Attached files

file filename
EX-4 - EX-4 - CAMCO FINANCIAL CORPl39185exv4.htm
EX-23 - EX-23 - CAMCO FINANCIAL CORPl39185exv23.htm
EX-32.I - EX-32.I - CAMCO FINANCIAL CORPl39185exv32wi.htm
EX-31.I - EX-31.I - CAMCO FINANCIAL CORPl39185exv31wi.htm
EX-31.II - EX-31.II - CAMCO FINANCIAL CORPl39185exv31wii.htm
EX-32.II - EX-32.II - CAMCO FINANCIAL CORPl39185exv32wii.htm
EX-10.XXIV - EX-10.XXIV - CAMCO FINANCIAL CORPl39185exv10wxxiv.htm
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
OR
     
o   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: 0-25196
CAMCO FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
     
Delaware   51-0110823
     
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)
814 Wheeling Avenue, Cambridge, Ohio 43725
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (740) 435-2020
Securities registered pursuant to Section 12(b) of the Act:
     
Common Stock, $1 par value per share   NASDAQ Global Market
     
(Title of Each Class)   (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
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 o No þ
Indicate by check mark whether the issuer (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 þ No o
Indicate by check mark whether the registrant (1) 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
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 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large Accelerated Filer o   Accelerated Filer o   Non-Accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the last sale reported as of June 30, 2009, was $16.8 million. There were 7,205,595 shares of the registrant’s common stock outstanding on March 26, 2010.
DOCUMENTS INCORPORATED BY REFERENCE:
     Part III of Form 10-K: Portions of the Proxy Statement for the 2010 Annual Meeting of Stockholders
 
 

 


TABLE OF CONTENTS

PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Stock Information
Item 6. Selected Consolidated Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
SIGNATURES
INDEX TO EXHIBITS
EX-4
EX-10.XXIV
EX-23
EX-31.I
EX-31.II
EX-32.I
EX-32.II


Table of Contents

PART I
Item 1. Business.
General
Camco Financial Corporation (“Camco” or the “Corporation”) is a financial services holding company that was organized under Delaware law in 1970. Camco is engaged in the financial services business in Ohio, Kentucky and West Virginia, through its wholly-owned subsidiaries, Advantage Bank and Camco Title Agency, Inc. In June 2001, Camco completed a reorganization in which it combined its banking activities under one Ohio savings bank charter known as Advantage Bank (“Advantage” or the “Bank”). Prior to the reorganization, Camco operated five separate banking subsidiaries serving distinct geographic areas. The branch office groups in each of the regions previously served by the subsidiary banks, except for the Bank’s Ashland, Kentucky, division, which was sold in 2004, now operate as regions of Advantage. In 2003, Camco dissolved its second tier subsidiary, Camco Mortgage Corporation, and converted its offices into branch offices of the Bank. In August 2004, Camco completed a business combination with London Financial Corporation of London, Ohio, and its wholly-owned subsidiary, The Citizens Bank of London. The acquisition was accounted for using the purchase method of accounting and, therefore, the financial statements for prior periods have not been restated. At the time of the merger, Advantage Bank merged into The Citizens Bank of London and changed the name of the resulting institution to Advantage Bank. As a result, Camco’s subsidiary financial institution is now an Ohio-chartered commercial bank. Further, Camco converted from a regulated thrift holding company to a Federal Reserve Board financial services holding company.
Advantage is primarily regulated by the State of Ohio Department of Commerce, Division of Financial Institutions (the “Division”), and the Federal Deposit Insurance Corporation (the “FDIC”). Advantage is a member of the Federal Home Loan Bank (the “FHLB”) of Cincinnati, and its deposit accounts are insured up to applicable limits by the Deposit Insurance Fund (the “DIF”) administered by the FDIC. Camco is regulated by the Federal Reserve Board.
Advantage’s lending activities include the origination of commercial real estate and business loans, consumer loans, and residential conventional fixed-rate and variable-rate mortgage loans for the acquisition, construction or refinancing of single-family homes located in Camco’s primary market areas. Camco also originates construction and permanent mortgage loans on condominiums, two- to four-family, multi-family (over four units) and nonresidential properties. Camco continues to diversify the balance sheet through increasing commercial, commercial real estate, and consumer loan portfolios as well as retail and business checking and money market deposit accounts.
The financial statements for Camco and its subsidiaries are prepared on a consolidated basis. The principal source of revenue for Camco on an unconsolidated basis has historically been dividends from the Bank. Payment of dividends to Camco by the Bank is subject to various regulatory restrictions and tax considerations.
References in this report to various aspects of the business, operations and financial condition of Camco may be limited to Advantage, as the context requires.
Camco’s Internet site, http://www.camcofinancial.com, provides Camco’s annual report 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 free of charge as soon as reasonably practicable after Camco has filed the report with the Securities and Exchange Commission.
Lending Activities
General. Camco’s lending activities include the origination of commercial real estate and business loans, consumer loans, and conventional fixed-rate and adjustable-rate mortgage loans for the construction, acquisition or refinancing of single-family residential homes located in Advantage’s primary market areas. Construction and permanent mortgage loans on condominiums, multifamily (over four units) and nonresidential properties are also offered by Camco.

2


Table of Contents

Loan Portfolio Composition. The following table presents certain information regarding the composition of Camco’s loan portfolio at the dates indicated:
                                                                                 
    At December 31,  
    2009     2008     2007     2006     2005  
            Percent             Percent             Percent             Percent             Percent  
            of             of             of             of             of  
            Total             Total             Total             Total             Total  
    Amount     Loans     Amount     Loans     Amount     Loans     Amount     Loans     Amount     Loans  
    (Dollars in thousands)  
Type of loan:
                                                                               
Residential properties
  $ 332,323       50.4 %   $ 402,736       53.2 %   $ 435,431       53.6 %   $ 474,110       58.0 %   $ 474,401       56.5 %
Multi-family
    39,027       5.9       38,633       5.1       40,589       5.0       43,392       5.3       51,475       6.1  
Nonresidential real estate
    124,245       18.8       129,334       17.1       126,437       15.6       105,577       12.9       105,380       12.5  
Construction
    16,384       2.5       31,097       4.1       45,677       5.6       42,654       5.2       64,601       7.7  
Commercial & development
    36,392       5.5       40,616       5.4       41,551       5.1       35,287       4.3       20,958       2.5  
Home equity lines of credit
    109,163       16.6       125,442       16.6       121,619       15.0       116,436       14.2       108,086       12.9  
Consumer & other loans
    17,743       2.7       4,176       .6       7,255       .9       7,851       1.0       22,114       2.6  
 
                                                           
Total
  $ 675,277       102.4     $ 772,034       102.1     $ 818,559       100.8     $ 825,307       100.9     $ 847,015       100.8  
 
                                                           
Less:
                                                                               
Unamortized yield adjustments
    (156 )     (0.0 )     354       0.0       166       (0.0 )     (8 )     (0.0 )     (266 )     (0.0 )
Allowance for loan losses
    (16,099 )     (2.4 )     (15,747 )     (2.1 )     (6,623 )     (0.8 )     (7,144 )     (0.9 )     (6,959 )     (0.8 )
 
                                                           
Total loans, net
  $ 659,022       100.0 %   $ 756,641       100.0 %   $ 812,102       100.0 %   $ 818,154       100.0 %   $ 839,790       100.0 %
 
                                                           
Loan Maturity Schedule. The following table sets forth certain information as of December 31, 2009, regarding the dollar amount of loans maturing in Camco’s portfolio based on the contractual terms to maturity of the loans. Demand loans, loans having no stated schedule of repayments and loans having no stated maturity, are reported as due in one year or less.
                                 
            Due after              
    Due in one year     one through     Due after five        
    or less     five years     years     Total  
    (In thousands)  
Loans:
                               
Residential properties
  $ 16,662     $ 45,495     $ 270,166     $ 332,323  
Multifamily
    843       22,805       15,379       39,027  
Nonresidential real estate
    5,467       42,809       75,969       124,245  
Construction
    3,602       9,065       3,717       16,384  
Commercial and development
    10,789       15,494       10,109       36,392  
Home equity lines of credit
    11,664       62,349       35,150       109,163  
Consumer and other loans
    7,054       4,946       5,743       17,743  
 
                       
 
                               
Total
  $ 56,081     $ 202,963     $ 416,233     $ 675,277  
 
                       
         
    Due after  
    December 31, 2010  
    (In thousands)  
Fixed rate of interest
  $ 183,526  
Adjustable rate of interest
    435,670  
 
     
 
       
Total
  $ 619,196  
 
     
Generally, loans originated by Advantage are on a fully-amortized basis. Advantage has no rollover provisions in its loan documents and anticipates that loans will be paid in full by the maturity date.
Residential Loans. A large portion of the lending activity of Advantage is the origination of fixed-rate and adjustable-rate conventional loans for the acquisition, refinancing or construction of single-family residences. Excluding construction loans and home equity line of credit, approximately 49.2% of total loans as of December 31, 2009, consisted of loans secured by mortgages on one- to four-family residential properties.

3


Table of Contents

Federal regulations and Ohio law limit the amount which Advantage may lend in relationship to the appraised value of the underlying real estate at the time of loan origination (the “Loan-to-Value Ratio” or “LTV”). In accordance with such regulations and law, Advantage generally makes loans for its own portfolio on single-family residences up to 95% of the value of the real estate and improvements. Advantage generally requires the borrower on each loan with an LTV in excess of 80% to obtain private mortgage insurance, loan default insurance or a guarantee by a federal agency. Advantage permits, on an exception basis, borrowers to exceed a LTV of 80% without private mortgage insurance, loan default insurance or a guarantee by a federal agency.
The interest rate adjustment periods on adjustable-rate mortgage loans (“ARMs”) offered by Advantage are generally one, three and five years. The interest rates initially charged on ARMs and the new rates at each adjustment date are determined by adding a stated margin to a designated interest rate index. Advantage has generally used one-year and three-year United States Treasury note yields, adjusted to a constant maturity, as the index for one-year and three-year adjustable-rate loans, respectively. Advantage has used the London Interbank Offered Rate (“LIBOR”) and FHLB advance rates as additional indices on certain loan programs to diversify its concentrations of indices that may prove beneficial during repricing of loans throughout changing economic cycles. The maximum adjustment on residential loans at each adjustment date for ARMs is usually 2%, with a maximum adjustment of 6% over the term of the loan.
From time to time, Advantage originates ARMs which have an initial interest rate that is lower than the sum of the specified index plus the margin. Such loans are subject to increased risk of delinquency or default due to increasing monthly payments as the interest rates on such loans increase to the fully indexed level. Advantage attempts to reduce the risk by underwriting one—year ARMs at the fully-indexed rate and three-year and five-year ARMs utilizing the note rates. None of Advantage’s ARMs have negative amortization or “payment option” features.
Residential mortgage loans offered by Advantage are usually for terms of up to 30 years, which could have an adverse effect upon earnings if the loans do not reprice as quickly as the cost of funds. To minimize such effect, Advantage generally sells fixed-rate loans to Freddie Mac and Fannie Mae. Furthermore, experience reveals that, as a result of prepayments in connection with refinancings and sales of the underlying properties, residential loans generally remain outstanding for periods which are substantially shorter than the maturity of such loans.
At December 31, 2009, fixed-rate loans comprised 32.1% of the 1-4 family residential loan portfolio. Approximately 67.9% of the 1-4 family residential loan portfolio had adjustable rates tied to U.S. Treasury note yields and LIBOR.
Construction and Development Loans. Advantage offers residential construction loans both to owner-occupants and to builders for homes being built under contract with owner-occupants. Advantage also makes loans to persons constructing projects for investment purposes. Loans for developed building lots are generally made on an adjustable-rate basis were for terms of up to three years with an LTV of 80% in the first half of 2009 with policy changes of two years with an LTV of 65% or less in the second half of 2009.
Advantage offers construction loans to owner-occupants at adjustable-rate term loans on which the borrower pays only interest on the disbursed portion during the construction period, which is usually 9 months. At December 31, 2009, approximately $3.2 million, of Advantage’s total loans consisted of construction loans for 1-4 family properties of which $734,000 was undisbursed.
Construction loans for investment properties involve greater underwriting and default risks than loans secured by mortgages on existing properties or construction loans for single-family residences. Loan funds are advanced upon the security of the project under construction, which is more difficult to value in the case of investment properties before the completion of construction. Moreover, because of the uncertainties inherent in estimating construction costs, it is relatively difficult to evaluate precisely the total loan funds required to complete a project and the related LTV ratios. In the event a default on a construction loan occurs and foreclosure follows, Advantage could be adversely affected because it would have to take control of the project and either arrange for completion of construction or dispose of the unfinished project. Advantage mitigates these risks by working with experienced developers which have substantial personal liquidity. At December 31, 2009, Advantage had $13.2 million of multi-family and non-residential loans, of which $11.3 million was undisbursed and $9.9 million of land development loans, with $1.0 million undisbursed and of which $4.8 million were classified as impaired and on nonaccrual status.
Nonresidential Real Estate Loans. Advantage originates loans secured by mortgages on nonresidential real estate, including retail, office and other types of business facilities. Nonresidential real estate loans are made on an adjustable-rate or fixed-rate basis for terms of up to 10 years. Nonresidential real estate loans originated by Advantage generally have an LTV of 80% in the first half of 2009 with policy changes of 75% or less. The largest nonresidential real estate loan outstanding at December 31, 2009, was a $3.8 million loan secured by a nursing home. Nonresidential real estate loans comprised $124.2 million, or 18.4% of total loans at December 31, 2009.
Nonresidential real estate lending is generally considered to involve a higher degree of risk than residential lending due to the relatively larger loan amounts and the effects of general economic conditions on the successful operation of income-producing properties. Advantage has endeavored to reduce this risk by carefully evaluating the credit history and past performance of the

4


Table of Contents

borrower, the location of the real estate, the quality of the management operating the property, the debt service ratio and cash flow analysis, the quality and characteristics of the income stream generated by the property and appraisals supporting the property’s valuation.
Consumer and Other Loans. Advantage makes various types of consumer loans, including loans made to depositors on the security of their savings deposits, automobile loans, home improvement loans, home equity line of credit loans and unsecured personal loans. Home equity loans are made at fixed and variable rates of interest for terms of up to 15 years. Most other consumer loans are generally made at fixed rates of interest for terms of up to 10 years. The risk of default on consumer loans during an economic recession is greater than for residential mortgage loans.
Advantage’s home equity line of credit loan portfolio totaled $109.2 million, or 16.2%, of the total loan portfolio at December 31, 2009. During 2009, management continued to tighten lending standards on home equity lines of credit in response to significant economic weakness and declining home values. These actions included increasing minimum credit scores and reducing the combined LTV on new loans. At December 31, 2009, education, consumer and other loans constituted $17.7 million, or 2.6% of Advantage’s total loans.
Loan Solicitation and Processing. Loan originations are developed from a number of sources, including: solicitations by Advantage’s lending staff; referrals from real estate brokers, loan brokers and builders; participations with other banks; continuing business with depositors, other business borrowers and real estate developers; and walk-in customers. Advantage’s management stresses the importance of individualized attention to the financial needs of its customers.
The loan origination process for each of Advantage’s regions is centralized in the processing and underwriting of loans. Mortgage loan applications from potential borrowers are taken by loan officers originating loans, and then forwarded to the loan department for processing. The Bank typically obtains a credit report, verification of employment and other documentation concerning the borrower and orders an appraisal of the fair market value of the collateral which will secure the loan. The collateral is thereafter physically inspected and appraised by a staff appraiser or by a designated fee appraiser approved by the Board of Directors of Advantage. Upon the completion of the appraisal and the receipt of all necessary information regarding the borrower, the loan is reviewed by an underwriter with appropriate loan approval authority. If the loan is approved, an attorney’s opinion of title or title insurance is obtained on the real estate which will secure the loan. Borrowers are required to carry satisfactory fire and casualty insurance and, if applicable, flood and private mortgage insurance, and to name Advantage as an insured mortgagee.
The procedure for approval of construction loans is the same as for residential mortgage loans, except that the appraiser evaluates the building plans, construction specifications and construction cost estimates. Advantage also evaluates the feasibility of the proposed construction project.
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. Centralized processing and underwriting are utilized to add adequate controls over the credit review process.
Loan Originations, Purchases and Sales. Generally all residential fixed-rate loans made by Advantage are originated with documentation which will permit a possible sale of such loans to secondary mortgage market investors. When a mortgage loan is sold to the investor, Advantage services the loan by collecting monthly payments of principal and interest and forwarding such payments to the investor, net of a servicing fee. Fixed-rate loans not sold and generally all of the ARMs originated by Advantage are held in Advantage’s loan portfolio. During the year ended December 31, 2009, Advantage sold approximately $108.5 million in loans. Loans serviced by Advantage for others totaled $497.0 million at December 31, 2009.
The Corporation’s lending efforts have historically focused on loans secured by existing 1-4 family residential properties. Generally, such loans have been underwritten on the basis of no more than an 80% loan-to-value ratio, which has historically provided the Corporation with adequate collateral coverage in the event of default. Nevertheless, Advantage, as with any lending institution, is subject to the risk that residential real estate values could deteriorate in its primary lending areas within Ohio, West Virginia, and northern Kentucky, thereby impairing collateral values.
Of the total loans originated by Advantage during the year ended December 31, 2009, 45.1% were ARM and 54.9% were fixed-rate loans. Adjustable-rate loans comprised 68.0% of Advantage’s total loans outstanding at December 31, 2009.
From time to time, Advantage sells participation interests in mortgage loans, business loans and commercial loans originated by it and purchases whole loans or participation interests in loans originated by other lenders. Advantage held whole loans and participations in loans originated by other lenders of approximately $20.1 million at December 31, 2009. Loans which Advantage purchases must meet or exceed the underwriting standards for loans originated by Advantage.

5


Table of Contents

The following table presents Advantage’s mortgage loan origination, purchase, sale and principal repayment activity for the periods indicated:
                                         
    Year ended December 31,  
    2009     2008     2007     2006     2005  
    (In thousands)  
Loans originated:
                                       
Construction (purchased and originated)
  $ 2,310     $ 7,774     $ 41,323     $ 23,752     $ 45,066  
Permanent
    190,662       107,776       80,900       86,613       121,033  
Consumer and other
    55,243       127,604       173,070       172,403       234,214  
 
                             
 
                                       
Total loans originated
    245,905       243,154       295,293       282,768       400,313  
 
                                       
Loans purchased
    7,035       249       3,021       3,698       11,141  
 
                                       
Reductions:
                                       
Principal repayments
    204,502       229,330       249,922       250,409       323,314  
Loans sold
    108,481       45,330       49,953       50,924       69,734  
Transfers from loans to real estate owned
    9,631       6,574       5,490       4,092       3,725  
 
                             
Total reductions
    (322,614 )     (281,234 )     (305,365 )     (305,425 )     (396,773 )
 
                                       
Increase (decrease) in other items, net (1)
    (29,655 )     (18,614 )     505       (959 )     (2,656 )
Net increase (decrease)
  $ (99,329 )   $ (56,445 )   $ (6,546 )   $ (19,918 )   $ 12,025  
 
                             
 
(1)   Other items primarily consist of amortization of deferred loan origination fees and the provision for losses on loans.
Lending Limit. Federal regulations and Ohio law generally impose a lending limit on the aggregate amount that a depository institution can lend to one borrower to an amount equal to 15% of the institution’s total capital for risk-based capital purposes plus any loan reserves not already included in total capital (the “Lending Limit Capital”). A depository institution may loan to one borrower an additional amount not to exceed 10% of the institution’s Lending Limit Capital, if the additional amount is fully secured by certain forms of “readily marketable collateral.” Real estate is not considered “readily marketable collateral.” In applying this limit, the regulations require that loans to certain related or affiliated borrowers be aggregated.
The largest amount which Advantage could have loaned to one borrower at December 31, 2009, was approximately $10.1 million. The largest amount Advantage had outstanding to one borrower and related persons or entities at December 31, 2009, was $9.1 million, which consisted of loans secured by 1-4 units within seven subdivisions.
Loan Concentrations. Advantage has historically originated loans secured by real estate. At December 31, 2009, approximately 90.0% of total loans were secured by real estate, with 65.4% of total loans secured by 1-4 family residential real estate. Home equity lines of credit comprised 16.2% of total loans at December 31, 2009. There were no concentrations of loans to specific industries that exceeded 8.6% of total loans at December 31, 2009.
Regulatory guidance suggests that financial institutions not exceed 3x risk based capital in a concentration of commercial real estate. At December 31, 2009, Camco’s ratio for this concentration was 2.25x risk based capital approximately $50.8 million under the guidance limitation.
Loan Origination and Other Fees. In addition to interest earned on loans, Advantage may receive loan origination fees or “points” relating to the loan amount, depending on the type of loan, plus reimbursement of certain other expenses. Loan origination fees and other fees are a volatile source of income, varying with the volume of lending and economic conditions. All 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. Generally, after a loan payment is 15 days delinquent, a late charge of 5% of the amount of the payment is assessed and a collection officer contacts the borrower to request payment. In certain limited instances, Advantage may modify the loan or grant a limited moratorium on loan payments to enable the borrower to reorganize his or her financial affairs. Advantage generally initiates foreclosure proceedings, in accordance with applicable laws, when it appears that a modification or moratorium would not be effective.
Real estate which has been acquired by Advantage as a result of foreclosure or by deed in lieu of foreclosure is classified as “real estate owned” until it is sold. “Real estate owned” is recorded at the lower of the book value of the loan or the fair value of the property less estimated selling expenses at the date of acquisition. Periodically, “real estate owned” is reviewed to ensure that fair

6


Table of Contents

value is not less than carrying value, and any write-down resulting from the review is charged to earnings as a provision for losses on real estate acquired through foreclosure. All costs incurred from the date of acquisition are expensed in the period paid.
The following table reflects the amount of loans in a delinquent status as of the dates indicated:
                                         
    At December 31,  
    2009     2008     2007     2006     2005  
    (Dollars in thousands)  
Loans delinquent for:
                                       
one — two payments
  $ 12,590     $ 13,338     $ 18,210     $ 13,833     $ 9,490  
three or more payments
    29,543       25,202       19,070       18,536       13,922  
 
                             
Total delinquent loans
  $ 42,133     $ 38,540     $ 37,280     $ 32,369     $ 23,412  
 
                             
 
                                       
Ratio of total delinquent loans to total net loans (1)
    6.39 %     5.09 %     4.59 %     3.91 %     2.76 %
 
                             
 
(1)   Total net loans include loans held for sale.
Nonaccrual status denotes loans greater than three payments past due, loans for which, in the opinion of management, the collection of additional interest is unlikely, or loans that meet nonaccrual criteria as established by regulatory authorities. Payments received on a nonaccrual loan are either applied to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the collectability of the loan.
The following table sets forth information with respect to Advantage’s nonaccrual and delinquent loans for the periods indicated.
                                         
    At December 31,  
    2009     2008     2007     2006     2005  
    (Dollars in thousands)  
Loans accounted for on nonaccrual basis:
                                       
Real estate:
                                       
Residential(1)
  $ 19,190     $ 20,616     $ 8,411     $ 9,618     $ 7,576  
Multi-family
    2,341       3,139       871       4,682       2,300  
Nonresidential
    3,857       18,057       6,908       1,989       3,109  
Construction
    4,382       8,603       5,568       92        
Commercial
    515       1,393       455       398       387  
Home equity lines of credit
    2,415       1,549       925       750       391  
Consumer and other
    148       127       857       136       159  
 
                             
Total nonaccrual loans
    32,848       53,484       23,995       17,665       13,922  
Accruing loans delinquent three months or more
                                       
Real estate:
                                       
Residential
          44       1,520       728        
Multi-family
                      143        
Nonresidential
    2,853                          
Construction
    638                          
Commercial
    110                          
 
                             
Total loans 90 days past due and accruing
    3,601       44       1,520       871        
 
                             
Total nonperforming loans
    36,449       53,528       25,515       18,536       13,922  
 
                             
Other real estate owned
    9,660       5,841       5,034       3,956       2,581  
 
                             
Total nonperforming assets
  $ 46,109     $ 59,369     $ 30,549     $ 22,492     $ 16,503  
 
                             
 
                                       
Allowance for loan losses
  $ 16,099     $ 15,747     $ 6,623     $ 7,144     $ 6,959  
 
                             
 
                                       
Nonperforming loans as a percent of total net loans (2)
    5.40 %     6.91 %     3.13 %     2.23 %     1.64 %
Nonperforming assets to total assets
    5.47 %     5.93 %     2.99 %     2.15 %     1.54 %
Allowances for loan losses as a percent of nonperforming loans
    44.2 %     29.4 %     26.0 %     38.5 %     50.0 %
Memo section:
                                       
Troubled debt restructurings
                                       
Loans and leases restructured and in compliance with modified terms
  $ 16,645     $ 11,440                    
 
                             
Loans and leases restructured and not in compliance with modified terms
  $ 4,783     $ 12,882                    
 
                             
 
(1)   Includes loans secured by first and junior liens
 
(2)   Includes loans held for sale.

7


Table of Contents

The amount of interest income that would have been recorded had nonaccrual loans performed in accordance with contractual terms totaled approximately $2.1 million for the year ended December 31, 2009. Interest collected on such loans and included in net earnings was $1.4 million.
Federal regulations require the Bank to classify its assets on a regular basis. Problem assets are to be classified as either (i) “substandard,” (ii) “doubtful” or (iii) “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss of principal and or interest if the deficiencies are not corrected. Doubtful assets have the same weaknesses as substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of existing facts, conditions and value. Assets classified as “loss” are considered uncollectible and of such little value that their treatment as assets without the establishment of a specific reserve is unwarranted. Loans classified and generally charged off in the month are identified as a loss. Regulations provide for the reclassification of assets by examiners. At December 31, 2009, the aggregate amounts of Advantage’s classified assets were as follows:
         
    December 31, 2009  
    (In thousands)  
Classified loans:
       
Substandard
  $ 48,231  
Doubtful
    735  
Loss
    117  
 
     
Total classified assets
  $ 49,083  
 
     
The interpretive guidance of the regulations also includes a “special mention” category, consisting of assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification, but which possess credit deficiencies or potential weaknesses deserving management’s close attention. Advantage had assets in the amount of $22.6 million designated as “special mention” at December 31, 2009 compared to $9.8 million at December 31, 2008.
Allowance for Loan Losses
Lending money is a substantial part of our business. However, every loan we make carries a risk of non-payment. This risk is affected by, among other things: cash flow of the borrower and/or the project being financed; in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral; the credit history of a particular borrower; changes in economic and industry conditions; and the duration of the loan.
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make significant estimates that affect the financial statements. One of our most critical estimates is the level of the allowance for loan losses. Due to the inherent nature of these estimates, we cannot provide absolute assurance that we will not be required to charge earnings for significant unexpected loan losses.
We maintain an allowance for loan losses that we believe is a reasonable estimate of known and inherent losses within the loan portfolio. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for loan losses by considering general market conditions, credit quality of the loan portfolio, the collateral supporting the loans and performance of customers relative to their financial obligations with us. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed current estimates. We cannot fully predict the amount or timing of losses or whether the loan loss allowance will be adequate in the future.
In originating loans, the Bank recognizes that credit losses will be experienced and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the security for the loan. It is management’s policy to maintain an adequate allowance for loan losses based on, among other things, the Bank’s historical loan loss experience, evaluation of economic conditions and regular reviews of delinquencies and loan portfolio quality. The Bank increases its allowance for loan losses by charging provisions for loan losses against the Bank’s income.

8


Table of Contents

General allowances are made pursuant to management’s assessment of risk in the Bank’s loan portfolio as a whole. Specific allowances are provided for individual loans when ultimate collection is considered questionable by management after reviewing the current status of loans which are contractually past due and considering the net realizable value of the security for the loan. Management continues to actively monitor the Bank’s asset quality and to charge off loans against the allowance for loan losses when appropriate or to provide specific loss reserves when necessary. Although management believes it uses the best information available to make determinations with respect to the allowance for loan losses, future adjustments may be necessary if economic conditions differ substantially from the economic conditions in the assumptions used in making the initial determinations.
                 
    December 31,   December 31,
    2009   2008
    (Dollars in thousands)
General allowance
  $ 11,700     $ 10,138  
Specific allowance
    4,399       5,609  
Total allowance
  $ 16,099     $ 15,747  
Management’s approach includes establishing a specific valuation allowance by evaluating individual non-performing loans for probable losses based on a systematic approach involving estimating the realizable value of the underlying collateral. Additionally, management established a general valuation allowance for pools of performing loans segregated by collateral type. For the general valuation allowance, management is applying a prudent loss factor based on our historical loss experience, while considering trends based on changes to non-performing loans and foreclosure activity, and our subjective evaluation of the economic environment. The loan portfolio is segregated into categories based on collateral type and a loss factor is applied to each category. The initial basis for each loss factor is the Corporation’s loss experience for each category. Historical loss percentages are calculated and adjusted by taking charge-offs (net of recoveries) in each risk category during the past 12 consecutive quarters and dividing the total by the balance of each category.
The following table sets forth an analysis of Advantage’s allowance for loan losses historical loss experience:
                                         
    Year ended December 31,  
    2009     2008     2007     2006     2005  
    (Dollars in thousands)  
Balance at beginning of year
  $ 15,747     $ 6,623     $ 7,144     $ 6,959     $ 6,476  
Charge-offs:
                                       
1-4 family residential real estate (1)
    8,267       3,568       1,049       646       702  
Multifamily and nonresidential real estate
    2,548       836       743       562       133  
Nonresidential real estate
    7,116       354       173              
Other Construction and Land
    2,484       703                    
Consumer
    20       21       76       212       117  
Commercial
    2,052       964       25             321  
Agriculture Loans
    41       112       27       11        
Overdraft Protection
    18       9       134       8       7  
Total charge-offs
    22,546       6,567       2,097       1,439       1,280  
 
                             
Recoveries:
                                       
1-4 family residential real estate (1)
    445       373       27       25       265  
Multifamily and nonresidential real estate
    608       19       3       25        
Nonresidential real estate
    13       235       4       2        
Other Construction and Land
          1       2              
Consumer
          46       19       102       17  
Commercial
    22       223       1       30        
Agriculture Loans
                22              
Overdraft Protection
    18       1       3             1  
 
                             
Total recoveries
    1,106       898       81       184       283  
 
                             
Net (charge-offs) recoveries
    (21,440 )     (5,669 )     (2,016 )     (1,255 )     (997 )
Provision for losses on loans
    21,792       14,793       1,495       1,440       1,480  
 
                                       
Balance at end of year
  $ 16,099     $ 15,747     $ 6,623     $ 7,144     $ 6,959  
 
                             
 
                                       
Net (charge-offs) recoveries to average loans
    (3.21 )%     (.74 )%     (.25 )%     (.15 )%     (.12 )%
 
(1) Includes home equity lines of credit.

9


Table of Contents

The following table sets forth the allocation of Advantage’s allowance for loan losses by type of loan at the dates indicated:
                                                                                 
    At December 31,  
    2009     2008     2007     2006     2005  
            Percent             Percent             Percent             Percent             Percent  
            Of loans             Of loans             Of loans             Of loans             Of loans  
            In each             In each             In each             In each             In each  
            Category             Category             Category             Category             Category  
            To total             To total             To total             To total             To total  
    Amount     Loans     Amount     Loans     Amount     Loans     Amount     Loans     Amount     Loans  
    (Dollars in thousands)  
Real estate:
                                                                               
Residential
  $ 4,912       49.2 %   $ 3,842       52.2 %   $ 2,723       53.2 %   $ 2,367       57.4 %   $ 2,470       56.0 %
Multi-family
    1,527       5.8       1,725       5.0       1,413       5.0       1,168       5.3       512       6.1  
Nonresidential
    4,066       18.4       2,783       16.8       791       15.4       1,883       12.8       1,970       12.4  
Construction
    863       2.4       1,306       4.0       665       5.6       239       5.2       276       7.6  
Commercial & development
    2,906       5.4       3,170       5.3       268       5.1       952       4.3       1,035       2.5  
Home equity lines of credit
    1,185       16.2       983       16.2       690       14.9       252       14.1       232       12.8  
Consumer & other
    640       2.6       1,938       0.5       73       .8       283       0.9       464       2.6  
 
                                                           
 
                                                                               
Total
  $ 16,099       100.0 %   $ 15,747       100.0 %   $ 6,623       100.0 %   $ 7,144       100.0 %   $ 6,959       100.0 %
 
                                                           
Investment and Mortgage-Backed Securities Activities
Federal regulations permit Camco to invest liquid assets, in United States Treasury obligations, securities of various U.S. Government sponsored enterprises, certificates of deposit at FDIC insured banks, corporate debt and equity securities or obligations of state and local political subdivision’s and municipalities. Camco is also permitted to make limited investments in commercial paper and certain mutual funds.
The following table sets forth the composition of Camco’s investment securities portfolio, except its stock in the FHLB of Cincinnati, at the dates indicated:
                                                                                                 
    At December 31,  
    2009     2008     2007  
    Amortized     % of     Fair     % of     Amortized     % of     Fair     % of     Amortized     % of     Fair     % of  
    Cost     Total     Value     total     Cost     Total     Value     total     Cost     Total     Value     total  
    (Dollars in thousands)  
Held to maturity:
                                                                                               
U.S. Government sponsored enterprises
  $       0.0 %   $       0.0 %   $ 10,955       11.3 %   $ 11,044       11.2 %   $       0.0 %   $       0.0 %
Municipal bonds
    501       .9       558       1.0       541       0.6       574       0.6     $ 567       0.6     $ 591       0.6  
Mortgage-backed Securities
    1,612       2.8       1,642       2.8       1,910       1.9       1,912       1.9       2,202       2.4       2,202       2.4  
 
                                                                       
Total
    2,113       3.7       2,200       3.8       13,406       13.8       13,530       13.7       2,769       3.0       2,793       3.0  
 
                                                                       
Available for sale:
                                                                                               
U.S. Government sponsored enterprises
    14,514       25.7       14,564       25.0       28,318       29.1       28,639       29.0       37,519       40.9       37,782       41.2  
Municipal bonds
                            100       0.1       101       1.2       210       0.2       212       0.2  
Corporate equity securities
    157       .3       88       .2       157       0.2       143       0.1       157       0.2       164       0.2  
Mortgage-backed securities
    39,690       70.3       41,298       71.0       55,218       56.8       56,469       57.1       51,051       55.7       50,761       55.4  
 
                                                                       
Total
    54,361       96.3       55,950       96.2       83,793       86.2       85,352       86.3       88,937       97.0       88,919       97.0  
 
                                                                       
Total investments and mortgage-backed securities
  $ 56,474       100.0 %   $ 58,150       100.0 %   $ 97,199       100.0 %   $ 98,882       100.0 %   $ 91,706       100.0 %   $ 91,712       100.0 %
 
                                                                       

10


Table of Contents

The following table presents the contractual maturities of Advantage’s investment securities, except its stock in the FHLB of Cincinnati and corporate equity securities, and the weighted-average yields for each range of maturities:
                                                                                         
    At December 31, 2009  
                    After one     After five              
    One year or less     through five years     through ten years     After ten years     Total  
                                                                                    Weighted-  
    Amortized     Average     Amortized     Average     Amortized     Average     Amortized     Average     Amortized     Fair     Average  
    Cost     Yield     Cost     Yield     Cost     Yield     Cost     Yield     cost     Value     yield  
    (Dollars in thousands)  
U.S. Government Sponsored enterprises
  $ 11,514       2.58 %   $       %   $ 3,000       3.00 %   $       %   $ 14,514     $ 14,564       2.67 %
Municipal bonds
                  411       4.20                   90       6.66       501       558       4.64  
Mortgage-backed Securities
    953       4.48       7,731       4.13       7,488       4.79       25,130       5.25       41,302       42,940       4.88  
 
                                                                 
 
                                                                                       
Total
  $ 12,467       2.73 %   $ 8,142       4.13 %   $ 10,488       4.28 %   $ 25,220       5.26 %   $ 56,317     $ 58       4.30 %
 
                                                                 
Deposits and Borrowings
General. Deposits are a primary source of Advantage’s funds for use in lending and other investment activities. In addition to deposits, Advantage derives funds from interest payments and principal repayments on loans, advances from the FHLB of Cincinnati and income on earning assets. Loan payments are a relatively stable source of funds, while deposit inflows and outflows fluctuate more in response to general interest rate and money market conditions. As part of Advantage’s asset and liability management strategy, FHLB advances and other borrowings are used to fund loan originations and for general business purposes. FHLB advances are also used on a short-term basis to compensate for reductions in the availability of funds from other sources.
Deposits. Deposits are attracted principally from within Advantage’s primary market area through the offering of a broad selection of deposit instruments, including interest-bearing and non-interest bearing checking accounts, money market deposit accounts, regular savings accounts, health savings accounts, term certificate accounts and retirement savings plans. In 2006 we began offering brokered certificates of deposit as an alternative to advances from the FHLB, these offerings were discontinued in the latter half of 2009. In 2010, we began offerings with Qwick Rate as part of the bank’s contingency funding plan. Qwick Rate is a non-brokered deposit listing service that provides the Bank with access to institutional certificate of deposits. The Bank pays an annual subscription fee to access the listing service. Interest rates paid, maturity terms, service fees and withdrawal penalties for the various types of accounts are established periodically by management of Advantage based on its liquidity requirements, growth goals and interest rates paid by competitors.
Effective January 1, 2010 interest rates paid by Advantage on deposits became subject to limitations as a result of a consent order Advantage entered into with the FDIC and Ohio Division of Financial Institutions in July 2009 (“Consent Order”). See “Regulation_Regulatory Agreements” below. Deposits solicited by the Bank cannot significantly exceed the prevailing rates in our market areas. The FDIC has implemented by regulation the statutory language “significantly exceeds” as meaning more than 75 basis points. Although the rule became effective January 1, 2010, Advantage has utilized these standards since mid year 2009.
The following table sets forth the dollar amount of deposits in the various types of savings programs offered by Advantage at the dates indicated:
                                                 
    At December 31,  
    2009     2008     2007  
            Weighted-             Weighted-             Weighted-  
    Amount     average rate     Amount     average rate     Amount     average rate  
                    (Dollars in thousands)                  
Non-interest bearing demand
  $ 38,911       %   $ 37,526       %   $ 35,755       %
Interest-bearing demand
    70,564       0.43       87,199       0.91       91,132       1.57  
Money market demand accounts
    96,172       0.68       112,749       1.35       111,740       3.57  
Passbook and statement savings accounts
    36,638       0.25       33,838       0.26       36,963       0.27  
Total certificate accounts
    417,617       2.73       452,644       3.79       416,594       4.80  
 
                                   
Total deposits
  $ 659,902       1.89 %   $ 723,956       2.71 %   $ 692,184       3.68 %
 
                                   

11


Table of Contents

The following table sets forth the amount and maturities of Advantage’s time deposits in excess of $100,000 at December 31, 2009:
         
    (In thousands)  
Three months or less
  $ 26,444  
Over three to six months
    18,369  
Over six to twelve months
    45,787  
Over twelve months
    45,716  
 
     
Total
  $ 136,316  
Borrowings. The twelve regional FHLBs function as central reserve banks, providing credit for their member institutions. As a member in good standing of the FHLB of Cincinnati, Advantage is authorized to apply for advances from the FHLB of Cincinnati, provided certain standards of creditworthiness have been met. Advances are made pursuant to several different programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s regulatory capital or on the FHLB’s assessment of the institution’s creditworthiness. Under current regulations, a member institution must meet certain qualifications to be eligible for FHLB advances. FHLB advances are secured by a blanket pledge on Advantage’s 1-4 family and multifamily residential loans, home equity lines of credit, junior mortgages and FHLB stock. Advantage currently provides their 1-4 family residential notes as collateral without recourse or warranty.
Borrowings also include repurchase agreements and subordinated debentures. Repurchase agreements are collateralized by a portion of Advantage’s investment portfolio.
Competition
Advantage competes for deposits with other commercial banks, savings associations, savings banks, insurance companies and credit unions and with the issuers of commercial paper and other securities, such as shares in money market mutual funds. The primary factors in competing for deposits are interest rates and convenience of office location. In making loans, Advantage competes with other commercial banks, savings banks, savings associations, consumer finance companies, credit unions and other lenders. Advantage competes for loan originations primarily through the interest rates and loan fees it charges and through the efficiency and quality of the services it provides to borrowers. Competition is affected by, among other things, the general availability of lendable funds, general and local economic conditions, current interest rate levels and other factors which are not readily predictable.
Service Corporation Activities
Advantage has no operating subsidiaries. First S&L Corporation, a subsidiary of Advantage, is inactive and was capitalized on a nominal basis at December 31, 2009.
Employees
As of December 31, 2009, Camco had 224 full-time employees and 28 part-time employees. Camco believes that relations with its employees are stable. None of the employees of Camco are represented by a collective bargaining unit.
REGULATION
General
As a financial services holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), Camco is subject to regulation, examination and oversight by the Board of Governors of the Federal Reserve System (“FRB”). Although Camco is recognized as a financial holding company, most regulations pertaining to bank holding companies also apply to it. Advantage is a non-member of the FRB and is primarily subject to regulation by the State of Ohio, Department of Commerce, Division of Ohio Financial Institution and the FDIC. Camco and Advantage must file periodic reports with these governmental agencies, as applicable, concerning their activities and financial condition. Examinations are conducted annually by the applicable regulators to determine whether Camco and Advantage are in compliance with various regulatory requirements and are operating in a safe and sound manner. Advantage is also subject to certain regulations promulgated by the FRB.
Ohio Regulation
Regulation by the Division affects the internal organization of Advantage, as well as its depository, lending and other investment activities. Periodic examinations by the Division are usually conducted on a joint basis with the FDIC. Ohio law requires that Advantage maintain federal deposit insurance as a condition of doing business. The ability of Ohio chartered banks to engage in

12


Table of Contents

certain state-authorized investments is subject to oversight and approval by the FDIC. See “Federal Deposit Insurance Corporation — State Chartered Bank Activities.”
Any mergers involving, or acquisitions of control of, Ohio banks must be approved by the Division. The Division may initiate certain supervisory measures or formal enforcement actions against Ohio chartered banks. Ultimately, if the grounds provided by law exist, the Division may place an Ohio chartered bank in conservatorship or receivership.
In addition to being governed by the laws of Ohio specifically governing banks, Advantage is also governed by Ohio corporate law, to the extent such law does not conflict with the laws specifically governing banks.
Federal Deposit Insurance Corporation
Supervision and Examination. The FDIC is responsible for the regulation and supervision of all commercial banks that are not members of the FRB (“Non-member Banks”). The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of federally insured banks and thrifts and safeguards the safety and soundness of the bank and thrift industries.
Non-member Banks are subject to regulatory oversight under various state and federal consumer protection and fair lending laws. These laws govern, among other things, truth-in-lending and truth-in-savings disclosure, equal credit opportunity, fair credit reporting and community reinvestment. Failure to abide by federal laws and regulations governing community reinvestment could limit the ability of an institution to open a new branch or engage in a merger transaction.
State Chartered Bank Activities. The ability of Advantage to engage in any state-authorized activities or make any state-authorized investments, as principal, is limited if such activity is conducted or investment is made in a manner different than that permitted for, or subject to different terms and conditions than those imposed on, national banks. Engaging as a principal in any such activity or investment not permissible for a national bank is subject to approval by the FDIC. Such approval will not be granted unless certain capital requirements are met and there is not a significant risk to the FDIC insurance fund. Most equity and real estate investments (excluding office space and other real estate owned) authorized by state law are not permitted for national banks. Certain exceptions are granted for activities deemed by the FRB to be closely related to banking and for FDIC-approved subsidiary activities.
Liquidity. Advantage is not required to maintain a specific level of liquidity; however, the FDIC expects it to maintain adequate liquidity to protect safety and soundness.
Regulatory Capital Requirements. Camco and Advantage are required by applicable law and regulations to meet certain minimum capital requirements. The capital standards include a leverage limit, or core capital requirement, a tangible capital requirement and a risk-based capital requirement.
The leverage capital requirement is a minimum level of Tier 1 capital to average total consolidated assets of 4%. “Tier 1” capital includes common stockholders equity, noncumulative perpetual preferred stock and minority interest in the equity accounts of consolidated subsidiaries, less all intangibles, other than includable purchased mortgage servicing rights and credit card relationships.
Regulatory Agreements.
On March 4, 2009, Camco entered into a Memorandum of Understanding (the “MOU”) with the FRB. The MOU prohibits Camco from engaging in certain activities while the MOU is in effect, including, without the prior written approval of the FRB, (1) the declaration or payment of dividends to stockholders or (2) the repurchase of Camco’s stock.
On August 5, 2009 Camco, entered into a written agreement with the FRB. The written agreement requires Camco to obtain FRB approval prior to: (i) declaring or paying any dividends; (ii) receiving dividends or any other form of payment representing a reduction in capital from Advantage; (iii) making any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities; (iv) incurring, increasing or guaranteeing any debt; or (v) repurchasing any Camco stock. The written agreement also required Camco to develop a capital plan and submit it to the FRB for approval.
Advantage entered into a consent agreement with the FDIC and the Ohio Division of Financial Institutions that provided for the issuance of an order by the FDIC and the Ohio Division. That order was executed by the FDIC and Ohio Division on July 31, 2009 (the “Consent Order”). The Consent Order requires Advantage to, among other things, (i) increase its Tier 1 risk based capital to 8%; and (ii) seek regulatory approval prior to declaring or paying any cash dividend. As a result of the Consent Order, Advantage is disqualified as a public depository under Ohio law and will incur higher premiums for FDIC insurance of its accounts.
For purposes of computing risk-based capital, assets and certain off-balance sheet items are weighted at percentage levels ranging from 0% to 100%, depending on their relative risk. Advantage did not meet this 8% requirement at December 31, 2009.
As a result of the Consent Order, the Bank will be considered “adequately capitalized” until the Consent Order is removed by the FDIC and the Ohio Division of Financial Institutions.

13


Table of Contents

A material failure to comply with the provisions of either the Consent Order or the MOU could result in additional enforcement actions by the FDIC, the Ohio Division or the FRB.
Transactions with Affiliates and Insiders
All transactions between banks and their affiliates must comply with Sections 23A and 23B of the Federal Reserve Act (the “FRA”) and the FRB’s Regulation W. An affiliate is any company or entity which controls, is controlled by or is under common control with the financial institution. In a holding company context, the parent holding company of a bank and any companies that are controlled by such parent holding company are affiliates of the institution. Generally, Sections 23A and 23B of the FRA (i) limit the extent to which a financial institution or its subsidiaries may engage in “covered transactions” with any one affiliate up to an amount equal to 10% of such institution’s capital stock and surplus for any one affiliate and 20% of such capital stock and surplus for the aggregate of such transactions with all affiliates, and (ii) require that all such transactions be on terms substantially the same, or at least as favorable to the institution or the subsidiary, as those provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and similar types of transactions. Exemptions from Sections 23A or 23B of the FRA may be granted only by the FRB. Advantage was in compliance with these requirements at December 31, 2009.
Change in Control
Federal Law. The Federal Deposit Insurance Act (the “FDIA”) provides that no person, acting directly or indirectly or in concert with one or more persons, shall acquire control of any insured depository institution or holding company, unless 60-days prior written notice has been given to the primary federal regulator for that institution and such regulator has not issued a notice disapproving the proposed acquisition. Control, for purposes of the FDIA, means the power, directly or indirectly, alone or acting in concert, to direct the management or policies of an insured institution or to vote 25% or more of any class of securities of such institution. Control exists in situations in which the acquiring party has direct or indirect voting control of at least 25% of the institution’s voting shares, controls in any manner the election of a majority of the directors of such institution or is determined to exercise a controlling influence over the management or policies of such institution. In addition, control is presumed to exist, under certain circumstances where the acquiring party (which includes a group “acting in concert”) has voting control of at least 10% of the institution’s voting stock. These restrictions do not apply to holding company acquisitions. See “Holding Company Regulation”.
Ohio Law. A statutory limitation on the acquisition of control of an Ohio bank requires the written approval of the Division prior to the acquisition by any person or entity of a controlling interest. Control exists, for purposes of Ohio law, when any person or entity which, either directly or indirectly, or acting in concert with one or more other persons or entities, owns, controls, holds with power to vote, or holds proxies representing, 15% or more of the voting shares or rights of an association, or controls in any manner the election or appointment of a majority of the directors. Ohio law also requires that certain acquisitions of voting securities that would result in the acquiring shareholder owning 20%, 33-1/3% or 50% of the outstanding voting securities of Camco must be approved in advance by the holders of at least a majority of the outstanding voting shares represented at a meeting at which a quorum is present and a majority of the portion of the outstanding voting shares represented at such a meeting, excluding the voting shares by the acquiring shareholder. This statute was intended, in part, to protect shareholders of Ohio corporations from coercive tender offers.
Holding Company Regulation
As a financial holding company, Camco has registered with the FRB and is subject to FRB regulations, examination, supervision and reporting requirements. Because Camco is a bank holding company that has elected to become a financial services holding company, some of the restrictions on its activities are reduced. Camco’s financial services holding company status allows Advantage to associate or have management interlocks with business organizations engaged in securities activities. In order to maintain status as a financial holding company, Advantage must be well capitalized and well managed, and must meet Community Reinvestment Act obligations. Failure to maintain such standards may ultimately permit the FRB to take certain enforcement actions against Camco.
Federal Reserve Requirements
FRB regulations currently require banks to maintain reserves of 3% of net transaction accounts (primarily NOW accounts) up to $44.4 million (subject to an exemption of up to $10.3 million). At December 31, 2009, Advantage was in compliance with its reserve requirements.

14


Table of Contents

Item 1A. Risk Factors.
Like all financial companies, Camco’s business and results of operations are subject to a number of risks, many of which are outside of our control. In addition to the other information in this report, readers should carefully consider that the following important factors, among others, could materially impact our business and future results of operations.
     We expect to continue to be subject to restrictions and conditions of Consent Order issued by the Federal Deposit Insurance Corporation and the Ohio Division of Financial Institutions. We have incurred and expect to continue to incur significant additional regulatory compliance expense in connection with the Consent Order. Failure to comply with the expected Consent Order could result in additional enforcement action against us, including the imposition of monetary penalties.
The Bank continues to be under the conditions of the Consent Order as a result of various regulatory concerns as of December 31, 2009. The management team has made significant progress on numerous directives provided in the consent order. If we fail to comply with the terms and conditions of the Consent Order, the FDIC or the Ohio Division of Financial Institutions could take additional enforcement action against us, including the imposition of monetary penalties as well as further operating restrictions. We have incurred and expect to continue to incur significant additional regulatory compliance expense in connection with the Consent Order, and we will incur ongoing expenses attributable to compliance with the terms of the Consent Order. Although we do not expect it, it is possible regulatory compliance expenses related to the Consent Order could have a materially adverse impact on us in the future. While we believe that we will be able to take actions that will result in the Consent Order being terminated in the future, such actions may not result in the FDIC and Ohio Division of Financial Institutions terminating the Consent Order.
     Our capital levels currently are not sufficient to achieve compliance with the higher capital requirements we must meet as defined in the Consent Order.
Under the Consent Order the FDIC required the Bank to raise its tier I capital to 8% by February 28, 2010. While we did achieve the required capital position during 2009, we did not maintain the levels of capital required at February 28, 2010. As of December 31, 2009, the Bank would have needed approximately $8.2 million in additional capital based on assets at such date to meet this requirement. The Corporation currently does not have any capital available to invest in the Bank. We are considering various strategies to help us achieve the required capital level, but there is no assurance that any capital raising strategy can be completed successfully in the near future. Moreover, any further increases to our allowance for loan losses and operating losses would negatively impact our capital levels and make it more difficult to achieve the capital level directed by the FDIC and Ohio Division of Financial Institutions. Based on our failure to meet the required capital level, the FDIC or the Ohio Division of Financial Institutions could take additional enforcement action against us.
     We have a relatively high percentage of non-performing loans and classified assets relative to our total assets. If our allowance for loan losses is not sufficient to cover our actual loan losses, our ability to become profitable will be adversely affected.
At December 31, 2009, our non-performing loans totaled $42.5 million, representing 5.4% of total loans and 5.0% of total assets. In addition, loans which management has classified as either substandard, doubtful or loss totaled $49.1 million, representing 7.3% of total loans and 5.8% of total assets. At December 31, 2009, our allowance for loan losses was $16.1 million, representing 49.0% of non-performing loans. In the event our loan customers do not repay their loans according to their terms and the collateral securing the payment of these loans is insufficient to pay any remaining loan balance, we may experience significant loan losses, which could have a materially adverse effect on our operating results. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover probable losses in our loan portfolio, resulting in additions to our allowance. The additions to our allowance for loan losses would be made through increased provision for loan losses, which would reduce our income.
Since 2008, our loan quality has been negatively impacted by deteriorating conditions within the commercial real estate market and economy as a whole, which has caused declines in commercial real estate values and deterioration in financial condition of various commercial borrowers. Additionally, increases in delinquent real estate mortgage loans have occurred as a result of deteriorating economic conditions and a decline in the housing market across our geographic footprint that reflected declining home prices and increasing inventories of houses for sale. These conditions have led Camco to downgrade the loan quality ratings on various commercial real estate loans through its normal loan review process. In addition, several impaired loans have become under-collateralized due to reductions in the estimated net realizable fair value of the underlying collateral. As a result,

15


Table of Contents

Camco’s provision for loans losses, net charge-offs and nonperforming loans in recent quarters have continued to be higher than historical levels. The additional provisions for loan losses in this period were largely attributed to the aforementioned issues.
     The Corporation and the Bank operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.
Advantage Bank is subject to extensive regulation, supervision and examination by the FDIC, our primary regulator, and by the Ohio Division of Financial Institutions. The Corporation also is subject to regulation and supervision by the FRB. Such regulation and supervision govern the activities in which an institution and its holding Company may engage, and are intended primarily for the protection of the insurance fund and for the depositors and borrowers of the Bank. The regulation and supervision by regulatory authorities are not intended to protect the interests of investors in our common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.
     The enactment of recent legislation may significantly affect our financial condition, results of operation, liquidity or stock price.
The Emergency Economic Stabilization Act of 2008 (“EESA”) was signed into law on October 3, 2008. As part of EESA, the Treasury established the Troubled Assets Relief Program, including the Capital Purchase Program (“CPP”), to provide up to $700 billion of funding to eligible financial institutions through the purchase of capital stock and other financial instruments for the purpose of stabilizing and providing liquidity to the U.S. financial markets. Then, on February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (“ARRA”), as a sweeping economic recovery package intended to stimulate the economy and provide for broad infrastructure, energy, health, and education needs. There can be no assurance as to the actual impact that EESA or its programs, including the CPP, and ARRA or its programs, will have on the national economy or financial markets. The failure of these significant legislative measures to help stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect our business, financial condition, results of operations, access to credit or the trading price of our common shares.
There have been numerous actions undertaken in connection with or following EESA and ARRA by the FRB, Congress, the Treasury, the FDIC, the SEC and others in efforts to address the current liquidity and credit crisis in the financial industry that followed the sub-prime mortgage market meltdown which began in late 2007. These measures include homeowner relief that encourages loan restructuring and modification; the establishment of significant liquidity and credit facilities for financial institutions and investment banks; the lowering of the federal funds rate; emergency action against short selling practices; a temporary guaranty program for money market funds; the establishment of a commercial paper funding facility to provide back-stop liquidity to commercial paper issuers; and coordinated international efforts to address illiquidity and other weaknesses in the banking sector. The purpose of these legislative and regulatory actions is to help stabilize the U.S. banking system. EESA, ARRA and the other regulatory initiatives described above may not have their desired effects. If the volatility in the markets continues and economic conditions fail to improve or worsen, our business, financial condition and results of operations could be materially and adversely affected.
FDIC insurance premiums have increased substantially in 2009, and Advantage expects to pay higher FDIC premiums in the future because bank failures have significantly reduced the deposit insurance fund’s ratio of reserves to insured deposits. The FDIC adopted a revised risk-based deposit insurance assessment schedule on February 27, 2009, which raised deposit insurance premiums. On May 22, 2009, the FDIC also implemented a special assessment, which totaled $436,000 for Advantage. Additional special assessments may be imposed by the FDIC for future periods. On November 12, 2009, the FDIC adopted a final rule that requires insured depository institutions to prepay on December 30, 2009, their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011, and 2012. Advantage’s deposit insurance premiums will also increase because of the Consent Order. Additional bank failures may require additional significant deposit insurance premium increases, which would affect Advantage’s income. On November 12, 2009, Advantage received an exemption from prepaying its quarterly risk-based assessment for the fourth quarter of 2009, and all of 2010, 2011, and 2012. As a result, Advantage will continue to pay on a quarterly basis.
     Difficult economic conditions and market volatility have adversely impacted the banking industry and financial markets generally and may significantly affect our business, financial condition, or results of operation.
The continued deteriorating economic conditions in our markets may negatively affect the Corporation. The Midwest’s falling home prices and increasing foreclosures, unemployment and underemployment, have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs of asset values by financial institutions. The resulting write-downs to assets of financial institutions have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to seek government assistance or bankruptcy protection.

16


Table of Contents

Many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers, including to other financial institutions because of concern about the stability of the financial markets and the strength of counterparties. It is difficult to predict how long these economic conditions will exist, which of our markets, products or other businesses will ultimately be affected, and whether management’s actions will effectively mitigate these external factors. Accordingly, the resulting lack of available credit, lack of confidence in the financial sector, decreased consumer confidence, increased volatility in the financial markets and reduced business activity could materially and adversely affect the Camco’s business, financial condition and results of operations.
As a result of the challenges presented by economic conditions, we may face the following risks in connection with these events:
   
Inability of borrowers to make timely repayments of their loans, or decreases in value of real estate collateral securing the payment of such loans resulting in significant credit losses, which could result in increased delinquencies, foreclosures and customer bankruptcies, any of which could have a material adverse effect on our operating results.
 
   
Increased regulation of the financial services industry, including heightened legal standards and regulatory requirements or expectations. Compliance with such regulation will likely increase costs and may limit Camco’s ability to pursue business opportunities.
 
   
Further disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations, may result in an inability to borrow on favorable terms or at all from other financial institutions.
 
   
Increased competition among financial services companies due to the recent consolidation of certain competing financial institutions and the conversion of certain investment banks to bank holding companies, which may adversely affect the Camco’s ability to market our products and services.
Volatility in the economy may negatively impact the fair value of our stock.
The market price for Camco’s common stock has been volatile in the past, and several factors could cause the price to fluctuate substantially in the future, including:
    announcements of developments related to our business;
 
    fluctuations in our results of operations;
 
    sales of substantial amounts of our securities into the marketplace;
 
    general conditions in our markets or the worldwide economy;
 
    a shortfall in revenues or earnings compared to securities analysts’ expectations;
 
    our inability to pay cash dividends
 
    changes in analysts’ recommendations or projections; and
 
    our announcement of new acquisitions or other projects.
Changes in interest rates could adversely affect our financial condition and results of operations.
Our results of operations depend substantially on our net interest income, which is the difference between (i) interest income on interest-earning assets, principally loans and investment securities, and (ii) interest expense on deposit accounts and borrowings. These rates are highly sensitive to many factors beyond our control, including general economic conditions, inflation, recession, unemployment, money supply and the policies of various governmental and regulatory authorities. While we have taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that these measures will be effective in avoiding undue interest rate risk.
Increases in interest rates can affect the value of loans and other assets, including our ability to realize gains on the sale of assets. We originate loans for sale and for our portfolio. Increasing interest rates may reduce the volume of origination of loans for sale and consequently the volume of fee income we earn on such sales. Further, increasing interest rates may adversely affect the ability of borrowers to pay the principal or interest on loans and leases, resulting in an increase in non-performing assets and a reduction of income recognized.

17


Table of Contents

In contrast, decreasing interest rates have the effect of causing clients to refinance mortgage loans faster than anticipated. This causes the value of assets related to the servicing rights on loans sold to be lower than originally anticipated. If this happens, we may need to write down the value of our servicing assets faster, which would accelerate our expense and lower our earnings.
The Corporation relies, in part, on external financing to fund its operations and the availability of such funds in the future could adversely impact its growth strategy and prospects.
The Bank relies on deposits, advances from the FHLB and other borrowings to fund its operations. The Corporation also has previously issued subordinated debentures to raise additional capital to fund its operations. Although the Corporation considers such sources of funds adequate for its current capital needs, the Corporation may seek additional debt or equity capital in the future to achieve its long-term business objectives. The sale of equity or convertible debt securities in the future may be dilutive to the Corporation shareholders, and debt refinancing arrangements may require the Corporation to pledge some of its assets and enter into covenants that would restrict its ability to incur further indebtedness. Additional financing sources, if sought, might be unavailable to the Corporation or, if available, could be on terms unfavorable to it. If additional financing sources are unavailable, not available on reasonable terms or the Corporation is unable to obtain any required regulatory approval for additional debt, the Corporation’s growth strategy and future prospects could be adversely impacted.
Credit risks could adversely affect our results of operations.
There are inherent risks associated with our lending activities, including credit risk, which is the risk that borrowers may not repay outstanding loans or that the value of the collateral securing loans will decrease. We extend credit to a variety of customers based on internally set standards and judgment. We attempt to manage credit risk through a program of underwriting standards, the review of certain credit decisions and an on-going process of assessment of the quality of the credit already extended. However, conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond our control may increase our credit risk. Such adverse changes in the economy may have a negative impact on the ability of borrowers to repay their loans. Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral. In addition, substantially all of our loans are to individuals and businesses in Ohio. Consequently, any decline in the economy of this market area could have a materially adverse effect on our financial condition and results of operations.
We operate in an extremely competitive market, and our business will suffer if we are unable to compete effectively.
In our market area, we encounter significant competition from other commercial banks, savings associations, savings banks, insurance companies, consumer finance companies, credit unions, other lenders and with the issuers of commercial paper and other securities, such as shares in money market mutual funds. The increasingly competitive environment is a result primarily of changes in regulation and the accelerating pace of consolidation among financial service providers. Many of our competitors have substantially greater resources and lending limits than we do and may offer services that we do not or cannot provide.
Our ability to pay cash dividends is subject to prior FRB approval.
In March 2009, we entered into a memorandum of understanding (“MOU”) with the FRB that prohibits the Corporation from paying dividends without the FRB’s prior approval. We do not know how long this restriction will remain in place. Even if we are permitted to pay a dividend, we are dependent primarily upon the earnings of our operating subsidiaries for funds to pay dividends on our common stock. The payment of dividends by our subsidiaries is subject to certain regulatory restrictions. Currently, Advantage is prohibited from paying any dividends to Camco without the prior approval of the FDIC and the Ohio Division of Financial Institutions. As a result, any payment of dividends in the future by Camco will be dependent, in large part, on our subsidiaries’ ability to satisfy these regulatory restrictions and our subsidiaries’ earnings, capital requirements, financial condition and other factors. Although, in the past, our financial earnings and financial condition have allowed us to declare and pay periodic cash dividends to our stockholders, there can be no assurance that our dividend policy or size of dividend distribution will continue in the future.
The preparation of financial statements requires management to make estimates about matters that are inherently uncertain.
Management’s accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods in order to ensure that they comply with generally accepted accounting principles and reflect management’s judgment as to the

18


Table of Contents

most appropriate manner in which to record and report our financial condition and results of operations. Two of the most critical estimates are the level of the allowance of loan losses and the valuation of mortgage servicing rights. Due to the inherent nature of these estimates, we cannot provide absolute assurance that we will not significantly increase the allowance for loan losses or sustain loan losses that are significantly higher than the provided allowance, nor that we will not recognize a significant provision for the impairment of mortgage servicing rights.
Our organizational documents may have the effect of discouraging a third party from acquiring us.
Our certificate of incorporation and bylaws contain provisions that make it more difficult for a third party to gain control or acquire us. These provisions also could discourage proxy contests and may make it more difficult for dissident stockholders to elect representatives as directors and take other corporate actions. These provisions of our governing documents may have the effect of delaying, deferring or preventing a transaction or a change in control that might be in the best interest of our stockholders.
Consumers may decide not to use banks to complete their financial transactions.
Technology and other changes are allowing parties to utilize alternative methods to complete financial transactions that historically have involved banks. For example, consumers can now maintain funds in brokerage accounts or mutual funds that would have historically been held as bank deposits. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.
Camco may be named as a defendant from time to time in a variety of litigation and other actions.
Camco or one of its subsidiaries may be named as a defendant from time to time in a variety of litigation arising in the ordinary course of their respective businesses. Such litigation is normally covered by errors and omissions or other appropriate insurance. However, significant litigation could cause Camco to devote substantial time and resources to defending its business or result in judgments or settlements that exceed insurance coverage, which could have a material adverse effect on Camco’s financial condition and results of operation. Further, any claims asserted against Camco, regardless of merit or eventual outcome, may harm Camco’s reputation and result in loss of business. In addition, Camco may not be able to obtain new or difference insurance coverage, or adequate replacement policies with acceptable terms.
The Corporation’s allowance for loan losses may not be adequate to cover actual losses.
The Corporation maintains an allowance for loan losses to provide for loan defaults and non-performance. The Corporation’s allowance for loan losses may not be adequate to cover actual loan losses, and future provisions for loan losses could materially and adversely affect the Corporation’s operating results. The Corporation’s allowance for loan losses is based on its historical loss experience, as well as an evaluation of the risks associated with its loans held for investment. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates that may be beyond the Corporation’s control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review the Corporation’s loans and allowance for loan losses. While the Corporation believes that its allowance for loan losses is adequate to cover current losses, the Corporation could need to increase its allowance for loan losses or regulators could require it to increase this allowance. Either of these occurrences could materially and adversely affect the Corporation’s earnings and profitability.
A material breach in Camco’s security systems may have a significant effect on Camco’s business and reputation.
Camco collects, processes and stores sensitive consumer data by utilizing computer systems and telecommunications networks operated by both Camco and third party service providers. Camco has security and backup and recovery systems in place, as well as a business continuity plan, to ensure the computer systems will not be inoperable, to the extent possible. Camco also has security to prevent unauthorized access to the computer systems and requires its third party service providers to maintain similar controls. However, management cannot be certain that these measures will be successful. A security breach of the computer systems and loss of confidential information, such as customer account numbers and related information, could result in a loss of customers’ confidence and, thus, loss of business.

19


Table of Contents

Item 1B. Unresolved Staff Comments.
     None.
Item 2. Properties.
The following table provides the location of, and certain other information pertaining to, Camco’s office premises as of December 31, 2009, with dollars in thousands:
                     
    Year facility   Leased   Net
    commenced   or   book
Office Location   operations   owned   value (1)
134 E. Court Street
Washington Court House, Ohio
    1963     Owned (2)   $ 532.1  
 
1050 Washington Ave.
Washington Court House, Ohio
    1996     Owned     476.7  
 
1 N. Plum Street
Germantown, Ohio
    1998     Owned     450.2  
 
687 West Main Street
New Lebanon, Ohio
    1998     Owned     56.9  
 
2 East High Street
London, Ohio
    2004     Owned     530.9  
 
3002 Harrison Avenue
Cincinnati, Ohio
    2000     Owned     1,040.5  
 
1111 St. Gregory Street
Cincinnati, Ohio
    2000     Leased (3)     12.7  
 
5071 Glencrossing Way
Cincinnati, Ohio
    2000     Leased (4)     7.3  
 
126 S. 9th Street
Cambridge, Ohio
    1998     Owned     74.2  
 
226 Third Street
Marietta, Ohio
    1976     Owned (5)     521.6  
 
1925 Washington Boulevard
Belpre, Ohio
    1979     Owned     214.5  
 
478 Pike Street
Marietta, Ohio
    1998     Leased (6)     495.5  
 
814 Wheeling Avenue
Cambridge, Ohio
    1963     Owned     1,026.0  
 
327 E. 3rd Street
Uhrichsville, Ohio
    1975     Owned     59.8  
 
175 N. 11th Street
Cambridge, Ohio
    1981     Owned     301.4  
 
209 Seneca Avenue
Byesville, Ohio
    1978     Leased (7)     2.0  
 
547 S. James Street
Dover, Ohio
    2002     Owned(8)     361.7  

20


Table of Contents

                         
    Year facility   Leased   Net
    commenced   or   book
Office Location   operations   owned   value (1)
2497 Dixie Highway
Ft. Mitchell, Kentucky
    2001     Owned       529.6  
 
                       
401-7 Pike Street
Covington, Kentucky
    2001     Owned       81.0  
 
                       
7550 Dixie Highway
Florence, Kentucky
    2001     Owned       409.0  
 
                       
6901 Glenn Highway
Cambridge, Ohio
    1999     Owned  (9)      1,126.5  
 
                       
1500 Grand Central Ave.- Suite #102
Vienna, West Virginia
    2004     Leased  (10)      149.0  
 
                       
123 Southgate Parkway
Cambridge, Ohio
    2005     Leased  (11)      50.9  
 
                       
6360 Tylersville Road
Mason, Ohio
    2006     Leased  (12)      131.5  
 
                       
1104 Eagleton Blvd.
London, Ohio
    2006     Leased  (13)      255.0  
 
                       
828 Wheeling Avenue
Cambridge, Ohio
    2007     Leased  (14)      12.5  
 
                       
440 Polaris Parkway
Westerville, OH 43082
    2009     Leased  (15)      0.0  
 
(1)   Net book value amounts are for land, buildings, improvements and construction in progress.
 
(2)   The 134 E. Court Street facility also serves as the Camco Title — Washington Court House office.
 
(3)   The lease expires in October 2010.
 
(4)   The lease expires in November 2010.
 
(5)   The 226 Third Street facility also serves as the Camco Title — Marietta office.
 
(6)   The lease expires in November 2017. Advantage has the option to renew for two five-year terms. The lease is for land only.
 
(7)   The lease expires in September 2010. Advantage has the option to renew the lease for a five-year term.
 
(8)   The 547 S. James Street facility also serves as the Camco Title — Dover office.
 
(9)   The Camco Financial Corporation staff re-located to 814 Wheeling Avenue, Cambridge. Building is currently vacant and listed with a local realtor and under contract.
 
(10)   The lease expires in October 2013. Advantage has the option to renew for three five-year terms.
 
(11)   The lease expires in June 2012. Advantage has the option to purchase at a cost of $120,000.
 
(12)   The lease expires in October 2016. Advantage has the option to renew the lease for two five-year terms.
 
(13)   The lease expires in May 2011. Advantage has the option to renew for three five-year terms.
 
(14)   The lease expires in June 2010. Advantage has the option to renew for two one-year terms. Advantage has the option to purchase at a cost of $185,000 with a 3% escalation.
 
(15)   The lease expires in August 2012.
Camco also owns furniture, fixtures and equipment. The net book value of Camco’s investment in office premises and equipment totaled $2.0 million at December 31, 2009. See Note E of Notes to Consolidated Financial Statements in item 8 below.

21


Table of Contents

Item 3. Legal Proceedings.
Neither Camco nor Advantage is presently engaged in any legal proceedings of a material nature. From time to time, Advantage is involved in legal proceedings to enforce its security interest in collateral taken as security for its loans.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Stock Information
At February 28, 2010, Camco had 7,205,595 shares of common stock with approximately 2,991 holders of record. Camco’s common stock is listed on The Nasdaq Global Market (“Nasdaq”) under the symbol “CAFI.” The table below sets forth the high and low daily closing price for the common stock of Camco, together with the dividends declared per share of common stock, for each quarter of 2009 and 2008.
                         
                    Cash
                    Dividends
Year ended December 31, 2009   High   Low   Declared
Quarter ending:
                       
December 31, 2009 (1)
  $ 2.17     $ 1.51     $ 0.0000  
September 30, 2009 (1)
    2.60       2.00       0.0000  
June 30, 2009
    3.66       1.56       0.0100  
March 31, 2009
    3.70       0.85       0.0100  
 
                       
Year ended December 31, 2008
                       
Quarter ending:
                       
December 31, 2008
  $ 9.88     $ 2.17     $ 0.0375  *
September 30, 2008
    11.75       9.12       0.0000  *
June 30, 2008
    12.20       9.85       0.0750  
March 31, 2008
    11.26       8.93       0.1500  
 
*   Beginning in the third quarter of 2008 the timing of dividends was modified to incorporate actual quarter end results prior to the declaration of dividends.
 
    The Board of Directors declared the cash dividend for third quarter on October 13, 2008 and the dividend was paid on October 31, 2008. The fourth quarter dividend was declared on January 20, 2009.
 
(1)   See “Liquidity and Capital Resources” in Item 7 of this Form 10-K for discussion of restrictions that materially limit Camco’s ability to pay dividends.

22


Table of Contents

Performance Graph
The following graph compares the cumulative total return on Camco’s common stock with the cumulative total return of an index of companies whose shares are traded on Nasdaq and the SNL All Bank & Thrift Index for the same period.
CAMCO FINANCIAL CORPORATION
(PERFORMANCE GRAPH)
                                                                 
 
        Period Ending    
  Index     12/31/04       12/31/05       12/31/06       12/31/07       12/31/08       12/31/09    
 
Camco Financial Corporation
      100.00         96.41         89.13         80.94         24.24         15.23    
 
NASDAQ Composite
      100.00         101.37         111.03         121.92         72.49         104.31    
 
SNL Bank and Thrift
      100.00         101.57         118.68         90.50         52.05         51.35    
 
On January 23, 2009, Camco awarded the Chief Executive Officer and President of Camco 50,000 shares of restricted stock in connection with his employment as Chief Executive Officer and President of Camco. The restricted stock vests over four years in equal installments of 12,500 shares each year, beginning on the first anniversary of the date of the restricted stock award. The restricted stock award was a private placement exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.
Camco did not repurchase any stock during 2009.

23


Table of Contents

Item 6. Selected Consolidated Financial Data.
The following tables set forth certain information concerning the consolidated financial position and results of operations of Camco for the periods indicated. This selected consolidated financial data should be read in conjunction with the consolidated financial statements appearing elsewhere in this report.
SELECTED CONSOLIDATED FINANCIAL DATA: (1)
                                         
As of December 31:   2009   2008   2007   2006   2005
    (In thousands)
Total amount of:
                                       
Assets
  $ 842,655     $ 1,000,446     $ 1,023,261     $ 1,048,216     $ 1,071,248  
Interest-bearing deposits in other financial institutions
    17,663       35,272       5,432       12,673       11,299  
Securities available for sale — at market
    55,950       85,352       88,919       107,506       109,514  
Securities held to maturity
    2,113       13,406       2,769       3,449       4,176  
Loans receivable — net (1)
    659,497       758,826       815,271       821,818       841,737  
Deposits
    659,902       723,956       692,184       684,782       660,242  
FHLB advances and other borrowings
    109,232       183,833       220,981       257,139       307,223  
Stockholders’ equity
    60,514       71,700       88,634       91,092       90,763  
 
SELECTED CONSOLIDATED OPERATING DATA: (1)
 
For the year ended December 31:   2009   2008   2007   2006   2005
    (In thousands, except per share data)
Total interest income
  $ 44,724     $ 56,783     $ 64,877     $ 62,689     $ 57,078  
Total interest expense
    20,594       30,974       36,421       32,771       26,529  
Net interest income
    24,130       25,809       28,456       29,918       30,549  
Provision for losses on loans
    21,792       14,793       1,495       1,440       1,480  
Net interest income after provision for losses on loans
    2,338       11,016       26,961       28,478       29,069  
Other income
    8,261       3,708       6,588       5,033       6,592  
General, administrative and other expense
    28,113       28,481       26,985       24,910       22,754  
Goodwill Impairment
          6,683                    
 
                                       
Earnings (loss) before federal income taxes (credits)
    (17,514 )     (20,440 )     6,266       8,601       12,907  
Federal income taxes (credits)
    (6,297 )     (5,116 )     1,765       2,727       4,141  
Net earnings (loss)
  $ (11,217 )   $ (15,324 )   $ 4,501     $ 5,874     $ 8,766  
 
                                       
Earnings (loss) per share:
                                       
Basic
  $ (1.56 )   $ (2.14 )   $ .61     $ .78     $ 1.15  
Diluted (2)
  $ (1.56 )   $ (2.14 )   $ .61     $ .78     $ 1.15  
Dividends declared per share
  $ 0.0200     $ 0.2625     $ 0.6000     $ 0.6000     $ 0.5800  
 
                                       
Return on average assets (3)
    (1.20 )%     (1.50 )%     0.43 %     0.55 %     0.82 %
Return on average equity (3)
    (15.73 )     (17.93 )     4.98       6.46       9.73  
Average equity to average assets (3)
    7.63       8.34       8.67       8.58       8.43  
Dividend payout ratio (4)
    N/A (5)     N/A (5)     98.36       76.92       50.43  
 
(1)     Includes loans held for sale.
 
(2)   Represents a pro-forma presentation based upon net earnings from operations divided by weighted-average basic and diluted shares outstanding.
 
(3)   Ratios are based upon the mathematical average of the balances at the end of each month.
 
(4)   Represents dividends per share divided by basic earnings per share.
 
(5)   Not meaningful.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
Since its incorporation in 1970, Camco Financial Corporation (“Camco” or the “Corporation”) has evolved into a full-service provider of financial products through its subsidiaries, Advantage Bank (“Advantage or “Bank”) and Camco Title Agency. Utilizing a common marketing theme based on Camco’s commitment to personalized customer service, Camco has grown from $22.8 million of consolidated assets in 1970 to $843.0 million of consolidated assets at December 31, 2009. Camco’s rate of growth is largely attributable to its acquisitions and its continued expansion of product lines from the limited deposit and loan offerings which the Bank could offer in the heavily regulated environment of the 1970s to the wider array of financial service products that commercial banks traditionally offer. Additionally, Camco has enhanced its operational growth, to a lesser extent, by chartering a title insurance agency.

24


Table of Contents

Management believes that continued success in the financial services industry will be achieved by those institutions with a rigorous dedication to building value-added customer-oriented organizations. Toward this end, each of the Bank’s regions has the ability to make local decisions for customer contacts and services, however back-office operations are consolidated and centralized. Based on consumer and business preferences, the Bank’s management designs financial service products with a view towards differentiating each of the constituent regions from its competition. Management believes that the Bank regions’ ability to rapidly adapt to consumer and business needs and preferences is essential to them as community-based financial institutions competing against the larger regional and money-center bank holding companies.
Camco’s profitability depends primarily on its level of net interest income, which is the difference between interest income on interest-earning assets, principally loans, mortgage-backed securities and investment securities, and interest expense on deposit accounts and borrowings. In recent years, Camco’s operations have also been heavily influenced by its level of other income, including mortgage banking income and other fee income. Camco’s operations are also affected by general, administrative and other expenses, including employee compensation and benefits, occupancy expense, data processing, franchise taxes, advertising, other operating expenses and federal income tax expense.
Overview
During 2009, the economic environment for financial services companies continued to be disruptive and challenging. We continued to execute our long-term strategic plan to diversify the balance sheet by strategically working to increase our commercial, commercial real estate and consumer loan portfolios and improve our funding mix by reducing borrowings and increasing transaction-based deposits.
We have found that “core” deposit growth continues to be challenging. Competition for deposits continues to put pressure on marginal funding costs, despite continued lower rates in 2009. During fiscal 2009, deposits decreased 8.8%, primarily due to our decrease in public funds and brokered deposits. The brokered deposits were not renewed in 2009 as loan balances decreased and cash was utilized to decrease higher yielding non “core” funding and borrowed funds.
The real estate market in the Midwest continues to create a very challenging environment for most financial institutions. Bankruptcies, foreclosures and unemployment have continued to rise in Ohio. We are working diligently to manage delinquencies and work with our loan customers in order to reduce losses for them, as well as our Corporation. The total loan portfolio decreased $97.6 million for the full year of 2009 as we tightened credit standards and became more selective in underwriting new loans, which coupled with the volatile market conditions and the current economic environment, reduced new loan production.
Nonperforming loans decreased to $36.4 million at the end of 2009 compared to $53.5 million at the end of 2008. The decrease primarily occurred in non-residential loans with all loan categories decreasing to some extent. We continue to deal with the economic challenges in our markets, through our loan charge-offs and provision for loan losses as we recognize the results of these current economic conditions and issues related to higher than normal unemployment. Net charge offs totaled $21.4 million during 2009 and we continue to aggressively work with borrowers to mitigate additional losses.
We believe we are taking significant steps forward in managing our operational efficiency. We are continuing our focus on improving noninterest income and controlling noninterest expense by exiting unprofitable lines of business and refining our operations. We continue to analyze new products to deepen relationships with our customers and improve the structure of our balance sheet.
Forward-Looking Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and this annual report include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (Exchange Act), as amended, which can be identified by the use of forward-looking terminology, such as may, might, could, would, believe, expect, intend, plan, seek, anticipate, estimate, project or continue or the negative thereof or comparable terminology. All statements other than statements of historical fact included in this document regarding our outlook, financial position and results of

25


Table of Contents

operation, liquidity, capital resources and interest rate sensitivity are forward-looking statements. These forward-looking statements also include, but are not limited to:
    anticipated changes in industry conditions created by state and federal legislation and regulations;
 
    anticipated changes in general interest rates and the impact of future interest rate changes on our profitability, capital adequacy and the fair value of our financial assets and liabilities;
 
    retention of our existing customer base and our ability to attract new customers;
 
    the development of new products and services and their success in the marketplace;
 
    the adequacy of the allowance for loan losses; and,
 
    statements regarding our anticipated loan and deposit account growth, expense levels, liquidity and capital resources and projections of earnings.
These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results to be materially different from any future results expressed or implied by such forward-looking statements. Although we believe the expectations reflected in such forward-looking statements are reasonable, we can give no assurance such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements included herein include, but are not limited to:
    competition in the industry and markets in which we operate;
 
    levels of non-performing assets;
 
    changes in general interest rates;
 
    loan demand;
 
    rapid changes in technology affecting the financial services industry;
 
    real estate values;
 
    changes in government regulation; and
 
    general economic and business conditions.
This MD&A is intended to give stockholders a more comprehensive review of the issues facing management than could be obtained from an examination of the financial statements alone. This analysis should be read in conjunction with the consolidated financial statements and related footnotes and the selected financial data elsewhere in this annual report. As used herein and except as the context may otherwise require, references to “Camco,” “the Corporation”, “we,” “us,” or “our” means, collectively, Camco Financial Corporation and its wholly owned subsidiaries, Advantage Bank and Camco Title Agency.
Critical Accounting Policies
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as disclosures found elsewhere in this annual report, are based upon Camco’s consolidated financial statements, which are prepared in accordance with US GAAP. The preparation of these financial statements requires Camco to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Several factors are considered in determining whether or not a policy is critical in the preparation of financial statements. These factors include, among other things, whether the estimates are significant to the financial statements, the nature of the estimates, the

26


Table of Contents

ability to readily validate the estimates with other information including third parties or available prices, and sensitivity of the estimates to changes in economic conditions and whether alternative accounting methods may be utilized under US GAAP.
Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of mortgage servicing rights. Actual results could differ from those estimates.
Allowance for Loan Losses
The procedures for assessing the adequacy of the allowance for loan losses reflect management’s evaluation of credit risk after careful consideration of all information available to management. In developing this assessment, management must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown such as economic factors, developments affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may require an increase or a decrease in the allowance for loan losses.
Each quarter management analyzes the adequacy of the allowance for loan losses based on review of the loans in the portfolio along with an analysis of external factors (including current housing price depreciation, homeowners’ loss of equity, etc) and historical delinquency and loss trends. The allowance is developed through specific components; 1) the specific allowance for loans subject to individual analysis, 2) the allowance for classified loans not otherwise subject to individual analysis and 3) the allowance for non-classified loans (including homogenous loans).
Classified loans with indication or acknowledgment of deterioration in specific industries are subject to individual analysis. Loan classifications are those used by regulators consisting of Special Mention, Substandard, Doubtful and Loss. In evaluating these loans for impairment, the measure of expected loss is based on the present value of the expected future cash flows discounted at the loan’s effective interest rate, a loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. All other classified assets and non-classified assets are combined with the homogenous loan pools and segregated into loan segments. The segmentation is based on grouping loans with similar risk characteristics (one-to-four family, home equity, etc.). Loss rate factors are developed for each loan segment which are used to estimate losses and determine an allowance. The loss factors for each segment are derived from historical loss experience. Management also considers various internal and external factors to determine additional adjustments needed such as historical delinquency, trends in classifications, etc.
The allowance is reviewed by management to determine whether the amount is considered adequate to absorb losses inherent in the loan portfolio. Management’s evaluation of the adequacy of the allowance is an estimate based on management’s current judgment about the credit quality of the loan portfolio. This evaluation includes specific loss estimates on certain individually reviewed loans, statistical loss estimates for loan pools that are based on historical loss experience, and general loss estimates that are based upon the size, quality, and concentration characteristics of the various loan portfolios, adverse situations that may affect a borrower’s ability to repay, and current economic and industry conditions. Also considered as part of that judgment is a review of the Bank’s trends in delinquencies and loan losses, trends in delinquencies and losses for the region, nation, and economic factors. While the Corporation strives to reflect all known risk factors in its evaluations, judgment errors may occur.
Mortgage Servicing Rights
To determine the fair value of our mortgage servicing rights (“MSRs”) each reporting quarter, we transmit information to a third party provider who assists us with determining the possible impairment of MSRs, as described below.
Servicing assets are recognized as separate assets when loans are sold with servicing retained. A pooling methodology, in which loans with similar characteristics are “pooled” together, is applied for valuation purposes. Once pooled, each grouping of loans is evaluated on a discounted earnings basis to determine the present value of future earnings that a purchaser could expect to realize from the portfolio. Earnings are projected from a variety of sources including loan service fees, interest earned on float, net interest earned on escrow balances, miscellaneous income and costs to service the loans. The present value of future earnings is the estimated market value for the pool, calculated using consensus assumptions that a third party purchaser would utilize in evaluating a potential acquisition of the servicing. Events that may significantly affect the estimates used are changes in interest rates and the related impact on mortgage

27


Table of Contents

loan prepayment speeds and the payment performance of the underlying loans. The interest rate for float is also calculated by our third party utilizing the current period fed funds rate. We believe this methodology provides a reasonable estimate. Mortgage loan prepayment speeds are calculated by the third party provider utilizing industry standards in estimating prepayment speeds and provides specific scenarios with each evaluation. Based on the assumptions discussed, pre-tax projections are prepared for each pool of loans serviced. These earning figures approximate the cash flow that could be received from the servicing portfolio. Valuation results are presented quarterly to management. At that time, we review the information and MSRs are marked to the lower of amortized cost or fair value for the current quarter.
Summary. We believe the accounting estimates related to the allowance for loan losses, the capitalization, amortization, and valuation of mortgage servicing rights are “critical accounting estimates” because: (1) the estimates are highly susceptible to change from period to period because they require us to make assumptions concerning the changes in the types and volumes of the portfolios, rates of future prepayments, and anticipated economic conditions, and (2) the impact of recognizing an impairment or loan loss could have a material effect on Camco’s assets reported on the balance sheet as well as its net earnings.
Discussion of Financial Condition Changes from December 31, 2009 to December 31, 2008
At December 31, 2009, Camco’s consolidated assets totaled $842.7 million, a decrease of $157.8 million, or 15.8%, from the December 31, 2008 total. The decrease in total assets was comprised primarily of decreases in loans receivable, securities and cash and interest bearing deposits in other financial institutions which were offset partially by the increase in real estate acquired through foreclosure. We expect asset growth to continue to be limited in the near term as the unemployment rates continue to rise and the economy continues to struggle. Further deterioration of the residential loan market in the Midwest and fewer new purchases may result in a shift in the loan portfolio toward commercial and consumer loans. The current loan rates may continue to contribute to additional profits relating to the sale of fixed rate loans, but due to a slowdown of new purchases it is not likely that the profits will continue to be as strong in 2010. Possible future growth in deposits would most likely be used to reduce outstanding borrowings and brokered deposits or fund commercial loan growth. We believe that the distressed economic environment is expected to continue through the first half of 2010 but we look for commercial loan growth in the latter half of 2010.
Cash and interest-bearing deposits in other financial institutions totaled $38.2 million at December 31, 2009, a decrease of $14.1 million, or 27.0%, from December 31, 2008 levels. This decrease is reflective of our decision to rely on “core” relationships and discontinuing purchases of brokered deposits and bidding on public funds during 2009. Securities totaled $58.1 million at December 31, 2009, a decrease of $40.7 million, or 41.2%, from the total at December 31, 2008. Investment security purchases totaled $27.0 million, principal repayments totaling $67.8 million. The yield on securities purchased during the period was 1.66%.
Approximately 20.04% of the securities portfolio is expected to mature or prepay during 2010. We have kept the duration and average life of the securities portfolio very short in order to provide liquidity and to reduce borrowings, when available.
At December 31, 2009, other than $501,000 of municipal bonds, all of our debt securities were issued and guaranteed by US Government sponsored enterprises such as Freddie Mac, Fannie Mae, Ginnie Mae and the FHLB. We held no private-label mortgage-backed securities or collateralized debt obligations.
Loans receivable net and loans held for sale totaled $659.5 million at December 31, 2009, a decrease of $99.3 million, or 13.1%, from the total at December 31, 2008. The decrease resulted primarily from repayments of $204.5 million and loan sales of $108.5 million, a $9.6 million transfers to real estate owned, partially offset by loan disbursements and purchases totaling $245.2 million and an increase of $21.8 million of provision relating to our allowance for loan and leases. Loan origination volume, including purchases of loans, increased from the comparable 2008 period by $62.4 million, or 140.8%, while the volume of loan sales increased by $63.2 million, or 139.3% year to year. The number of loans originated for sale in the secondary market continued to increase in the residential real estate market significantly as rates decreased and customers re-financed at the current lower rates. Instead of selling adjustable rate loans, we have typically held adjustable-rate mortgage loans for investment as an integral part of our strategy.

28


Table of Contents

Loan originations during the 12 month period were comprised primarily of $117.4 million of loans secured by one- to four-family residential real estate, $94.0 million in commercial loans and $33.8 million in consumer and other loans. Our intent is to expand consumer and commercial real estate lending in future periods as a means of increasing the yield on our loan portfolio and continue with our strategic plan of moving to a more “bank” like institution. In the near term, however, lending volumes of acceptable risk have diminished somewhat due to a slowing economy and loan repayments have been used to reduce borrowings and maintain liquidity.
During the fourth quarter of 2009, the yield on loans was 6.02%, as the non accrual loans decreased and the portfolio mix continued to shift to higher yielding multi-family, consumer and nonresidential loans. This shift is partially offsetting lower effective rates in the loan portfolio during 2009 due to adjustable rate loans repricing in the current lower rate environment. The overall loan portfolio decreased for the full year of 2009 as the level of charge offs increased and we continued to tighten credit standards and became more selective in underwriting new loans, which significantly reduced new loan production coupled with economic challenges in our markets, particularly in the market for residential real estate.
The allowance for loan losses totaled $16.1 million and $15.7 million at December 31, 2009 and 2008, respectively, representing 44.2% and 29.4% of nonperforming loans at those dates. Nonperforming loans (three monthly payments or more delinquent plus nonaccrual loans) totaled $36.4 million and $53.5 million at December 31, 2009 and 2008, respectively, constituting 5.4% and 6.91% of total net loans, including loans held for sale, at those dates. Net charge-offs totaled $21.4 million for 2009 and were comprised mainly of 1-4 family loans, non residential real estate and commercial.
The following table details delinquent and nonaccrual loans at December 31, 2009 and 2008:
                                                 
    December 31, 2009     December 31, 2008  
    (In thousands)  
    30 - 89     90+ days                     90+ days        
    days     delinquent,             30 - 89 days     delinquent,        
    delinquent     accruing     Nonaccrual     delinquent     accruing     Nonaccrual  
Residential
  $ 4,818     $     $ 16,354     $ 6,419     $ 44     $ 17,203  
Multifamily
    79             2,047       30             3,139  
Non Residential
    2,693       2,853       4,151       306               18,057  
 
                                               
Construction / development
    534       638       4,383       253             8,603  
Commercial
    92       110       515       453             1,434  
HELOC and second mortgage
    2,020             5,250       2,434             4,962  
Consumer and other
    77             148       89             86  
 
                                   
Total
  $ 10,313     $ 3,601     $ 32,848     $ 9,984     $ 44     $ 53,484  
 
                                   
Although we believe that the allowance for loan losses at December 31, 2009 is adequate to cover losses inherent in the loan portfolio at that date based upon the available facts and circumstances, there can be no assurance that additions to the allowance for loan losses will not be necessary in future periods, which could adversely affect our results of operations. Unemployment rates in our markets and Ohio in general, are higher than the national average. Ohio registered the nation’s twelfth-highest state foreclosure rate in 2009. Additionally, Ohio is experiencing declining values of residential real estate. However, Ohio in general has not experienced significant increases in home values over the past five years like many regions in the U.S., which should comparatively mitigate losses on loans. Nonetheless, these factors, compounded by a very uncertain national economic outlook, may continue to increase the level of future losses beyond our current expectations.
At December 31, 2009, the Corporation’s real estate owned (REO) consisted of 132 repossessed properties with a net book value of $9.7 million. Initial loss is recorded as a charge to the allowance for loan losses within 90 days of being transferred to REO. Thereafter, if there is a further deterioration in value, a specific valuation allowance is established and charged to operations. The Corporation reflects costs to carry REO as period costs in operations when incurred.

29


Table of Contents

When property is acquired through foreclosure or deed in lieu of foreclosure, it is initially recorded at the fair value of the related assets at the date of foreclosure, less estimated costs to sell the property.
The Corporation works with borrowers to avoid foreclosure if possible and we continue to aggressively work with borrowers to mitigate additional losses, if it becomes inevitable that a borrower will not be able to retain ownership of their property, the Corporation often seeks a deed in lieu of foreclosure in order to gain control of the property earlier in the recovery process. As a result, REO grew $3.8 million during 2009. The strategy of pursuing deeds in lieu of foreclosure more aggressively should result in a reduction in the holding period for nonperforming assets and ultimately reduce economic losses.
Deposits totaled $659.9 million at December 31, 2009 a decrease of $64.1 million, or 8.8% from December 31, 2008. The following table details our deposit portfolio balances and the average rate paid on our deposit portfolio at December 31, 2009, and December 31, 2008:
                                                 
    December 31, 2009     December 31, 2008     Change  
    (In thousands)  
    Balance     Rate     Balance     Rate     Balance     Rate  
Noninterest-bearing demand
  $ 38,911       0.00 %   $ 37,526       0.00 %   $ 1,388       0.00 %
Interest-bearing demand
    70,564       0.43       87,199       0.91       (16,635 )     (0.48 )
Money market
    96,172       0.68       112,749       1.35       (16,577 )     (0.67 )
Savings
    36,638       0.25       33,838       0.26       2,800       (0.01 )
Certificates of deposit — retail
    385,622       2.70       413,134       3.75       (27,512 )     (1.05 )
Certificates of deposit — brokered
    31,995       3.19       39,510       4.23       (7,515 )     (1.04 )
 
                                   
Total deposits
  $ 659,902       1.89 %   $ 723,956       2.71 %   $ (64,051 )     (0.82 )%
 
                                   
The decrease in certificates of deposits and money markets was primarily due to decreases in public funds and brokered deposits. We continue to focus and implement our strategy of improving the long-term funding mix of the Bank’s deposit portfolio by developing “core relationships” with small businesses, and adding commercial and retail checking accounts. We have implemented a number of organizational and product development initiatives including a new suite of commercial and small business checking accounts, enhancements to our online business cash management system, and the launch of remote deposit capture solution. We believe these products will help us be more competitive for business checking accounts. See “Liquidity and Capital Resources” in this MD&A for further discussion on our deposit strategy and additional liquidity risks.
The decrease in retail certificates of deposits is due to customers being rate sensitive and their preference toward higher yielding interest rates. We have reduced the rates offered on some of our accounts and feel we are competitive with current markets and are planning on strategic growth of “core relationships”. We also believe that if we are able to maintain the certificates of deposit maturing in 2010 the continued decreasing of rates will help to stabilize and possibly reduce our cost of funds. To reduce interest rate risk over the long term, we will increase our efforts to lengthen the duration of our deposit structure and our FHLB borrowings.
We anticipate continuing to pay down brokered deposits in early 2010, in order to maintain the Bank’s margin, by growing core deposits. In the future, brokered deposits may be used for liquidity position and contingency funding. However, we acknowledge that brokered deposits are not core, franchise-enhancing deposits, and we do not intend to stray from our strategy of improving the long-term funding mix of the Bank’s deposit portfolio by aggregating small business, commercial and retail checking accounts.
Advances from the FHLB and other borrowings decreased by $74.6 million, or 40.6%, to a total of $109.2 million at December 31, 2009. We were able to reduce borrowings as a result of a net decrease in the loan portfolio of $97.6 million and a decrease of $40.7 million in our investment portfolios which was offset partially by decreases in cash balances of $14.1 million from year to year. The Corporation continues to focus on our strategy of growing and replacing a portion of these funding sources with core relationship deposits (checking, savings, money market and CD accounts) in 2010.
Stockholders’ equity totaled $60.5 million at December 31, 2009, a decrease of $11.2 million, or 15.6% from December 31, 2008. The decrease resulted primarily from a net loss of $11.2 million and dividends of $143,000.

30


Table of Contents

These decreases were partially offset by, decreasing interest rates that increased the fair value of our investments securities and resulted in an increase in unrealized gains on available for sale securities, net of tax, of $21,000.
The Bank is required to maintain minimum regulatory capital pursuant to the Consent Order of 8%. At December 31, 2009 the Bank’s tier one capital was 6.82%.
Comparison of Results of Operations for the Years Ended December 31, 2009 and December 31, 2008
General. Camco’s net loss for the year ended December 31, 2009, totaled $11.2 million, a decrease in loss of $4.1 million, or 26.8%, from the $15.3 million of net loss reported in 2008. The decrease in the net loss was primarily due to additional expense in 2008 of $6.7 million in goodwill impairment charges, and additional impairment of $3.4 million in mortgage servicing rights, and $628,000 of expenses relating to the termination of the First Place Financial Corporation merger which was offset partially by a $7.0 million increase in the provision for loan losses and a $1.2 million increase in the federal taxes benefit.
Net Interest Income. Net interest income for the year ended December 31, 2009, amounted to $24.1 million, a decrease of $1.7 million, or 6.5%, compared to 2008, generally reflecting the effects of a $100.7 million decrease in the average balance of interest earning assets. Net interest margin increased to 2.91% for the twelve months ending December 31, 2009 compared to 2.77% for the comparable period in 2008. The increase in net interest margin during the 2009 period, compared to the same period of 2008, was due, nearly equally, to a lower volume of interest-earning assets and a lower yield on those assets offset partially by lower volume of interest-bearing liabilities and a lower cost of interest-bearing liabilities in the 2009 period.
Margin pressure has continued in 2009 due to the yield on assets continuing to decline but, we have continued with our strategies and offset the revenues by decreasing the balances of our borrowed funds. Although we feel the loan portfolio has not grown sufficiently we are currently implementing strategies to increase the volume in 2010 with continual diversification of the loan portfolio and growth in commercial and consumer loan balances as these types of loans are normally higher-yielding assets than adjustable rate mortgages. We also plan to continue to maintain cost of funds by banking our “commercial relationships” and retrieving deposits instead of borrowing at higher yields.
Interest income on loans totaled $40.2 million for the year ended December 31, 2009, a decrease of $10.2 million, or 20.3%, from the comparable 2008 total. The decrease resulted primarily from a 56 basis point decrease in the average yield, from 6.58% in 2008, to 6.02% in 2009, coupled with a $99.5 million, or 13.0%, decrease in the average balance of loans outstanding year to year. Interest income on securities totaled $3.1 million for the year ended December 31, 2009, a $1.3 million, or 29.4%, decrease from the 2008 period. The decrease was due primarily to a $21.3 million, or 21.7%, decrease in the average balance outstanding, coupled with a 44 basis point decrease in the average yield, to 4.01% in 2009. Interest income on FHLB stock decreased by $155,000, or 10.1%, due primarily to a 61 basis point decrease in the average yield, to 4.62% in 2009 offset partially by a $543,000 increase in the average balance outstanding year to year. Interest income on other interest-bearing deposits decreased by $405,000, or 93.8%, due primarily to a 116 basis point decrease in the average yield, to 0.05% in 2009 offset partially by a $19.5 million, increase in the average balance outstanding year to year.
Interest expense on deposits totaled $15.3 million for the year ended December 31, 2009, a decrease of $7.4 million, or 32.5%, compared to the year ended December 31, 2008, due primarily to a 99 basis point decrease in the average cost of deposits, to 2.32% for 2009, coupled with a $24.3 million, or 3.5%, decrease in the average balance of interest-bearing deposits outstanding year to year. Interest expense on borrowings totaled $5.2 million for the year ended December 31, 2009, a decrease of $3.0 million, or 36.4%, from 2008. The decrease resulted primarily from a $46.2 million, or 23.8%, decrease in the average balance outstanding year to year coupled with a 70 basis point decrease in the average rate to 3.54% in 2009.
Approximately $278.5 million, or 66.68%, of our certificate deposit portfolio will mature during 2010. While this presents an opportunity to continue reducing our cost of funds, (as these deposits are re-pricing in a generally lower interest rate environment) we continue to experience competition for deposits in our market areas. This competition is limiting our ability to further reduce the marginal cost of deposits to a level reflective of the general rate environment. Continued decreases in interest rates have compressed our net interest margin due to the lag in re-pricing between our loan and deposit portfolios. At the same time, the loan portfolio has not grown to offset these tighter spreads. As noted earlier, we plan to continue to diversify the loan portfolio by encouraging growth in

31


Table of Contents

commercial and consumer loan balances. This strategy should slow net interest margin compression as these types of loans are normally higher-yielding assets than conventional mortgage loans and investment securities.
Provision for Losses on Loans. A provision for losses on loans is charged to earnings to bring the total allowance for loan losses to a level considered appropriate by management based on historical experience, the volume and type of lending conducted by the Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Bank’s market areas, and other factors related to the collectability of the Bank’s loan portfolio. Key drivers of the provision are declines in commercial real estate values on existing impaired loans and loan downgrades. The higher allocation in recent quarters primarily reflects the impact of distressed commercial real estate values and general economic conditions on specific reserves for impaired loans, while the elevated level of charge-offs in the fourth quarter and 2009 resulted in higher loss factors and charge offs related to classified loans. The allowance allocated to the real estate and consumer loan categories is based upon Camco’s allowance methodology for homogeneous pools of loans. The fluctuations and changes in these allocations are consistent with the changes in loan quality, loss experience and economic factors in each of the loan categories. Nonperforming loans (three monthly payments or more delinquent plus nonaccrual loans) totaled $32.8 million at December 31, 2009, a decrease from $53.5 million from December 31, 2008. Additionally, net charge offs totaled $21.4 million for the year ended December 31, 2009 compared to $6.6 million, for the year ended December 31, 2008.
Based upon an analysis of these factors and the continued uncertain economic outlook, we added $21.8 million to the provision for losses on loans for the twelve months ended December 31, 2009, compared to $14.8 million for the same period in 2008. We believe our classified loans are adequately reserved for at December 31, 2009. However, there can be no assurance that the loan loss allowance will be adequate to absorb losses on known classified assets or that the allowance will be adequate to cover losses on classified assets in the future, understanding that all lending activity contains associated risks of loan losses. In addition, the mix and composition of both portfolio loans and nonperforming loans change from period to period. When the Company sets the allowance for loan losses it is dependent on a detailed analysis of different ratios. As of December 31, 2009 the ratio of allowance for loan losses to nonperforming loans increased from the prior year and our loan reserves also increased, representing 2.38% of total net loans versus 2.04% at December 31, 2008.
We have included the following information with respect to impairment measurements relating to collateral-dependent loans for better understanding of our process and procedures relating to fair value of financial instruments:
  The percentage of impaired loans on which we relied on a current third party appraisal for valuation exceeded 90% as of December 31, 2009.
 
  Based on policy, a loan is typically deemed impaired (nonperforming) once it has gone over 90 days delinquent. Our management of the troubled credit will vary as will the timing of valuations, loan loss provision and charge offs based on a multitude of factors such as, cash flow of the business/borrower, responsiveness of the borrower, communication with the commercial banker, property inspections, property deterioration, and delinquency. Typically, a nonperforming, non-homogeneous collateral dependent loan will be valued and adjusted (if needed) within a 90 day period after determination of impairment. If impaired, the collateral is then evaluated and an updated appraisal is most typically ordered. Upon receipt of an appraisal or other valuation, we complete an impairment analysis to determine if the impaired loan requires a specific reserve. The time frame may be as short as 30 days or as much as 180 days, when an appraisal is ordered.
 
  Camco’s credit risk management process consistently monitors key performance metrics across both the performing and non performing assets to identify any further degradation of credit quality. Additionally, impaired credits are monitored in weekly loan committee asset quality discussions, monthly Asset Classification Committee meetings and quarterly loan loss reserve reviews. Strategy documents and exposure projections are completed on a monthly basis to ensure that the current status of the troubled asset is clearly understood and reported.
 
  The Asset Classification Committee oversees the management of all impaired loans and any subsequent loss provision or chargeoff that is considered. When a loan is deemed impaired, the valuation is obtained to determine any existing loss that may be present as of the valuation date. Policy dictates that any differences from fair market value, less costs to sell, are to be recognized as loss during the current period (loan

32


Table of Contents

    loss provision or chargeoff). Any deviations from this policy will be identified by amount and contributing reasons for the policy departure during our quarterly reporting process.
 
  Camco’s policies dictate that an impaired loan subject to partial chargeoff will remain in a nonperforming status until it is brought current. Typically, this occurs when a loan is paid current and completes a period on on-time payments that demonstrate that the loan can perform. Camco monitors through various system reports any loan whose terms have been modified. These reports identify troubled debt restructures, modification, and renewals.
 
  When circumstances do not allow for updated collateral or Camco determines that an appraisal is not needed, the underlying collateral’s fair market value is estimated in the following ways:
  §   Camco personnel property inspections combined with original appraisal review
 
  §   Auditor values
 
  §   Broker price opinions
 
  §   Various on-line fair market value estimations programs (i.e. Freddie Mac, Fannie Mae, Zillow, etc).
Other Income. Other income totaled $8.3 million for the year ended December 31, 2009, an increase of $4.6 million, or 122.8%, compared to 2008. The increase in other income was primarily attributable to a $3.3 million increase in the value of our mortgage servicing rights coupled with a $907,000 increase in gains on sales of loans.
The increase in mortgage servicing rights was due to decreased prepayment speeds. Balances remained consistent year to year at $497.0 million and $497.4 million at December 31, 2009 and 2008 respectively. The servicing portfolios include one-to-four family residential mortgage loans for others, which are primarily sold to Freddie Mac and Fannie Mae.
The increase in gain on sale of loans income for 2009 was due to an increase in loan sales of $63.2 million year to year.
General, Administrative and Other Expense. General, administrative and other expense totaled $28.1 million for the year ended December 31, 2009, a decrease of $7.1 million, or 20.1%, compared to 2008. The decrease was due primarily to a $6.7 million of expense relating to impairment charges taken on goodwill coupled with $628,000 in merger and acquisition related charges in 2008. These decreases were offset partially by an increase of FDIC insurance of $2.1 million in 2009.
The increase in FDIC premiums resulted from increases in premium rates and deposit balances along with the decreased credits issuances in 2008 relating to the reorganization of the Deposit Insurance Fund assessment of premiums by the FDIC.
Federal Income Taxes. The benefit for Federal income taxes totaled $6.3 million for the year ended December 31, 2009, an increase of $1.2 million, compared to the benefit provision recorded in 2008. The effective tax rates amounted to 36.0% and 25.0% for the years ended December 31, 2009 and 2008, respectively. The increase in federal income tax benefit was primarily attributable to tax credits related to our investment in affordable housing partnerships totaling $571,000 in 2009 compared to $198,000 in 2008. Additionally the tax-exempt character of earnings on bank-owned life insurance supplements the difference between the effective rate of tax benefits and the statutory corporate tax rate for the years ended December 31, 2009 and 2008.
Comparison of Results of Operations for the Years Ended December 31, 2008 and December 31, 2007
General. Camco’s net loss for the year ended December 31, 2008, totaled $15.3 million, a decrease of $19.8 million, or 440.5%, from the $4.5 million of net income reported in 2007. The decrease in earnings was primarily due to the additional $13.3 million in the provision for loan losses, coupled with a $6.7 million in goodwill impairment charges, impairment of $2.6 million in mortgage servicing rights, $1.0 million relating to write down of real estate owned and $628,000 expenses relating to the termination of the First Place Financial Corporation merger which was offset partially by a $6.9 million decrease in the provision for federal taxes.

33


Table of Contents

Net Interest Income. Net interest income for the year ended December 31, 2008, amounted to $25.8 million, a decrease of $2.6 million, or 9.3%, compared to 2007, generally reflecting the effects of a $27.0 million decrease in the average balance of interest earning assets. Net interest margin fell to 2.77% for the twelve months ending December 31, 2008 compared to 2.97% for the comparable period in 2007. The compression in net interest margin during the 2008 period, compared to the same period of 2007, was due, nearly equally, to a lower volume of interest-earning assets and a lower yield on those assets offset partially by lower cost of interest-bearing liabilities in the 2008 period.
Margin pressure is due to the yield on assets declining at a faster rate than the cost of funds. At the same time, the loan portfolio has not grown sufficiently to offset the tighter spreads to result in higher net interest income. While loan production has slowed, we continue to diversify the loan portfolio by encouraging continued growth in commercial and consumer loan balances as these types of loans are normally higher-yielding assets than adjustable rate mortgage loans.
Interest income on loans totaled $50.4 million for the year ended December 31, 2008, a decrease of $7.5 million, or 13.0%, from the comparable 2007 total. The decrease resulted primarily from a 52 basis point decrease in the average yield, from 7.10% in 2007, to 6.58% in 2008, coupled with a $49.4 million, or 6.1%, decrease in the average balance of loans outstanding year to year. Interest income on securities totaled $4.4 million for the year ended December 31, 2008, a $226,000, or 4.9%, decrease from the 2007 period. The decrease was due primarily to a $5.8 million, or 5.5%, decrease in the average balance outstanding, partially offset by a 3 basis point increase in the average yield, to 4.45% in 2008. Interest income on FHLB stock decreased by $359,000, or 18.9%, due primarily to a 137 basis point decrease in the average yield, to 5.23% in 2008 offset partially by a $623,000 increase in the average balance outstanding year to year. Interest income on other interest-bearing deposits was the same from year to year which included a 415 basis point decrease in the average yield to 1.21% in 2008 offset by a $27.6 million, or 342.9% decrease in the average outstanding balance year to year.
Interest expense on deposits totaled $22.7 million for the year ended December 31, 2008, a decrease of $2.7 million, or 10.6%, compared to the year ended December 31, 2007, due primarily to a 59 basis point decrease in the average cost of deposits, to 3.31% for 2008, offset partially by a $33.4 million, or 5.1%, increase in the average balance of interest-bearing deposits outstanding year to year. Interest expense on borrowings totaled $8.2 million for the year ended December 31, 2008, a decrease of $2.7 million, or 25.0%, from 2007. The decrease resulted primarily from a $55.3 million, or 22.2%, decrease in the average balance outstanding year to year coupled with a 16 basis point decrease in the average rate to 4.24% in 2008.
Approximately $289.0 million, or 63.8%, of our certificate deposit portfolio will mature during 2009. While this presents an opportunity, to continue to reduce our cost of funds since, these deposits are re-pricing in a generally lower interest rate environment, we continue to experience competition for deposits in our market areas, which is limiting our ability to quickly reduce the marginal cost of deposits to a level reflective of the general rate environment. Previous decreases in the Prime rate have continued to compress our net interest margin due to the lag in re-pricing between our loan and deposit portfolios. At the same time, the loan portfolio has not grown to offset these tighter spreads. As noted earlier, we plan to continue to diversify the loan portfolio by encouraging growth in commercial and consumer loan balances. This strategy should slow net interest margin compression as these types of loans are normally higher-yielding assets than conventional mortgage loans and investment securities.
Provision for Losses on Loans. A provision for losses on loans is charged to earnings to bring the total allowance for loan losses to a level considered appropriate by management based on historical experience, the volume and type of lending conducted by the Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Bank’s market areas, and other factors related to the collectability of the Bank’s loan portfolio. Based upon an analysis of these factors, management recorded a provision for losses on loans totaling $14.8 million for the year ended December 31, 2008, an increase of $13.3 million, from the provision recorded in 2007. The increase in provision was due to economic conditions relating to higher unemployment statistics, increasing foreclosures in Ohio and increased charge offs which was coupled with increased classified assets.
Other Income. Other income totaled $3.7 million for the year ended December 31, 2008, a decrease of $2.9 million, or 43.7%, compared to 2007. The decrease in other income was primarily attributable to a $2.6 million decrease in the value of our mortgage servicing rights coupled with a $293,000 decrease in title fee and rent and other income.

34


Table of Contents

The decrease in mortgage servicing rights was due to increased volatility in the market, which in turn increased the prepayment speeds utilized to value the portfolio. At December 31, 2008, we serviced $497.4 million of one-to-four family residential mortgage loans for others, primarily Freddie Mac and Fannie Mae, which declined from $516.0 million at December 31, 2007.
The decrease in rent and other income for 2008 was due to a decrease in loan prepayment penalties of $187,000 coupled with decreased income from our title insurance agency which fell $173,000 in 2008 due to the significant slowdown in home sales and related mortgage loan volume.
General, Administrative and Other Expense. General, administrative and other expense totaled $35.2 million for the year ended December 31, 2008, an increase of $7.9 million, or 28.9%, compared to 2007. The increase was due primarily to a $6.7 million impairment charge taken on goodwill coupled with the write down of real estate owned properties of $1.0 million and $628,000 in merger and acquisition related charges. Core noninterest expense excluding merger and goodwill impairment charges totaled $27.9 million for the year ended December 31, 2008, an increase of $570,000 or 2.1% increase. The increase in core non interest expense was primarily due to increased FDIC premiums and the write down of real estate owned which were partially offset by decreases in advertising, supplies, travel and training and loan and deposit expenses.
The goodwill impairment charge is reflective of the most recent testing valuation as of September 30, 2008, and utilizing subsequent events through December 21, 2008, which indicated the fair value of the reporting unit was fully impaired as of December 31, 2008.
The increase in FDIC premiums resulted from increases in premium rates and deposit balances along with the decreased credits issuances in 2008 relating to the reorganization of the Deposit Insurance Fund assessment of premiums by the Federal Deposit Insurance Corporation.
The increase in real estate owned and other expense is reflective of falling real estate values that negatively impacted our portfolio value and caused a write down to fair market value coupled with additional properties taken in to real estate owned due to foreclosures in 2008. Approximately one of every 448 households in Ohio were in foreclosure at December 31, 2008. Additionally, as noted earlier, home values in Ohio have continued to decline from previous levels. These factors, compounded by an uncertain economic outlook and increasing unemployment, may result in continued expenses in 2009. This was coupled with additional costs relating to bank paid PMI insurance linked to a new product offering in 2008.
While advertising, supplies and travel and training expenses have decreased, it is not foreseeable that they will continue to be at these lower levels due to much of the decrease was related to the announced merger with First Place that was terminated November 2008.
Federal Income Taxes. The benefit for Federal income taxes totaled $5.1 million for the year ended December 31, 2008, a decrease of $6.9 million, compared to the provision recorded in 2007. The effective tax rates amounted to 25.0% and 28.2% for the years ended December 31, 2008 and 2007, respectively. The decrease in federal income tax expense was primarily attributable to a $26.7 million decrease in pre-tax earnings. Tax credits related to our investment in affordable housing partnerships totaled $198,000 in 2008, additionally the tax-exempt character of earnings on bank-owned life insurance supplements the difference between the effective rate of tax benefits and the statutory corporate tax rate for the years ended December 31, 2008 and 2007.

35


Table of Contents

AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA
The following table presents for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resulting yields, and the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. The table does not reflect any effect of income taxes. Balances are based on the average of month-end balances which, in the opinion of management, do not differ materially from daily balances. Some items in the prior-year financial statements were reclassified to conform to the current year’s presentation, including the reclassification of nonaccrual loans, mortgage servicing rights and the allowance for loan losses from Loans receivable to Noninterest-earning assets.
                                                                         
    Year ended December 31,  
    2009     2008     2007  
    Average     Interest     Avg     Average     Interest     Avg     Average     Interest     Average  
    outstanding     earned /     yield/     outstanding     earned /     yield/     outstanding     earned /     yield/  
    balance     paid     rate     balance     paid     rate     balance     paid     Rate  
                            (Dollars in thousands)                          
Interest-earning assets:
                                                                       
Loans receivable (1)
  $ 667,746     $ 40,231       6.02 %   $ 767,202     $ 50,446       6.58 %   $ 816,637     $ 57,955       7.10 %
Securities (2)
    76,886       3,085       4.01 %     98,212       4,369       4.45 %     103,962       4,595       4.42 %
FHLB Stock
    29,888       1,381       4.62 %     29,345       1,536       5.23 %     28,722       1,895       6.60 %
Interest-bearing deposits and other
    55,074       27       0.05 %     35,610       432       1.21 %     8,041       432       5.36 %
 
                                                     
Total interest-earning assets
    829,594       44,724       5.39 %     930,369       56,783       6.10 %     957,362       64,877       6.78 %
 
                                                                       
Noninterest-earning assets (3)
    105,626                       94,220                       87,949                  
 
                                                                 
 
                                                                       
Total Average Assets
  $ 935,220                     $ 1,024,597                     $ 1,045,311                  
 
                                                                 
 
                                                                       
Interest-bearing liabilities:
                                                                       
Deposits
  $ 661,806     $ 15,349       2.32 %   $ 686,116     $ 22,728       3.31 %   $ 652,711     $ 25,429       3.90 %
FHLB advances and other
    148,223       5,245       3.54 %     194,458       8,246       4.24 %     249,793       10,992       4.40 %
 
                                                     
Total interest-bearing liabilities
    810,029       20,594       2.54 %     880,574       30,974       3.52 %     902,504       36,421       4.04 %
 
                                                                       
Noninterest-bearing deposits
    37,256                       37,918                       35,919                  
Noninterest-bearing liabilities
    16,606                       20,619                       16,418                  
 
                                                                 
 
                                                                       
Total Average Liabilities
    863,891                       939,111                       954,841                  
 
                                                                       
Total Average Shareholders’ equity
    71,329                       85,486                       90,470                  
 
                                                                 
 
                                                                       
Net interest income/Interest rate spread
  $ 935,220     $ 24,130       2.85 %   $ 1,024,597     $ 25,809       2.58 %   $ 1,045,311     $ 28,456       2.74 %
 
                                                           
Net interest margin (4)
                    2.91 %                     2.77 %                     2.97 %
Average interest-earning assets to average interest-bearing liabilities
                    105.42 %                     105.65 %                     106.08 %
 
(1)   Includes loans held for sale. Loan fees are immaterial.
 
(2)   Includes securities designated as available for sale and held to maturity
 
(3)   Includes nonaccrual loans, mortgage servicing rights and allowance for loan losses
 
(4)   Net interest income as a percent of average interest-earning assets

36


Table of Contents

Rate/Volume Table
The following table describes the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected Camco’s interest income and expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (change in volume multiplied by prior year rate), (ii) changes in rate (change in rate multiplied by prior year volume) and (iii) total changes in rate and volume.
                                                 
    2009     2008  
    Increase/(decrease) due to     Increase/(decrease) due to  
Year ended December 31   Volume     Rate     Total     Volume     Rate     Total  
    (In thousands)  
Interest income attributable to:
                                               
Loans receivable (1)
  $ (6,207 )   $ (4,008 )   $ (10,215 )   $ (3,391 )   $ (4,118 )   $ (7,509 )
Securities
    (885 )     (399 )     (1,284 )     (257 )     31       (226 )
Interest-bearing deposits and other
    565       (1,125 )     (560 )     42       (401 )     (359 )
 
                                   
Total interest income
    (6,527 )     (5,532 )     (12,059 )     (3,606 )     (4,488 )     (8,094 )
Interest expense attributable to:
                                               
Deposits
    (780 )     (6,599 )     (7,379 )     1,403       (4,104 )     (2,701 )
Borrowings
    (1,769 )     (1,232 )     (3,001     (2,359 )     (387     (2,746 )
 
                                   
Total Interest expense
    (2,549 )     (7,831 )     (10,380 )     (956 )     (4,491 )     (5,447 )
 
                                               
Increase (decrease) in net interest income
  $ (3,978 )   $ 2,299     $ (1,679 )   $ (2,650 )   $ 3     $ (2,647 )
 
                                   
 
(1)    Includes loans held for sale.
Yields Earned and Rates Paid
The following table sets forth the weighted-average yields earned on Camco’s interest-earning assets, the weighted-average interest rates paid on Camco’s interest-bearing liabilities and the interest rate spread between the weighted-average yields earned and rates paid by Camco at the dates indicated. This does not reflect the spread that may eventually be achieved in 2010 or beyond due to possible changes in weighted-average yields earned on interest-earning assets and paid on interest-bearing liabilities in the upcoming year.
                 
    At December 31,  
    2009     2008  
Weighted-average yield on:
               
Loan portfolio (1)
    5.88 %     6.47 %
Investment portfolio (2)
    4.34       4.05  
Total interest-earning assets
    5.71       5.66  
 
               
Weighted-average rate paid on:
               
Deposits
    1.89       2.71  
FHLB advances
    3.61       3.65  
Total interest-bearing liabilities
    2.11       2.89  
 
           
 
               
Interest rate spread
    3.60 %     2.77 %
 
           
 
(1)   Includes loans held for sale and excludes the allowance for loan losses.
 
(2)   Includes earnings on FHLB stock and investment securities. Taxable equivalent yield used.

37


Table of Contents

Liquidity and Capital Resources
     Liquidity is the Corporation’s ability to generate adequate cash flows to meet the demands of its customers and provide adequate flexibility for the Corporation to take advantage of market opportunities. Cash is used to fund loans, purchase investments, fund the maturity of liabilities, and at times to fund deposit outflows and operating activities. The Corporation’s principal sources of funds are deposits; amortization, prepayments and sales of loans; maturities, sales and principal receipts from securities; borrowings; and operations. Managing liquidity entails balancing the need for cash or the ability to borrow against the objectives of maximizing profitability and minimizing interest rate risk. The most liquid types of assets typically carry the lowest yields.
     Camco is a single bank holding company and its primary ongoing source of liquidity is from dividends received from the Bank. Such dividends arise from the cash flow and earnings of the Bank. Ohio statutes impose certain limitations on the payment of dividends and other capital distributions by banks. Generally, absent approval of the Ohio Division, such statutes limit dividend and capital distributions to earnings of the current and two preceding years. Currently, the Consent Order prohibits the Bank from paying a dividend to Camco without prior approval of the FDIC and Ohio Division. Camco currently has $5.0 million outstanding trust preferred securities with a maturity date of 2037. If needed, Camco’s agreement regarding these securities provides for a deferment of interest payment for up to 20 consecutive quarters without default. Based on notification received from the FRB on April 30, 2009, Camco was required to exercise this provision to defer interest payments and has deferred a total of three quarters as of December 31, 2009. See Note K to the Financial Statements in Item 8 below. If the Corporation desires to raise funds in the future, it may consider engaging in further offerings of preferred securities, debentures or other borrowings as well as issuance of capital stock, but any such strategic decisions would require regulatory approval. Further, as a result of entering into the MOU with the FRB on March 4, 2009, we are prohibited from paying dividends to our stockholders without first obtaining the approval of the FRB. Our ability to pay dividends to stockholders is dependent on our net earnings. A continued decline in earnings increases in loan losses, or higher regulatory capital reserve requirements may jeopardize our ability to pay dividends at historical levels.
     The objective of the Bank’s liquidity management is to maintain ample cash flows to meet obligations for depositor withdrawals, fund the borrowing needs of loan customers, and to fund ongoing operations. Core relationship deposits are the primary source of the Bank’s liquidity. As such, the Bank focuses on deposit relationships with local business and consumer clients with a strategy to increase the number of services/products per client. The Corporation views such deposits as the foundation of its long-term liquidity because it believes such core deposits are more stable and less sensitive to changing interest rates and other economic factors compared to large time deposits or wholesale purchased funds.
     We monitor and assess liquidity needs daily in order to meet deposit withdrawals, loan commitments and expenses. Camco’s liquidity contingency funding plan identifies liquidity thresholds and red flags that may evidence liquidity concerns or future crises. The contingency plan details specific actions to be taken by management and the Board of Directors. It also identifies sources of emergency liquidity, both asset and liability-based, should we encounter a liquidity crisis. In conjunction with the Corporation’s asset/liability and interest rate risk management activities, we actively monitor liquidity risk and analyze various scenarios that could impact or impair Camco’s ability to access emergency funding during a liquidity crisis.
     Liquid assets consist of cash and interest-bearing deposits in other financial institutions, investments and mortgage-backed securities. Approximately $11.3 million, or 20.0%, of our

38


Table of Contents

investment portfolio is expected to mature or prepay during 2010. While these maturities could provide a significant source of liquidity in the short term, public unit deposits and repurchase agreements limit our ability to use these funds freely due to the collateral requirements of such. State and local political subdivision deposits equaled $22.2 million at December 31, 2009, and $60.2 million at December 31, 2008. We may implement additional product strategies to lessen this restriction on our investment portfolio to increase our liquidity options.
     Additional sources of liquidity include deposits, borrowings and principal and interest repayments on loans. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan and security prepayments are more influenced by interest rates, general economic conditions, and competition and are difficult to predict.
     Diversified and reliable sources of wholesale funds are utilized to augment core deposit funding. Borrowings may be used on a long or short-term basis to compensate for reduction in other sources of funds or on a long term basis to support lending activities. The Bank utilizes its investment securities, certain loans and FHLB stock to provide collateral to support its borrowing needs. Management believes that its focus on core relationship deposits coupled with access to borrowing through reliable counterparties provides reasonable and prudent assurance that ample liquidity is available. However, depositor or counterparty behavior could change in response to competition, economic or market situations or other unforeseen circumstances, which could have liquidity implications that may require different strategic or operational actions. One source of wholesale funding is brokered deposits. Consistent with its risk management policy and in response to the general tightening of credit and liquidity conditions in the financial markets at large, the Bank has utilized brokered deposits. At December 31, 2009, such deposits totaled approximately $32.3 million, exclusive of CDARS deposits.
     Approximately $278.5 million of the Corporation’s certificate of deposit portfolio is scheduled to mature during 2010. Depositors continue a preference toward short-term certificates or other issuances less than 18 months. This places additional liquidity pressure on the Corporation as competition for deposits is very strong in Ohio, Kentucky and West Virginia. A material loss of these short-term deposits could force us to seek funding through contingency sources, which may negatively impact earnings.
     FHLB advances are another funding source. In the past, Camco has depended heavily on borrowings to fund balance sheet growth. While significant strategic and tactical focus is currently being placed on deposit growth, borrowings and additional borrowing capacity at the FHLB are still vital sources of liquidity and growth funding. We have approximately $52.7 million of additional borrowing capacity available as of December 31, 2009. However, our total borrowing capacity at the FHLB is dependent on the level of eligible collateral assets held by the Bank and the Bank’s credit rating with the FHLB. Our total borrowing capacity with the FHLB decreased to $167.0 million at December 31, 2009, from $219.8 million at December 31, 2008. This capacity has decreased as our one to four- family loan portfolio, the primary collateral for FHLB borrowings, has shrunk and the increase in nonperforming loans has reduced our credit rating (and thereby increased its collateral requirements) in 2009 compared to 2008. The inability of the Bank to access contingency funding from the FHLB may significantly limit our growth and negatively affect earnings. We have improved on-balance-sheet liquidity and in response to higher collateral maintenance requirements and decreases in our overall borrowing capacity.
     We plan to continue to monitor our funding sources through brokered deposits and FHLB borrowings, but recognize that our current credit risk profile may restrict these sources. Our Funds Management Group will monitor the deposit rates in our markets to allow for competitive pricing in order to raise funds through deposits. Funds in excess of loan demand and available borrowing repayments will be held in short-term investments or federal funds sold. We are taking these actions

39


Table of Contents

to proactively prepare for the possibility of continued deterioration in the credit markets and increases in our nonperforming loans, which may reduce our borrowing capacity at the FHLB further.
The following table sets forth information regarding the Bank’s obligations and commitments to make future payments under contract as of December 31, 2009.
                                         
    Payments due by period  
    Less                   More    
    than 1   1-3   3-5   than 5    
    year   years   years   years   Total  
    (In thousands)
Contractual obligations:
                                       
Operating lease obligations
  $ 393     $ 553     $ 362     $ 149     $ 1,457  
Advances from the Federal Home Loan Bank
    32,263       23,658       15,510       25,860       97,291  
Repurchase agreements
    6,941                         6,941  
Certificates of deposit
    278,450       116,359       22,808             417,617  
Subordinated debentures(1)
                      5,000       5,000  
Ohio Equity Funds for Affordable Housing
    1,189       958       301       228       2,676  
 
                                       
Amount of commitments per period
                                       
Commitments to originate loans:
                                       
Revolving, open-end lines
    53,290                         53,290  
1-4 family residential construction
    8,378                         8,378  
Commercial real estate, other construction loan and land development loans
    26,090                         26,090  
Commercial real estate, construction, and land development loans not secured by real estate
    6,753                         6,753  
Other unused commitments
    9,590                         9,590  
Stand-by letters of credit
    493                         493  
 
                                       
Total contractual obligations
  $ 423,830     $ 141,528     $ 38,981     $ 31,237     $ 635,576  
 
                                       
 
(1)   The subordinated debentures are redeemable at par, at Camco’s option, commencing September 15, 2012. The debentures mature on September 15, 2037.
We anticipate that we will have sufficient funds available to meet our current loan commitments. Based upon historical deposit flow data, the Bank’s competitive pricing in its market and management’s experience, we believe that a significant portion of our maturing certificates of deposit in 2010 will remain with the Bank, but recognize the significance of the risks discussed above.
Liquidity management is both a daily and long-term management process. In the event that we should require funds beyond our ability to generate them internally, additional funds are available through the use of FHLB advances, internet deposits, and through the sales of loans and/or securities.

40


Table of Contents

Off-Balance Sheet Arrangements
We engage in off-balance sheet credit-related activities that could require us to make cash payments in the event that specified future events occur. The contractual amounts of these activities represent the maximum exposure to the Bank (as further described in financial statement footnote Note J — Commitments). However, certain off-balance sheet commitments are expected to expire or be only partially used; therefore, the total amount of commitments does not necessarily represent future cash requirements. These off-balance sheet activities are necessary to meet the financing needs of the Bank’s customers.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our results of operations depend substantially on our net interest income. Like most financial institutions, our interest income and cost of funds are affected by general economic conditions, levels of market interest rates, and by competition, and in addition, our community banking focus makes our results from operations particularly dependent on the Ohio economy.
The purpose of asset/liability management is to provide stable net interest income growth by protecting our earnings from undue interest rate risk, which arises from changes in interest rates and changes in the balance sheet mix, and by managing the risk/return relationships between liquidity, interest rate risk, market risk, and capital adequacy. Our asset/liability management objective is to maintain consistent growth in net interest income within the Board’s policy limits. This objective is accomplished through management of balance sheet composition, liquidity, and interest rate risk exposures arising from changing economic conditions, interest rates and customer preferences.
We maintain an asset/liability management policy that provides guidelines for controlling exposure to interest rate risk by setting tolerance levels for the net interest margin scenario changes developed simulation models under different interest rate scenarios to measure the risk to earnings over the next 12-month period.
We consider interest rate risk to be Camco’s most significant market risk. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. Consistency of Camco’s net interest income is largely dependent upon the effective management of interest rate risk.
We employ an earnings simulation model to analyze net interest income sensitivity to changing interest rates. The model is based on actual cash flows and repricing characteristics and incorporates market-based assumptions regarding the effect of changing interest rates on the prepayment rates of certain assets and liabilities. The model also includes management projections for activity levels in each of the product lines offered. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model. Assumptions are inherently uncertain and the measurement of net interest income or the impact of rate fluctuations on net interest income cannot be precisely predicted. Actual results may differ from simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.
The Bank’s Asset/Liability Management Committee (“ALCO”), which includes senior management representatives and reports to the Bank’s Board of Directors, monitors and manages interest rate risk within Board-approved policy limits. The interest rate risk position of Camco presented below is determined by measuring the anticipated change in net interest income over a 12 month horizon assuming an instantaneous and parallel shift (linear) increase or decrease in all interest rates.

41


Table of Contents

Interest rate sensitivity analysis is used to measure the Bank’s interest rate risk by computing estimated changes in Net Interest Income (NII) and the Economic Value of Equity (EVE) in the event of a range of assumed changes in market interest rates. EVE represents the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities. This analysis assesses the risk of loss in market risk sensitive instruments in the event of an immediate and sustained 1 and 2% increase or decrease in market interest rates.
The following table presents the Bank’s projected change in NII and EVE for the various rate shock levels at December 31, 2009.
                 
  Change in        
Interest Rates        
 (basis points)   NII % Change   EVE % Change
+200
    5.90 %     -9.44 %
+100
    2.50 %     -3.78 %
-100
    -5.10 %     0.84 %
-200
    -11.77 %     -0.49 %
The current simulation identifies a decreasing net interest income in a declining rate environment. A contributing factor to this decline is the existing higher prepayment speeds incorporated into our model at year end along with decreased interest revenue due to higher non-performing loans when compared to funding sources. In a rising rate environment our net interest income increases due to the decreasing refinance opportunities and the significant amount of adjustable rate loans within our loan portfolio. These assets will adjust faster than liabilities due to the lagging nature of adjustments in our deposit base.
These estimated changes in net interest income and economic value of equity are within the policy guidelines established by the Board of Directors. In order to reduce the exposure to interest rate fluctuations and to manage liquidity, we have developed sale procedures for several types of interest-sensitive assets. Generally, all long-term, fixed-rate single family residential mortgage loans underwritten according to Freddie Mac and Fannie guidelines are sold upon origination. A total of $39.6 million and $44.6 million of such loans were sold to Freddie Mac, Fannie Mae and other parties during 2009 and 2008, respectively.

42


Table of Contents

Item 8. Financial Statements and Supplementary Data.
Management’s Report on Internal Control over Financial Reporting
Management of the Corporation is responsible for establishing and maintaining adequate internal control over financial reporting, (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) that is designed to produce reliable financial statements in conformity with accounting principles generally accepted in the United States. The Company’s internal control over financial reporting 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 Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden, and misstatements resulting from error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 based upon the criteria for effective internal control over financial reporting described in “Internal Control—Integrated Framework” issued by COSO. Based upon this assessment, management believes that, as of December 31, 2009, the internal control over financial reporting was not effective because there was a control deficiency that constituted a material weakness.
A material weakness is a control deficiency or a combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected. As of December 31, 2009, we did not maintain effective controls over the preparation and review of our allowance for loan losses. Specifically, we did not maintain effective internal controls over the review process on historical loss factors in the current loan loss provision. This control deficiency resulted in an increase in the Company’s allowance for loan losses and loan loss provision as of and for the year ended December 31, 2009. Accordingly, management determined that this control deficiency constitutes a material weakness in internal control over financial reporting as of December 31, 2009.

43


Table of Contents

Plans for Remediation of Material Weakness
The Company is in the process of actively remediating this material weakness. The Company’s plans include the following:
    Establishing an interdepartmental committee, which will be a subgroup of the Asset Classification Committee, amongst credit administration, enterprise risk management and finance department to review the overall loan loss provision process by assessing the historical risk factors, the recent trends, and economic forecasts, as appropriate. This enhanced collaborative process will help identify trends that should be recognized in the overall loan loss provision process while permitting the use of professional judgment necessary to interpret the complex data. The jointly compiled loan loss provision will be reported to and approved by the executive management including CEO and the Board of Directors on a quarterly basis.
 
    Performing more frequent loan loss provision analysis than current quarterly analysis until otherwise decided in the future. Complete analysis as of the month-end prior to the quarter-end will be performed and reviewed by the aforementioned committee.
Although we believe that the improvements in our internal control processes as designed are adequate to remediate the material weakness, we will not consider the material weakness to be remediated until the new processes operate for a sufficient period of time, and we are confident that they are operating effectively.

44


Table of Contents

Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Camco Financial Corporation
We have audited the accompanying consolidated statement of financial condition of Camco Financial Corporation as of December 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Camco Financial Corporation as of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Camco Financial Corporation’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 29, 2010 expressed an adverse opinion on internal control over financial reporting.
/s/ Plante & Moran PLLC
March 29, 2010
Columbus, Ohio

45


Table of Contents

Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Camco Financial Corporation
We have audited Camco Financial Corporation’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Camco Financial Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on Camco Financial Corporation’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal control over financial reporting 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 Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. The review process related to the allowance for loan losses was not effective to identify errors in the historical loss data utilized in the calculation of the allowance.
In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Camco Financial Corporation has not maintained effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Camco Financial Corporation as of December 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009. The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2009 financial statements, and this report does not affect our report dated March 29, 2010, which expressed an unqualified opinion on those financial statements.
/s/ Plante & Moran PLLC
March 29, 2010
Columbus, Ohio

46


Table of Contents

CAMCO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
(In thousands, except share data)
                 
    2009     2008  
ASSETS
               
 
               
Cash and due from banks
  $ 20,490     $ 17,013  
Interest-bearing deposits in other financial institutions
    17,663       35,272  
 
           
Cash and cash equivalents
    38,153       52,285  
Securities available-for-sale, at market
    55,950       85,352  
Securities held-to-maturity, at cost
    2,113       13,406  
Loans held for sale — at lower of cost or market
    475       2,185  
Loans receivable — net
    659,022       756,641  
Office premises and equipment — net
    10,870       11,868  
Real estate acquired through foreclosure
    9,660       5,841  
Federal Home Loan Bank stock — at cost
    29,888       29,888  
Accrued interest receivable
    3,979       4,118  
Mortgage servicing rights — at lower of cost or market
    4,433       3,731  
Prepaid expenses and other assets
    5,712       10,785  
Cash surrender value of life insurance
    18,838       22,532  
Prepaid and refundable federal income taxes
    3,562       1,814  
 
           
 
               
Total assets
  $ 842,655     $ 1,000,446  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
Deposits
  $ 659,902     $ 723,956  
Other borrowings
    11,941       16,727  
Advances from the Federal Home Loan Bank
    97,291       167,106  
Advances by borrowers for taxes and insurance
    1,909       2,458  
Accounts payable and accrued liabilities
    11,098       18,499  
 
           
Total liabilities
    782,141       928,746  
 
               
Commitments
           
 
               
Stockholders’ equity
               
Preferred stock — $1 par value; authorized 100,000 shares; no shares outstanding
           
Common stock — $1 par value; authorized 14,900,000 shares; 8,884,508 shares issued at December 31, 2009 and 8,834,508 shares issued at December 31, 2008
  $ 8,885     $ 8,835  
Additional paid-in capital
    60,124       59,896  
Retained earnings
    14,695       26,055  
Accumulated other comprehensive income
    1,049       1,028  
Unearned compensation
    (125 )      
Treasury stock - 1,678,913 shares at December 31, 2009 and 2008, at cost
    (24,114 )     (24,114 )
 
           
Total stockholders’ equity
    60,514       71,700  
 
           
 
               
Total liabilities and stockholders’ equity
  $ 842,655     $ 1,000,446  
 
           

47


Table of Contents

CAMCO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2009, 2008 and 2007
(In thousands, except per share data)
                         
    2009     2008     2007  
Interest and dividend income
                       
Loans
  $ 40,231     $ 50,446     $ 57,955  
Investment securities
    3,085       4,369       4,595  
Other interest-bearing accounts
    1,408       1,968       2,327  
 
                 
Total interest income
    44,724       56,783       64,877  
Interest expense
                       
Deposits
    15,349       22,728       25,429  
Borrowings
    5,245       8,246       10,992  
 
                 
Total interest expense
    20,594       30,974       36,421  
 
                 
 
                       
Net interest income
    24,130       25,809       28,456  
 
                       
Provision for losses on loans
    21,792       14,793       1,495  
 
                 
 
                       
Net interest income after provision for losses on loans
    2,338       11,016       26,961  
Other income
                       
Rent and other
    970       792       911  
Title fees
    723       479       652  
Loan servicing fees
    1,264       1,308       1,375  
Gain on sale of loans
    1,271       364       353  
Mortgage servicing rights — net
    703       (2,625 )     (68 )
Service charges and other fees on deposits
    2,277       2,387       2,441  
Gain on sale of investment securities
          2       1  
Gain (loss) on sale of premises and equipment
    127       1       (25 )
Income on cash surrender value life insurance
    926       1,000       948  
 
                 
Total other income
    8,261       3,708       6,588  
General, administrative and other expense
                       
Employee compensation and benefits
    12,453       13,279       13,216  
Occupancy and equipment
    3,247       3,374       3,464  
Federal deposit insurance premiums
    2,471       406       81  
Data processing
    1,190       1,152       1,186  
Advertising
    525       938       1,299  
Franchise taxes
    1,018       1,202       1,104  
Postage, supplies and office expenses
    1,394       1,341       1,421  
Travel, training and insurance
    315       404       518  
Professional services
    1,692       1,355       1,452  
Transaction processing
    895       1,009       947  
Real estate owned and other expenses
    2,312       2,074       1,148  
Loan expenses
    597       1,319       1,447  
Goodwill Impairment
          6,683        
Merger expenses
    4       628        
 
                 
Total general, administrative and other expense
    28,113       35,164       27,283  
 
                       
Earnings (loss) before federal income taxes
    (17,514 )     (20,440 )     6,266  
Federal income taxes
                       
Current
    (3,924 )     (713 )     1,216  
Deferred
    (2,373 )     (4,403 )     549  
 
                 
Total federal income taxes
    (6,297 )     (5,116 )     1,765  
 
                 
NET EARNINGS (LOSS)
  $ (11,217 )   $ (15,324 )   $ 4,501  
 
                 
EARNINGS (LOSS) PER SHARE
                       
Basic
  $ (1.56 )   $ (2.14 )   $ 0.61  
 
                 
Diluted
  $ (1.56 )   $ (2.14 )   $ 0.61  
 
                 

48


Table of Contents

CAMCO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31, 2009, 2008 and 2007
(In thousands)
                         
    2009     2008     2007  
Net earnings (loss)
  $ (11,217 )   $ (15,324 )   $ 4,501  
Other comprehensive income net of tax effects:
                       
Unrealized holding on securities during the period, net of taxes of $11, $536 and $625 in 2009, 2008 and 2007, respectively
    21       1,040       1,213  
 
                       
Reclassification adjustment for realized gains included in operations, net of taxes of $0, $1 and $1 for the years ended December 31, 2009, 2008 and 2007, respectively
          (1 )     (1 )
 
                 
 
                       
Comprehensive income (loss)
  $ (11,196 )   $ (14,285 )   $ 5,713  
 
                 
 
                       

49


Table of Contents

CAMCO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended December 31, 2009, 2008 and 2007
(In thousands, except per share data)
                                                                 
                                    Accumulated                        
                    Additional             other                     Total  
    Shares     Common     paid-in     Retained     comprehensive     Unearned     Treasury     stockholders’  
    outstanding     stock     capital     earnings     income (loss)     compensation     stock     equity  
Balance at January 1, 2007
    7,155,595     $ 8,832     $ 59,722     $ 43,954     $ (1,225 )   $     $ (20,191 )   $ 91,092  
 
                                               
 
                                                               
Stock options exercised
    2,427       3       28                               31  
Cash dividends declared — $0.60 per share
                      (4,372 )                       (4,372 )
Stock Option Expense
                92                               92  
Net earnings for the year ended December 31, 2007
                      4,501                         4,501  
Purchase of treasury shares
    (309,888 )                                   (3,923 )     (3,923 )
Unrealized losses on securities designated as available for sale, net of related tax benefits
                            1,213                   1,213  
 
                                               
 
                                                               
Balance at December 31, 2007
    7,155,595     $ 8,835     $ 59,842     $ 44,083     $ (12 )   $     $ (24,114 )   $ 88,634  
 
                                               
 
                                                               
Stock options exercised
                                               
Cash dividends declared — $0.2625 per share
                      (1,872 )                       (1,872 )
Stock Option Expense
                54                               54  
Net loss for the year ended December 31, 2008
                      (15,324 )                       (15,324 )
Change in accounting — split dollar life insurance
                      (832 )                       (832 )
Unrealized gains on securities designated as available for sale, net of related tax benefits
                            1,040                   1,040  
 
                                               
 
                                                               
Balance at December 31, 2008
    7,155,595     $ 8,835     $ 59,896     $ 26,055     $ 1,028     $     $ (24,114 )   $ 71,700  
 
                                               
 
                                                               
Stock options exercised
                                               
Cash dividends declared — $0.02 per share
                      (143 )                       (143 )
Stock Option Expense
                153                               153  
Net loss for the year ended December 31, 2009
                      (11,217 )                       (11,217 )
Restricted shares granted
    50,000       50       75                   (125 )            
Unrealized gains of securities designated as available for sale, net of related tax benefits
                            21                   21  
 
                                               
Balance at December 31, 2009
    7,205,595     $ 8,885     $ 60,124     $ 14,695     $ 1,049     $ (125 )   $ (24,114 )   $ 60,514  
 
                                               

50


Table of Contents

CAMCO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2009, 2008 and 2007
(In thousands)
                         
    2009     2008     2007  
Cash flows from operating activities:
                       
Net earnings (loss) for the year
  $ (11,217 )   $ (15,324 )   $ 4,501  
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
                       
Amortization of premiums and discounts on investment and mortgage-backed securities — net
    (20 )     58       115  
Amortization of mortgage servicing rights — net
    360       3,229       747  
Depreciation and amortization
    1,413       1,352       1,434  
Stock option expense
    153       54       92  
Deferred federal income taxes
    2,373       (4,403 )     549  
Provision for losses on loans
    21,792       14,793       1,495  
Amortization of deferred loan origination fees
    468       343       84  
Loss on sale of real estate acquired through foreclosure
    1,069       1,364       297  
Gain on sale of investment securities
          (2 )     (1 )
(Gain) loss on sale of premises and equipment, net
    (127 )     (1 )     25  
Federal Home Loan Bank stock dividends
          (1,166 )      
Net increase in cash surrender value of life insurance
    (766 )     (825 )     (786 )
Gain on sale of loans
    (1,271 )     (364 )     (353 )
Loans originated for sale in the secondary market
    (106,771 )     (44,346 )     (49,458 )
Proceeds from sale of mortgage loans in the secondary market
    109,752       45,694       50,306  
Impairment of Goodwill
          6,683        
Increase (decrease) in cash, due to changes in:
                       
Accrued interest receivable
    139     3,988       468  
Prepaid expenses and other assets
    (1,431 )     (1,388 )     (4,283 )
Accounts payable and other liabilities
    (5,731 )     29       (250 )
 
                 
Net cash provided by operating activities
    10,185       9,768       4,982  
 
                       
Cash flows provided by (used in) investing activities:
                       
Proceeds from sale of investment securities designated as available for sale
          4,254       3  
Purchase of securities designated as available for sale
    (27,019 )     (50,175 )     (43,729 )
Purchase of securities designated as held to maturity
          (24,104 )      
Principal repayments and maturities of investment-securities held to maturity
    11,333       13,513       667  
Principal repayments and maturities of investment securities available for sale
    56,432       50,962       64,050  
Loan disbursements
    (131,381 )     (197,981 )     (245,835 )
Purchases of loans
    (7,035 )     (249 )     (3,021 )
Principal repayments on loans
    204,502       229,330       249,922  
Purchase of premises and equipment
    (476 )     (366 )     (1,131 )
Proceeds from sale of office premises and equipment
    189       2       16  
Proceeds from sale of real estate acquired through foreclosure
    4,025       3,825       2,454  
Proceeds from surrender of life insurance
    4,460              
 
                 
Net cash provided by investing activities
    115,030       29,011       23,396  
 
                 
Net cash provided by operating and investing activities (balance carried forward)
    125,215       38,779       28,378  
 
                 

51


Table of Contents

CAMCO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the years ended December 31, 2009, 2008 and 2007
(In thousands)
                         
    2009     2008     2007  
Net cash provided by operating and investing activities (balance brought forward)
  $ 125,215     $ 38,779     $ 28,378  
 
                       
Cash flows provided by financing activities:
                       
 
                       
Net increase(decrease) in deposits
    (64,054 )     31,772       7,402  
Proceeds from Federal Home Loan Bank advances
    44,000       79,600       79,000  
Proceeds from subordinated debentures
                5,000  
Repayment of Federal Home Loan Bank advances
    (113,815 )     (111,558 )     (125,224 )
Net change in repurchase agreements
    (4,786 )     (5,190 )     10,066  
Dividends paid on common stock
    (143 )     (2,953 )     (4,411 )
Proceeds from exercise of stock options
                31  
Purchase of treasury stock
                (3,923 )
Net increase (decrease) in advances by borrowers for taxes and insurance
    (549 )     (1,169 )     143  
 
                 
Net cash used in financing activities
    (139,347 )     (9,498 )     (31,916 )
 
                 
 
                       
Net increase (decrease) in cash and cash equivalents
    (14,132 )     29,281       (3,538 )
 
                       
Cash and cash equivalents at beginning of year
    52,285       23,004       26,542  
 
                 
 
                       
Cash and cash equivalents at end of year
  $ 38,153     $ 52,285     $ 23,004  
 
                 
 
                       
Supplemental disclosure of cash flow information:
                       
 
                       
Cash paid during the year for:
                       
 
                       
Interest on deposits and borrowings
  $ 20,726     $ 30,396     $ 36,687  
 
                 
 
                       
Income taxes
  $ 144     $ 250     $ 1,125  
 
                 
 
                       
Transfers from loans to real estate acquired through foreclosure
  $ 9,631     $ 6,574     $ 5,490  
 
                 

52


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    Camco Financial Corporation (“Camco” or the “Corporation”) is a financial holding company whose business activities are limited primarily to holding the common stock of Advantage Bank (“Advantage” or the “Bank”) and Camco Title Agency (“Camco Title”). Advantage conducts a general banking business within Ohio, West Virginia and northern Kentucky which consists of attracting deposits from the general public and applying those funds to the origination of loans for residential, consumer and nonresidential purposes. Advantage’s profitability is significantly dependent on net interest income, which is the difference between interest income generated from interest-earning assets (i.e. loans and investments) and the interest expense paid on interest-bearing liabilities (i.e. customer deposits and borrowed funds). Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing liabilities and the interest received or paid on these balances. The level of interest rates paid or received by Advantage can be significantly influenced by a number of factors, such as governmental monetary policy, that are outside of management’s control.
    The consolidated financial information presented herein has been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and general accounting practices within the financial services industry. In preparing financial statements in accordance with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from such estimates.
    The following is a summary of the Corporation’s significant accounting policies which have been consistently applied in the preparation of the accompanying consolidated financial statements. Some items in the prior-year financial statements were reclassified to conform to the current year’s presentation.
    1. Principles of Consolidation
    The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
    2. Investment Securities
    Investment securities are classified as held to maturity or available for sale upon acquisition. Securities classified as held to maturity are carried at cost only if the Corporation has the positive intent and ability to hold these securities to maturity. Securities designated as available for sale are carried at fair value with resulting unrealized gains or losses recorded to stockholders’ equity. Realized gains and losses on sales of securities are recognized on the trade date using the specific identification method. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

53


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
    3. Loans Receivable
    Loans held in the portfolio are stated at the principal amount outstanding, adjusted for deferred loan origination fees and costs and the allowance for loan losses.
    The accrual of interest on loans is discontinued at the time the loan is three monthly payments delinquent unless the credit is well secured and in the process of collection. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. Uncollectible interest on loans that are contractually past due is charged off, or an allowance is established based on management’s periodic evaluation. The allowance is established by a charge to interest income equal to all interest previously accrued and not received, and income is not recognized until, in management’s judgment, the borrower’s ability to make periodic interest and principal payments has returned to normal, in which case the loan is returned to accrual status.
    Loans held for sale are carried at the lower of cost (less principal payments received) or fair value (market value), calculated on an aggregate basis. At December 31, 2009 and 2008, loans held for sale were carried at cost.
    4. Loan Origination and Commitment Fees
    Currently, the Corporation accounts for loan origination fees and costs by deferring all loan origination fees received, net of certain direct origination costs, on a loan-by-loan basis and amortizing the interest income using the interest method, giving effect to actual loan prepayments. Fees received for loan commitments are deferred and amortized over the life of the related loan using the interest method.
    5. Allowance for Loan Losses
    It is the Corporation’s policy to provide valuation allowances for estimated losses on loans based upon past loss experience, current trends in the level of delinquent and problem loans, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral and current economic conditions in the Bank’s primary market areas. When the collection of a loan becomes doubtful, or otherwise troubled, the Corporation records a charge-off or an allowance equal to the difference between the fair value of the property securing the loan and the loan’s carrying value. Such provision is based on management’s estimate of the fair value of the underlying collateral, taking into consideration the current and currently anticipated future operating or sales conditions. As a result, such estimates are particularly susceptible to changes that could result in a material adjustment to results of operations in the near term. Recovery of the carrying value of such loans is dependent to a great extent on economic, operating, and other conditions that may be beyond the Corporation’s control.
    The Corporation accounts for impaired loans by measurements based upon the present value of expected future cash flows discounted at the loan’s effective interest rate or, as an alternative, at the loan’s observable market price or fair value of the collateral.
    A loan is defined as impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. In applying the provisions, the Corporation considers its investment in owner-occupied one- to four-family residential loans, home equity lines of credit and consumer installment loans to be homogeneous and therefore excluded from separate identification for evaluation of impairment. With respect to the Corporation’s investment in multi-family, commercial and nonresidential loans, and its evaluation of any impairment thereon, such loans are generally

54


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE—A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
    5. Allowance for Loan Losses (continued)
    collateral-dependent and as a result are carried as a practical expedient at the lower of cost or fair value. It is the Corporation’s policy to charge off unsecured credits that are more than ninety days delinquent.
    The allowance for impaired loans is included in the Bank’s overall allowance for credit losses. The provision necessary to increase this allowance is included in the Bank’s overall provision for losses on loans.
    6. Real Estate Acquired Through Foreclosure
    Real estate acquired through foreclosure is carried at the lower of the loan’s unpaid principal balance (cost) or fair value less estimated selling expenses at the date of acquisition. Real estate loss provisions are recorded if the fair value of the property subsequently declines below the amount determined at the recording date. In determining the lower of cost or fair value at acquisition, costs relating to development and improvement of property are capitalized. Costs relating to holding real estate acquired through foreclosure, net of rental income, are charged against earnings as incurred.
    7. Office Premises and Equipment
    Office premises and equipment are carried at cost and include expenditures which extend the useful lives of existing assets. Maintenance, repairs and minor renewals are expensed as incurred. For financial reporting, depreciation and amortization are provided on the straight-line method over the useful lives of the assets, estimated to be ten to fifty years for buildings and improvements and three to twenty-five years for furniture, fixtures and equipment. An accelerated depreciation method is used for tax reporting purposes.
    8. Mortgage Servicing Rights
    The Corporation accounts for mortgage servicing rights (“MSRs”) as separate assets. Mortgage servicing rights are acquired through either the purchase or origination of mortgage loans and the subsequent sale of those loans with servicing rights retained. At that time, an allocation of the cost of the loan is considered the mortgage servicing right asset.
    The Corporation assesses the rights for impairment quarterly. Impairment is measured based on fair value. The mortgage servicing rights recorded by the Bank are segregated into pools for valuation purposes, using as pooling criteria the loan term and coupon rate.
    To determine the fair value of the MSRs each reporting quarter, information is transmitted to a third party provider who assists in determining the fair value of MSRs, as described below.
    Servicing assets are recognized as separate assets when loans are sold with servicing retained. A pooling methodology to the servicing valuation, in which loans with similar characteristics are “pooled” together, is applied for valuation purposes. Once pooled, each grouping of loans is evaluated on a discounted earnings basis to determine the present value of future earnings that a purchaser could expect to realize from the portfolio. Earnings are projected from a variety of sources including loan service fees, interest earned on float, net interest earned on escrow balances, miscellaneous income and costs to service the loans. The present value of future earnings is the estimated market value for the pool, calculated using consensus assumptions that a third party purchaser would utilize in evaluating a potential acquisition of the servicing. Events that may significantly affect the estimates used are changes in interest rates and the related impact on mortgage loan prepayment speeds and

55


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE—A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
    8. Mortgage Servicing Rights (continued)
    the payment performance of the underlying loans. The interest rate for float is also calculated utilizing the current period fed funds rate. Mortgage loan prepayment speeds are calculated by taking into consideration Advantage Bank’s historical trends when estimating prepayment speeds and helped provide scenarios with each evaluation. Based on the assumptions, pre-tax projections are prepared for each pool of loans serviced. These earning figures approximate the cash flow that could be received from the servicing portfolio. Valuation results are presented quarterly to management. At that time, the information is reviewed and MSRs are marked to the lower of amortized cost or fair value for the current quarter.
    The Corporation recorded capitalization related to mortgage servicing rights totaling approximately $1.2 million, $604,000, and $679,000, for the years ended December 31, 2009, 2008 and 2007, respectively.
    The Corporation recorded amortization related to mortgage servicing rights totaling approximately $360,000, $3.3 million and $747,000, for the years ended December 31, 2009, 2008 and 2007, respectively. The carrying value of the Corporation’s mortgage servicing rights, which approximated their fair value, totaled approximately $4.4 million and $3.7 million at December 31, 2009 and 2008 respectively. Fair value was determined using discount rates ranging from 7.5% to 9.0% in 2009 and 8.0% to 12.0% in 2008, and prepayment speeds ranging from 6.0% to 31.4% in 2009 and from 9.6% to 30.0% in 2008.
    At December 31, 2009 and 2008, the Bank was servicing mortgage loans of approximately $497.0 million and $497.4 million, respectively, which were sold to the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and other investors.
    9. Goodwill
    In prior years, the Corporation has grown through mergers and acquisitions accounted for under the purchase method of accounting. Under the purchase method, the Corporation is required to allocate the cost of an acquired company to the assets acquired, including identified intangible assets, and liabilities assumed based on their estimated fair values at the date of acquisition. The excess cost over the net assets acquired represents goodwill, which is not subject to amortization.
    Goodwill arising from business combinations represents the value attributable to unidentifiable intangible elements in the business acquired. Goodwill recorded by the Corporation in connection with its acquisitions relates to the inherent value in the businesses acquired and this value is dependent upon the Corporation’s’ ability to provide quality, cost-effective services in a competitive market place. As such, goodwill value is supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or the inability to deliver cost-effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods.
    Goodwill is not amortized but is tested for impairment when indicators of impairment exist, or at least annually. Potential goodwill impairment exists when the fair value of the reporting unit (as defined by US GAAP) is less than its carrying value. An impairment loss is recognized in earnings only when the carrying amount of goodwill is less than its implied fair value. The 2008 evaluation showed impairment and the total goodwill was written off per the fair value appraisal in December 2008.

56


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE—A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
    10. Federal Income Taxes
    Income taxes are provided based on the liability method of accounting, which includes the recognition of deferred tax assets and liabilities for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. In general, Camco records deferred tax assets when the event giving rise to the tax benefit has been recognized in the Consolidated Financial Statements.
    A valuation allowance is recognized to reduce any deferred tax assets that, based upon available information, it is more-likely-than-not all, or any portion, of the deferred tax asset will not be realized. Assessing the need for, and amount of, a valuation allowance for deferred tax assets requires significant judgment and analysis of evidence regarding realization of the deferred tax assets. In most cases, the realization of deferred tax assets is dependent upon Camco generating a sufficient level of taxable income in future periods, which can be difficult to predict. Given the nature of Camco’s deferred tax assets, management determined no valuation allowances were needed at either December 31, 2009 or 2008.
    The calculation of tax liabilities is complex and requires the use of estimates and judgment since it involves the application of complex tax laws that are subject to different interpretations by Camco and the various tax authorities. These interpretations are subject to challenge by the tax authorities upon audit or to reinterpretation based on management’s ongoing assessment of facts and evolving case law.
    From time-to-time and in the ordinary course of business, Camco is involved in inquiries and reviews by tax authorities that normally require management to provide supplemental information to support certain tax positions taken in the tax returns. Uncertain tax positions are initially recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Management believes it has taken appropriate positions on its tax returns, although the ultimate outcome of any tax review cannot be predicted with certainty. Still, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the current and historical financial statements.

57


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE—A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
    11. Earnings Per Share
    Basic earnings per common share is computed based upon the weighted-average number of common shares outstanding during the year. Diluted earnings per common share is computed including the dilutive effect of additional potential common shares issuable under outstanding stock options. Diluted earnings per share is not computed for periods in which an operating loss is sustained. The computations were as follows for the years ended December 31:
                         
For the years ended (in thousands, except per share information)   2009     2008     2007  
BASIC:
                       
Net earnings (loss)
  $ (11,217 )   $ (15,324 )   $ 4,501  
 
                       
Weighted average common shares outstanding
    7,202       7,156       7,327  
 
                 
 
                       
Earnings (loss) per share — Basic
  $ (1.56 )   $ (2.14 )   $ 0.61  
 
                 
 
                       
DILUTED:
                       
Net earnings (loss)
  $ (11,217 )   $ (15,324 )   $ 4,501  
 
                       
Weighted average common shares outstanding
    7,202       7,156       7,327  
Dilutive effect of stock options
    0       0       1  
 
                 
Total common shares and dilutive potential common shares
    7,202       7,156       7,328  
 
                       
Diluted earnings (loss) per share
  $ (1.56 )   $ (2.14 )   $ 0.61  
 
                 
    Options to purchase 255,833, 219,990 and 283,557 shares of common stock at December 31, 2009, 2008 and 2007, respectively, were excluded from the computation of diluted earnings per share for those years because of the loss incurred and anti-dilutive impact of the options.
    12. Cash and Cash Equivalents
    Cash and cash equivalents consist of cash and due from banks and interest-bearing deposits in other financial institutions with original maturities of three months or less.
    13. Advertising
    Advertising costs are expensed when incurred.

58


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE—A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
        .
14. New Accounting Pronouncements
     On June 29, 2009, the Financial Accounting Standards Board (FASB) issued an accounting pronouncement establishing the FASB Accounting Standards Codification (ASC) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities. Other than resolving certain minor inconsistencies in current U.S. generally accepted accounting principles (GAAP), the ASC is not intended to change GAAP, but rather to make it easier to review and research GAAP applicable to a particular transaction or specific accounting issue.
     ASC Topic 820, Fair Value Measurement and Disclosure. In April 2009, an amendment to the accounting and reporting standards of fair value measurements and disclosures was issued. The amendment provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. This amendment also provides guidance on identifying circumstances that indicate a transaction is not orderly. The adoption of this standard did not have a material effect on the Corporation’s financial statements.
     ASC Topic 320, Investments — Debt and Equity Securities. Effective June 30, 2009, the Corporation adopted the amendment to the accounting and reporting standards regarding recognition and disclosure of other-than-temporary impairment (“OTTI”). This amendment requires recognition of only the credit portion of OTTI in current earnings for those debt securities where there is no intent to sell or it is more likely than not the Corporation would not be required to sell the security prior to expected recovery. The remaining portion of the OTTI is to be included in other comprehensive income. The adoption of this amendment did not have a material impact on the Corporation’s financial statements.
     ASC Topic 855, Subsequent Events. On May 28, 2009, the FASB issued an accounting pronouncement establishing general standards of accounting for and disclosure of subsequent events, which are events occurring after the balance sheet date but before the date the financial statements are issued or available to be issued. In particular, the pronouncement requires entities to recognize in the financial statements the effect of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date, including the estimates inherent in the financial preparation process. Entities may not recognize the impact of subsequent events that provide evidence about conditions that did not exist at the balance sheet date but arose after that date.
     ASC Topic 860, Transfers and Servicing. In November 2009, an amendment to the accounting standards for transfers of financial assets was issued. This amendment removes the concept of a qualifying special purpose entity from existing GAAP and removes the exception from applying the accounting and reporting standards within ASC 810, Consolidation, to qualifying special purpose entities. This amendment also establishes conditions for accounting and reporting of a transfer of a portion of a financial asset, modifies the asset sale/derecognition criteria, and changes how retained interests are initially measured. This amendment is expected to provide greater transparency about transfers of financial assets and a transferor’s continuing involvement, if any, with the transferred assets. This accounting pronouncement will be effective in 2010. The adoption of this pronouncement is not expected to have a material impact on the Corporation’s financial statements.

59


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE—A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued).
     14. New Accounting Pronouncements (continued)
     ASC Topic 810, Consolidation. In November 2009, an amendment to the accounting standards for consolidation was issued. The new guidance amends the criteria for determining the primary beneficiary of, and the entity required to consolidate, a variable interest entity. This accounting pronouncement will be effective in 2010. The adoption of this pronouncement is not expected to have a material on the Corporation’s financial statements.
     15. Reclassifications
Some items in the prior year financial statements were reclassified to conform to the current presentation.

60


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B — INVESTMENT SECURITIES
    The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of investment securities at December 31, 2009 and 2008 are as follows:
                                 
    2009  
            Gross     Gross     Estimated  
    Amortized     unrealized     unrealized     fair  
    cost     gains     losses     value  
    (In thousands)  
Available for sale:
                               
U.S. Government sponsored enterprises
  $ 14,514     $ 88     $ 38     $ 14,564  
Corporate equity securities
    157               69       88  
Mortgage-backed securities
    39,690       1,609       1       41,298  
 
                       
Total investment securities available for sale
  $ 54,361     $ 1,697     $ 108     $ 55,950  
 
                       
 
                               
Held to maturity:
                               
Municipal bonds
  $ 501     $ 57     $     $ 558  
Mortgage-backed securities
    1,612       36       6       1,642  
 
                       
Total investment securities held to maturity
  $ 2,113     $ 93     $ 6     $ 2,200  
 
                       
                                 
    2008  
            Gross     Gross     Estimated  
    Amortized     unrealized     unrealized     fair  
    cost     gains     losses     value  
    (In thousands)  
Available for sale:
                               
U.S. Government sponsored enterprises
  $ 28,318     $ 321     $     $ 28,639  
Municipal bonds
    100       1             101  
Corporate equity securities
    157             14       143  
Mortgage-backed securities
    55,218       1,252       1       56,469  
 
                       
Total investment securities available for sale
  $ 83,793     $ 1,574     $ 15     $ 85,352  
 
                       
 
                               
Held to maturity:
                               
U.S. Government sponsored enterprises
  $ 10,955     $ 89     $     $ 11,044  
Municipal bonds
    541       33             574  
Mortgage-backed securities
    1,910       28       26       1,912  
 
                       
Total investment securities held to maturity
  $ 13,406     $ 150     $ 26     $ 13,530  
 
                       

61


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE—B — INVESTMENT SECURITIES (continued).
    The amortized cost and estimated fair value of investment securities at December 31, 2009 by contractual term to maturity are shown below.
                                 
    Available for Sale     Held to Maturity  
            Estimated             Estimated  
    Amortized     fair     Amortized     fair  
    cost     value     Cost     value  
    (In thousands)  
Due in one year or less
                       
Due after one year through five years
  $ 11,514     $ 11,602     $ 411     $ 448  
Due after five years through ten years
    3,000       2,962              
Due after ten years
                90       110  
 
                       
Total investment securities
    14,514       14,564       501       558  
 
                       
 
                               
Due in one year or less
    951       971       2       2  
Due after one year through five years
    7,730       7,931       1       1  
Due after five years through ten years
    7,048       7,366       440       448  
Due after ten years
    23,961       25,030       1,169       1,191  
Total Mortgage-backed securities
    39,690       41,298       1,612       1,642  
 
                       
 
                               
Corporate equity securities
    157       88              
 
                       
 
                               
Total
  $ 54,361     $ 55,950     $ 2,113     $ 2,200  
 
                       
    Proceeds from sales of investment securities during the years ended December 31, 2009, 2008 and 2007, totaled $-, $4.3 million and $3,000 respectively, resulting in gross realized gains of $-, $2,000 and $1,000 in those respective years.

62


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE–B — INVESTMENT SECURITIES (continued).
The table below indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2009 and 2008, are as follows:
                                 
    2009  
    Less than 12 months     More than 12 months  
    Fair     Unrealized     Fair     Unrealized  
Description of securities:   value     losses     value     losses  
    (In thousands)  
Available for sale:
                               
Corporate equity securities
  $ 43     $ 55     $ 45     $ 14  
U.S. Government sponsored enterprises
    4,976       38              
Mortgage-backed securities
    45       1              
Held to maturity
                               
Mortgage-backed securities
    25       1       522       5  
 
                       
Total temporarily impaired securities
  $ 5,089     $ 95     $ 567     $ 19  
 
                       
Management has the intent and ability to hold these securities for the foreseeable future and the decline in the fair value is primarily due to changes in market interest rates. The fair values are expected to recover as securities approach maturity dates.
                                 
    2008  
    Less than 12 months     More than 12 months  
    Fair     Unrealized     Fair     Unrealized  
Description of securities:   value     losses     value     losses  
    (In thousands)  
Available for sale:
                               
Corporate equity securities
  $ 143     $ 14     $     $  
Mortgage-backed securities
    2,495       1              
Held to maturity
                               
Mortgage-backed securities
    599       22       254       4  
 
                       
Total temporarily impaired securities
  $ 3,237     $ 37     $ 254     $ 4  
 
                       
Management has the intent and ability to hold these securities for the foreseeable future and the decline in the fair value is primarily due to an increase in market interest rates. The fair values are expected to recover as securities approach maturity dates.
At December 31, 2009 and 2008, approximately $34.0 million and $81.7 million respectively was pledged in accordance with federal and state requirements to secure deposits and repurchase agreements.

63


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE–C — LOANS RECEIVABLE
                 
    2009     2008  
    (In thousands)  
Conventional real estate loans:
               
Residential properties
  $ 332,323     $ 402,736  
Multi-family
    39,027       38,633  
Nonresidential real estate
    124,245       129,334  
Construction
    16,384       31,097  
Commercial & development
    36,392       40,616  
Home equity lines of credit
    109,163       125,442  
Consumer, education and other loans
    17,743       4,176  
 
           
Total
    675,277       772,034  
 
               
Increase (decrease) due to:
               
Unamortized yield adjustments
    (156 )     354  
Allowance for loan losses
    (16,099 )     (15,747 )
 
           
 
               
Loans receivable — net
  $ 659,022     $ 756,641  
 
           
The Bank, in the ordinary course of business, has granted loans to certain of its directors, executive officers, and their related interests. Such loans are made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than normal risk of collectability. The aggregate dollar amount of these loans totaled approximately $691,000 and $561,000 at December 31, 2009 and 2008, respectively. During 2009, $531,000 of related party loans were made and repayments totaled $199,000. In 2009, the related party loans decreased by $202,000 due to the resignation of an executive officer.

64


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE–D — ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows for the years ended December 31:
                         
    2009     2008     2007  
    (In thousands)  
Balance at beginning of year
  $ 15,747     $ 6,623     $ 7,144  
Provision for losses on loans
    21,792       14,793       1,495  
Charge-offs of loans
    (22,546 )     (6,567 )     (2,097 )
Recoveries
    1,106       898       81  
 
                 
 
                       
Balance at end of year
  $ 16,099     $ 15,747     $ 6,623  
 
                 
    Nonaccrual and nonperforming loans totaled approximately $36.4 million, $53.5 million and $25.5 million at December 31, 2009, 2008 and 2007, respectively. Interest income that would have been recognized had such nonaccrual loans performed pursuant to contractual terms totaled approximately $2.1 million, $2.0 million and $1.5 million for the years ended December 31, 2009, 2008 and 2007, respectively.
    The Bank’s impaired loan information is as follows:
                 
At December 31:   2009     2008  
    (In thousands)  
Impaired loans with related allowance
  $ 7,509     $ 25,012  
Impaired loans with no related allowance
    18,473       24,370  
 
           
 
               
Total impaired loans
  $ 25,982     $ 49,382  
 
           
 
               
Allowance on impaired loans
  $ 4,399     $ 5,609  
 
           
                           
For the year ended December 31:   2009   2008   2007
    (In thousands)
Average balance of impaired loans
  $ 40,544     $ 25,936     $ 11,467  
Cash basis interest income recognized on impaired loans
  $ 1,044     $ 267     $ 674  
NOTE–E — OFFICE PREMISES AND EQUIPMENT
Office premises and equipment at December 31, is summarized as follows:
                 
    2009     2008  
    (In thousands)  
Land
  $ 2,120     $ 2,120  
Buildings and improvements
    13,134       13,368  
Furniture, fixtures and equipment
    9,325       9,619  
 
           
 
    24,579       25,107  
Less accumulated depreciation and amortization
    13,709       13,239  
 
           
 
               
 
  $ 10,870     $ 11,868  
 
           
Depreciation expense amounted to $1.3 million for the years ended December 31, 2009, 2008 and 2007.

65


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE–F — DEPOSITS
Deposit balances by type and weighted-average interest rate at December 31, 2009 and 2008, are summarized as follows:
                                 
    2009     2008  
    Amount     Rate     Amount     Rate  
            (Dollars in thousands)          
Noninterest-bearing checking accounts
  $ 38,911       %   $ 37,526       %
NOW accounts
    70,564       0.43       87,199       0.91  
Money market demand accounts
    96,172       0.68       112,749       1.35  
Passbook and statement savings accounts
    36,638       0.25       33,838       0.26  
Certificates of deposit
    417,617       2.73       452,644       3.79  
 
                       
 
                               
Total deposits
  $ 659,902       1.89 %   $ 723,956       2.71 %
 
                       
At December 31, 2009 and 2008, the Corporation had certificate of deposit accounts with balances in excess of $100,000 totaling $136.3 million and $160.9 million, respectively.
The contractual maturities of outstanding certificates of deposit are summarized as follows at December 31, 2009:
         
Year ending December 31:   (In thousands)  
2010
  $ 278,450  
2011
    105,466  
2012
    10,892  
2013
    16,927  
2014
    5,882  
Thereafter
     
 
     
 
       
Total certificate of deposit accounts
  $ 417,617  
 
     

66


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE–G — ADVANCES FROM THE FEDERAL HOME LOAN BANK
The following table summarizes the types of advances from the Federal Home Loan Bank of Cincinnati (FHLB) at December 31:
2009
                         
    Weighted-     Weighted-        
    Average     Average     Balance  
    Rate     Maturity (years)     (in thousands)  
Overnight repurchase-based
    3.25 %     0.01     $ 234  
Fixed-rate, interest only
    2.52       1.17       32,000  
Fixed-rate, amortizing
    6.02       7.89       2,057  
Fixed-rate, interest only, convertible
    3.88       3.62       38,000  
Fixed-rate, interest only, putable
    4.39       3.43       25,000  
 
                 
Total
    3.61 %     2.86     $ 97,291  
 
                 
2008
                         
    Weighted-     Weighted-        
    Average     Average     Balance  
    Rate     Maturity (years)     (in thousands)  
Overnight repurchase-based
    0.55 %     0.01     $ 15,000  
Fixed-rate, interest only
    3.80       1.04       78,000  
Fixed-rate, amortizing
    5.72       7.42       3,106  
Fixed-rate, interest only, convertible
    3.85       3.85       46,000  
Fixed-rate, interest only, putable
    4.39       4.43       25,000  
 
                 
Total
    3.65 %     2.35     $ 167,106  
 
                 
Convertible fixed-rate advances may be converted to floating-rate advances, on a quarterly basis, at the option of the FHLB. Putable fixed-rate advances may be terminated, on a quarterly basis after a fixed period of time, at the option of the FHLB. The Corporation may only repay convertible and putable advances upon conversion or termination by the FHLB without penalty, prior to maturity.

67


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE–G — ADVANCES FROM THE FEDERAL HOME LOAN BANK AND OTHER BORROWINGS (continued).
Advances from the FHLB, collateralized at December 31, 2009, by a blanket agreement using substantially all of the Bank’s one- to four- family and multi-family mortgage portfolios and the Bank’s investment in FHLB stock, are as follows:
             
Maturing year          
Ending December 31,   Interest rate range   (Dollars in thousands)  
2010
  0.49%-5.01%   $ 37,000  
2011
  3.85%-4.93%     8,000  
2012
  4.45%-4.70%     10,000  
2013
  2.66%-6.05%     10,196  
2014
  4.26%-6.10%     5,326  
Thereafter
  3.25%-7.00%     26,769  
 
         
 
           
 
      $ 97,291  
 
         
NOTE–H — OTHER BORROWINGS
In July 2007, the Corporation formed a special purpose entity, Camco Statutory Trust I (Trust), for the sole purpose of issuing $5.0 million trust preferred securities. Additionally, Camco issued subordinated debentures to the Trust in exchange for the proceeds of the offering of the trust preferred securities. The subordinated debentures represent the sole asset of the Trust. The subordinated debentures are due on September 15, 2037 (Due Date). The subordinated debentures carry a fixed rate of interest of 6.648% until September 15, 2012, at which point the interest rate becomes variable at 133 basis points over the three month LIBOR rate. The Corporation may redeem the subordinated debentures any time prior to the Due Date as follows:
         
Call Date   Terms
  9/15/2010    
Callable at 101.570% of par
  9/15/2011    
Callable at 100.785% of par
  9/15/2012    
Callable until Due Date at par
Camco and Camco Statutory Trust I are permitted to defer interest and dividend payments, respectively, for up to five consecutive years without resulting in a default. These dividends have been deferred since April, 2009.
Obligations for securities sold under agreements to repurchase were collateralized at December 31, 2009 and 2008, by investment securities with a book value including accrued interest of approximately $6.4 million and $16.6 million and a market value of approximately $6.7 million and $16.6 million, respectively. The maximum balance of repurchase agreements outstanding at any month-end during the years ended December 31, 2009 and 2008, was $15.2 million and $12.7 million, respectively, and the average month-end balance outstanding for 2009 and 2008 was approximately $8.9 million and $11.6 million, respectively.

68


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE–I — FEDERAL INCOME TAXES
A reconciliation of the rate of taxes which are payable at the federal statutory rate are summarized as follows:
                         
    2009     2008     2007  
    (In thousands)  
Federal income taxes computed at the expected statutory rate
  $ (5,955 )   $ (6,950 )   $ 2,130  
Increase (decrease) in taxes resulting from:
                       
Nontaxable dividend and interest income
    (10 )     (13 )     (13 )
Increase in cash surrender value of life insurance – net
    (258 )     (265 )     (267 )
Goodwill impairment
          2,272        
Surrender of bank owned life insurance & penalty
    452              
Other
    (526 )     (160 )     (85 )
 
                 
Federal income tax provision per consolidated financial statements
  $ (6,297 )   $ (5,116 )   $ 1,765  
 
                 
     The components of the Corporation’s net deferred tax liability at December 31 is as follows:
                 
Taxes (payable) refundable on temporary            
differences at statutory rate:   2009     2008  
    (In thousands)  
Deferred tax assets:
               
General loan loss allowance
  $ 5,495     $ 5,354  
Deferred income
    185       72  
Deferred compensation
    1,111       1,069  
Other assets
    526       681  
Deferred loan fees and non accrual interest
    56        
Tax credits and low income housing credits
    1,202        
NOL carryforward
    1,035        
 
           
Total deferred tax assets
    9,610       7,176  
 
           
 
               
Deferred tax liabilities:
               
FHLB stock dividends
  $ (5,017 )   $ (5,017 )
Mortgage servicing rights
    (1,507 )     (1,268 )
Book versus tax depreciation
    (976 )     (1,093 )
Original issue discount
    (525 )     (516 )
Unrealized gains on securities designated as available for sale
    (540 )     (531 )
Purchase price adjustments
    (162 )     (162 )
Other liabilities, net
    (76 )     (29 )
Deferred loan fees
          (117 )
 
           
Total deferred tax liabilities
    (8,803 )     (8,733 )
 
               
Net deferred tax asset (liability)
  $ 807     $ (1,557 )
 
           

69


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE I — FEDERAL INCOME TAXES (continued).
    At December 31, 2009, the Corporation has a $3.0 million net operating loss carry forward available to reduce future income taxes through 2029.
    For years prior to 1996, the Bank was allowed a special bad debt deduction generally limited to 8% of otherwise taxable income, subject to certain limitations based on aggregate loans and savings account balances at the end of the year. If the amounts that qualified as deductions for federal income taxes are later used for purposes other than for bad debt losses, including distributions in liquidation, such distributions will be subject to federal income taxes at the then current corporate income tax rate. The percentage of earnings bad debt deduction had accumulated to approximately $12.1 million as of December 31, 2009. The amount of the unrecognized deferred tax liability relating to the cumulative bad debt deduction was approximately $4.1 million at December 31, 2009.
NOTE J — COMMITMENTS
    The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers, including commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest-rate risk in excess of the amount recognized in the consolidated statement of financial condition. The contract or notional amounts of the commitments reflect the extent of the Bank’s involvement in such financial instruments.
    The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as those utilized for on-balance-sheet instruments.
    The following table summarizes the Bank’s outstanding commitments to originate adjustable and fixed-rate loans at December 31:
                 
            Unused lines of    
    Fixed Rate   Adjustable   Credit – HELOC   Stand by
(in thousands)   Loans   Rate Loans   & Other   letters of credit
2009   $4,984   $44,831   $54,286   $493
2008   $5,000   $21,000   $73,400   $575
    Management believes that all loan commitments are able to be funded through cash flow from operations and existing liquidity. Fees received in connection with these commitments have not been recognized in earnings.
    Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral on loans may vary but the preponderance of loans granted generally include a mortgage interest in real estate as security.

70


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE J — COMMITMENTS (continued).
    The Corporation has entered into lease agreements for office premises and equipment under operating leases which expire at various dates through the year ended December 31, 2017. The following table summarizes minimum payments due under lease agreements by year:
         
Year ending      
December 31,   (In thousands)  
2010
  $ 393  
2011
    306  
2012
    247  
2013
    154  
2014
    104  
2015 and thereafter
    253  
 
     
 
       
 
  $ 1,457  
 
     
    Rental expense under operating leases totaled approximately $395,000, $395,000 and $423,000 for the years ended December 31, 2009, 2008 and 2007, respectively.
NOTE K — REGULATORY CAPITAL
    Camco and Advantage are subject to the regulatory capital requirements of the Federal Reserve Board (the “FRB”) and Advantage is subject to the requirements of the Federal Deposit Insurance Corporation (the “FDIC”). Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Corporation and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
    The FRB and FDIC have adopted risk-based capital ratio guidelines to which the Corporation is subject. The guidelines establish a systematic analytical framework that makes regulatory capital requirements more sensitive to differences in risk profiles among banking organizations. Risk-based capital ratios are determined by allocating assets and specified off-balance sheet commitments to four risk-weighting categories, with higher levels of capital being required for the categories perceived as representing greater risk.

71


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE K — REGULATORY CAPITAL (continued).
    These guidelines divide the capital into two tiers. The first tier (“Tier I”) includes common equity, certain non-cumulative perpetual preferred stock (excluding auction rate issues) and minority interests in equity accounts of consolidated subsidiaries, less goodwill and certain other intangible assets (except mortgage servicing rights and purchased credit card relationships, subject to certain limitations). Supplementary (“Tier II”) capital includes, among other items, cumulative perpetual and long-term limited-life preferred stock, mandatory convertible securities, certain hybrid capital instruments, term subordinated debt and the allowance for loan losses, subject to certain limitations, less required deductions. Banks and financial holding companies are required to maintain a total risk-based capital ratio of 8%, of which 4% must be Tier I capital. The regulatory agencies may, however, set higher capital requirements when particular circumstances warrant. Banks experiencing or anticipating significant growth are expected to maintain capital ratios, including tangible capital positions, well above the minimum levels.
    During 2009, management was notified by the FDIC that for Advantage to be categorized as “well-capitalized” under the regulatory framework the Bank must have a Tier 1 leverage to average assets equating to 8.00%. To be categorized as “well-capitalized” Camco and Advantage must maintain this minimum capital ratio per the FDIC.
    The following tables present certain information regarding compliance by Camco and Advantage with applicable regulatory capital requirements at December 31, 2009:
                                                 
                                    To be “well-
                                    capitalized”
                                    under prompt
                    For capital   corrective
                    Adequacy   action
    Actual   purposes   provisions
    Amount   Ratio   Amount   Ratio   Amount   Ratio
    (Dollars in thousands)
Total capital to risk-weighted assets:
                                               
Camco Financial Corporation
  $ 71,979       11.42 %   ≥$ 50,439     8.0 %   ≥$ 63,048       10.0 %
Advantage Bank(1)
  $ 67,293       10.71 %   ≥$ 50,274     8.0 %   ≥$ 62,842       10.0 %
 
                                               
Tier I capital to risk-weighted assets:
                                               
Camco Financial Corporation
  $ 64,022       10.15 %   ≥$ 25,219     4.0 %   ≥$ 37,829       6.0 %
Advantage Bank(1)
  $ 59,336       9.44 %   ≥$ 25,137     4.0 %   ≥$ 37,705       6.0 %
 
                                               
Tier I leverage to average assets:
                                               
Camco Financial Corporation
  $ 64,022       7.33 %   ≥$ 34,945     4.0 %   ≥$ 43,681       5.0 %
Advantage Bank (1)
  $ 59,336       6.82 %   ≥$ 34,784     4.0 %   ≥$ 43,479       5.0 %
 
(1)   Due to the consent order Advantage cannont be considered well capitalized until such order is lifted by the FDIC and the Ohio Division

72


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE K — REGULATORY CAPITAL (continued).
    The following tables present certain information regarding compliance by Camco and Advantage with applicable regulatory capital requirements at December 31, 2008:
                                                 
                                    To be “well-
                                    capitalized”
                                    under prompt
                    For capital   corrective
                    Adequacy   action
    Actual   purposes   provisions
    Amount   Ratio   Amount   Ratio   Amount   Ratio
    (Dollars in thousands)
Total capital to risk-weighted assets:
                                               
Camco Financial Corporation
  $ 83,710       12.55 %   ≥$ 53,351     8.0 %   ≥$ 66,689       10.0 %
Advantage Bank
  $ 78,372       11.78 %   ≥$ 53,242     8.0 %   ≥$ 66,552       10.0 %
 
                                               
Tier I capital to risk-weighted assets:
                                               
Camco Financial Corporation
  $ 75,299       11.29 %   ≥$ 26,676     4.0 %   ≥$ 40,013       6.0 %
Advantage Bank
  $ 69,961       10.51 %   ≥$ 26,621     4.0 %   ≥$ 39,931       6.0 %
 
                                               
Tier I leverage to average assets:
                                               
Camco Financial Corporation
  $ 75,299       7.39 %   ≥$ 40,754     4.0 %   ≥$ 50,943       5.0 %
Advantage Bank
  $ 69,961       6.89 %   ≥$ 40,608     4.0 %   ≥$ 50,760       5.0 %
    Federal law prohibits a financial institution from making a capital distribution to anyone or paying management fees to any person having control of the institution if, after such distribution or payment, the institution would be undercapitalized. Additionally, the payment of dividends by Advantage Bank to its parent and by Camco Financial Corporation to shareholders is subject to restriction by regulatory agencies. These restrictions normally limit dividends from the Bank to the sum of the Bank’s current and prior two years’ earnings, as defined by the agencies.
 
    On March 4, 2009, Camco Financial Corporation (“Camco”) entered into a Memorandum of Understanding (the “MOU”) with the FRB. The MOU prohibits Camco from engaging in certain activities while the MOU is in effect, including, without the prior written approval of the FRB, (1) the declaration or payment of dividends to stockholders or (2) the repurchase of Camco’s stock.
 
    On April 30, 2009, Camco Financial Corporation (“Camco”) was notified by The FRB that it had conducted a “surveillance review” as of December 31, 2008. Based on that review, the FRB notified Camco that it must (i) eliminate shareholder dividends and (ii) defer interest payments on its 30-year junior subordinated deferrable interest notes that were issued to its wholly-owned subsidiary, Camco Statutory Trust I, in its trust preferred financing that was completed in July 2007. These prohibitions were memorialized in a written agreement with the FRB entered into on August 5, 2009. See below Camco and Camco Statutory Trust I are permitted to defer interest and dividend payments, respectively, for up to five consecutive years without resulting in a default. Camco may not resume these dividend or interest payments until it receives approval from the Federal Reserve.
 
    As a result of the surveillance review, Camco entered into a Written Agreement (the “Camco Agreement”) with the FRB on August 5, 2009. The Camco Agreement memorializes the requirements imposed on April 30, 2009 and requires Camco to obtain FRB approval prior to: (i) declaring or paying any dividends; (ii) receiving dividends or any other form of payment representing a reduction in capital

73


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE K — REGULATORY CAPITAL (continued).
    from Advantage; (iii) making any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities; (iv) incurring, increasing or guaranteeing any debt; or (v) repurchasing any Camco stock.
    Advantage entered into a consent agreement with the FDIC and the State of Ohio, Division of Financial Institutions (“Ohio Division”) that provided for the issuance of an order by the FDIC and the Ohio Division, which order was executed by the FDIC and Ohio Division on July 31, 2009 (the “Bank Agreement”). The Bank Agreement requires Advantage to, among other things, (i) increase its Tier 1 risk based capital to 8%; and (ii) seek regulatory approval prior to declaring or paying any cash dividend. As a result of the Bank Agreement, Advantage is disqualified as a public depository under Ohio law and will incur higher premiums for FDIC insurance of its accounts.
A material failure to comply with the provisions of either agreement could result in additional enforcement actions by the FDIC, the Ohio Division or the Federal Reserve.
NOTE L — FAIR VALUE
    As a financial services Corporation, the carrying value of certain financial assets and liabilities is impacted by the application of fair value measurements, either directly or indirectly. In certain cases, an asset or liability is measured and reported at fair value on a recurring basis, such as available-for-sale investment securities. In other cases, management must rely on estimates or judgments to determine if an asset or liability not measured at fair value warrants an impairment write-down or whether a valuation reserve should be established. Given the inherent volatility, the use of fair value measurements may have a significant impact on the carrying value of assets or liabilities, or result in material changes to the financial statements, from period to period.
    The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
      Cash and Cash Equivalents: The carrying amount reported in the consolidated statements of financial condition for cash and cash equivalents is deemed to approximate fair value.
 
      Investment Securities: Fair values for investment securities are based on quoted market prices and dealer quotes.
 
      Loans Held for Sale: Fair value for loans held for sale is the contracted sales price of loans committed for delivery, which is determined on the date of sale commitment.
 
      Loans Receivable: The loan portfolio has been segregated into categories with similar characteristics, such as one- to four-family residential real estate, multi-family residential real estate, installment and other. These loan categories were further delineated into fixed-rate and adjustable-rate loans. The fair values for the resultant loan categories were computed via discounted cash flow analysis, using current interest rates offered for loans with similar terms to borrowers of similar credit quality.
 
      Federal Home Loan Bank stock: The carrying amount presented in the consolidated statements of financial condition is deemed to approximate fair value.
 
      Accrued Interest Receivable and Payable: The carrying value for accrued interest approximates fair value.

74


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE L— FAIR VALUE (continued).
      Deposits: The fair values of deposits with no stated maturity, such as money market demand deposits, savings and NOW accounts have been analyzed by management and assigned estimated maturities and cash flows which are then discounted to derive a value. The fair value of fixed-rate certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.
 
      Advances from the Federal Home Loan Bank: The fair value of these advances is estimated using the rates currently offered for similar advances of similar remaining maturities or, when available, quoted market prices.
 
      Repurchase Agreements: The fair value of repurchase agreements is based on the discounted value of contractual cash flows using rates currently offered for similar maturities.
 
      Subordinated debentures: The fair value of subordinated debenture is based on the discounted value of contractual cash flows using rates currently offered for smaller maturities.
 
      Advances by Borrowers for Taxes and Insurance: The carrying amount of advances by borrowers for taxes and insurance is deemed to approximate fair value.
 
      Commitments to Extend Credit: For fixed-rate and adjustable-rate loan commitments, the fair value estimate considers the difference between current levels of interest rates and committed rates. At December 31, 2009 and 2008, the fair value of loan commitments was not material.
Based on the foregoing methods and assumptions, the carrying value and fair value of the Corporation’s financial instruments are as follows:
                                 
    December 31,  
    2009   2008  
    Carrying   Fair   Carrying   Fair
    value   value   value   value
    (In thousands)
Financial assets
                               
Cash and cash equivalents
  $ 38,153     $ 38,153     $ 52,285     $ 52,285  
Investment securities available for sale
    55,950       55,950       85,352       85,352  
Investment securities held to maturity
    2,113       2,200       13,406       13,530  
Loans held for sale
    475       485       2,185       2,205  
Loans receivable
    659,022       646,990       756,641       713,447  
Federal Home Loan Bank stock
    29,888       29,888       29,888       29,888  
Accrued interest receivable
    3,979       3,979       4,118       4,118  
 
                               
Financial liabilities
                               
Deposits
  $ 659,902     $ 647,149     $ 723,956     $ 733,322  
Advances from the Federal Home Loan Bank
    97,291       101,924       167,106       175,246  
Repurchase agreements
    6,941       6,941       11,727       11,727  
Subordinated debentures
    5,000       4,768       5,000       4,997  
Advances by borrowers for taxes and insurance
    1,909       1,909       2,458       2,458  
Accrued interest payable
    1,669       1,669       1,801       1,801  

75


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE L — FAIR VALUE (continued).
Listed below are three levels of inputs that Camco uses to measure fair value:
      Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
 
      Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also consists of an observable market price for a similar asset or liability. This includes the use of “matrix pricing” used to value debt securities absent the exclusive use of quoted prices.
 
      Level 3: Consists of unobservable inputs that are used to measure fair value when observable market inputs are not available. This could include the use of internally developed models, financial forecasting, etc.
    Fair value is defined as the price that would be received to sell an asset or transfer a liability between market participants at the balance sheet date. When possible, the Corporation looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Corporation looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and Camco must use other valuation methods to develop a fair value. The fair value of impaired loans is based on the fair value of the underlying collateral, which is estimated through third party appraisals or internal estimates of collateral values.
    The following table presents financial assets and liabilities measured on a recurring basis for balances at December 31, 2009 and 2008:
                                 
    Balance at   Fair Value Measurements at Reporting Date Using
(in thousands)   December 31,   Level 1   Level 2   Level 3
2009
 
Securities available for sale
  $ 55,950             $ 55,950          
 
                               
2008
                               
 
                               
Securities available for sale
  $ 85,352             $ 85,352          

76


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE L — FAIR VALUE (continued).
    The following table presents financial assets and liabilities measured on a non-recurring basis:
                                                
        Fair Value Measurements at Reporting Date Using    
 
  Balance at,                           Change in fair value
for the year ended
(in thousands)   December 31,   Level 1   Level 2   Level 3   December 31,
2009
 
Impaired loans
  $ 25,982                     $ 25,982     $ 13,081  
Real estate acquired through foreclosure
    9,660                       9,660       945  
 
                                       
2008
                                       
Impaired loans
  $ 49,382                     $ 49,382     $ 5,423  
Real estate acquired through foreclosure
    5,841                       5,841       1,054  
    Impaired loans, which are measured for impairment using the fair value of the collateral at December 31, 2009, had a carrying amount of $26.0 million, with a valuation allowance of $4.4 million, resulting in an additional provision for loan losses of $13.1 million during the year ended December 2009.
    Fair value for real estate acquired through foreclosure is generally determined by obtaining recent appraisals on the properties. Other types of valuing include broker price opinions and valuations pertaining to the current and anticipated deterioration in the regional economy and real estate market, as evidenced by, among other things, a net out migration of the local population, unemployment rates, increasing vacancy rates, borrower delinquencies, declining property values and rental prices, differences between foreclosure appraisals and real estate owned sales prices, and an increase in concessions and other forms of discounting or other items approved by our asset classification committee. The fair value under such appraisals is determined by using one of the following valuation techniques: income, cost or comparable sales. The fair value is then reduced by management’s estimate for the direct costs expected to be incurred in order to sell the property. Holding costs or maintenance expenses are recorded as period costs when occurred and are not included in the fair value estimate.

77


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M — BENEFIT PLANS
    The Corporation has a non-contributory retirement plan which provides benefits to certain key officers. The Corporation’s future obligations under the plan have been provided for via the purchase of single premium key man life insurance of which the Corporation is the beneficiary. The Corporation recorded expense related to the plan totaling approximately $62,000, $21,000 and $101,000 during the years ended December 31, 2009, 2008 and 2007, respectively.
    The Corporation also has a 401(k) Salary Savings Plan covering substantially all employees. Contributions by the employees are voluntary and are subject to matching contributions by the employer under a fixed percentage, which may be increased at the discretion of the Board of Directors. Total expense under this plan was $267,000, $330,000 and $360,000 for the years ended December 31, 2009, 2008 and 2007, respectively.
    Stock Option Plans
    The Corporation follows a fair-value based method for valuing stock-based compensation that measures compensation cost at the grant date based on the fair value of the award.
    The fair value of each option grant is estimated on the date of grant using the modified Black-Scholes options-pricing model. The following table details the fair value and assumptions used to value stock options as of the grant date that were granted in 2009 and 2008:
                 
    2009     2008  
Fair value, calculated
  $ 1.43     $ 0.74  
Exercise Price
  $ 2.46     $ 9.07  
Risk-free interest rate
    2.66 %     3.52 %
Expected stock price volatility
    61.00 %     15.75 %
Expected dividend yield
    1.63 %     6.00 %
Expected Life
  10 years   10 years
    The following information applies to options outstanding at December 31, 2009:
                                         
    Options outstanding     Options Exercisable  
            Weighted-                      
            Average     Weighted-             Weighted-  
            Remaining     Average             Average  
Range of   Number     Contractual     Exercise     Number     Exercise  
Exercise Prices   Outstanding     Life (Years)     Price     Exercisable     Price  
$1.89 - $2.50
    80,000       9.0     $ 2.46       80,000     $ 2.46  
$8.92 - $9.75
    24,675       7.3       9.00       11,437       9.10  
$11.36 - $14.16
    77,831       4.5       13.55       65,687       13.60  
$14.55 - $17.17
    78,327       3.5       16.43       78,327       16.43  
 
                             
 
    260,833       5.8     $ 10.59       235,451     $ 10.54  

78


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE M — BENEFIT PLANS (continued)
Stock Option Plans (continued)
A summary of unvested options as of, and changes during the year ended, December 31, 2009, were as follows:
         
    Number  
Unvested options:
       
Beginning of period
    64,986  
Granted
    80,000  
Forfeited
    (17,597 )
Vested during the period
    (102,007 )
 
     
Unvested options at December 31
    25,382  
The total intrinsic value of options exercised during the years ended December 31, 2009, 2008, and 2007, was $0, $0, and $2,000, respectively.
As of December 31, 2009, there was $125,000 of total unrecognized compensation cost related to non-vested stock options. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.0 years.
A summary of the status of the Corporation’s stock option plans as of December 31, 2009, 2008 and 2007, and changes during the years ending on those dates is presented below:
                                                 
    2009     2008     2007  
            Weighted             Weighted             Weighted  
            average             average             average  
            exercise             exercise             exercise  
    Shares     price     Shares     price     Shares     price  
Outstanding at beginning of year
    260,703     $ 14.11       318,238     $ 15.10       304,874     $ 15.20  
Granted
    80,000       2.46       47,167       9.07       26,920       12.34  
Exercised
                            (2,427 )     12.50  
Forfeited and Expired
    (79,870 )     13.96       (104,702 )     14.84       (11,129 )     14.67  
 
                                   
 
                                               
Outstanding at end of year
    260,833     $ 10.59       260,703     $ 14.11       318,238     $ 15.10  
 
                                   
 
                                               
Options exercisable at year-end
    235,451     $ 10.54       195,717     $ 15.01       254,717     $ 15.32  
 
                                   
Weighted-average fair value of options granted during the year
          $ 1.43             $ 0.74             $ 1.22  
 
                                         
On January 23, 2009, Camco awarded the Chief Executive Officer and President of Camco 50,000 shares of restricted stock in connection with his employment as Chief Executive Officer and President of Camco. The restricted stock vests over four years in equal installments of 12,500 shares each year, beginning on the first anniversary of the date of the restricted stock award. The restricted stock award was a private placement exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.

79


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE N — CAMCO FINANCIAL CORPORATION CONDENSED FINANCIAL INFORMATION
    The following condensed financial statements summarize the financial position of the Corporation as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years ended December 31, 2009, 2008 and 2007:
CAMCO FINANCIAL CORPORATION
STATEMENTS OF FINANCIAL CONDITION

December 31,
(In thousands)
                 
    2009     2008  
ASSETS
               
 
               
Cash in Advantage
  $ 796     $ 1,878  
Interest-bearing deposits in other financial institutions
    395       213  
Investment securities designated as available for sale
    88       143  
Investment in Advantage
    60,874       71,372  
Investment in Camco Title
    857       632  
Office premises and equipment — net
    1,145       1,159  
Cash surrender value of life insurance
    1,247       1,209  
Prepaid expenses and other assets
    559       332  
Deferred federal income taxes
    6        
Prepaid and refundable federal income taxes
    478       350  
 
           
 
               
Total assets
  $ 66,445     $ 77,288  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
Accounts payable and other accrued liabilities
  $ 931     $ 573  
Borrowings
    5,000       5,000  
Deferred federal income taxes
          15  
 
           
Total liabilities
    5,931       5,588  
 
               
Stockholders’ equity
               
Common stock
    8,885       8,835  
Additional paid-in capital
    60,124       59,896  
Retained earnings
    14,695       26,055  
Accumulated other comprehensive income (loss)
    1,049       1,028  
Unearned compensation
    (125 )      
Treasury stock, at cost
    (24,114 )     (24,114 )
 
           
Total stockholders’ equity
    60,514       71,700  
 
           
 
               
Total liabilities and stockholders’ equity
  $ 66,445     $ 77,288  
 
           

80


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE N — CAMCO FINANCIAL CORPORATION CONDENSED FINANCIAL INFORMATION (continued).
CAMCO FINANCIAL CORPORATION
STATEMENTS OF OPERATIONS

Year ended December 31,
(In thousands)
                         
    2009     2008     2007  
Income
                       
Dividends from Advantage
  $     $ 2,000     $ 3,000  
Dividends from Camco Title
          250       350  
Interest and other income
    61       68       157  
Gain on sale of investments
                1  
(Excess distributions from) undistributed earnings of Advantage
    (10,555 )     (16,168 )     2,069  
(Excess distribution from) undistributed earnings of Camco Title
    225       (179 )     (204 )
 
                 
Total income
    (10,269 )     (14,029 )     5,373  
Interest Expense
    343       343       139  
General, administrative and other expense
    1,073       1,601       1,107  
 
                 
Earnings (loss) before federal income tax credits
    (11,685 )     (15,973 )     4,127  
Federal income tax credits
    (468 )     (649 )     (374 )
 
                 
 
                       
Net earnings (loss)
  $ (11,217 )   $ (15,324 )   $ 4,501  
 
                 

81


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE N — CAMCO FINANCIAL CORPORATION CONDENSED FINANCIAL INFORMATION (continued).
CAMCO FINANCIAL CORPORATION
STATEMENTS OF CASH FLOWS

Year ended December 31,
(In thousands)
                         
    2009     2008     2007  
Cash flows from operating activities:
                       
Net earnings (loss) for the year
  $ (11,217 )   $ (15,324 )   $ 4,501  
Adjustments to reconcile net earnings (loss) to net cash flows provided by operating activities:
                       
(undistributed earnings) distribution in excess of earnings of Advantage
    10,555       16,168       (2,069 )
Excess distribution from (undistributed net earnings of) Camco Title
    (225 )     179       204  
Gain on sale of investments
                (1 )
Depreciation and amortization
    14       48       41  
Increase (decrease) in cash due to changes in:
                       
Prepaid expenses and other assets
    1       40       54  
Accounts payable and other liabilities
    283       51       (47 )
Accrued federal income taxes
    (128 )     (611 )     (145 )
Deferred federal income taxes
    (2 )     27       6  
 
                 
Net cash provided by operating activities
    (719 )     578       2,544  
 
                       
Cash flows from investing activities:
                       
Proceeds from redemption of available for sale securities
                3  
Net increase in cash surrender value of life insurance
    (38 )     (37 )     (36 )
(Increase) decrease in interest-bearing deposits in other financial institutions
    (182 )     (113 )     5,072  
 
                 
Net cash provided by (used in) investing activities
    (220 )     (150 )     5,039  
 
                       
Cash flows from financing activities:
                       
Proceeds from exercise of stock options
                31  
Proceeds from subordinated debentures
                5,000  
Dividends paid
    (143 )     (2,953 )     (4,411 )
Purchase of treasury shares
                (3,923 )
 
                 
Net cash used in financing activities
    (143 )     (2,953 )     (3,303 )
 
                 
 
                       
Net increase (decrease) in cash and cash equivalents
    (1,082 )     (2,525 )     4,280  
 
                       
Cash and cash equivalents at beginning of year
    1,878       4,403       123  
 
                 
 
                       
Cash and cash equivalents at end of year
  $ 796     $ 1,878     $ 4,403  
 
                 

82


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O — QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
    The following table summarizes the Corporation’s quarterly results for the years ended December 31, 2009 and 2008.
                                 
    Three Months Ended  
    December 31,     September 30,     June 30,     March 31,  
    (In thousands, except per share data)  
2009:
                               
Total interest income
  $ 10,616     $ 10,987     $ 11,234     $ 11,887  
Total interest expense
    4,394       4,808       5,350       6,042  
 
                       
 
                               
Net interest income
    6,222       6,179       5,884       5,845  
Provision for losses on loans (2)
    19,914       440       790       648  
Other income
    2,424       1,612       2,262       1,963  
General, administrative and other expenses
    6,968       7,249       6,893       7,003  
 
                       
 
                               
Earnings (loss) before income taxes (credits)
    (18,236 )     102       463       157  
Federal income taxes (credits) (1)
    (6,427 )     (253 )     461       (78 )
 
                       
 
                               
Net earnings (loss)
  $ (11,809 )   $ 355     $ 2     $ 235  
 
                       
 
                               
Earnings (loss) per share:
                               
Basic
  $ (1.64 )   $ 0.05     $ 0.00     $ 0.03  
 
                       
 
                               
Diluted
  $ (1.64 )   $ 0.05     $ 0.00     $ 0.03  
 
                       
 
(1)   The change in 2nd quarter federal income taxes is related to the surrender of bank owned life insurance.
 
(2)   The fourth quarter results were significantly affected by sizeable loan charge offs that were taken and the subsequent need to replenish the allowance for loan and lease losses through a provision of $19.9 million. The Credit Administration unit received substantial information related to several larger commercial credits that resulted in partial and full writedowns based on impairment and collateral dependency that was not received during prior quarters of 2009. Additionally consistent with accounting standards the company was required to consider events subsequent to December 31, 2009 to determine the end of year loss position. Specifically, during the fourth quarter and early 2010 we received information on three significant commercial relationships that required a total writedown or full specific loss reserve totaling $10.1 million. (included is a previously reported $2.6 million fraudulent loan). Additionally, we received specific fourth quarter information relating to our identified concentration in non owner occupied investors. A total of $1.8 million was required to be written off on four investors during the fourth quarter of 2009. Additionally, during the first two months of 2010 we received several property valuations on troubled credits that resulted in several smaller dollar writedowns.

83


Table of Contents

CAMCO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O — QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (continued).
                                 
    Three Months Ended  
    December 31,     September 30,     June 30,     March 31,  
    (In thousands, except per share data)  
2008:
                               
Total interest income
  $ 13,277     $ 14,107     $ 14,315     $ 15,084  
Total interest expense
    7,080       7,441       7,849       8,604  
 
                       
 
                               
Net interest income
    6,197       6,666       6,466       6,480  
Provision for losses on loans (1)
    11,031       590       850       2,322  
Other income
    (1,228 )     1,804       1,813       1,319  
General, administrative and other expenses
    14,553       6,586       6,886       7,139  
 
                       
 
                               
Earnings before income taxes
    (20,615 )     1,294       543       (1,662 )
Federal income taxes
    (4,852 )     225       170       (659 )
 
                       
 
                               
Net earnings (loss)
  $ (15,763 )   $ 1,069     $ 373     $ (1,003 )
 
                       
 
                               
Earnings (loss) per share:
                               
Basic
  $ (2.20 )   $ .15     $ .05     $ (.14 )
 
                       
 
                               
Diluted
  $ (2.20 )   $ .15     $ .05     $ (.14 )
 
                       
 
(1)   Comparing the 2009 fourth quarter provisions to that of 2008, the company experienced similar timing on large end of year provision, however we have determined that the causes are not the same. During the fourth quarter 2008 the Company’s internal monitoring of portfolio credit risk indicated an increasing negative trend in the Commercial loan portfolios in addition to declining economic indicators. Based on these trends management began to take a more conservative approach to its loan risk grading process and the factors that influence the bank’s allowance for loan loss. Specifically, this more conservative approach increased the consideration given to qualitative factors (e.g. delinquency, non-performing loans, economic indicators, etc.) in the company’s loan loss assumption and the resulting need for higher provisions for loan loss.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Corporation has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2009. As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2009.
There were no changes in Camco’s internal controls over financial reporting that occurred during the quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.
The information under the sections “MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING” and “REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM” in Item 8 of this Form 10-K, are incorporated herein by reference.
Item 9B. Other Information.
Not applicable

84


Table of Contents

PART III
Item 10. Directors, Executive Officers and Corporate Governance.
     The information contained under the captions “Election of Directors,” “Incumbent Directors,” “Executive Officers,” “Board Meetings, Committees, Risk Oversight and Compensation of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement for the 2010 Annual Meeting of Stockholders to be filed by Camco on or about April 19, 2010 (“2010 Proxy Statement”), is incorporated herein by reference.
     Camco has adopted a Code of Ethics that applies to all directors and employees. The Code of Ethics is posted on Camco’s website at www.camcofinancial.com.
Item 11. Executive Compensation.
     The information contained in the 2010 Proxy Statement under the captions, “Board Meetings, Committees, Risk Oversight and Compensation of Directors”, “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Compensation of Executive Officers” and “Employment and Change of Control Agreements” is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
     The information contained in the 2010 Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management” is incorporated herein by reference.
     Camco maintains the Camco Financial Corporation 1995 Stock Option and Incentive Plan, the First Ashland Financial Corporation 1995 Stock Option and Incentive Plan, the Westwood Homestead Financial Corporation 1997 Stock Option Plan and the Camco Financial Corporation 2002 Equity Incentive Plan (collectively, the “Plans”) under which it may issue equity securities to its directors, officers and employees. Each of the Plans was approved by Camco’s stockholders.
     The following table shows, as of December 31, 2009, the number of common shares issuable upon the exercise of outstanding stock options, the weighted-average exercise price of those stock options, and the number of common shares remaining for future issuance under the Plans, excluding shares issuable upon exercise of outstanding stock options.
Equity Compensation Plan Information
                         
                    Number of securities
                    remaining available for
    Number of securities           future issuance under
    to be issued upon   Weighted-average   equity compensation plans
    exercise of   exercise price of   (excluding securities
Plan Category   outstanding options   outstanding options   reflected in column (a))
Equity compensation plans approved by security holders
    260,833     $ 10.59       291,938  
Item 13. Certain Relationships and Related Transactions, and Director Independence
     The information contained in the 2010 Proxy Statement under the captions “Related Person Transactions” and “Board Meetings, Committees, Risk Oversight and Compensation of Directors” is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
     The information contained in the 2010 Proxy Statement under the captions “Audit and Risk Management Committee Report” and “Audit Fees” is incorporated herein by reference.

85


Table of Contents

PART IV
Item 15. Exhibits and Financial Statement Schedules.
     Exhibits.
     
3(i)
  Certificate of Incorporation
 
   
3(ii)
  Bylaws
 
   
4
  Letter of Agreement to Furnish Copies of Long-term Debt Instruments and Agreements
 
   
10(i)
  Employment Agreement between Camco and James E. Huston
 
   
10(iii)
  Form of 2002 Salary Continuation Agreement
 
   
10(iv)
  Form of 1996 Salary Continuation Agreement
 
   
10(v)
  Form of Executive Deferred Compensation Agreement
 
   
10(vi)
  First Ashland Financial Corporation 1995 Stock Option and Incentive Plan
 
   
10(vii)
  Incentive Stock Option Award Agreement Pursuant to the First Ashland Financial Corporation 1995 Stock Option and Incentive Plan
 
   
10(viii)
  Non-Qualified Stock Option Award Agreement Pursuant to the First Ashland Financial Corporation 1995 Stock Option and Incentive Plan
 
   
10(ix)
  Camco Financial Corporation 2002 Equity Incentive Plan
 
   
10(x)
  Incentive Stock Option Award Agreement Pursuant to the Camco Financial Corporation 2002 Equity and Incentive Plan
 
   
10(xi)
  Non-Qualified Stock Option Award Agreement Pursuant to the Camco Financial Corporation 2002 Equity and Incentive Plan
 
   
10(xii)
  Camco Financial Corporation 1995 Stock Option and Incentive Plan
 
   
10(xiii)
  Westwood Homestead Financial Corporation 1997 Stock Option Plan
 
   
10(xiv)
  Incentive Stock Option Award Agreement Pursuant to the Westwood Homestead Financial Corporation 1997 Stock Option Plan
 
   
10(xv)
  Non-Qualified Stock Option Award Agreement Pursuant to the Westwood Homestead Financial Corporation 1997 Stock Option Plan
 
   
10(xvi)
  Summary of Cash Bonus Plan
 
   
10(xvii)
  Change of Control Agreement including Attachment A listing participants
 
   
10(xviii)
  Restricted Stock Award Agreement of James E. Huston
 
   
10(xix)
  Stock Option Award Agreement of James E. Huston
 
   
10(xx)
  Amendment to 1997 Stock Option Plan
 
   
10(xxi)
  Amendment to 2002 Stock Option Plan
 
   
10 (xxii)
  Amendment to Change of Control Agreements
 
   
10 (xxiii)
  Amendment to Salary Continuation Agreements
 
   
10 (xxiv)
  Cease and Desist
 
   
11
  Statement regarding computation of per share earnings
 
   
14
  Code of Ethics
 
   
21
  Subsidiaries of Camco
 
   
23
  Consent of Plante & Moran PLLC regarding Camco’s Consolidated Financial Statements and Form S-8
 
   
31(i)
  Certification of Chief Executive Officer
 
   
31(ii)
  Certification of Chief Financial Officer
 
   
32(i)
  Certification of Chief Executive Officer
 
   
32(ii)
  Certification of Chief Financial Officer

86


Table of Contents

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.
         
  Camco Financial Corporation
 
 
  By   /s/ James E. Huston    
    James E. Huston,   
    Chairman, President, Chief Executive Officer   
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
             
By
  /s/ Jeffrey T. Tucker   By   /s/ Paul D. Leake
 
           
 
  Jeffrey T. Tucker,       Paul D. Leake,
 
  Lead Director       Director
 
           
Date:
  March 29, 2010   Date:   March 29, 2010
 
           
By
  /s/ Carson K. Miller   By   /s/ Terry A. Feick
 
           
 
  Carson K. Miller       Terry A. Feick,
 
  Director       Director
 
           
Date:
  March 29, 2010   Date:   March 29, 2010
 
           
By
  /s/ Edward D. Goodyear   By   /s/ Andrew S. Dix
 
           
 
  Edward D. Goodyear,       Andrew S. Dix
 
  Director       Director
 
           
Date:
  March 29, 2010   Date:   March 29, 2010
 
           
By
  /s/ J. Timothy Young   By   /s/ Douglas F Mock
 
           
 
  J. Timothy Young       Douglas F. Mock
 
  Director       Director
 
           
Date:
  March 29 , 2010   Date:   March 29, 2010
 
           
By
  /s/ James E. Brooks   By   /s/ Kristina K. Tipton
 
           
 
  James E. Brooks       Kristina K. Tipton
 
  Chief Financial Officer,
Principal Financial Officer
      Principal Accounting Officer
 
           
Date:
  March 29, 2010   Date:   March 29, 2010

 


Table of Contents

INDEX TO EXHIBITS
         
ITEM   DESCRIPTION   DOCUMENT REFERENCE
Exhibit 3(i)
  Third Restated Certificate of Incorporation of Camco Financial Corporation, as amended   Incorporated by reference to Camco’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, Film no. 04668873 (“2003 Form 10-K”), Exhibit 3(i)
 
       
Exhibit 3(ii)
  2003 Amended and Restated By-Laws of Camco Financial Corporation   Incorporated by reference to Camco’s Annual Annual Report on Form 10-K for the fiscal year ended December 31, 2006, Exhibit 3(ii)
 
       
Exhibit 4
  Letter of Agreement to Furnish Copies of Long-term Debt Instruments and Agreements   Filed herewith
 
       
Exhibit 10(i)
  Employment Agreement dated January 1, 2001, by and between Camco Financial Corporation and James E. Huston   Incorporated by reference to Camco’s 8-K filed on January 7, 2009, film no. 09512081 (“2009 8-K”), Exhibit 10
 
       
Exhibit 10(iii)
  Form of 2002 Salary Continuation Agreement, including individualized Schedule A’s for each participant   Incorporated by reference to Camco’s 2003 Form 10-K, Exhibit 10(iv)
 
       
Exhibit 10(iv)
  Form of 1996 Salary Continuation Agreement, including Schedule A’s for D. Edward Rugg and Edward A. Wright   Incorporated by reference to Camco’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (“2004 Form 10-K”), Exhibit 10(iv)
 
       
Exhibit 10(v)
  Form of Executive Deferred Compensation Agreement   Incorporated by reference to Camco’s 2003 Form 10-K, Exhibit 10(vi)
 
       
Exhibit 10(vi)
  First Ashland Financial Corporation 1995 Stock Option and Incentive Plan   Incorporated by reference to Camco’s Form S-8 filed on June 10, 2002, File Number 333-90142, Exhibit 4.01
 
       
Exhibit 10(vii)
  Incentive Stock Option Award Agreement Pursuant to the First Ashland Financial Corporation 1995 Stock Option and Incentive Plan   Incorporated by reference to Camco’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (“2004 Form 10-K”), Exhibit 10(vii)
 
       
Exhibit 10(viii)
  Non-Qualified Stock Option Award Agreement Pursuant to the First Ashland Financial Corporation 1995 Stock Option and Incentive Plan   Incorporated by reference to Camco’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (“2004 Form 10-K”), Exhibit 10(viii)
 
       
Exhibit 10(ix)
  Camco Financial Corporation 2002
Equity Incentive Plan
  Incorporated by reference to Camco’s Form S-8 filed on June 10, 2002, File Number 333-90152, Exhibit 4.01
 
       
Exhibit 10(x)
  Incentive Stock Option Award Agreement Pursuant to the Camco Financial Corporation 2002 Equity and Incentive Plan   Incorporated by reference to Camco’s Form 8-K filed on February 2, 2005, film no. 05570393 (“2005 8-K”), Exhibit 10.5

 


Table of Contents

INDEX TO EXHIBITS (continued)
         
ITEM   DESCRIPTION   DOCUMENT REFERENCE
Exhibit 10(xi)
  Non-Qualified Stock Option Award Agreement Pursuant to the Camco Financial Corporation 2002 Equity and Incentive Plan   Incorporated by reference to Camco’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (“2004 Form 10-K”), Exhibit 10(xi)
 
       
Exhibit 10(xii)
  Camco Financial Corporation 1995 Stock Option and Incentive Plan   Incorporated by reference to Camco’s Form S-8 filed on June 10, 2002, File Number 333-90166, Exhibit 4.01
 
       
Exhibit 10(xiii)
  Westwood Homestead Financial
Corporation 1997 Stock Option Plan
  Incorporated by reference to Camco’s Form S-8 filed on January 5, 2000, File Number 333-94113, Exhibit 4.01
 
       
Exhibit 10(xiv)
  Incentive Stock Option Award Agreement Pursuant to the Westwood Homestead Financial Corporation 1997 Stock Option Plan   Incorporated by reference to the 2005 8-K, Exhibit 10.4
 
       
Exhibit 10(xv)
  Non-Qualified Stock Option Award Agreement Pursuant to the Westwood Homestead Financial Corporation 1997 Stock Option Plan   Incorporated by reference to the 2005 8-K, Exhibit 10.3
 
       
Exhibit 10(xvi)
  Summary of Bonus Plan   Incorporated by reference to the 2008 10-k, Exhibit 10(xvi)
 
       
Exhibit 10(xvii)
  Change of Control Agreement including Attachment A listing participants   Incorporated by reference to the 2008 10-k, Exhibit 10(xvii)
 
       
Exhibit 10(xviii)
  Restricted Stock Award Agreement of James E. Huston   Incorporated by reference to the 2008 10-k, Exhibit 10(xviii)
 
       
Exhibit 10(xix)
  Stock Option Award Agreement of James E. Huston   Incorporated by reference to the 2008 10-k, Exhibit 10(xix)
 
       
Exhibit 10 (xx)
  Amendment to 1997 Stock Option Plan   Incorporated by reference to the 2008 10-k, Exhibit 10(xx)
 
       
Exhibit 10 (xxi)
  Amendment to 2002 Stock Option Plan   Incorporated by reference to the 2008 10-k, Exhibit 10(xxi)
 
       
Exhibit 10 (xxii)
  Amendment to Change of Control Agreements   Incorporated by reference to the 2008 10-k, Exhibit 10(xxii)
 
       
Exhibit 10 (xxiii)
  Amendment to Salary Continuation Agreements   Incorporated by reference to the 2008 10-k, Exhibit 10(xxiii)
 
       
Exhibit 10 (xxiv)
  Cease and Desist   Filed herewith
 
       
Exhibit 11
  Statement regarding computation of per share earnings   Incorporated by reference to Camco’s 2009 Annual Report to Stockholders, filed herewith as Exhibit 11
 
       
Exhibit 14
  Code of Ethics   Camco elects to satisfy Regulation S-K §229.406(c) by posting its Code of Ethics on its website at www.camcofinancial.com
 
       
Exhibit 21
  Subsidiaries of Camco   Incorporated by reference to Camco’s 2003 Form 10-K, Exhibit 21

 


Table of Contents

         
ITEM   DESCRIPTION   DOCUMENT REFERENCE
Exhibit 23
  Consent of Plante & Moran PLLC regarding Camco’s Consolidated Financial Statements and Form S-8   Filed herewith
 
       
Exhibit 31(i)
  Section 302 Certification by Chief Executive Officer   Filed herewith
 
       
Exhibit 31(ii)
  Section 302 Certification by Chief Financial Officer   Filed herewith
 
       
Exhibit 32(i)
  Section 1350 Certification by Chief Executive Officer   Filed herewith
 
       
Exhibit 32(ii)
  Section 1350 Certification by Chief Financial Officer   Filed herewith