FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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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
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(Exact name of registrant as specified in its charter)
Delaware 51-0110823
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6901 Glenn Highway, Cambridge, Ohio 43725
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(Address of principal executive office)
Registrant's telephone number, including area code: (740) 435-2020
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 August 11, 2000, the latest practicable date, 6,931,897.2 shares of the
registrant's common stock, $1.00 par value, were issued and outstanding.
Page 1 of 17 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 Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
Quantitative and Qualitative Disclosures about
Market Risk 15
PART II - OTHER INFORMATION 16
SIGNATURES 17
2
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Camco Financial Corporation
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
June 30, December 31,
ASSETS 2000 1999
<S> <C> <C>
Cash and due from banks $ 14,893 $ 16,707
Interest-bearing deposits in other financial institutions 2,982 247
--------- -------
Cash and cash equivalents 17,875 16,954
Investment securities available for sale - at market 261 273
Investment securities held to maturity - at cost, approximate market value of $16,957
and $16,452 as of June 30, 2000 and December 31, 1999 17,436 16,864
Mortgage-backed securities available for sale - at market 10,745 6,475
Mortgage-backed securities held to maturity - at cost, approximate market value of
$5,452 and $5,818 as of June 30, 2000 and December 31, 1999 5,560 5,944
Loans held for sale - at lower of cost or market 4,747 3,183
Loans receivable - net 925,598 723,042
Office premises and equipment - net 14,260 11,706
Real estate acquired through foreclosure 328 419
Federal Home Loan Bank stock - at cost 18,608 14,605
Accrued interest receivable on loans 5,266 3,890
Accrued interest receivable on mortgage-backed securities 118 78
Accrued interest receivable on investment securities and interest-bearing deposits 270 252
Prepaid expenses and other assets 1,614 888
Cash surrender value of life insurance 5,865 5,657
Goodwill and other intangible assets 3,220 3,252
--------- -------
Total assets $1,031,771 $813,482
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 589,671 $461,787
Advances from the Federal Home Loan Bank 357,410 279,125
Advances by borrowers for taxes and insurance 1,685 3,360
Accounts payable and accrued liabilities 4,660 3,006
Dividends payable 832 832
Accrued federal income taxes 241 133
Deferred federal income taxes 1,076 2,630
--------- -------
Total liabilities 955,575 750,873
Stockholders' equity
Preferred stock - $1 par value; authorized 100,000 shares;
no shares outstanding - -
Common stock - $1 par value; authorized, 14,900,000 shares, 7,057,917 and
5,752,310 shares issued at June 30, 2000 and December 31, 1999, respectively 7,058 5,752
Additional paid-in capital 41,551 30,351
Retained earnings - substantially restricted 29,123 27,205
Less 126,019 and 41,888 shares of treasury stock - at cost (1,416) (575)
Accumulated comprehensive loss, unrealized losses on securities designated
as available for sale, net of related tax effects (120) (124)
--------- -------
Total stockholders' equity 76,196 62,609
--------- -------
Total liabilities and stockholders' equity $1,031,771 $813,482
========= =======
</TABLE>
3
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Camco Financial Corporation
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Six months ended Three months ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Interest income
Loans $34,601 $22,030 $17,932 $11,392
Mortgage-backed securities 577 341 288 204
Investment securities 570 394 295 198
Interest-bearing deposits and other 875 786 451 351
------ ------ ------ ------
Total interest income 36,623 23,551 18,966 12,145
Interest expense
Deposits 13,204 9,417 6,802 4,715
Borrowings 10,120 4,022 5,428 2,224
------ ------ ------ ------
Total interest expense 23,324 13,439 12,230 6,939
------ ------ ------ ------
Net interest income 13,299 10,112 6,736 5,206
Provision for losses on loans 292 123 156 69
------ ------ ------ ------
Net interest income after provision
for losses on loans 13,007 9,989 6,580 5,137
Other income
Late charges, rent and other 996 1,203 527 587
Loan servicing fees 406 199 112 140
Service charges and other fees on deposits 343 260 180 148
Gain on sale of loans 626 1,331 469 549
Gain (loss) on sale of real estate acquired through foreclosure 36 (13) 4 (9)
Gain on sale of investment and mortgage-backed securities
designated as available for sale 5 - 5 -
Gain on sale of property and equipment 9 - 4 -
------ ------ ------ ------
Total other income 2,421 2,980 1,301 1,415
General, administrative and other expense
Employee compensation and benefits 4,727 3,796 2,271 1,972
Occupancy and equipment 1,510 1,207 778 621
Federal deposit insurance premiums 58 147 29 73
Data processing 686 449 403 219
Advertising 401 330 212 187
Franchise taxes 553 438 262 223
Amortization of goodwill 75 75 35 37
Other operating 2,014 2,012 1,103 1,074
------ ------ ------ ------
Total general, administrative and other expense 10,024 8,454 5,093 4,406
------ ------ ------ ------
Earnings before federal income taxes 5,404 4,515 2,788 2,146
Federal income taxes
Current 1,794 1,250 1,224 563
Deferred 51 279 (261) 167
------ ------ ------ ------
Total federal income taxes 1,845 1,529 963 730
------ ------ ------ ------
NET EARNINGS $ 3,559 $ 2,986 $ 1,825 $ 1,416
====== ====== ====== ======
EARNINGS PER SHARE
Basic $.52 $.52 $.26 $.25
=== === === ===
Diluted $.51 $.51 $.26 $.24
=== === === ===
</TABLE>
4
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Camco Financial Corporation
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Six months ended Three months ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net earnings $3,559 $2,986 $1,825 $1,416
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) during the
period, net of tax of $3, $(62), $3 and $(46) 7 (120) 7 (90)
Reclassification adjustment for realized gains
included in net earnings, net of tax of $2 for
the six and three months ended June 30, 2000 (3) - (3) -
----- ----- ----- -----
Comprehensive income $3,563 $2,866 $1,829 $1,326
===== ===== ===== =====
Accumulated comprehensive loss $ (120) $ (24) $ (120) $ (24)
===== ===== ===== =====
</TABLE>
5
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Camco Financial Corporation
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,
(In thousands)
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net earnings for the period $ 3,559 $ 2,986
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Amortization of deferred loan origination fees (169) (196)
Amortization of premiums and discounts on investment and
mortgage-backed securities - net 13 3
Amortization of goodwill 75 75
Amortization of purchase accounting adjustments - net (272) 19
Depreciation and amortization 598 570
Provision for losses on loans 292 123
(Gain) loss on sale of real estate acquired through foreclosure (36) 13
Federal Home Loan Bank stock dividends (612) (313)
Gain on sale of loans (227) (236)
Gain on sale of property and equipment (9) -
Gain on sale of investment and mortgage-backed securities designated
as available for sale (5) -
Loans originated for sale in the secondary market (38,675) (52,574)
Proceeds from sale of loans in the secondary market 37,338 58,309
Increase (decrease) in cash, net of acquisition of Westwood Homestead Financial
Corporation, due to changes in:
Accrued interest receivable (636) (115)
Prepaid expenses and other assets (611) (866)
Accrued interest and other liabilities 1,548 310
Federal income taxes:
Current (305) (395)
Deferred 51 279
------- -------
Net cash provided by operating activities 1,917 7,992
Cash flows provided by (used in) investing activities:
Proceeds from maturities of investment securities and interest-bearing deposits 185 5,000
Purchases of investment securities designated as held to maturity (750) (7,498)
Purchases of investments designated as available for sale - (22)
Purchase of mortgage-backed securities designated as available for sale - (5,080)
Principal repayments on mortgage-backed securities 1,331 1,807
Loan principal repayments 74,158 120,991
Loan disbursements (136,989) (201,700)
Purchases of loans (1,791) (21,068)
Additions to office premises and equipment (1,049) (689)
Additions to real estate acquired through foreclosure (37) (44)
Proceeds from sale of real estate acquired through foreclosure 794 126
Purchase of Federal Home Loan Bank stock (2,054) (1,778)
Proceeds from sale of Federal Home Loan Bank stock 504 -
Net increase in cash surrender value of life insurance (128) (124)
Purchase of cash surrender life insurance (80) (250)
Purchase of Westwood Homestead Financial Corporation (1,879) -
------- -------
Net cash used in investing activities (67,785) (110,329)
------- -------
Net cash used in operating and investing activities
(balance carried forward) (65,868) (102,337)
------- -------
</TABLE>
6
<PAGE>
Camco Financial Corporation
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the six months ended June 30,
(In thousands)
2000 1999
<S> <C> <C>
Net cash used in operating and investing activities
(balance brought forward) $(65,868) $(102,337)
Cash flows provided by (used in) financing activities:
Net increase in deposits 27,568 14,535
Proceeds from Federal Home Loan Bank advances and other borrowings 164,000 93,756
Repayment of Federal Home Loan Bank advances and other borrowings (120,488) (19,319)
Dividends paid on common stock (1,664) (1,274)
Proceeds from exercise of stock options 8 -
Decrease in advances by borrowers for taxes and insurance (2,635) (473)
Purchase of treasury shares - (340)
------- --------
Net cash provided by financing activities 66,789 86,885
------- --------
Increase (decrease) in cash and cash equivalents 921 (15,452)
Cash and cash equivalents at beginning of period 16,954 35,815
------- --------
Cash and cash equivalents at end of period $ 17,875 $ 20,363
======= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings $ 23,366 $ 12,612
======= ========
Income taxes $ 1,804 $ 928
======= ========
Supplemental disclosure of noncash investing activities:
Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects $ 4 $ (120)
======= ========
Recognition of mortgage servicing rights in accordance with
SFAS No. 125 $ 399 $ 1,095
======= ========
Transfers from loans to real estate acquired through foreclosure $ 479 $ 747
======= ========
Liabilities assumed, stock and cash paid in acquisition of Westwood
Homestead Financial Corporation $159,698 $ -
Less: fair value of assets received 159,698 -
------- --------
Amount assigned to goodwill $ - $ -
======= ========
</TABLE>
7
<PAGE>
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 the
Corporation included in Camco's Annual Report on Form 10-K for the year
ended December 31, 1999. 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 six
and three month periods ended June 30, 2000, are not necessarily
indicative of the results which may be expected for the entire year.
In January 2000, Camco Financial Corporation ("Camco", or the
"Corporation") acquired Westwood Homestead Financial Corporation
("Westwood Financial") utilizing the purchase method of accounting (the
"Merger"). Westwood Financial was dissolved upon consummation of the
Merger and Westwood Financial's banking subsidiary, Westwood Homestead
Savings Bank, continued operations as a wholly-owned subsidiary of the
Corporation. Camco paid $11.1 million in cash and issued 1,304,875 of
its common shares in connection with the Merger.
2. Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Camco and its six 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"), Westwood Homestead
Savings Bank ("Westwood") (collectively hereinafter "the Banks") and
Camco Title Insurance Agency, Inc., as well as two second tier
subsidiaries, Camco Mortgage Corporation and WestMar Mortgage Company.
All significant intercompany balances and transactions have been
eliminated.
3. Earnings Per Share
Basic earnings per share for the six and three month periods ended June
30, 2000, is computed based on 6,898,226 and 6,931,898 weighted-average
shares outstanding during the respective periods.
Basic earnings per share for the six and three month periods ended June
30, 1999, is computed based on 5,738,710 and 5,736,175 weighted-average
shares outstanding during the respective periods.
8
<PAGE>
Camco Financial Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Earnings Per Share (continued)
Diluted earnings per share is computed taking into consideration common
shares outstanding and dilutive potential common shares to be issued
under the Corporation's stock option plans. Weighted-average common
shares deemed outstanding for purposes of computing diluted earnings
per share totaled 6,935,820 and 6,960,455 for the six and three month
periods ended June 30, 2000, and 5,856,153 and 5,844,063 for the six
and three month periods ended June 30, 1999, respectively.
Incremental shares related to the assumed exercise of stock options
included in the computation of diluted earnings per share for the six
and three month periods ended June 30, 2000, totaled 37,594 and 28,557,
respectively, and totaled 117,443 and 107,888 for the six and three
month periods ended June 30, 1999, respectively.
Options to purchase 432,795 shares of common stock with a
weighted-average exercise price of $12.16 were outstanding at June 30,
2000, but were excluded from the computation of common share
equivalents for the six months ended June 30, 2000, because the
exercise prices were greater than the average market price of the
common shares.
Options to purchase 485,331 shares of common stock with a
weighted-average exercise price of $11.81 were outstanding at June 30,
2000, but were excluded from the computation of common share
equivalents for the three months ended June 30, 2000, because the
exercise prices were greater than the average market price of the
common shares.
4. Effects of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
requires entities to recognize all derivatives in their financial
statements as either assets or liabilities measured at fair value. SFAS
No. 133 also specifies new methods of accounting for hedging
transactions, prescribes the items and transactions that may be hedged,
and specifies detailed criteria to be met to qualify for hedge
accounting.
The definition of a derivative financial instrument is complex, but in
general, it is an instrument with one or more underlyings, such as an
interest rate or foreign exchange rate, that is applied to a notional
amount, such as an amount of currency, to determine the settlement
amount(s). It generally requires no significant initial investment and
can be settled net or by delivery of an asset that is readily
convertible to cash. SFAS No. 133 applies to derivatives embedded in
other contracts, unless the underlying of the embedded derivative is
clearly and closely related to the host contract.
SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000. On adoption, entities are permitted to
transfer held-to-maturity debt securities to the available-for-sale or
trading category without calling into question their intent to hold
other debt securities to maturity in the future. SFAS No. 133 is not
expected to have a material impact on the Corporation's financial
statements.
9
<PAGE>
Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the three and six month periods ended June 30, 2000 and 1999
General
Camco's profitability depends primarily on the level of its 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 have 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 employee compensation and benefits, occupancy and equipment,
federal deposit insurance premiums, as well as various other operating expense
categories, including federal income tax expense.
Discussion of Financial Condition Changes from December 31, 1999 to June 30,
2000
At June 30, 2000, Camco's consolidated assets totaled $1.0 billion, an increase
of $218.3 million, or 26.8%, over the December 31, 1999 total. The increase was
primarily due to the acquisition of Westwood, in January 2000, which resulted in
net asset growth of approximately $159.5 million and deposit growth of $100.3.
The additional increase in total assets was through internal growth, primarily
in loans receivable, and was funded by deposit growth of $27.6 million and an
increase of $78.3 million in advances from the Federal Home Loan Bank ("FHLB").
Cash and interest-bearing deposits in other financial institutions totaled $17.9
million at June 30, 2000, an increase of $921,000, or 5.4%, from December 31,
1999 levels. Investment securities totaled $17.7 million at June 30, 2000, an
increase of $560,000, or 3.3%, over the total at December 31, 1999. Investment
securities purchases totaled $750,000, while maturities amounted to $185,000
during the six-month period ended June 30, 2000.
Mortgage-backed securities totaled $16.3 million at June 30, 2000, an increase
of $3.9 million, or 31.3%, over December 31, 1999, due primarily to the $5.2
million of mortgage-backed securities acquired through the Merger, which was
partially offset by principal repayments totaling $1.3 million.
Loans receivable and loans held for sale increased by $204.1 million, or 28.1%,
during the six months ended June 30, 2000, to a total of $930.3 million. The
increase resulted primarily from loans acquired through the Merger totaling
$142.0 million and loan disbursements totaling $177.5 million, which were
partially offset by principal repayments of $74.2 million and loan sales of
$37.1 million. The volume of loans originated and purchased during the 2000 six
month period was exceeded by that of the 1999 period by $97.9 million, or 35.6%,
while the volume of loan sales decreased by $21.0 million year to year. Loan
origination volume and loan sales have been effected during the 2000 period by
the overall increase in interest rates in the economy. Loans held for sale
totaled $4.7 million at June 30, 2000, compared to $3.2 million at December 31,
1999.
10
<PAGE>
Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three and six month periods ended June 30, 2000 and 1999
Discussion of Financial Condition Changes from December 31, 1999 to June 30,
2000 (continued)
During the six months ended June 30, 2000, continued rising interest rates
shifted consumer preference from fixed-rate mortgages to adjustable-rate
mortgages ("ARMs"). The majority of loans originated by Camco in 2000 have been
ARMs and, consistent with its past practice, Camco has retained most of the ARMs
in its portfolio.
Nonperforming loans (90 days or more delinquent plus nonaccrual loans) totaled
$5.0 million and $4.0 million at June 30, 2000 and December 31, 1999,
respectively, constituting .54% and .55% of total net loans, including loans
held for sale, at those dates. Nonperforming loans consist primarily of one- to
four-family residential properties which management believes are adequately
collateralized. The consolidated allowance for loan losses totaled $2.7 million
and $1.9 million at June 30, 2000 and December 31, 1999, respectively,
representing 54.0% and 46.9% of nonperforming loans, respectively, at those
dates. The allowance for loan losses was increased as a result of the Merger by
$641,000 which represents the allowance maintained by Westwood prior to the
Merger. Although management believes that its allowance for loan losses is
adequate based upon the available facts and circumstances at June 30, 2000,
there can be no assurance that additions to such allowance will not be necessary
in future periods, which could adversely affect Camco's results of operations.
Deposits totaled $589.7 million at June 30, 2000, an increase of $127.9 million,
or 27.7%, over December 31, 1999 levels. The increase resulted primarily from
deposits of $100.3 million acquired in the Merger coupled with deposit portfolio
growth of $27.6 million, or 6.0%, which resulted primarily from management's
continuing efforts to achieve a moderate rate of growth through advertising and
pricing strategies. Advances from the Federal Home Loan Bank ("FHLB") increased
by $78.3 million, or 28.0%, to a total of $357.4 million at June 30, 2000. The
increase was due primarily to net current period borrowings totaling $43.5
million, coupled with advances of $35.2 million acquired through the Merger. The
proceeds from deposit growth and FHLB advances were primarily used to fund loan
originations during the six month period.
The Banks are required to maintain minimum regulatory capital pursuant to
federal regulations. At June 30, 2000, the Banks' regulatory capital exceeded
all regulatory capital requirements.
Comparison of Results of Operations for the Six Months Ended June 30, 2000 and
1999
General
The inclusion of the accounts of Westwood, which Camco acquired in January 2000
in a transaction accounted for using the purchase method of accounting,
significantly contributed to the increases in the level of income and expenses
during the six and three months ended June 30, 2000, compared to the six and
three months ended June 30, 1999. The statements of earnings for the six and
three month periods ended June 30, 1999, were not restated for the Merger.
11
<PAGE>
Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three and six month periods ended June 30, 2000 and 1999
Comparison of Results of Operations for the Six Months Ended June 30, 2000 and
1999 (continued)
General (continued)
Camco's net earnings for the six months ended June 30, 2000 totaled $3.6
million, an increase of $573,000, or 19.2%, over the $3.0 million of net
earnings reported in the comparable 1999 period. The increase in earnings was
primarily attributable to a $3.2 million increase in net interest income, which
was partially offset by a $169,000 increase in the provision for losses on
loans, a decrease in other income of $559,000, a $1.6 million increase in
general, administrative and other expense and a $316,000 increase in the
provision for federal income taxes.
Net Interest Income
Total interest income for the six months ended June 30, 2000, increased by $13.1
million, or 55.5%, over the six month period ended June 30, 1999, generally
reflecting the effects of growth in average interest-earning assets of
approximately $294.0 million.
Interest income on loans and mortgage-backed securities totaled $35.2 million
for the six months ended June 30, 2000, an increase of $12.8 million, or 57.2%,
over the comparable 1999 period. The increase resulted primarily from a $296.5
million, or 49.6%, increase in the average balance outstanding year to year, and
a 38 basis point increase in the average yield. Interest income on investments
and other interest-bearing assets increased by $265,000, or 22.5%, due primarily
to an increase of 159 basis points in the weighted-average yield, which was
partially offset by a $2.5 million, or 5.6%, decrease in the average balance
outstanding year to year.
Interest expense on deposits increased by $3.8 million, or 40.2%, to a total of
$13.2 million for the six months ended June 30, 2000, due primarily to a $119.2
million, or 26.6%, increase in average deposits outstanding over the prior year
and an increase of 45 basis points in the weighted-average interest rates paid.
Interest expense on borrowings totaled $10.1 million for the six months ended
June 30, 2000, an increase of $6.1 million, or 151.6%, over the 1999 six month
period. The increase resulted primarily from a $168.3 million, or 107.5%,
increase in the average balance outstanding year to year and an increase of 109
basis points in the weighted-average interest rates paid.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $3.2 million, or 31.5%, to a total of $13.3
million for the six months ended June 30, 2000. The interest rate spread
decreased to approximately 2.59% for the six months ended June 30, 2000, from
2.88% for the 1999 period, while the net interest margin decreased to
approximately 2.84% in 2000, compared to 3.15% in 1999.
12
<PAGE>
Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three and six month periods ended June 30, 2000 and 1999
Comparison of Results of Operations for the Six Months Ended June 30, 2000 and
1999 (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 Camco, the
status of past due principal and interest payments, general economic conditions,
particularly as such conditions relate to Camco's market area, and other factors
related to the collectibility of Camco's loan portfolio. The provision for
losses on loans totaled $292,000 for the six months ended June 30, 2000, an
increase of $169,000 over the comparable period in 1999. The current period
provision generally reflects the effects of loan portfolio growth. There can be
no assurance that the allowance for loan losses will be adequate to cover losses
on nonperforming loans in the future.
Other Income
Other income totaled $2.4 million for the six months ended June 30, 2000, a
decrease of $559,000, or 18.8%, from the comparable 1999 period. The decrease in
other income was primarily attributable to a $705,000, or 53.0%, decrease in
gains on sale of loans and a decrease of $207,000, or 17.2%, in late charges,
rent and other. The decrease in gains on sale of loans primarily reflects a
reduction in sales volume year to year, due primarily to the overall increase in
interest rates in the economy. The decrease in late charges, rent and other was
primarily attributable to a $176,000 decrease in title company fees compared to
the same period in 1999.
General, Administrative and Other Expense
General, administrative and other expense totaled $10.0 million for the six
months ended June 30, 2000, an increase of $1.6 million, or 18.6%, over the
comparable period in 1999. This increase was due primarily to a $931,000, or
24.5%, increase in employee compensation and benefits, a $303,000, or 25.1%,
increase in occupancy and equipment, a $115,000, or 26.3%, increase in franchise
taxes and a $237,000, or 52.8%, increase in data processing expense, which were
partially offset by a decrease in federal deposit insurance premiums of $89,000,
or 60.5%.
The acquisition of Westwood accounted for $1.3 million, or 81.3%, of the total
increase in general, administrative and other expenses. Exclusive of the effects
of the Merger, the increase in employee compensation and benefits resulted
primarily from normal merit increases coupled with increased staffing levels due
to Camco's overall growth year to year. The increase in office occupancy and
equipment expense was due to increased depreciation and increased building
maintenance costs and franchise taxes increased due primarily to the
Corporation's equity growth year to year.
Federal Income Taxes
The provision for federal income taxes totaled $1.8 million for the six months
ended June 30, 2000, an increase of $316,000, or 20.7%, over the six months
ended June 30, 1999. This increase was attributable to a $889,000, or 19.7%,
increase in pre-tax earnings. The Corporation's effective tax rate amounted to
34.1% and 33.9% for the six months ended June 30, 2000 and 1999.
13
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Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three and six month periods ended June 30, 2000 and 1999
Comparison of Results of Operations for the Three Months Ended June 30, 2000 and
1999
General
Camco's net earnings for the three months ended June 30, 2000 totaled $1.8
million, an increase of $409,000, or 28.9%, over the $1.4 million of net
earnings reported in the comparable 1999 period. The increase in earnings was
primarily attributable to a $1.5 million increase in net interest income, which
was partially offset by a decrease in other income of $114,000, a $687,000
increase in general, administrative and other expense, a $233,000 increase in
the provision for federal income taxes and an $87,000 increase in the provision
for loan losses.
Net Interest Income
Total interest income for the three months ended June 30, 2000, increased by
$6.8 million, or 56.2%, over the three month period ended June 30, 1999,
generally reflecting the effects of growth in average interest-earning assets
outstanding of approximately $310.0 million, or 46.7%.
Interest income on loans and mortgage-backed securities totaled $18.2 million
for the three months ended June 30, 2000, an increase of $6.6 million, or 57.1%,
over the comparable 1999 period. The increase resulted primarily from a $307.6
million, or 49.4%, increase in the average balance outstanding year to year, and
a 38 basis point increase in the average yield. Interest income on investments
and other interest-bearing assets increased by $197,000, or 35.9%, due primarily
to an increase of 152 basis points in the weighted-average yield, coupled with a
$2.4 million, or 5.9%, increase in the average balance outstanding year to year.
Interest expense on deposits increased by $2.1 million, or 44.3%, to a total of
$6.8 million for the three months ended June 30, 2000, due primarily to a $135.4
million, or 29.9%, increase in average deposits outstanding over the prior year
and an increase of 46 basis points in the weighted-average interest rates paid.
Interest expense on borrowings totaled $5.4 million for the three months ended
June 30, 2000, an increase of $3.2 million, or 144.1%, over the 1999 three month
period. The increase resulted primarily from a $165.9 million, or 96.0%,
increase in the average balance outstanding year to year coupled with an
increase of 126 basis points in the weighted-average interest rates paid.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $1.5 million, or 29.4%, to a total of $6.7
million for the three months ended June 30, 2000. The interest rate spread
decreased to approximately 2.51% for the three months ended June 30, 2000, from
2.89% for the 1999 period, while the net interest margin decreased to
approximately 2.77% in 2000, compared to 3.36% in 1999.
14
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Camco Financial Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the three and six month periods ended June 30, 2000 and 1999
Comparison of Results of Operations for the Three Months Ended June 30, 2000 and
1999 (continued)
Provision for Losses on Loans
Based on historical experience, the volume and type of lending conducted by
Camco, the status of past due principal and interest payments, general economic
conditions, particularly as such conditions relate to Camco's market area, and
other factors related to the collectibility of Camco's loan portfolio. The
provision for losses on loans totaled $156,000 for the three months ended June
30, 2000, an increase of $87,000 from the comparable period in 1999. The current
period provision generally reflects the effects of loan portfolio growth. There
can be no assurance that the allowance for loan losses will be adequate to cover
losses on nonperforming loans in the future.
Other Income
Other income totaled $1.3 million for the three months ended June 30, 2000, a
decrease of $114,000, or 8.1%, from the comparable 1999 period. The decrease in
other income was primarily attributable to an $80,000, or 14.6%, decrease in
gains on sale of loans and a decrease of $60,000, or 10.2%, in late charges,
rent and other, which were partially offset by a $32,000, or 21.6%, increase in
service charges on deposits. The decrease in gains on sale of loans primarily
reflects a reduction in sales volume year to year. The decrease in late charges,
rent and other was primarily attributable to a $33,000 decrease in title company
fees compared to the same quarter in 1999.
General, Administrative and Other Expense
General, administrative and other expense totaled $5.1 million for the three
months ended June 30, 2000, an increase of $687,000, or 15.6%, over the
comparable period in 1999. This increase was due primarily to a $299,000, or
15.2%, increase in employee compensation and benefits, a $157,000, or 25.3%,
increase in occupancy and equipment, a $39,000, or 17.5%, increase in franchise
taxes and a $184,000, or 84.0%, increase in data processing expense, which were
partially offset by a decrease in federal deposit insurance premiums of $44,000,
or 60.3%.
Federal Income Taxes
The provision for federal income taxes totaled $963,000 for the three months
ended June 30, 2000, an increase of $233,000, or 31.9%, over the three months
ended June 30, 1999. This increase is attributable to a $642,000, or 29.9%,
increase in pre-tax earnings. The Corporation's effective tax rate amounted to
34.5% and 34.0% for the three months ended June 30, 2000 and 1999, respectively.
Quantitative and Qualitative Disclosures about Market Risk
There has been no material change in the Corporation's market risk since the
Corporation's Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 1999.
15
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Camco Financial Corporation
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities and Use of Proceeds
None
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
On May 23, 2000, Camco held its Annual Meeting of
Stockholders. One matter was submitted to stockholders for
which the following votes were cast:
Three directors were elected to terms expiring in 2002, as
follows:
For Withheld
Robert C. Dix, Jr. 5,776,097 101,352
Kenneth R. Elshoff 5,775,461 101,988
Paul D. Leake 5,774,413 103,036
ITEM 5. Other Information
Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
15 Independent Accountants' Report
27 Financial data schedule for the six months
ended June 30, 2000.
(b) Reports on Form 8-K: None.
16
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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: August 14, 2000 By: /s/Larry A. Caldwell
----------------------------- ---------------------------
Larry A. Caldwell
Chief Executive Officer
Date: August 14, 2000 By: /s/Gary Crane
----------------------------- ---------------------------
Gary Crane
Chief Financial Officer
17
