Exhibit 13

DIRECTORS

Croghan Bancshares, Inc.
The Croghan Colonial Bank

James E. Bowlus, Lead Director
President/Treasurer
Fremont Candy & Cigar, Inc.

Michael D. Allen Sr.
Executive Vice President/General Manager
International Metal Hose Company

James R. Faist
Vice President of Finance
Crown Battery Manufacturing Company

Claire F. Johansen
Owner
Lane of Dreams Farm, LLC

Stephen A. Kemper
Owner
Kemper Iron & Metal Company

Daniel W. Lease
Vice President Administration/CFO
Whetstone Technology, LLC

Thomas W. McLaughlin
Vice President/CFO
Underground Utilities, Inc.

Allan E. Mehlow
Chief Financial Officer
The Mosser Group/WMOG, Inc.

Rick M. Robertson
President/CEO
The Croghan Colonial Bank

Gary L. Zimmerman
Owner/Partner
Swint-Reineck Company

DIRECTORS EMERITI

Ted L. Hilty

Thomas F. Hite

Don W. Miller

Robert H. Moyer

Albert C. Nichols

J. Terrence Wolfe

OFFICERS

Croghan Bancshares, Inc.

Rick M. Robertson
President/CEO

Thomas J. Elder Jr.
Vice President

Kendall W. Rieman
Vice President/Treasurer

Barry F. Luse
Vice President/Secretary

SENIOR MANAGEMENT TEAM

The Croghan Colonial Bank

Rick M. Robertson
President/CEO

Thomas J. Elder Jr.
Executive Vice President/CLO

Kendall W. Rieman
Executive Vice President/CFO/COO

Barry F. Luse
Senior Vice President/Trust Officer

Jeffrey L. Geary
Senior Vice President/Commercial Lending

Daniel N. Schloemer
Senior Vice President/Commercial Lending

Jodi A. Albright
Vice President/Retail Services Manager

Michael J. Hartenstein
Vice President/Technology/Operations Officer

Laura M. Whipple
Human Resource Manager

CROGHAN BANCSHARES, INC.

CONTENTS

Financial Highlights		1
President’s Letter		2
Description of the Corporation and Common Share Information		4
Selected Financial Data		5
Management’s Discussion and Analysis		6
Management’s Report On Internal Control Over Financial Reporting		20
Report of Independent Registered Public Accounting Firm		21
Consolidated Financial Statements		22

FINANCIAL HIGHLIGHTS

										Percent
		2010				2009				Change
For the year:
Net income		$	4,024,000			$	3,106,000				29.6	%
Income per common share			2.38				1.81				31.5	%
Dividends per common share			1.28				1.28				—
Return on average assets			.82	%			.66	%
Return on average stockholders’ equity			7.03	%			5.56	%
At year-end:
Assets		$	489,727,000			$	481,988,000				1.6	%
Loans			293,305,000				324,484,000				(9.6	)%
Securities			144,623,000				110,138,000				31.3	%
Deposits			384,157,000				370,719,000				3.6	%
Stockholders’ equity			56,513,000				56,127,000				.7	%
Book value per common share		$	33.71			$	32.75				2.9	%
Stockholders’ equity to total assets			11.54	%			11.64	%
Number of stockholders of record			693				700				(1.0	)%
Number of full-time equivalent employees			150				146				2.7	%

A Message from CEO Rick Robertson

Having joined Croghan in 2010, I am already proud, pleased, and thankful to be part of the Croghan team. I am also pleased to be able to provide the details of increased profitability and growth for Croghan.

A Good Year of Financial Progress

Net income for 2010 totaled $4,024,000 compared to $3,106,000 in 2009. On a per share basis, this earnings improvement represents a 31.5% increase. Our asset base has also grown to $489,727,000 at December 31, 2010. Croghan has maintained a strong equity and a strong liquidity position. I believe that Croghan is positioned well for the future.

Challenges Remain

While we are well positioned, we also face significant challenges. Clearly, economic conditions have presented numerous challenges for our entire marketplace. While an economic improvement is in the forecast, most believe the improvement will not be as fast or as sizeable as hoped for. Our loans are the earning assets that generate a significant portion of our revenue, and with this economy, our loan portfolio has decreased year over year. A major challenge for our leadership team is to reverse this downward trend, increase loan production, and yet maintain quality in our loan portfolio.

Opportunities for the Future

In these challenging times, working to our strengths will be critical for financial progress. Fortunately, we have a number of strengths such as:

	•		Our Commercial Lending team is strong and supported by a quality credit team. We have excellent Cash Management products and a strong desire to help our clients.
	•		The Wealth Management/Trust team provides exceptional experience and advice. Favorable investment returns are also appreciated by clients. This group helps distinguish us as an outstanding community bank.
	•		Our Branch Banking team is being positioned to increase our full service capabilities for clients by streamlining and improving our consumer lending capabilities and by providing access to mortgage loans and investment products.
	•		The Technology and Operations team has completed a number of critical upgrades and has others in process. Significant work has been completed to protect you and your information. Upgrades have been completed to enhance our debit card program and to prepare for the convenience of electronic statements for those clients desiring the service.

People and Promotions

Several senior level promotions have occurred within The Croghan Colonial Bank. Recognition of “jobs well done” plus providing opportunities for additional challenges are critical elements for advancements within our leadership team.

Tom Elder was promoted to Executive Vice President & Chief Lending Officer.

Kendall Rieman was promoted to Executive Vice President/CFO/COO.

Barry Luse was promoted to Senior Vice President & Trust Officer.

Jeff Geary was promoted to Senior Vice President — Commercial Lending.

Dan Schloemer was promoted to Senior Vice President — Commercial Lending.

In addition, Jim Bowlus was elected to serve as Lead Director of Croghan Bancshares, Inc. This election was made by the independent directors of the holding company.

In Closing

At Croghan, we have a strong financial foundation created by the work of many individuals over a period of more than 100 years. We have an appreciation for our history and that financial strength. Our challenge is to move the organization forward through the economic uncertainties that exist.

On behalf of our Board of Directors and our entire employee group, thank you to our shareholders for your investment and continuing support. Our objectives certainly include the continued financial progress at Croghan and being that great community bank that we are proud of.

Sincerely,

Rick M. Robertson
President and Chief Executive Officer

January 2011

Croghan Bancshares, Inc.

DESCRIPTION OF THE CORPORATION

Croghan Bancshares, Inc., an Ohio corporation (the “Corporation” or “Croghan”), is a bank holding company incorporated in 1983 with $489,727,000 in total assets as of December 31, 2010. Croghan owns all of the outstanding shares of The Croghan Colonial Bank (the “Bank”), an Ohio state-chartered bank incorporated in 1888 and headquartered in Fremont, Ohio.

The Bank offers a diverse range of commercial and retail banking services through its 11 banking centers located in Bellevue, Clyde, Custar, Fremont, Green Springs, Monroeville, Norwalk, and Port Clinton, Ohio. Products are comprised of traditional banking services such as consumer, commercial, agricultural and real estate loans, personal and business checking accounts, savings accounts, time deposit accounts, safe deposit box services, and trust department services. Investment products bearing no FDIC insurance are offered through the Bank’s Trust and Investment Services Division.

MARKET PRICE AND DIVIDENDS ON COMMON SHARES

The Corporation’s common shares are quoted on the OTC Bulletin Board under the symbol “CHBH.” The following shows the ranges of high and low price quotations, as reported on the OTC Bulletin Board, for the Corporation’s common shares for each quarterly period during 2010 and 2009. OTC Bulletin Board quotations reflect inter-dealer prices, without mark-up, mark-down, or commission and may not necessarily represent actual transactions.

		2010								2009
		Low				High				Low				High
First Quarter		$	21.68				25.00			$	21.55				26.50
Second Quarter			23.00				26.00				23.40				28.50
Third Quarter			24.15				26.00				24.00				28.00
Fourth Quarter			24.05				25.95				22.00				25.30

Dividends declared by the Corporation on its common shares during the past two years were as follows:

		2010				2009
Three-months ended March 31		$	.32			$	.32
Three-months ended June 30			.32				.32
Three-months ended September 30			.32				.32
Three-months ended December 31			.32				.32
Total		$	1.28			$	1.28

The ability of the Corporation to declare and pay dividends on its common shares is dependent, in large part, on dividends received from the Bank. The ability of the Bank to pay dividends is subject to certain legal and regulatory limitations described in Note 17 to the Consolidated Financial Statements of the Annual Report and in the discussion of “Liquidity” under Management’s Discussion and Analysis of Financial Condition and Results of Operations.

There were 696 holders of record of the Corporation’s common shares on January 31, 2011.

AVAILABILITY OF MORE INFORMATION

To obtain a free copy of the Corporation’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2010, please write to:

Croghan Bancshares, Inc.
Barry F. Luse, Secretary
323 Croghan Street
Fremont, OH 43420

Croghan Bancshares, Inc.

FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA

						Years ended December 31,
		2010				2009				2008				2007				2006
						(Dollars in thousands, except share data)
Statements of operations:
Total interest income		$	22,739			$	23,926			$	25,892			$	27,752			$	26,904
Total interest expense			5,085				6,275				8,160				10,524				9,613
Net interest income			17,654				17,651				17,732				17,228				17,291
Provision for loan losses			1,675				3,000				1,550				100				380
Net interest income, after provision for loan losses			15,979				14,651				16,182				17,128				16,911
Total non-interest income			3,780				3,588				3,414				3,486				3,035
Total non-interest expenses			14,732				14,181				13,526				12,755				12,168
Income before federal income taxes			5,027				4,058				6,070				7,859				7,778
Federal income taxes			1,003				952				1,718				2,348				2,289
Net income		$	4,024			$	3,106			$	4,352			$	5,511			$	5,489
Per share of common stock:
Net income		$	2.38			$	1.81			$	2.51			$	3.13			$	3.03
Dividends			1.28				1.28				1.28				1.24				1.20
Book value			33.71				32.75				31.86				30.53				28.65
Average shares of common stock outstanding			1,692,307				1,719,509				1,732,611				1,763,320				1,814,011
Year-end balances:
Loans, net		$	288,350			$	320,051			$	346,146			$	347,156			$	353,678
Securities			144,623				110,138				72,981				51,479				61,913
Total assets			489,727				481,988				460,476				455,128				458,858
Deposits			384,157				370,719				345,077				362,833				371,194
Stockholders’ equity			56,513				56,127				54,819				53,288				51,163
Average balances:
Loans, net		$	302,065			$	330,829			$	341,499			$	343,979			$	337,538
Securities			126,385				83,555				66,394				55,007				70,090
Total assets			490,198				468,170				455,286				448,489				452,209
Deposits			375,246				358,192				356,668				364,481				366,261
Stockholders’ equity			57,249				55,895				53,820				52,011				50,357
Selected ratios:
Net yield on average interest-earning assets			4.01	%			4.12	%			4.26	%			4.23	%			4.19	%
Return on average assets			.82				.66				.96				1.23				1.21
Return on average stockholders’ equity			7.03				5.56				8.09				10.60				10.90
Net loan charge-offs as a percent of average outstanding net loans			.38				.56				.47				.10				.12
Allowance for loan losses as a percent of year-end loans			1.69				1.37				.94				.96				1.01
Stockholders’ equity as a percent of total year-end assets			11.54				11.64				11.90				11.71				11.15

Croghan Bancshares, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides additional information relating to Croghan’s financial condition and results of operations. This information is presented to further the reader’s understanding of Croghan’s Consolidated Financial Statements included in this the Annual Report.

FORWARD-LOOKING STATEMENTS

Where appropriate, the following discussion contains the insights of management into known events and trends that have or may be expected to have a material effect on Croghan’s operations and financial condition. The information presented may also contain forward-looking statements regarding future financial performance, which are not historical facts and which involve various risks and uncertainties. Croghan cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and advises readers that various factors including regional and national economic conditions, changes in the levels of market interest rates, and competitive and regulatory issues could affect Croghan’s financial performance and cause the actual results for future periods to differ materially from those anticipated or projected.

Without limiting the foregoing and by way of example and not by way of limitation, some of the statements in the following referenced sections of this discussion and analysis are forward-looking and are, therefore, subject to such risks and uncertainties:

	1.		Management’s discussion of the interest rates included under “Net Interest Income”
	2.		Management’s discussion relating to the determination and assessment of the provision and allowance for loan losses included under “Provision for Loan Losses and the Allowance for Loan Losses”
	3.		Management’s discussion of capital requirements and impairment charges included under “Stockholders’ Equity”
	4.		Management’s discussion relating to the Bank’s liquidity sources and needs included under “Liquidity”
	5.		Management’s discussion of interest rate risk exposure included under “Interest Rate Risk”
	6.		Management’s discussion of goodwill evaluation under “Significant Accounting Policies”

Croghan 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

Croghan’s net income for the year ended December 31, 2010 was $4,024,000, compared to $3,106,000 in 2009, and $4,352,000 in 2008. Net income in 2010 as compared to 2009 was favorably impacted by a $1,325,000 decrease in the provision for loan losses, a $192,000 increase in non-interest income, and a $3,000 increase in net interest income, while net income was unfavorably impacted by a $551,000 increase in non-interest expense and a $51,000 increase in federal income tax expense.

The return on average assets in 2010 was .82%, compared to .66% in 2009, and .96% in 2008. The return on average stockholders’ equity was 7.03% in 2010, 5.56% in 2009, and 8.09% in 2008. Net income per share in 2010 amounted to $2.38, compared to $1.81 in 2009, and $2.51 in 2008. Changes in these amounts from year to year were generally reflective of changes in the level of net income.

Assets increased to $489,727,000 at December 31, 2010, compared to $481,988,000 at December 31, 2009, an increase of 1.6%. Loans decreased $31,179,000, or 9.6%, to $293,305,000 at December 31, 2010, compared to $324,484,000 at December 31, 2009. The decrease in loans resulted from continued soft loan demand in Croghan’s market area, the sale of substantially all fixed rate mortgage loans originated in 2010, and $1,153,000 of net loan charge-offs recognized in 2010. Securities increased $34,485,000, or 31.3%, to $144,623,000 at December 31, 2010, compared to $110,138,000 at December 31, 2009. Deposits increased $13,438,000, or 3.6%, to $384,157,000 at December 31, 2010, from $370,719,000 at December 31, 2009. Stockholders’ equity at December 31, 2010 was $56,513,000, a .7% increase compared to $56,127,000 at December 31, 2009.

RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income, which represents the revenue generated from interest-earning assets in excess of the interest cost of funding those assets, is Croghan’s principal source of income. Net interest income is influenced by market interest rate conditions and the volume and mix of interest-earning assets and interest-bearing liabilities. Many external factors affect net interest income and typically include the strength of client loan demand, client preference for individual deposit account products, competitors’ loan and deposit product offerings, the national and local economic climates, and Federal Reserve monetary policy.

The following demonstrates the components of net interest income for the years ended December 31:

		2010				2009				2008
		(Dollars in thousands)
Average interest-earning assets		$	440,620			$	428,275			$	416,393
Interest income			22,739				23,926				25,892
Average rate earned			5.16	%			5.59	%			6.22	%
Average interest-bearing liabilities		$	372,526			$	356,283			$	348,557
Interest expense			5,085				6,275				8,160
Average rate paid			1.37	%			1.76	%			2.34	%
Net interest income		$	17,654			$	17,651			$	17,732
Net interest yield (net interest income divided by average interest-earning assets)			4.01	%			4.12	%			4.26	%

2010 vs. 2009. Net interest income for 2010 increased $3,000, or .02%, to $17,654,000, compared to $17,651,000 in 2009. Average interest-earning assets in 2010 increased $12,345,000, which resulted from the mixture of the securities portfolio increase, the increase in cash and cash equivalents, and the loan portfolio decrease. Throughout 2010, Croghan continued to reinvest the loan portfolio run-off in the security portfolio, which helped maintain net interest income. Average interest-bearing liabilities increased $16,243,000, which was a direct result of increases in deposits, due to the continued change in consumer trends.

The average rate earned on interest-earning assets decreased to 5.16% in 2010 from 5.59% in 2009, and the average rate paid on interest-bearing liabilities also decreased to 1.37% in 2010 from 1.76% in 2009. The net effect of these changes was that Croghan’s net interest yield decreased to 4.01% in 2010 from 4.12% in 2009. In 2010, the Federal Reserve Open Market Committee (FOMC) continued to maintain low managed interest rates. The low rates have caused the average rate earned on interest-earning assets and average rate paid on interest-bearing liabilities to decrease in 2010 even more so than in 2009. The Bank expects this trend to continue throughout 2011.

2009 vs. 2008. Net interest income for 2009 decreased $81,000, or .5%, to $17,651,000, compared to $17,732,000 in 2008. Average interest-earning assets in 2009 increased $11,882,000, which was a result of the mixture of the loan portfolio decrease, securities portfolio increase, and increase in cash and cash equivalents. Throughout 2009, Croghan reinvested the mix of loan portfolio run-off and the increase in deposits to increase the security portfolio to help maintain net interest income. Average interest-bearing liabilities increased $7,726,000, which was a result of increases in deposits, which was a trend resulting from consumers not spending and keeping monies in deposits.

In 2009, the FOMC maintained the low managed interest rates causing the average rate earned on interest-earning assets and average rate paid on interest-bearing liabilities to decrease in 2009. The average rate earned on interest-earning assets decreased to 5.59% in 2009 from 6.22% in 2008, while the average rate paid on interest-bearing liabilities decreased to 1.76% in 2009 from 2.34% in 2008. The net effect of these changes was that Croghan’s net interest yield decreased to 4.12% in 2009 from 4.26% in 2008.

PROVISION FOR LOAN LOSSES AND THE ALLOWANCE FOR LOAN LOSSES

Croghan’s loan policy provides guidelines for managing both credit risk and asset quality. The policy details acceptable lending practices, establishes loan-grading classifications, and prescribes the use of a loan review process. Croghan employs credit analysis staff 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

PROVISION FOR LOAN LOSSES AND THE ALLOWANCE FOR LOAN LOSSES (CONTINUED)

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.

Croghan performs ongoing reviews to identify potential problem and nonperforming loans and also completes in-depth analysis with respect to the quarterly allowance for loan losses calculation. Part of this analysis involves assessing the need for specific reserves relative to impaired loans. This evaluation typically includes a review of the loan’s past performance history, a comparison of the estimated collateral value in relation to the outstanding loan balance, the overall financial strength of the borrower, industry risks pertinent to the borrower, and competitive trends that may influence the borrower’s future financial performance. Loans are considered impaired when, based upon the most current information available, it appears probable that the borrower will not be able to make payments according to the contractual terms of the loan agreement. Impaired loans are recorded at the observable market price of the loan, the fair value of the underlying collateral (if the loan is collateral dependent), or the present value of the expected future cash flows discounted at the loan’s effective interest rate. Given that Croghan’s impaired loans are typically collateralized by real estate or other borrower assets, the fair value of individual impaired loans is most often based upon the underlying collateral value. Large groups of smaller balance homogenous loans are collectively evaluated for impairment.

To determine the allowance for loan losses, Croghan prepares a detailed quarterly analysis that focuses on delinquency trends, the status of nonperforming loans (i.e., impaired, nonaccrual, restructured, and past due 90 days or more), current and historical trends of charged-off loans within each loan category (i.e., commercial, real estate, and consumer), existing local and national economic conditions, and changes within the volume and mix in each loan category. Higher loss rates are applied in calculating the allowance for loan losses relating to potential problem loans. The loss rates are periodically evaluated considering historic loss rates in the respective potential problem loan categories (i.e., special mention, substandard, doubtful) and current trends. During 2009, Croghan began updating the allowance for loan losses analysis monthly.

Regular provisions are made in amounts sufficient to maintain the balance in the allowance for loan losses at a level considered by management to be adequate for losses within the portfolio. Even though management uses all available information to assess possible loan losses, future additions or reductions to the allowance may be required as changes occur in economic conditions and specific borrower circumstances. The regulatory agencies that periodically review Croghan’s allowance for loan losses may also require additions to the allowance or the charge-off of specific loans based upon the information available to them at the time of their examinations.

The following provides factors relating to the provision and allowance for loan losses for the years ended December 31:

		2010				2009				2008
		(Dollars in thousands)
Provision for loan losses charged to expense		$	1,675			$	3,000			$	1,550
Net loan charge-offs			1,153				1,854				1,621
Net loan charge-offs as a percent of average outstanding net loans			.38	%			.56	%			.47	%

The following provides information relating to problem loans and the allowance for loan losses as of December 31:

		2010				2009				2008
		(Dollars in thousands)
Nonaccrual loans		$	4,127			$	5,903			$	1,845
Loans contractually past due 90 days or more and still accruing interest			586				45				334
Restructured loans			4,665				3,191				—
Potential problem loans, other than those past due 90 days or more, nonaccrual, or restructured			15,873				22,227				13,140
Total potential problem and nonperforming loans		$	25,251			$	31,366			$	15,319
Allowance for loan losses		$	4,955			$	4,433			$	3,287
Allowance for loan losses as a percent of year-end loans			1.69	%			1.37	%			.94	%

PROVISION FOR LOAN LOSSES AND THE ALLOWANCE FOR LOAN LOSSES (CONTINUED)

2010 vs. 2009.

Provision for loan losses and net loan charge-offs

The 2010 provision for loan losses totaled $1,675,000, which was $1,325,000 less than the 2009 provision of $3,000,000. The decrease in the 2010 provision was attributable to a decrease in both the level of loan charge-offs during 2010, as compared to 2009, and the level of potential problem and nonperforming loans at December 31, 2010, as compared to December 31, 2009. During 2010, Croghan recognized $1,153,000 of net charge-offs, which was down $701,000 from the $1,854,000 of net charge-offs in 2009. Overall, the trends in the historical loss rates, which are used to calculate losses on non-impaired credits, stayed consistent throughout 2010. The historical loss rates, along with a reduced level of charge-offs and a reduction of potential problem and nonperforming loans, resulted in a decreased level of provision for loan losses for the year ended December 31, 2010 when compared with the same period in 2009.

Nonaccruals and net loan charge-offs

The $1,776,000 decrease in nonaccrual loans in 2010 compared to 2009 was due to the overall reduced level of loans moved to nonaccrual status and from the pay down of loans that were on nonaccrual status at the end of 2009. Several large commercial real estate loans, amounting to $2,606,000 as of December 31, 2009, that were on nonaccrual status were paid off during 2010 and resulted in net charge-offs of $98,000 during 2010. New balances of commercial and commercial real estate clients that moved to nonaccrual status during 2010 had loans that totaled $1,925,000 at December 31, 2010. These nonaccrual loans resulted in $259,000 of net charge-offs during 2010.

Restructured loans

Restructured loans at December 31, 2010 totaled $4,665,000. These loans are performing commercial related loans which are all under 30 days past due. These loans were restructured from their original loan agreements by modifying their principal and interest payment terms, or have interest only payments for a short period of time, typically between one to six months. These restructured terms allow the client to remain current during a period in which they expect or are experiencing a reduction in their anticipated or actual cash flow. After the period of interest only payments, the loans are anticipated to start paying principal and interest payments similar to the original loan agreements.

Potential problem and nonperforming loans

Croghan typically classifies a loan as a potential problem loan, regardless of its collateralization or any contractually obligated guarantors, when a review of the borrower’s financial statements indicates that the borrower does not generate sufficient operating cash flow to adequately service its debts.

Total potential problem and nonperforming loans decreased $6,115,000, or 19.5%, to $25,251,000 at December 31, 2010, compared to $31,366,000 at December 31, 2009. Components of this decrease included a $1,776,000 decrease in nonaccrual loans, a $6,354,000 decrease in potential problem loans, and a $1,474,000 increase in restructured loans.

PROVISION FOR LOAN LOSSES AND THE ALLOWANCE FOR LOAN LOSSES (CONTINUED)

The following provides additional detail pertaining to the past due status of Croghan’s potential problem loans as of December 31, 2010 (dollars in thousands):

Potential problem loans not currently past due		$	8,746
Potential problem loans past due one day or more but less than 10 days			3,079
Potential problem loans past due 10 days or more but less than 30 days			3,051
Potential problem loans past due 30 days or more but less than 60 days			641
Potential problem loans past due 60 days or more but less than 90 days			356
Total potential problem loans		$	15,873

The following provides additional detail pertaining to the collateralization of Croghan’s potential problem loans as of December 31, 2010 (dollars in thousands):

Collateralized by an interest in real property		$	15,427
Collateralized by an interest in assets other than real property			438
Unsecured			8
Total potential problem loans		$	15,873

2009 vs. 2008.

Provision for loan losses and net loan charge-offs

The 2009 provision for loan losses totaled $3,000,000, or $1,450,000 more than the 2008 provision of $1,550,000. The increase in the 2009 provision was attributable to an increase in both the level of loan charge-offs during 2009, as compared to 2008, and the level of potential problem and nonperforming loans at December 31, 2009, as compared to December 31, 2008. During 2009, Croghan recognized $1,854,000 of net charge-offs, which was up $233,000 from the $1,621,000 of net charge-offs in 2008. The increase in net charge-offs over 2008 and 2009 has also resulted in a significant increase in the historical loss rates used in calculating the Bank’s allowance for loan losses for non-impaired credits.

Nonaccruals and net loan charge-offs

The $4,058,000 increase in nonaccrual loans from 2008 to 2009 was due to several commercial and commercial real estate clients that experienced deteriorating cash flows throughout the year. One commercial loan client ceased operations during the year resulting in an addition of $1,211,000 to nonaccrual loans and $757,000 of net loan charge-offs. Charge-offs during 2009 from loans on nonaccrual of interest at year-end amounted to $1,257,000.

Restructured loans

Restructured loans at December 31, 2009 totaled $3,191,000. These loans are performing commercial related loans which were all under 30 days past due. These loans were restructured from their original loan agreements by modifying their principal and interest payment terms to have interest only payments for a short period of time, typically between one to six months. These restructured terms allow the client to remain current during a period in which they expect or are experiencing a reduction in their anticipated or actual cash flow. After the period of interest only payments, all the loans are set to start paying principal and interest payments similar to the original loan agreements.

Potential problem and nonperforming loans

Loan quality in general deteriorated in 2009 as Croghan’s market area continued to experience the effects of poor economic times. Croghan typically classifies a loan as a potential problem loan, regardless of its collateralization or any contractually obligated guarantors, when a review of the borrower’s financial statements indicates that the borrower does not generate sufficient operating cash flow to adequately service its debts.

Total potential problem and nonperforming loans increased $16,047,000, or 104.8%, to $31,366,000 at December 31, 2009, compared to $15,319,000 at December 31, 2008. This increase resulted from a $4,058,000 increase in nonaccrual loans, a $3,191,000 increase in restructured loans, and a $9,087,000 increase in potential problem loans at December 31, 2009, as compared to December 31, 2008. The increase was due to both the volume of loans being classified as potential problem loans, as well as several other large commercial loans being classified as potential problem credits.

PROVISION FOR LOAN LOSSES AND THE ALLOWANCE FOR LOAN LOSSES (CONTINUED)

Also within this category, the primary reason for the increase was due to one large commercial client in the manufacturing industry being downgraded due to a deterioration of their cash flow. This client remains current and no modifications of their original loan agreements have been made. Extensive analysis of the client’s cash flow and collateral position shows that the client continues to be in a position to meet all future principal and interest obligations.

A positive trend in the categories of potential problem and nonperforming loans at December 31, 2009 as compared to December 31, 2008 was a $289,000 decrease in loans contractually past due 90 days or more and still accruing interest.

The following provides additional detail pertaining to the past due status of Croghan’s potential problem loans as of December 31, 2009 (dollars in thousands):

Potential problem loans not currently past due		$	16,453
Potential problem loans past due one day or more but less than 10 days			186
Potential problem loans past due 10 days or more but less than 30 days			4,833
Potential problem loans past due 30 days or more but less than 60 days			528
Potential problem loans past due 60 days or more but less than 90 days			227
Total potential problem loans		$	22,227

The following provides additional detail pertaining to the collateralization of Croghan’s potential problem loans as of December 31, 2009 (dollars in thousands):

Collateralized by an interest in real property		$	21,622
Collateralized by an interest in assets other than real property			600
Unsecured			5
Total potential problem loans		$	22,227

NON-INTEREST INCOME

Non-interest income is comprised of the items summarized in the following for the years ended December 31:

		2010				2009				2008
		(Dollars in thousands)
Trust income		$	1,026			$	898			$	865
Service charges on deposit accounts			1,460				1,491				1,569
Gain on sale of loans			282				289				—
Gain on sale of securities			11				—				19
Increase in cash value of life insurance			411				345				374
Other operating income			590				565				587
Total non-interest income		$	3,780			$	3,588			$	3,414

2010 vs. 2009. Total non-interest income in 2010 increased $192,000, or 5.4%, to $3,780,000, compared to $3,588,000 in 2009. Trust income in 2010 increased $128,000, or 14.3%, from the 2009 level. The Trust Department held total assets of $146,100,000 for 546 clients at December 31, 2010, compared to $133,452,000 at December 31, 2009. Services offered by the Trust Department include qualified retirement plans (e.g., 401k and simple plans), personal trusts, investment management accounts, cash management accounts, individual retirement accounts, custody accounts, charitable trusts, and charitable gift annuities.

Service charges on deposit accounts decreased $31,000, or 2.1%, in 2010 as compared to 2009 as a continuation in the change in consumer spending that started in 2009 and has continued through 2010.

Croghan had a gain of $282,000 from selling fixed-rate residential mortgage loans in 2010. Included in gain on sale of loans was capitalized mortgage servicing rights of $161,000. At December 31, 2010, the unpaid balance of mortgage loans serviced for others amounted to $24,267,000.

NON-INTEREST INCOME (CONTINUED)

Croghan has purchased split-dollar life insurance policies on behalf of certain current and former employees and officers. The increase in the cash value of these policies accumulates on a tax-exempt basis, as long as the policies are not cashed, and the tax savings is used to fund supplemental retirement benefits for the named individuals. The total cash value of these life insurance policies aggregated $11,357,000 at December 31, 2010 and $10,946,000 at December 31, 2009. The increase in cash value of the policies amounted to $411,000 in 2010, compared to $345,000 in 2009.

Other operating income increased $25,000, or 4.4%, to $590,000 in 2010, from $565,000 in 2009. Other operating income includes fees generated by the Investment Department of Croghan’s Trust and Investment Services Division. The Investment Department markets non-FDIC insured investment products, such as mutual funds and annuities. Fees generated by the Investment Department totaled $112,000 in 2010, compared to $76,000 in 2009. Other items of note that comprise other operating income include gains on sale of other real estate owned, rental income, ATM surcharge fees, MasterCard merchant referral commissions, safe deposit box fees, credit life insurance sales commissions, and fees from the sale of official checks and money orders.

2009 vs. 2008. Total non-interest income in 2009 increased to $3,588,000, compared to $3,414,000 in 2008, an increase of $174,000, or 5.1%. Trust income in 2009 increased $33,000, or 3.8%, from the 2008 level. The Trust Department held total assets of $133,452,000 for 761 clients at December 31, 2009, compared to $137,614,000 at December 31, 2008.

Service charges on deposit accounts decreased $78,000, or 5.0%, in 2009 as compared to 2008 as a result of general changes in consumer spending throughout the 2009 year.

During the first quarter of 2009, Croghan commenced selling fixed-rate residential mortgage loans resulting in gain on sale of loans of $289,000. Included in gain on sale of loans was capitalized mortgage servicing rights of $102,000. At December 31, 2009, the unpaid balance of mortgage loans serviced for others amounted to $13,454,000.

The cash value of split-dollar life insurance policies aggregated $10,946,000 at December 31, 2009 and $10,601,000 at December 31, 2008. The increase in cash value of the policies amounted to $345,000 in 2009, compared to $374,000 in 2008.

Other operating income decreased $22,000, or 3.7%, to $565,000 in 2009, from $587,000 reported in 2008. Fees generated by the Investment Department totaled $76,000 in 2009, compared to $133,000 in 2008.

NON-INTEREST EXPENSES

Non-interest expenses are comprised of the items summarized in the following for the years ended December 31:

		2010				2009				2008
		(Dollars in thousands)
Salaries and wages		$	6,513			$	5,926			$	5,955
Employee benefits			1,758				1,648				1,666
Total personnel			8,271				7,574				7,621
Occupancy of premises			838				834				900
FDIC premium assessments			528				669				50
Amortization of core deposit intangible asset			58				57				58
Equipment and vehicle			1,067				1,195				1,263
Professional and consulting services			501				520				423
State franchise and other taxes			516				516				500
Postage			259				296				297
Stationery and supplies			222				247				226
Advertising and marketing			190				192				208
Third party computer processing			278				275				290
Examination fees			186				191				199
MasterCard franchise and processing			134				152				141
Loan collection and repossession fees			291				255				167
ATM network and processing fees			174				252				220
Telephone			91				100				107
Other operating			1,128				856				856
Total non-interest expenses		$	14,732			$	14,181			$	13,526

NON-INTEREST EXPENSES (CONTINUED)

2010 vs. 2009. Total non-interest expenses in 2010 increased to $14,732,000, from $14,181,000 in 2009, an increase of $551,000, or 3.9%. Total personnel expense increased $697,000, or 9.2%, to $8,271,000 in 2010, from $7,574,000 in 2009. Included in the personnel expense are costs related to the hiring of Croghan’s new President/CEO, and amounts paid under the Bank’s Performance Compensation for Stakeholders program totaling $319,000. Full-time equivalent employees totaled 150 at December 31, 2010, compared to 146 at December 31, 2009.

The FDIC premium assessments decreased to $528,000 in 2010, which was down from $669,000 in 2009. Included in the 2009 amount was a one-time FDIC Special Assessment ruling issued in May of 2009. The ruling required all insured depository institutions to pay a special assessment equal to the lesser of 5 basis points on total assets less Tier 1 capital, or 10 basis points on total deposits. While there was no special assessment in 2010, quarterly premiums remained at increased levels compared to two years ago, and are expected to remain at the increased levels, which are due to the increased deposit premium rates.

On September 29, 2009, the FDIC adopted a Notice of Proposed Rulemaking (NPR) that mandated insured depository institutions prepay their quarterly risk-based assessments to the FDIC for the fourth quarter of 2009 and for all of 2010, 2011, and 2012 on December 30, 2009 at the time of payment of their risk-based assessment for the third quarter of 2009. Accordingly, as of December 31, 2010, Croghan had a prepaid assessment balance, which is included in other assets, of $1,269,000 to cover 2011 and 2012 FDIC expenses.

In 2010, Croghan implemented virtualization at a total cost of $194,000. Virtualization is a consolidation of Croghan’s computer servers which will improve efficiencies, as well as give the Bank a real time disaster recovery system, which will help reduce the impact to Croghan and its clients of unforeseen disaster.

2009 vs. 2008. Total non-interest expenses in 2009 increased to $14,181,000, from $13,526,000 in 2008, an increase of $655,000, or 4.8%, including a $619,000 increase in FDIC premium assessments. Total personnel expense decreased $47,000, or .6%, to $7,574,000 in 2009, from $7,621,000 in 2008. Full-time equivalent employees totaled 146 at December 31, 2009 compared to 151 at December 31, 2008. Other expenses that increased more than $50,000 between 2009 and 2008 included professional and consulting services and loan collection and repossession fees.

The significant increase in FDIC premium assessments was due to increased deposit premium rates as well as the FDIC Special Assessment ruling issued in May of 2009.

Fees for professional and consulting services increased $97,000 in 2009, primarily due to Croghan establishing an enterprise risk management program, as well as Croghan engaging an independent third party to perform a goodwill impairment evaluation, the results of which demonstrated no impairment of goodwill as of July 1, 2009. Loan collection and repossession fees increased $88,000 in 2009, due to a significant increase in the volume of troubled loans that required attention resulting in foreclosures, as well as additional legal fees incurred on several large problem commercial loans.

FEDERAL INCOME TAXES

Federal income tax expense totaled $1,003,000 in 2010, compared to $952,000 in 2009, and $1,718,000 in 2008. The effective tax rate in 2010 was 19.6%, compared to 23.5% in 2009, and 28.3% in 2008. Federal income tax expense was offset by a $43,000 income tax refund during the third quarter of 2010. The decrease in the effective tax rate in 2010, as compared to 2009, was attributable to the aforementioned tax refund, as well as tax exempt income from securities and the increase in cash value of life insurance policies comprising a larger portion of income before federal income taxes.

FINANCIAL POSITION

SECURITIES

Croghan’s securities portfolio is used to enhance net interest income, provide liquidity in the event of unforeseen cash flow needs, and diversify financial risk. At December 31, 2010, Croghan classified substantially all of its securities as available-for-sale. Available-for-sale securities are reported at their fair values, with the net unrealized gain or loss, net of tax, reported as a component of stockholders’ equity known as “accumulated other comprehensive income (loss).” All securities are periodically reviewed for impairment.

Croghan’s available-for-sale investment portfolio is primarily comprised of U.S. Government agency and political subdivision obligations. The fair value of available-for-sale securities totaled $140,279,000 at December 31, 2010, compared to $105,792,000 at December 31, 2009. As previously mentioned in the “Net Interest Income” section, Croghan invested the run-off from the loan portfolio and increase in deposits into the securities portfolio to help maintain net interest income. Croghan has one corporate debt obligation which is classified as held-to-maturity and carried at amortized cost, amounting to $500,000 at December 31, 2010 and $502,000 at December 31, 2009.

Croghan’s restricted stock includes shares issued by the Federal Reserve Bank of Cleveland, Federal Home Loan Bank of Cincinnati, and Bankers Bancshares, Inc. of Gahanna, Ohio. Croghan maintains investments in these entities to facilitate borrowing capacity (FHLB), as a member (Federal Reserve), and for loan participation opportunities (Bankers Bancshares). The carrying value of restricted stock totaled $3,844,000 at December 31, 2010 and 2009.

The aggregate carrying value of all securities at December 31, 2010 totaled $144,623,000, an increase of 31.3%, as compared to $110,138,000 at December 31, 2009. Throughout 2010, proceeds from securities maturities, sales, and calls were used to purchase new securities.

LOANS

The following summarizes total loans and the percent change by major category as of December 31:

		2010				2009				Percent Change
		(Dollars in thousands)
Commercial, financial, and agricultural		$	21,576			$	27,311				(21.0	)%
Real estate — residential mortgage			114,268				129,931				(12.1	)%
Real estate — non-residential mortgage			140,103				146,485				(4.4	)%
Real estate — construction			4,084				5,828				(29.9	)%
Consumer			10,676				12,333				(13.4	)%
Credit card			2,598				2,596				.1	%
Total loans		$	293,305			$	324,484				(9.6	)%

Croghan’s market area in 2010 has still been subjected to decreased loan demand from many current and prospective clients. The soft loan demand as well as continued strict loan underwriting guidelines which are in place to help prevent future troubled loans, have caused the outstanding balance of total loans to decrease $31,179,000, or 9.6%, to $293,305,000 at December 31, 2010 from $324,484,000 at December 31, 2009. As demonstrated in the preceding table, decreases occurred in all loan categories except for credit card loans. The most significant decreases based on dollar amounts during 2010 occurred in the real estate — residential mortgage category which decreased $15,663,000, or 12.1%, primarily as a result of selling fixed rate mortgages in the secondary market, and reduced levels of loan originations due to declining loan volumes and stagnant economic conditions. The Bank continued to actively sell new fixed rate mortgages in the secondary market in 2010, primarily to help manage interest rate risk, as newly-originated 15-30 year fixed rate mortgages are being sold at historically low interest rates. The real estate — non-residential mortgage category decreased $6,382,000, or 4.4%, and the commercial, financial, and agricultural loan category decreased $5,735,000, or 21.0%, as a result of charge-offs, and reclassification due to the securing of real estate as collateral for more of these loans. The consumer loan category decreased $1,657,000, or 13.4%, which mainly resulted from competition from non-traditional credit sources. The real estate — construction category decreased $1,744,000, or 29.9%, as a result of the continued poor economic climate.

OTHER REAL ESTATE OWNED

During 2010, other real estate owned (OREO) decreased $887,000 to $1,443,000 at December 31, 2010, compared to $2,330,000 at December 31, 2009. The decrease was primarily attributable to the Bank being able to sell properties that were obtained from a real estate development loan client who ceased operations during the fourth quarter of 2009. During 2010, the Bank sold various properties from its OREO portfolio and recognized write-downs on properties held in OREO at December 31, 2010, resulting in an overall loss on sale or write-down of OREO of $239,000.

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES

Deposits and other interest-bearing liabilities at December 31, 2010 increased $8,052,000, or 1.9%, compared to December 31, 2009. Deposits and other interest-bearing liabilities serve as a primary source of cash flows to fund loan demand and are summarized in the following as of December 31:

		2010				2009				Percent Change
		(Dollars in thousands)
Demand non-interest bearing		$	61,409			$	60,072				2.2	%
Savings, NOW, and money market deposits			189,412				159,316				18.9	%
Time deposits			133,336				151,331				(11.9	)%
Total deposits			384,157				370,719				3.6	%
Federal funds purchased and securities sold under repurchase agreements			20,989				16,375				28.2	%
Federal Home Loan Bank borrowings			25,500				35,500				(28.2	)%
Total deposits and other interest-bearing liabilities		$	430,646			$	422,594				1.9	%

Demand non-interest bearing and savings, NOW, and money market deposits, and federal funds purchased and securities sold under repurchase agreements increased, and Federal Home Loan Bank borrowings and time deposits decreased in 2010. Federal Home Loan Bank borrowings decreased $10,000,000, due to a borrowing that matured in December 2010. The increase in demand non-interest bearing deposits of $1,337,000, along with the increase in savings, NOW, and money market deposits of $30,096,000, resulted from the Bank continuing to build strong relationships with its clients as well as a change in savings patterns experienced throughout the industry. Federal funds purchased and securities sold under repurchase agreements increased $4,614,000, or 28.2%, due to the influx of cash from our client base during 2010. The decrease in time deposits was due to the aforementioned all-time low interest rate environment.

STOCKHOLDERS’ EQUITY

Croghan’s stockholders’ equity is summarized in the following at December 31:

		2010				2009
		(Dollars in thousands)
Common stock		$	23,926			$	23,926
Surplus			179				179
Retained earnings			40,050				38,187
Accumulated other comprehensive income			507				1,044
Treasury stock			(8,149	)			(7,209	)
Total stockholders’ equity		$	56,513			$	56,127

STOCKHOLDERS’ EQUITY (CONTINUED)

Accumulated other comprehensive income consists of the net unrealized gain on securities classified as available-for-sale. At December 31, 2010, the Bank held $140,279,000 of available-for-sale securities with a net unrealized gain of $507,000, net of income taxes. This compares to available-for-sale securities of $105,792,000 at December 31, 2009, with a net unrealized gain of $1,044,000, net of income taxes. The $537,000 decrease in accumulated other comprehensive income was the result of customary and expected fluctuations in the bond market related to changes in interest rates during 2010. Since management believes that none of the Bank’s investment securities holdings are in an unrealized loss position at December 31, 2010 and 2009 are other than temporarily impaired, there were no securities impairment charges made to operations in either 2010 or 2009.

Treasury stock at December 31, 2010 increased $940,000, or 13.0%, as compared to December 31, 2009. During 2010, Croghan repurchased 37,497 of its outstanding shares at an average price of $25.08 per share, all of which were maintained in treasury stock at December 31, 2010.

Bank holding companies, including Croghan, are subject to minimum capital requirements established by the Federal Reserve Board. Additionally, all insured depository institutions, including the Bank, are subject to the Federal Reserve Board’s capital classification system that assigns institutions into one of the following categories: well capitalized, adequately capitalized, or undercapitalized. Failure of a bank or bank holding company to meet the adequately capitalized or minimum capital standards may result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on an institution’s financial statements.

The Federal Reserve Board’s minimum Tier I risk-based and total risk-based capital ratios established for bank holding companies are 4% and 8%, respectively. At December 31, 2010, Croghan had a Tier I risk-based capital ratio of 14.1% and a total risk-based capital ratio of 15.4%. To be considered as “well capitalized” under prompt corrective action provisions, a bank must have a Tier I risk-based capital ratio (as defined) of at least 6% and a total capital ratio (as defined) of at least 10%. At December 31, 2010, the Bank was deemed “well capitalized” with a Tier I risk-based capital ratio of 12.5% and a total risk-based capital ratio of 14.3%. A detailed analysis of the capital amounts and related capital ratios for Croghan and the Bank is included in Note 17 to the Consolidated Financial Statements. Management believes that, as of December 31, 2010 and 2009, Croghan and the Bank met all applicable capital adequacy requirements.

LIQUIDITY

The Bank’s primary sources of liquidity are derived from its core deposit base and stable stockholders’ equity position. Secondary liquidity is provided by adjusting the daily federal funds sold position (when available), by actively managing the investment portfolio, and by adjusting federal funds purchased (borrowed) under established lines of credit from correspondent banks. At December 31, 2010, the Bank had established lines of credit with two correspondent banks to purchase federal funds, which are readily available on an unsecured short-term basis to meet daily liquidity needs as they arise. There were no federal funds purchased during 2010. The Bank had no federal funds purchased at December 31, 2010 and 2009. The Bank had additional borrowing capacity of $65,937,000 available from the Federal Home Loan Bank of Cincinnati. These funds can be drawn upon subject to adequate pledging of Federal Home Loan Bank stock and eligible residential mortgage loans.

Additionally, the Bank maintains a portion of its assets in liquid form to meet anticipated client loan demands and to fund possible deposit account outflows. At December 31, 2010, liquid assets in the form of cash and cash equivalents totaled $21,856,000, or 4.5%, of total assets. The Bank also had $140,279,000 of available-for-sale securities which management has no current plans of selling, but could provide liquidity should the need arise. Management believes these liquid assets, as well as a staggered maturity schedule for other borrowings, principal pay downs within the investment portfolio, and cash flow from loan repayments provide adequate liquidity for day-to-day operations.

The liquidity needs of Croghan, primarily the need to pay quarterly cash dividends to stockholders, are funded by upstream-dividends from the Bank. Dividends to the holding company from the Bank totaled $3,101,000 in 2010, $2,300,000 in 2009, and $2,897,000 in 2008. The ability of the Bank to pay dividends is subject to limitations under various laws and regulations and to prudent and sound banking practices. In general, subject to certain minimum capital requirements, the Bank may declare a dividend at any time without the approval from the State of Ohio Division of Financial Institutions, provided its dividends in a calendar year do not exceed the total of its net profits for that year combined with its retained profits for the two preceding years. Under these provisions, the Bank had $1,663,000 available for dividends on January 1, 2011 and projects adequate income throughout 2011 to support Croghan’s cash dividends to stockholders.

INTEREST RATE RISK

Interest rate risk is one of Croghan’s most significant financial exposures. This risk, which is common to the financial institution sector, is an integral part of Croghan’s operations and impacts the rate-pricing strategy for essentially all loan and deposit products. The management and oversight of interest rate risk, including the establishment of acceptable guidelines, is the responsibility of the Asset/Liability Management Committee (ALCO). The ALCO Committee, and the associated Asset/Liability Management Policy, seeks to quantify and monitor the risk, to adequately provide for liquidity needs, and to maximize net interest income by managing net interest yield.

Croghan monitors its interest rate risk through a sensitivity analysis, which strives to measure potential changes in future earnings and the fair values of its financial instruments that could result from hypothetical changes in interest rates. The first step in this analysis is to estimate the expected cash flows from Croghan’s financial instruments using the interest rates in effect at December 31, 2010. To arrive at fair value estimates, the cash flows from Croghan’s financial instruments are discounted to their approximated present values.

Hypothetical changes in interest rates are applied to those financial instruments, and the cash flows and fair value estimations are then simulated. When calculating the net interest income estimations, hypothetical rates are applied to the financial instruments based upon the assumed cash flows. The Bank has historically applied interest rate “shocks” to its financial instruments of 100 and 200 basis points (up and down) for its net interest income, and 200 basis points (up and down) for the value of its equity. In 2010 the Bank added 300 and 400 (up and down) shocks to its net interest income to further its monitoring process. As a continuation from 2009, interest rates were still below 1.0% at December 31, 2010, resulting in the sensitivity analysis not being able to be performed with respect to a negative change in market rates.

The following presents the potential sensitivity in the Bank’s net interest income for a 100, 200, 300, and 400 basis-point (i.e., 1.0%, 2.0%, 3.0%, and 4.0%) change in market interest rates and the potential sensitivity in the present value of the Bank’s equity for a sudden and sustained 200 basis-point (i.e., 2.0%) change in market interest rates (dollars in thousands):

		December 31, 2010								ALCO Guidelines
		Change in Dollars				Change in Percent				For the Change in
		($)				(%)				Percent (%)
Annual Net Interest Income Impact
For a Change of + 100 Basis Points			352				.9				(5.0	)
For a Change of - 100 Basis Points			N/A				N/A				5.0
For a Change of + 200 Basis Points			914				2.6				(7.5	)
For a Change of - 200 Basis Points			N/A				N/A				7.5
For a Change of + 300 Basis Points			1,648				4.6				(10.0	)
For a Change of - 300 Basis Points			N/A				N/A				10.0
For a Change of + 400 Basis Points			2,263				6.3				(15.0	)
For a Change of - 400 Basis Points			N/A				N/A				15.0
Impact on the Net Present Value of Equity
For a Change of + 200 Basis Points			(5,218	)			(8.7	)			(20.0	)
For a Change of - 200 Basis Points			N/A				N/A				20.0

The projected volatility of net interest income and the net present value of equity at December 31, 2010 were within Croghan’s established guidelines. The preceding analysis encompasses the use of a variety of assumptions, including the relative levels of market interest rates, loan prepayments, and the possible reaction of depositors to changes in interest rates. The analysis simulates possible outcomes and should not be relied upon as being indicative of actual results. Additionally, the analysis does not necessarily contemplate all of the actions that Croghan could undertake in response to changes in market interest rates.

OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS, AND CONTINGENT LIABILITIES AND COMMITMENTS

The following summarizes Croghan’s loan commitments, including letters of credit, as of December 31, 2010 (dollars in thousands):

		Amount of Commitment to Expire Per Period
Type of Commitment		Total Amount				Less Than 1 Year				1-3 Years				4-5 Years				Over 5 Years
Commercial lines of credit		$	36,916			$	33,610			$	3,116			$	—			$	190
Real estate lines of credit			25,017				518				409				584				23,506
Consumer lines of credit			997				997				—				—				—
Credit card lines of credit			10,394				10,394				—				—				—
Guarantees			—				—				—				—				—
Total Commitments		$	73,324			$	45,519			$	3,525			$	584			$	23,696

Croghan had $73,324,000 in total loan commitments at December 31, 2010, including $45,519,000 expiring within one year. All lines of credit represent either fee-paid or legally binding loan commitments for the loan categories noted. Letters of credit are also included in the amounts noted below, since Croghan requires that each letter of credit be supported by a loan agreement. Commercial and consumer lines represent both unsecured and secured obligations. Real estate lines are secured by mortgages on residential and non-residential property. Credit card lines are made on an unsecured basis. It is anticipated that a significant portion of these lines will expire without being drawn upon, particularly credit card lines, which represent the maximum amount available to all cardholders. Additionally, $27,256,000 of the commercial lines are due on demand, with many of those lines established for seasonal operating purposes.

The following summarizes Croghan’s other contractual obligations as of December 31, 2010 (dollars in thousands):

		Payments Due by Period
Contractual Obligations		Total Amount				Less Than 1 Year				1-3 Years				4-5 Years				Over 5 Years
Long-term debt		$	25,500			$	13,000			$	7,500			$	—			$	5,000
Capital leases			—				—				—				—				—
Operating leases			316				55				159				88				14
Unconditional purchase obligations			—				—				—				—				—
Other			748				—				—				—				748
Total Obligations		$	26,564			$	13,055			$	7,659			$	88			$	5,762

Long-term debt represents borrowings from the Federal Home Loan Bank of Cincinnati which requires payment of interest on a monthly basis with principal due at maturity. The obligations are at fixed interest rates and stipulate a prepayment penalty if the respective note’s interest rate exceeds the current market rate for similar borrowings at the time of prepayment. As notes mature, Croghan evaluates the liquidity and interest-rate circumstances at that point in time to determine whether to pay off or renew the notes. The evaluation process typically includes: the strength of current and projected client loan demand, Croghan’s federal funds sold or purchased position, projected cash flows from maturing investment securities, the current and projected market interest rate environment, local and national economic conditions, and client demand for Croghan’s deposit product offerings.

Croghan had no capital leases or unconditional purchase obligations as of December 31, 2010. Additionally, obligations pertaining to deposits or federal funds purchased and securities sold under repurchase agreements are not included. Croghan’s operating lease obligations include the Port Clinton banking center, located in a retail supermarket in the Knollcrest Shopping Center, and an ATM site north of Fremont. Croghan also has various future operating lease obligations aggregating $140,000 at December 31, 2010 for photocopying and mail processing equipment which are not included in the table.

The “Other” contractual obligations totaling $748,000 represent projected payments for the periods indicated to various participants and their designated beneficiaries in the Bank’s various supplemental retirement benefit plans. Of this amount, $183,000 has been accrued as a liability as of December 31, 2010.

IMPACT OF RECENT ACCOUNTING STANDARDS

A summary of new accounting standards adopted or subject to adoption in 2010, as well as newly-issued but not effective accounting standards at December 31, 2010, is presented in Notes 2 and 23, respectively, to the Consolidated Financial Statements.

SIGNIFICANT ACCOUNTING POLICIES

Croghan’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices for the commercial banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements. These estimates, assumptions, and judgments are based upon the information available as of the date of the financial statements.

The most significant accounting policies followed by Croghan are presented in Note 1 to the Consolidated Financial Statements. These policies, along with the other disclosures presented in the Notes to the Consolidated Financial Statements and in Management’s Discussion and Analysis, provide information about how significant assets and liabilities are valued in the financial statements and how those values are determined. Management has identified the determination of the allowance for loan losses as the accounting area that requires the most subjective and complex estimates, assumptions, and judgments and, as such, could be the most subject to revision in the near term as new information becomes available. Additionally, management has identified the determination of the value of goodwill as another accounting area that requires complex estimates, assumptions, and judgments.

As noted in the section entitled “Provision for Loan Losses and the Allowance for Loan Losses”, Croghan performs a detailed quarterly analysis to assess the adequacy of its allowance for loan losses. This analysis encompasses a variety of factors including the potential loss exposure for individually reviewed loans, the historical loss experience for each loan category (i.e., commercial, real estate, and consumer), the volume of nonperforming loans (i.e., loans in nonaccrual status or past due 90 days or more), the volume of loans past due 30 to 89 days, a segmentation of each loan category by internally-assigned risk grades, any significant changes in lending or loan review staff, an evaluation of current and future local and national economic conditions, any significant changes in the volume or mix of loans within each category, a review of the significant concentrations of credit, and any legal, competitive, or regulatory concerns.

A goodwill evaluation is performed as of July 1 of each year. The evaluation process provides data to substantiate the balance in goodwill by estimating Croghan’s implied market value based upon recent bank merger and acquisition transactions. If the results indicate that Croghan’s estimated implied value is greater than its total stockholder’s equity plus goodwill as of the evaluation date, then no impairment exists. To date, none of Croghan’s goodwill evaluations have revealed the need for an impairment charge. On July 1, 2009, Croghan had an independent valuation specialist, which supported management’s assessment that no impairment adjustments to goodwill were warranted. Management does not believe that any significant conditions have changed relating to the goodwill impairment through December 31, 2010.

MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

The management of Croghan Bancshares, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in conformity with U.S. generally accepted accounting principles. Internal control over financial reporting of Croghan Bancshares, Inc. and its subsidiary (the “Corporation”) includes those policies and procedures that:

	(1)		pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Corporation;
	(2)		provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Corporation are being made only in accordance with authorizations of management and directors of the Corporation; and
	(3)		provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on the financial statements.

With the supervision and participation of our President and Chief Executive Officer and our Treasurer, management assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth for effective internal control over financial reporting as described in the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the Corporation’s system of internal control over financial reporting is effective as of December 31, 2010.

This Annual Report does not include an attestation report of the Corporation’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Corporation’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Corporation to provide only management’s report in this Annual Report.

Rick M. Robertson		Kendall W. Rieman
President and Chief Executive Officer		Treasurer

February 11, 2011

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors
Croghan Bancshares, Inc.
Fremont, Ohio

We have audited the accompanying consolidated balance sheets of Croghan Bancshares, Inc. and its subsidiary as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Croghan Bancshares, Inc. and its subsidiary as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

Toledo, Ohio
March 28, 2011

Offices in 17 states and Washington, DC

Croghan Bancshares, Inc.
CONSOLIDATED BALANCE SHEETS

		December 31,
		2010				2009
		(Dollars in thousands, except par value)
ASSETS
CASH AND CASH EQUIVALENTS		$	21,856			$	16,724
SECURITIES
Available-for-sale, at fair value			140,279				105,792
Held-to-maturity, at amortized cost, fair value of $505 in 2010 and $526 in 2009			500				502
Restricted stock			3,844				3,844
Total securities			144,623				110,138
LOANS			293,305				324,484
Less: Allowance for loan losses			4,955				4,433
Net loans			288,350				320,051
PREMISES AND EQUIPMENT, NET			6,613				6,863
CASH SURRENDER VALUE OF LIFE INSURANCE			11,357				10,946
GOODWILL			10,430				10,430
CORE DEPOSIT INTANGIBLE ASSET, NET			115				173
ACCRUED INTEREST RECEIVABLE			1,980				1,857
OTHER REAL ESTATE OWNED			1,443				2,330
OTHER ASSETS			2,960				2,476
TOTAL ASSETS		$	489,727			$	481,988
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing		$	61,409			$	60,072
Savings, NOW, and Money Market deposits			189,412				159,316
Time			133,336				151,331
Total deposits			384,157				370,719
Federal funds purchased and securities sold under repurchase agreements			20,989				16,375
Federal Home Loan Bank borrowings			25,500				35,500
Dividends payable			536				549
Other liabilities			2,032				2,718
Total liabilities			433,214				425,861
STOCKHOLDERS’ EQUITY
Common stock, $12.50 par value. Authorized 6,000,000 shares; issued 1,914,109 shares			23,926				23,926
Surplus			179				179
Retained earnings			40,050				38,187
Accumulated other comprehensive income			507				1,044
Treasury stock, 237,729 shares in 2010 and 200,232 shares in 2009, at cost			(8,149	)			(7,209	)
Total stockholders’ equity			56,513				56,127
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	489,727			$	481,988

The accompanying notes are an integral part of the consolidated financial statements.

Croghan Bancshares, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS

		Years ended December 31,
		2010				2009				2008
		(Dollars in thousands, except per share data)
INTEREST INCOME
Loans, including fees		$	18,156			$	20,305			$	22,677
Securities:
Obligations of U.S. Government agencies and corporations			2,640				2,311				2,037
Obligations of states and political subdivisions			1,703				1,064				798
Other			215				220				233
Federal funds sold			—				—				71
Deposits in other banks			25				26				76
Total interest income			22,739				23,926				25,892
INTEREST EXPENSE
Deposits			3,728				4,842				6,744
Other borrowings			1,357				1,433				1,416
Total interest expense			5,085				6,275				8,160
Net interest income			17,654				17,651				17,732
PROVISION FOR LOAN LOSSES			1,675				3,000				1,550
Net interest income, after provision for loan losses			15,979				14,651				16,182
NON-INTEREST INCOME
Trust income			1,026				898				865
Service charges on deposit accounts			1,460				1,491				1,569
Gain on sale of loans			282				289				—
Gain on sale of securities			11				—				19
Other			1,001				910				961
Total non-interest income			3,780				3,588				3,414
NON-INTEREST EXPENSES
Salaries, wages, and employee benefits			8,271				7,574				7,621
Occupancy of premises			838				834				900
Amortization of core deposit intangible asset			58				57				58
Other operating			5,565				5,716				4,947
Total non-interest expenses			14,732				14,181				13,526
Income before federal income taxes			5,027				4,058				6,070
FEDERAL INCOME TAXES			1,003				952				1,718
NET INCOME		$	4,024			$	3,106			$	4,352
NET INCOME PER SHARE, based on 1,692,307 shares in 2010 1,719,509 shares in 2009 1,732,611 shares in 2008		$	2.38			$	1.81			$	2.51

The accompanying notes are an integral part of the consolidated financial statements.

Croghan Bancshares, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

		Years ended December 31, 2010, 2009, and 2008
														Accumulated
														other
		Common								Retained				comprehensive				Treasury
		stock				Surplus				earnings				income				stock				Total
		(Dollars in thousands, except per share data)
BALANCE AT DECEMBER 31, 2007		$	23,926			$	179			$	35,292			$	157			$	(6,266	)		$	53,288
Cumulative effect of change in accounting principle, net of income taxes			—				—				(149	)			—				—				(149	)
Comprehensive income:
Net income			—				—				4,352				—				—				4,352
Change in net unrealized gain, net of reclassification adjustments and related income taxes			—				—				—				314				—				314
Total comprehensive income																							4,666
Purchase of 24,560 treasury shares			—				—				—				—				(772	)			(772	)
Cash dividends declared, $1.28 per share			—				—				(2,214	)			—				—				(2,214	)
BALANCE AT DECEMBER 31, 2008			23,926				179				37,281				471				(7,038	)			54,819
Comprehensive income:
Net income			—				—				3,106				—				—				3,106
Change in net unrealized gain, net of related income taxes			—				—				—				573				—				573
Total comprehensive income																							3,679
Purchase of 6,981 treasury shares			—				—				—				—				(171	)			(171	)
Cash dividends declared, $1.28 per share			—				—				(2,200	)			—				—				(2,200	)
BALANCE AT DECEMBER 31, 2009			23,926				179				38,187				1,044				(7,209	)			56,127
Comprehensive income:
Net income			—				—				4,024				—				—				4,024
Change in net unrealized gain, net of related income taxes			—				—				—				(537	)			—				(537	)
Total comprehensive income																							3,487
Purchase of 37,497 treasury shares			—				—				—				—				(940	)			(940	)
Cash dividends declared, $1.28 per share			—				—				(2,161	)			—				—				(2,161	)
BALANCE AT DECEMBER 31, 2010		$	23,926			$	179			$	40,050			$	507			$	(8,149	)		$	56,513

The accompanying notes are an integral part of the consolidated financial statements.

Croghan Bancshares, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

		Years ended December 31,
		2010				2009				2008
		(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	4,024			$	3,106			$	4,352
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			846				975				1,073
Provision for loan losses			1,675				3,000				1,550
Deferred federal income taxes			(303	)			(441	)			(149	)
Gain on sale of loans			(282	)			(289	)			—
Loss on sale or write-down of other real estate owned			30				24				—
Federal Home Loan Bank stock dividends			—				—				(100	)
Increase in cash value of life insurance			(411	)			(345	)			(374	)
Net amortization of security premiums and discounts			1,196				314				75
Provision for deferred compensation			2				8				142
Gain on sale of securities			(11	)			—				(19	)
Gain on disposal of premises			—				(39	)			—
Proceeds from sale of loans, net of originations			201				180				—
Decrease (increase) in accrued interest receivable			(123	)			17				42
Decrease (increase) in other assets			(116	)			(1,767	)			23
Increase (decrease) in other liabilities			(345	)			175				174
Net cash provided by operating activities			6,383				4,918				6,789
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities			24,093				23,036				14,111
Proceeds from sales of available-for-sale securities			1,996				—				3,899
Proceeds from sale of other real estate owned			1,738				82				246
Proceeds from disposal of premises and equipment			—				67				124
Purchases of available-for-sale securities			(62,573	)			(59,523	)			(38,993	)
Purchase of restricted stock			—				(115	)			—
Net decrease (increase) in loans			29,145				20,953				(1,080	)
Additions to premises and equipment			(515	)			(621	)			(667	)
Net cash used in investing activities			(6,116	)			(16,121	)			(22,360	)