclosures, the changes were made as part of the continuing efforts to converge GAAP and IFRS. The adoption of this guidance was effective for interim and annual periods beginning after December 15, 2011, and its adoption did not have a significant impact on the Corporation’s financial statements.

In June 2011, FASB issued ASU 2011-05, Comprehensive Income , amending ASC Topic 220 to require that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, the guidance requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented. The option to present components of other comprehensive income as part of the statement of stockholders’ equity was eliminated. In December 2011, FASB issued ASU 2011-12 to defer changes in ASU 2011-05 that relate to the presentation of reclassification adjustments until FASB has time to reconsider the presentation of such adjustments. The remaining portion of ASU 2011-05 was effective for annual periods beginning after December 15, 2011, and its adoption did not have a significant impact on the Corporation’s financial statements.

In December 2011, FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities , amending ASC Topic 210 requiring an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The amendment is effective for the annual and interim periods beginning on or after January 1, 2013, and the Corporation has not yet determined the financial statement impact.

In July 2012, FASB issued ASU 2012-02, Intangibles – Goodwill and Other , amending ASC Topic 350 to simplify how an entity tests indefinite-lived intangible assets other than goodwill for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendment permits an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset other than goodwill is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. The amendment is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012. Management does not expect the amendment to have any effect on the Corporation’s financial statements.

 

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NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of recognized financial instruments were as follows:

 

     September 30, 2012      December 31, 2011  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  
     (Dollars in Thousands)  

Financial Assets

           

Cash and cash equivalents

   $ 9,248      $ 9,248      $ 60,093      $ 60,093  

Securities

     253,415        253,415        229,126        229,126  

Loans, net

     312,178        319,731        297,187        302,984  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 574,841      $ 582,394      $ 586,406      $ 592,203  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial Liabilities

           

Deposits

   $ 507,077      $ 508,879      $ 501,837      $ 503,563  

Federal Funds purchased and securities sold under repurchase agreements

     19,126        19,261        40,861        39,932  

Borrowed funds

     17,973        19,584        18,500        19,980  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 544,176      $ 547,724      $ 561,198      $ 563,475  
  

 

 

    

 

 

    

 

 

    

 

 

 

The preceding summary does not include accrued interest receivable, cash surrender value of life insurance, dividends payable, and other liabilities which are also considered financial instruments. The estimated fair value of such items is considered to be their carrying amount.

The Bank also has unrecognized financial instruments which relate to commitments to extend credit and standby letters of credit. The contract amount of such financial instruments totaled $85,633,000 at September 30, 2012 and $76,793,000 at December 31, 2011. Since many of these commitments are expected to expire without being drawn upon, these contract amounts do not necessarily represent future cash requirements.

The following methods and assumptions were used to estimate fair value of each class of financial instruments:

Cash and Cash Equivalents

Fair value is determined to be the carrying amount for these items because they represent cash or mature in 90 days or less and do not represent unanticipated credit concerns.

Securities

The fair value of securities (both available-for-sale and held-to-maturity) is determined based on quoted market prices of the individual securities or, if not available, estimated fair value is obtained by comparison to other known securities with similar risk and maturity characteristics. Such value does not consider possible tax ramifications or estimated transaction costs. The fair value of restricted stock is considered to be its carrying amount.

 

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Loans

Fair value for loans is estimated for portfolios of loans with similar financial characteristics. For adjustable rate loans, which re-price at least annually and generally possess low risk characteristics, the carrying amount is believed to be a reasonable estimate of fair value. For fixed-rate loans, the fair value is estimated based on a discounted cash flow analysis, considering weighted average rates and terms of the portfolio, adjusted for credit and interest rate risk inherent in the loans. Fair value for non-performing loans is based on recent appraisals or estimated discounted cash flows. The estimated value of credit card loans is based on existing loans and does not include the value that relates to estimated cash flows from new loans generated from existing cardholders over the remaining life of the portfolio.

Deposit Liabilities

The fair value of core deposits, including demand deposits, savings accounts, and certain money market deposits, is the amount payable on demand. The fair value of fixed-rate certificates of deposit is estimated using the rates offered at period end for deposits of similar remaining maturities. The estimated fair value does not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the marketplace.

Other Financial Instruments

The fair value of federal funds purchased, securities sold under repurchase agreements, as well as borrowed funds, is determined based on a discounted cash flow analysis using current interest rates.

The fair value estimates of financial instruments are made at a specific point in time based on relevant market information. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

NOTE 4 – FAIR VALUE MEASUREMENTS

Assets and liabilities carried at fair value are required to be classified and disclosed according to this process for determining fair value. There are three levels of determining fair value:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date. Unobservable inputs reflect the Corporation’s own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available under the circumstances, which might include the Corporation’s own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.

 

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Table of Contents

There were no financial instruments measured at fair value that moved to a lower level in the fair value hierarchy due to the lack of observable quotes in inactive markets for those instruments at September 30, 2012 and December 31, 2011.

The following summarizes financial assets (there were no financial liabilities) measured at fair value as of September 30, 2012 and December 31, 2011, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

 

9/30/2012    Level 1
inputs
     Level 2
inputs
     Level 3
inputs
     Total fair
value
 
     (Dollars in Thousands)  

Recurring

           

Securities available-for-sale:

           

Obligations of U.S. Government agencies and corporations

   $ 0       $ 145,589      $ 0       $ 145,589  

Obligations of states and political subdivisions

     0         103,302        0         103,302  

Other

     0         350        0         350  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 0       $ 249,241      $ 0       $ 249,241  
  

 

 

    

 

 

    

 

 

    

 

 

 

Nonrecurring

           

Other real estate owned

   $ 0       $ 0       $ 1,362      $ 1,362  

Impaired loans

     0         0         13,175        13,175  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 0       $ 0       $ 14,537      $ 14,537  
  

 

 

    

 

 

    

 

 

    

 

 

 
12/31/2011    Level 1
inputs
     Level 2
inputs
     Level 3
inputs
     Total fair
value
 
     (Dollars in Thousands)  

Recurring

           

Securities available-for-sale:

           

Obligations of U.S. Government agencies and corporations

   $ 0       $ 137,244      $ 0       $ 137,244  

Obligations of states and political subdivisions

     0         87,688        0         87,688  

Other

     0         350        0         350  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 0       $ 225,282      $ 0       $ 225,282  
  

 

 

    

 

 

    

 

 

    

 

 

 

Nonrecurring

           

Other real estate owned

   $ 0       $ 0       $ 1,877      $ 1,877  

Impaired loans

     0         0         14,681        14,681  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 0       $ 0       $ 16,558      $ 16,558  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, follows.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the corporation’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Corporation’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Corporation’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Securities Available-for-Sale

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities would typically include certain government bonds and exchange traded equities. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of such instruments, which would generally be classified within Level 2 of the valuation hierarchy, include corporate and municipal bonds, mortgage-backed securities, and asset-backed securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. The Corporation did not have any securities classified as Level 1 or Level 3 at September 30, 2012 and December 31, 2011.

Impaired Loans

The Corporation does not record impaired loans at fair value on a recurring basis. However, periodically, a loan is considered impaired and is reported at the fair value of the underlying collateral, less estimated costs to sell, if repayment is expected solely from the collateral. Collateral values are estimated using Level 2 inputs, including recent appraisals and Level 3 inputs based on customized discounting criteria. Due to the significance of the Level 3 inputs, impaired loans have been classified as Level 3.

Other Real Estate Owned

The Corporation values other real estate owned at the estimated fair value of the underlying collateral less expected selling costs. Such values are estimated primarily using appraisals and reflect a market value approach. Due to the significance of the Level 3 inputs, other real estate owned has been classified as Level 3.

 

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Table of Contents

NOTE 5 – SECURITIES

Amortized cost and fair value securities were as follows:

 

     September 30, 2012      December 31, 2011  
     Amortized
cost
     Fair Value      Amortized
cost
     Fair Value  
     (Dollars in Thousands)  

Obligations of U.S. Government agencies and corporations

   $ 142,935      $ 145,589      $ 135,929      $ 137,244  

Obligations of states and political subdivisions

     96,604        103,302        82,426        87,688  

Other

     350        350        350        350  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale

     239,889        249,241        218,705        225,282  

Restricted stock

     4,174        4,174        3,844        3,844  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 244,063      $ 253,415      $ 222,549      $ 229,126  
  

 

 

    

 

 

    

 

 

    

 

 

 
     September 30, 2012      December 31, 2011  
     Gross
unrealized
gains
     Gross
unrealized
losses
     Gross
unrealized
gains
     Gross
unrealized
losses
 
     (Dollars in Thousands)  

Obligations of U.S. Government agencies and corporations

   $ 3,113      $ 459      $ 2,142      $ 827  

Obligations of states and political subdivisions

     6,712        14        5,264        2  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,825      $ 473      $ 7,406      $ 829  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

NOTE 6 – LOANS

The following presents the balances and activity in the allowance for loan losses for the period ended September 30, 2012 and September 30, 2011 (dollars in thousands):

 

9/30/2012    Commercial     Residential
real estate
   

Non-

residential
real estate

    Construction
real estate
    Consumer     Credit
Card
    Total  

Balance at December 31, 2011

   $ 615     $ 1,905     $ 1,926     $ 179     $ 84     $ 69     $ 4,778  

Provision charged to expense

     5        547        (345     21        84        13        325   

Losses charged off

     (2     (451     (322     0        (61     (20     (856

Recoveries

     11        22        46        0        12        5        96   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2012

   $ 629     $ 2,023     $ 1,305     $ 200     $ 119     $ 67     $ 4,343  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
9/30/2011    Commercial     Residential
real estate
   

Non-

residential

real estate

    Construction
real estate
    Consumer     Credit
Card
    Total  

Balance at December 31, 2010

   $ 542     $ 1,857     $ 2,049     $ 347     $ 85     $ 75     $ 4,955  

Provision charged to expense

     (212     310        188        (8     11        11        300   

Losses charged off

     (56     (460     (628     0        (34     (31     (1209

Recoveries

     196        72        523        0        20        7        818   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2011

   $ 470     $ 1,779     $ 2,132     $ 339     $ 82     $ 62     $ 4,864  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

The following presents the balances in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2012 and December 31, 2011 (dollars in thousands):

 

9/30/2012    Commercial      Residential
real estate
    

Non-

residential

real estate

     Construction
real estate
     Consumer      Credit
card
     Total  

Allowance for loan losses:

                    

Ending Balance attributable to loans:

                    

Individually evaluated for impairment

   $ 25       $ 335      $ 185      $ 0       $ 0       $ 0       $ 545  

Collectively evaluated for impairment

     604        1,688        1,120        200        119        67        3,798  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 629      $ 2,023      $ 1,305      $ 200      $ 119      $ 67      $ 4,343  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans individually evaluated for impairment

   $ 3,141      $ 3,087      $ 7,492      $ 0       $ 0       $ 0       $ 13,720  

Loans collectively evaluated for impairment

     27,249        126,246        127,794        3,663        14,930        2,919        302,801  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 30,390      $ 129,333      $ 135,286      $ 3,663      $ 14,930      $ 2,919      $ 316,521  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
12/31/2011    Commercial      Residential
real estate
    

Non-

residential
real estate

     Construction
real estate
     Consumer      Credit
card
     Total  

Allowance for loan losses:

                    

Ending Balance attributable to loans:

                    

Individually evaluated for impairment

   $ 0       $ 496      $ 646      $ 53      $ 0       $ 0       $ 1,195  

Collectively evaluated for impairment

     615         1,409        1,280        126        84        69        3,583  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 615      $ 1,905      $ 1,926      $ 179      $ 84      $ 69      $ 4,778  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans individually evaluated for impairment

   $ 685      $ 2,912      $ 11,220      $ 1,059      $ 0       $ 0       $ 15,876  

Loans collectively evaluated for impairment

     28,278        124,538        115,195        4,178        11,203        2,697        286,089  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 28,963      $ 127,450      $ 126,415      $ 5,237      $ 11,203      $ 2,697      $ 301,965  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

The following represents loans individually evaluated for impairment by class of loans as of September 30, 2012 and December 31, 2011 (dollars in thousands):

 

9/30/2012                     
With no related allowance recorded:    Unpaid
principal
balance
     Recorded
investment
     Allowance
for loan
loss
allocated
 

Agricultural loans

   $ 0       $ 0       $ 0   

Commercial loans

     3,000         3,000         0   

Commercial overdraft LOC

     59         59         0   

Commercial non-profit/political subdivisions

     0         0         0   

Open-end home equity

     122         122         0   

1 – 4 family real estate (1 st mortgages)

     1,484         1,419         0   

1 – 4 family real estate (Jr. mortgages)

     46         46         0   

Multifamily real estate

     212         212         0   

Farm real estate

     0         0         0   

Non-farm/non-residential real estate

     5,007         5,007         0   

Construction real estate

     0         0         0   

Consumer loans – vehicle

     0         0         0   

Consumer overdraft LOC

     0         0         0   

Consumer loans – mobile home

     0         0         0   

Consumer loans – home improvement

     0         0         0   

Consumer loans – other

     0         0         0   

MasterCard/VISA

     0         0         0   

With an allowance recorded:

        

Agricultural loans

     0         0         0   

Commercial loans

     82         82         25   

Commercial overdraft LOC

     0         0         0   

Commercial non-profit/political subdivisions

     0         0         0   

Open-end home equity

     0         0         0   

1 – 4 family real estate (1 st mortgages)

     1,448         1,288         335   

1 – 4 family real estate (Jr. mortgages)

     0         0         0   

Multifamily real estate

     0         0         0   

Farm real estate

     0         0         0   

Non-farm/non-residential real estate

     2,635         2,485         185   

Construction real estate

     0         0         0   

Consumer loans – vehicle

     0         0         0   

Consumer overdraft LOC

     0         0         0   

Consumer loans – mobile home

     0         0         0   

Consumer loans – home improvement

     0         0         0   

Consumer loans – other

     0         0         0   

MasterCard/VISA

     0         0         0   
  

 

 

    

 

 

    

 

 

 

Total

   $ 14,095       $ 13,720       $ 545   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

12/31/2011

        
With no related allowance recorded:    Unpaid
principal
balance
     Recorded
investment
     Allowance
for loan
loss
allocated
 

Agricultural loans

   $ 0       $ 0       $ 0   

Commercial loans

     630         630         0   

Commercial overdraft LOC

     55         55         0   

Commercial non-profit/political subdivisions

     0         0         0   

Open-end home equity

     19         19         0   

1 – 4 family real estate (1 st mortgages)

     873         863         0   

1 – 4 family real estate (Jr. mortgages)

     77         77         0   

Multifamily real estate

     0         0         0   

Farm real estate

     0         0         0   

Non-farm/non-residential real estate

     8,246         8,246         0   

Construction real estate

     0         0         0   

Consumer loans – vehicle

     0         0         0   

Consumer overdraft LOC

     0         0         0   

Consumer loans – mobile home

     0         0         0   

Consumer loans – home improvement

     0         0         0   

Consumer loans – other

     0         0         0   

MasterCard/VISA

     0         0         0   

With an allowance recorded:

        

Agricultural loans

     0         0         0   

Commercial loans

     0         0         0   

Commercial overdraft LOC

     0         0         0   

Commercial non-profit/political subdivisions

     0         0         0   

Open-end home equity

     0         0         0   

1 – 4 family real estate (1 st mortgages)

     2,097         1,818         433   

1 – 4 family real estate (Jr. mortgages)

     135         135         63   

Multifamily real estate

     0         0         0   

Farm real estate

     0         0         0   

Non-farm/non-residential real estate

     3,395         2,974         646   

Construction real estate

     1,059         1,059         53   

Consumer loans – vehicle

     0         0         0   

Consumer overdraft LOC

     0         0         0   

Consumer loans – mobile home

     0         0         0   

Consumer loans – home improvement

     0         0         0   

Consumer loans – other

     0         0         0   

MasterCard/VISA

     0         0         0   
  

 

 

    

 

 

    

 

 

 

Total

   $ 16,586       $ 15,876       $ 1,195   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

The Bank categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Bank uses the following definitions for risk ratings:

 

   

Special Mention – Loans classified as “special mention” possess some credit deficiency or potential weakness that deserves close attention, but do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk of losses in the future.

 

   

Substandard – Loans classified as “substandard” are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard have well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are categorized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

   

Doubtful – Loans classified as “doubtful” have all of the weaknesses of those classified as substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. The following presents loans as of September 30, 2012 and December 31, 2011 that are collectively evaluated for impairment and are considered not impaired. Investments in each category found below do not include loans that are deemed impaired and analyzed individually for impairment which were presented previously (dollars in thousands):

 

9/30/2012    Pass      Special
mention
     Substandard      Doubtful      Not
rated
 

Agricultural loans

   $ 3,365       $ 0       $ 0       $ 0       $ 0   

Commercial loans

     22,833         32         146         0         0   

Commercial overdraft LOC

     0         0         0         0         107   

Commercial non-profit/political subdivisions

     766         0         0         0         0   

Open-end home equity

     25,783         379         307         0         0   

1 – 4 family real estate (1 st mortgages)

     87,670         1,539         2,156         0         0   

1 – 4 family real estate (Jr. mortgages)

     8,102         46         264         0         0   

Multifamily real estate

     8,043         0         2,452         0         0   

Farm real estate

     8,966         295         0         0         0   

Non-farm/non-residential real estate

     95,079         9,960         2,999         0         0   

Construction real estate

     2,716         0         947         0         0   

Consumer loans – vehicle

     5,156         6         3         0         0   

Consumer overdraft LOC

     0         0         0         0         263   

Consumer loans – mobile home

     576         0         0         0         0   

Consumer loans – home improvement

     225         0         0         0         0   

Consumer loans – other

     8,677         8         16         0         0   

MasterCard/VISA

     0         0         0         0         2,919   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 277,957       $ 12,265       $ 9,290       $ 0       $ 3,289   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

20


Table of Contents
12/31/2011    Pass      Special
mention
     Substandard      Doubtful      Not
rated
 

Agricultural loans

   $ 3,207       $ 0       $ 0       $ 0       $ 0   

Commercial loans

     23,596         192         10         0         0   

Commercial overdraft LOC

     0         0         0         0         353   

Commercial non-profit/political subdivisions

     920         0         0         0         0   

Open-end home equity

     26,879         449         268         0         0   

1 – 4 family real estate (1 st mortgages)

     83,743         1,233         2,250         0         0   

1 – 4 family real estate (Jr. mortgages)

     9,416         0         300         0         0   

Multifamily real estate

     5,973         0         2,856         0         0   

Farm real estate

     8,645         47         0         0         0   

Non-farm/non-residential real estate

     80,391         12,279         5,004         0         0   

Construction real estate

     3,220         0         958         0         0   

Consumer loans – vehicle

     3,408         3         5         0         0   

Consumer overdraft LOC

     0         0         0         0         236   

Consumer loans – mobile home

     706         18         0         0         0   

Consumer loans – home improvement

     194         0         0         0         0   

Consumer loans – other

     6,577         36         20         0         0   

MasterCard/VISA

     0         0         0         0         2,697   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 256,875       $ 14,257       $ 11,671       $ 0       $ 3,286   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

21


Table of Contents

The following presents the recorded investment by class of loans which are not on nonaccrual and have collectively been evaluated for impairment as of September 30, 2012 and December 31, 2011 (dollars in thousands):

 

9/30/2012    30-89 days
past due
     90+ days
past due
     Total
past due
     Not
past due
     Total  

Agricultural loans

   $ 0       $ 0       $ 0       $ 3,365      $ 3,365  

Commercial loans

     1         0         1         23,010        23,011  

Commercial overdraft LOC

     0         0         0         107        107  

Commercial non-profit/political subdivisions

     0         0         0         766        766  

Open-end home equity

     219         103         322         26,147        26,469  

1 – 4 family real estate (1 st mortgages)

     2,354        281        2,635        88,730        91,365  

1 – 4 family real estate (Jr. mortgages)

     150        0         150        8,262        8,412  

Multifamily real estate

     0         0         0         10,495        10,495  

Farm real estate

     44         0         44         9,217        9,261  

Non-farm/non-residential real estate

     699         0         699         107,339        108,038  

Construction real estate

     0         0         0         3,663        3,663  

Consumer loans – vehicle

     9         0         9         5,156        5,165  

Consumer overdraft LOC

     8         1         9         254        263  

Consumer loans – mobile home

     6         0         6         570        576  

Consumer loans – home improvement

     0         0         0         225        225  

Consumer loans – other

     76         0         76         8,625        8,701  

MasterCard/VISA

     43         7         50         2,869        2,919  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,609      $ 392      $ 4,001      $ 298,800      $ 302,801  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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12/31/2011    30-89 days
past due
     90+ days
past due
     Total
past due
     Not
past due
     Total  

Agricultural loans

   $ 0       $ 0       $ 0       $ 3,207      $ 3,207  

Commercial loans

     16         0         16         23,782        23,798  

Commercial overdraft LOC

     0         0         0         353        353  

Commercial non-profit/political subdivisions

     0         0         0         920        920  

Open-end home equity

     213         91         304         27,293        27,597  

1 – 4 family real estate (1 st mortgages)

     2,046        566        2,612        84,614        87,226  

1 – 4 family real estate (Jr. mortgages)

     48         9         57         9,658        9,715  

Multifamily real estate

     0         0         0         8,829        8,829  

Farm real estate

     38         0         38         8,655        8,693  

Non-farm/non-residential real estate

     616         0         616         97,057        97,673  

Construction real estate

     0         0         0         4,178        4,178  

Consumer loans – vehicle

     6         0         6         3,410        3,416  

Consumer overdraft LOC

     9         0         9         227        236  

Consumer loans – mobile home

     18         0         18         706        724  

Consumer loans – home improvement

     0         0         0         194        194  

Consumer loans – other

     41         0         41         6,592        6,633  

MasterCard/VISA

     30         6         36         2,661        2,697  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,081      $ 672      $ 3,753      $ 282,336      $ 286,089  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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The following presents the recorded investment in loans past due 90 days or more still accruing, nonaccrual, and Troubled Debt Restructurings (TDR) by class as of September 30, 2012 and December 31, 2011 (dollars in thousands):

 

9/30/2012    Loans
past due
90+ and still
accruing
     Nonaccrual      TDR  

Agricultural loans

   $ 0       $ 0       $ 0   

Commercial loans

     0         11         93   

Commercial overdraft LOC

     0         0         0   

Commercial non-profit/political subdivisions

     0         0         0   

Open-end home equity

     103         17         105   

1 – 4 family real estate (1 st mortgages)

     281         1,864        1043   

1 – 4 family real estate (Jr. mortgages)

     0         30         15   

Multifamily real estate

     0         212         0   

Farm real estate

     0         0         0   

Non-farm/non-residential real estate

     0         705         3,150   

Construction real estate

     0         —           —     

Consumer loans – vehicle

     0         0         0   

Consumer overdraft LOC

     1         0         0   

Consumer loans – mobile home

     0         0         0   

Consumer loans – home improvement

     0         0         0   

Consumer loans – other

     0         0         0   

MasterCard/VISA

     7         0         0   
  

 

 

    

 

 

    

 

 

 

Total

   $ 392       $ 2,839       $ 4,406   
  

 

 

    

 

 

    

 

 

 
12/31/2011    Loans
past due
90+ and still
accruing
     Nonaccrual      TDR  

Agricultural loans

   $ 0       $ 0       $ 0   

Commercial loans

     0         88         54   

Commercial overdraft LOC

     0         0         0   

Commercial non-profit/political subdivisions

     0         0         0   

Open-end home equity

     91         19         413   

1 – 4 family real estate (1 st mortgages)

     566         2,338         99   

1 – 4 family real estate (Jr. mortgages)

     9         113         0   

Multifamily real estate

     0         0         0   

Farm real estate

     0         0         0   

Non-farm/non-residential real estate

     0         1,054         3,569   

Construction real estate

     0         1,059         692   

Consumer loans – vehicle

     0         0         0   

Consumer overdraft LOC

     0         0         0   

Consumer loans – mobile home

     0         0         0   

Consumer loans – home improvement

     0         0         0   

Consumer loans – other

     0         0         0   

MasterCard/VISA

     6         0         0   
  

 

 

    

 

 

    

 

 

 

Total

   $ 672       $ 4,671       $ 4,827   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

The following presents the recorded investment in TDR loans by class, which occurred during the nine-months ended September 30, 2012 (dollars in thousands):

 

9/30/2012    Number of
Contracts
     Recorded
investment
     Allowance
for loan
losses
allocated
 

Agricultural loans

     0       $ 0       $ 0   

Commercial loans

     1         68         0   

Commercial overdraft LOC

     0         0         0   

Commercial non-profit/political subdivisions

     0         0         0   

Open-end home equity

     1         89         0   

1 – 4 family real estate (1 st mortgages)

     6         581         25   

1 – 4 family real estate (Jr. mortgages)

     2         15         0   

Multifamily real estate

     0         0         0   

Farm real estate

     0         0         0   

Non-farm/non-residential real estate

     0         0         0   

Construction real estate

     0         0         0   

Consumer loans – vehicle

     0         0         0   

Consumer overdraft LOC

     0         0         0   

Consumer loans – mobile home

     0         0         0   

Consumer loans – home improvement

     0         0         0   

Consumer loans – other

     0         0         0   

MasterCard/VISA

     0         0         0   
  

 

 

    

 

 

    

 

 

 

Total

     10       $ 753       $ 25   
  

 

 

    

 

 

    

 

 

 

During the nine-month period ended September 30, 2012, there was a recorded investment of restructured loans totaling $753,000 that resulted from TDRs, of which $25,000 was added to the Allowance for Loan Losses.

Within the TDR loan portfolio, two of the loan modifications resulted in extending the maturity of each loan and a new amortization of the balance of the loan while another two loan modifications resulted in a reduced interest rate. Two modifications had an independent source bring the note current and agree to pay the payments for a period of time. Also within the TDR portfolio, two loans had a reduction of principal and interest to maturity resulting in a balloon payment at the stated maturity date, one TDR loan had its principal and interest suspended for 11 months, and one had interest only concession for six months.

 

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Table of Contents

NOTE 7 – STOCK BASED COMPENSATION

The Corporation established a Stock Option and Incentive Plan (the “2002 Plan”) in 2002, which permitted the Corporation to award stock options and/or stock appreciation rights to directors and managerial and other key employees of the Corporation. The awards could be in the form of stock options and/or stock appreciation rights. The 2002 Plan, which provided for the issuance of up to 190,951 shares, expired in March 2012. At the 2012 Annual Meeting, the shareholders of the Corporation adopted the Croghan Bancshares Inc. 2012 Equity Incentive Plan (the “2012 Plan”), which permits the Corporation to award stock options, stock appreciation rights, restricted stock, and other stock-based and performance-based awards to directors, employees, and other eligible participants. A total of 162,082 shares are available for issuance pursuant to the 2012 Plan. As of September 30, 2012, no awards had yet been granted under the 2012 Plan.

 

    Outstanding Stock Options     Exercisable Stock Options  
Exercise price
range
  Number     Weighted
average
exercise
price
    Weighted
average
contractual
life (years)
    Number     Weighted
average
exercise
price
    Weighted
average
contractual
life (years)
 
24.99     28,869      $ 24.99       8        0        N/A        N/A   

The following summarizes stock option activity for the first nine months of 2012:

 

Outstanding, January 1, 2012

     28,869  

Granted

     0   

Exercised

     0   
  

 

 

 

Outstanding, September 30, 2012

     28,869  
  

 

 

 

Exercisable, September 30, 2012

     9,623  
  

 

 

 

The fair value of options granted is estimated at the date of grant using the Black Scholes option pricing model. The following shows the weighted-average fair value of options granted and the assumptions used in calculating that value for the years indicated:

 

     2011  

Weighted-average fair value of options granted

   $ 3.62  

Average dividend yield

     5

Expected volatility

     25

Risk-free interest rate

     2.85

Expected term (in years)

     8   

There were no new options granted during 2012; however compensation expense related to options granted in 2011, which is included in salaries and wages in the consolidated statements of income for the nine months ended September 30, 2012, amounted to $35,000. Compensation expense is recognized over the three year vesting period of the options. As of September 30, 2012, there was $32,000 of unrecognized compensation expense expected to be recognized over the vesting period.

 

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Table of Contents

NOTE 8 - BRANCH ACQUISITION

On August 31, 2011, the Bank entered into an agreement to purchase four branch offices of The Home Savings and Loan Company of Youngstown, Ohio, (“HSL”) located in Fremont, Clyde, and Tiffin, Ohio. Under the terms of the agreement, the Bank assumed all related deposits and purchased the related branch premises and certain loans. The transaction was completed on December 16, 2011, with assets acquired and deposits assumed being recorded at their estimated fair values as follows:

 

     (Dollars in
thousands)
 

Cash

   $ 83,496   

Loans

     21,502   

Bank premises and equipment

     1,801   

Goodwill

     4,245   

Core deposit intangible asset

     1,269   

Other assets

     71   
  

 

 

 

Total assets acquired

   $ 112,384   
  

 

 

 

Deposits assumed

   $ 111,072   

Other liability – payable to seller

     1,312   
  

 

 

 

Total liabilities assumed

   $ 112,384   
  

 

 

 

The “other liability - payable to seller” represents the changes in the amounts of certain assets acquired and liabilities assumed between the final settlement date and December 16, 2011, the actual closing (transfer) date. Under the terms of the agreement, a final closing statement was prepared by seller within 30 days after closing and received by the Bank on January 15, 2012, and the Bank made final payment to seller based on the final closing statement.

On December 16, 2011, the contractual balance of loans transferred was $21,697,000, and the contractual balance of deposits transferred was $109,970,000. Loans acquired included residential real estate and consumer loans secured by real estate and personal property that management determined to be risk graded as a pass rated loans as defined in Note 6.

The operating results of the acquired branches subsequent to the closing are included in the Corporation’s consolidated financial statements. The core deposit intangible asset is amortized on a sum of digits basis over a period of ten years, the CD market valuation is amortized on a straight-line basis over a two year period, and the discounted loan market valuation is accreted to income on a straight-line basis over a five year period.

Goodwill of $4,245,000 arose in the acquisition of the HSL branches because consideration paid effectively included amounts relating to the benefit of expected synergies, revenue growth, and future market development. These benefits are not recognized separately from goodwill because they do not meet the recognition requirement for identifiable intangible assets. All goodwill arising from this acquisition is expected to be deductible for tax purposes on a straight-line basis over a 15 year period.

 

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Table of Contents

The excess cash in the transaction was used to increase the Bank’s investment portfolio and cash balances. Going forward, excess cash will be used in the form of continued investment growth and to fund anticipated loan growth.

On March 12, 2012, the Bank made a payment of $1,026,000 to settle differences between the final settlement statement and the draft settlement statement. The settlement amount reduced the previously reported cash, goodwill, and other liability categories. Goodwill was reduced by $46,000, as result of the final payment, reducing the related goodwill amount to $4,199,000.

 

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

Where appropriate, the following discussion relating to the Corporation contains the insights of management into known events and trends that have or may be expected to have a material effect on the Corporation’s operations and financial condition. The information presented may also contain certain forward-looking statements regarding future financial performance, which are not historical facts and which involve various risks and uncertainties. When used herein, the terms “anticipates”, “believes”, “plans”, “intends”, “expects”, “estimates”, “projects”, “targets”, “will”, “would”, “should”, “could”, and similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, but are not the exclusive means of identifying such statements. The Corporation’s actual results may differ materially from those expressed or implied in such forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, changes in regional and/or national economic conditions, changes in policies by regulatory agencies, fluctuations in interest rates, changes in FDIC insurance assessment rates, demand for loans in the Corporation’s market area, and competitive conditions in the financial services industry. Additional information concerning a number of important factors which could cause actual results to differ materially from the forward-looking statements is available in the Corporation’s filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including the disclosure in Item 1A. Risk Factors” of Part I of Croghan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the “2011 Form 10-K”).

The Corporation cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Corporation does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements, except to the extent required by law.

PERFORMANCE SUMMARY

Net income for the three-month period ended September 30, 2012 was $1,284,000, or $.77 per common share, compared to $1,541,000, or $.92 per common share, for the same period in 2011. Net income for the nine-month period ended September 30, 2012 was $3,589,000, or $2.15 per common share, compared to $3,848,000, or $2.30 per common share, for the same period in 2011. The results for the third quarter 2012 compared to the third quarter 2011 were adversely impacted by a decrease of $256,000 in net interest income, a $250,000 increase in the provision for loan losses, and an increase of $234,000 in non-interest expenses. Results for the third quarter were positively impacted by a $294,000 increase in non-interest income and a $189,000 decrease to the provision for federal income taxes.

 

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Table of Contents

Assets at September 30, 2012 totaled $616,199,000, compared to $629,651,000 at December 31, 2011. Total cash and cash equivalents decreased $50,844,000 to $9,248,000 during the nine-month period ended September 30, 2012, and total securities increased $24,289,000 to $253,415,000 at September 30, 2012. Total loans increased $14,556,000 to $316,521,000 at September 30, 2012, from $301,965,000 at 2011 year end. Total deposits increased $5,240,000 to $507,077,000 at September 30, 2012, from $501,837,000 at 2011 year end.

FINANCIAL POSITION

The following comments are based upon a comparison of Croghan’s financial position at September 30, 2012 to December 31, 2011.

Total cash and cash equivalents decreased $50,845,000 (84.6%) and total securities increased $24,289,000 (10.6%) during the nine-month period ended September 30, 2012. Total loans increased $14,556,000 (4.8%) to $316,521,000 at September 30, 2012, compared to $301,965,000 at December 31, 2011. During the same period, deposits increased $5,240,000 (1.0%) to $507,077,000 at September 30, 2012, compared to $501,837,000 at December 31, 2011.

The increase in securities during the nine-month period ended September 30, 2012 primarily resulted from purchases of available-for-sale securities of $94,762,000, with maturities during the period of $61,263,000. Also, during the period there were sales of securities totaling $7,858,000. The security balance increase was the result of using the excess cash from the HSL acquisition to purchase securities, as well as the continuation of investing pay downs and maturing securities back into the portfolio. Securities were sold during the second quarter to fund loan growth.

The total loan balance increased during the nine-month period ended September 30, 2012, due to the Bank being able to grow the portfolio through increased customer demand and the new markets gained from the HSL acquisition.

Components of the increase in deposits included a $26,696,000 (8.7%) increase in the liquid deposit category (demand, savings, NOW, and money market deposit accounts), which was partially offset by a $21,457,000 (11.1%) decrease in the time deposit category. Croghan strives to maintain a strong interest margin by balancing deposit needs to fund anticipated loan demand and by maintaining the necessary deposit pricing structure.

Stockholders’ equity at September 30, 2012 increased to $66,766,000, or $39.90 book value per common share, compared to $62,883,000, or $37.58 book value per common share, at December 31, 2011. Stockholders’ equity at September 30, 2012 includes accumulated other comprehensive income, consisting of net unrealized gains on securities classified as available-for-sale, net of related income taxes. At September 30, 2012, Croghan held $249,241,000 of available-for-sale securities with a net unrealized gain of $6,172,000, net of income taxes, compared to $225,282,000 in available-for-sale securities at December 31, 2011, with a net unrealized gain of $4,341,000, net of income taxes.

During the first quarter of 2012, the Board of Directors opted not to renew the stock buy-back program which began in February 2002. During the life span of the program, a total of 248,791 shares were repurchased by Croghan. The 240,729 treasury shares held as of September 30, 2012 and December 31, 2011 are reported at their acquired cost.

A cash dividend of $.32 per share was declared on September 11, 2012, payable on October 31, 2012 to shareholders of record as of October 12, 2012.

 

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Table of Contents

NET INTEREST INCOME

Net interest income, which represents the excess revenue generated from interest-earning assets over the interest cost of funding those assets, decreased $256,000 (5.3%) for the three-month period ended September 30, 2012 as compared to the same period in 2011. Net interest income decreased $307,000 (2.2%) for the nine-month period ended September 30, 2012, as compared to the same period in 2011. Croghan’s net interest margin decreased to 3.19 percent for the nine-month period ended September 30, 2012, compared to 4.05 percent for the same period in 2011. The increase of $110,027,000 in average interest-earning assets year-over-year was primarily due to acquisition of cash, loans, and deposits in the HSL branch acquisition. The decrease in net interest income partially resulted from the Bank recognizing interest of $206,000 during the third quarter of 2011, which resulted from the collection of a loan that had been on non-accrual. Contributing to help offset the decrease is the continued reduction in average cost of funds, and, as a result, reduced rates on interest-bearing deposits. This reduction is offset by the decrease in loan yields and the increase in available-for-sale securities which are lower yielding assets.

PROVISION FOR LOAN LOSSES AND THE ALLOWANCE FOR LOAN LOSSES

Croghan’s comprehensive loan policy provides guidelines for managing credit risk and asset quality. The policy details acceptable lending practices, establishes loan-grading classifications, and stipulates the use of a loan review process. Croghan directly employs three staff members dedicated to the credit analysis function to aid in facilitating the early identification of problem loans, to help ensure sound credit decisions, and to assist in the determination of the allowance for loan losses. Croghan also engages an outside credit review firm to supplement the credit analysis function and to provide an independent assessment of the loan review process. Croghan’s loan policy, loan review process, and credit analysis staff facilitate management’s evaluation of the credit risk inherent in the lending function.

The following table details factors relating to the provision and allowance for loan losses for the periods noted:

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 
     (Dollars in thousands)  

Provision for loan losses charged to expense

   $ 325      $ 300   

Net loan charge-offs

     760        391   

Annualized net loan charge-offs as a percent of average outstanding loans

     .33     .19

 

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Table of Contents

The following table details factors relating to non-performing and potential problem loans as of the dates noted:

 

     September 30, 2012     December 31, 2011  
     (Dollars in thousands)  

Nonaccrual loans

   $ 2,033      $ 3,376   

Loans contractually past due 90 days or more and still accruing interest

     392        672   

TDR-accruing

     3,600        3,532   

TDR-non-accruing

     806        1,295   
  

 

 

   

 

 

 

Total TDR loans

     4,406        4,827   

Potential problem loans, other than those past due 90 days or more, nonaccrual, or restructured

     9,027        18,161   
  

 

 

   

 

 

 

Total potential problem and non-performing loans

   $ 15,858      $ 27,036   
  

 

 

   

 

 

 

Allowance for loan losses

   $ 4,343      $ 4,778   

Allowance for loan losses as a percent of period-end loans

     1.37     1.58

During the third quarter of 2012, the Bank recognized a $150,000 provision for loan losses as compared to a negative provision of $100,000 during the same period a year ago. The negative provision in the third quarter 2011 resulted from the collection of a loan that was on nonaccrual and previously charged off. Net loan charge-offs increased $369,000 during the first nine months of 2012 compared to the same period a year ago. The 2012 third quarter provision was calculated by using average historical loss rates, as well as specific loss estimates on impaired loans, which together are used to calculate certain segments of loans and their corresponding allowance for loan losses.

Total potential problem and non-performing loans, which are summarized in the preceding table, decreased $11,178,000, or 41.3%, to $15,858,000 at September 30, 2012, compared to $27,036,000 at December 31, 2011. Favorable components included a $9,134,000 decrease in potential problem loans other than those past due 90 days or more, nonaccrual, or restructured. This decrease was partially the result of one large commercial borrower having significant financial improvement, which allowed the Bank to upgrade this credit. Other favorable components included a $1,343,000 decrease in nonaccrual loans, a $280,000 decrease in loans contractually past due 90 days or more and still accruing interest, and a $421,000 decrease in the total TDR loan category.

As illustrated in the following table, $7,968,000, or 88.3%, of total potential problem loans were less than 30 days past due and $9,022,000, or 99.9%, were secured with collateral at September 30, 2012.

Croghan typically classifies credits as potential problem loans, regardless of collateralization or the existence of contractually obligated guarantors, when a review of the borrower’s financial statements indicates that the borrowing entity does not generate sufficient operating cash flow to adequately service its debts. All of the potential problem loans at September 30, 2012, totaling $9,027,000, are currently performing loans (less than 90 days past due) and a majority are collateralized by an interest in real property.

 

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The following table provides additional detail pertaining to the past due status of Croghan’s potential problem loans as of the dates noted:

 

     September 30,
2012
     December 31,
2011
 
     (Dollars in thousands)  

Potential problem loans not currently past due

   $ 6,509       $ 16,984   

Potential problem loans past due one day or more but less than 10 days

     187         91   

Potential problem loans past due 10 days or more but less than 30 days

     1,272         167   

Potential problem loans past due 30 days or more but less than 60 days

     878         342   

Potential problem loans past due 60 days or more but less than 90 days

     181         577   
  

 

 

    

 

 

 

Total potential problem loans

   $ 9,027       $ 18,161   
  

 

 

    

 

 

 

Total potential problem loans not currently past due decreased $10,475,000 during the first nine months of 2012, which resulted primarily from one commercial borrower being upgraded. This decrease was partially offset by a $1,341,000 increase in the aggregate amount of potential problem loans in the past due categories.

The following table provides additional detail pertaining to the collateralization of Croghan’s potential problem loans as of the dates noted:

 

     September 30,
2012
     December 31,
2011
 
     (Dollars in thousands)  

Collateralized by an interest in real property

   $ 8,861       $ 17,582   

Collateralized by an interest in assets other than real property

     161         575   

Unsecured

     5         4   
  

 

 

    

 

 

 

Total potential problem loans

   $ 9,027       $ 18,161   
  

 

 

    

 

 

 

Management will continue to monitor asset quality trends throughout 2012 to ensure adequate provisions for loan losses are made in a timely manner. It is Croghan’s policy to maintain the allowance for loan losses at a level sufficient to provide for losses inherent in the portfolio. Management believes the allowance for loan losses at September 30, 2012 is adequate to provide for those losses identified as well as those losses inherent within the loan portfolio.

NON-INTEREST INCOME

Total non-interest income increased $294,000 (37.3%) for the three-month period ended September 30, 2012, compared to the same period in 2011, and increased $866,000 (35.3%) for the nine-month period ended September 30, 2012, compared to the same period in 2011. During the third quarter of 2012, the Bank had gains on sale of loans of $62,000, which was up $37,000 compared to the third quarter of 2011; an increase of $40,000 in trust income; an increase of $62,000 in income stemming from service charges on deposit accounts; and an increase in other income of $21,000. Comparatively, during the third quarter of 2011, the Bank had gains on sale of securities of $149,000 compared to none during the third quarter of 2012. Also, during the third quarter of 2011, the Bank had an Other Than Temporarily Impaired security write down related to one security in the amount of $283,000.

 

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NON-INTEREST EXPENSES

Total non-interest expenses increased $234,000 (6.3%) for the three-month period ended September 30, 2012, as compared to the same period in 2011, and increased $1,120,000 (10.2%) for the nine-month period ended September 30, 2012, as compared to the same period in 2011. Salaries, wages, and employee benefits increased $71,000 (3.4%) between comparable three-month periods and $254,000 (4.1%) between comparable nine-month periods. Occupancy of premises expense increased $19,000 (8.8%) between comparable three-month periods and increased $66,000 (10.0%) between comparable nine-month periods. Amortization of core deposit intangible increased $86,000 between comparable three-month periods, and increased $257,000 between comparable nine-month periods due to the core deposit intangible that resulted from the HSL acquisition. Other operating expenses increased $58,000 (4.1%) between comparable three-month periods and $543,000 (13.1%) between comparable nine-month periods. These increases are a result of the HSL acquisition.

Within the other operating expense category is the FDIC insurance expense. During the nine-month period ended September 30, 2012, the FDIC insurance expense was $297,000, compared to $293,000 during the same period in 2011. The Bank prepaid the amount of $1,797,000 in December 2009 and had a remaining prepaid balance of $601,000 at September 30, 2012. This prepaid assessment amount is included in “Other assets” of the Corporation. Future quarterly assessments will be charged against the prepaid asset until such time as the prepaid asset has been full expensed, at which point the Bank will resume paying premiums to the FDIC.

FEDERAL INCOME TAX EXPENSE

Federal income tax expense decreased $189,000 (39.8%) between comparable three-month periods and $327,000 (30.6%) between comparable nine-month periods. The Corporation’s effective tax rate for the nine months ended September 30, 2012 was 17.1 percent, compared to 21.8 percent for the same period in 2011. The decrease in the effective tax rate is a result of an increase in tax exempt interest income from investment securities, as well as a decrease in income before federal income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Short-term borrowings of federal funds purchased and repurchase agreements averaged $23,724,000 for the nine-month period ended September 30, 2012. This compares to $22,514,000 for the nine-month period ended September 30, 2011, and $23,433,000 for the twelve-month period ended December 31, 2011.

Borrowings from the Federal Home Loan Bank and Great Lakes Bankers Bank totaled $17,973,000 at September 30, 2012, compared to $18,500,000 at December 31, 2011, and $12,500,000 at September 30, 2011.

Capital expenditures for premises and equipment totaled $177,000 for the nine-month period ended September 30, 2012, compared to $386,000 for the same period in 2011. The 2012 expenditures included improvements to the acquired HSL banking centers, ATM upgrades, and an air conditioning unit upgrade.

Loan commitments, including letters of credit, as of September 30, 2012, totaled $85,633,000 compared to $76,793,000 at December 31, 2011. Since many of these commitments are expected to expire without being drawn upon, these totals do not necessarily represent future cash requirements.

 

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  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the quantitative and qualitative information about market risk from the information provided in Croghan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the “2011 Form 10-K”).

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF CONTROLS AND PROCEDURES

With the participation of the Corporation’s principal executive officer and principal financial officer, the Corporation’s management has evaluated the effectiveness of the Corporation’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Corporation’s principal executive officer and principal financial officer have concluded that:

 

(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

There were no changes in the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the Corporation’s fiscal quarter ended September 30, 2012, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Management is not aware of any pending legal proceedings, except for routine legal proceedings to which the Corporation’s subsidiary Bank is a party incidental to its banking business. Management considers none of those proceedings to be material.

 

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ITEM 1A. RISK FACTORS

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in “Item 1A. Risk Factors” of Part I of the 2011 Form 10-K, which could materially affect our business, financial condition, and/or operating results. There have been no material changes from those risk factors previously disclosed in “Item 1A. Risk Factors” of Part I of the 2011 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

 

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ITEM 6. EXHIBITS

 

Exhibit

Number

   Description and Exhibit Location
  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)
101    The following materials from Croghan Bancshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011; (ii) the Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (unaudited); (iii) the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2012 and 2011 (unaudited); (iv) the Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2012 and 2011 (unaudited); (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited); and (vi) the Notes to Unaudited Consolidated Financial Statements tagged as blocks of text and in detail (included with this filing)*

* Pursuant to Rule 406T of SEC Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

CROGHAN BANCSHARES, INC.

              Registrant
Date: October 26, 2012     By:   /s/ Rick M. Robertson
     

Rick M. Robertson, President and CEO

(Principal Executive Officer)

Date: October 26, 2012     By:   /s/ Kendall W. Rieman
     

Kendall W. Rieman, Treasurer

(Principal Financial Officer)

 

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EXHIBIT INDEX

 

Exhibit

Number

   Description    Exhibit Location
  31.1    Rule 13a-14(a)/15d-14(a) Certification – Principal Executive Officer    Filed herewith
  31.2    Rule 13a-14(a)/15d-14(a) Certification – Principal Financial Officer    Filed herewith
  32    Section 1350 Certification – Principal Executive Officer and Principal Financial Officer    Filed herewith
101    The following materials from Croghan Bancshares, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011; (ii) the Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (unaudited); (iii) the Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2012 and 2011 (unaudited); (iv) the Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2012 and 2011 (unaudited); (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited); and (vi) the Notes to Unaudited Consolidated Financial Statements tagged as blocks of text and in detail*    Filed herewith

* Pursuant to Rule 406T of SEC Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are furnished and not deemed filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

 

38

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