-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DNENpGaV6aDhVbAo68+VGxc/SBhWkTJaeB67xzLEX20tcrj7yyTU1KFaj1WcGDfk D7pVIhmj6SwWNAcRUGtWbA== 0000896463-97-000110.txt : 19970515 0000896463-97-000110.hdr.sgml : 19970515 ACCESSION NUMBER: 0000896463-97-000110 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMCO FINANCIAL CORP CENTRAL INDEX KEY: 0000016614 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 510110823 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25196 FILM NUMBER: 97605074 BUSINESS ADDRESS: STREET 1: 814 WHEELING AVENUE CITY: CAMBRIDGE STATE: OH ZIP: 43725 BUSINESS PHONE: 6144325641 10-Q 1 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 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 -2- Camco Financial Corporation CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands, except share data) March 31, December 31, ASSETS 1997 1996 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 ========= ========
-3- Camco Financial Corporation CONSOLIDATED STATEMENTS OF EARNINGS For the three months ended March 31, (In thousands, except per share data) 1997 1996 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 ========== ==========
-4- Camco Financial Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended March 31, (In thousands) 1997 1996 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 ========= ========
-5- Camco Financial Corporation CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the three months ended March 31, (In thousands) 1997 1996 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 $ -- ======= ======= -6-
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 -7- 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. -8- 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. -9- 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. -10- 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. -11- 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. -12- 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. -13- 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. -14- 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 -15- 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 -16- EX-27 2
9 1000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 13,358 1,495 0 0 6,160 32,975 32,761 394,532 1,257 472,430 363,558 56,131 6,952 0 0 0 3,063 42,726 472,430 7,971 636 235 8,842 4,100 4,947 3,895 48 0 2,785 1,761 1,761 0 0 1,181 .39 .39 3.51 1,573 1,544 0 0 1,247 38 0 1,257 101 0 1,156
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