FORM 10-KSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification Number)
814 Wheeling Avenue, Cambridge, Ohio 43725
------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (614) 432-5641
Securities registered pursuant to Section 12(b) of the Exchange Act:
--------------------------------------------------------------------
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $1 par value per share
------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes __X__ No _____ .
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B 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-KSB or any amendment to
this Form 10-KSB. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the average of the bid and asked
price of such stock as of March 15, 1996, was $30.0 million. (The exclusion
from such amount of the market value of the shares owned by any person shall
not be deemed an admission by the Registrant that such person is an affiliate
of the Registrant.)
The issuer's revenues for the fiscal year ended December 31, 1995, were
$28,733,000.
1,971,477.1 shares of the Registrant's common stock were issued and
outstanding on March 15, 1996.
-1-
<PAGE>
PART I
Item 7. Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants
Board of Directors
Camco Financial Corporation
We have audited the accompanying consolidated statements of financial
condition of Camco Financial Corporation and Subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of earnings,
stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The consolidated financial
statements for the year ended December 31, 1993 were audited by other auditors
whose report, dated March 4, 1994, expressed an unqualified opinion on such
financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the 1995 and 1994 financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Camco Financial Corporation and Subsidiaries as of December 31, 1995 and
1994, and the consolidated results of their operations and their cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
As more fully explained in Notes A and B, the Corporation changed its method
of accounting for certain securities as of January 1, 1994.
As more fully explained in Note C, the Corporation changed its method of
accounting for gains on sale of loans during the year ended December 31, 1995.
Grant Thornton LLP
Cincinnati, Ohio
February 1, 1996 (except for Note M as to which the date is March 26, 1996)
-2-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31,
(In thousands, except share data)
ASSETS 1995 1994
<S> <C> <C>
Cash and due from banks $ 11,325 $ 8,220
Short-term interest bearing deposits in other financial institutions 2,122 1,059
-------- --------
Cash and cash equivalents 13,447 9,279
Interest-bearing deposits in other financial institutions 1,881 7,427
Investment securities available for sale - at market 3,131 2,978
Investment securities - at cost, approximate market value of $19,123
and $25,903 as of December 31, 1995 and 1994 19,283 27,333
Mortgage-backed securities available for sale - at market 985 1,464
Mortgage-backed securities - at cost, approximate market value of
$5,045 and $5,150 as of December 31, 1995 and 1994 5,002 5,452
Loans held for sale - at lower of cost or market 1,518 468
Loans receivable - net 291,233 260,991
Office premises and equipment - net 4,153 4,081
Real estate acquired through foreclosure 28 39
Federal Home Loan Bank stock - at cost 2,832 2,262
Accrued interest receivable on loans 1,736 1,318
Accrued interest receivable on mortgage-backed securities 58 86
Accrued interest receivable on investment securities and
interest-bearing deposits 335 460
Prepaid expenses and other assets 699 547
Prepaid federal income taxes 148 442
-------- --------
TOTAL ASSETS $346,469 $324,627
======== ========
-3-
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
Deposits $286,574 $ 266,861
Advances from the Federal Home Loan Bank 26,078 26,511
Taxes and insurance prepaid by borrowers 2,964 3,190
Accounts payable and accrued liabilities 1,797 2,119
Dividends payable 207 296
Deferred federal income taxes 1,156 909
-------- ---------
Total liabilities 318,776 299,886
Commitments -- --
Stockholders' equity
Preferred stock - $1 par value; authorized 100,000 shares;
no shares outstanding -- --
Common stock - $1 par value; authorized, 2,500,000 shares,
issued 1,971,482 shares at December 31, 1995 and 1,875,414
shares at December 31, 1994 1,971 1,875
Additional paid-in capital 5,735 4,416
Retained earnings - substantially restricted 19,936 18,466
Unrealized gains (losses) on securities designated as
available for sale 51 (16)
-------- ---------
Total stockholders' equity 27,693 24,741
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $346,469 $ 324,627
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
<TABLE>
Camco Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
For the year ended December 31,
(In thousands, except share data)
1995 1994 1993
<S> <C> <C> <C>
Interest income
Loans $ 22,939 $ 16,622 $ 15,359
Mortgage-backed securities 423 497 712
Investment securities 1,570 1,826 1,526
Interest-bearing deposits and other 508 814 1,393
---------- ----------- -----------
Total interest income 25,440 19,759 18,990
Interest expense
Deposits 12,478 9,497 9,725
Borrowings 1,779 736 27
---------- ----------- -----------
Total interest expense 14,257 10,233 9,752
---------- ----------- -----------
Net interest income 11,183 9,526 9,238
Provision for loan losses 143 97 310
---------- ----------- -----------
Net interest income after provision for loan losses 11,040 9,429 8,928
Other income
Late charges, rent and other 915 752 590
Loan servicing fees 796 769 621
Service charges and other fees on deposits 448 408 366
Gain on sale of loans 1,126 501 1,546
Gain (loss) on sale of real estate acquired through foreclosure 8 148 (17)
---------- ----------- -----------
Total other income 3,293 2,578 3,106
---------- ----------- -----------
General, administrative and other expense
Employee compensation and benefits 4,198 3,606 2,862
Occupancy of premises 902 930 774
Federal deposit insurance premiums 625 574 534
Data processing 397 405 408
Advertising 406 409 307
State franchise taxes 322 291 277
Other 1,925 1,939 1,801
---------- ----------- -----------
Total general, administrative and other expense 8,775 8,154 6,963
---------- ----------- -----------
Earnings before federal income taxes 5,558 3,853 5,071
Federal income taxes
Current 1,794 1,356 1,725
Deferred 116 (45) 22
---------- ----------- -----------
1,910 1,311 1,747
---------- ----------- -----------
NET EARNINGS $ 3,648 $ 2,542 $ 3,324
========== =========== ===========
EARNINGS PER SHARE $ 1.85 $ 1.47 $ 1.93
========== =========== ===========
Weighted average number of common shares outstanding 1,970,349 1,727,835 1,724,140
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
<TABLE>
Camco Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1995, 1994 and 1993
(In thousands, except share data)
Unrealized
gains (losses)
on securities
Additional designated Total
Common Stock paid-in as available Retained stockholders'
($1 par value) capital for sale earnings equity
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $ 781 $1,510 $ - $14,674 $16,965
Stock options exercised 2 13 - - 15
Cash dividends declared - $.2898 per share - - - (478) (478)
2 for 1 stock split, including cash in lieu of
fractional shares 782 (782) - - -
Net earnings - - - 3,324 3,324
---------- ---------- ---- ----------- ---------
Balance, December 31, 1993 1,565 741 - 17,520 19,826
Stock options exercised 1 7 - - 8
Cash dividends declared - $.3510 per share - - - (578) (578)
Stock dividend (5%) including cash in lieu of
fractional shares 78 938 - (1,018) (2)
Proceeds from offering of common stock 231 2,730 - - 2,961
Designation of securities as available for sale
upon adoption of SFAS No. 115 - - 298 - 298
Net earnings - - - 2,542 2,542
Unrealized losses on securities designated as
available for sale - - (314) - (314)
---------- ---------- ---- ----------- ---------
Balance, December 31, 1994 1,875 4,416 (16) 18,466 24,741
Stock options exercised 2 8 - - 10
Cash dividends declared - $.3903 per share - - - (770) (770)
Stock dividend (5%) including cash in lieu
of fractional shares 94 1,311 - (1,408) (3)
Net earnings - - - 3,648 3,648
Unrealized gain on securities designated as
available for sale - - 67 - 67
---------- ---------- ---- ----------- ---------
Balance at December 31, 1995 $1,971 $5,735 $ 51 $19,936 $27,693
========== ========== ---- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
<TABLE>
Camco Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31,
(In thousands)
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,648 $ 2,542 $ 3,324
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 758 641 375
Provision for loan losses 143 97 310
Loss (gain) on sale of real estate acquired through
foreclosure (8) (148) 29
Federal Home Loan Bank stock dividends (177) (109) (75)
Gain on sale of loans (471) (501) (1,042)
Gain on sale of equipment (5) -- --
Loans originated for sale in the secondary market (39,941) (35,015) (114,488)
Proceeds from sale of mortgage loans in the
secondary market 39,362 41,777 113,483
Current federal income taxes 294 (381) (16)
Deferred federal income taxes 116 (45) 22
Other - net (742) 801 (134)
-------- -------- ---------
Net cash provided by operating activities 2,977 9,659 1,788
-------- -------- ---------
Cash flows provided by (used in) investing activities:
Proceeds from maturities of investment securities
and interest-bearing deposits 15,296 18,156 22,211
Proceeds from sale of investment securities -- -- 1,005
Purchases of investment securities and interest-
bearing deposits -- (11,126) (23,155)
Loans purchased - (710) (1,287)
Loans originated, net of principal collected (30,694) (68,160) (10,674)
Purchase of mortgage-backed securities -- (500) (1,832)
Principal collected on mortgage-backed securities 1,061 2,807 4,644
Additions to premises and equipment (565) (535) (721)
Proceeds from sale of premises and equipment 37 -- --
Purchase of securities designated as held to maturity (1,775) -- --
Proceeds from sale of real estate acquired through foreclosure 89 333 315
Proceeds from redemption of FHLB stock -- 67 217
Purchase of FHLB stock (393) (551) --
Additions to real estate acquired through foreclosure (70) (92) --
Other - net -- 1 (129)
-------- -------- ---------
Net cash used in investing activities (17,014) (60,310) (9,406)
-------- -------- ---------
Net cash used in operating and investing
activities (subtotal carried forward) (14,037) (50,651) (7,618)
-------- -------- ---------
</TABLE>
-7-
<PAGE>
<TABLE>
Camco Financial Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the year ended December 31,
(In thousands)
1995 1994 1993
<C> <C> <C>
Net cash used in operating and investing activities
(subtotal brought forward) $(14,037) $(50,651) $ (7,618)
Cash flows provided by (used in) financing activities:
Net increase in deposits 19,713 14,642 2,467
Advances from Federal Home Loan Bank and
other borrowings 70,400 63,241 10,000
Repayment of Federal Home Loan Bank advances
and other borrowings (70,833) (38,230) (8,614)
Dividends paid on common stock (859) (580) (399)
Proceeds from exercise of stock options 10 8 15
Proceeds from offering of common stock -- 2,961 --
Increase (decrease) in taxes and insurance prepaid
by borrowers (226) 1,778 294
-------- -------- --------
Net cash provided by financing activities 18,205 43,820 3,763
-------- -------- --------
Increase (decrease) in cash and cash equivalents 4,168 (6,831) (3,855)
Cash and cash equivalents at beginning of year 9,279 16,110 19,965
-------- -------- --------
Cash and cash equivalents at end of year $ 13,447 $ 9,279 $ 16,110
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest on deposits and borrowings $ 14,003 $ 10,143 $ 9,781
======== ======== ========
Income taxes $ 1,684 $ 1,329 $ 1,606
======== ======== ========
Supplemental disclosure of noncash investing activities:
Transfers of mortgage loans to real estate acquired
through foreclosure $ 70 $ 72 $ 764
======== ======== ========
Issuance of mortgage loans upon sale of real
estate acquired through foreclosure $ 42 $ 277 $ 638
======== ======== ========
Unrealized gain (loss) on securities designated as
available for sale, net of related taxes $ 51 $ (16) $ --
======== ======== ========
Recognition of gains on sale of loans in accordance
with SFAS No. 122 $ 655 $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-8-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Camco Financial Corporation's (the Corporation) business activities have
been limited primarily to holding the common shares of its four
wholly-owned subsidiaries: Cambridge Savings Bank (Cambridge), Marietta
Savings Bank (Marietta), First Federal Savings Bank of Washington Court
House (First Federal) (collectively hereinafter the Banks) and East Ohio
Land Title Agency, Inc., and two second tier subsidiaries, Camco Mortgage
Corporation and WestMar Mortgage Company. Accordingly, the Company's
results of operations are economically dependent upon the results of the
Banks' operations. The Banks conduct a general commercial banking business
in southeastern and central Ohio which consists of attracting deposits
from the general public and applying those funds to the origination of
loans for residential, consumer and nonresidential purposes. The Banks'
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 amount 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 the
Banks can be significantly influenced by a number of competitive 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 generally accepted accounting principles (GAAP) and
general accounting practices within the financial services industry. In
preparing financial statements in accordance with 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, with the exception of the policy described in Note A-3,
have been consistently applied in the preparation of the accompanying
consolidated financial statements.
1. Principles of Consolidation
The Corporation's consolidated financial statements include the accounts
of Camco and its wholly-owned and second tier subsidiaries. All
significant intercompany balances and transactions have been eliminated.
-9-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2. Interest Rate Risk
The earnings of the Banks are primarily dependent upon net interest
income, which is determined by 1) the difference between yields earned on
interest-earning assets and rates paid on interest-bearing liabilities
(interest rate spread) and 2) the relative amounts of interest-earning
assets and interest-bearing liabilities outstanding. The Corporation's
interest rate spread is affected by regulatory, economic and competitive
factors that influence interest rates, loan demand and deposit flows. The
Corporation is vulnerable to an increase in interest rates to the extent
that interest-bearing liabilities mature or reprice more rapidly than
interest-earning assets. At December 31, 1995, 1994 and 1993, the
Corporation had net interest-earning assets of $328.0 million, $309.4
million and $264.8 million with weighted average effective yields of
8.07%, 7.33% and 6.70%, and net interest-bearing liabilities of
approximately $312.7 million, $293.4 million and $253.7 million, with
weighted average effective interest rates of 4.82%, 4.29% and 3.66%. To
minimize the effect of adverse changes in interest rates on its results of
operations, the Corporation has implemented an asset and liability
management plan that emphasizes increasing the interest rate sensitivity
and shortening the maturities of its interest-earning assets and extending
the maturities of its interest-bearing liabilities. Although the
Corporation has undertaken a variety of strategies to minimize its
exposure to interest rate risk, its primary emphasis has been on the
origination and purchase of adjustable rate loans.
3. Investment Securities and Mortgage-Backed Securities
Prior to January 1, 1994, investment securities and mortgage-backed
securities were carried at cost, adjusted for amortization of premiums and
accretion of discounts. The investments and mortgage-backed securities
were carried at cost, as it was management's intent and the Corporation
had the ability to hold the securities until maturity. Investment
securities and mortgage-backed securities held for indefinite periods of
time, or which management utilized as part of its asset/liability
management strategy, or that would be sold in response to changes in
interest rates, prepayment risk, or the perceived need to increase
regulatory capital were classified as held for sale at the point of
purchase and carried at the lower of cost or market.
-10-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3. Investment Securities and Mortgage-Backed Securities (continued)
In May 1993, the Financial Accounting Standards Board issued SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities" (the
Statement). SFAS No. 115 requires that investments be categorized as
held-to-maturity, trading, or available for sale. 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. Trading
securities and securities available for sale are carried at fair value
with resulting unrealized gains or losses recorded to operations or
stockholders' equity, respectively. The Corporation adopted the Statement
for the year beginning January 1, 1994. The effect of adoption was to
initially increase stockholders' equity by approximately $298,000 on
January 1, 1994, representing the unrealized market value appreciation on
investment and mortgage-backed securities designated as available for
sale, net of applicable deferred federal income taxes. Subsequent to
January 1, 1994, the amount of unrealized gains on securities designated
as available for sale had declined and, at December 31, 1995 and 1994, the
Corporation's equity accounts reflected net unrealized gains and losses of
$51,000 and $16,000, respectively. Realized gains or losses on sales of
securities are recognized using the specific identification method.
4. Loans Held for Sale
Loans held for sale are carried at the lower of acquisition cost (less
principal payments received) or fair value (market value), calculated on
an aggregate basis. At December 31, 1994, such loans were carried at
market, with a corresponding $5,000 loss recognized through operations. At
December 31, 1995, such loans were recorded at cost, which approximated
fair value.
5. Loans Receivable
Loans held in portfolio are stated at the principal amount outstanding,
adjusted for premiums and discounts on loans purchased and sold and the
allowance for loan losses. Premiums and discounts on loans purchased and
sold are amortized and accreted to operations using the interest method
over the average life of the underlying loans.
Interest is accrued as earned unless the collectibility of the loan is in
doubt. 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 income is subsequently
recognized only to the extent that cash payments are received 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.
-11-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
6. Loan Origination and Commitment Fees
The Corporation accounts for loan origination fees and costs in accordance
with Statement of Financial Accounting Standards No. 91 (SFAS No. 91)
"Accounting for Nonrefundable Fees and Costs Associated with Originating
or Acquiring Loans and Initial Direct Cost of Leases". Pursuant to the
provisions of SFAS No. 91, all loan origination fees received, net of
certain direct origination costs, are deferred on a loan-by-loan basis and
amortized to interest income using the interest method, giving effect to
actual loan prepayments. Additionally, SFAS No. 91 generally limits the
definition of loan origination costs to the direct costs attributable to
originating a loan, i.e., principally actual personnel costs.
Fees received for loan commitments are deferred and amortized over the
life of the related loan using the interest method.
7. Allowance for Loan Losses
It is the Corporation's policy to provide valuation allowances for
estimated losses on loans based upon past loss experience, trends in the
level of delinquent and specific problem loans, adverse situations that
may affect the borrower's ability to repay, the estimated value of any
underlying collateral and current and anticipated economic conditions in
the primary market area. When the collection of a loan becomes doubtful,
or otherwise troubled, the Corporation records a loan loss provision 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.
In May 1993, the Financial Accounting Standards Board issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan". This Statement, which
was amended by SFAS No. 118 as to certain income recognition and financial
statement disclosure provisions, requires that impaired loans be measured
based upon the present value of expected future cash flows discounted at
the loan's effective interest rate or, as an alternative, at the loans
observable market price or fair value of the collateral. The Corporation
adopted the Statement effective January 1, 1995, without material effect
on consolidated financial condition or results of operations.
-12-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
7. Allowance for Loan Losses (continued)
Under SFAS No. 114, 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 of SFAS No. 114, the Corporation
considers its investment in one-to-four family residential loans 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 impaired nonresidential loans, such loans are
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. Similarly, collateral dependent loans
which are more than ninety days delinquent are considered to constitute
more than a minimum delay in repayment and are evaluated for impairment
under SFAS No. 114 at that time.
At December 31, 1995, the Corporation had no loans that would be defined
as impaired under SFAS No. 114.
8. Real Estate Acquired Through Foreclosure
Real estate acquired through foreclosure is carried at the lower of cost
(principal balance of the former mortgage loan plus costs of obtaining
title and possession), or fair value less estimated selling expense at
date of acquisition. Any excess of cost over fair value is charged to the
allowance for loan losses at acquisition. Costs relating to the
development and improvement of property are capitalized up to the fair
value of the property, whereas those relating to holding the property are
charged to expense.
9. Premises and Equipment
Depreciation of premises and equipment is computed using the straight-line
method over estimated useful lives of 10 to 50 years for buildings and
improvements and 3 to 25 years for furniture, fixtures and equipment.
-13-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
10. Federal Income Taxes
The Corporation accounts for Federal income taxes pursuant to Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS No. 109). Pursuant to the provisions of SFAS No. 109, a deferred tax
liability or deferred tax asset (benefit) is computed by applying the
current statutory tax rates to net taxable or deductible temporary
differences between the tax basis of an asset or liability and its
reported amount in the financial statements that will result in taxable or
deductible amounts in future periods. Deferred tax benefits are recorded
only to the extent that the amount of net deductible temporary differences
or carryforward attributes may be utilized against current period
earnings, carried back against prior years' earnings, offset against
taxable temporary differences reversing in future periods, or utilized to
the extent of management's estimate of future taxable income. A valuation
allowance is provided for deferred tax benefits to the extent that the
value of net deductible temporary differences and carryforward attributes
exceeds management's estimates of taxes payable on future taxable income.
Deferred tax liabilities are provided on the total amount of net temporary
differences taxable in the future.
11. Earnings Per Share and Dividends Per Share
Earnings per share is calculated based on the weighted average number of
common and common equivalent shares (which includes those stock options
that are dilutive) outstanding during the respective periods, adjusted to
reflect a 5% stock dividend effected during the years ended December 31,
1995 and 1994, and a 2-for-1 stock split effected in the form of a 100%
stock dividend in 1993. Dividends per share for the years ended December
31, 1995, 1994 and 1993, have also been adjusted to reflect the effect of
such stock dividends and stock split.
12. Fair Value of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
about Fair Value of Financial Instruments", requires disclosure of fair
value information about financial instruments, whether or not recognized
in the consolidated statement of financial condition, for which it is
practicable to estimate that value. In cases where quoted market prices
are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected
by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates cannot
be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. SFAS No.
107 excludes certain financial instruments and all non-financial
instruments from its disclosure requirements. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the
Corporation.
-14-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
12. Fair Value of Financial Instruments (continued)
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 Due from Banks: The carrying amount reported in the
consolidated statement of financial condition for cash and
due from banks is deemed to approximate fair value.
Interest-bearing Deposits in Other Financial Institutions:
For short-term interest-bearing deposits in other financial
institutions, the carrying amount reported in the
consolidated statement of financial condition is deemed to
approximate fair value. For other interest-bearing deposits
in other financial institutions, fair values are estimated
using discounted cash flow analyses, using interest rates
currently being offered for such deposits with similar
remaining maturities.
Investment Securities and Mortgage-backed Securities: Fair
values for investment securities and mortgage-backed
securities are based on quoted market prices and dealer
quotes.
Loans receivable: The loan portfolio has been segregated
into categories with similar characteristics, such as
one-to-four family residential, 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 statement of financial condition is
deemed to approximate fair value.
Accrued Interest Receivable and Accrued Interest Payable:
The carrying amount as reported in the consolidated
statement of financial condition is deemed a reasonable
estimate of fair value.
Deposits: The fair values of deposits with no stated
maturity, such as money market demand deposits, savings and
NOW accounts, are deemed equal to the amount payable on
demand as of December 31, 1995 and 1994. The fair value of
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.
-15-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
12. Fair Value of Financial Instruments (continued)
Advances from 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.
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.
Based on the foregoing methods and assumptions, the carrying value and
fair value of the Corporation's financial instruments are as follows:
<TABLE>
December 31,
1995 1994
Carrying Fair Carrying Fair
value value value value
(In thousands)
<S> <C> <C> <C> <C>
Financial assets
Cash and due from banks $ 11,325 $ 11,325 $ 8,220 $ 8,220
Interest-bearing deposits 4,003 4,003 8,486 8,486
Investment securities 22,414 22,254 30,311 28,881
Mortgage-backed securities 5,987 6,030 6,916 6,614
Loans receivable 292,751 291,671 261,459 255,662
Federal Home Loan Bank stock 2,832 2,832 2,262 2,262
-------- -------- -------- --------
$339,312 $338,115 $317,654 $310,125
======== ======== ======== ========
Financial liabilities
Deposits $286,574 $290,243 $266,861 $265,592
Advances from the Federal
Home Loan Bank 26,078 26,139 26,511 26,866
-------- -------- -------- --------
$312,652 $316,382 $293,372 $292,458
======== ======== ======== ========
</TABLE>
13. Cash and Cash Equivalents
Cash and cash equivalents consist of cash and amounts due from depository
institutions and short-term interest-bearing time deposits in other
financial institutions with original maturities of three months or less.
-16-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
14. Advertising
Advertising costs are expensed when incurred.
15. Reclassification
Certain prior year amounts have been reclassified to conform to the 1995
consolidated financial statement presentation.
NOTE B - INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated fair values of investment securities at December 31, 1995 and
1994 are as follows:
<TABLE>
December 31, 1995
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
(In thousands)
<S> <C> <C> <C> <C>
Held to maturity:
U.S. Government agency obligations $19,147 $17 $ 184 $18,980
Municipal bonds 136 7 -- 143
------- --- ------ -------
Total investment securities
held to maturity 19,283 24 184 19,123
Available for sale:
U.S. Government agency obligations 2,999 46 -- 3,045
Corporate equity securities 82 4 -- 86
------- --- ------ -------
Total investments available
for sale 3,081 50 -- 3,131
------- --- ------ -------
Total investment securities $22,364 $74 $ 184 $22,254
======= === ====== =======
December 31, 1994
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
(In thousands)
Held to maturity:
U.S. Government agency obligations $27,185 $ 1 $1,434 $25,752
Municipal bonds 148 5 2 151
------- --- ------ -------
Total investment securities
held to maturity 27,333 6 1,436 25,903
Available for sale:
U.S. Government agency obligations 2,998 5 25 2,978
------- --- ------ -------
Total investment securities $30,331 $11 $1,461 $28,881
======= === ====== =======
</TABLE>
-17-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE B - INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES
(continued)
The amortized cost, gross unrealized gains and losses, and estimated fair
values of mortgage-backed securities at December 31, 1995 and 1994, are as
follows:
<TABLE>
December 31, 1995
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
(In thousands)
<S> <C> <C> <C> <C>
Held to maturity:
FNMA $3,218 $33 $ 3 $3,248
FHLMC 1,784 21 8 1,797
------ --- ---- ------
Total mortgage-backed securities
held to maturity 5,002 54 11 5,045
Available for sale:
FHLMC 968 17 -- 985
------ --- ---- ------
Total mortgage-backed securities $5,970 $71 $ 11 $6,030
====== === ==== ======
December 31, 1994
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
(In thousands)
Held to maturity:
FNMA $3,378 $ - $195 $3,183
FHLMC 2,074 -- 107 1,967
------ --- ---- ------
Total mortgage-backed securities
held to maturity 5,452 -- 302 5,150
Available for sale:
FHLMC 1,487 13 36 1,464
------ --- ---- ------
Total mortgage-backed securities $6,939 $13 $338 $6,614
====== === ==== ======
</TABLE>
-18-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE B - INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES
(continued)
The amortized cost and estimated fair value of investment and
mortgage-backed securities at December 31, 1995 and 1994 (including
securities designated as available for sale) by contractual term to
maturity are shown below. Actual maturities may differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
December 31,
1995 1994
Estimated Estimated
Amortized fair Amortized fair
cost value cost value
(In thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 6,019 $ 6,030 $ 3,582 $ 3,432
Due after one year through five years 15,217 15,084 23,682 22,645
Due after five years through ten years 1,046 1,054 3,067 2,804
------- ------- ------- -------
Total investment securities 22,282 22,168 30,331 28,881
Corporate equity securities 82 86 -- --
Mortgage-backed securities - not
due at a single maturity date 5,970 6,030 6,939 6,614
------- ------- ------- -------
Total $28,334 $28,284 $37,270 $35,495
======= ======= ======= =======
</TABLE>
During the year ended December 31, 1993, investment securities were sold
at amortized cost resulting in cash proceeds of $1.0 million. There were
no sales of investment securities during the years ended December 31, 1995
and 1994.
There were no sales of mortgage-backed securities during the years ended
December 31, 1995, 1994 and 1993.
-19-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE C - LOANS RECEIVABLE
Loans receivable at December 31 consist of the following:
1995 1994
(In thousands)
Conventional real estate loans:
Existing residential properties $244,422 $212,886
Nonresidential real estate 11,486 14,845
Construction 19,944 21,947
Developed building lots 965 1,147
Education loans 2,728 2,799
Consumer and other loans 22,589 18,659
-------- --------
Total 302,134 272,283
Less:
Undisbursed loans in process 8,717 9,483
Deferred loan origination fees and other
unearned income - net 1,152 866
Allowance for loan losses 1,032 943
-------- --------
Total loans receivable - net $291,233 $260,991
======== ========
As depicted above, the Corporation's lending efforts have historically
focused on loans secured by existing residential properties, which
comprise approximately $244.4 million, or 84%, of the total loan portfolio
at December 31, 1995 and approximately $212.9 million, or 82%, of the
total loan portfolio at December 31, 1994. 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, the Corporation, as with
any lending institution, is subject to the risk that residential real
estate values could deteriorate in its primary lending areas of eastern
Ohio and northern West Virginia, thereby impairing collateral values.
However, management is of the belief that residential real estate values
in the Corporation's primary lending areas are presently stable.
In May 1995, the FASB issued SFAS No. 122 "Accounting for Mortgage
Servicing Rights," which requires that the Corporation recognize as
separate assets, rights to service mortgage loans for others, regardless
of how those servicing rights are acquired. An institution that acquires
mortgage servicing rights through either the purchase or origination of
mortgage loans and sells those loans with servicing rights retained is
required to allocate some of the cost of the loans to the mortgage
servicing rights.
SFAS No. 122 requires that securitization of mortgage loans be accounted
for as sales of mortgage loans and acquisitions of mortgage-backed
securities. Additionally, SFAS No. 122 requires that capitalized mortgage
servicing rights and capitalized excess servicing receivables be assessed
for impairment. Impairment is measured based on fair value.
-20-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE C - LOANS RECEIVABLE (continued)
SFAS No. 122 was effective for years beginning after December 15, 1995,
(January 1, 1996, as to the Corporation) to transactions in which an
entity acquires mortgage servicing rights and to impairment evaluations of
all capitalized mortgage servicing rights and capitalized excess servicing
receivables whenever acquired. Retroactive application was prohibited, and
earlier adoption is encouraged. Management elected early adoption of SFAS
No. 122 in the current year, which resulted in the recognition of $655,000
in pre-tax gains on sales of loans during the year ended December 31,
1995.
The mortgage servicing rights recorded by the Banks', calculated in
accordance with the provisions of SFAS No. 122, were segregated into pools
for valuation purposes, using as pooling criteria the loan term and coupon
rate. Once pooled, each grouping of loans was evaluated on a discounted
earnings basis to determine the present value of future earnings that a
purchaser could expect to realize from each portfolio. Earnings were
projected from a variety of sources including loan servicing fees,
interest earned on float, net interest earned on escrows, miscellaneous
income, and costs to service the loans. The present value of future
earnings is the "economic" value for the pool, i.e., the net realizable
present value to an acquirer of the acquired servicing.
At December 31, 1995 and 1994, the Banks were servicing approximately
$242.9 million and $240.5 million, respectively, of mortgage loans that
have been sold to the Federal Home Loan Mortgage Corporation and other
investors.
Activity in the allowance for loan losses is summarized as follows for
the years ended December 31:
1995 1994 1993
(In thousands)
Balance at beginning of year $ 943 $ 1,028 $ 889
Provision for losses 143 97 310
Charge-offs, net of immaterial recoveries (54) (182) (171)
------- ------- -------
Balance at end of year $ 1,032 $ 943 $ 1,028
======= ======= =======
Nonaccrual and nonperforming loans totaled approximately $1.1 million,
$1.2 million and $2.0 million at December 31, 1995, 1994 and 1993,
respectively. Interest income that would have been recognized had
nonaccrual loans performed pursuant to contractual terms totaled
approximately $24,000, $57,000 and $64,000 for the years ended December
31, 1995, 1994 and 1993, respectively.
The Banks, in the ordinary course of business, have granted loans to
certain of their directors, executive officers, and their associates. Such
loans are made on substantially 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 collectibility. The aggregate dollar amount of these loans
(excluding loans to any such individual which in the aggregate did not
exceed $60,000) was less than 5% of stockholders' equity at December 31,
1995 and 1994.
-21-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE C - LOANS RECEIVABLE (continued)
At December 31, 1995 and 1994, the Banks had outstanding commitments to
originate or purchase fixed rate loans of approximately $2.7 million and
$502,000, respectively, and adjustable rate loans of approximately $4.0
million and $3.5 million, respectively. In the opinion of management, such
commitments were at market rates on those dates and commitments were, or
will be, discharged from existing excess liquidity.
NOTE D - PREMISES AND EQUIPMENT
Premises and equipment at December 31 is summarized as follows:
1995 1994
(In thousands)
Land $ 919 $ 791
Buildings and improvements 4,095 4,005
Furniture, fixtures and equipment 2,662 2,358
------- -------
7,676 7,154
Less accumulated depreciation
and amortization (3,523) (3,073)
------- -------
$ 4,153 $ 4,081
======= =======
NOTE E - DEPOSITS
Deposit balances (including accrued interest payable) by weighted-average
interest rate at December 31, 1995 and 1994, are summarized by savings
type as follows:
<TABLE>
1995 1994
Amount Rate Amount Rate
(In thousands)
<S> <C> <C> <C> <C>
NOW accounts $ 44,591 2.30% $ 41,658 2.22%
Money market demand accounts 15,047 3.29 20,756 2.98
Passbook and statement savings accounts 50,498 3.01 57,981 3.00
-------- ---- -------- ----
Total withdrawable accounts 110,136 2.76 120,395 2.73
-------- ---- -------- ----
Money market certificates:
Seven days to one year 19,332 4.73 19,994 3.95
One to two year 54,336 5.99 41,228 5.28
Two to eight year 70,198 6.13 67,621 5.68
Negotiated rate certificates 21,446 5.63 7,489 5.24
Individual retirement accounts 11,126 6.23 10,134 4.69
-------- ---- -------- ----
Total certificate accounts 176,438 5.88 146,466 5.24
-------- ---- -------- ----
Total deposits $286,574 4.68% $266,861 4.10%
======== ==== ======== ====
</TABLE>
-22-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE E - DEPOSITS (continued)
Interest expense on deposits is summarized as follows for the years ended
December 31:
1995 1994 1993
(In thousands)
Certificate accounts $ 9,592 $6,173 $6,326
NOW accounts and money
market demand accounts 1,450 1,447 1,520
Passbook and statement savings
accounts 1,436 1,877 1,879
------- ------ ------
$12,478 $9,497 $9,725
======= ====== ======
The contractual maturities of outstanding certificates of deposit are
summarized as follows at December 31:
1995 1994
Year ending December 31: (In thousands)
1995 $ - $ 71,357
1996 105,593 46,664
1997 48,826 11,513
1998 14,479 11,928
1999 3,713 3,594
After 1999 3,827 1,410
-------- --------
Total certificate of deposit accounts $176,438 $146,466
======== ========
At December 31, 1995 and 1994, public savings deposits were collateralized
by investment securities and interest-bearing deposits in other banks
totaling $20.0 million and $12.2 million, respectively.
NOTE F - ADVANCES FROM FEDERAL HOME LOAN BANK
At December 31, 1995 and 1994, Federal Home Loan Bank advances consisted
of short-term cash management borrowings which matured within one year and
30 days of the respective dates. At such respective dates, the advances
carried weighted-average interest rates of 6.31% and 7.00%, and were
collateralized by certain first mortgage loans totaling $39.1 million and
$39.8 million, as well as Federal Home Loan Bank stock of the respective
Bank subsidiaries which are parties to the borrowings.
-23-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE G - FEDERAL INCOME TAXES
The Corporation and its subsidiaries file a consolidated Federal income
tax return. The Banks are permitted under the Internal Revenue Code to
deduct from otherwise taxable income either actual bad debts under the tax
experience method, or an annual addition to a reserve for bad debts based
upon a percentage of taxable income subject to certain limitations. The
bad debt deduction allowable under the percentage of taxable income method
equals 8% of taxable income determined without regard to that deduction
and with certain adjustments. The bad debt deductions allowable under the
tax methods differ from the allowance method used for financial accounting
purposes. Bad debt deductions under the percentage of taxable income
method are included in taxable income of later years only if the bad debt
reserve is used subsequently for purposes other than to absorb bad debt
losses. Because the Corporation does not intend to use the reserve for
purposes other than to absorb losses, no deferred income taxes have been
provided on additions made to the reserve prior to January 1, 1987.
Retained earnings at December 31, 1995 includes approximately $3.6 million
representing such bad debt deductions for which no deferred income taxes
have been provided.
The components of the Corporation's net deferred tax liability as of
December 31, 1995 and 1994 are summarized as follows:
<TABLE>
1995 1994
Temporary Tax Temporary Tax
difference at 34% difference at 34%
<S> <C> <C> <C> <C>
Deferred tax liabilities:
Deferred loan origination fees $ (639) $ (217) $(1,160) $ (394)
FHLB stock dividends (952) (324) (775) (264)
Percentage of earnings bad debt deduction (1,750) (595) (1,250) (425)
Retirement expense (156) (53) (144) (49)
Mortgage servicing rights (655) (223) -- --
Other liabilities (285) (97) (232) (79)
------- ------- ------- -------
Total deferred tax liabilities (4,437) (1,509) (3,561) (1,211)
Deferred tax assets:
General loan loss allowance 949 323 833 283
Other assets 88 30 56 19
------- ------- ------- -------
Total deferred tax assets 1,037 353 889 302
------- ------- ------- -------
Net deferred tax liability $(3,400) $(1,156) $(2,672) $ (909)
======= ======= ======= =======
</TABLE>
-24-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE G - FEDERAL INCOME TAXES (continued)
A reconciliation of the effective tax rate for the years ended December
31, 1995, 1994 and 1993, respectively, and the federal statutory rate in
each of these years of 34%, computed by applying the statutory federal
corporate tax rate to income before taxes, are summarized as follows:
<TABLE>
December 31,
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Expected federal tax at statutory rate $1,890 $1,310 $1,724
Other 20 1 23
------ ------ ------
Tax provision per consolidated financial
statements $1,910 $1,311 $1,747
====== ====== ======
</TABLE>
NOTE H - REGULATORY CAPITAL REQUIREMENTS
On July 1, 1994, Marietta and Cambridge changed corporate charters to
state savings banks. As a result, effective July 1, Cambridge and Marietta
became subject to the regulatory capital requirements of the Federal
Deposit Insurance Corporation (FDIC).
The Federal Deposit Insurance Corporation (FDIC) has adopted risk-based
capital ratio guidelines to which Cambridge Savings Bank and Marietta
Savings Bank are 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-weighted categories, with
higher levels of capital being required for the categories perceived as
representing greater risk.
These guidelines divide the capital into two tiers. The first tier ("Tier
1") 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. Savings banks are required to maintain a total risk-based
capital ratio of 8%, of which 4% must be Tier 1 capital. The FDIC may,
however, set higher capital requirements when particular circumstances
warrant. Savings banks experiencing or anticipating significant growth are
expected to maintain capital ratios, including tangible capital positions,
well above the minimum levels.
-25-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE H - REGULATORY CAPITAL REQUIREMENTS (continued)
In addition, the FDIC established guidelines prescribing a minimum Tier 1
leverage ratio (Tier 1 capital to adjusted total assets as specified in
the guidelines). These guidelines provide for a minimum Tier 1 leverage
ratio of 3% for savings banks that meet certain specified criteria,
including that they have the highest regulatory rating and are not
experiencing or anticipating significant growth. All other savings banks
are required to maintain a Tier 1 leverage ratio of 3% plus an additional
cushion of at least 100 to 200 basis points.
As of December 31, 1995, Cambridge and Marietta's regulatory capital
exceeded all minimum capital requirements as shown in the following table:
<TABLE>
Cambridge Regulatory capital
Tier 1 Total
Tier 1 capital to capital to
leverage Percent risk-based Percent risk-based Percent
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital under generally
accepted accounting
principles $12,491 $12,491 $12,491
Additional capital items
General valuation
allowances - limited - - 330
------- ------- --------
Regulatory capital
computed 12,491 8.0 12,491 14.9 12,821 15.3
Maximum range of
capital requirement 7,813 5.0 6,724 8.0 6,724 8.0
------- --- ------- ----- ------- -----
Regulatory
capital - excess $ 4,678 3.0 $ 5,767 6.9 $ 6,097 7.3
======= === ======= ===== ======= =====
Marietta Regulatory capital
Tier 1 Total
Tier 1 capital to capital to
leverage Percent risk-based Percent risk-based Percent
(In thousands)
Capital under generally
accepted accounting
principles $7,911 $7,911 $7,911
Additional capital items
General valuation
allowances - - 326
----- ----- ------
Regulatory capital
computed 7,911 8.0 7,911 13.6 8,237 14.2
Maximum range of
capital requirement 4,956 5.0 4,646 8.0 4,646 8.0
----- --- ----- ----- ----- -----
Regulatory
capital - excess $2,955 3.0 $3,265 5.6 $3,591 6.2
====== === ====== ===== ====== =====
</TABLE>
-26-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE H - REGULATORY CAPITAL REQUIREMENTS (continued)
First Federal Savings Bank is subject to minimum regulatory capital
standards promulgated by the Office of Thrift Supervision. Such minimum
capital standards generally require the maintenance of regulatory capital
sufficient to meet each of three tests, hereinafter described as the
tangible capital requirement, the core capital requirement and the
risk-based capital requirement. The tangible capital requirement provides
for minimum tangible capital (defined as shareholders' equity less all
intangible assets) equal to 1.5% of adjusted total assets. The core
capital requirement provides for minimum core capital (tangible capital
plus certain forms of supervisory goodwill and other qualifying intangible
assets) equal to 3.0% of adjusted total assets. An OTS proposal, if
adopted in present form, would increase the core capital requirement to a
range of 4.0% - 5.0% of adjusted total assets for substantially all
savings associations. An additional proposal, which was approved in 1994
and becomes effective for institutions with total assets of more than $300
million in 1996, imposes an addition to the risk-based requirement based
on an institution's sensitivity to interest-rate risk. Management
anticipates no material change to the Savings Bank's excess regulatory
capital position as a result of these changes in the regulatory capital
requirement. The risk-based capital requirement currently provides for the
maintenance of core capital plus general loss allowances equal to 8.0% of
risk-weighted assets. In computing risk-weighted assets, the Corporation
multiplies the value of each asset on its statement of financial condition
by a defined risk-weighting factor, e.g., one-to-four family residential
loans carry a risk-weighted factor of 50%.
As of December 31, 1995, the First Federal's regulatory capital exceeded
all minimum capital requirements as shown in the following table:
<TABLE>
Tangible Core Risk-based
First Federal capital capital capital
(In thousands)
<S> <C> <C> <C>
Equity capital under GAAP $ 6,677 $ 6,677 $ 6,677
General loan loss allowance -- -- 293
------- ------- -------
Bank's regulatory capital 6,677 6,677 6,970
Minimum regulatory capital requirement 1,378 2,756 3,920
------- ------- -------
Bank's regulatory capital in excess of
minimum requirements $ 5,299 $ 3,921 $ 3,050
======= ======= =======
Bank's regulatory capital as a percent
of assets 7.3% 7.3% 14.2%
======= ======= =======
Asset base used for regulatory capital purposes $91,880 $91,880 $49,001
======= ======= =======
</TABLE>
-27-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE H - REGULATORY CAPITAL REQUIREMENTS (continued)
The Corporation's management believes that, under the current regulatory
capital regulations, the Banks will continue to meet their minimum capital
requirements in the foreseeable future. However, events beyond the control
of the Corporation, such as increased interest rates or a downturn in the
economy in areas where the subsidiaries have most of their loans, could
adversely affect future earnings and, consequently, the ability to meet
future minimum regulatory capital requirements.
NOTE I - PENSION PLAN
The Corporation has a non-contributory insured defined benefit pension
plan (the Plan) covering all eligible employees. The Plan's benefit
formula is the projected unit credit formula which encompasses future
salary levels and participants' years of service.
Net pension costs includes the following components for the years ended
December 31:
1995 1994 1993
(In thousands)
Service cost - benefits earned during year $185 $180 $139
Interest cost on projected benefit obligation 158 155 123
(Gain)loss on plan assets (139) (53) 9
Net amortization, deferral and other 65 27 62
---- ---- ----
Net pension cost $269 $309 $333
==== ==== ====
-28-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE I - PENSION PLAN (continued)
The following table sets forth the Plan's funded status and amounts
recognized in the consolidated statement of financial condition at
December 31:
1995 1994
(In thousands)
Actuarial present value of benefit obligation:
Vested benefit obligation $ 1,819 $ 1,431
======= =======
Accumulated benefit obligation $ 1,955 $ 1,526
======= =======
Plan assets at fair value $ 1,918 $ 1,527
Actuarial present value of projected benefit
obligation for services rendered to date 3,033 2,425
------- -------
Plan assets less than projected benefit obligation (1,115) (898)
Unrecognized net loss 1,168 913
Unrecognized transition liability, net of amortization 2 2
Other 116 136
------- -------
Prepaid pension cost (included in prepaid expenses
and other assets) $ 171 $ 153
======= =======
Assumptions for the plan valuations include:
Year ended
December 31,
1995 1994 1993
Weighted average discount rate 6.00% 6.50% 6.75%
Annual rate of increase in compensation levels 4.50% 4.50% 5.00%
Expected long-term rate of return on assets 8.00% 7.00% 5.50%
The unrecognized transition liability is being amortized straight-line as
a component of pension cost over a 20 year period.
-29-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE I - PENSION PLAN (continued)
Plan assets at December 31, 1995 and 1994 were invested in certificates of
deposit at the Banks, money market funds, stock and bond mutual funds and
in 10,923 and 10,404 shares of the Corporation's common stock at the
respective dates.
The Corporation also has a 401(k) Salary Savings Plan covering
substantially all employees. Total expense under this plan was $62,000,
$63,000 and $51,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
NOTE J - STOCK OPTION PLANS
Stockholders of the Corporation have approved three stock option plans.
Under the 1972 Plan, 161,416 common shares were reserved for issuance to
officers, directors, and key employees of the Corporation and its
subsidiaries. The 1982 Plan reserved 66,702 common shares for issuance to
employees of the Corporation and its subsidiaries. The foregoing number of
shares under option have been adjusted to reflect the 5% stock dividends
effected during the years ended December 31, 1995 and 1994, and the stock
split effected in the form of a 100% stock dividend in 1993. At December
31, 1995, all of the stock options had been granted and were subject to
exercise at the discretion of the grantees through 2002.
Under the 1995 Plan, 93,000 shares were reserved for issuance. As of
December 31, 1995, options to purchase 70,000 shares were awarded to
officers, directors, and key employees at the common stock's fair value on
the grant date, subject to stockholder approval in April 1996.
-30-
<PAGE>
<TABLE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE J - STOCK OPTION PLANS (continued)
The following summarizes stock option transactions for the 1972 and 1982
Plans:
1972 Plan
option
Number price
of shares per share Total
<S> <C> <C> <C>
Outstanding at December 31, 1992 and 1993 2,668 $1.58-$5.72 $12,629
Effect of 5% stock dividend in 1994 133 - -
------ --------------- -------
Outstanding at December 31, 1994 2,801 $1.50-$5.44 12,629
Exercised (1,382) $3.55 (avg.) (4,911)
Effect of 5% stock dividend in 1995 71 - -
------ --------------- -------
Outstanding at December 31, 1995 1,490 $5.18 $7,718
====== =============== =======
1982 Plan
option
Number price
of shares per share Total
Outstanding at December 31, 1992 8,894 $5.72 $50,820
Exercised (2,688) $5.72 (15,375)
------ --------------- -------
Outstanding at December 31, 1993 6,206 $5.72 35,445
Exercised (1,361) $5.44 (7,685)
Effect of 5% stock dividend in 1994 259 - -
------ --------------- -------
Outstanding at December 31, 1994 5,104 $5.44 27,760
Exercised (1,058) $5.44 (5,755)
Effect of 5% stock dividend in 1995 202 - -
------ --------------- -------
Outstanding at December 31, 1995 4,248 $5.18 $22,005
====== =============== =======
</TABLE>
-31-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE K - CAMCO FINANCIAL CORPORATION CONDENSED FINANCIAL INFORMATION
The following condensed financial statements summarize the financial
position of Camco Financial Corporation as of December 31, 1995 and 1994
and the results of its operations and its cash flows for each of the
years ended December 31, 1995, 1994 and 1993:
Camco Financial Corporation
STATEMENTS OF FINANCIAL CONDITION
December 31,
(In thousands)
1995 1994
ASSETS
Cash in subsidiary Banks $ 685 $ 467
Investment securities available for sale 86 --
Investment in Bank subsidiaries utilizing
the equity method 27,079 21,731
Investment in title agency subsidiary 232 160
Notes receivable from Bank subsidiary -- 3,000
Other 46 46
------- --------
Total assets $28,128 $ 25,404
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and other accrued liabilities $ 110 $ 112
Dividends payable 207 296
Current federal income taxes payable 118 255
------- --------
Total liabilities 435 663
Stockholders' equity
Common stock 1,971 1,875
Additional paid-in capital 5,735 4,416
Retained earnings - substantially restricted 19,936 18,466
Unrealized gain (loss) on investment securities
designated as available for sale, net of
related tax effects 51 (16)
------- --------
Total stockholders' equity 27,693 24,741
------- --------
Total liabilities and stockholders' equity $28,128 $ 25,404
======= ========
-32-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE K - CAMCO FINANCIAL CORPORATION CONDENSED FINANCIAL
INFORMATION (continued)
Camco Financial Corporation
STATEMENTS OF EARNINGS
Year ended December 31,
(In thousands)
1995 1994 1993
Income:
Dividends from Bank subsidiaries $ 1,123 $ 870 $ 991
Interest and other income 140 203 10
Equity in undistributed net income
of the Bank subsidiaries 2,781 1,845 2,556
Equity in undistributed net income
of title agency subsidiary 72 8 65
------- ------- -------
Total income 4,116 2,926 3,622
General, administrative and other
expense 607 496 398
------- ------- -------
Earnings before federal income tax
credits 3,511 2,430 3,224
Federal income tax credits (137) (112) (100)
------- ------- -------
Net earnings $ 3,648 $ 2,542 $ 3,324
======= ======= =======
-33-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE K - CAMCO FINANCIAL CORPORATION CONDENSED FINANCIAL INFORMATION
(continued)
<TABLE>
Camco Financial Corporation
STATEMENTS OF CASH FLOWS
Year ended December 31,
(In thousands)
1995 1994 1993
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net earnings for the year $ 3,648 $ 2,542 $ 3,324
Adjustments to reconcile net income to net
cash flows from operating activities:
Undistributed net income of the Bank
subsidiaries (2,781) (1,845) (2,556)
Undistributed net income of title
agency subsidiary (72) (8) (65)
Decrease (increase) in other assets (61) (16) 5
Increase (decrease) in accounts payable
and other liabilities (2) (72) 20
Increase (decrease) in federal income taxes payable (136) 35 --
------- ------- -------
Net cash provided by operating activities 596 636 728
------- ------- -------
Cash flows used in investing activities:
Issuance of note receivable to Bank subsidiary -- (3,000) --
Repayment of note receivable from Bank subsidiary 3,000 -- --
Contribution of capital to Bank subsidiaries (2,500) -- --
Purchase of investment securities (29) -- --
------- ------- -------
Net cash provided by (used in) investing activities 471 (3,000) --
Cash flows provided by (used in) financing activities:
Common stock options exercised 10 8 15
Dividends paid (859) (580) (399)
Proceeds from offering of common stock -- 2,961 --
------- ------- -------
Net cash provided by (used in) financing activities (849) 2,389 (384)
------- ------- -------
Net increase in cash and cash equivalents 218 25 344
Cash and cash equivalents - beginning of year 467 442 98
------- ------- -------
Cash and cash equivalents - end of year $ 685 $ 467 $ 442
======= ======= =======
</TABLE>
-34-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE K - CAMCO FINANCIAL CORPORATION CONDENSED FINANCIAL INFORMATION
(continued)
During 1994, the Corporation undertook an offering of common stock which
was completed on December 28, 1994. The Corporation issued 231,000 shares
of common stock in the offering at $14.50 per share. After giving effect
to offering expenses of $379,000, the Corporation recognized a $3.0
million increase in stockholders' equity.
NOTE L - SEGMENT INFORMATION
The following table sets forth the Corporation's revenues, income before
income taxes, and assets for each of its business segments for the years
ended December 31, 1995, 1994 and 1993. For purposes of the table,
"revenue" represents the sum of total interest income and total other
income:
Year ended
December 31,
1995 1994 1993
(In thousands)
Revenue:
Banking $ 26,827 $ 20,429 $ 19,876
Mortgage banking 2,808 2,703 3,575
--------- --------- ---------
Total business segments 29,635 23,132 23,451
Intersegment eliminations (902) (795) (849)
--------- --------- ---------
Total $ 28,733 $ 22,337 $ 22,602
========= ========= =========
Earnings before income taxes:
Banking $ 4,092 $ 2,934 $ 3,675
Mortgage banking 1,698 1,099 1,825
--------- --------- ---------
Total business segments 5,790 4,033 5,500
Intersegment eliminations (232) (180) (429)
--------- --------- ---------
Total $ 5,558 $ 3,853 $ 5,071
========= ========= =========
Assets-year-end:
Banking $ 344,177 $ 323,355 $ 269,867
Mortgage banking 3,096 1,817 7,752
--------- --------- ---------
Total business segments 347,273 325,172 277,619
Intersegment eliminations (804) (545) (521)
--------- --------- ---------
Total $ 346,469 $ 324,627 $ 277,098
========= ========= =========
-35-
<PAGE>
Camco Financial Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1995, 1994 and 1993
NOTE M - PENDING BUSINESS COMBINATION
On March 26, 1996, Camco Financial entered into a definitive merger
agreement (the agreement) with First Ashland Financial Corporation (First
Ashland). Pursuant to the agreement, Camco Financial has agreed to acquire
First Ashland for cash and common shares with an approximate fair value
totaling $28 million. Following the acquisition, First Ashland's banking
subsidiary, First Federal Bank for Savings, will continue operations as a
stand alone subsidiary of Camco Financial. At December 31, 1995, First
Ashland reported assets of approximately $90 million and stockholders'
equity of approximately $24 million.
-36-
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
23.a Consent of Grant Thornton LLP
23.b Consent of Deloitte & Touche LLP
99 Reissued report of Deloitte & Touche LLP
-37-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Camco Financial Corporation
By Larry A. Caldwell
_______________________________
Larry A. Caldwell,
President, Chief Executive
Officer and a Director
Date: November 25, 1996
-38-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
23.a Consent of Grant Thornton LLP
23.b Consent of Deloitte & Touche LLP
99 Reissued report of Deloitte & Touche LLP
-39-
ACCOUNTANT'S CONSENT
We have issued our report dated February 1, 1996, accompanying the
consolidated financial statements of Camco Financial Corporation which are
included in Amendment No. 1 to the Annual Report on Form 10-KSB/A for the year
ended December 31, 1995. We hereby consent to the incorporation by reference
of said report in Camco's Form S-8 (33-88072).
Grant Thornton LLP
Cincinnati, Ohio
November 25, 1996
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-88072 of Camco Financial Corporation on Form S-8 of our report dated March 4,
1994 (except for share and per share data as described in Note 1 as to which the
date is May 24, 1994), appearing in this Amendment No. 1 to the Annual Report on
Form 10-KSB/A of Camco Financial Corporation for the year ended December 31,
1995.
DELOITTE & TOUCHE LLP
Columbus, Ohio
November 20, 1996
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of CAMCO Financial Corporation:
We have audited the accompanying consolidated statement of income,
stockholders' equity, and cash flows of CAMCO Financial Corporation and its
subsidiaries for the year ended December 31, 1993. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of CAMCO
Financial Corporation audits subsidiaries for the year ended December 31, 1993,
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Columbus, Ohio
March 4, 1996 (except for share and per share data as described in Note 1 as to
which the date is May 24, 1994)
