Exhibit 13

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
		2009				2008				Change
For the year:
Net income			$3,106,000				$4,352,000				(28.6)%
Income per common share			1.81				2.51				(27.9)%
Dividends per common share			1.28				1.28				-
Return on average assets			.66%				.96%
Return on average stockholders’ equity			5.56%				8.09%
At year-end:
Assets			$481,988,000				$460,476,000				4.7%
Loans			324,484,000				349,433,000				(7.1)%
Securities			110,138,000				72,981,000				50.9%
Deposits			370,719,000				345,077,000				7.4%
Stockholders’ equity			56,127,000				54,819,000				2.4%
Book value per common share			$32.75				$31.86				2.8%
Stockholders’ equity to total assets			11.64%				11.90%
Number of stockholders of record			700				723				(3.2)%
Number of full-time equivalent employees			146				151				(3.3)%

To Our Shareholders:

Performance in a Tough Year

As we looked to 2009, we were facing an unprecedented series of events that would likely redefine the face of the financial industry. We did not know the extent of the damage or what the industry would look like in the aftermath. But we did know that we had to prepare for a severe economic downturn.

At Croghan we resolved to navigate through the tough conditions, to help our clients in every way we could and to show leadership in our communities. Through it all, we have not strayed from our strategy of building long-term relationships and staying with our core practice of providing a safe, sound, and convenient place for our clients to do their banking.

As a community bank, we can make a difference for the many families and businesses that we serve throughout our communities. That includes knowing our clients and offering them financially sound services that we can all understand. Another part of that formula is focusing on long-term consistent performance rather than being distracted by initiatives that drive only short-term earnings. This has allowed us to stay stable and healthy in the midst of such economic and financial turmoil around us. We never found ourselves in a position to have to stop investing in our systems, our infrastructure, our people, or the further development of our products. I feel that this emphasis on serving clients and growing our business will drive our results for years to come.

Through it all, we’ve managed to keep a high level of liquidity and preserve our strong capital position, which has allowed us to maintain our dividend payout, while continuing to produce positive net income to the bottom line.

There are many areas that are impacted during an economic recession. Among them, we’ve seen businesses struggle with cash flows and homeowners feeling the effects of rising unemployment rates. During 2009, we experienced a decline in loan balances due mostly to those types of pressures. In turn, we’ve built up our reserve for loan loss by increasing our provision expense. The economy, and its impact on our industry, has also led to many financial institution failures. These failures have burdened the national deposit insurance system to the point that our FDIC premium costs have increased dramatically.

Despite these difficult conditions, we have continued to make loans and maintain a solid balance sheet. Because of our capital position, expense control efforts, risk management, and consistent focus on credit quality, we believe we have many opportunities for growth and are positioned to do so as conditions improve.

Along the way we lost a good friend and former board member in 2009, as Claude Young passed away unexpectedly in November. He was deeply committed to his family and his community and we will miss him.

Priorities for 2010

As we look forward to 2010, we are committed to being a better bank every day. What sets us apart is not just what we do, but how we do it. First, our job every day is to WOW our clients. We’re committed to understanding our clients’ needs and their problems and finding the right solutions.

Our second priority is to focus on growth opportunities and utilize our competitive advantage so we can grow our natural market share. Regarding acquisitions, we’ve always said that if we see an opportunity that’s consistent with our growth strategy, meets our risk requirements, and can be arranged in a shareholder-friendly way, we’ll seriously consider it. Regardless, we enter every growth discussion with the understanding that the reason to get bigger and gain economies of scale is when doing so enables us to do a better job for our clients and shareholders.

Third, our strength is based on risk that we can understand and measure. We continue to focus on maximizing the return on every dollar of risk we take. And this leads to our final concentration, which is to operate with excellence and manage expenses to improve productivity. That means getting the job done better than our competitors every day.

Building for the Future

We know how fortunate we are to have good employees who like helping others. Without a management team who also believes in the fundamentals of exceptional client service, rigorous cost control, and pristine credit quality, we simply would not be the strong organization we are today, especially given the economic pressures of the past two years. Our staff knows what distinguishes Croghan—we believe in building long-term relationships with our clients and we understand that our success is intertwined with theirs. This success results in added shareholder value.

As we plan for the future, we like our position and believe that our business is strong. Even in tough years like 2008 and 2009, we did not – and will not – stop doing all the things that make our company better.

With my recent announcement and retirement plans scheduled later this year, I would like to express my thanks to the employees, clients, and shareholders of Croghan. This is a wonderful organization to the credit of the people who are a part of it. Everyone connected should feel proud of what we have here. I certainly do, and I thank you for allowing me to serve you.

Sincerely,

Steven C. Futrell
President and Chief Executive Officer

January 2010

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 $481,988,000 in total assets as of December 31, 2009. 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 2009 and 2008. OTC Bulletin Board quotations reflect inter-dealer prices, without mark-up, mark-down, or commission and may not necessarily represent actual transactions.

		2009								2008
		Low				High				Low				High
First Quarter		$	21.55				26.50			$	27.50				35.00
Second Quarter			23.40				28.50				27.00				36.25
Third Quarter			24.00				28.00				26.25				28.75
Fourth Quarter			22.00				25.30				23.00				27.75

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

		2009				2008
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 699 holders of record of the Corporation’s common shares on January 31, 2010.

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, 2009, 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,
		2009				2008				2007				2006				2005
		(Dollars in thousands, except share data)
Statements of operations:
Total interest income		$	23,926			$	25,892			$	27,752			$	26,904			$	25,385
Total interest expense			6,275				8,160				10,524				9,613				7,310
Net interest income			17,651				17,732				17,228				17,291				18,075
Provision for loan losses			3,000				1,550				100				380				705
Net interest income, after
provision for loan losses			14,651				16,182				17,128				16,911				17,370
Total non-interest income			3,588				3,414				3,486				3,035				2,761
Total non-interest expenses			14,181				13,526				12,755				12,168				12,077
Income before federal income taxes			4,058				6,070				7,859				7,778				8,054
Federal income taxes			952				1,718				2,348				2,289				2,333
Net income		$	3,106			$	4,352			$	5,511			$	5,489			$	5,721
Per share of common stock:
Net income		$	1.81			$	2.51			$	3.13			$	3.03			$	3.05
Dividends			1.28				1.28				1.24				1.20				1.16
Book value			32.75				31.86				30.53				28.65				27.07
Average shares of common stock outstanding		1,719,509				1,732,611				1,763,320				1,814,011				1,877,987
Year-end balances:
Loans, net		$	320,051			$	346,146			$	347,156			$	353,678			$	337,286
Securities			110,138				72,981				51,479				61,913				81,421
Total assets			481,988				460,476				455,128				458,858				461,899
Deposits			370,719				345,077				362,833				371,194				368,459
Stockholders’ equity			56,127				54,819				53,288				51,163				49,931
Average balances:
Loans, net		$	330,829			$	341,499			$	343,979			$	337,538			$	340,158
Securities			83,555				66,394				55,007				70,090				72,131
Total assets			468,170				455,286				448,489				452,209				459,707
Deposits			358,192				356,668				364,481				366,261				368,315
Stockholders’ equity			55,895				53,820				52,011				50,357				50,052
Selected ratios:
Net yield on average interest-earning assets			4.12%				4.26%				4.23%				4.19%				4.30%
Return on average assets			.66				.96				1.23				1.21				1.24
Return on average stockholders’ equity			5.56				8.09				10.60				10.90				11.43
Net loan charge-offs as a percent of average outstanding net loans			.56				.47				.10				.12				.22
Allowance for loan losses as a percent of year-end loans			1.37				.94				.96				1.01				1.06
Stockholders’ equity as a percent of total year-end assets			11.64				11.90				11.71				11.15				10.81

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 of 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”

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, 2009 was $3,106,000, compared to $4,352,000 in 2008, and $5,511,000 in 2007. Net income in 2009 as compared to 2008 was unfavorably impacted by a $1,450,000 increase in the provision for loan losses, a $655,000 increase in non-interest expenses, and an $81,000 decrease in net interest income, while net income was favorably impacted by a $174,000 increase in non-interest income and a $766,000 decrease in federal income tax expense. The increase in the provision for loan losses is more fully explained in the “Provision for Loan Losses and the Allowance for Loan Losses” section. The increase in non-interest expenses is primarily attributable to a $619,000 increase in FDIC premiums as more fully discussed in the “Non-interest Expenses” section. The decrease in federal income taxes is reflective of the decrease in Croghan’s income before federal income taxes.

The return on average assets in 2009 was .66%, compared to .96% in 2008, and 1.23% in 2007. The return on average stockholders’ equity was 5.56% in 2009, 8.09% in 2008, and 10.60% in 2007. Net income per share in 2009 amounted to $1.81, compared to $2.51 in 2008, and $3.13 in 2007. Changes in these amounts from year to year were generally reflective of changes in the level of net income.

Assets increased to $481,988,000 at December 31, 2009, compared to $460,476,000 at December 31, 2008, an increase of 4.7%. Loans decreased $24,949,000, or 7.1%, to $324,484,000 at December 31, 2009, compared to $349,433,000 at December 31, 2008. The decrease in loans resulted from continued soft loan demand in Croghan’s market area, the selling of substantially all fixed rate mortgage loans originated in 2009, and $1,854,000 of net loan charge-offs recognized in 2009. With the decline in loan demand and corresponding increase in deposits, securities increased $37,157,000, or 50.9%, to $110,138,000 at December 31, 2009, compared to $72,981,000 at December 31, 2008. Deposits increased $25,642,000, or 7.4%, to $370,719,000 at December 31, 2009, from $345,077,000 at December 31, 2008. Stockholders’ equity at December 31, 2009 was $56,127,000, a 2.4% increase compared to $54,819,000 at December 31, 2008.

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:

		2009				2008				2007
		(Dollars in thousands)
Average interest-earning assets		$	428,275			$	416,393			$	406,940
Interest income			23,926				25,892				27,752
Average rate earned			5.59%				6.22%				6.82%
Average interest-bearing liabilities		$	356,283			$	348,557			$	345,290
Interest expense			6,275				8,160				10,524
Average rate paid			1.76%				2.34%				3.05%
Net interest income		$	17,651			$	17,732			$	17,228
Net interest yield (net interest income divided by average interest-earning assets)			4.12%				4.26%				4.23%

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 Federal Reserve Open Market Committee (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.

2008 vs. 2007. Net interest income for 2008 increased $504,000, or 2.9%, to $17,732,000, compared to $17,228,000 in 2007. Average interest-earning assets in 2008 increased $9,453,000, which was a direct result of the increase to the securities portfolio. Throughout 2008, Croghan took advantage of favorable spreads between investment rates and other borrowing rates which resulted in an increase to the security portfolio, other borrowings, and net interest income. Average interest-bearing liabilities increased $3,267,000, which was a result of increases in borrowed funds and offset by a decrease in deposits.

In 2008, the FOMC lowered managed interest rates 200 basis points, or 2.00%. With the reductions in managed rates, the average rate earned on interest-earning assets and average rate paid on interest-bearing liabilities both decreased in 2008. The average rate earned on interest-earning assets decreased to 6.22% in 2008 from 6.82% in 2007, while the average rate paid on interest-bearing liabilities decreased to 2.34% in 2008 from 3.05% in 2007. The net effect of these changes was that Croghan’s net interest yield increased to 4.26% in 2008 from 4.23% in 2007.

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 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.

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

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:

		2009				2008				2007
		(Dollars in thousands)
Provision for loan losses charged to expense		$	3,000			$	1,550			$	100
Net loan charge-offs			1,854				1,621				342
Net loan charge-offs as a percent of average outstanding net loans			.56%				.47%				.10%

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

		2009				2008				2007
		(Dollars in thousands)
Nonaccrual loans		$	5,903			$	1,845			$	2,285
Loans contractually past due 90 days or more and still accruing interest			45				334				237
Restructured loans			3,191				-				-
Potential problem loans, other than those past due 90 days or more, nonaccrual, or restructured			22,227				13,140				9,405
Total potential problem and nonperforming loans		$	31,366			$	15,319			$	11,927
Allowance for loan losses		$	4,433			$	3,287			$	3,358
Allowance for loan losses as a percent of year-end loans			1.37%				.94%				.96%

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

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 the past two years 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 is 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 loans 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 are all under 30 days past due. These loans have been 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 has deteriorated as Croghan’s market area continues 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. 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 to Croghan.

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

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, 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

2008 vs. 2007. The 2008 provision for loan losses totaled $1,550,000, or $1,450,000 more than the 2007 provision of $100,000. The increase in the 2008 provision was attributable to an increase in both the level of loan charge-offs during 2008, as compared to 2007, and the level of potential problem and nonperforming loans at December 31, 2008, as compared to December 31, 2007. During 2008, Croghan recognized $1,055,000 of charge-offs on one commercial loan credit. Croghan had provided a specific reserve relating to the credit of $800,000 in its allowance for loan losses calculation as of December 31, 2007.

Total potential problem and nonperforming loans increased $3,392,000, or 28.4%, to $15,319,000 at December 31, 2008, compared to $11,927,000 at December 31, 2007. The adverse trends resulted from Croghan’s higher level of potential problem loans at December 31, 2008, as compared to December 31, 2007, and were indicative of worsening economic conditions in Croghan’s primary lending area.

Positive trends in the categories of potential problem and nonperforming loans at December 31, 2008 as compared to December 31, 2007 included a $440,000 decrease in nonaccrual loans. Adverse trends included a $97,000 increase in loans contractually past due 90 days or more and still accruing interest and a $3,735,000 increase in other potential problem loans at December 31, 2008, as compared to December 31, 2007. This increase was primarily due to both the volume of loans being classified as potential problem loans, as well as several large commercial credits being classified as potential problem credits.

The following provides additional detail pertaining to the past due status of Croghan’s potential problem loans as of December 31, 2008 (dollars in thousands):

Potential problem loans not currently past due		$	10,139
Potential problem loans past due one day or more but less than 10 days			2,193
Potential problem loans past due 10 days or more but less than 30 days			487
Potential problem loans past due 30 days or more but less than 60 days			224
Potential problem loans past due 60 days or more but less than 90 days			97
Total potential problem loans		$	13,140

The following provides additional detail pertaining to the collateralization of Croghan’s potential problem loans as of December 31, 2008 (dollars in thousands):

Collateralized by an interest in real property		$	12,381
Collateralized by an interest in assets other than real property			747
Unsecured			12
Total potential problem loans		$	13,140

NON-INTEREST INCOME

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

		2009				2008				2007
		(Dollars in thousands)
Trust income		$	898			$	865			$	888
Service charges on deposit accounts			1,491				1,569				1,551
Gain on sale of loans			289				-				-
Gain on sale of securities			-				19				-
Increase in cash value of life insurance			345				374				355
Other operating income			565				587				692
Total non-interest income		$	3,588			$	3,414			$	3,486

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. 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 $78,000, or 5.0%, in 2009 as compared to 2008 as a result of general change 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.

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 $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. 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 $76,000 in 2009, compared to $133,000 in 2008. Other items of note that comprise other operating income include 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.

2008 vs. 2007. Total non-interest income in 2008 decreased to $3,414,000, compared to $3,486,000 in 2007, a decrease of $72,000, or 2.1%. Trust income in 2008 decreased $23,000, or 2.6%, from the 2007 level. The Trust Department held total assets of $137,614,000 for 760 clients at December 31, 2008, compared to $140,063,000 of assets at December 31, 2007.

Service charges on deposit accounts increased $18,000, or 1.2%, in 2008 as compared to 2007 as a result of Croghan’s continued development of various deposit products and services, as well as close scrutiny of its fee structure in comparison to its costs.

The cash value of split-dollar life insurance policies aggregated $10,601,000 at December 31, 2008 and $10,227,000 at December 31, 2007. The increase in cash value of the policies amounted to $374,000 in 2008, compared to $355,000 in 2007.

Other operating income decreased $105,000, or 15.2%, to $587,000 in 2008, from $692,000 reported in 2007. Fees generated by the Investment Department totaled $133,000 in 2008, compared to $98,000 in 2007.

NON-INTEREST EXPENSES

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

		2009				2008				2007
		(Dollars in thousands)
Salaries and wages		$	5,926			$	5,955			$	5,663
Employee benefits			1,648				1,666				1,523
Total personnel			7,574				7,621				7,186
Occupancy of premises			834				900				837
FDIC premium assessments			669				50				43
Amortization of core deposit intangible asset			57				58				58
Equipment and vehicle			1,195				1,263				1,196
Professional and consulting services			520				423				437
State franchise and other taxes			516				500				496
Postage			296				297				294
Stationery and supplies			247				226				219
Advertising and marketing			192				208				179
Third party computer processing			275				290				241
Examination fees			191				199				182
MasterCard franchise and processing			152				141				155
Loan collection and repossession fees			255				167				72
ATM network and processing fees			252				220				184
Telephone			100				107				99
Other operating			856				856				877
Total non-interest expenses		$	14,181			$	13,526			$	12,755

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 on May 22, 2009, which 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.

On September 29, 2009, the FDIC adopted a Notice of Proposed Rulemaking (NPR) that would mandate that 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 when they pay their risk-based assessment for the third quarter of 2009. The assessments will address the FDIC’s short-term liquidity needs. While the FDIC may use the prepaid premiums to pay resolution costs, the FDIC cannot immediately include the premiums in the calculation of the deposit insurance fund reserve. Under the plan, each depository institution would record the entire amount of its prepayment as an asset, and each depository would record an expense for its calculated regular quarterly assessment and a credit to the prepaid asset until the asset is exhausted. Accordingly, as of December 31, 2009, Croghan had prepaid assessments, which are included in other assets, of $1,797,000 to cover 2010, 2011, and 2012.

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. 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.

In 2010, Croghan expects to implement virtualization, a technical upgrade which will cost approximately $200,000. Virtualization is a consolidation of Croghan’s computer servers which will improve efficiencies, as well as give Croghan a real time disaster recovery system which will help reduce the impact to Croghan and its clients of unforeseen disaster. These upgrades to Croghan’s operations will take place during the first and second quarters of 2010.

NON-INTEREST EXPENSES (CONTINUED)

2008 vs. 2007. Total non-interest expenses in 2008 increased to $13,526,000, from $12,755,000 in 2007, an increase of $771,000, or 6.0%. Total personnel expense increased $435,000, or 6.1%, to $7,621,000 in 2008, from $7,186,000 in 2007. In connection with the split-dollar life insurance policies described in the “Non-Interest Income” section, Croghan has entered into agreements with certain officers and employees to provide for supplemental retirement benefits. In connection with these agreements, Croghan recognized a provision for deferred compensation of $142,000 in 2008 (none in 2007), which is included in employee benefits. Full-time equivalent employees totaled 151 at December 31, 2008 compared to 152 at December 31, 2007. Other expenses that changed more than $50,000 between 2008 and 2007 included occupancy of premises, equipment and vehicle, and loan collection and repossession fees.

Occupancy of premises expense increased $63,000, or 7.5%, in 2008, as compared to 2007. The increase was primarily due to the costs incurred from the opening of the new Norwalk banking center, improvements at the West banking center, and improvements to the Main banking center. Equipment and vehicle expenses increased $67,000, or 5.6%, in 2008, as compared to 2007. Increases in equipment costs were primarily due to additional equipment purchased for the Norwalk, Main, and West banking centers, equipment maintenance contract fees, and merchant capture costs.

Loan collection and repossession fees increased $95,000 in 2008 as compared to 2007, due to a significant increase in the volume of foreclosures, as well as additional legal fees incurred on several large problem commercial loans.

FEDERAL INCOME TAXES

Federal income tax expense totaled $952,000 in 2009, compared to $1,718,000 in 2008, and $2,348,000 in 2007. The effective tax rate in 2009 was 23.5%, compared to 28.3% in 2008, and 29.9% in 2007. The decrease in the effective tax rate in 2009, as compared to 2008 was attributable to tax exempt income from securities and split dollar life insurance 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, 2009, 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 $105,792,000 at December 31, 2009, compared to $68,748,000 at December 31, 2008. 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 $502,000 at December 31, 2009 and $504,000 at December 31, 2008.

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, 2009 and $3,729,000 at December 31, 2008.

The aggregate carrying value of all securities at December 31, 2009 totaled $110,138,000, an increase of 50.9%, as compared to $72,981,000 at December 31, 2008. Also, throughout 2009, Croghan used proceeds from securities maturities, sales, calls, and Federal Home Loan Bank borrowings to purchase new securities.

LOANS

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

										Percent
		2009				2008				Change
		(Dollars in thousands)
Commercial, financial, and agricultural		$	27,311			$	32,566				(16.1	)%
Real estate – residential mortgage			129,931				147,050				(11.6	)%
Real estate – non-residential mortgage			146,485				142,452				2.8	%
Real estate – construction			5,828				9,952				(41.4	)%
Consumer			12,333				14,843				(16.9	)%
Credit card			2,596				2,570				1.0	%
Total loans		$	324,484			$	349,433				(7.1	)%

Due to the continued downturn in economic conditions throughout Croghan’s market area and continued strict loan underwriting demands, the outstanding balance of Croghan’s total loans decreased $24,949,000, or 7.1%, to $324,484,000 at December 31, 2009 from $349,433,000 at December 31, 2008. As demonstrated in the preceding table, decreases occurred in all loan categories except for non-residential real estate and credit card loans. The increase in non-residential real estate loans of $4,033,000, or 2.8%, reflected Croghan’s continued emphasis on obtaining real estate collateral for commercial loans. The most significant decreases during 2009 occurred in the real estate – residential mortgage category which decreased $17,119,000, or 11.6%, 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 poor economic conditions. The decision to actively sell new fixed rate mortgages in the secondary market was made primarily to help manage interest rate risk. Newly-originated 15-30 year fixed rate mortgages being sold carry historically low interest rates. The Bank has decided to reduce its interest rate risk to future potential increases in loan rates by selling these assets, and investing the proceeds in the securities portfolio. Also declining in 2009 was the commercial, financial, and agricultural loan category, which decreased $5,255,000, or 16.1%, 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 $2,510,000, or 16.9%, as a result of continued consumer spending habit changes and competition from non-traditional credit sources. The real estate – construction category decreased $4,124,000, or 41.4%, as a result of the poor economic climate.

OTHER REAL ESTATE OWNED

During 2009, other real estate owned (OREO) increased $2,036,000 to $2,330,000 at December 31, 2009 compared to $294,000 at December 31, 2008. This increase was primarily attributable to a real estate development loan client who ceased operations during the fourth quarter of 2009. In December 2009, Croghan accepted from the client deeds in lieu of foreclosure to various residential and non-residential properties resulting in a $1,915,000 transfer to OREO. During 2009, Croghan sold various properties from OREO and recognized a write-down on a property held in OREO at December 31, 2009, resulting in an overall loss on sale or write-down of OREO of $24,000.

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES

Deposits and other interest-bearing liabilities at December 31, 2009 increased $20,666,000, or 5.1%, compared to December 31, 2008. 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:

										Percent
		2009				2008				Change
		(Dollars in thousands)
Demand non-interest bearing		$	60,072			$	49,820				20.6	%
Savings, NOW, and money market deposits			159,316				143,922				10.7	%
Time deposits			151,331				151,335				-	%
Total deposits			370,719				345,077				7.4	%
Federal funds purchased and securities sold under repurchase agreements			16,375				17,351				(5.6	)%
Federal Home Loan Bank borrowings			35,500				39,500				(10.1	)%
Total deposits and other interest-bearing liabilities		$	422,594			$	401,928				5.1	%

Demand non-interest bearing and savings, NOW, and money market deposits increased, and Federal Home Loan Bank borrowings, time deposits, and federal funds purchased and securities sold under repurchase agreements decreased in 2009. Federal Home Loan Bank borrowings decreased $4,000,000, due to a borrowing that matured in March 2009. The increase in demand non-interest bearing deposits of $10,252,000, along with the increase in savings, NOW, and money market deposits of $15,394,000, was due to the continued strategy of Croghan to build strong relationships with our clients as well as a change in savings patterns experienced throughout the industry. Federal funds purchased and securities sold under repurchase agreements decreased $976,000, or 5.6%, due to the influx of demand deposits that occurred during 2009. The small decrease in time deposits was due to the continued low interest rate environment.

STOCKHOLDERS’ EQUITY

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

		2009				2008
		(Dollars in thousands)
Common stock		$	23,926			$	23,926
Surplus			179				179
Retained earnings			38,187				37,281
Accumulated other comprehensive income			1,044				471
Treasury stock			(7,209	)			(7,038	)
Total stockholders’ equity		$	56,127			$	54,819

STOCKHOLDERS’ EQUITY (CONTINUED)

Accumulated other comprehensive income consists of the net unrealized gain on securities classified as available-for-sale. At December 31, 2009, Croghan held $105,792,000 of available-for-sale securities with a net unrealized gain of $1,044,000, net of income taxes. This compares to available-for-sale securities of $68,748,000 at December 31, 2008, with a net unrealized gain of $471,000, net of income taxes. The $573,000 change in accumulated other comprehensive income was the result of customary and expected fluctuations in the bond market related to changes in interest rates during 2009. Since management believes that none of Croghan’s investment securities holdings in an unrealized loss position at December 31, 2009 and 2008 are other than temporarily impaired, there were no securities impairment charges made to operations in either 2009 or 2008.

Treasury stock at December 31, 2009 increased $171,000, or 2.4%, as compared to December 31, 2008. During 2009, Croghan repurchased 6,981 of its outstanding shares at an average price of $24.54 per share, all of which were maintained in treasury stock at December 31, 2009.

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, 2009, Croghan had a Tier I risk-based capital ratio of 13.3% and a total risk-based capital ratio of 14.6%. 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, 2009, the Bank was deemed “well capitalized” with a Tier I risk-based capital ratio of 11.7% and a total risk-based capital ratio of 13.9%. 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, 2009 and 2008, 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, 2009, 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. The average balance borrowed under these lines during 2009 totaled $134,000. The Bank had no federal funds purchased at December 31, 2009 compared to $1,600,000 purchased at December 31, 2008. The Bank also had additional borrowing capacity of $57,551,000 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, 2009, liquid assets in the form of cash and cash equivalents totaled $16,724,000, or 3.5%, of total assets. The Bank also had $105,792,000 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 $2,300,000 in 2009, $2,897,000 in 2008, and $5,378,000 in 2007. 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 $2,188,000 available for dividends on January 1, 2010 and projects adequate income throughout 2010 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, seek 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, 2009. 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. Croghan 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. However, because interest rates were below 1.0% at December 31, 2009, the sensitivity analysis can’t be performed with respect to a negative 100 and 200 basis point change in market rates.

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

		December 31, 2009								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			548				3.1				(10.0	)
For a Change of –100 Basis Points			N/A				N/A				10.0
For a Change of +200 Basis Points			554				3.1				(15.0	)
For a Change of –200 Basis Points			N/A				N/A				15.0
Impact on the Net Present Value of Equity
For a Change of +200 Basis Points			(10,218	)			(9.6	)			(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, 2009 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, 2009 (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			$ 29,383				$28,085				$187				$   111				$  1,000
Real estate lines of credit			30,646				298				650				1,304				28,394
Consumer lines of credit			576				576				-				-				-
Credit card lines of credit			10,670				10,670				-				-				-
Guarantees			-				-				-				-				-
Total Commitments			$71,275				$39,629				$837				$1,415				$29,394

Croghan had $71,275,000 in total loan commitments at December 31, 2009, including $39,629,000 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, $26,917,000 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, 2009 (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			$35,500				$10,000				$15,500				$5,000				$5,000
Capital leases			-				-				-				-				-
Operating leases			290				54				110				104				22
Unconditional purchase obligations			-				-				-				-				-
Other			674				72				-				-				602
Total Obligations			$36,464				$10,126				$15,610				$5,104				$5,624

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, 2009. 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 $76,000 at December 31, 2009 for photocopying and mail processing equipment which are not included in the table.

The “Other” contractual obligations totaling $674,000 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, $215,000 has been accrued as a liability as of December 31, 2009. During the fourth quarter of 2008, these agreements were amended for certain former and current executive officers. Under the terms of these amended agreements, those individuals agreed to accept specified accelerated payments based on a discount rate of 6.0%. The Bank made payments in January 2010 of $72,000 under the amended agreements.

IMPACT OF RECENT ACCOUNTING STANDARDS

A summary of new accounting standards adopted or subject to adoption in 2009, as well as newly-issued but not effective accounting standards at December 31, 2009 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 impairment evaluation is performed as of July 1 of each year, 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. The most recent valuation, performed July 1, 2009 by an independent valuation specialist, supported management’s assessment that no impairment adjustments to goodwill were warranted. To date, none of Croghan’s goodwill evaluations have revealed the need for an impairment charge. Management does not believe than any significant conditions have changed relating to the goodwill impairment through December 31, 2009.

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, 2009. 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, 2009.

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 temporary rules of the Securities and Exchange Commission that permit the Corporation to provide only management’s report in this Annual Report.

Steven C. Futrell		Kendall W. Rieman
President and Chief Executive Officer		Treasurer
February 12, 2010

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, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. 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, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

Toledo, Ohio March 26, 2010

Offices in 17 states and Washington, DC

Croghan Bancshares, Inc.
CONSOLIDATED BALANCE SHEETS

		December 31,
ASSETS		2009				2008
	(Dollars in thousands, except par value)
CASH AND CASH EQUIVALENTS		$	16,724			$	10,132
SECURITIES
Available-for-sale, at fair value			105,792				68,748
Held-to-maturity, at amortized cost, fair value of $526 in 2009 and $512 in 2008			502				504
Restricted stock			3,844				3,729
Total securities			110,138				72,981
LOANS			324,484				349,433
Less: Allowance for loan losses			4,433				3,287
Net loans			320,051				346,146
PREMISES AND EQUIPMENT, NET			6,863				7,181
CASH SURRENDER VALUE OF LIFE INSURANCE			10,946				10,601
GOODWILL			10,430				10,430
CORE DEPOSIT INTANGIBLE ASSET, NET			173				230
ACCRUED INTEREST RECEIVABLE			1,857				1,874
OTHER REAL ESTATE OWNED			2,330				294
OTHER ASSETS			2,476				607
TOTAL ASSETS		$	481,988			$	460,476
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Demand, non-interest bearing		$	60,072			$	49,820
Savings, NOW, and Money Market deposits			159,316				143,922
Time			151,331				151,335
Total deposits			370,719				345,077
Federal funds purchased and securities sold under repurchase agreements			16,375				17,351
Federal Home Loan Bank borrowings			35,500				39,500
Dividends payable			549				551
Other liabilities			2,718				3,178
Total liabilities			425,861				405,657
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			38,187				37,281
Accumulated other comprehensive income			1,044				471
Treasury stock, 200,232 shares in 2009 and 193,251 shares in 2008, at cost			(7,209	)			(7,038	)
Total stockholders’ equity			56,127				54,819
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	481,988			$	460,476

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

Croghan Bancshares, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS

		Years ended December 31,
		2009				2008				2007
	(Dollars in thousands, except per share data)
INTEREST INCOME
Loans, including fees		$	20,305			$	22,677			$	25,168
Securities:
Obligations of U.S. Government agencies and corporations			2,311				2,037				1,327
Obligations of states and political subdivisions			1,064				798				763
Other			220				233				271
Federal funds sold			-				71				223
Deposits in other banks			26				76				-
Total interest income			23,926				25,892				27,752
INTEREST EXPENSE
Deposits			4,842				6,744				9,324
Other borrowings			1,433				1,416				1,200
Total interest expense			6,275				8,160				10,524
Net interest income			17,651				17,732				17,228
PROVISION FOR LOAN LOSSES			3,000				1,550				100
Net interest income, after provision for loan losses			14,651				16,182				17,128
NON-INTEREST INCOME
Trust income			898				865				888
Service charges on deposit accounts			1,491				1,569				1,551
Gain on sale of loans			289				-				-
Gain on sale of securities			-				19				-
Other			910				961				1,047
Total non-interest income			3,588				3,414				3,486
NON-INTEREST EXPENSES
Salaries, wages, and employee benefits			7,574				7,621				7,186
Occupancy of premises			834				900				837
Amortization of core deposit intangible asset			57				58				58
Other operating			5,716				4,947				4,674
Total non-interest expenses			14,181				13,526				12,755
Income before federal income taxes			4,058				6,070				7,859
FEDERAL INCOME TAXES			952				1,718				2,348
NET INCOME		$	3,106			$	4,352			$	5,511
NET INCOME PER SHARE, based on
1,719,509 shares in 2009,
1,732,611 shares in 2008, and
1,763,320 shares in 2007		$	1.81			$	2.51			$	3.13

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

Croghan Bancshares, Inc.

		Years ended December 31, 2009, 2008, and 2007
														Accumulated
														other
		Common								Retained				comprehensive				Treasury
		stock				Surplus				earnings				income (loss)				stock				Total
		(Dollars in thousands, except per share data)
BALANCE AT DECEMBER 31, 2006			$23,926				$171				$31,961				$(206	)			$(4,689	)			$51,163
Comprehensive income:
Net income			-				-				5,511				-				-				5,511
Change in net unrealized gain (loss), net of related income taxes			-				-				-				363				-				363
Total comprehensive income																							5,874
Purchase of 41,051 treasury shares			-				-				-				-				(1,598	)			(1,598	)
Proceeds from sale of 763 treasury shares			-				8				-				-				21				29
Cash dividends declared, $1.24 per share			-				-				(2,180	)			-				-				(2,180	)
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