FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1997
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 (Zip Code)
executive office)
Registrant's telephone number, including area code: (614) 432-5641
Check 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 past 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 _____
As of May 9, 1997, the latest practicable date 3,061,519.9 shares of the
registrant's common stock, $1.00 par value, were issued and outstanding.
Page 1 of 16 pages
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Camco Financial Corporation
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION 15
SIGNATURES 16
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Camco Financial Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, December 31,
ASSETS 1997 1996
<S> <C> <C>
Cash and due from banks $ 13,358 $ 10,587
Interest-bearing deposits in other financial institutions 1,495 7,278
--------- --------
Cash and cash equivalents 14,853 17,865
Certificates of deposit in other financial institutions -- 990
Investment securities available for sale - at market 5,653 5,174
Investment securities - at cost, approximate market value of $22,740
and $21,822 as of March 31, 1997 and December 31, 1996 22,590 21,844
Mortgage-backed securities available for sale - at market 507 742
Mortgage-backed securities - at cost, approximate market value of
$10,021 and $10,735 as of March 31, 1997 and December 31, 1996 10,385 10,700
Loans held for sale - at lower of cost or market 2,770 931
Loans receivable - net 391,762 387,992
Office premises and equipment - net 6,857 6,811
Real estate acquired through foreclosure 118 53
Federal Home Loan Bank stock - at cost 4,157 3,942
Accrued interest receivable on loans 2,523 2,443
Accrued interest receivable on mortgage-backed securities 65 69
Accrued interest receivable on investment securities and
interest-bearing deposits 462 499
Prepaid expenses and other assets 1,127 495
Cash surrender value of life insurance 4,937 4,880
Goodwill and other intangible assets 3,664 3,701
Prepaid federal income taxes -- 319
--------- --------
Total assets $ 472,430 $469,450
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 363,558 $358,009
Advances from the Federal Home Loan Bank 56,131 57,354
Advances by borrowers for taxes and insurance 2,058 2,864
Accounts payable and accrued liabilities 2,933 4,490
Dividends payable 383 368
Accrued federal income taxes 228 --
Deferred federal income taxes 1,350 1,352
--------- --------
Total liabilities 426,641 424,437
Stockholders' equity
Preferred stock - $1 par value; authorized 100,000 shares;
no shares outstanding -- --
Common stock - $1 par value; authorized, 4,900,000 shares,
3,061,520 and 3,062,893 issued at March 31, 1997 and
December 31, 1996 3,063 3,063
Additional paid-in capital 21,917 21,917
Retained earnings - substantially restricted 20,811 20,005
Unrealized gains (losses) on securities designated as
available for sale, net of related tax effects (2) 28
--------- --------
Total stockholders' equity 45,789 45,013
--------- --------
Total liabilities and stockholders' equity $ 472,430 $469,450
========= ========
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Camco Financial Corporation
CONSOLIDATED STATEMENTS OF EARNINGS
For the three months ended March 31,
(In thousands, except per share data)
1997 1996
<S> <C> <C>
Interest income
Loans $ 7,971 $ 6,079
Mortgage-backed securities 190 98
Investment securities 446 313
Interest-bearing deposits and other 235 153
---------- ----------
Total interest income 8,842 6,643
Interest expense
Deposits 4,100 3,237
Borrowings 847 365
---------- ----------
Total interest expense 4,947 3,602
---------- ----------
Net interest income 3,895 3,041
Provision for losses on loans 48 21
---------- ----------
Net interest income after provision for losses on loans 3,847 3,020
Other income
Late charges, rent and other 277 247
Loan servicing fees 120 186
Service charges and other fees on deposits 126 95
Gain on sale of loans 156 416
Gain on sale of real estate acquired through foreclosure 20 --
---------- ----------
Total other income 699 944
General, administrative and other expense
Employee compensation and benefits 1,347 1,014
Occupancy and equipment 344 260
Federal deposit insurance premiums 65 163
Data processing 139 100
Advertising 98 86
Franchise taxes 114 106
Amortization of goodwill 37 --
Other operating 641 479
---------- ----------
Total general, administrative and other expense 2,785 2,208
---------- ----------
Earnings before federal income taxes 1,761 1,756
Federal income taxes
Current 567 523
Deferred 13 74
---------- ----------
Total federal income taxes 580 597
---------- ----------
NET EARNINGS $ 1,181 $ 1,159
========== ==========
EARNINGS PER SHARE $ .39 $ .56
========== ==========
Weighted average number of common shares outstanding 3,062,893 2,069,797
========== ==========
</TABLE>
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Camco Financial Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31,
(In thousands)
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 1,181 $ 1,159
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of deferred loan origination fees (98) (105)
Amortization of premiums and discounts on investment and
mortgage-backed securities - net 3 12
Amortization of goodwill 37 --
Depreciation and amortization 160 106
Provision for losses on loans 48 21
Gain on sale of real estate acquired through foreclosure (20) --
Federal Home Loan Bank stock dividends (70) (29)
Gain on sale of loans (56) (112)
Loans originated for sale in the secondary market (11,805) (29,537)
Proceeds from sale of loans in the secondary market 10,022 26,889
Increase (decrease) in cash due to changes in:
Accrued interest receivable (39) (81)
Prepaid expenses and other assets (632) (35)
Accrued interest and other liabilities (1,542) (253)
Federal income taxes:
Current 547 378
Deferred 13 74
--------- --------
Net cash used in operating activities (2,251) (1,513)
Cash flows provided by (used in) investing activities:
Proceeds from maturities of investment securities
and interest-bearing deposits 2,240 3,274
Purchases of investment securities (2,509) (2,236)
Loan principal repayments 23,198 15,839
Loan disbursements (27,095) (10,960)
Principal repayments on mortgage-backed securities 544 267
Additions to office premises and equipment (206) (254)
Proceeds from sale of real estate acquired through foreclosure 132 --
Purchase of Federal Home Loan Bank stock (145) --
Net increase in cash surrender value of life insurance (57) --
--------- --------
Net cash provided by (used in) investing activities (3,898) 5,930
Cash flows provided by (used in) financing activities:
Net increase in deposits 5,549 3,727
Proceeds from advances from the Federal Home Loan Bank and
other borrowings 103,130 2,000
Repayment of Federal Home Loan Bank advances
and other borrowings (104,353) (8,009)
Dividends paid on common stock (383) (207)
Decrease in advances by borrowers for taxes and insurance (806) (1,454)
--------- --------
Net cash provided by (used in) financing activities 3,137 (3,943)
--------- --------
Increase (decrease) in cash and cash equivalents (3,012) 474
Cash and cash equivalents at beginning of period 17,865 13,447
--------- --------
Cash and cash equivalents at end of period $ 14,853 $ 13,921
========= ========
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Camco Financial Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the three months ended March 31,
(In thousands)
1997 1996
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings $ 4,963 $ 3,621
======= =======
Income taxes $ 100 $ --
======= =======
Supplemental disclosure of noncash investing activities:
Unrealized losses on securities designated as available
for sale, net of related tax effects $ (30) $ (10)
======= =======
Recognition of gains on sale of loans in accordance with
SFAS No. 122 $ 100 $ 304
======= =======
Transfer of loans to real estate acquired through foreclosure $ 180 $ --
======= =======
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Camco Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements were prepared
in accordance with instructions for Form 10-Q and, therefore, do not
include information or footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. Accordingly, these financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto of Camco Financial Corporation ("Camco" or the
"Corporation") included in Camco's Annual Report on Form 10-KSB for the
year ended December 31, 1996. However, all adjustments (consisting only of
normal recurring accruals) which, in the opinion of management, are
necessary for a fair presentation of the consolidated financial statements
have been included. The results of operations for the three month periods
ended March 31, 1997 and 1996 are not necessarily indicative of the results
which may be expected for the entire year.
2. Principles of Consolidation
Camco has five wholly-owned subsidiaries: Cambridge Savings Bank
("Cambridge Savings"), Marietta Savings Bank ("Marietta Savings"), First
Federal Savings Bank of Washington Court House ("First Federal"), First
Federal Bank for Savings ("First Savings") (collectively hereinafter "the
Banks") and East Ohio Land Title Agency, Inc., as well as two second tier
subsidiaries, Camco Mortgage Corporation and WestMar Mortgage Company.
First Savings was acquired by Camco on October 4, 1996, pursuant to the
merger of First Ashland Financial Corporation with and into Camco (the
"Merger") in a transaction accounted for using the purchase method of
accounting. Consequently, the March 31, 1996, consolidated statement of
earnings and statement of cash flows have not been restated for the merger.
The Company'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.
3. Effects of Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," establishing financial
accounting and reporting standards for stock-based employee compensation
plans. SFAS No. 123 encourages all entities to adopt a new method of
accounting to measure compensation cost of all employee stock compensation
plans based on the estimated fair value of the award at the date it is
granted. Companies are, however, allowed to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting, which generally does not result in compensation expense
recognition for most plans. Companies that elect to remain with the
existing accounting method are required to disclose in a footnote to the
financial statements pro forma net earnings and, if presented, earnings per
share, as if SFAS No. 123 had been adopted. The accounting requirements of
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Camco Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Effects of Recent Accounting Pronouncements (continued)
SFAS No. 123 are effective for transactions entered into during fiscal
years that begin after December 15, 1995; however, companies are required
to disclose information for awards granted in their first fiscal year
beginning after December 15, 1994. Management has determined that Camco
will continue to account for stock-based compensation pursuant to
Accounting Principles Board Opinion No. 25, and therefore, the disclosure
provisions of SFAS No. 123 will have no material effect on its consolidated
financial condition or results of operations.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers of
Financial Assets, Servicing Rights, and Extinguishment of Liabilities,"
that provides accounting guidance on transfers of financial assets,
servicing of financial assets, and extinguishment of liabilities. SFAS No.
125 introduces an approach to accounting for transfers of financial assets
that provides a means of dealing with more complex transactions in which
the seller disposes of only a partial interest in the assets, retains
rights or obligations, makes use of special purpose entities in the
transaction, or otherwise has continuing involvement with the transferred
assets. The new accounting method, referred to as the financial components
approach, provides that the carrying amount of the financial assets
transferred be allocated to components of the transaction based on their
relative fair values. SFAS No. 125 provides criteria for determining
whether control of assets has been relinquished and whether a sale has
occurred. If the transfer does not qualify as a sale, it is accounted for
as a secured borrowing. Transactions subject to the provisions of SFAS No.
125 include, among others, transfers involving repurchase agreements,
securitizations of financial assets, loan participations, factoring
arrangements, and transfers of receivables with recourse.
An entity that undertakes an obligation to service financial assets
recognizes either a servicing asset or liability for the servicing contract
(unless related to a securitization of assets, and all the securitized
assets are retained and classified as held-to-maturity). A servicing asset
or liability that is purchased or assumed is initially recognized at its
fair value. Servicing assets and liabilities are amortized in proportion to
and over the period of estimated net servicing income or net servicing loss
and are subject to subsequent assessments for impairment based on fair
value.
SFAS No. 125 provides that a liability is removed from the balance sheet
only if the debtor either pays the creditor and is relieved of its
obligation for the liability or is legally released from being the primary
obligor.
SFAS No. 125 is effective for transfers and servicing of financial assets
and extinguishment of liabilities occurring after December 31, 1997, and is
to be applied prospectively. Earlier or retroactive application is not
permitted. Management does not believe that adoption of SFAS No. 125 will
have a material adverse effect on Camco's consolidated financial position
or results of operations.
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Camco Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Effects of Recent Accounting Pronouncements (continued)
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
requires companies to present basic earnings per share and, if applicable,
diluted earnings per share, instead of primary and fully diluted earnings
per share, respectively. Basic earnings per share is computed without
including potential common shares, i.e., no dilutive effect. Diluted
earnings per share is computed taking into consideration common shares
outstanding and dilutive potential common shares, including options,
warrants, convertible securities and contingent stock agreements. SFAS No.
128 is effective for periods ending after December 15, 1997. Early
application is not permitted. Based upon the provisions of SFAS No. 128,
the Corporation's basic and diluted earnings per share for the three months
ended March 31, 1997 would have been $.39 and $.37, and basic and diluted
earnings per share for the three months ended March 31, 1996, would have
been $.56 and $.56, respectively.
4. Reclassifications
Certain reclassifications have been made to the March 31, 1996,
consolidated financial statements to conform to the March 31, 1997,
presentation.
5. Recent Legislation
Congress is considering legislation to eliminate the federal savings and
loan charter and separate federal regulation of savings and loan
associations. Pursuant to such legislation, Congress may develop a common
charter for all financial institutions, eliminate the OTS and regulate
First Federal and First Savings as banks or require them to change their
charters. Such changes would likely change the types of activities in which
such institutions could engage and would probably subject them to greater
regulation by the FDIC. In addition, the Corporation might become subject
to different holding company regulations.
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Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three month periods ended March 31, 1997 and 1996
General
Camco's profitability depends primarily on the 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
net earnings has also been heavily influenced by the level of other income,
including gains on sale of loans, loan servicing fees, and other fees. Camco's
operations are also influenced by the level of general, administrative and other
expenses, including salaries and employee benefits, occupancy, federal deposit
insurance premiums, as well as various other operating expense categories,
including federal income tax expense.
Since its incorporation in 1970, Camco has evolved into a full service provider
of financial products to the communities served by its banking subsidiaries.
Utilizing a common marketing theme committed to personalized customer service,
Camco and its affiliates have grown from $22.4 million in consolidated assets in
1970 to $472.4 million of consolidated assets at March 31, 1997. Camco's level
of growth is largely attributable to the acquisitions of Marietta Savings, First
Federal and First Savings and the continued expansion of product lines from the
previously limited deposit and loan offerings of a heavily regulated 1970's
savings and loan association, to the full array of financial service products
that were the previous domain of commercial banks. Additionally, Camco's
operational growth has been enhanced by vertical integration of the residential
lending function through establishing mortgage banking operations in the Banks'
primary market areas and, to a lesser extent, by chartering a title insurance
agency.
Management believes that continued success in the financial services industry
will be achieved by those institutions with a rigorous dedication to bringing
value-added services to their customers. Toward this end, each of the Banks'
operations are decentralized, with a separate Board of Directors and management
team focusing on consumer preferences for financial products in the respective
communities served. Based on such consumer preferences, Camco's management
designs financial service products with a view towards differentiating each of
the constituent Banks from the competition. It is management's opinion that the
Banks' abilities to rapidly adapt to consumer needs and preferences are
essential in order to compete against the larger regional and money-center bank
holding companies.
Discussion of Financial Condition Changes from December 31, 1996 to March 31,
1997
At March 31, 1997, Camco's consolidated assets totaled $472.4 million, an
increase of $3.0 million, or .6%, over the December 31, 1996 total. The increase
in total assets is primarily attributable to an increase of $5.6 million in
loans receivable and loans held for sale, which was funded through growth in
deposits totaling $5.5 million and undistributed net earnings of $798,000,
partially offset by a decrease of $1.2 million in Federal Home Loan Bank
advances.
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Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three month periods ended March 31, 1997 and 1996
Discussion of Financial Condition Changes from December 31, 1996 to March 31,
1997 (continued)
Cash and interest-bearing deposits in other financial institutions totaled $14.9
million at March 31, 1997, a decline of $4.0 million, or 21.2%, from December
31, 1996 levels. Management elected to utilize excess liquidity to fund
purchases on higher-yielding investment securities and to fund loan growth.
Investment securities totaled $28.2 million at March 31, 1997, an increase of
$1.2 million, or 4.5%, over December 31, 1996. During the 1997 quarter,
investment securities totaling $2.5 million were purchased, while maturities
amounted to $1.3 million.
Mortgage-backed securities totaled $10.9 million at March 31, 1997, a decrease
of $550,000 from December 31, 1996, due primarily to principal repayments during
the quarter. Loans receivable and loans held for sale increased by $5.6 million,
or 1.4%, during the three months ended March 31, 1997, to a total of $394.5
million. The increase was primarily attributable to loan disbursements of $38.9
million which was partially offset by principal repayments of $23.2 million and
loan sales of $10.0 million.
Nonperforming loans (90 days or more delinquent plus nonaccrual loans), totaled
$2.5 million and $2.4 million at March 31, 1997 and December 31, 1996,
respectively, constituting .63% and .61% of total net loans, including loans
held for sale at those dates. The consolidated allowance for loan losses totaled
$1.3 million and $1.2 million at March 31, 1997 and December 31, 1996,
respectively, representing 50.2% and 52.5% of nonperforming loans at those
dates. The provision for loan losses for the three months ended March 31, 1997
is primarily attributable to growth in the loan portfolio during that period.
Deposits totaled $363.6 million at March 31, 1997, an increase of $5.5 million,
or 1.5%, over December 31, 1996 levels. The increase resulted primarily from
management's continuing efforts to achieve a moderate rate of growth through
advertising and pricing strategies. The proceeds from deposit growth were
partially used to repay certain advances from the Federal Home Loan Bank, which
declined by $1.2 million, or 2.1%, to a total of $56.1 million at March 31,
1997.
The Banks are required to maintain minimum regulatory capital pursuant to
federal regulations. At March 31, 1997, the Banks' regulatory capital exceeded
all regulatory capital requirements.
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Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three month periods ended March 31, 1997 and 1996
Comparison of Results of Operations for the Three Months Ended March 31, 1997
and 1996
Increases in the level of income and expenses during the three month period
ended March 31, 1997, as compared to the comparable quarter in 1996, is
primarily due to the inclusion of the accounts of First Savings, which was
acquired by Camco on October 4, 1996, in a transaction accounted for using the
purchase method of accounting. Accordingly, the statement of earnings and the
statement of cash flows for the quarter ended March 31, 1996, was not restated
for the Merger.
General
Camco's net earnings for the three months ended March 31, 1997 totaled $1.2
million, an increase of $22,000, or 1.9%, over net earnings reported in the
comparable 1996 period. The increase in earnings in the 1997 period is primarily
attributable to an increase in net interest income of $854,000 and a decrease in
the provision for federal income taxes of $17,000, which were partially offset
by an increase in general, administrative and other expense of $577,000, a
decrease in other income of $245,000 and an increase in the provision for loan
losses of $27,000.
Net Interest Income
Total interest income for the three months ended March 31, 1997, increased by
$2.2 million, or 33.1%, reflecting the effects of growth in average
interest-earning assets outstanding, which was partially offset by a decrease in
yield year to year. Interest income on loans and mortgage-backed securities
totaled $8.2 million for the three months ended March 31, 1997, an increase of
$2.0 million, or 32.1%, over the comparable 1996 quarter. The increase resulted
primarily from the $105.2 million, or 35.4%, increase in the average balance
outstanding year to year. Interest income on investments and interest-bearing
deposits increased by $215,000, or 46.1%, due to an increase in average balances
of $13.3 million.
Interest expense on deposits increased by $863,000, or 26.7%, to a total of $4.1
million for the three months ended March 31, 1997, due primarily to a $73.6
million increase in the average balance of deposits outstanding. Interest
expense on borrowings totaled $847,000 for the three months ended March 31,
1997, an increase of $482,000, or 132.1%, over the comparable quarter in 1996.
The increase resulted primarily from a $35.5 million increase in average
borrowings outstanding year to year.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $854,000, or 28.1%, for the three months ended
March 31, 1997, compared to the comparable period in 1996. The interest rate
spread increased by 28 basis points for the three months ended March 31, 1997,
to 3.51%, from 3.23% in the 1996 period, while the net interest margin amounted
to 3.50% in 1997 and 3.12% in 1996.
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Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three month periods ended March 31, 1997 and 1996
Comparison of Results of Operations for the Three Months Ended March 31, 1997
and 1996 (continued)
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 Banks,
the amount of past due principal and interest payments, general economic
conditions, particularly as such conditions relate to the Bank's market area,
and other factors related to the collectibility of the Bank's loan portfolio.
The provision for losses on loans totaled $48,000 for the three months ended
March 31, 1997, an increase of $27,000 from the comparable period in 1996. The
current period provision generally reflects the effects of loan portfolio growth
and an increase in the level of nonperforming loans.
While management believes that its allowance for loan losses at March 31, 1997,
is adequate based upon the available facts and circumstances, there can be no
assurance that the loan loss allowance will be adequate to cover losses on
nonperforming assets in the future.
The foregoing statement is a "forward-looking" statement within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Factors that could affect the
adequacy of the loan loss allowance include, but are not limited to, the
following: (1) changes in the national and local economy which may negatively
impact the ability of borrowers to repay their loans and which may cause the
value of real estate and other properties that secure outstanding loans to
decline; (2) unforeseen adverse changes in circumstances with respect to certain
large loan borrowers; (3) decrease in the value of collateral securing consumer
loans to amounts equal to less than the outstanding balances of the consumer
loans; and (4) determinations by various regulatory agencies that the Savings
Bank must recognize additions to its loan loss allowance based on such
regulators' judgment of information available to them at the time of their
examinations.
Other Income
Other income totaled $699,000 for the three months ended March 31, 1997, a
decrease of $245,000, or 26.0%, from the comparable 1996 period. The decrease in
other income is primarily attributable to a $260,000, or 62.5%, decrease in
gains on sale of loans and a decrease of $66,000, or 35.5%, in loan servicing
fees, which were partially offset by a $30,000, or 12.1%, increase in late
charges, rent and other, an increase of $31,000, or 32.6%, in service charges
and other fees on deposits, and a $20,000 gain on sale of real estate acquired
through foreclosure. The decrease in gains on sales of loans reflects a decrease
in sales volume year to year. The increase in late charges, rent and other and
service charges on deposits was primarily attributable to an increase in fees on
loans and deposit accounts as a result of the growth in the respective
portfolios.
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Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three month periods ended March 31, 1997 and 1996
Comparison of Results of Operations for the Three Months Ended March 31, 1997
and 1996 (continued)
General, Administrative and Other Expense
General, administrative and other expense totaled $2.8 million for the three
months ended March 31, 1997, an increase of $577,000, or 26.1%, over the
comparable 1996 quarter. The increase is due primarily to a $333,000, or 32.8%,
increase in employee compensation and benefits, an $84,000, or 32.3%, increase
in occupancy and equipment, a $39,000, or 39.0%, increase in data processing, a
$37,000, or 100%, increase in the amortization of goodwill arising from the
Merger, and a $162,000, or 33.8%, increase in other operating expense, which
were partially offset by a $98,000, or 60.1%, decrease in federal deposit
insurance premiums. The increase in occupancy and equipment is attributable to
depreciation expense on office equipment purchased in 1995 and general repairs
of office buildings. The increase in employee compensation and benefits is
attributable to decreased deferred loan origination costs as a result of the
decrease in origination volume in 1997. The decrease in federal deposit
insurance premiums is due to the lower federal deposit insurance premium
following recapitalization of the Savings Association Insurance Fund ("SAIF") in
1996.
Federal Income Taxes
The provision for federal income taxes decreased in the three months ended March
31, 1997 by $17,000, or 2.8%. This decrease is primarily attributable to the
non-taxable increase in cash surrender value of life insurance. The effective
tax rates were 32.9% and 34.0% for the three month periods ended March 31, 1997
and 1996, respectively.
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<PAGE>
Camco Financial Corporation
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable
ITEM 5. Other Materially Important Events
None
ITEM 6. Exhibits and Reports on Form 8-K
Exhibit 27: Financial Data Schedule for the three month
period ended March 31, 1997
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<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Date: 5/13/97 By: /s/Larry A. Caldwell
____________________________________________
Larry A. Caldwell
its President and Chief Executive Officer
Date: 5/13/97 By: /s/Anthony J. Popp
____________________________________________
Anthony J. Popp
its Chief Financial Officer
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