UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2013.

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission File Number 0-20159

CROGHAN BANCSHARES, INC.

(Exact name of Registrant as specified in its charter)


Ohio		31-1073048
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

323 Croghan Street, Fremont, Ohio		43420
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (419) 332-7301

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [X]

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [ ] No [X]

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller Reporting Company [X]

(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [ X ]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant’s most recently completed second fiscal quarter: The aggregate market value of the Registrant’s common shares, par value $12.50 per share, held by non-affiliates as of June 30, 2013, based on the closing price quoted on the OTC Bulletin Board on such date, was $54,619,560.

The Registrant had 2,270,729 common shares, par value $12.50 per share, outstanding as of February 28, 2014.

This Annual Report on Form 10K contains 124 pages. The Exhibit Index is on pages 51 through 52 and also immediately preceding the filed exhibits on pages 47 through 49.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Annual Report to Shareholders for the fiscal year ended December 31, 2013 (the “2013 Annual Report to Shareholders”) are incorporated by reference into PART II of this Annual Report on Form 10-K.

INDEX


Part I
Item 1.	Business	4 - 23
Item 1A.	Risk Factors	24 - 28
Item 1B.	Unresolved Staff Comments	28
Item 2.	Properties	28
Item 3.	Legal Proceedings	28
Item 4.	Mine Safety Disclosures	28

Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	29
Item 6.	Selected Financial Data	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 8.	Financial Statements and Supplementary Data	30
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	30
Item 9A.	Controls and Procedures	30 - 31
Item 9B.	Other Information	31

Part III
Item 10.	Directors, Executive Officers, and Corporate Governance	32 - 36
Item 11.	Executive Compensation	36 - 42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	43 - 44
Item 13.	Certain Relationships and Related Transactions, and Director Independence	44 - 45
Item 14.	Principal Accountant Fees and Services	45 - 46

Part IV
Item 15.	Exhibits and Financial Statement Schedules	47 - 49

Signatures		50

PART I

ITEM 1. BUSINESS

GENERAL

Croghan Bancshares, Inc. (the “Corporation”), was organized under the laws of the State of Ohio on September 27, 1983, and is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”). As the result of a reorganization effective in 1984, the Corporation acquired all of the voting shares of The Croghan Colonial Bank (the “Bank”), an Ohio chartered bank organized in 1888. The Bank is the only direct subsidiary of the Corporation and substantially all of the Corporation’s operations are conducted through the Bank. The Bank has one wholly-owned insurance company subsidiary, Croghan Insurance Agency LLC (“Croghan Insurance”), which was organized on August 21, 2009 as an Ohio limited liability company for the purpose of allowing the Bank to participate in certain commission revenue generated through its third party insurance agreement. The principal offices of the Corporation, the Bank, and Croghan Insurance are located at 323 Croghan Street, Fremont, Ohio. The Bank operates 16 Ohio offices, including one in Bellevue, one in Clyde, one in Curtice, five in Fremont, one in Green Springs, one in Monroeville, one in Norwalk, one in Oak Harbor, one in Oregon, one in Port Clinton, and two in Tiffin.

On December 6, 2013, the Corporation completed the acquisition of Indebancorp and its bank subsidiary, National Bank of Ohio (“NBOH”), in a stock and cash merger transaction. Under the terms of the merger agreement, the shareholders of Indebancorp received either $55.00 in cash, 1.63 common shares of the Corporation, or a combination thereof subject to the overall consideration being 70% stock and 30% cash. Based on the closing price of the Corporation’s common shares on December 6, 2013 (i.e., the date of closing), the transaction was valued at $29.15 million and is expected to qualify as a tax-free reorganization. Indebancorp and NBOH were headquartered in Oak Harbor, Ohio, and operated four full-service branches and two loan production offices, all located within 30 miles of its corporate headquarters. In the transaction, the Bank acquired a total of $223,095,000 in total assets, with $163,453,000 in net loans and $22,876,000 in securities, and assumed $194,491,000 in deposits.

In December 2013, the Bank also completed the sale of its Custar Branch to another financial institution. The branch sale included $28,328,000 of assets, including $16,590,000 of cash paid and cash on hand and $11,467,000 of loans, and the transfer of $29,500,000 of liabilities, including $29,483,000 of deposits.

The Corporation maintains a website at www.croghan.com (this uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate the Corporation’s website into this Annual Report on Form 10-K). The Corporation makes available free of charge on or through its website, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after the Corporation electronically files such material with, or furnishes such material to, the Securities and Exchange Commission (the “SEC”).

Through the Bank, the Corporation operates in one industry segment – the commercial banking industry. The Bank conducts a general banking business embracing the usual functions of commercial, retail, and savings banking, including time, savings, money market and demand deposits; commercial, industrial, agricultural, real estate, consumer installment, and credit card lending; safe deposit box rental; automatic teller machines; trust department services; and other services tailored for individual customers. The Bank originates and services secured and unsecured loans to individuals, firms, and corporations. Direct loans are made to individuals and installment obligations are purchased from retailers, both with and without recourse. The Bank makes a variety of residential, industrial, commercial, and agricultural loans secured by real estate, including interim construction financing. Additionally, investment products bearing no Federal Deposit Insurance Corporation (“FDIC”) insurance are offered through the Bank’s Trust and Investment Services Division.

Interest and fees on loans are the Bank’s primary sources of income. The Bank’s principal expenses are interest paid on deposit accounts and borrowed funds, and personnel and operating costs. Operating results are dependent to a significant degree on the “net interest income” of the Bank, which is the difference between the interest income derived from its interest-earning assets, such as loans and securities, and the interest expense paid on its interest-bearing liabilities, consisting of deposits and borrowings. Interest income and interest expense are significantly affected by general economic conditions and the policies of various regulatory authorities. See “EFFECTS OF GOVERNMENT MONETARY POLICY” on page 22 of this Annual Report on Form 10-K.

The Corporation’s only sources of funds are dividends and interest paid by the Bank. The ability of the Bank to pay dividends is subject to limitations under various laws and regulations, and to prudent and sound banking principles. See “DIVIDEND RESTRICTIONS” on page 22 of this Annual Report on Form 10-K.

As a bank holding company, the Corporation is subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System (the “FRB”). The deposits of the Bank are insured up to the applicable limits by the FDIC and, therefore, the Bank is subject to regulation, supervision, and examination by the FDIC. As a bank incorporated under the laws of the State of Ohio, the Bank is also subject to regulation, supervision, and examination by the Division of Financial Institutions of the Ohio Department of Commerce (the “Division”). See “REGULATION AND SUPERVISION” beginning on page 18, and “REGULATORY CAPITAL REQUIREMENTS” beginning on page 20 of this Annual Report on Form 10-K.

Because the Corporation’s activities have been limited primarily to holding the common shares of the Bank, the following discussion of operations focuses primarily on the business of the Bank. The following discussion encompasses only domestic operations since neither the Corporation nor the Bank have any foreign operations or foreign loans.

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K which are not historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects”, “believes”, “anticipates”, “targets”, “plans”, “will”, “would”, “should”, “could”, and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. Factors that might cause such difference include, but are not limited to, the factors discussed under “ITEM 1A – RISK FACTORS” beginning on page 24 of this Annual Report on Form 10-K. Forward-looking statements speak only as of the date on which they are made and, except as required by law, the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made to reflect unanticipated events. All subsequent written and oral forward-looking statements attributable to the Corporation or any person acting on its behalf are qualified by these cautionary statements.

LENDING ACTIVITIES

General. As a commercial bank, the Bank makes a wide variety of different types of loans. Among the Bank’s lending activities are the origination of commercial, financial, and agricultural loans, which may be secured by various assets of the borrower or unsecured; loans secured by mortgages on residential and non-residential real estate; construction loans secured by mortgages on the underlying property; consumer loans which may be on an unsecured basis or secured by vehicles or other assets of the borrower; and credit card loans which are typically unsecured.

The following table sets forth the composition of the Bank’s loan portfolio by type of loan at the dates indicated:


	December 31,

	2013		2012		2011		2010		2009

	(Dollars in thousands)
Type of Loan: (1)
Commercial, financial, and agricultural (2)		$ 44,134		$ 35,303		$ 28,963		$ 21,576		$ 27,311
Real estate – mortgage		387,936		264,189		253,865		254,371		276,416
Real estate – construction		11,608		3,635		5,237		4,084		5,828
Consumer		27,515		15,234		11,203		10,676		12,333
Credit card and other		3,555		2,916		2,697		2,598		2,596

		$474,748		$321,277		$301,965		$293,305		$324,484

(1)	The Bank made no foreign loans in 2013, 2012, 2011, 2010, or 2009.

(2)	Lease financing receivables included in commercial, financial, and agricultural, were $313,000 in 2013, $184,000 in 2012, $311,000 in 2011, $650,000 in 2010, and $859,000 in 2009.

Loan Maturity Schedule. The following table sets forth certain information, as of December 31, 2013, regarding the dollar amount of loans maturing in the Bank’s portfolio based on their contractual terms to maturity and the dollar amount of such loans that have fixed or variable rates within certain maturity ranges after 2013:


	Maturing

	Within one year		After one but within five years		After five years		Total

	(Dollars in thousands)

Commercial, financial, and agricultural		$10,079		$21,484		$12,571		$44,134
Real estate – construction		2,715		1,816		7,077		11,608

Total		$12,794		$23,300		$19,648		$55,742


	Interest Sensitivity

	Fixed Rate		Variable Rate

	(Dollars in thousands)

Due after one but within five years		$21,587		$1,713
Due after five years		7,623		12,025

		$29,210		$13,738

The above maturity information is based on the contract terms at December 31, 2013, and does not include any possible “rollover” at maturity date. In the normal course of business, the Bank considers and acts upon the borrower’s request for renewal of a loan at maturity. Evaluation of such a request includes a review of the borrower’s credit history, the collateral securing the loan, and the purpose for such request.

Commercial, Financial, and Agricultural Loans. The Bank makes loans for commercial purposes, including industrial and professional purposes, to sole proprietorships, partnerships, corporations, limited liability companies, and other business enterprises. The Bank makes agricultural loans for the purpose of financing agricultural production, including all costs associated with growing crops or raising livestock. Commercial, financial, and agricultural loans may be secured, other than by real estate, or unsecured, requiring one single repayment, or on an installment repayment schedule. Commercial, financial, and agricultural loans generally have final maturities of five years or less and are made with interest rates that adjust either daily or annually based upon the national prime rate in effect at the time of the applicable rate change. However, under the current low rate environment there has been a shift to lock in fixed rates to maturity. Such loans typically do not contain any periodic rate adjustment caps or lifetime rate caps.

Commercial lending involves certain risks relating to changes in local and national economic conditions and the resulting effect on the borrowing entities. Such loans are subject to greater risk of default during periods of adverse economic conditions. Because such loans may be secured by equipment, inventory, accounts receivable, and other non-real estate assets, the collateral may not be sufficient to ensure full payment of the loan in the event of a default. To reduce such risk, the Bank may obtain the personal guarantees of one or more of the principals of the borrowers.

At December 31, 2013, the Bank had $44,134,000, or 9.3% of total loans, invested in commercial, financial, and agricultural loans. At December 31, 2013, the Bank had $188,000 of nonperforming loans of this type (i.e., those loans in nonaccrual status or past due 90 days or more).

Real Estate – Mortgage Loans. The Bank makes non-residential real estate loans secured by first mortgages and/or junior mortgages on non-residential real estate, including retail stores, office buildings, warehouses, apartment buildings, and residential real estate loans secured by first mortgages on one-to-four family residences, with a majority being single-family residences.

Non-Residential Real Estate Loans. The Bank’s non-residential real estate loans generally have final maturities of between 10 and 20 years and are typically made with adjustable interest rates (“ARMs”). Interest rates on the ARMs adjust either daily, annually, every three years, or every five years based upon the national prime or U.S. Treasury Note rates in effect at the time of the applicable rate change. Such loans typically do not contain periodic rate adjustment caps or lifetime rate caps.

The Bank limits the amount of each non-residential real estate loan in relationship to the appraised value of the real estate and improvements at the time of origination of such loans. The maximum loan-to-value ratio (the “LTV”) on non-residential real estate loans made by the Bank is 80%, subject to certain exceptions.

Non-residential real estate lending is generally considered to involve a higher degree of risk than residential lending. Such risk is due primarily to the dependence of the borrower on the cash flow from the property to service the loan. If the cash flow from the property is reduced due to a downturn in the economy for example, or due to any other reason, the borrower’s ability to repay the loan may be impaired. To reduce such risk, the decision to underwrite a non-residential real estate loan is based primarily on the quality and characteristics of the income stream generated by the property and/or the business of the borrower. The Bank carefully evaluates the location of the real estate, the quality of the management operating the property, the debt service ratio, and appraisals supporting the property’s valuation. In addition, the Bank may obtain the personal guarantees of one or more of the principals of the borrower.

At December 31, 2013, the Bank had $211,852,000, or 44.6% of total loans, invested in non-residential real estate loans, a majority of which were secured by properties located in the Northwestern Ohio area. At December 31, 2013, the Bank had $2,842,000 of nonperforming loans of this type.

Residential Real Estate Loans. The Bank’s residential real estate loans have either fixed or adjustable interest rates (“ARMs”). Interest rates on ARMs adjust every three or five years based upon the three or five year Constant Treasury Maturity (“CMT”) as published by the Wall Street Journal, plus an additional margin, that is in effect at the time of the applicable rate change. The three and five year ARMs typically have periodic adjustment caps of 2% and lifetime adjustment caps of 6%. The maximum amortization period for such loans is 30 years. The Bank does not engage in the practice of deeply discounting the initial rates on such loans, nor does the Bank engage in the practice of putting payment caps on loans which could lead to negative amortization. In addition to the three and five year ARM programs, where the loan is retained and serviced by the Bank, loans are originated by the Bank and sold into the secondary market (e.g., to Freddie Mac and Fannie Mae). The Bank retains the servicing and related support functions on loans that are sold into the secondary market. The establishment of this arrangement allows the Bank to maintain its customer relationships by providing very competitive residential real estate loan offerings, while at the same time eliminating the risks associated with long-term fixed-rate mortgage loan financing.

The Bank limits the amount of each residential real estate loan in relationship to the appraised value of the real estate and improvements at the time of origination of a residential real estate loan. The maximum LTV on residential real estate loans made by the Bank is 85%, subject to certain exceptions.

The Bank’s residential real estate loans amounted to $176,084,000 at December 31, 2013, which represented 37.1% of total loans. At December 31, 2013, the Bank had $2,663,000 of nonperforming loans of this type.

Real Estate – Construction Loans. The Bank makes construction loans to finance land development prior to erecting new structures and the construction of new buildings or additions to existing buildings. During the construction period, these loans are structured with either fixed rates or adjustable rates of interest tied to changes in the national prime interest rate. Many of the construction loans originated by the Bank are made to owner-occupants for the construction of single-family homes. Other loans are made to builders and developers for various projects, including the construction of homes and other buildings that have not been pre-sold, and the preparation of land for site and project development.

Construction loans involve greater underwriting and default risks than do loans secured by mortgages on improved and developed properties due to the effects that general economic conditions have on real estate developments, developers, managers, and builders. In addition, such loans are more difficult to evaluate and monitor. Loan funds are advanced upon the security of the project under construction, which is more difficult to value before the completion of construction. Moreover, because of the uncertainties inherent in estimating construction costs, it is relatively difficult to accurately evaluate the LTVs and the total loan funds required to complete a project. In the event that a default or foreclosure on a construction or land development loan occurs, the Bank must take control of the project and attempt either to arrange for completion of construction or dispose of the unfinished project.

At December 31, 2013, the Bank’s construction loans amounted to $11,608,000, or 2.5% of total loans. At December 31, 2013, the Bank had no nonperforming loans of this type.

Consumer Loans. The Bank makes a variety of consumer loans to individuals for family, household, and other personal expenditures. These loans often are made for the purpose of financing the purchase of vehicles, furniture, educational expenses, medical expenses, taxes, or vacation expenses. Consumer loans may be secured, other than by real estate, or unsecured, and generally require repayment pursuant to an installment repayment schedule.

Consumer loans involve a higher risk of default than residential real estate loans, particularly in the case of loans that are unsecured or secured by rapidly depreciating assets, such as vehicles. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage or depreciation, and the remaining deficiency may not warrant further collection efforts against the borrower. In addition, consumer loan collections depend on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, illness, or personal bankruptcy. Various federal and state laws, including federal and state bankruptcy and insolvency laws, may also limit the amount which can be recovered on such loans.

At December 31, 2013, the Bank had $27,515,000, or 5.8% of total loans, invested in consumer loans, of which $34,000 were nonperforming.

Credit Card and Other Loans. Credit card and other loans are made to individuals for personal expenditures and principally arise from bank credit cards. Such loans generally pose the most risk as they are most frequently unsecured.

At December 31, 2013, the Bank had $3,555,000, or 0.7% of total loans, invested in credit card and other loans, of which $37,000 were nonperforming.

Loan Solicitation and Processing. The Bank’s loan originations are developed from a number of sources, including continuing business with depositors, borrowers, and real estate developers, periodic newspaper and radio advertisements, solicitations by the Bank’s lending staff, walk-in customers, director referrals, and loan participations purchased from other financial institutions.

For non-residential real estate loans, the Bank obtains information with respect to the credit and business history of the borrower and prior projects completed by the borrower. Personal guarantees of one or more principals of the borrower are obtained as deemed necessary. An environmental study of the real estate might also be conducted when deemed necessary. Upon the completion of the appraisal of the non-residential real estate and the receipt of information on the borrower, the loan application may be submitted to the Loan Committee for approval or rejection if the loan amount is in excess of established limits contained in the Bank’s Loan Policy. Additionally, loans in material amounts as established in the Bank’s Loan Policy must be submitted to the Executive Committee of the Board of Directors for approval or rejection.

In connection with residential real estate loans, the Bank may obtain a credit report, verification of employment and other documentation concerning the creditworthiness of the borrower. An appraisal of the fair market value of the real estate on which the Bank will be granted a mortgage to secure the loan is generally prepared by an independent appraiser approved by the Board of Directors. An environmental study of the real estate is conducted only if the appraiser has reason to believe that an environmental problem may exist.

When either a residential or non-residential real estate loan application is approved, a lawyer’s opinion of title or title insurance is obtained with respect to the real estate which will secure the loan. Borrowers are required to carry satisfactory fire and casualty insurance and flood insurance, if applicable, and to name the Bank as an insured mortgagee.

Commercial, financial, and agricultural loans are underwritten primarily on the basis of the stability of the income generated by the business and/or property. The personal guarantees of one or more principals of the borrower also are generally obtained. Consumer loans are underwritten on the basis of the borrower’s credit history and an analysis of the borrower’s income and expenses, ability to repay the loan and the value of the collateral, if any. The procedure for approval of real estate - construction loans is the same as for real estate - mortgage loans, except that an appraiser evaluates the building plans, construction specifications and estimates of construction costs. The Bank also evaluates the feasibility of the proposed construction project and the experience and record of the builder.

Loan Origination and Other Fees. The Bank realizes loan origination fees and other fee income from its lending activities. The Bank also realizes income from late payment charges, application fees, and fees for other miscellaneous services. Loan origination fees and other fees realized by the Bank are a volatile source of income and vary with the volume of lending, loan repayments and general economic conditions. Nonrefundable loan origination fees and certain direct loan origination costs are deferred and recognized as an adjustment to yield over the life of the related loan.

Delinquent Loans, Nonperforming Assets, and Classified Assets. When a borrower fails to make a required payment on a loan, the Bank attempts to cause the deficiency to be cured by contacting the borrower. In most cases, deficiencies are cured promptly as a result of these efforts.

When a borrower fails to make a timely payment, the borrower will receive a series of scheduled delinquency notices and possibly follow-up calls from an employee of the Bank. In most cases, delinquencies are paid promptly. Generally, if a real estate loan becomes 90 days delinquent, the borrower and collateral will be assessed to determine whether foreclosure action is required. When deemed appropriate by management, a foreclosure action will be instituted or a deed in lieu of foreclosure will be pursued.

Loans are placed into nonaccrual status when, in the opinion of management, full collection of principal and interest is unlikely. Under-collateralized loans are then fully or partially charged-off against the allowance for loan losses, and interest is recognized on a cash basis where future collections of principal are probable.

The following table presents information concerning the amount of loans which contain certain risk elements at the dates indicated:


	December 31,

	2013		2012		2011		2010		2009

	(Dollars in thousands)

Loans accounted for on a nonaccrual basis including Troubled Debt Restructuring (“TDR”) non-accruing (1)		$4,604		$2,753		$4,671		$4,127		$5,903

Loans contractually past due 90 days or more as to principal or interest payments and still accruing interest (2)		1,160		967		672		586		45

Loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest because of a deterioration in the financial position of the borrower (3)		6,081		4,342		3,532		4,665		3,191

(1)

The amount of gross interest income that would have been recorded had all nonaccrual loans been current in accordance with their terms approximated $151,000 in 2013, $161,000 in 2012, $200,000 in 2011, $270,000 in 2010, and $375,000 in 2009. Actual interest included in interest income on these loans amounted to $33,000 in 2013, $39,000 in 2012, $33,000 in 2011, $36,000 in 2010, and $33,000 in 2009.

(2)

Excludes loans accounted for on a nonaccrual basis.

(3)

Excludes loans accounted for on a nonaccrual basis and loans contractually past due 90 days or more as to principal or interest payments.

In addition to the loan amounts identified in the preceding table, there was $7,079,000 of potential problem loans at December 31, 2013. While these loans are all currently performing, management has some doubt about the ability of the borrowers to continue to comply with all of their present loan repayment terms. Management 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 the borrowing entity does not generate sufficient operating cash flow to adequately service its debts.

The Bank’s loans are spread over a broad range of industrial classifications. As of December 31, 2013, the Bank had no significant concentrations of loans (i.e., greater that 10% of total loans) to borrowers engaged in the same or similar industries.

Allowance for Loan Losses. The Bank maintains an allowance for loan losses to provide for loans that might not be repaid. At December 31, 2013, the Bank’s allowance for loan losses totaled $4,042,000. To determine the adequacy of the allowance for loan losses, the Bank performs a detailed quarterly analysis that focuses on delinquency trends within each loan category (i.e., commercial, real estate, and consumer loans), the status of nonperforming loans (i.e., impaired, nonaccrual and restructured loans, and loans past due 90 days or more), current and historic trends of charged-off loans within each category, existing local and national economic conditions, and changes in the volume and mix within each loan category. Additionally, loans that are identified as impaired are individually evaluated and specific reserves provided to the extent the loan amount exceeds anticipated future cash flows, including cash flows from the sale of the underlying collateral.

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 Bank’s portfolio. While management believes that it uses the best information available to determine the allowance for loan losses, unforeseen market conditions could result in adjustments, and net earnings could be significantly affected if circumstances differ substantially from the assumptions used in making the final determination. The regulatory agencies that periodically review the Bank’s allowance for loan losses may also require adjustments 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 table shows the daily average loan balances, for the periods indicated, and changes in the allowance for loan losses for such years:


	December 31,
	2013		2012		2011		2010		2009

	(Dollars in thousands)

Daily average amount of loans		$331,291		$306,343		$286,576		$306,924		$334,648


Allowance for loan losses at beginning of year		$4,325		$4,778		$4,955		$4,433		$3,287


Loan charge-offs:
Commercial, financial, and agricultural		(-)		(2)		(56)		(4)		(212)
Real estate – mortgage		(529)		(984)		(1,649)		(1,169)		(1,594)
Consumer		(73)		(75)		(38)		(97)		(141)
Credit card and other		(47)		(23)		(43)		(39)		(74)

		(649)		(1,084)		(1,786)		(1,309)		(2,021)


Recoveries of loans previously charged off:
Commercial, financial, and agricultural		13		15		203		15		66
Real estate – mortgage		18		72		598		93		34
Consumer		51		13		23		42		57
Credit card and other		9		6		10		6		10

		91		106		834		156		167

Net charge-offs		(558)		(978)		(952)		(1,153)		(1,854)


Additions to allowance charged to expense		275		525		775		1,675		3,000

Allowance for loan losses at end of year		$4,042		$4,325		$4,778		$4,955		$4,433

Allowance for loan losses as a percent of year-end loans		.85%		1.35%		1.58%		1.69%		1.37%

Ratio of net charge-offs during the year to average net loans outstanding during the year		.17%		.32%		.34%		.38%		.56%

The amount of charge-offs and recoveries fluctuate from year to year due to factors relating to the condition of the general economy and specific business segments. During 2009, there were no commercial loan charge-offs exceeding $25,000; however, there was one recovery that totaled $34,000 that was recovered from a commercial loan that was charged off in 2008. Also during 2009, there were 15 real estate loan charge-offs individually exceeding $25,000 with the largest being $518,000, and others including $253,000, $224,000, and $178,000. There were no individual recoveries over $25,000 in the real estate loan category during 2009. There were also two consumer loan charge-offs that individually exceeded $25,000 during 2009 with the largest being $31,000. During 2010, there were no commercial loan charge-offs or recoveries exceeding $25,000. Also during 2010, there were 11 real estate loan charge-offs individually exceeding $25,000 with the largest being $273,000, and others including $180,000, $138,000, and $85,000. There were two individual recoveries over $25,000 in the real estate loan category during 2010. There were no consumer loan charge-offs or recoveries that individually exceeded $25,000 during 2010. During 2011, there was one commercial loan charge-off exceeding $25,000 that totaled $36,000 and there was a recovery from one borrower totaling $169,000. Also during 2011, there were 15 real estate loan charge-offs individually exceeding $25,000 with the largest being $335,000, and others including $308,000, $120,000, $112,000, and $100,000. There were two individual recoveries over $25,000 in the real estate loan category during 2011 totaling $519,000 and $66,000. There were no consumer loan charge-offs or recoveries that individually exceeded $25,000 during 2011. During 2012, there were no commercial loan charge-offs or recoveries exceeding $25,000. Also during 2012, there were 15 real estate loan charge-offs individually exceeding $25,000 with the largest being $150,000, and others including $83,000, $65,000, and two each of $59,000. There were no recoveries over $25,000 in the real estate loan category during 2012. There were no consumer loan charge-offs or recoveries that individually exceeded $25,000 during 2012. During 2013, there were no commercial loan charge-offs or recoveries exceeding $25,000, five real estate charge-offs exceeding $25,000 (with the largest charge-off being $159,000 and the aggregate being $305,000), and one consumer loan charge-off of $29,000. There were no other individual charge-offs or recoveries exceeding $25,000 during 2013. There were no lease financing charge-offs or recoveries in any of the years presented.

The Corporation recognized a provision for loan losses of $275,000 for the year ended December 31, 2013. The decrease in the provision for loan losses in 2013, as compared to 2012, was due to a decrease in the level of specifically analyzed loans in 2013, as compared to 2012, and a reduction in net loan charge-offs of $420,000. The Bank will continue to monitor the credit quality of its entire loan portfolio to maintain the allowance for loan losses at an appropriate level.

The following table allocates the allowance for loan losses for the periods indicated to each loan category. The allowance has been allocated to the categories of loans noted according to the amount deemed to be reasonably necessary to provide for the possibility of losses being incurred based on specific credit analyses:


	December 31, 2013				December 31, 2012
	Allowance		Percentage of loans to total loans		Allowance		Percentage of loans to total loans

	(Dollars in thousands)				(Dollars in thousands)

Commercial, financial, and agricultural		$ 456		9.3%		$ 621		11.0%
Real estate – mortgage		2,885		81.7%		3,315		82.2%
Real estate – construction		464		2.5%		184		1.1%
Consumer		164		5.8%		127		4.8%
Credit card and other		73		.7%		78		.9%

		$4,042		100.0%		$4,325		100.0%


	December 31, 2011				December 31, 2010
	Allowance		Percentage of loans to total loans		Allowance		Percentage of loans to total loans

	(Dollars in thousands)				(Dollars in thousands)

Commercial, financial, and agricultural		$ 615		9.6%		$ 542		7.4%
Real estate – mortgage		3,831		84.1%		3,906		86.7%
Real estate – construction		179		1.7%		347		1.4%
Consumer		84		3.7%		85		3.6%
Credit card and other		69		.9%		75		.9%

		$4,778		100.0%		$4,955		100.0%


	December 31, 2009
	Allowance		Percentage of loans to total loans

	(Dollars in thousands)

Commercial, financial, and agricultural		$ 526		8.4%
Real estate – mortgage		3,649		85.2%
Real estate – construction		72		1.8%
Consumer		115		3.8%
Credit card and other		71		.8%

		$4,433		100.0%

The Bank decreased its allowance for loan losses to $4,042,000 at December 31, 2013, from $4,325,000 at December 31, 2012. There were specific reserves of $437,000 on individual credits at December 31, 2013. Because the loan loss allowance is based on estimates, it is monitored on an ongoing basis and adjusted as necessary to provide an adequate allowance.

INVESTMENT ACTIVITIES

The Bank’s investment policy is designed to effectively utilize excess funds and to provide for liquidity needs as dictated by loan demand and daily operations. The Bank’s federal income tax position is also a consideration in its investment decisions. Investments in tax-exempt securities with maturities of less than 20 years are often desirable when the net yield exceeds that of taxable securities and the Bank’s effective tax rate warrants such investments.

The following sets forth the carrying amount of securities at December 31, 2013, 2012, and 2011:


	December 31,
	2013		2012		2011

	(Dollars in thousands)

Obligations of U.S. Government agencies and corporations (1)		$153,465		$131,990		$137,244
Obligations of states and political subdivisions (2)		98,657		105,881		87,688
Other securities (2)		5,387		4,524		4,194

		$257,509		$242,395		$229,126

(1)	There were no holdings of U.S. Treasury securities at December 31, 2013, 2012, or 2011.

(2)	There were no securities of any single “issuer” where the aggregate carrying amount of such securities exceeded ten percent of stockholders’ equity.

The following sets forth the maturities of securities at December 31, 2013 and the weighted average yields of such securities:


	Maturing
	Within one year				After one but within five years				After five but within ten years				After ten years
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield

	(Dollars in thousands)

Obligations of U.S. Government agencies and corporations		$23,321		.63%		$114,046		2.21%		$15,397		2.70%		$ 701		5.68%
Obligations of states and political subdivisions (1)		5,066		3.37%		22,631		3.26%		58,319		3.18%		12,641		2.72%

Total (2)		$28,387		1.12%		$136,677		2.20%		$73,716		3.07%		$13,342		2.86%

(1)	Weighted average yields on non-taxable obligations have been computed on a fully tax-equivalent basis assuming a tax rate of 34%.

(2)	Excludes equity investments of $5,387,000 which have no stated maturity.

DEPOSITS AND BORROWINGS

General. Deposits have traditionally been the Bank’s primary funding source for use in lending and other investment activities. In addition to deposits, the Bank derives funds from interest and principal repayments on loans and income from other earning assets. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows tend to fluctuate in response to economic conditions and interest rates. The Bank has established lines of credit with its major correspondent banks to purchase federal funds to meet liquidity needs. At December 31, 2013, the Bank did not have any federal funds purchased, out of the $17,000,000 available under such lines of credit.

The Bank also uses retail repurchase agreements as a source of funds. These agreements essentially represent borrowings by the Bank from customers with maturities of three months or less. Certain securities are pledged as collateral for these agreements. At December 31, 2013, the Bank had $24,577,000 in retail repurchase agreements.

Neither the Corporation nor the Bank had any capital lease obligations as of December 31, 2013. The Bank had future operating lease obligations totaling $85,000 at December 31, 2013, related to the following lease arrangements: the Port Clinton banking center located in a retail supermarket in the Knollcrest Shopping Center, an ATM site north of Fremont, a loan production office in Perrysburg Ohio, and an ATM and Night Drop box in two separate locations on the Put In Bay Islands. Additionally, the Bank had various future operating lease obligations aggregating $47,000 at December 31, 2013, for photocopying and mail processing equipment.

Deposits. Deposits are attracted principally from within the Bank’s designated market area by offering a variety of deposit instruments, including regular savings accounts, negotiable order of withdrawal (“NOW”) accounts, money market deposit accounts, term certificate accounts, and individual retirement accounts (“IRAs”). Interest rates paid, maturity terms, service fees, and withdrawal penalties for the various types of accounts are established periodically by the Bank’s management based on the Bank’s liquidity requirements, growth goals, and market trends. The Bank does not use brokers to attract deposits. The amount of deposits from outside the Bank’s market area is not significant.

The average daily amount of deposits (all in domestic offices) and average rates paid on such deposits for 2013, 2012, and 2011 as set forth in the following table:


	2013					2012					2011
	Average balance		Average rate paid			Average balance		Average rate paid			Average balance		Average rate paid

	(Dollars in thousands)

Non-interest bearing demand deposits		$102,355		-			$ 87,396		-			$ 68,977		-
Interest-bearing demand deposits		95,840		.07	%		82,390		.08	%		66,335		.07	%
Savings, including Money Market, deposits		183,372		.13	%		168,352		.19	%		133,603		.28	%
Time deposits		155,904		.84	%		178,121		1.09	%		131,081		1.67	%

Total		$537,471					$516,259					$399,996

Maturities of time deposits of $100,000 or more outstanding at December 31, 2013 were as follows (dollars in thousands):



3 months or less					$ 8,991
Over 3 through 6 months					6,385
Over 6 through 12 months					7,530
Over 12 months					36,154

Total					$59,060

Borrowings. In addition to repurchase agreements, the Bank has agreements with correspondent banks to purchase federal funds as needed to meet daily liquidity needs. As a member of the Federal Home Loan Bank of Cincinnati (“FHLB”) since 1993, the Bank is authorized to obtain advances from the FHLB provided certain credit standards are met. The Bank had $10,276,000 in FHLB advances outstanding at December 31, 2013 and had an additional borrowing capacity of $43,033,000.

The following table sets forth the maximum month-end balance for the Bank’s outstanding short-term borrowings (i.e., federal funds purchased and repurchase agreements), along with the average aggregate balances and weighted average interest rates, for 2013, 2012, and 2011:


	2013		2012		2011

	(Dollars in thousands)

Balance at year-end		$24,577		$32,344		$40,861

Maximum balance at any month-end during the period		24,577		32,344		40,861

Average balance		17,192		23,552		23,432

Weighted average interest rate		.09%		.12%		.19%

The following sets forth the maximum month-end balance for the Bank’s outstanding long-term borrowings (i.e., FHLB advances and a note payable to a correspondent bank), along with the average aggregate balance and weighted average interest rates, for 2013, 2012, and 2011:


	2013		2012		2011

	(Dollars in thousands)

Balance at year-end		$14,346		$15,199		$18,500

Maximum balance at any month-end during the period		14,922		18,500		30,500

Average balance		14,826		18,015		20,075

Weighted average interest rate		3.86%		4.07%		3.44%

ASSET/LIABILITY MANAGEMENT

The Bank’s earnings are highly dependent upon its net interest income, which is the difference between the interest income derived from interest-earning assets, such as loans and securities, and interest expense paid on interest-bearing liabilities, consisting of deposits and borrowings. Interest rate risk is one of the Bank’s most significant financial exposures. This risk, which is common to the financial institution sector, is an integral part of the Bank’s operations and impacts the rate-pricing strategies for essentially all of the Bank’s loan and deposit products.

The Bank 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 the Bank’s financial instruments using the interest rates in effect at December 31, 2013. To arrive at fair value estimates, the cash flows from the Bank’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 estimates 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 applies interest rate “shocks” to its financial instruments of 100, 200, 300, and 400 basis points (1%, 2%, 3%, and 4%) up and down for its net interest income, and 200 basis points (2%) up and down for the value of its equity. However, because interest rates were below 1.0% at December 31, 2013, the sensitivity analysis could not be performed with respect to a negative 200, 300, and 400 basis point changes in market rates.

The following table presents the potential sensitivity in the Bank’s annual net interest income to 100, 200, 300, and 400 basis-point changes in market interest rates and the potential sensitivity in the present value of the Bank’s equity if a sudden and sustained 200 basis-point change in market interest rates occurred (dollars in thousands):


	December 31, 2013
	Change in Dollars ($)	Change in Percent (%)

Annual Net Interest Income Impact
For a Change of +100 Basis Points	(904)	(1.7)
For a Change of - 100 Basis Points	740	1.4
For a Change of +200 Basis Points	(555)	(1.1)
For a Change of - 200 Basis Points	N/A	N/A
For a Change of +300 Basis Points	(939)	(1.8)
For a Change of - 300 Basis Points	N/A	N/A
For a Change of +400 Basis Points	(1,398)	(2.7)
For a Change of - 400 Basis Points	N/A	N/A

Impact on the Net Present Value of Equity
For a Change of +200 Basis Points	6,388	3.3
For a Change of - 200 Basis Points	N/A	N/A

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 the Bank could undertake in response to changes in market interest rates. For example, the Bank could enter into derivatives or swaps, which are not included in the model.

The following table sets forth, for the years ended December 31, 2013, 2012, and 2011, the distribution of assets, liabilities, and stockholders’ equity, including interest amounts and average rates of major categories of interest-earning assets and interest-bearing liabilities:


	2013						2012						2011
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate

	(Dollars in thousands)
Assets

Interest-earning assets:
Loans (1) (2)		$331,291		$16,713		5.04%		$306,343		$16,797		5.48%		$286,576		$16,632		5.80%
Taxable securities		143,863		1,578		1.10%		156,354		1,231		.79%		98,876		2,724		2.75%
Non-taxable securities (3)		98,039		3,137		3.20%		93,521		3,006		3.21%		64,809		2,254		3.48%
Interest-earning deposits		9,777		28		.39%		8,188		25		.31%		7,327		12		.16%

Total interest-earning assets (4)		582,970		21,456		3.68%		564,406		21,059		3.73%		457,588		21,622		4.73%


Non-interest-earning assets:
Cash and due from banks		15,656						17,524						14,638
Unrealized gains on securities		4,759						8,461						3,389
Bank premises and equipment, net		7,493						7,824						6,568
Other assets		33,632						33,986						28,964
Less allowance for loan losses		(4,167)						(4,010)						(4,729)

Total		$640,343		$21,456				$628,191		$21,059				$506,418		$21,622


Liabilities and Stockholders’ Equity

Interest-bearing liabilities:
Savings, NOW and Money Market deposits		$279,212		$ 302		.11%		$250,742		$ 376		.15%		$199,938		$ 425		.21%
Time Deposits		155,904		1,303		.84%		178,121		1,947		1.09%		131,081		2,195		1.67%
Federal funds purchased and securities sold under repurchase agreements		17,193		16		.09%		23,552		29		.12%		23,432		44		.19%
Borrowed funds		14,825		573		3.86%		18,015		734		4.07%		20,075		691		3.44%

Total interest-bearing liabilities		467,134		2,194		.47%		470,430		3,086		.90%		374,526		3,355		.90%

Non-interest-bearing liabilities:
Demand deposits		102,355						87,396						68,977
Other liabilities		3,450						4,935						3,294

Total non-interest-bearing liabilities		105,805						92,331						72,271

Stockholders’ equity:
Stockholders’ equity		62,645						56,969						56,232
Unrealized gains on securities		4,759						8,461						3,389

Total stockholders’ equity		67,404						65,430						59,621

Total		$640,343		$2,194				$628,191		$3,086				$506,418		$3,355

Net interest income				$19,262						$17,973						$18,267

Net yield on interest-earning assets						3.30%						3.18%						3.99%

(1)	Included in loan interest income are loan fees of $676 in 2013, $717 in 2012, and $447 in 2011 (in thousands).

(2)	Non-accrual loans are included in loan totals and do not have a material impact on the analysis presented.

(3)	Interest and yield for non-taxable securities have not been tax-effected for the 34% exception for federal income taxes.

(4)	Excludes unrealized gains on taxable and non-taxable securities.

The following table sets forth, for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in volume and changes in rate:


	2013 compared to 2012 Increase (decrease) due to volume/rate (1)						2012 compared to 2011 Increase (decrease) due to volume/rate (1)
	Volume		Rate		Net		Volume		Rate		Net

	(Dollars in thousands)

Interest income:
Loans receivable		$1,313		$(1,397)		$(84)		$1,112		$(947)		$165
Taxable securities		(106)		453		347		1,076		(2,569)		(1,493)
Non-taxable securities		145		(14)		131		934		(182)		752
Interest bearing deposits		4		(1)		3		1		12		13

Total interest-earning assets		1,356		(959)		397		3,123		(3,686)		(563)


Interest expense:
Savings, NOW, and Money Market deposits		40		(114)		(74)		93		(142)		(49)
Time deposits		(223)		(421)		(644)		648		(896)		(248)
Federal funds purchased and securities sold under repurchase agreements		(7)		(6)		(13)		0		(15)		(15)
Borrowed funds		(126)		(35)		(161)		(76)		119		43

Total interest-bearing liabilities		(316)		(576)		(892)		665		(934)		(269)

Net interest income		$1,672		$(383)		$1,289		$2,458		$(2,752)		$(294)

(1)	The change in interest income and interest expense due to changes in both volume and rate, which cannot be segregated, has been allocated proportionately to the absolute dollar change due to volume and the change due to rate.

The ratio of net income to daily average total assets and average stockholders’ equity, and certain other ratios, for the periods noted are as follows:


	Year ended December 31,
	2013			2012			2011

Percentage of net income to:
Average total assets		.69	%		.77	%		.94	%
Average stockholders’ equity		6.60	%		7.40	%		7.97	%

Percentage of cash dividends declared per common share to net income per common share -basic		49.61	%		44.29	%		45.07	%

Percentage of average stockholders’ equity to average total assets		10.53	%		10.42	%		11.77	%

COMPETITION

The Bank faces intense competition in its market areas. The Bank competes for commercial and individual deposits and/or loans with other commercial banks in Huron, Lucas, Ottawa, Sandusky, Seneca, and Wood counties in Northwestern Ohio, as well as with savings and loan associations in the trade area, credit unions, brokerage firms, mutual funds, and loan production offices and other financial units of non-local bank holding companies. Many competitors of the Bank have substantially greater resources and lending limits and can offer services that the Bank does not or cannot provide. The primary factors in competing for loans are interest rates charged and overall services provided to borrowers, while the primary factors in competing for deposits are interest rates paid on deposits, account liquidity, convenience, hours of facilities, and quality of service provided to depositors. The Bank focuses on personalized service, convenience of facilities, pricing of products, community stature, and its local ownership and control in meeting its competition.

SUBSIDIARY ACTIVITIES

The Corporation’s only subsidiary is the Bank. The Bank’s only subsidiary is Croghan Insurance, which engages in activities related to the sale of insurance and, as a licensed insurance agency, receives commissions from insurance sales.

EMPLOYEES

As of December 31, 2013, the Corporation and its subsidiaries employed 174 full-time employees and 35 part-time employees. The Corporation and its subsidiaries believe that relations with its employees are excellent. The Corporation and its subsidiaries provide a variety of benefits to full-time employees, including health, disability, and life insurance benefits.

REGULATION AND SUPERVISION

The Corporation is registered as a bank holding company under the BHCA. As a bank holding company, the Corporation is required to file periodic reports with, and is subject to regulation, supervision and examination by, the FRB. Such examination by the FRB determines whether the Corporation is operating in accordance with various regulatory requirements and in a safe and sound manner.

The FRB has extensive enforcement authority over bank holding companies, including the ability to assess civil money penalties, issue cease and desist orders, and require that a bank holding company divest subsidiaries. In general, the FRB may initiate enforcement actions for activities that are deemed by the FRB to constitute a serious risk to the financial safety, soundness, or stability of a bank holding company, that are inconsistent with sound banking principles, or that are in violation of law. Further, bank holding companies and their subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit or lease or sale of any property or the furnishing of services.

Subject to certain exceptions, the BHCA requires a bank holding company to obtain the prior approval of the FRB before (a) acquiring all or substantially all of the assets of any bank or bank holding company, (b) merging or consolidating with any other bank holding company, or (c) acquiring direct or indirect ownership or control of any voting shares of any other bank, if after such acquisition, the bank holding company would own or control more than 5% of the voting shares of such bank. In making such determinations, the FRB considers the effect of the acquisition on competition, the financial and managerial resources of the holding company, and the convenience and needs of the affected communities.

The BHCA also prohibits a bank holding company from acquiring more than 5% of the voting shares of any company that is not a bank and from engaging in any activities other than banking or managing or controlling banks or furnishing services to its subsidiaries. The primary exception to this prohibition allows a bank holding company to own shares in any company the activities of which the FRB has determined, by order or regulation, to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

The Gramm-Leach-Bliley Act of 1999 (the “GLB Act”) permits qualifying bank holding companies to become financial holding companies and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. A bank holding company may become a financial holding company if each of its subsidiary banks is well capitalized under the prompt corrective action provisions of the Federal Deposit Insurance Corporation Act of 1991, is well managed, and has at least a satisfactory rating under the Community Reinvestment Act, by filing a declaration that the bank holding company wishes to become a financial holding company. The Corporation has not elected to become a financial holding company at this time, but intends to periodically re-evaluate the advantages and disadvantages of becoming a financial holding company.

As an Ohio-chartered bank, the Bank is further subject to regulation, supervision, and examination by the Division. Chapter 1109 of the Ohio Revised Code imposes limitations on the amount of certain types of loans and other investments that an Ohio-chartered bank is permitted to make. In addition, the aggregate amount that an Ohio-chartered bank can lend to any one borrower is limited by Ohio law to an amount equal to 15% of the institution’s unimpaired capital. An Ohio-chartered bank may lend to one borrower an additional amount not to exceed 10% of the institution’s unimpaired capital, if the additional amount is fully secured by certain forms of “readily marketable collateral.” Real estate is not considered “readily marketable collateral.”

The Division conducts periodic examinations of the Bank, often times on a joint basis with the FRB examiners. The Division may initiate certain supervisory measures or formal enforcement actions against an Ohio-chartered bank. Ultimately, if the grounds provided by law exist, the Division may place an Ohio-chartered bank in conservatorship or receivership. Any mergers, acquisitions, or changes of control involving an Ohio-chartered bank must be approved by the Division.

In addition to Ohio laws relating to banks, the Bank is subject to the Ohio general corporation law to the extent such law does not conflict with the laws specifically governing banks.

Croghan Insurance, the Bank’s wholly-owned insurance agency subsidiary, is also subject to the insurance laws and regulations of the State of Ohio and the Ohio Department of Insurance. The insurance laws and regulations require education and licensing of agencies and individual agents, require reports, and impose business conduct rules.

The Bank is also a member of the Federal Reserve System and is subject to regulation, supervision, and examination by the FRB. The FRB issues regulations governing the operations of state member banks, examines state member banks, and may initiate enforcement actions against state member banks and certain persons affiliated with them for violations of laws and regulations or for engaging in unsafe or unsound practices. If the grounds provided by law exist, the FRB may appoint a conservator or a receiver for a state member bank.

Sections 23A and 23B of the Federal Reserve Act and the FRB’s Regulation W restrict transactions by banks and their subsidiaries with their affiliates. Generally, Sections 23A and 23B and Regulation W: (a) limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of the bank’s capital stock and surplus (i.e., tangible capital); (b) limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all affiliates to 20% of the bank’s capital stock and surplus; and (c) require that all such covered transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate. The term “covered transactions” includes the making of loans, the purchase of assets, the issuance of a guarantee, and other similar types of transactions.

A bank’s authority to extend credit to executive officers, directors, and greater than 10% shareholders, as well as entities controlled by such persons, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated by the FRB. Among other requirements, these loans must be made on terms substantially the same as those offered to unaffiliated persons, or be made as part of a benefit or compensation program and on terms widely available to employees, and must not involve a greater than normal risk of repayment. The amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.

The Corporation and the Bank are subject to the Community Reinvestment Act of 1977, as amended (the “CRA”), which is designed to encourage financial institutions to give special attention to the needs of low and moderate income areas in meeting the credit needs of the communities in which they operate. If the CRA regulatory evaluation of a bank’s activities is less than satisfactory, regulatory approval of proposed acquisitions, branch openings, and other applications requiring FRB approval may be delayed until a satisfactory CRA evaluation is achieved. The Bank currently has a CRA regulatory evaluation of satisfactory.

The Bank is a member of the FHLB of Cincinnati and, therefore, must maintain an investment in the capital stock of the FHLB. Upon the origination or renewal of a loan or advance, each FHLB is required by law to obtain and maintain a security interest in certain types of collateral. Each FHLB is required to establish standards of community investment or service that its members must maintain for continued access to long-term advances from the FHLB. The standards take into account a member’s performance under the CRA and its record of lending to first-time home buyers.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) was enacted into law on July 21, 2010. The Dodd-Frank Act is significantly changing the regulation of financial institutions and the financial services industry. Because the Dodd-Frank Act requires various federal agencies to adopt a broad range of regulations with significant discretion, many of the details of the new law and the effects they will have on the Corporation will not be known for months and even years. The following summarizes significant aspects of the Dodd-Frank Act that may affect the Corporation and the Bank:

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a new Consumer Financial Protection Bureau has been established with broad powers to adopt and enforce consumer protection regulations;

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the federal law prohibiting the payment of interest on commercial demand deposit accounts was eliminated effective in July 2011;

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the standard maximum amount of deposit insurance per customer was permanently increased to $250,000 and non-interest-bearing transaction accounts have unlimited insurance through December 31, 2012;

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the assessment base for determining deposit insurance premiums has been expanded from domestic deposits to average assets minus average tangible equity;

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public companies in all industries are or will be required to provide shareholders the opportunity to cast a non-binding advisory vote on executive compensation;

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new capital regulations for bank holding companies have been adopted, which will impose stricter requirements, and any new trust preferred securities issued after May 19, 2010 will no longer constitute Tier I capital; and

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new corporate governance requirements applicable generally to all public companies in all industries require new compensation practices and disclosure requirements, including requiring companies to “claw back” incentive compensation under certain circumstances, to consider the independence of compensation advisors, and to make additional disclosures in proxy statements with respect to compensation matters.

Many provisions of the Dodd-Frank Act have not yet been implemented and will require interpretation and rule making by federal regulators. As a result, the ultimate effect of the Dodd-Frank Act on the Corporation cannot yet be determined. However, it is likely that the implementation of these provisions will increase compliance costs and fees paid to regulators, along with possibly restricting the operations of the Corporation and the Bank.

REGULATORY CAPITAL REQUIREMENTS

The FRB has adopted risk-based capital guidelines for bank holding companies, such as the Corporation, and for state member banks, such as the Bank. Bank holding companies and state member banks must maintain adequate consolidated capital to meet the minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet items such as standby letters of credit) (the “Total Risk-Based Ratio”) of 8%. At least half of the minimum-required Total Risk-Based Ratio (4%) must be composed of “Tier 1” capital, which consists of common stockholders’ equity, minority interests in certain equity accounts of consolidated subsidiaries, and a limited amount of perpetual preferred stock and qualified trust preferred securities, less goodwill and certain other intangibles. The remainder of total risk-based capital (commonly referred to as “Tier 2” risk-based capital) may consist of certain amounts of hybrid capital instruments, mandatory convertible debt, subordinated debt, preferred stock not qualifying as Tier 1 capital, loan and lease loss allowances, and net unrealized gains on certain available-for-sale securities, all subject to limitations established by the guidelines.

Under the guidelines, capital is compared to the relative risk of the balance sheet. To derive the risk included in the balance sheet, one of four risk weights (0%, 20%, 50%, and 100%) is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The FRB also has established minimum leverage ratio guidelines for bank holding companies and state member banks. The guidelines provide for a minimum ratio of Tier 1 capital to average total assets (excluding the loan and lease loss allowance, goodwill, and certain other intangibles) (the “Leverage Ratio”) of 3% for bank holding companies and state member banks that meet specified criteria, including having the highest regulatory rating. All other bank holding companies and state member banks must maintain a Leverage Ratio of 4% to 5%. The guidelines further provide that bank holding companies and state member banks making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels.

The following sets forth the Tier 1 Risk-Based Ratio, Total Risk-Based Ratio, and Leverage Ratio for the Corporation and the Bank at December 31, 2013:


	At December 31, 2013
	Corporation				Bank
	Amount		Percent		Amount		Percent
	(Dollars in thousands)

Tier 1 risk-based		$56,036		11.0%		$59,574		11.8%
Minimum capital requirement		20,339		4.0		20,277		4.0

Excess		$35,697		7.0%		$39,297		7.8%


Total risk-based		$60,078		11.8%		$63,616		12.6%
Minimum capital requirement		40,678		8.0		40,555		8.0

Excess		$19,400		3.8%		$23,061		4.6%


Leverage ratio		$56,036		8.6%		$59,574		9.1%
Minimum capital requirement		26,089		4.0		26,075		4.0

Excess		$29,947		4.6%		$33,499		5.1%

The FRB and other federal banking agencies have established a system of prompt corrective action to resolve certain problems of capital deficient and otherwise troubled banks under its regulation. This system is based on five capital level categories for insured depository institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” At each successively lower defined capital category, an institution is subject to more restrictive and numerous mandatory or discretionary regulatory actions or limits, and the federal banking agencies have less flexibility in determining how to resolve the problems of the institution. An undercapitalized institution must submit a capital restoration plan to the FRB within 45 days after it becomes undercapitalized. Such an institution will be subject to increased monitoring and asset growth restrictions and will be required to obtain prior approval for acquisitions, branching, and engaging in new lines of business. Furthermore, critically undercapitalized institutions must be placed in conservatorship or receivership within 90 days of reaching that capitalization level, except under limited circumstances.

The Bank’s capital levels at December 31, 2013 met the standards for the highest level, a “well capitalized” institution.

In December 2010, the Basel Committee on Banking Supervision, an international forum for cooperation on banking supervisory matters, announced the “Basel III” capital standards, which proposed new capital requirements for banking organizations. On July 2, 2013, the Federal Reserve Board adopted a final rule implementing a revised capital framework based in part on the Basel III capital standards and, on July 9, 2013, the Office of the Comptroller of the Currency also adopted a final rule and the FDIC adopted an interim final rule implementing a revised capital framework based in part on the Basel III capital standards. The rule will not begin to phase in until January 1, 2014 for larger institutions and January 1, 2015 for smaller, less complex banking organizations such as the Corporation. The rule will be fully phased in by January 1, 2019.

The implementation of the final rule will lead to higher capital requirements and more restrictive leverage and liquidity ratios than those currently in place. Specifically, the rule imposes the following minimum capital requirements on federally insured financial institutions: (1) a new minimum common equity tier 1 capital to risk-weighted assets ratio of 4.5%; (2) a leverage capital ratio of 4%; (3) a tier 1 risk-based capital ratio of 6%; and (4) a total risk-based capital ratio of 8%. Under the rule, common equity generally consists of common stock, retained earnings and limited amounts of minority interests in the form of common stock. In addition, in order to avoid limitations on capital distributions, such as dividend payments and certain bonus payments to executive officers, the rule requires insured financial institutions to hold a capital conservation buffer of common equity tier 1 capital above its minimum risk-based capital requirements. The capital conservation buffer will be phased in over time, becoming effective on January 1, 2019, and will consist of an additional amount of common equity equal to 2.5% of risk-weighted assets. The rule will also revise the regulatory agencies’ prompt corrective action framework by incorporating the new regulatory capital minimums and updating the definition of common equity. Until the rule is fully phased in, we cannot predict the ultimate impact it will have upon the financial condition or results of operations of the Corporation.

DIVIDEND RESTRICTIONS

The ability of the Corporation to obtain funds for the payment of dividends on its common shares is largely dependent on the amount of dividends which may be declared and paid by the Bank to the Corporation. However, the FRB expects the Corporation to serve as a source of strength to the Bank, which may require the Corporation to retain capital for further investment in the Bank, rather than pay dividends to the Corporation’s shareholders. The ability of the Bank to pay dividends to the Corporation is subject to various legal limitations and to prudent and sound banking principles. Generally, the Bank may declare a dividend without the approval of the Division, unless the total dividends in a calendar year exceed the total of its net profits for the year plus its retained profits for the preceding two years, less required transfers to surplus. However, the Bank is prohibited from paying dividends out of its surplus if, after paying such dividends, it would fail to meet the required minimum Total Risk-Based Ratio requirements and minimum Leverage Ratio requirements under the FRB guidelines.

FDIC DEPOSIT INSURANCE

The FDIC is an independent federal agency which insures the deposits of federally-insured banks and savings associations up to certain prescribed limits and safeguards the safety and soundness of financial institutions. The deposits of the Bank are subject to the deposit insurance assessments of the FDIC. Under the FDIC’s deposit insurance assessment system, the assessment rate for any insured institution may vary according to regulatory capital levels of the institution and other factors such as supervisory evaluations.

The FDIC is authorized to prohibit any insured institution from engaging in any activity that poses a serious threat to the insurance fund and may initiate enforcement actions against a bank, after first giving the institution’s primary regulatory authority an opportunity to take such action. The FDIC may also terminate the deposit insurance of any institution that has engaged in or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, order or condition imposed by the FDIC.

On February 7, 2011, the FDIC approved a final rule that changed the deposit insurance assessment base, as required by the Dodd-Frank Act. As adopted, the final rule changed the deposit insurance assessment base from domestic deposits to average assets minus average tangible equity. In addition, the final rule also adopted a new large-bank pricing assessment scheme and established a target size for the Deposit Insurance Fund. The final rule went into effect beginning with the second quarter of 2011.

FRB RESERVE REQUIREMENTS

For 2013, FRB regulations required depository institutions to maintain reserves of 3% of net transaction accounts (primarily demand and NOW accounts) up to and including $79,500,000 (subject to an exemption for the first $12,400,000 of net transaction accounts), and of 10% of net transaction accounts in excess of $79,500,000. For 2014, the applicable threshold for net transaction accounts have been increased by the FRB to $89,000,000 (subject to an exemption for the first $13,300,000 of net transaction accounts).

EFFECTS OF GOVERNMENT MONETARY POLICY

The business and earnings of the Bank are affected by general and local economic conditions and by the policies of various governmental regulatory authorities. In particular, the FRB regulates money and credit conditions and interest rates in order to influence general economic conditions, primarily through open market acquisitions or dispositions of United States Government securities, varying the discount rate on member bank borrowings, and setting reserve requirements against member and nonmember bank deposits. FRB monetary policies have had a significant effect on the interest income and interest expense of commercial banks, including the Bank, and are expected to continue to do so in the future.

SEC REGULATION

Through the third quarter of 2012, the Corporation was an SEC-reporting company and filed reports, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, with the SEC under the Exchange Act. The Corporation was also required to comply with regulations governing proxy solicitations and certain shareholders were required to file security ownership reports. In April 2012, the JOBS Act was signed into law and amended Sections 12(g) and 15(d) of the Exchange Act to increase the holders of record threshold for banks and bank holding companies to terminate the proxy solicitation and security ownership reports and to suspend their obligations to file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. With respect to the Corporation, the JOBS Act increased the holder of record threshold from 300 to 1,200. Because the Corporation had fewer than 700 holders of record of its common shares at the time of the adoption of the JOBS Act, the Corporation became eligible to suspend and terminate those obligations. Due to the expense associated with preparing and filing periodic reports with the SEC and the historically low trading volume of the

Corporation’s common shares, among other reasons, the Board of Directors of the Corporation approved deregistration of the Corporation’s common shares under Section 12(g) of the Exchange Act and the suspension of the Corporation’s reporting obligations under Section 15(d) of the Exchange Act during the fourth quarter of 2012. The Corporation subsequently filed with the SEC Form 15 on November 13, 2012 to terminate the registration of its common shares under Section 12(g) and Form 15 on March 27, 2013 to suspend its reporting obligations under Section 15(d).

Because the common shares issued to shareholders of Indebancorp in the merger that was completed in December 2013 were being registered with the SEC pursuant to a Registration Statement on Form S-4, the Corporation was required to recommence filing reports with the SEC under Section 15(d) of the Exchange Act beginning with the filing of the Corporation’s Quarterly Report on Form 10-Q for the quarterly period ending September 30, 2013. The Corporation’s obligation to file reports under Section 15(d) of the Exchange Act continues through the filing of this Annual Report on Form 10-K for the fiscal year ending December 31, 2013 (which is the year in which the Registration Statement on Form S-4 became effective) and will then automatically terminate because the Corporation had fewer than 1,200 holders of record as of the first day of the 2014 fiscal year. As a result, the Corporation intends to suspend its reporting obligations under Section 15(d) of the Exchange Act following the filing of this Annual Report on Form 10-K.

EFFECT OF ENVIRONMENTAL REGULATION

Compliance with federal, state, and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect upon the capital expenditures, earnings, or competitive position of the Corporation or the Bank. The Corporation believes the nature of the operations of the Bank has little, if any, environmental impact. The Corporation, therefore, does not anticipate any material capital expenditures for environmental control facilities for the foreseeable future. The Corporation believes that its primary exposure to environmental risk is through the lending activities of the Bank. In the event management believes there exists a potential environmental risk, the Bank attempts to mitigate the potential risk by requiring environmental site assessments at the time the loan is originated. In addition, the Bank typically requires an environmental assessment prior to any foreclosure of non-residential real estate collateral.

ITEM 1A. Risk Factors

Set forth below is a description of risk factors related to the Corporation’s business, provided to enable investors to assess, and be appropriately apprised of, certain risks and uncertainties the Corporation faces in conducting its business. An investor should carefully consider the risks described below and elsewhere in this report, which could materially and adversely affect the Corporation’s business, results of operations, or financial condition. The risks and uncertainties discussed below are also applicable to forward-looking statements contained in this report and in other reports filed by the Corporation with the Securities and Exchange Commission. Given these risks and uncertainties, investors are cautioned not to place undue reliance on forward-looking statements.

Changes in interest rates could have a material adverse effect on the Corporation’s financial condition and results of operations.

The Corporation’s operating results are dependent to a significant degree on the difference between the interest rates earned on interest-earning assets such as loans and investment securities, and the interest rates paid on interest-bearing liabilities such as deposits and borrowings. These rates are highly sensitive to many factors beyond the Corporation’s control, including general economic conditions, and the policies of various governmental and regulatory authorities (in particular, the Board of Governors of the Federal Reserve System). Changes in interest rates will influence the demand for loans, the prepayment of loans, the purchase of investments, the generation of deposits, and the rates received on loans and investment securities and paid on deposits and borrowings, and these changes could have a material adverse effect on the Corporation’s financial condition and results of operations. The impact of these changes may be magnified if the Corporation does not effectively manage the relative sensitivity of its assets and liabilities to changes in market interest rates. Additional information pertaining to the impact that changes in interest rates could have on our net income is contained in the section entitled “ASSET/LIABILITY MANAGEMENT” under Item 1 of this Annual Report on Form 10-K.

Changes in economic and political conditions could adversely affect the Corporation’s financial condition and results of operations.

The Corporation’s success depends, to a significant extent, upon economic and political conditions, local and national, as well as governmental fiscal and monetary policies. Conditions such as inflation, recession, unemployment, change in interest rates, money supply, and other factors beyond the Corporation’s control may adversely affect its asset quality, deposit levels, and loan demand and, therefore, its earnings. Because the Corporation has a significant amount of real estate loans, further decreases in real estate values could adversely affect the value of property used as collateral. Adverse changes in the economy may also have a negative effect on the ability of the Corporation’s borrowers to make timely repayments of their loans, which would have an adverse impact on the Corporation’s earnings. In addition, a substantial portion of the Corporation’s loans are to individuals and businesses located in Northwest Ohio. Consequently, a significant continued decline in the economy of this market area could have a materially adverse effect on the Corporation’s financial condition and results of operations.

The Corporation’s loan portfolio is concentrated in Northwest Ohio, and changes in the economic conditions and real estate valuations in this market area could adversely impact results of operations, financial condition and cash flows.

The Corporation’s lending and deposit gathering activities are concentrated in Huron, Lucas, Ottawa, Sandusky, Seneca and Wood Counties in Northwest Ohio. The Corporation’s success has and will continue to depend on the general economic conditions in Northwest Ohio, particularly given that a significant portion of the Corporation’s lending relates to real estate located in this area. Real estate values in these Ohio communities have been negatively impacted by the recent economic crisis. Although there has been some improvement recently in some economic measures, including home prices and unemployment rates in Ohio, adverse changes in the economic conditions in the Northwest Ohio markets could impair the Corporation’s ability to collect payments on loans, increase loan delinquencies, increase problem assets and foreclosures, increase claims and lawsuits, increase devaluations recognized within the Corporation’s OREO portfolio, decrease the demand for the Corporation’s products and services and decrease the value of collateral for loans, especially real estate values, which could have a material adverse effect on the Corporation’s financial condition, results of operations and cash flows.

If actual loan losses exceed the allowance for loan losses, the Corporation’s net income will decrease.

The Corporation maintains an allowance for loan losses based upon a number of relevant factors, including, but not limited to, trends in the level of nonperforming assets and classified loans, current economic conditions in the primary lending area, past loss experience, possible losses arising from specific problem loans, and changes in the composition of the loan portfolio. 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. While the Corporation’s management believes that it uses the best information available to determine the allowance for loan losses, unforeseen market conditions could result in material adjustments, and net earnings could be significantly adversely affected, if circumstances differ substantially from the assumptions and estimates used by management to determine the allowance for loan losses.

FDIC insurance premiums may increase materially, which would negatively affect the Corporation’s net income.

The Federal Deposit Insurance Corporation (“FDIC”) insures deposits at FDIC-insured financial institutions, including the Bank. The FDIC charges insured financial institutions premiums to maintain the Deposit Insurance Fund at a certain level. The costs of resolving bank failures have increased during the last few years and decreased the Deposit Insurance Fund. The FDIC collected a special assessment in 2009 to replenish the Deposit Insurance Fund and also required a prepayment of an estimated amount of future deposit insurance premiums. If the costs of future bank failures increase, deposit insurance premiums may also increase.

The Corporation’s businesses have been and may continue to be adversely affected by conditions in the financial markets and economic conditions generally.

The capital and credit markets have been experiencing unprecedented levels of volatility since 2008. As a consequence of the U.S. economic recession, business activity across a wide range of industries has faced serious difficulties due to the lack of consumer spending and the extreme lack of liquidity in the global credit markets. Unemployment has also increased significantly. A sustained weakness or weakening in business and economic conditions generally or specifically in the markets in which the Corporation does business could have one or more of the following adverse effects on its businesses:

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A decrease in the demand for loans and other products and services offered by the Corporation.

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An impairment of certain intangible assets, such as goodwill.

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An increase in the number of clients who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to the Corporation. An increase in the number of delinquencies, bankruptcies or defaults could result in a higher level of nonperforming assets, net charge-offs, provision for loan losses, and valuation adjustments on loans held for sale.

Legislative or regulatory changes or actions could adversely impact the Corporation’s business.

The financial services industry is extensively regulated. Banking laws and regulations are primarily intended for the protection of consumers, depositors and the deposit insurance fund, not to benefit our shareholders. Changes to laws and regulations or other actions by regulatory agencies may negatively impact the Corporation, possibly limiting the services it provides, increasing the ability of non-banks to compete with it, or requiring it to change the way it operates. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on the operation of an institution and the ability to determine the adequacy of an institution’s allowance for loan losses. Failure to comply with applicable laws, regulations and policies could result in sanctions being imposed by the regulatory agencies, including the imposition of civil money penalties, which could have a material adverse effect on the Corporation’s operations and financial condition.

In light of current conditions in the global financial markets and the global economy, regulators have increased their focus on the regulation of the financial services industry. Recently, Congress and the federal bank regulators have acted on an unprecedented scale in responding to the stresses experienced in the global financial markets. Some of the laws enacted by Congress and regulations promulgated by federal bank regulators subject the Corporation, and other financial institutions, to additional restrictions, oversight and costs that may have an impact on the Corporation’s business and results of operations. The Dodd-Frank Act was signed into law on July 21, 2010 and, although it became generally effective in July 2010, many of its provisions have extended implementation periods and delayed effective dates and will require extensive rulemaking by regulatory authorities. The Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, could result in a number of adverse impacts. The levels of capital and liquidity with which the Corporation must operate may be subject to more stringent capital requirements. In addition, the Corporation may be subjected to higher deposit insurance premiums to the FDIC. The Corporation may also be subject to additional regulations under the newly established Consumer Financial Protection Bureau, which was given broad authority to implement new consumer protection regulations. These and other provisions of the Dodd-Frank Act may place significant additional costs on the Corporation, impede its growth opportunities and place it at a competitive disadvantage.

The Corporation may not be able to pay dividends in the future in accordance with past practice.

As a bank holding company, the Corporation’s principal source of funds to pay dividends on its common shares is dividends from the Bank. In the event that the Bank is unable to pay dividends, the Corporation may not be able to pay dividends on its common shares.

The ability of the Bank to pay dividends to the Corporation is subject to various legal limitations and to prudent and sound banking principles. Generally, subject to certain minimum capital requirements, the Bank may declare a dividend without the approval of the Division of Financial Institutions of the Ohio Department of Commerce, unless the total dividends in a calendar year exceed the total of the Bank’s net profits for the year combined with the Bank’s retained profits of the two preceding years. In the event that the Bank is unable to pay dividends, the Corporation in turn would likely have to reduce or stop paying dividends on its common shares. The Corporation’s failure to pay dividends on its common shares could, in turn, have a material adverse effect on the market price of the Corporation’s common shares.

The Corporation’s credit standards and on-going process of credit assessment might not protect it from significant credit losses.

The Corporation takes credit risk by virtue of making loans. The Corporation’s exposure to credit risk is managed through the use of consistent and conservative underwriting standards. The Corporation’s credit administration function employs risk management techniques to ensure that loans adhere to corporate policy and problem loans are promptly identified. While these procedures are designed to provide the Corporation with the information needed to implement policy adjustments where necessary, and to take proactive corrective actions, there can be no assurance that such measures will be effective in avoiding undue credit risk.

The Corporation depends upon the accuracy and completeness of information about customers.

In deciding whether to extend credit or enter into other transactions with customers, the Corporation may rely on information provided by customers, including financial statements and other financial information. The Corporation may also rely on representations of customers as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent accountants. For example, in deciding whether to extend credit to a business, the Corporation may assume that the customer’s financial statements conform with generally accepted accounting principles and present fairly, in all material respects, the financial condition, results of operations, and cash flows of the customer. The Corporation may also rely on the reports of accounting firms issuing an opinion or other assurances on those financial statements. The Corporation’s financial condition and results of operation could be negatively impacted to the extent it relies on financial statements that do not comply with generally accepted accounting principles or that are materially misleading.

The Corporation may elect or be compelled to seek additional capital in the future, but that capital may not be available when it is needed.

The Corporation and the Bank are required by federal and state regulatory authorities to maintain adequate levels of capital to support their operations. If the Bank experiences increased loan losses, additional capital may need to be infused. In addition, the Corporation may elect to raise additional capital to support its business or to finance acquisitions, or it may otherwise elect or be required to raise additional capital. The Corporation’s ability to raise additional capital, if needed, will depend on its financial performance, conditions in the capital markets, economic conditions and a number of other factors, many of which are outside its control. Accordingly, there can be no assurance that the Corporation can raise additional capital if needed or on acceptable terms. If the Corporation cannot raise additional capital when needed, it may have a material adverse effect on the Corporation’s financial condition and results of operations. In addition, the Corporation’s issuance of additional common shares, preferred shares or other equity securities to raise additional capital may have a dilutive effect on our existing shareholders and could lead to a decline in the price of our common shares.

The Corporation operates in an extremely competitive market and the Corporation will suffer if it is unable to compete effectively.

In the Corporation’s market area, it encounters significant competition from other commercial banks, as well as from savings and loan associations, credit unions, brokerage firms, mutual funds, and loan production offices and other financial units of non-local bank holding companies. The increasingly competitive environment is a result primarily of changes in regulation, changes in technology, product delivery systems, and the accelerating pace of consolidation among financial service providers. Many of the Corporation’s competitors have substantially greater resources and lending limits than it does and may offer services that it does not or cannot provide. The Corporation’s ability to maintain its history of strong financial performance will depend in part on its continued ability to compete successfully in its market area and on its ability to expand its scope of available financial services as needed to meet the needs and demands of its customers.

There is a limited trading market for the Corporation’s common shares, thus the ability to sell or purchase the Corporation’s common shares may be limited.

The ability to sell common shares of the Corporation or purchase additional common shares of the Corporation largely depends upon the existence of an active market for the Corporation’s common shares. Although the Corporation’s common shares are quoted on the OTC Bulletin Board, they are not listed on any securities exchange and the volume of trading of the Corporation’s common shares has been limited historically. As a result, it may be difficult to sell or purchase the Corporation’s common shares at the volume, time and price that is desired. In addition, a fair valuation of the purchase or sales price of the Corporation’s common shares also depends upon an active trading market, and thus the price received for a thinly traded stock, such as the Corporation’s common shares, may not reflect its true value.

Changes in accounting standards could impact the Corporation’s results of operations.

The accounting standard setters, including the Financial Accounting Standards Board, the SEC, and other regulatory bodies, periodically change the financial accounting and reporting standards that govern the preparation of the Corporation’s consolidated financial statements. These changes can be difficult to predict and can materially affect how the Corporation records and reports its financial condition and results of operations. In some cases, the Corporation could be required to apply a new or revised standard retroactively, which would result in the restatement of its financial statements for prior periods.

Changes in tax laws could adversely affect the Corporation’s results of operations.

The Corporation is subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, withholding and ad valorem taxes. Changes to the Corporation’s taxes could have a material adverse effect on its results of operations. In addition, the Corporation’s customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by the Corporation’s customers may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for loans and deposit products. In addition, such negative effects on the Corporation’s customers could result in defaults on the loans made by the Bank and decrease the value of mortgage-backed securities in which the Bank has invested.

The Corporation relies heavily on its management team and the unexpected loss of key management may adversely affect its business and financial results.

The Corporation’s success to date has been strongly influenced by its ability to attract and to retain senior management experienced in banking in the markets that the Corporation serves. The Corporation’s ability to retain executive officers and the current management team will continue to be important to successful implementation of its strategies. The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on the Corporation’s business and financial results.

The Corporation must stay current on technological changes in order to compete effectively and meet customer demands.

The financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and may enable the Corporation to reduce costs. The Corporation’s future success will depend, in part, on its ability to use technology to provide products and services that provide convenience to customers and to create additional efficiencies in its operations. Some of the Corporation’s competitors have substantially greater resources to invest in technological improvements. The Corporation may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers.

The Corporation’s information systems may experience an interruption or security breach.

The Corporation relies heavily on communications and information systems to conduct its business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Corporation’s customer relationship management, general ledger, deposit, loan and other systems. While the Corporation has policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of its information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failure, interruption or security breach of the Corporation’s information systems could damage the Corporation’s reputation, result in a loss of customer business, subject the Corporation to additional regulatory scrutiny, or expose the Corporation to civil litigation and possible financial liability.

The Corporation may be the subject of litigation, which could result in legal liability and damage to its business and reputation.

From time to time, the Corporation and the Bank may be subject to claims or legal action from customers, employees or others. Financial institutions like the Corporation and the Bank are facing a growing number of significant class actions, including those based on the manner of calculation of interest on loans and the assessment of overdraft fees. Future litigation could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. The Corporation and the Bank are also involved from time to time in other reviews, investigations and proceedings (both formal and informal) by governmental and other agencies regarding their businesses. These matters also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Like other financial institutions, the Corporation and the Bank are also subject to risk from potential employee misconduct, including non-compliance with policies and improper use or disclosure of confidential information. Substantial legal liability or significant regulatory action against the Corporation could materially adversely affect its business, financial condition or results of operations and/or cause significant reputational harm to its business.

ITEM 1B. Unresolved Staff Comments

Not applicable.

ITEM 2. Properties

The Corporation neither owns nor leases any properties. The principal offices of the Corporation, the Bank, and Croghan Insurance are located at 323 Croghan Street, Fremont, Ohio. In addition, the Bank operates 15 banking centers, including one in Bellevue, one in Clyde, one in Curtice, four in Fremont, one in Green Springs, one in Monroeville, one in Norwalk, one in Oak Harbor, one in Oregon, one in Port Clinton, and two in Tiffin, Ohio. The Bank also operates a Loan Production Office in Perrysburg, Ohio. The Bank’s operations center is also located in Fremont, Ohio. With the exception of the Port Clinton banking center, located in a retail supermarket in the Knollcrest Shopping Center, Perrysburg office, an ATM site north of Fremont, and two ATM night deposits on the Put In Bay Islands, which are leased, all other premises are owned by the Bank.

ITEM 3. Legal Proceedings

Management is aware of no pending legal proceedings to which the Corporation, the Bank, or Croghan Insurance is a party or of which any of their property is subject, other than ordinary routine litigation to which the Bank is a party incidental to its banking business. The Corporation considers none of those proceedings to be material. Similarly, management is aware of no material proceedings involving the Corporation, the Bank, or Croghan Insurance that are contemplated by any governmental authority.

ITEM 4. Mine Safety Disclosures

Not applicable

PART II

Issuer Purchases of Equity Securities

The Corporation’s common shares are quoted on the OTC Bulletin Board under the symbol “CHBH”. There were approximately 998 holders of record of the Corporation’s common shares as of February 28, 2014.

The other information required by Items 201(a), 201(b) and 201(c) of SEC Regulation S-K is contained in (a) Financial Statement Note 19, captioned “REGULATORY MATTERS,” on pages 51 through 52 of the 2013 Annual Report to Shareholders, (b) the section captioned “DIVIDEND RESTRICTIONS”, in Item 1 of Part 1 of this Annual Report on Form 10-K, and (c) the section captioned “MARKET PRICE AND DIVIDENDS ON COMMON SHARES” on page 5 of the 2013 Annual Report to Shareholders, and each of (a), (b) and (c) is incorporated herein by reference.

The Corporation did not repurchase any of its common shares during 2012 or 2013.

ITEM 6. Selected Financial Data

The information required by this Item 6 is contained under the caption “FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA” on page 6 of the 2013 Annual Report to Shareholders and is incorporated herein by reference.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and

Results of Operations

The information required by this Item 7 is contained under the caption “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” on pages 7 through 21 of the 2013 Annual Report to Shareholders and is incorporated herein by reference.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

The information required by this Item 7A is contained in the discussion of interest rate sensitivity included in the section captioned “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - INTEREST RATE RISK”, beginning on page 19 of the 2013 Annual Report to Shareholders and is incorporated herein by reference, and in the section captioned “ASSET/LIABILITY MANAGEMENT” in Item 1 of Part I of this Form 10-K. In addition, discussions of the Corporation’s contractual obligations, contingent liabilities and commitments, and off-balance sheet arrangements is included in the section captioned “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS, AND CONTINGENT LIABILITIES AND COMMITMENTS” on page 20 of the 2013 Annual Report to Shareholders, and in Financial Statement Note 18, captioned “FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK” on page 51 of the 2013 Annual Report to Shareholders, and both are incorporated herein by reference.

ITEM 8. Financial Statements and Supplementary Data

The following consolidated financial statements (and reports thereon) are set forth on pages 23 through 59 of the 2013 Annual Report to Shareholders and are incorporated herein by reference:


Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets – December 31, 2013 and 2012
Consolidated Statements of Operations – Years ended December 31, 2013, 2012, and 2011
Consolidated Statements of Comprehensive Income – Years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2013, 2012, and 2011
Consolidated Statements of Cash Flows – Years ended December 31, 2013, 2012, and 2011
Notes to Consolidated Financial Statements

ITEM 9. Changes in and Disagreements with Accountants on

Accounting and Financial Disclosure

Not applicable

ITEM 9A. Controls and Procedures

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

(a)

information required to be disclosed by the Corporation in this Annual Report on Form 10-K and the other reports which the Corporation files or submits under the Exchange Act would be accumulated and communicated to the Corporation’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure;

(b)	information required to be disclosed by the Corporation in this Annual Report on Form 10-K and the other reports which the Corporation files or submits under the Exchange Act would be recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and

(c)	the Corporation’s disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.

Management’s Annual 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, 2013. 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 (1992),” 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, 2013.

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 applicable rules and regulations.

Changes in Internal Control Over Financial Reporting. There were no changes in the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the Corporation’s fiscal quarter ended December 31, 2013, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

ITEM 9B. Other Information

None

PART III

ITEM 10. Directors, Executive Officers, and Corporate Governance

Directors and Executive Officers

The following sets forth information concerning each director of the Corporation (including each director nominated for re-election as a director of the Corporations at the 2014 Annual Meeting of Shareholders to be held on May 13, 2014). Unless otherwise indicated, each person has held his or her principal occupation for more than five years. All directors of the Corporation also serve as members of the Board of Directors of the Bank.

Board Nominations

The following sets forth information, as of the date of this Proxy Statement, concerning each Board nominee for election as a director of the Corporation. Unless otherwise indicated, each person has held his or her principal occupation for more than five years. All directors of the Corporation also serve as members of the Board of Directors of the Bank.


Name	Age	Position(s) Held with the Company and the Bank and Principal Occupation(s)	Director of the Company Continuously Since	Nominee for Term Expiring In

John J. Caputo	67	Semi-Retired, Co-Owner/Vice President of Jack Bradley Realty Company located in Ottawa County since 1976 and operating in Sandusky County since 1990. Mr. Caputo was elected as a director of the Company and the Bank upon the closing of the merger of Indenbancorp with and into the Company on December 6, 2013.	2013	2017

James C. Dunn	67	Co-Owner of Dunn Chevrolet Buick located in Oregon, Ohio. Mr. Dunn was elected as a director of the Company and the Bank upon the closing of the merger of Indenbancorp with and into the Company on December 6, 2013.	2013	2016

Claire F. Johansen	60	Owner of Lane of Dreams Farm LLC, an equestrian training center located in Tiffin, Ohio.	2000	2017

Rick M. Robertson	61	President and Chief Executive Officer of the Company and the Bank since September 2010. Previously served as Executive Vice President and Chief Banking Officer at ViewPoint Bank headquartered in Plano, Texas, from February 2006 to August 2010, and served as Chairman at ViewPoint Bankers Mortgage, Inc., a wholly-owned subsidiary of ViewPoint Bank, from September 2007 to August 2010.	2010	2017

Gary L. Zimmerman	67	Owner and Partner of Swint-Reineck Company, a real estate holding company located in Fremont, Ohio. Formerly Owner and President of Swint-Reineck Hardware, Inc.	1991	2017

Continuing Directors

The following sets forth information, as of the date of this Proxy Statement, concerning the current directors whose terms will continue after the Annual Meeting. Unless otherwise indicated, each person has held his principal occupation for more than five years. All directors of the Company also serve as members of the Board of Directors of the Bank.


Name	Age	Position(s) Held with the Company and the Bank and Principal Occupation(s)	Director of the Company Continuously Since	Term Expires In

Michael D. Allen Sr.	68	Executive Vice President and General Manager of International Metal Hose Company, a manufacturer of flexible conduit and metal tubing located in Bellevue, Ohio.	2002	2015

James E. Bowlus	65	President and Treasurer of Fremont Candy & Cigar Inc., located in Fremont, Ohio. Lead Independent Director of the Company and the Bank since October 2010.	2000	2016

James R. Faist	66	Retired in 2011 as Vice President of Finance of Crown Battery Manufacturing Company located in Fremont, Ohio.	2007	2016

Stephen A. Kemper	74	Owner and President of Kemper Iron and Metal Company, a recycler and scrap processor located in Bellevue, Ohio.	1996	2015

Daniel W. Lease	65	Vice President of Administration and CFO of WT Holdings LCC, a manufacturing holding company located in Cabot, Pennsylvania. Formerly President of KL&L, Inc., a refractory construction company located in Braddock, Pennsylvania. Formerly Vice President of Administration and CFO of Whetstone Technology, LLC, a refractory products manufacturer located in Cabot, Pennsylvania.	1994	2016

Thomas W. McLaughlin	61	Vice President of Underground Utilities, Inc., a construction company located in Monroeville, Ohio.	2006	2015

Allan E. Mehlow	59	Chief Financial Officer of The Mosser Group/WMOG Inc. located in Fremont, Ohio.	2000	2016

The following are the executive officers of the Company and the Bank, all of whom are elected annually and serve at the pleasure of the Board of Directors of the Corporation and the Bank.


Name	Age	Position and Business Background

Charles T. Barteck	51	Mr. Barteck is Vice President and Retail Sales Manager of the Bank and has served in such position since December 2011. He previously served as President/Owner of Buckeye Land Title LTD in Genoa, Ohio from 2009 to 2011. Prior to joining Buckeye Land Title LTD, he served as Vice President of Commercial Lending from 2007 to 2009 and 2000 to 2004 at Genoa Banking Company. He also served as Vice President of Retail at Genoa Banking Company from 2004 to 2007.

Stacy A. Cox	46	Ms. Cox is Senior Vice President and Chief Operations Officer of the Bank and has served is such position since September 2011. She previously served as Vice President of Core Banking Operations and Information Technology at First National Bank in Omaha, Nebraska from September 2008 to September 2011. Prior to joining First National Bank Omaha, she worked at Huntington National Bank (Sky Financial Group) from 1992 until 2008 as Senior Vice President.

Thomas J. Elder Jr.	66	Mr. Elder was Executive Vice President/Chief Lending Officer of the Bank until his retirement on July 26, 2013. He had served in such position since May 2010. He joined the Bank in February 2003 and served as Senior Vice President/Chief Lending Officer of the Bank from May 2008 to May 2010, and as Vice President/Chief Lending Officer of the Bank from October 2003 to May 2008. He had also served as Vice President of the Corporation since July 2006.

Barry F. Luse	61	Mr. Luse is Senior Vice President & Trust Officer of the Bank and has served in such position since May 2010. He joined the Bank in 1990 and served as Trust Officer of the Bank from 1990 to 1993, as Vice President/Trust Officer of the Bank from 1993 to 2009, and as Vice President/Senior Trust Officer of the Bank from May 2009 to May 2010. He has also served as Secretary of the Corporation since March 2001. Mr. Luse is a lawyer and has been a member of the Ohio Bar since 1983.



Kendall W. Rieman	43	Mr. Rieman is Executive Vice President and Chief Financial Officer of the Bank and has served in such position since September 2011. He joined the Bank in 2006 and served as Vice President and Chief Financial Officer/Chief Operations Officer of the Bank from June 2006 to May 2010, as Senior Vice President and Chief Financial Officer/Chief Operations Officer of the Bank from May 2010 to January 2011, and as Executive Vice President and Chief Financial Officer/Chief Operations Officer of the Bank from January 2011 to September 2011. He has also served as Treasurer of the Corporation since July 2006.

Rick M. Robertson	61	Mr. Robertson is President and Chief Executive Officer of the Corporation and the Bank and has served in such position since September 2010. Before joining the Corporation and the Bank, Mr. Robertson served as Executive Vice President and Chief Banking Officer of ViewPoint Bank headquartered in Plano, Texas, from February 2006 until August 2010, and served as Chairman of ViewPoint Bankers Mortgage, Inc., a wholly-owned subsidiary of ViewPoint Bank, from September 2007 until August 2010. Prior to joining ViewPoint Bank, Mr. Robertson worked for Key Bank as Michigan District President from February 2002 until February 2006.

Daniel N. Schloemer	57	Mr. Schloemer is Senior Vice President and Chief Lending Officer of the Bank and has served in such position since July 2013. He joined the Bank in 2002 and has served as Vice President and Commercial Loan Officer from 2002 to 2011 and as Senior Vice President and Commercial Loan Officer from 2011 to 2013.

Compliance With Section 16(a) of the Exchange Act

Not applicable – The Corporation does not have a class of equity securities registered pursuant to Section 12 of the Exchange Act.

Nominating Procedures for Directors

The Corporation does not currently have a separate nominating committee of the Board of Directors. Instead, all of the independent directors of the Corporation meet in executive session to consider and recommend nominees for election or re-election to the Board of Directors of the Corporation. The Board of Directors believes that the independent directors as a group are able to perform the nominating functions in a fair and impartial manner. As a result, the Board of Directors believes it is unnecessary to create a separate nominating committee at this time.

The independent directors consider nominees proposed by shareholders of the Corporation in the same manner as nominees proposed by the Board of Directors. Section 2.04 of the Regulations prescribes the method by which a shareholder may nominate a candidate for election to the Board of Directors. Nominations for the election of directors at an annual meeting, other than those made by or on behalf of the existing Board of Directors of the Corporation, must be made in writing and must be received by the Secretary of the Corporation on or before the December 31st immediately preceding the annual meeting, or within a reasonable time as determined by the Board of Directors. Such notification must contain the following information:

—

The name, age, business or residence address of each nominee;

—

The principal occupation or employment of each nominee;

—

The number of common shares of the Corporation owned beneficially and/or of record by each nominee; and

—

The length of time each nominee has owned such shares.

Audit Committee

The Board of Directors of the Corporation has an Audit Committee that is comprised of Michael D. Allen Sr., Daniel W. Lease, and Thomas W. McLaughlin (Chair).

The Board of Directors of the Corporation has determined that each of Messrs. Lease and McLaughlin qualifies as an “audit committee financial expert” as defined in SEC rules. Mr. Lease has been a Certified Public Accountant since 1976, has served as Chief Financial Officer of Whetstone Technology, LLC since 2001, and served as President and Chief Executive Officer of Wahl Refractories, Inc. prior to 2001. Mr. McLaughlin has been a Certified Public Accountant since 1976, has served as Vice President and Chief Financial Officer of Underground Utilities, Inc. since December 2005, and practiced in the public accounting profession for more than 30 years prior to joining Underground Utilities, Inc.

Code of Ethics

The Corporation has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that is applicable to all employees of the Corporation and the Bank, including the Corporation’s principal executive officer and principal financial officer. The Code of Ethics is included in Exhibit 14 to this Annual Report on Form 10-K.

ITEM 11. Executive Compensation

Compensation of Directors

During the 2013 fiscal year, each director of the Corporation received a fee of $900 for attendance at each meeting of the Board of Directors of the Bank and a fee of $450 for attendance at each committee meeting. Each chair of a committee of the Board of Directors received an additional fee of $100 for attendance at each meeting and the Board’s Lead Independent Director receives an additional fee of $100 for attendance at each Board of Directors meeting.

No compensation was paid to directors for attendance at meetings of the Board of Directors of the Corporation in 2013. Directors who are also officers of Corporation or the Bank do not receive compensation for attendance at committee meetings.

The following contains information regarding the compensation awarded or paid to, or earned by, the directors during the 2013 fiscal year.

Director Compensation


Name (1)	Fees Earned or Paid in Cash ($)	All Other Compensation ($)	Total ($)
Michael D. Allen Sr.	$26,200.00	$0		$26,200.00
James E. Bowlus (2)	$34,550.00	$0		$34,550.00
John J. Caputo (3)	$0.00	$0		$0.00
James C. Dunn (3)	$900.00	$0		$900.00
James R. Faist	$20,700.00	$0		$20,700.00
Claire F. Johansen	$25,300.00	$0		$25,300.00
Stephen A. Kemper	$25,200.00	$0		$25,200.00
Daniel W. Lease	$19,650.00	$0		$19,650.00
Thomas W. McLaughlin	$23,000.00	$0		$23,000.00
Allan E. Mehlow	$23,400.00	$0		$23,400.00
Gary L. Zimmerman	$18,900.00	$0		$18,900.00

(1)

Rick M. Robertson is not included in the above table because he served as a named executive officer of the Corporation during the 2013 fiscal year, and the fees paid to Mr. Robertson in his capacity as director of the Bank are fully reflected in the Summary Compensation Table below.

(2)

Includes a $5,000 fee paid to Mr. Bowlus in recognition of additional time and effort devoted to the Indebancorp merger transaction.

(3)

John J. Caputo and James C. Dunn were elected as directors of the Corporation and the Bank effective December 6, 2013.

Compensation of Executive Officers

Provided below is an overview of the Corporation’s compensation policies and practices for its executive officers, including named executive officers. The term “named executive officers” refers to the Corporation’s Chief Executive Officer and those other executive officers of the Corporation included in the Summary Compensation Table.

Objectives of Croghan Compensation Programs

The primary objective of the Corporation’s compensation programs is to provide competitive compensation to attract, retain, and motivate qualified employees who will contribute to the long-term success of the Corporation. In furtherance of this objective, the Corporation regularly evaluates the compensation provided to the Corporation’s executive officers to ensure that it remains competitive in relation to the compensation paid to similarly situated executive officers at other financial institutions of comparable size and performance. In addition, the Corporation endeavors to ensure that the compensation provided to the Corporation’s executive officers is internally equitable based upon the skill requirements and responsibilities associated with each executive position.

The Corporation’s compensation programs are designed to reward each executive officer’s job performance and contributions to the Corporation. These factors are generally determined in the subjective judgment of the Corporation’s Compensation Committee for the Chief Executive Officer and with the benefit of performance reviews and salary recommendations by the Chief Executive Officer and the Corporation’s human resources department for other executive officers.

In making compensation decisions, the Compensation Committee places significant emphasis on the Corporation’s performance relative to the Corporation’s industry and peers. The Compensation Committee generally has not considered stock price as an indicator of company performance in making compensation decisions because the price of the Corporation’s common shares is subject to a variety of factors outside of the Corporation’s control.

Components of 2013 Executive Compensation

The following are general components to the annual compensation that the Corporation provides to its executive officers:

—

base salary

—

cash bonuses

—

retirement and death benefits

—

equity-based awards

—

perquisites and other benefits

Base Salary

Base salary represents the primary component of annual compensation paid to the Corporation’s executive officers. When recommending an executive officer’s salary within the pay range established by peer group comparison data, the Corporation’s Compensation Committee primarily considers the executive officer’s job performance and contribution to the objectives of the Corporation. As discussed above, these factors are determined in the subjective judgment of the Compensation Committee for the Chief Executive Officer and with the benefit of performance reviews and salary recommendations by the Chief Executive Officer for other executive officers of the Corporation and the Bank. To a lesser extent, the Compensation Committee also considers local and national economic conditions and future business prospects of the Bank in setting base salary levels.

Cash Bonuses

Effective January 1, 2003, the Bank introduced the “Performance Compensation for STAKEHOLDERS™” program in which all employees, including the named executive officers, participate. Pursuant to this program, employees of the Corporation and the Bank are eligible to receive annual cash bonuses based on the attainment of established company-wide performance goals. These goals focus on four general areas of company performance: growth, profitability, loan quality, and productivity. Performance targets and bonus levels under the program are established at the start of the each fiscal year through a collaborative effort involving management and the Compensation Committee, and are subject to final approval by the Board of Directors. Additionally, the Corporation and the Bank occasionally award discretionary cash bonuses to its executive officers to attract new executive officers, to reward exceptional job performance, or to address special circumstances. Discretionary bonuses are awarded on a limited basis and are not contemplated or anticipated when setting annual compensation for the Corporation’s executive officers.

Equity-Based Awards

The Corporation believes that it is also important to provide compensation which serves as an incentive for pursuing the long-term growth, profitability and financial success of the Corporation. Accordingly, the Board of Directors adopted the Croghan Bancshares, Inc. 2002 Stock Option and Incentive Plan (the “2002 Plan”), which was approved by the shareholders of the Corporation at the 2002 Annual Meeting of Shareholders. The 2002 Plan expired in accordance with its terms in March 2012, as a result of which no further awards may be granted under the 2002 Plan. The Board subsequently adopted the Croghan Bancshares, Inc. 2012 Equity Incentive Plan (the “2012 Plan”), which was approved by the shareholders of the Corporation at the 2012 Annual Meeting of Shareholders.

Perquisites and Other Benefits

The Corporation provides its executive officers with certain perquisites and other benefits that the Compensation Committee believes are reasonable to enable the Corporation to attract and retain qualified executive officers and to promote business development activities by the executive officers in the communities served by the Bank. In accordance with past practice, the Corporation approved cash bonuses in 2013 to reimburse certain executive officers, including certain named executive officers, for the cost of dues to the Fremont Country Club and the Catawba Island Club. The Compensation Committee believes that these perquisites and other benefits are reasonable in amount and consistent with those provided by similarly situated financial institutions in the Corporation’s market area.

The executive officers of the Corporation are eligible to participate in the Bank’s 401(k) Profit Sharing Plan on the same basis as all full-time employees of the Bank. For each executive officer or other employee who participates in the 401(k) Profit Sharing Plan, the Bank matches 50% of contributions up to 6% of the participant’s annual compensation, with a maximum match of 3% of annual compensation. The Corporation may also provide an annual discretionary contribution to the 401(k) Profit Sharing Plan on behalf of executive officers and other employees based upon a Board-established target percentage of employee compensation for those eligible to participate in the plan.

The executive officers of the Corporation are also eligible to participate in all of the employee benefit plans, such as medical, dental, group term life insurance, and disability insurance, which are generally available to all employees of the Corporation and the Bank on a non-discriminatory basis.

SUMMARY COMPENSATION TABLE

The following contains information regarding the compensation earned by the named executive officers of the Corporation during the fiscal years ended December 31, 2013 and 2012.

Summary Compensation Table


Name and Principal Position	Year	Salary ($)	Bonus & Non-Equity Incentive Plan Compensation ($) (1)	Stock Awards (2)	All Other Compensation ($)	Total ($)

Rick M. Robertson President and Chief Executive Officer of the Corporation and the Bank	2013 2012	$271,415 (3) $247,570 (5)	$60,000 $41,650	$0 $51,965	$29,051 (4) $24,469 (6)	$360,466 $365,654


Kendall W. Rieman Vice President and Treasurer of the Corporation and Executive Vice President and Chief Financial Officer of the Bank	2013 2012	$156,874 $145,711	$38,824 $16,759	$0 $26,060	$20,042 (7) $16,691 (8)	$215,740 $205,221

Thomas J. Elder Jr. Vice President of the Corporation and Executive Vice President and Chief Lending Officer of the Bank until July 26, 2013	2013 2012	$89,307 $138,027	$15,000 $15,183	$0 $15,605	$7,832 (9) $9,299 (10)	$112,139 $178,114

Stacy A. Cox Senior Vice President and Chief Operating Officer of the Bank	2013 2012	$126,311 $122,635	$35,157 $13,489	$0 $15,605	$10,940 (11) $6,891 (12)	$172,408 $158,620

(1)

Includes discretionary bonuses and non-equity incentive plan compensation paid pursuant to the Stakeholders^TM Program.

(2)

Stock awards consist of restricted stock awards granted to employees during the fiscal year ended December 31, 2012 under the 2012 Equity Incentive Plan. Shares awarded in 2012 will vest annually over a five year period, starting April 30, 2013. The dollar value shown in the Stock Awards Column above represent the aggregate grant date fair value computed using the Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation – Stock Compensation.” Grant date fair value for restricted stock is calculated using the closing stock price on the date of grant, which was $31.21 per share for all 2012 grants.

(3)

Includes director fees of $15,300 paid to Mr. Robertson for attendance at meetings of the Board of Directors of the Bank.

(4)

Includes (a) $10,018 reimbursed to Mr. Robertson for the payment of club dues and (b) $9,082 of matching contributions and a $9,951 discretionary contribution made by the Bank to the 401(k) Profit Sharing Plan on behalf of Mr. Robertson.

(5)

Includes director fees of $10,800 paid to Mr. Robertson for attendance at meetings of the Board of Directors of the Bank.

(6)

Includes (a) $7,831 reimbursed to Mr. Robertson for the payment of club dues and (b) $8,411 of matching contributions and $8,227 discretionary contribution made by the Bank to the 401(k) Profit Sharing Plan of behalf of Mr. Robertson.

(7)

Includes (a) $6,139 reimbursed to Mr. Rieman for the payment of club dues and (b) $5,833 of matching contributions and $8,070 discretionary contribution made by the Bank to the 401(k) Profit Sharing Plan on behalf of Mr. Rieman.

(8)

Includes (a) $6,645 reimbursed to Mr. Rieman for the payment of club dues and (b) $4,425 of matching contributions and $5,621 discretionary contribution made by the Bank to the 401(k) Profit Sharing Plan on behalf of Mr. Rieman.

(9)

Includes $3,323 of matching contributions and $4,509 discretionary contribution made by the Bank to the 401(k) Profit Sharing Plan on behalf of Mr. Elder.

(10)

Includes $4,140 of matching contributions and $5,159 discretionary contribution made by the Bank to the 401(k) Profit Sharing Plan on behalf of Mr. Elder.

(11)

Includes $4,794 of matching contributions and $6,146 discretionary contribution made by the Bank to the 401(k) Profit Sharing Plan on behalf of Ms. Cox.

(12)

Includes $2,709 of matching contributions and $4,182 discretionary contribution made by the Bank to the 401(k) Profit Sharing Plan on behalf of Ms. Cox.

Grants of Plan-Based Awards for 2012 Fiscal Year

Under the 2012 plan, the Corporation awarded 5,250 restricted shares to certain employees during the fiscal year ended December 31, 2012. Of the restricted shares awarded, Rick Robertson received 1,665 shares, Kendall Rieman 835 shares, Thomas Elder Jr. 500 shares, and Stacy Cox 500 shares. Shares awarded in 2012 vest annually over a five year period, starting April 30, 2013.

Grants of Plan-Based Awards for 2013 Fiscal Year

No plan-based awards were granted by the Corporation during the 2013 fiscal year.

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth information regarding the unexercised stock options held by each of the named executive officers as of the end of the 2013 fiscal year. Dollar amounts have been rounded up to the nearest whole dollar.


	Option Awards				Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable (1)	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($) (2)	Option Expiration Date	Number of shares or units of stock that have not vested (#)	Market Value of shares or units of stock that have not vested (3)

Rick M. Robertson	5,500	2,750	$24.99	05-09-2021	1,332	$45,621

Kendall W. Rieman	2,750	1,375	$24.99	05-09-2021	668	$22,879

Barry F. Luse	2,750	1,375	$24.99	05-09-2021	400	$13,700

Daniel N. Schloemer	1,374	687	$24.99	05-09-2021	400	$13,700

Stacy A. Cox	--	--			400	$13,700

Charles T. Barteck	--	--			200	$6,850

(1)

All amounts reflect Common Shares of the Corporation underlying stock options granted pursuant to the 2002 Plan.

(2)

Stock options have 10-year terms and vest over a 3-year period. The portion of the stock options that are unexercisable will vest and become exercisable as follows: Provided that the participant has not terminated prior to such date, the option will vest and become exercisable with respect to one-third of the common shares subject to the option on each of the first three anniversaries of the grant date.

(3)

The market value was determined using the closing price of the Corporation’s common shares at the end of fiscal year 2013.

Option Exercises and Restricted Stock Vesting During 2013 Fiscal Year

None of the Corporation’s named executive officers exercised any stock options during the 2013 fiscal year.

Employment Agreement with Rick M. Robertson

On November 9, 2010, the Bank entered into an employment agreement with Rick M. Robertson with respect to Mr. Robertson’s service as President and Chief Executive Officer of the Bank (the “Robertson Agreement”).

The Robertson Agreement provides for an initial term of three years commencing on August 30, 2010. Beginning on August 30, 2011 and each day thereafter, the initial term is automatically extended for one (1) additional day unless either party provides the other with at least 90 days prior written notice that the term will not be extended, such that the term will have a rolling two (2) year term after August 30, 2011.

Pursuant to the Robertson Agreement, Mr. Robertson is entitled to receive an annual base salary of $230,000 that may be adjusted in accordance with the salary administration program in effect for Bank employees generally. Mr. Robertson was eligible to receive a discretionary annual bonus for the period ending December 31, 2010 and is eligible to receive an annual bonus for each period beginning after December 31, 2010 equal to between five percent (5%) and twenty percent (20%) of his annual base salary. The amount of this annual bonus is based on the satisfaction or attainment of mutually acceptable performance goals. Mr. Robertson is entitled to participate in the various employee benefit plans, programs, and arrangements available to other senior officers of the Bank.

If Mr. Robertson’s employment is terminated by the Bank without “cause” (as defined in the Robertson Agreement) or voluntarily terminates his employment for “good reason” (as defined in the Robertson Agreement), Mr. Robertson will be entitled to a payment equal to two times his annual base salary.

If Mr. Robertson’s employment is terminated without cause within twenty-four (24) months following a “change in control” (as defined in the Robertson Agreement), in lieu of any other payment under the Robertson Agreement, Mr. Robertson will be entitled to: (a) two times his annual base salary; (b) a payment equal to 14% of his annual base salary; and (c) a payment equal to his “target” bonus opportunity.

If any payment or distribution to Mr. Robertson under the Robertson Agreement or otherwise would be subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, the payments and or distributions under the Robertson Agreement or otherwise will be reduced to $1.00 less than the amount which would cause the payments or distributions to be subject to the excise tax.

If, following the termination of Mr. Robertson’s employment other than for cause, the Bank determines that cause to terminate Mr. Robertson existed, Mr. Robertson will forfeit any future rights to payment under the Robertson Agreement and will be required to repay any amounts paid under the Robertson Agreement upon written notice from the Board of Directors of the Bank.

The Robertson Agreement contains non-competition and non-solicitation covenants to prevent Mr. Robertson, during the term of the Robertson Agreement and for twenty-four (24) months thereafter, from competing with the Bank within a 100-mile radius of Fremont, Ohio, or soliciting customers or employees of the Bank to terminate their relationship with the Bank. The Robertson Agreement also contains a nondisclosure covenant that prevents Mr. Robertson from disclosing confidential information.

Employment Agreement with Kendall W. Rieman

On September 10, 2013, the Bank entered into an employment agreement with Kendall W. Rieman with respect to Mr. Rieman’s service as Executive Vice President and Chief Financial Officer of the Bank (the “Rieman Agreement”).

The Rieman Agreement provides for an initial term of two years. Thereafter, the Rieman Agreement will be extended for successive one-year renewal terms unless the Bank’s Board of Directors elects, in its sole discretion, to terminate the agreement by providing written notice of termination to Mr. Rieman not less than 90 days prior to the end of the initial term or then-applicable renewal term.

Pursuant to the Rieman Agreement, Mr. Rieman is entitled to receive an annual base salary of $160,000 that may be adjusted in accordance with the salary administration program in effect for Bank employees generally. Mr. Rieman may be eligible for any incentive bonus payment in each calendar year based on the satisfaction or attainment of performance goals or objectives and such other terms and conditions as the Board of Directors, in its sole discretion, may provide, and the Board of Directors, in its sole discretion, may also elect to provide Mr. Rieman with additional equity compensation. The Rieman Agreement also provides that the Bank will pay or reimburse Mr. Rieman for reasonable initiation fees, assessments and periodic membership dues in connection with establishing a membership at a country club or similar membership and a membership in an appropriate service organization. Mr. Rieman is also entitled to participate in the various employee benefit plans, programs, and arrangements available to other senior officers of the Bank.

If Mr. Rieman’s employment is terminated by the Bank without “cause” (as defined in the Rieman Agreement) or voluntarily terminates his employment for “good reason” (as defined in the Rieman Agreement), Mr. Rieman will be entitled to a payment equal to two times his annual base salary.

If Mr. Rieman’s employment is terminated without cause within twenty-four (24) months following a “change in control” (as defined in the Rieman Agreement), in lieu of any other payment under the Rieman Agreement, Mr. Rieman will be entitled to: (a) two times his annual base salary; (b) a payment equal to 7% of his annual base salary; and (c) a payment equal to his “target” bonus opportunity.

If any payment or distribution to Mr. Rieman under the Rieman Agreement or otherwise would be subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, the payments and or distributions under the Rieman Agreement or otherwise will be reduced to $1.00 less than the amount which would cause the payments or distributions to be subject to the excise tax.

If, following the termination of Mr. Rieman’s employment other than for cause, the Bank determines that cause to terminate Mr. Rieman existed, Mr. Rieman will forfeit any future rights to payment under the Rieman Agreement and will be required to repay any amounts paid under the Rieman Agreement upon written notice from the Board of Directors of the Bank.

The Rieman Agreement contains non-competition and non-solicitation covenants to prevent Mr. Rieman, during the term of the Rieman Agreement and for twenty-four (24) months thereafter, from competing with the Bank within a 100-mile radius of Fremont, Ohio, or soliciting customers or employees of the Bank to terminate their relationship with the Bank. The Rieman Agreement also contains a nondisclosure covenant that prevents Mr. Rieman from disclosing confidential information.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters

Beneficial Ownership Information

As of March 14, 2014, no person or entity beneficially owned more than five percent (5%) of the outstanding common shares of the Corporation.

As of March 14, 2014, the following sets forth certain information concerning the beneficial ownership of common shares by each director of the Corporation, by each person nominated by the Board of Directors for election as a director of the Corporation at the 2014 Annual Meeting of Shareholders, by each of the named executive officers of the Corporation and by all current executive officers and directors of the Corporation as a group.


Name of Beneficial Owner	Amount and Nature of Beneficial Ownership (1)		Percent of Class (2)
Michael D. Allen Sr.		6,886	(3)
Charles T. Barteck		14	(3)
James E. Bowlus (4)		35,550	1.57%
John J. Caputo (5)		5,623	(3)
Stacy A. Cox		134	(3)
James C. Dunn (6)		14,824	(3)
James R. Faist (7)		2,500	(3)
Claire F. Johansen		4,330	(3)
Stephen A. Kemper		9,419	(3)
Daniel W. Lease (8)		5,433	(3)
Barry F. Luse (9)		7,587	(3)
Thomas W. McLaughlin		4,817	(3)
Allan E. Mehlow		3,773	(3)
Kendall W. Rieman		5,763	(3)
Rick M. Robertson		8,883	(3)
Daniel N. Schloemer		2,349	(3)
Gary L. Zimmerman		3,920	(3)
All current executive officers and directors as a group (17 persons)		121,805	5.36%

(1)

Unless otherwise noted, the beneficial owner is the owner of record and has sole voting and investment power with respect to all of the common shares and none of the common shares are pledged as security, except for 4,200 common shares held by Mr. McLaughlin which are pledged as security to an unaffiliated financial institution. The mailing address of each of the current executive officers and directors of the Corporation is 323 Croghan Street, Fremont, Ohio 43420.

(2)

The percent of class is based upon the sum of (a) 2,270,729 common shares of the Corporation outstanding on March 14, 2014 and (b) the number of common shares, if any, as to which the named person or group has the right to acquire beneficial ownership upon the exercise of options which are currently exercisable or will become exercisable within 60 days of March 14, 2014.

(3)

Reflects ownership of less than 1% of the outstanding common shares of the Corporation.

(4)

Includes 300 shares owned by Mr. Bowlus’ wife, as to which she exercises sole voting and investment power.

(5)

All shares are held jointly by Mr. Caputo and his wife, as to which they exercise shared voting and investment power.

(6)

Includes 4,793 shares owned by Mr. Dunn’s wife, as to which she exercises sole voting and investment power.

(7)

All shares are held jointly by Mr. Faist and his wife, as to which they exercise shared voting and investment power.

(8)

Includes 4,688 shares owned jointly by Mr. Lease and his wife, as to which they exercise shared voting and investment power.

(9)

Includes 130 shares owned by Mr. Luse’s wife, as to which she exercises sole voting and investment power, and 160 shares owned jointly by Mr. Luse and his wife, as to which they exercise shared voting and investment power.

Equity Plan Information

The following table provides certain information regarding the Corporation’s equity compensation plans as of December 31, 2013.


	(a)		(b)		(c)
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights		Weighted-average exercise price of outstanding options, warrants, and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by security holders		28,869		24.99		156,832	(2)

Equity compensation plans not approved by security holders (1)		-		-		-

Total		28,869		24.99		156,832

(1)	The Corporation has no equity compensation plans that have not been approved by the Corporation’s shareholders.

(2)	Represents common shares available for issuance under the 2012 plan. The 2002 Plan expired in March 2012 and no further awards may be granted under the 2002 Plan.

Related Party Transactions

Pursuant to its Charter, the Corporation’s Audit Committee is responsible for reviewing and overseeing the procedures designed to identify “related party” transactions that are material to the Corporation’s consolidated financial statements or otherwise require disclosure under applicable laws, and the Audit Committee has the authority to approve such “related party” transactions.

During the 2013 and 2012 fiscal years, the Bank entered into banking-related transactions in the ordinary course of business with certain executive officers, directors, and principal shareholders of the Corporation (including certain executive officers of the Bank), members of their immediate families and corporations or organizations with which they are affiliated. It is expected that similar transactions will be entered into in the future. Loans to such persons have been made on substantially the same terms, including the interest rate charged and collateral required, as those prevailing at the time for comparable transactions with persons not affiliated with the Corporation or the Bank. These loans have been, and are presently, subject to no more than the normal risk of collectibility and present no other unfavorable features.

Director Independence

The Board of Directors of the Corporation affirmatively determines whether each director of the Corporation is independent based on the definition of an “independent director” set forth in NASDAQ Marketplace Rule 5605(a)(2). In making this determination, the Board of Directors considered any transactions, relationships, or arrangements between each director (including his or her family members and affiliates) and the Corporation or the Bank, including those described above under “Related Party Transactions.”

Based on these considerations, the Board of Directors has determined that each of the following individuals who served as a director during the 2013 fiscal year qualifies as an “independent director”:


Michael D. Allen Sr.	Claire F. Johansen	Thomas W. McLaughlin
James E. Bowlus	James R. Faist	Allan E. Mehlow
John J. Caputo	Stephen A. Kemper	Gary L. Zimmerman
James C. Dunn	Daniel W. Lease

The Board of Directors has determined that Rick M. Robertson did not qualify as an “independent director” because he serves as President and Chief Executive Officer of the Corporation and the Bank.

ITEM 14. Principal Accountant Fees and Services

In accordance with the Audit Committee Charter and the requirements of the Sarbanes-Oxley Act of 2002 and related SEC rules, all services to be provided by the Corporation’s independent registered public accounting firm are subject to pre-approval by the Audit Committee. This includes audit services, audit-related services, tax services and other services. In some cases, the pre-approval of services is provided by the full Audit Committee. In other cases, the Chair of the Audit Committee has the delegated authority to pre-approve additional services, and such pre-approvals are then communicated to the full Audit Committee. All (100%) of the audit services, audit related services, tax services, and other services provided by the Corporation’s independent registered public accounting firm, CliftonLarsonAllen LLP during 2013 and 2012 were pre-approved by the Audit Committee.

The Sarbanes-Oxley Act and related SEC rules prohibit the Corporation from obtaining certain non-audit services from its auditing firm in order to avoid potential conflicts of interest. The Corporation has not obtained any of these prohibited services from CliftonLarsonAllen LLP since these rules went into effect.

The following lists the fees that the Corporation paid or accrued for the audit and other services provided by CliftonLarsonAllen LLP for the following fiscal years.


	2013		2012

Audit Fees		$102,648		$196,500
Audit-Related Fees		27,100		26,780
Tax Fees		12,575		14,925

Total		$142,323		$238,205

Audit Fees

This category includes the audit of the Corporation’s annual financial statements, review of financial statements included in the Corporations Quarterly Reports on Form 10-Q, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements and the preparation of the annual “management letter” on internal control matters.

Audit-Related Fees

This category consists of assurance and related services provided by CliftonLarsonAllen LLP that are reasonably related to the performance of the audit or review of the Corporation’s financial statements and are not reported under “Audit Fees.” The services provided by CliftonLarsonAllen LLP under this category include: the annual audit of the Bank’s 401(k) Profit Sharing Plan, including review of the related Form 11-K for 2012; and reporting on the Trust Department and on the suitability of the design and operating effectiveness of its controls for both years.

Tax Fees

This category consists of professional services rendered by CliftonLarsonAllen for tax compliance, tax advice, and tax planning. The services provided by CliftonLarsonAllen LLP under this category include tax return preparation and miscellaneous technical tax advice.

All Other Fees

None

AUDIT COMMITTEE REPORT

In fulfilling its oversight responsibilities with respect to the Corporation’s audited financial statements for the year ended December 31, 2013, the Audit Committee has:

—

reviewed and discussed the Corporations’ audited financial statements with management;

—

discussed with CliftonLarsonAllen LLP, the Corporation’s independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T as currently in effect; and

—

received the written disclosures and the letter from CliftonLarsonAllen LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding CliftonLarsonAllen’s LLP communications with the Audit Committee concerning independence, and has discussed with CliftonLarsonAllen LLP its independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors of the Corporation (and the Board of Directors has approved) that the audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013, for filing with the SEC.

Submitted by the members of the Audit Committee.

Michael D. Allen Sr., Daniel W. Lease (Chair) and Thomas W. McLaughlin

PART IV

ITEM 15. Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

The following consolidated financial statements (and reports thereon) are set forth on pages 23 through 59 of the Corporation’s 2013 Annual Report to Shareholders (included as Exhibit 13 to this Annual Report on Form 10-K) and are incorporated herein by reference:


Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - December 31, 2013 and 2012
Consolidated Statements of Operations - Years ended December 31, 2013, 2012, and 2011
Consolidated Statements of Comprehensive Income – Years ended December 31, 2013, 2012 and 2011
Consolidated Statements of Stockholders’ Equity - Years ended December 31, 2013, 2012, and 2011
Consolidated Statements of Cash Flows - Years ended December 31, 2013, 2012, and 2011
Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

Financial statement schedules have been omitted either because they are not applicable or because the required information is provided in the consolidated financial statements or in the notes thereto.

(a)(3) Exhibits

The following exhibits are filed with or incorporated by reference in this Annual Report on Form 10-K:


Exhibit Number	Description	Location

2.1	Agreement and Plan of Merger, dated as of June 20, 2013, by and between Croghan Bancshares, Inc. and Indebancorp	Incorporated herein by reference to Annex A to the Prospectus/Proxy Statement included in the Registration Statement on Form S-4/A of the Registrant filed on September 12, 2013 (File No. 333-190362)

3.1(a)	Amended Articles of Incorporation of Croghan Bancshares, Inc.	Incorporated herein by reference to Exhibit 3(i) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 (File No. 0-20159)

3.1(b)	Certificate of Amendment to Articles of Incorporation of Croghan Bancshares, Inc. as filed with the Ohio Secretary of State on May 12, 2006	Incorporated herein by reference to Exhibit 3.1(b) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (File No. 0-20159)

3.2	Amended and Restated Code of Regulations of Croghan Bancshares, Inc.	Incorporated herein by reference to Exhibit 3(ii) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000 (File No. 0-20159)

4.1	Agreement to furnish instruments and agreements defining rights of holders of long-term debt	Included in this filing

*10.1	Croghan Bancshares, Inc. Amended and Restated 2002 Stock Option and Incentive Plan	Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 0-20159)


Exhibit Number	Description	Location

*10.2	Form of Incentive Stock Option Award Agreement to be used in connection with grants under the Croghan Bancshares, Inc. Amended and Restated 2002 Stock Option and Incentive Plan	Incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (File No. 0-20159)

*10.3	Croghan Bancshares, Inc. 2012 Equity Incentive Plan	Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-4 of the Registrant filed on August 2, 2013 (File No. 333-190362)

*10.4	Form of Restricted Stock Award Agreement to be used in connection with grants under the Croghan Bancshares, Inc. 2012 Equity Incentive Plan	Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-4 of the Registrant filed on August 2, 2013 (File No. 333-190362)

*10.5	Executive Supplemental Death Benefit Agreement	Incorporated by reference to Exhibit 10(v) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003 (File No. 0-20159)

*10.6	Employment Agreement, dated as of November 9, 2010, between The Croghan Colonial Bank and Rick M. Robertson	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 16, 2010 (File No. 0-20159)

*10.7	Amendment to Employment Agreement, dated as of July 21, 2011, between The Croghan Colonial Bank and Rick M. Robertson	Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 (File No. 0-20159)

*10.8	Employment Agreement, dated as of September 10, 2013, between The Croghan Colonial Bank and Kendall W. Rieman	Included with this filing

13	2013 Annual Report to Shareholders	Included with this filing (not deemed filed except for portions thereof which are specifically incorporated by reference into this Annual Report on Form 10-K)

14	Croghan Bancshares, Inc. Code of Business Conduct and Ethics	Included with this filing

21	Subsidiaries of the Registrant	Included with this filing

31.1	Rule 13a-14(a)/15d-14(a) Certification – Principal Executive Officer	Included with this filing

31.2	Rule 13a-14(a)/15d-14(a) Certification – Principal Financial Officer	Included with this filing


Exhibit Number	Description	Location

32	Section 1350 Certification – Principal Executive Officer and Principal Financial Officer	Included with this filing

101	The following materials from Croghan Bancshares, Inc.’s 2013 Annual Report and incorporated therefrom in Croghan Bancshares, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of December 31, 2013 and 2012; (ii) the Consolidated Statements of Operations for the years ended December 31, 2013, 2012, and 2011; (iii) the Consolidated Statements of Comprehensive Income - Years ended December 31, 2013, 2012, and 2011; (iv) the Consolidated Statements Stockholders’ Equity for the years ended December 31, 2013, 2012, and 2011; (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012, and 2011; and (vi) the Notes to Consolidated Financial Statements	Included with this filing

*	Denotes management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


						CROGHAN BANCSHARES, INC.

Date: March 28, 2014						/s/ Rick M. Robertson
						Rick M. Robertson
						President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the date indicated:


Signature		Title(s)

/s/ Rick M. Robertson Rick M. Robertson		President and Chief Executive Officer (Principal Executive Officer) and Director

/s/ Kendall W. Rieman Kendall W. Rieman		Treasurer (Principal Financial Officer and Principal Accounting Officer)

/s/ Michael D. Allen Sr. Michael D. Allen Sr.		Director

/s/ James E. Bowlus James E. Bowlus		Director

/s/ John J. Caputo John J. Caputo		Director

/s/ James C. Dunn James C. Dunn		Director

/s/ James R. Faist James R. Faist		Director

/s/ Claire F. Johansen Claire F. Johansen		Director

/s/ Stephen A. Kemper Stephen A. Kemper		Director

/s/ Daniel W. Lease Daniel W. Lease		Director

/s/ Thomas W. McLaughlin Thomas W. McLaughlin		Director

/s/ Allan E. Mehlow Allan E. Mehlow		Director

/s/ Gary L. Zimmerman Gary L. Zimmerman		Director

Date: March 28, 2014

EXHIBIT INDEX


Exhibit Number	Description	Location

2.1	Agreement and Plan of Merger, dated as of June 20, 2013, by and between Croghan Bancshares, Inc. and Indebancorp	Incorporated herein by reference to Annex A to the Prospectus/Proxy Statement included in the Registration Statement on Form S-4/A of the Registrant filed on September 12, 2013 (File No. 333-190362)

3.1(a)	Amended Articles of Incorporation of Croghan Bancshares, Inc.	Incorporated herein by reference to Exhibit 3(i) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 (File No. 0-20159)

3.1(b)	Certificate of Amendment to Articles of Incorporation of Croghan Bancshares, Inc. as filed with the Ohio Secretary of State on May 12, 2006	Incorporated herein by reference to Exhibit 3.1(b) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (File No. 0-20159)

3.2	Amended and Restated Code of Regulations of Croghan Bancshares, Inc.	Incorporated herein by reference to Exhibit 3(ii) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000 (File No. 0-20159)

4.1	Agreement to furnish instruments and agreements defining rights of holders of long-term debt	Included in this filing

*10.1	Croghan Bancshares, Inc. Amended and Restated 2002 Stock Option and Incentive Plan	Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 0-20159)

*10.2	Form of Incentive Stock Option Award Agreement to be used in connection with grants under the Croghan Bancshares, Inc. Amended and Restated 2002 Stock Option and Incentive Plan	Incorporated by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (File No. 0-20159)

*10.3	Croghan Bancshares, Inc. 2012 Equity Incentive Plan	Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-4 of the Registrant filed on August 2, 2013 (File No. 333-190362)

*10.4	Form of Restricted Stock Award Agreement to be used in connection with grants under the Croghan Bancshares, Inc. 2012 Equity Incentive Plan	Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-4 of the Registrant filed on August 2, 2013 (File No. 333-190362)

*10.5	Executive Supplemental Death Benefit Agreement	Incorporated by reference to Exhibit 10(v) to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003 (File No. 0-20159)


Exhibit Number	Description	Location

*10.6	Employment Agreement, dated as of November 9, 2010, between The Croghan Colonial Bank and Rick M. Robertson	Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 16, 2010 (File No. 0-20159)

*10.7	Amendment to Employment Agreement, dated as of July 21, 2011, between The Croghan Colonial Bank and Rick M. Robertson	Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 (File No. 0-20159)

*10.8	Employment Agreement, dated as of September 10, 2013, between The Croghan Colonial Bank and Kendall W. Rieman	Included with this filing

13	2013 Annual Report to Shareholders	Included with this filing (not deemed filed except for portions thereof which are specifically incorporated by reference into this Annual Report on Form 10-K)

14	Croghan Bancshares, Inc. Code of Business Conduct and Ethics	Included with this filing

21	Subsidiaries of the Registrant	Included with this filing

31.1	Rule 13a-14(a)/15d-14(a) Certification – Principal Executive Officer	Included with this filing

31.2	Rule 13a-14(a)/15d-14(a) Certification – Principal Financial Officer	Included with this filing

32	Section 1350 Certification – Principal Executive Officer and Principal Financial Officer	Included with this filing

101	The following materials from Croghan Bancshares, Inc.’s 2013 Annual Report and incorporated therefrom in Croghan Bancshares, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of December 31, 2013 and 2012; (ii) the Consolidated Statements of Operations for the years ended December 31, 2013, 2012, and 2011; (iii) the Consolidated Statements of Comprehensive Income - Years ended December 31, 2013, 2012, and 2011; (iv) the Consolidated Statements Stockholders’ Equity for the years ended December 31, 2013, 2012, and 2011; (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012, and 2011; and (vi) the Notes to Consolidated Financial Statements	Included with this filing

*	Denotes management contract or compensatory plan or arrangement.

CROGHAN BANCSHARES INC 10-K