10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10 - Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                          to                                          

Commission File Number 0-25196

CAMCO FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	51-0110823
(State or other jurisdiction of	(I.R.S. Employer Identification Number)
incorporation or organization)

6901 Glenn Highway, Cambridge, Ohio 43725-9757

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (740) 435-2020

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ       No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o       Accelerated Filer þ       Non-Accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o       No þ

As of November 1, 2006, the latest practicable date, 7,463,056 shares of the registrant’s common stock, $1.00 par value, were issued and outstanding.

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		16
	Quantitative and Qualitative Disclosures about Market Risk		26
	Controls and Procedures		28
PART II -	OTHER INFORMATION		30
SIGNATURES			31
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

Camco Financial Corporation

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except share data)

	September 30,			December 31,
	2006			2005
ASSETS
Cash and due from banks	$	11,160		$	21,786
Interest-bearing deposits in other financial institutions		10,299			11,299
Cash and cash equivalents		21,459			33,085
Investment securities available for sale — at market		56,005			47,907
Investment securities held to maturity — at cost, approximate market value of $942 and $947 as of September 30, 2006 and December 31, 2005, respectively		916			919
Mortgage-backed securities available for sale — at market		53,834			61,607
Mortgage-backed securities held to maturity — at cost, approximate market value of $2,802 and $3,251 as of September 30, 2006 and December 31, 2005, respectively		2,870			3,257
Loans held for sale — at lower of cost or market		3,423			1,947
Loans receivable — net		837,837			846,763
Office premises and equipment — net		13,339			11,569
Real estate acquired through foreclosure		3,440			2,581
Federal Home Loan Bank stock — at cost		28,294			27,112
Accrued interest receivable		6,362			5,297
Prepaid expenses and other assets		2,110			1,228
Cash surrender value of life insurance		20,732			20,793
Goodwill — net of accumulated amortization		6,683			6,683
Prepaid federal income taxes		293			500
Total assets	$	1,057,597		$	1,071,248
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	684,911		$	660,242
Advances from the Federal Home Loan Bank and other borrowings		268,935			307,223
Advances by borrowers for taxes and insurance		2,884			3,249
Accounts payable and accrued liabilities		5,692			5,331
Dividends payable		1,120			1,102
Deferred federal income taxes		3,359			3,338
Total liabilities		966,901			980,485
Stockholders’ equity
Preferred stock — $1 par value; authorized 100,000 shares; no shares outstanding		—			—
Common stock — $1 par value; authorized 14,900,000 shares. 8,829,839 shares issued at September 30, 2006 and December 31, 2005		8,830			8,830
Additional paid-in capital		59,670			59,567
Retained earnings — substantially restricted		43,812			42,569
Accumulated other comprehensive income — unrealized gains on securities designated as available for sale, net of related tax effects		(1,425	)		(1,663	)
Less 1,369,025 and 1,251,125 shares of treasury stock at September 30, 2006 and December 31, 2005, respectively — at cost		(20,191	)		(18,540	)
Total stockholders’ equity		90,696			90,763
Total liabilities and stockholders’ equity	$	1,057,597		$	1,071,248

3

Camco Financial Corporation

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

	Nine months ended						Three months ended
	September 30,						September 30,
	2006			2005			2006			2005
Interest income
Loans	$	40,600		$	37,002		$	13,860		$	12,729
Mortgage-backed securities		1,843			2,172			602			679
Investment securities		1,609			800			590			358
Interest-bearing deposits and other		2,462			1,947			848			689
Total interest income		46,514			41,921			15,900			14,455
Interest expense
Deposits		15,276			11,298			5,744			4,009
Borrowings		8,753			8,173			2,904			2,893
Total interest expense		24,029			19,471			8,648			6,902
Net interest income		22,485			22,450			7,252			7,553
Provision for losses on loans		1,080			960			360			360
Net interest income after provision for losses on loans		21,405			21,490			6,892			7,193
Other income
Late charges, rent and other		1,830			2,278			642			818
Loan servicing fees		1,067			1,117			354			368
Service charges and other fees on deposits		1,108			1,090			325			370
Gain on sale of loans		235			564			56			215
Mortgage servicing rights – net		(181	)		(267	)		(113	)		(276	)
Gain on sale of investment, mortgage-backed securities and fixed assets		24			85			23			66
Gain (loss) on sale of real estate acquired through foreclosure		(66	)		16			(41	)		(18	)
Total other income		4,017			4,883			1,246			1,543
General, administrative and other expense
Employee compensation and benefits		10,986			10,461			3,691			3,588
Deferred compensation (FAS 91)		(1,503	)		(1,678	)		(473	)		(580	)
Occupancy and equipment		2,385			2,340			825			780
Data processing		1,041			995			316			317
Advertising		842			877			319			345
Franchise taxes		759			217			285			71
Other operating		4,104			3,898			1,447			1,214
Total general, administrative and other expense		18,614			17,110			6,410			5,735
Earnings before federal income taxes		6,808			9,263			1,728			3,001
Total federal income taxes		2,194			2,967			608			963
NET EARNINGS	$	4,614		$	6,296		$	1,120		$	2,038
EARNINGS PER SHARE
Basic	$	0.61		$	0.82		$	0.15		$	0.27
Diluted	$	0.61		$	0.82		$	0.15		$	0.27

4

Camco Financial Corporation

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Nine months ended					Three months ended
	September 30,					September 30,
	2006		2005			2006		2005
Net earnings	$	4,614	$	6,296		$	1,120	$	2,038
Other comprehensive income, net of tax:
Unrealized holding gains (losses) during the period, net of related taxes (benefits) of $123, $(521), $482and $(356) for the nine and three months ended September 30, 2006 and 2005, respectively		238		(1,012	)		935		(691	)
Reclassification adjustment for realized gains included in net earnings, net of taxes of $0, $27, $0 and $22 for the respective periods		—		(51	)		—		(44	)
Comprehensive income	$	4,852	$	5,233		$	2,055	$	1,303

5

Camco Financial Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30,
(In thousands)

	2006			2005
Cash flows from operating activities:
Net earnings for the period	$	4,614		$	6,296
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Amortization of deferred loan origination fees		167			57
Amortization of premiums and discounts on investment and mortgage-backed securities — net		165			374
Amortization of mortgage servicing rights — net		705			973
Amortization of purchase accounting adjustments — net		66			66
Depreciation and amortization		968			911
Stock option expense		103			—
Provision for losses on loans		1,080			960
Gain (loss) on sale of real estate acquired through foreclosure		66			(16	)
Gain on sale of office premises and equipment		(24	)		—
Federal Home Loan Bank stock dividends		(1,182	)		(927	)
Net increase in cash surrender value of life insurance		(580	)		(563	)
Gain on sale of investment mortgage-backed securities and fixed assets		—			(85	)
Gain on sale of loans		(235	)		(564	)
Loans originated for sale in the secondary market		(38,501	)		(52,577	)
Proceeds from sale of loans in the secondary market		37,260			50,661
Increase (decrease) in cash, due to changes in:
Accrued interest receivable		(1,065	)		(386	)
Prepaid expenses and other assets		(882	)		(177	)
Accrued interest and other liabilities		361			61
Federal income taxes:
Current		207			4,783
Deferred		(101	)		(114	)
Net cash provided by operating activities		3,192			9,733
Cash flows provided by (used in) investing activities:
Proceeds from maturities of investment securities		2,000			10,014
Proceeds from sale of investment securities designated as available for sale		—			174
Purchase of investment securities designated as available for sale		(9,915	)		(30,105	)
Purchase of mortgage-backed securities designated as available for sale		(1,967	)		(3,349	)
Purchase of loans		(2,099	)		(7,174	)
Loan disbursements		(177,845	)		(243,132	)
Principal repayments on loans		185,039			230,585
Principal repayments on mortgage-backed securities		10,143			16,589
Purchase of office premises and equipment		(2,752	)		(724	)
Proceeds from sale of office premises and equipment		38			—
Proceeds from sales of real estate acquired through foreclosure		907			1,922
Additions to real estate acquired through foreclosure		(20	)		(19	)
Proceeds from redemption of life insurance		641			—
Net cash provided by (used in) investing activities		4,170			(25,219	)
Net cash provided by (used in) operating and investing activities (subtotal carried forward)		7,362			(15,486	)

6

Camco Financial Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the nine months ended September 30,
(In thousands)

	2006			2005
Net cash provided by (used in) operating and investing activities
(subtotal brought forward)	$	7,362		$	(15,486	)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposits		24,669			2,130
Proceeds from Federal Home Loan Bank advances		55,500			41,204
Repayment of Federal Home Loan Bank advances and other borrowings		(93,788	)		(31,303	)
Dividends paid on common stock		(3,353	)		(3,329	)
Purchase of treasury stock		(1,651	)		(1,512	)
Proceeds from exercise of stock options		—			554
Advances by borrowers for taxes and insurance		(365	)		(878	)
Net cash used in financing activities		(18,988	)		6,866
Net decrease in cash and cash equivalents		(11,626	)		(8,620	)
Cash and cash equivalents at beginning of period		33,085			42,894
Cash and cash equivalents at end of period	$	21,459		$	34,274
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings	$	23,851		$	19,502
Cash paid for taxes	$	2,089		$	(1,802	)
Supplemental disclosure of noncash investing activities:
Transfers from mortgage loans to real estate acquired through foreclosure	$	3,140		$	2,743
Recognition of mortgage servicing rights in accordance with SFAS No. 140	$	524		$	706
Transfer of loans to real estate acquired through foreclosure	$	1,328		$	1,075
Dividends declared but unpaid	$	1,120		$	1,102

7

Camco Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the nine- and three-month periods ended September 30, 2006 and 2005

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 accounting principles generally accepted in the United States of America (“US GAAP”). 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-K for the year ended December 31, 2005. 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 nine- and three-month periods ended September 30, 2006, are not necessarily indicative of the results which may be expected for the entire year.
2.	Principles of Consolidation
	The accompanying consolidated financial statements include the accounts of Camco and its two wholly-owned subsidiaries: Advantage Bank (“Advantage” or the “Bank”) and Camco Title Agency, Inc.
3.	Critical Accounting Policies
	“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as disclosures found elsewhere in this quarterly report, are based upon Camco’s consolidated financial statements, which are prepared in accordance with US GAAP. The preparation of these financial statements requires Camco to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Several factors are considered in determining whether or not a policy is critical in the preparation of financial statements. These factors include, among other things, whether the estimates are significant to the financial statements, the nature of the estimates, the ability to readily validate the estimates with other information including third parties or available prices, and sensitivity of the estimates to changes in economic conditions and whether alternative accounting methods may be utilized under US GAAP.
	Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of mortgage servicing rights and goodwill impairment. Actual results could differ from those estimates.
	Allowance for Loan Losses
	The procedures for assessing the adequacy of the allowance for loan losses reflect our evaluation of credit risk after careful consideration of all information available to us. In developing this assessment, we must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown such as economic factors, developments affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may require an increase or a decrease in the allowance for loan losses.

8

Camco Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

3.	Critical Accounting Policies (continued)
	Allowance for Loan Losses (continued)
	The allowance is regularly reviewed by management to determine whether the amount is considered adequate to absorb probable losses. This evaluation includes specific loss estimates on certain individually reviewed loans, statistical loss estimates for loan pools that are based on historical loss experience, and general loss estimates that are based upon the size, quality, and concentration characteristics of the various loan portfolios, adverse situations that may affect a borrower’s ability to repay, and current economic and industry conditions. Also considered as part of that judgment is a review of the Bank’s trends in delinquencies and loan losses, as well as trends in delinquencies and losses for the region and nationally, and economic factors.
	The allowance for loan losses is maintained at a level believed adequate by management to absorb probable losses inherent in the loan portfolio. Management’s evaluation of the adequacy of the allowance is an estimate based on management’s current judgment about the credit quality of the loan portfolio. While the Corporation strives to reflect all known risk factors in its evaluations, judgment errors may occur.
	Mortgage Servicing Rights
	To determine the fair value of its mortgage servicing rights (“MSRs”) each reporting quarter, the Corporation transmits information to a third party provider, representing individual loan information in each pooling period accompanied by escrow amounts. The poolings are totaled by year through 2001 and quarterly thereafter. The third party then evaluates the possible impairment of MSRs as described below.
	Servicing assets are recognized as separate assets when loans are sold with servicing retained. A pooling methodology to the servicing valuation, in which loans with similar characteristics are “pooled” together, is applied for valuation purposes. Once pooled, each grouping of loans is evaluated on a discounted earnings basis to determine the present value of future earnings that a purchaser could expect to realize from the portfolio. Earnings are projected from a variety of sources including loan service fees, net interest earned on escrow balances, miscellaneous income and costs to service the loans. The present value of future earnings is the estimated market value for the pool, calculated using consensus assumptions that a third party purchaser would utilize in evaluating a potential acquisition of the MSR’s. Events that may significantly affect the estimates used are changes in interest rates and the related impact on mortgage loan prepayment speeds and the payment performance of the underlying loans. The interest rate for net interest earned on escrow balances, which is supplied by management, takes into consideration the investment portfolio average yield as well as current short duration investment yields. Management believes this methodology provides a reasonable estimate. Mortgage loan prepayment speeds are calculated by the third party provider utilizing the Economic Outlook as published by the Office of Chief Economist of Freddie Mac in estimating prepayment speeds and provides a specific scenario with each evaluation. Based on the assumptions discussed, pre-tax projections are prepared for each pool of loans serviced. These earning figures approximate the cash flow that could be received from the servicing portfolio. Valuation results are presented quarterly to management. At that time, management reviews the information and MSR’s are marked to lower of amortized cost or market for the current quarter.

9

Camco Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

3.	Critical Accounting Policies (continued)
	Goodwill
	We have developed procedures to test goodwill for impairment on an annual basis using June 30 financial information. This testing procedure is outsourced to a third party that evaluates possible impairment based on the following:
	The test involves assigning tangible assets and liabilities, identified intangible assets and goodwill to reporting units and comparing the fair value of each reporting unit to its carrying value including goodwill. The value is determined assuming a freely negotiated transaction between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. Accordingly, to derive the fair value of the reporting unit, the following common approaches to valuing business combination transactions involving financial institutions are utilized by a third party selected by Camco: (1) the comparable transactions approach – specifically based on earnings, book, assets and deposit premium multiples received in recent sales of comparable thrift franchises; and (2) the discounted cash flow approach. The application of these valuation techniques takes into account the reporting unit’s operating history, the current market environment and future prospects. As of the most recent quarter, the only reporting unit carrying goodwill is the Bank.
	If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and no second step is required. If not, a second test is required to measure the amount of goodwill impairment. The second test of the overall goodwill impairment compares the implied fair value of the reporting unit goodwill with the carrying amount of the goodwill. The impairment loss equals the excess of carrying value over fair value.
	After each testing period, the third party compiles a summary of the test that is then provided to the Audit and Risk Management Committee for review.
	Summary
	Management believes the accounting estimates related to the allowance for loan losses, the capitalization, amortization, and valuation of mortgage servicing rights and the goodwill impairment test are “critical accounting estimates” because: (1) the estimates are highly susceptible to change from period to period because they require management to make assumptions concerning the changes in the types and volumes of the portfolios, rates of future prepayments, and anticipated economic conditions, and (2) the impact of recognizing an impairment or loan loss could have a material effect on Camco’s assets reported on the balance sheet as well as its net earnings. Management has discussed the development and selection of these critical accounting estimates with the Audit and Risk Management Committee of the Board of Directors and the Audit and Risk Managment Committee has reviewed Camco’s disclosures relating to such matters in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

10

Camco Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the nine and three-month periods ended September 30, 2006 and 2005

4.	Earnings Per Share
	Basic earnings per common share is computed based upon the weighted-average number of common             shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under the Corporation’s stock option plans. The computations are as follows:

	For the nine months ended				For the three months ended
	September 30,				September 30,
	2006		2005		2006		2005
Weighted-average common shares outstanding (basic)		7,520,237		7,656,515		7,474,665		7,632,132
Dilutive effect of assumed exercise of stock options		3,207		6,311		2,854		6,977
Weighted-average common shares outstanding (diluted)		7,523,444		7,662,826		7,477,519		7,639,109

	Anti-dilutive options to purchase 290,477 and 207,771 shares of common stock with respective weighted-average exercise prices of $ 15.51 and $16.08 were outstanding at September 30, 2006 and 2005, respectively, but were excluded from the computation of common share equivalents for each of the three and nine month periods then ended, because the exercise prices were greater than average market price of the common shares.
5.	Stock Option Plans
	Under the 2002 Stock Option Plan, 400,000 shares were reserved for issuance. Additionally, in connection with the acquisition of Ashland Financial Corporation, the stock options of Ashland were converted into options to purchase 174,421 shares of the Corporation’s stock at an exercise price of $7.38 per share, which were exercisable through 2005. In connection with the 2000 acquisition of Westwood Homestead Financial Corporation, the stock options of Westwood Homestead were converted into options to purchase 311,794 shares of the Corporation’s stock at a weighted-average exercise price of $11.89 per share, which are exercisable though 2008.
	Effective January 1, 2006, the Corporation adopted SFAS No. 123R, “Accounting for Stock-Based Compensation,” which contains a fair-value based method for valuing stock-based compensation that measures compensation cost at the grant date based on the fair value of the award. Compensation is then recognized over the service period, which is usually the vesting period.

11

Camco Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

5.

Stock Option Plans (continued)

Prior to January 1, 2006, the Corporation utilized APB Opinion No. 25 and related Interpretations in accounting for its stock option plans. Accordingly, no compensation cost was recognized for the plans in 2005. Had compensation cost for the Corporation’s stock option plans been determined based on the fair value at the grant dates for awards under the plans consistent with SFAS No. 123R, the Corporation’s net earnings and earnings per share for the three-month and nine-month periods ended September 30, 2006 and 2005 would have been reported as the pro forma amounts indicated below:

		Nine months ended						Three months ended
		September 30						September 30
		2006			2005			2006			2005
Net earnings	As reported	$	4,614		$	6,296		$	1,120		$	2,038
Add: Stock-based compensation, expense included in reported income, net of tax			91			—			30			—
Deduct: Total stock-based compensation expense determined under fair value based method for awards, net of tax			(91	)		(64	)		(30	)		(21	)
		$	4,614		$	6,232		$	1,120		$	2,017
Earnings per share
Basic	As reported	$	.61		$	.82		$	.15		$	.27
	Stock-based compensation, net of tax		—			(.01	)		—			(.01	)
	Pro-forma	$	.61		$	.81		$	.15		$	.26
Diluted	As reported	$	.61		$	.82		$	.15		$	.27
	Stock-based compensation, net of tax		—			(.01	)		—			(.01	)
	Pro-forma	$	.61		$	.81		$	.15		$	.26

The fair value of each option grant is estimated on the date of grant using the modified Black-Scholes options-pricing model with the following assumptions used for grants during 2006 and 2005: dividend yields of 4.0% and 3.80%, respectively; expected volatility of 15.16% and 18.76%, respectively; risk-free interest rates of 4.57% and 4.22%, respectively, and; an expected life of ten years for all grants.

12

Camco Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the nine and three-month periods ended September 30, 2006 and 2005

5.	Stock Option Plans (continued)
	A summary of the status of the Corporation’s stock option plans as of September 30, 2006 and December 31, 2005, and changes during the periods ending on those dates is presented below:

	Nine months ended					Year ended
	September 30,					December 31,
	2006					2005
				Weighted-					Weighted-
				average					average
				exercise					exercise
	Shares			price		Shares			price
Outstanding at beginning of year		224,636		$	15.71		218,324		$	12.91
Granted		84,513			14.12		87,240			16.51
Exercised		—			—		(70,162	)		8.43
Forfeited		(1,807	)		15.09		(10,766	)		12.85
Outstanding at end of period		307,342		$	15.28		224,636		$	15.71
Options exercisable at period end		225,651		$	15.34		138,305		$	15.22
Weighted-average fair value of options granted during the period				$	2.09				$	2.89

The following information applies to options outstanding at September 30, 2006:

Number outstanding		5,255
Range of exercise prices	$	8.92-9.75
Number outstanding		96,123
Range of exercise prices	$	11.36-14.16
Number outstanding		205,964
Range of exercise prices	$	14.55-17.17
Weighted-average exercise price	$	15.28
Weighted-average remaining contractual life		6.85

6.	New Accounting Pronouncements
	Management is not aware of any proposed regulations or current recommendations by the Financial Accounting Standards Board or by regulatory authorities, which, if they were implemented, would have a material effect on the liquidity, capital resources, or operations of the Corporation. However, the potential impact of certain accounting pronouncements warrants further discussion.

13

Camco Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the nine and three-month periods ended September 30, 2006 and 2005

6.	New Accounting Pronouncements (continued)
	SFAS No. 123 (revised) “Share Based Payments”
	In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004) (“SFAS No. 123R”), Share Based Payments. SFAS No. 123R requires the Corporation to expense share based payments, including employee stock options, based on their fair value. The Corporation adopted SFAS No. 123R effective as of January 1, 2006. Accordingly, the impact of the adoption of SFAS No. 123R’s fair value method is included in the Corporation’s results of operations. The adoption of SFAS No. 123R did not have a material impact on the Corporation’s financial statements.
	SFAS No. 154 “Accounting Changes and Error Corrections”
	This Statement replaces APB Opinion No. 20, “Accounting Changes”, and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements”, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. This applies to accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 did not have a material impact on the Corporation’s financial statements.
	FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109”
	In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“Fin No. 48”). The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Specifically, Fin No. 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Fin No. 48 also provides guidance on the related derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions. Fin No. 48 is effective for fiscal years beginning after December 15, 2006. We do not believe the adoption of FIN 48 will have a material impact on the Corporation’s financial statements.
	SEC and SAB 108 Top 1N “Financial Statements – Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements”
	In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (“SAB 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 is effective for fiscal years ending after November 15, 2006. We do not believe SAB 108 will have a material impact on the Corporation’s financial statements.

14

Camco Financial Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the nine and three-month periods ended September 30, 2006 and 2005

7.

Forward Looking Statements

Certain statements contained in this report that are not historical facts are forward looking statements that are subject to certain risks and uncertainties. When used herein, the terms “anticipates,” “plans,” “expects,” “believes,” and similar expressions as they relate to Camco, the Bank, or management are intended to identify such forward looking statements. Camco’s actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, and rapidly changing technology affecting financial services.

15

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

For the nine- and three-month periods ended September 30, 2006 and 2005

Discussion of Financial Condition Changes from December 31, 2005 to September 30, 2006

At September 30, 2006, Camco’s consolidated assets totaled $1.1 billion, a decrease of $13.7 million, or 1.3%, from the December 31, 2005 total. The decrease in total assets was comprised primarily of decreases in cash and cash equivalents, mortgage backed securities available for sale, and loans receivable net, offset partially by the increase of investments securities available for sale.

In May of 2006, the company completed a conversion to a new core processing system for about the same operating cost as the previous system. The new system put all products and locations on one intergrated platform that provides improved information about our business, but more importantly provides customers faster and improved service to enhance their banking experience with Advantage.

Cash and interest-bearing deposits in other financial institutions totaled $21.5 million at September 30, 2006, a decrease of $11.6 million, or 31.5%, from December 31, 2005 levels. Investment securities totaled $56.9 million at September 30, 2006, an increase of $8.1 million, or 16.6%, from the total at December 31, 2005. Investment securities purchases totaled $9.9 million. Purchases were comprised primarily of intermediate-term callable U.S. Government sponsored enterprises with an average yield of 5.25%. Investments available for sale were purchased during the first nine months to provide collateral for public deposits.

Mortgage-backed securities totaled $56.7 million at September 30, 2006, a decrease of $8.2 million, or 12.6%, from December 31, 2005. The decrease was attributable to purchases of $2.0 million, which were offset by principal repayments totaling $9.8 million and a decrease of market value of certain securities totaling $210,000 during the nine-month period ended September 30, 2006. The yield on mortgage-backed securities purchased during the period was 6.05%. All of the securities purchased were classified as available for sale.

Loans receivable, including loans held for sale, totaled $841.3 million at September 30, 2006, a decrease of $7.5 million, or .9%, from December 31, 2005. The decrease resulted primarily from principal repayments of $185.0 million and loan sales of $37.0 million, which were offset by loan disbursments and purchases totaling $218.4 million. The volume of loans originated and purchased during the first nine months of 2006 decreased compared to the 2005 period by $84.4 million, or 27.9%, and the volume of loan sales also decreased by $13.1 million, or 26.1%, period to period. The number of loans originated for sale in the secondary market continues to decline as long term rates have risen and the economy slows. Rising interest rates generally results in an increase in the production of adjustable rate loans for the portfolio. Instead of selling adjustable rate loans, Camco has typically held adjustable-rate mortgage loans in its portfolio as an integral part of its strategy to build interest rate sensitive assets for interest rate risk purposes. Loan originations during the nine-month period ended September 30, 2006, were comprised primarily of $85.3 million of loans secured by one- to four-family residential real estate, $68.3 million in consumer and other loans and $64.8 million in loans secured by commercial real estate. Management intends to continue to expand its consumer and commercial real estate lending in future periods as a means of increasing the yield on its loan portfolio.

The allowance for loan losses totaled $7.1 million and $7.0 million at September 30, 2006 and December 31, 2005, respectively, representing 42.8% and 50.0% of nonperforming loans, respectively, at those dates. Nonperforming loans (90 days or more delinquent plus nonaccrual loans) totaled $16.6 million and $13.9 million at September 30, 2006 and December 31, 2005, respectively, constituting 1.97% and 1.64% of total net loans, including loans held for sale, at those dates. At September 30, 2006, nonperforming loans were comprised of $10.7 million in one- to four-family residential real estate loans, $4.3 million in commercial real estate loans and $1.6 million of consumer loans. Management believes all nonperforming loans are adequately reserved and no loss is expected over and above allocated reserves on such loans. Loans delinquent greater than 30 days but less than 90 days totaled $11.7 million at September 30, 2006, compared to $9.5 million at December 31, 2005, an increase of $2.2 million, or 23.6%. Although management believes that its allowance for loan losses is adequate based upon the available facts and

16

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Discussion of Financial Condition Changes from December 31, 2005 to September 30, 2006 (continued)

circumstances at September 30, 2006, there can be no assurance that increased provisions will not be necessary in future periods, which could adversely affect Camco’s results of operations.

Deposits totaled $684.9 million at September 30, 2006, an increase of $24.7 million, or 3.7%, from the total at December 31, 2005. The increase in deposits was due to a $33.2 million increase of certificates of deposit and a $21.5 million increase in money market accounts, which were partially offset by a $18.6 million decrease in interest-bearing checking accounts, a $10.2 million decrease in statement savings and a $1.8 million decrease in non-interest bearing checking accounts. The increase in certificates of deposit is a result of the Bank actively pursuing the extension of deposit maturities in a rising rate environment, coupled with the offering of brokered certificates of deposit, which are a lower cost alternative to advances from the Federal Home Loan Bank. The decreases in interest bearing checking accounts and savings accounts were due to highly competitive pricing in the Bank’s market area and customer demand for higher yielding certificates of deposit.

Stockholders’ equity totaled $90.7 million at September 30, 2006, a decrease of $67,000 from December 31, 2005. The decrease resulted primarily from dividends of $3.4 million and the purchase of $1.7 million in treasury stock, which were offset partially by net earnings of $4.6 million.

Advantage is required to maintain minimum regulatory capital pursuant to federal regulations. At September 30, 2006, the Bank’s regulatory capital exceeded all minimum regulatory capital requirements.

17

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Discussion of Financial Condition Changes from December 31, 2005 to September 30, 2006 (continued)

The following tables present certain information regarding compliance by Camco and Advantage with applicable regulatory capital requirements at September 30, 2006:

     Camco:

At September 30, 2006

To be “well-

capitalized” under

For capital

prompt corrective

Actual

adequacy purposes

action provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

Total capital (to risk-weighted assets)

$

91,843

12.23

%

³$60,073

³8.0

%

Not Applicable

Tier I capital (to risk-weighted assets)

$

84,759

11.29

%

³$30,036

³4.0

%

Not Applicable

Tier I leverage

$

84,759

8.08

%

³$41,977

³4.0

%

Not Applicable

     Advantage:

To be “well-

capitalized” under

For capital

prompt corrective

Actual

adequacy purposes

action provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

Total capital (to risk-weighted assets)

$

83,404

11.11

%

³$60,068

³8.0

%

³$75,085

³10.0

%

Tier I capital (to risk-weighted assets)

$

76,320

10.16

%

³$30,034

³4.0

%

³$45,051

³ 6.0

%

Tier I leverage

$

76,320

7.27

%

³$41,977

³4.0

%

³$52,472

³ 5.0

%

18

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Discussion of Financial Condition Changes from December 31, 2005 to September 30, 2006 (continued)

Federal law prohibits a financial institution from making a capital distribution to anyone or paying management fees to any person having control of the institution if, after such distribution or payment, the institution would be undercapitalized.

Comparison of Results of Operations for the Nine Months Ended September 30, 2006 and 2005

General

Camco’s net earnings for the nine months ended September 30, 2006 totaled $4.6 million, a decrease of $1.7 million, or 26.7%, from the $6.3 million of net earnings reported in the comparable 2005 period. The decrease in earnings was primarily due to the increase of $1.5 million in general, administrative and other expenses coupled with the decrease of $866,000 in other income which was offset partially by a $773,000, or 26.1%, decrease in the provision for federal taxes.

Total Interest Income

Total interest income amounted to $46.5 million for the nine months ended September 30, 2006, an increase of $4.6 million, or 11.0%, compared to the nine-month period ended September 30, 2005, generally reflecting the effects of an increase in yield on total interest-earning assets of 57 basis points, from 5.50% in the 2005 period to 6.07% in the 2006 period and a $5.7 million, or .6%, increase in the average balance of interest-earning assets outstanding year to year.

AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA

The following table presents for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resulting yields, and the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. The table does not reflect any effect of income taxes. Balances are based on the average of month-end balances which, in the opinion of management, do not differ materially from daily balances.

19

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Comparison of Results of Operations for the Nine Months Ended September 30, 2006 and 2005 (continued)

			For nine months ended September 30,
			2006							2005
	Average		Interest		Average			Average		Interest		Average
	outstanding		earned/		yield/			outstanding		earned/		yield/
	balance		paid		rate			balance		paid		rate
								(Dollars in thousands)
Interest-earning assets:
Loans receivable (1)	$	845,159	$	40,600		6.41	%	$	846,438	$	37,002		5.83	%
Mortgage-backed securities (2)		59,914		1,843		4.10			77,962		2,172		3.71
Investment securities (2)		52,900		1,609		4.06			31,402		800		3.40
Interest-bearing deposits and other interest-earning assets		63,120		2,463		5.20			59,546		1,947		4.36
Total interest-earning assets	$	1,021,093		46,515		6.07		$	1,015,348		41,921		5.50
Interest-bearing liabilities:
Deposits	$	644,990	$	15,276		3.16		$	643,639		11,298		2.34
FHLB advances		289,400		8,753		4.03			295,692		8,173		3.69
Total interest-bearing liabilities	$	934,390	$	24,029		3.43		$	939,331		19,471		2.76
Net interest income/Interest rate spread			$	22,485		2.65	%			$	22,450		2.74	%
Net interest margin (3)						2.94	%						2.95	%
Average interest-earning assets to average interest-bearing liabilities						109.3	%						108.1	%

(1)	Includes nonaccrual loans and loans held for sale.
(2)	Includes securities designated as available for sale.
(3)	Net interest income as a percent of average interest-earning assets
Interest income on loans totaled $40.6 million for the nine months ended September 30, 2006, an increase of $3.6 million, or 9.7%, from the comparable 2005 period. The increase resulted primarily from a 58 basis point increase in the average yield, to 6.41% in the 2006 period, which was offset partially by a $1.3 million, or .2%, decrease in the average balance outstanding. Interest income on mortgage-backed securities totaled $1.8 million for the nine months ended September 30, 2006, a $329,000, or 15.2%, decrease year to year. The decrease was due primarily to a $18.0 million, or 23.2%, decrease in the average balance outstanding, which was partially offset by a 39 basis point increase in the average yield, to 4.10% in the 2006 period. Interest income on investment securities increased by $809,000 or 101.1%, due primarily to a $21.5 million increase in the average balance outstanding, coupled with an increase in the average yield, to 4.06% in the 2006 period. Interest income on other interest-earning assets increased by $516,000, or 26.5%, due primarily to an 84 basis point increase in the average yield, to 5.2% in the 2006 period, coupled with an increase of $3.6 million, or 6.0%, in the average balance outstanding period to period.

20

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Comparison of Results of Operations for the Nine Months Ended September 30, 2006 and 2005 (continued)

Interest expense on deposits totaled $15.3 million for the nine months ended September 30, 2006, an increase of $4.0 million, or 35.2%, compared to the 2005 period, due primarily to a 82 basis point increase in the average cost of deposits, to 3.16% in the 2006 period, coupled with a $1.4 million, or .2%, increase in the average balance of deposits outstanding year to year. Interest expense on borrowings totaled $8.8 million for the nine months ended September 30, 2006, an increase of $580,000, or 7.1%, from the 2005 nine-month period. The increase resulted primarily from a 34 basis point increase in the average cost of borrowings to 4.03% in the 2006 period, which was partially offset by a $6.3 million, or 2.1%, decrease in the average balance outstanding year to year.

As a result of the foregoing changes in interest income and interest expense, net interest income increased by $35,000, or .2%, to a total of $22.5 million for the nine months ended September 30, 2006. The interest rate spread decreased to approximately 2.65% at September 30, 2006, from 2.74% at September 30, 2005, and the net interest margin decreased slightly to approximately 2.94% for the nine months ended September 30, 2005, compared to 2.95% for the 2005 nine month period.

Provision for Losses on Loans

A provision for losses on loans is charged to earnings to bring the total allowance for loan losses to a level considered appropriate by management based on historical experience, the volume and type of lending conducted by the Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Bank’s market areas, and other factors related to the collectibility of the Bank’s loan portfolio. Based upon an analysis of these factors, management recorded a provision for losses on loans totaling $1.1 million for the nine months ended September 30, 2006, an increase of $120,000, or 12.5%, to the comparable period in 2005. Management believes all nonperforming loans are adequately reserved. However, there can be no assurance the loan loss allowance will not be adequate to cover losses on classified assets in the future.

Other Income

Other income totaled $4.0 million for the nine months ended September 30, 2006, a decrease of $866,000, or 17.7%, from the comparable 2005 period. The decrease in other income was primarily attributable to a $449,000 or 19.7% decrease in late charges, rent and other income and a $329,000, or 58.3%, decrease in gain on sale of loans. The decrease in late charges rent and other was due primarily to a management decision to discontinue the accrual of late charges on commercial loans and move to a method that would recognize late charges as income when collected. This decision to reverse accrued late charges resulted in a decrease in other income of $166,000 for the period coupled with decreased prepayment fees of $225,000 and $54,000 in title and search fees earned by Camco Title Agency. The decrease in gain on the sale of loans was due to a decrease in the volume of loans sold of $13.1 million, or 26.1%, from the volume of loans sold in the 2005 period.

21

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Comparison of Results of Operations for the Nine Months Ended September 30, 2006 and 2005 (continued)
General, Administrative and Other Expense

General, administrative and other expense totaled $18.6 million for the nine months ended September 30 , 2006, an increase of $1.5 million, or 8.8%, from the comparable period in 2005. The increase in general, administrative and other expense was due primarily to a $525,000, or 5.0%, increase in employee compensation and benefits, and a $542,000, or 249.8%, increase in franchise taxes. The increase in employee compensation and benefits is primarily due to several key hires within the mid-management level of the Corporation as well as revenue generating commercial lenders in the markets we serve, recruiting expense, merit increases and increases in health insurance expense. The increase in franchise tax was due to incurring a normal level of expense after realizing a one-time savings which occurred in 2005 from the acquisition of London Financial Corporation in August 2004, when the bank adopted a state commercial bank charter.

Federal Income Taxes

The provision for federal income taxes totaled $2.2 million for the nine months ended September 30, 2006, a decrease of $773,000, or 26.1%, compared to the nine months ended September 30, 2005. This decrease was primarily attributable to a $2.5 million, or 26.5%, decrease in pre-tax earnings. The Corporation’s effective tax rates amounted to 32.4% and 32.0% for the nine-month periods ended September 30, 2006 and 2005, respectively.

Comparison of Results of Operations for the Three Months Ended September 30, 2006 and 2005

General

Camco’s net earnings for the three months ended September 30, 2006 totaled $1.1 million, a decrease of $918,000, or 45.0%, from the $2.0 million of net earnings reported in the comparable 2005 period. The decrease in earnings was primarily attributable to an increase of $675,000, or 11.8% in general, administrative and other expense coupled with a decrease in net interest income of $301,000, or 4.0% and a decrease of $297,000, or 19.3% in other income, which were partially offset by a $355,000, or 36.9%, decrease in the provision for federal taxes.

Net Interest Income

Total interest income amounted to $15.9 million for the three months ended September 30, 2006, an increase of $1.4 million, or 10.0%, compared to the three-month period ended September 30, 2005, generally reflecting the effects of an increase in yield on total interest-earning assets of 53 basis points, from 5.51% in the 2005 period to 6.04% in the 2006 period, which was offset partially by a $4.3 million, or .4%, decrease in the average balance of interest-earning assets outstanding quarter to quarter.

22

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Comparison of Results of Operations for the Three Months Ended September 30, 2006 and 2005 (continued)

AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA

The following table presents for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resulting yields, and the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. The table does not reflect any effect of income taxes. Balances are based on the average of month-end balances which, in the opinion of management, do not differ materially from daily balances.

			For three months ended September 30,
			2006							2005
	Average		Interest		Average			Average		Interest		Average
	outstanding		earned/		yield/			outstanding		earned/		yield/
	balance		paid		rate			balance		paid		rate
								(Dollars in thousands)
Interest-earning assets:
Loans receivable (1)	$	843,372	$	13,860		6.57	%	$	853,147	$	12,729		5.97	%
Mortgage-backed securities (2)		57,311		602		4.20			73,290		679		3.71
Investment securities (2)		56,634		590		4.17			39,555		358		3.62
Interest-bearing deposits and other interest-earning assets		64,387		848		5.27			60,004		689		4.59
Total interest-earning assets	$	1,021,704		15,900		6.22		$	1,025,996		14,455		5.64
Interest-bearing liabilities:
Deposits	$	656,621		5,744		3.50		$	642,363		4,009		2.50
FHLB advances		277,325		2,904		4.19			303,520		2,893		3.81
Total interest-bearing liabilities	$	933,946		8,648		3.70		$	945,883		6,902		2.92
Net interest income/Interest rate spread			$	7,252		2.52	%			$	7,553		2.72	%
Net interest margin (3)						2.84	%						2.94	%
Average interest-earning assets to average interest-bearing liabilities						109.4	%						108.5	%

Net Interest Income (continued)

Interest income on loans totaled $13.9 million for the three months ended September 30, 2006, an increase of $1.1 million, or 8.9%, from the comparable 2005 period. The increase resulted primarily from a 60 basis point increase in the average yield, to 6.57% from 5.97% in 2005, which was offset partially by a decrease in the balance outstanding of $9.8 million, or 1.2%, in the 2006 quarter. Interest income on mortgage-backed securities totaled $602,000 for the three months ended September 30, 2006, a $77,000, or 11.3%, decrease from the 2005 quarter. The decrease was due primarily to a $16.0 million, or 21.8%, decrease in the average balance outstanding in the 2006 period, which was partially offset by a 49 basis point increase in the average yield, to 4.20% in the 2006 period. Interest income on investment securities increased by $232,000, or 64.8%, due primarily to a $19.1 million increase in the average balance outstanding, coupled with a 71 basis point increase in the average yield, to 4.17% in the 2006 period. Interest income

23

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Comparison of Results of Operations for the Three Months Ended September 30, 2006 and 2005 (continued)

Net Interest Income (continued)

on other interest-earning assets increased by $159,000, or 23.1%, due primarily to a 68 basis point increase in the average yield, to 5.27% in the 2006 quarter compared to 4.59% for the three months ended September 30, 2005, coupled with an increase in the average balance outstanding of $4.4 million, or 7.3%.

Interest expense on deposits totaled $5.7 million for the three months ended September 30, 2006, an increase of $1.7 million, or 43.3%, compared to the same quarter in 2005, due primarily to an 80 basis point increase in the average cost of deposits, to 3.14% in the current quarter, coupled with an increase of $14.3 million, or 2.2%, in the average deposits outstanding. Interest expense on borrowings totaled $2.9 million for the three months ended September 30, 2006, an increase of $11,000, or .4%, from the same 2005 three-month period. The increase resulted primarily from a
37 basis point increase in the average cost of borrowings, to 4.03%, in the 2006 period, which was offset substantially by a $26.2 million, or 8.6%, decrease in the average balance outstanding period to period.

As a result of the foregoing changes in interest income and interest expense, net interest income decreased by $301,000, or 4.0%, to a total of $7.3 million for the three months ended September 30, 2006. The interest rate spread decreased to approximately 2.52% at September 30, 2006, from 2.72% at September 30, 2005, while the net interest margin decreased to approximately 2.84% for the three months ended September 30, 2006, compared to 2.94% for the 2005 period.

Provision for Losses on Loans

A provision for losses on loans is charged to earnings to bring the total allowance for loan losses to a level considered appropriate by management based on historical experience, the volume and type of lending conducted by the Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Bank’s market areas, and other factors related to the collectibility of the Bank’s loan portfolio. Based upon an analysis of these factors, management recorded a provision for losses on loans totaling $360,000 for the three months ended September 30, 2006, which is equal to the provision in the 2005 quarter. Management believes all classified loans are adequately reserved; however, there can be no assurance that the loan loss allowance will be adequate to absorb losses on known classified assets or that the allowance will be adequate to cover losses on classified assets in the future.

24

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Comparison of Results of Operations for the Three Months Ended September 30, 2006 and 2005 (continued)

Other Income

Other income totaled $1.2 million for the three months ended September 30, 2006, a decrease of $297,000, or 19.3%, from the comparable 2005 period. The decrease in other income was primarily attributable to a $176,000, or 21.5%, decrease in late charges, rent and other and a $159,000, or 74.0%, decrease in gain on sale of loans. The decrease in late charges, rent and other was due primarily to decreased prepayment fees and title and search fees earned by Camco Title Agency. The decrease on gain on sale of loans was due to a decrease in the volume of loans sold of $7.3 million, or 43.2%, from the voume of loans sold in the 2005 period.

General, Administrative and Other Expense

General, administrative and other expense totaled $6.4 million for the three months ended September 30, 2006, an increase of $675,000, or 11.8%, from the comparable quarter in 2005. The increase in general, administrative and other expense was due primarily to an increase of $103,000, or 2.9%, in employee compensation and benefits, a $107,000, or 18.5%, decrease in FAS 91 deferred compensation, a $214,000, or 301.4%, increase in state franchise taxes and a $235,000, or 19.7%, increase in other operating costs. The increase in employee compensation and benefits is due primarily to several key hires within the mid-management level of the Corporation as well as revenue generating commercial lenders in the markets we serve, merit increases and increases in health insurance expense. The decrease in deferred compensation relates to FAS 91 and the decline in residential loan production. The increase in franchise tax was primarily due to incurring a normal level of expense after realizing a one-time savings which occurred in 2005 from the acquisition of London Financial Corporation in August 2004, when the bank changed to a state charted commercial bank. The increase in other operating costs was primarily due to ATM processing and transaction expense coupled with increased charges relating to an increase in volume on Home Equity loans that generate closing costs. These costs are absorbed by the bank and recaptured over time from interest income.

Federal Income Taxes

The provision for federal income taxes totaled $608,000 for the three months ended September 30, 2006, a decrease of $355,000, or 36.9%, compared to the three months ended September 30, 2005. This decrease was primarily attributable to a $1.3 million, or 42.4%, decrease in pre-tax earnings. The Corporation’s effective tax rates amounted to 35.2% and 32.1% for the three-month periods ended September 30, 2006 and 2005, respectively.

25

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

Liquidity and Capital Resources

Camco, like other financial institutions, is required under applicable federal regulations to maintain sufficient funds to meet deposit withdrawals, loan commitments and expenses. Liquid assets consist of cash and interest-bearing deposits in other financial institutions, investments and mortgage-backed securities. Management monitors and assesses liquidity needs daily in order to meet deposit withdrawals, loan commitments and expenses.

The primary sources of funds include deposits, borrowings and principal and interest repayments on loans. Other funding sources include Federal Home Loan Bank advances.

The following table sets forth information regarding the Bank’s obligations and commitments to make future payments under contract as of September 30, 2006.

			Payments due by period
	Less						More
	than		1-3		3-5		than
	1 year		years		years		5 years		Total
	(In thousands)
Contractual obligations:
Operating lease obligations	$	83	$	593	$	467	$	723	$	1,866
Advances from the Federal Home Loan Bank		87,855		94,673		23,000		51,777		257,305
Certificates of deposit		256,812		155,438		10,452		855		423,557
Repurchase Agreements		2,083		947		320		—		3,350
Ohio Equity Funds for Housing Limited Partnership		166		1,463		1,097		274		3,000
Amount of commitments expiring per period
Commitments to originate loans:
Overdraft lines of credit		794								794
Home equity lines of credit		76,754								76,754
Commercial lines of credit		759								759
One- to four-family and multi-family loans		31,443								31,443
Non-residential real estate, commercial and land loans		13,182								13,182
Total contractual obligations	$	469,931	$	253,114	$	35,336	$	53,629	$	812,010

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk

     The objective of the Bank’s asset/liability management function is to maintain consistent growth in net interest income within the Bank’s policy limits. This objective is accomplished through management of the Bank’s balance sheet composition, liquidity, and interest rate risk exposures arising from changing economic conditions, interest rates and customer preferences.

     The goal of liquidity management is to provide adequate funds to meet changes in loan demand or unexpected deposit withdrawals. This is accomplished by maintaining liquid assets in the form of investment securities, maintaining sufficient unused borrowing capacity and achieving consistent growth in core deposits.

26

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

     Management considers interest rate risk the Bank’s most significant market risk. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. Consistency of the Bank’s net interest income is largely dependent upon the effective management of interest rate risk.

     To identify and manage its interest rate risk, the Bank employs an earnings simulation model to analyze net interest income sensitivity to changing interest rates. The model is based on actual cash flows and repricing characteristics and incorporates market-based assumptions regarding the effect of changing interest rates on the prepayment rates of certain assets and liabilities. The model also includes management projections for activity levels in each of the product lines offered by the Bank. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model. Assumptions are inherently uncertain and the measurement of net interest income or the impact of rate fluctuations on net interest income cannot be precisely predicted. Actual results may differ from simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.

     The Bank’s Asset/Liability Management Committee (“ALCO”), which includes senior management representatives and reports to the Bank’s Board of Directors, monitors and manages interest rate risk within Board-approved policy limits. The Bank’s current interest rate risk position is determined by measuring the anticipated change in net interest income over a 12 month horizon assuming an instantaneous and parallel shift (linear) increase or decrease in all interest rates.

     The following table shows the Bank’s estimated earnings sensitivity profile as of September 30, 2006:

Change in	Percentage Change in
Interest Rates	Net Interest Income
(basis points)	12 Months
+200		-13.63	%
+100		- 6.35	%
-100		- 2.21	%
- 200		- 5.01	%

     These estimated changes in net interest income are within the policy guidelines established by the Board of Directors.

     The ALCO also monitors the sensitivity of the Bank’s economic value of equity (“EVE”) due to sudden and sustained changes in market rates. The EVE ratio, measured on a static basis at the current period end, is calculated by dividing the economic value of equity by the economic value of total assets. The ALCO also monitors the change in EVE on a percentage change basis.

     The following table shows the EVE ratios as of September 30, 2006:

Change in
Interest Rates				Percentage
(basis points)	EVE Ratio			change in EVE
+ 200		7.90	%		- 4.85	%
+ 100		8.01	%		- 1.92	%
0		8.04	%		0
- 100		8.41	%		+ 6.13	%
- 200		8.74	%		+11.89	%

27

Camco Financial Corporation

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

For the nine- and three-month periods ended September 30, 2006 and 2005

     In order to reduce the exposure to interest rate fluctuations and to manage liquidity, the Bank has developed sale procedures for several types of interest-sensitive assets. Generally, all long-term, fixed-rate single family residential mortgage loans underwritten according to Freddie Mac or Fannie Mae guidelines are sold for cash upon origination. A total of $37.0 million and $50.1 million of such loans were sold to Freddie Mac and Fannie Mae and other parties during the nine months ended 2006 and 2005, respectively.

ITEM 4: Controls and Procedures

     (a) Camco’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of Camco’s disclosure controls and procedures (as defined under Rules 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934, as amended) as of September 30, 2006. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that Camco’s disclosure controls and procedures are effective.

     (b) There were no changes in Camco’s internal control over financial reporting during the quarter ended September 30, 2006, which materially affected or are reasonably likely to materially affect the internal controls over financial reporting.

28

Camco Financial Corporation

PART II

ITEM 1. Legal Proceedings

     Not applicable

ITEM 1A. Risk Factors

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)	Not applicable
(b)	Not applicable
(c)	All purchases of shares during the quarter was made under the 5% stock repurchase program announced April 26, 2006.

					Maximum number of
					shares that may yet
	Number of shares		Average price paid		be repurchased
Period of Repurchase	repurchased		per share		under the program
July 1 – 31		—	$	—		328,936
August 1 – 31		20,000		13.63		308,936
September 1 – 30		8,000		13.44		300,936
Total		28,000	$	13.57		300,936

ITEM 3. Defaults Upon Senior Securities

     Not applicable

ITEM 4. Submission of Matters to a Vote of Security Holders

     Not applicable

29

Camco Financial Corporation

PART II (continued)

ITEM 5. Other Information

On August 3, 2006, Camco entered into a Purpose and Ability Line of Credit Agreement (the “Line of Credit”) with KeyBank National Association (“KeyBank”) permitting short-term borrowings by the Company of up to an aggregate principal amount of $20,000,000.

Borrowings under the Line of Credit may be used to finance working capital needs of Camco and its subsidiaries, or for related business acquisitions. Borrowings under the Line of Credit will bear interest, at Camco’s option, at (i) the prime rate publicly announced from time to time by KeyBank minus 0.625% per annum, (ii) the one, two or three month LIBOR plus 1.25% per annum, or (iii) the overnight LIBOR plus 1.25% per annum. The Line of Credit contains usual and customary covenants for transactions of this type, including, without limitation, covenants limiting other indebtedness, liens and certain asset sales and various financial covenants relating to the capital, assets and net worth of Camco and its subsidiaries.

If Camco defaults under Line of Credit, KeyBank may terminate the commitments made under the Line of Credit, declare the amount outstanding, including all accrued interest and unpaid fees, payable immediately, and enforce any and all rights and interests created and existing under the Line of Credit and all other rights available under the law.

Camco currently has no borrowings outstanding under, and no present intention to draw any funds from, the Line of Credit; however, per the terms of the Line of Credit, the Company may draw funds at any time.

The foregoing description of the Line of Credit is qualified in its entirety by reference to the Purpose and Ability Line of Credit Agreement, a copy of which is attached as Exhibit 10.1 and is incorporated herein by reference.

ITEM 6. Exhibits

Incorporated by reference to Camco’s Annual Report on From 10-K for the fiscal year ended December 31, 2005, Film no. 6686685, Exhibit 3(i)

Exhibit 10.1	Line of Credit Agreement with Key Bank
Exhibit 31.1	Rule 13a-14(a)/15d –14(a) Certification by Chief Executive Officer
Exhibit 31.2	Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer
Exhibit 32.1	Section 1350 certification by Chief Executive Officer
Exhibit 32.2	Section 1350 certification by Chief Financial Officer

30

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: November 6, 2006	By:	/s/Richard C. Baylor
		Richard C. Baylor
		Chief Executive Officer
Date: November 6, 2006	By:	/s/Mark A. Severson
		Mark A. Severson
		Chief Financial Officer

31

EX-10.1

Exhibit 10.1
PURPOSE AND ABILITY LINE OF CREDIT AGREEMENT

     THIS PURPOSE AND ABILITY LINE OF CREDIT AGREEMENT is made as of August 3, 2006 between CAMCO FINANCIAL CORPORATION, a Delaware corporation (the “Borrower”) and KEYBANK NATIONAL ASSOCIATION, a national banking association with an office located at 88 East Broad Street, Columbus, Ohio 43215 (the “Bank”). The Borrower and the Bank, intending to be legally bound, hereby agree as follows:

     Section 1. Certain Defined Terms. As used in the Loan Documents, the following terms shall have the meanings set forth below. Additional defined terms appear elsewhere in the Loan Documents.

          “Account” means and includes all accounts (whether or not earned by performance), contract rights, chattel paper, instruments, documents, general intangibles (including, without limitation, tax refunds and tax refund claims) and all other forms of obligations owing to the Borrower, whether secured or unsecured, whether now existing or hereafter created, and whether or not specifically assigned to the Bank under the Loan Documents, all guaranties and other security therefor, all merchandise returned to or repossessed by the Borrower, and all rights of stoppage in transit and all other rights and remedies of an unpaid vendor, lienor or secured party.

          “Advantage Bank” means Advantage Bank, an Ohio corporation and a wholly owned subsidiary of the Borrower.

          “Affiliate” means any Person directly or indirectly controlling or under common control with another Person. For purposes of this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

          “Agreement” means this Purpose and Ability Line of Credit Agreement, as from time to time amended.

          “Banking Day” means a day on which the Bank is open for business.

          “Borrowing Date” is defined at Section 2.3.3.

          “Contractual Obligation” means, for any Person, any obligation, covenant, or condition contained in (a) any evidence of Indebtedness, (b) any agreement or instrument under or pursuant to which any evidence of Indebtedness has been issued, or (c) any other agreement, instrument or Guaranty, in each case to which such Person is a party or by which such Person or any of its assets or properties are bound.

          “Default” means any condition or event which constitutes an Event of Default or which would become an Event of Default with the giving of notice or the lapse of time or both (unless cured or waived).

          “End of the Credit” means the date on which the outstanding balance of the Total Facility becomes due and payable, whether by acceleration, maturity or otherwise.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

          “Euro Reserve Percentage” means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the actual reserve requirement for a member bank of the Federal Reserve System in respect of “Eurocurrency liabilities” (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on LIBOR Rate Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of the Bank to United States residents).

          “Event of Default” has the meaning set forth in Section 7.1.

          “Financial Statements” means the most recent financial statements of the Borrower that have been furnished to the Bank pursuant to Section 4.2.

          “GAAP” means generally accepted accounting principles in the United States in effect at the time any determination is made or financial statement is required hereunder as promulgated by the American Institute of Certified Public Accountants, the Accounting Principles Board, the Financial Accounting Standards Board or other body existing from time to time which is authorized to establish or interpret such principles.

          “Guaranty” means, at any date, for any Person, all obligations of such Person guaranteeing or in effect guaranteeing any Indebtedness, Leases, dividends or other obligations (the “Prime Obligations”) of any other Person (the “Primary Obligor”) in any manner, whether directly or indirectly, including, without limitation, obligations incurred through an agreement, contingent or otherwise, by such a particular Person (a) to purchase such Prime Obligations of the Primary Obligor or any properties or assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such Prime Obligations or (ii) to maintain working capital or equity capital or any other balance sheet condition of the Primary Obligor for the purchase or payment of such Prime Obligations, (c) to Lease property or to purchase property, securities or services from the Primary Obligor primarily for the purpose of assuring the owner of such Prime Obligations of the ability of the Primary Obligor to make payment of such Prime Obligations or (d) otherwise to assure the owner of such Prime Obligations against loss in respect thereof.

          “Indebtedness” means, for any Person (a) all indebtedness or other obligations of such Person for borrowed money or for the deferred purchase price of property or services (except for unsecured trade payables incurred in the ordinary course of business on normal and reasonable terms), (b) all indebtedness or other obligations of any other Person for borrowed money or for the deferred purchase price of property or services, the payment or collection of which such Person has guaranteed (except by reason of endorsement for deposit or collection in the ordinary course of business) or in respect of which such Person is liable, contingently or otherwise, including, without limitation, by way of agreement to purchase, to provide funds for payment, to supply funds to or otherwise to invest in such other Person, or otherwise to assure a creditor against loss, (c) all indebtedness or other obligations of any other Person for borrowed money or for the deferred purchase price of property or services secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien, upon or in property (including, without limitation, Accounts) owned by such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness or other obligations, (d) all direct or contingent obligations of such Person in respect of letters of

2

credit, and (e) all Lease obligations which have been or should be, in accordance with generally accepted accounting principles, capitalized on the books of such Person as lessee.

          “Interest Period” means, (a) for Standard LIBOR Loans, each one, two or three month period, each effective as of the first day of each Interest Period and ending on the last day of each Interest Period, provided that if any Interest Period is scheduled to end on a date for which there is no numerical equivalent to the date on which the Interest Period commenced, then it shall end instead on the last day of such calendar month or (b) for Overnight LIBOR Loans, each day. In no event shall the Borrower be permitted to select an Interest Period that ends after the Maturity Date.

          “Interest Rate” means either (a) the Prime Rate in effect from time to time minus sixty-two and one-half (62.5) basis points, (b) the Standard LIBOR plus 125 basis points or (c) the Overnight LIBOR plus 125 basis points, as selected by the Borrower.

          “Investment” in any Person means: (a) the acquisition (whether for cash, property, services, securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of such Person, and (b) any deposit with, or advance, loan or other extension of credit to, such Person (other than any such advance, loan or other extension of credit having a term not exceeding 90 days representing the purchase price of inventory or supplies purchased in the ordinary course of business) or guaranty of, or other contingent obligation with respect to, Debt or other liability of such Person and (without duplication) any amount committed to be advanced, lent or extended to such Person.

          “Lease” means any lease or other agreement (however denominated) providing for the use by one Person of real or personal property owned by another Person (or, the entering into such a lease or agreement).

          “LIBOR” means the offered rate for U.S. Dollar deposits of not less than $100,000 for a period of time equal to the applicable Interest Period as of 11:00 A.M. City of London, England time two London Banking Days prior to the first date of the applicable Interest Period as shown on the display designated as “British Bankers Assoc. Interest Settlement Rates” on the Telerate System (“Telerate”), Page 3750, or such other page or pages as may replace such pages on Telerate for the purpose of displaying such rate; provided, however, that if such rate is not available on Telerate then such offered rate shall be otherwise independently determined by the Bank from an alternate, substantially similar independent source available to the Bank or shall be calculated by the Bank by a substantially similar methodology as that theretofore used to determine such offered rate in Telerate (the “Index”). Each change in the LIBOR to be charged will become effective without notice on the commencement of each Interest Period.

          “LIBOR Banking Days” means days which are both Banking Days and London Banking Days.

          “Lien” means any mortgage, deed of trust, lien, charge, security interest (including, without limitation, a purchase money security interest as such term is defined in Section 9-107 of the UCC) or encumbrance of any kind upon, or pledge of, any property or asset, whether now owned or hereafter acquired, and includes the acquisition of, or agreement to acquire, any property or asset subject to any conditional sale agreement or other title retention agreement, including a Lease on terms tantamount thereto or on terms otherwise substantially equivalent to a purchase.

3

          “Line of Credit Commitment” means $20,000,000.

          “Line of Credit Loan” means a Loan made pursuant to the Line of Credit.

          “Line of Credit Notes” has the meaning set forth in Section 2.4.1.

          “Line of Credit” means up to $20,000,000 of credit, available on a revolving basis, to provide working capital support to the Borrower and funding for the acquisition of assets pursuant to the Notes, as well as any other uses otherwise permitted hereunder.

          “Loan” means any Line of Credit Loan or other advance made by the Bank to or on behalf of the Borrower pursuant to the Loan Documents.

          “Loan Documents” means this Agreement, the Notes issued hereunder , and any amendment or modification of the same.

          “London Banking Days” means days on which dealings are carried out in the London Interbank Market.

          “Maturity Date” means June 30, 2007.

          “Notes” means the Line of Credit Notes issued by the Borrower to the Bank from time to time hereunder.

          “Obligations” means (a) the obligations of the Borrower to the Bank under this Agreement and the Line of Credit Notes, (b) the obligations of the Borrower to the Bank under the remaining Loan Documents, (c) all costs and expenses incurred by the Bank in the collection or the enforcement of any such obligations of the Borrower, including, without limitation, reasonable attorneys’ fees and legal expenses, and (d) all other obligations of the Borrower to the Bank, created, arising, or evidenced pursuant to any Loan Document, whether direct or indirect, absolute or contingent, or now or hereafter existing or due or to become due.

          “Overnight LIBOR” means the LIBOR quoted by the Bank as its “Overnight” rate.

          “Permitted Lien” means any Lien described in the exceptions to Section 5.17.

          “Person” means any individual, sole proprietorship, partnership, joint venture, corporation, trust, unincorporated organization, government (or any department, agency, instrumentality or political division thereof) or any other entity.

          “Plan” means any plan, benefit or program of benefits or perquisites which has been or is currently being provided to one or more employees or which may in the future be established, maintained, or contributed to by the Borrower (or in which the Borrower or any of their employees participate, which provides benefits to employees or former employees of the Borrower), including any “employee benefit plan” as defined in ERISA, any payroll practice or personnel policy, and any system of governmental or other benefits to the cost of which the Borrower contribute by any means.

4

          “Prime Rate” means the interest rate publicly announced from time to time by the Bank as representing the prime rate. The prime rate is not intended to be the lowest rate of interest charged by the Bank in connection with extensions of credit to debtors.

          “Reportable Event” means any of the events set forth in Section 4043(b) of ERISA.

          “Request Date” means the day (a) at least three LIBOR Banking Days before the Borrowing Date of a Standard LIBOR Loan (as defined in Section 2.2) or (b) at least two Banking Days before the Borrowing Date of an Overnight LIBOR Loan or a Prime Rate Loan (as such terms are defined in Section 2.2).

          “Requirement of Law” means, for any Person, any term, condition, or provision of any law, rule, judgment, regulation, order, writ, injunction or decree of any court or government, domestic or foreign and any ruling of any arbitrator to which such Person is a party or by which such Person or any of its assets or property is bound or affected or from which such Person derives benefits, and, if such Person is a corporation, its charter documents and by-laws.

          “Subsidiary” means any Person of which the Borrower’s shall own, at the time as of which any determination is being made, directly or indirectly through a Subsidiary, such number of the outstanding shares of capital stock or other evidences of beneficial interest having ordinary voting power to elect a majority of the Board of Directors, or other similar governing body, of such Person.

          “Standard LIBOR” means the LIBOR quoted by the Bank for Interest Periods of one, two or three months, as provided herein.

          “SEC” means the Securities and Exchange Commission or any governmental authority succeeding to its principal functions.

          “Total Facility” means the sum of then-current outstanding principal balance of all Line of Credit Loans plus any other Obligations owing hereunder.

          “UCC” means the Uniform Commercial Code as in effect on the date of this Agreement and as the same may be supplemented or amended from time to time hereafter, of any state or states having jurisdiction from time to time pursuant to Section 9-103 thereof.

          1.2. Rules of Construction. All accounting terms used in the Loan Documents not otherwise specifically defined in the Loan Documents shall be construed in accordance with GAAP. Any other term not specifically defined in the Loan Documents shall be construed in accordance with the meaning for such terms under the UCC in effect from time to time in the State of Ohio. The meaning of any defined term used in the Loan Documents shall apply equally to the singular, plural and other forms of the term defined.

     Section 2. Total Facility; Interest and Fees.

          2.1. Line of Credit Loans The Bank agrees, subject to and on the terms and conditions set forth in the Agreement, to make Line of Credit Loans on behalf of the Borrower from time to time in principal amounts at any one time outstanding in an amount not to exceed the Line of Credit Commitment; provided, however, that, during the continuance of an Event of Default, the Bank may refuse to fund a request for a Line of Credit Loan at any time in its sole and absolute discretion. Subject to the remaining terms and conditions of the Agreement, the

5

Borrower may borrow, repay and reborrow the revolving portions of the Line of Credit from the Bank at any time or from time to time from the date of the Agreement until the End of the Credit.

          2.2. Line of Credit; Default Interest; Commitment Fee; Other Fees.

               2.2.1. The Borrower shall pay interest on the unpaid principal balance of all Line of Credit Loans, up to the amount of the Total Facility, at a fluctuating rate per annum equal to (a) the Interest Rate, from the date of the Agreement until and including the date an Event of Default occurs and (b) thereafter during the continuation of such Event of Default, the Interest Rate plus 300 basis points.

               2.2.2. The Borrower will pay a facility fee of $1,750 upon the execution of this Agreement.

          2.3. Loans.

               2.3.1. Forms of Loans. Each Line of Credit Loan shall, at the election of the Borrower, be made in federal funds or other immediately available money of the United States, either in the form of (i) a Prime Rate Loan for which the Interest Rate will be established with reference to the Prime Rate (the “Prime Rate Loans”); (ii) a Standard LIBOR Loan for which the Interest Rate will be established with reference to the Standard LIBOR (the “Standard LIBOR Loans”); or (iii) an Overnight LIBOR Loan for which the Interest Rate will be established with reference to the Overnight LIBOR (the “Overnight LIBOR Loans” and, collectively with the Standard LIBOR Loans, the “LIBOR Loans”). Each LIBOR Loan, upon the maturity of the applicable Interest Period, at the Borrower’s election, may be continued as an Overnight LIBOR Loan, a Standard LIBOR Loan with a new Interest Period or converted to a Prime Rate Loan, all as described in Section 2.3.3 below. Each Prime Rate Loan at any time at the Borrower’s election may be converted to a LIBOR Loan as described in Section 2.3.3 below. Each LIBOR Loan shall be in the initial principal amount of at least U.S. $250,000. The Borrower shall not be permitted to have more than six (6) LIBOR Loans outstanding hereunder at any one time for all the Loans outstanding.

               2.3.2. Availability of Loans. The Bank will make available to the Borrower each Line of Credit Loan by wire transfer to an account designated by Borrower on the Borrowing Date requested by the Borrower.

               2.3.3. Borrowing Procedures.

                    (a) Except as otherwise provided herein, each Line of Credit Loan shall be made pursuant to the Borrower’ draw certificate which shall be delivered to the Bank on the Request Date and shall specify (in addition to any other information requested by the Bank) (i) the total amount of the Loan; (ii) whether the Loan is to be a Prime Rate Loan, an Overnight LIBOR Loan or a Standard LIBOR Loan; (iii) the borrowing date (the “Borrowing Date”), which shall be a Banking Day in the case of a Prime Rate Loan or a London Banking Day in the case of a LIBOR Loan; (iv) in the case of a LIBOR Loan that the Bank quote to the Borrower on the Borrowing Date the LIBOR for Loans outstanding for an Interest Period or the Overnight LIBOR; (v) the proper form of executed Line of Credit Note in the amount of the requested Line of Credit Loan; (vi) the purpose of the Loan and (vii) the maturity date of the Loan; provided, however, that the maturity date for each loan may not be later than six months after the Borrowing Date. Requests for Prime Rate Loans shall be made prior to 3:00 p.m. on the Borrowing Date. Requests for LIBOR Loans shall be made by 12:00 noon on the Request Date.

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                    (b) In the case of a request for a LIBOR Loan, the Bank shall, no later than 11:00 a.m. on the Borrowing Date, notify the Borrower of the LIBOR applicable for the Interest Periods requested by the Borrower. The Borrower shall, no later than 12:00 Noon on the Borrowing Date, give notice by telephone confirmed by fax or otherwise in writing to be received by the Bank on the Borrowing Date, to the Bank whether it wishes (i) to complete such borrowing in the form of a LIBOR Loan and if so, the Interest Period; (ii) to make such borrowing, as a Prime Rate Loan or (iii) to cancel its request for a Line of Credit Loan. Failure by the Borrower to deliver such notice by 12:00 Noon on the Borrowing Date shall constitute cancellation of such request.

                    (c) For the purpose of computing the available portion of the Line of Credit Commitment, the Bank shall have the right, in its sole discretion, to treat as outstanding Line of Credit Loans under the Agreement the aggregate amount of (i) the drawn amount of outstanding letters of credit (if any) issued from time to time by the Bank directly or indirectly for the benefit of the Borrower (except letters of credit satisfactorily secured by certificates of deposit of the Bank), (ii) the unpaid principal amount of outstanding drafts accepted by the Bank in connection with any such letters of credit, and (iii) the unpaid amount of any interest, fees, costs or expenses otherwise then due and payable under the Loan Documents (to the extent for which the Bank has not established reserves).

                    (d) The records of the Bank regarding loans, charges and payments shall be deemed to be correct, accurate and binding on the Borrower and an account stated (except for adjustments made as provided in Section 6.2 hereof and corrections of errors discovered by the Bank) in the absence of manifest error.

          2.4. The Line of Credit Notes; Interest.

               2.4.1. Form of Line of Credit Notes. Each Line of Credit Loan made by the Bank shall be evidenced by a promissory note in the form attached hereto as Exhibit 2.4.1 (a “Line of Credit Note”), payable to the order of the Bank, executed by a duly authorized officer of the Borrower and representing the obligations of the Borrower to pay the aggregate unpaid principal amount of the Line of Credit Loans made by the Bank, with interest thereon as prescribed in this Section 2. Each Line of Credit Note shall (a) be dated it is executed, (b) be stated to mature on the earlier of (i) the Maturity Date or (ii) the date 180 days after the issuance of the Line of Credit Note; and (c) bear interest at the applicable Interest Rate per annum as provided in, and payable as specified in this Section 2.4. Each Line of Credit Loan made by the Bank and each payment made on account of principal or interest on the Line of Credit Notes shall be recorded by the Bank on its books and records in the usual and ordinary course of business; provided, however, that the failure of the Bank to make such recordation shall not limit or otherwise affect the obligations of the Borrower under the Line of Credit Notes.

               2.4.2. Interest on Prime Rate Loans. Subject to Section 2.2 hereof, each Prime Rate Loan shall bear interest on the unpaid principal balance thereof for each day from the day such Prime Rate Loan is made until it becomes due, at a fluctuating rate per annum equal to the Interest Rate. Interest on all Prime Rate Loans shall be calculated on the basis of the actual number of days elapsed over a year of 360 days. Any change in the Interest Rate on a Prime Rate Loan due to a change in the Prime Rate shall take effect at the opening of business on the date of such change in the Prime Rate. Interest on the Prime Rate Loans shall be payable monthly on the last Banking Day of each month.

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               2.4.3. Interest on LIBOR Loans. Subject to Section 2.2 hereof, each LIBOR Loan shall bear interest on the outstanding principal amount of such LIBOR Loan for each day from the day such LIBOR Loan is made until it becomes due, at a rate per annum equal to the Interest Rate. The Borrower shall pay, with respect to each LIBOR Loan, such additional amounts as shall be determined pursuant to Section 2.5; provided, however, that there shall be no “breakage” fees for Overnight LIBOR Loans. Interest on LIBOR Loans shall be payable on the last Banking Day of each month. Interest on all Standard LIBOR Loans shall be calculated on the actual number of days elapsed over a year of 360 days. Interest on all Overnight LIBOR Loans shall be calculated on the actual number of days elapsed over a year of 360 days.

               2.4.4. Additional Interest. For so long as the Bank maintains reserves against “Eurocurrency liabilities” (or any other category of liabilities which includes deposits by reference to which the Interest Rate on LIBOR Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of the Bank to United States residents) which the Bank determines in good faith to be legally required, and as a result the cost to the Bank of making or maintaining its LIBOR is determined by the Bank in good faith to have increased, then the Bank may require the Borrower to pay, contemporaneously with each payment of interest on any LIBOR Loan of the Bank, additional interest on such LIBOR Loan at a rate per annum equal to (a)(i) the applicable LIBOR divided by (ii) one minus the Euro Reserve Percentage minus (b) the applicable LIBOR.

               2.4.5. Withholding Taxes. All principal, interest and fee payments made by the Borrower under the Line of Credit Notes shall be in such amounts that the Bank shall receive all amounts owing thereunder and hereunder free and clear of any foreign or domestic withholding taxes, fees or other charges of any foreign or domestic taxing authority.

               2.4.6. Interest Rates. In no event whatsoever shall the Interest Rate and other charges hereunder exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event a court determines that the Bank has received interest and other charges hereunder in excess of the highest rate applicable hereto, the Bank shall promptly refund such excess amount to the Borrower and the provisions hereof shall be deemed amended to provide for such permissible rate.

               2.4.7. Failure to Elect Interest Option. Whenever any Interest Period for a Loan which is a Standard LIBOR Loan expires, and the Borrower have failed to provide the Bank with notice of their election to continue such Loan as a LIBOR Loan in accordance with the provisions of this Agreement such Loan automatically shall convert to and become a Prime Rate Loan hereunder effective as of the first day after the end of such Interest Period.

          2.5. Prepayments and Right to Reborrow. Outstanding Line of Credit Loans may be prepaid at any time without premium or penalty other than breakage fees resulting from the prepayment of a Standard LIBOR Loan prior to the last day of the Interest Period therefor. No prepayment shall affect the Borrower’ right to reborrow from the Bank before the Maturity Date. As used in the Section 2.5, “breakage fees” means an amount equal to the excess, if any, of (i) the Standard LIBOR rate that otherwise would have accrued under this Agreement on the principal amount so prepaid for the period from the date of such prepayment to the last day of the then current Interest Period for such Line of Credit Loan (the “Interim Period”) over (ii) the amount of interest that otherwise would have accrued on such principal amount at the then Standard LIBOR rate for such Interim Period determined as of the date of such prepayment.

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          2.6. Principal. The principal of the Line of Credit Loans shall be due and payable on the earlier of (a) the day 180 days after the date a Line of Credit Loan has been made, (b) the Maturity Date or (c) the End of the Credit. This Agreement shall remain in effect until the Obligations are fully paid and the Borrower has fully performed under the Loan Documents. All overdue interest accruing on each Loan under this Agreement and the Line of Credit Note shall automatically be converted to principal.

          2.7. Set Offs. Upon the occurrence and during the continuance of an Event of Default, the Bank shall have the right in addition to all other rights and remedies available to it, and regardless of the sufficiency of any of collateral (if any) or of the other rights and remedies so available, to set off against any of the Obligations, whether matured or unmatured, all amounts owing to the Borrower by the Bank, whether or not then due and payable, in a deposit account with the Bank or the Bank’s Affiliates and all other funds or property of the Borrower on deposit with or otherwise held by or in the custody of the Bank or the Bank’s Affiliates for the beneficial account of the Borrower, whether solely in the name of or for the benefit of the Borrower or jointly in the name of or for the benefit of the Borrower and any other Person, all without notice to or demand on the Borrower or any other Person, all such notices and demands being hereby expressly waived. The Borrower hereby confirms the Bank’s right of banker’s Lien or set off and nothing in any of the Loan Documents is deemed to be a waiver or prohibition of the exercise by the Bank of such right of banker’s Lien or set off.

          2.8. Payments and Endorsements.

               2.8.1. Except as otherwise effected pursuant to Section 2.8.2 below, the Borrower shall make all payments of principal, interest, fees and other expenses due and payable under the Loan Documents to the banking office of the Bank specified on the signature page, for the account of the Bank in immediately available funds. All Line of Credit Loans made by the Bank to the Borrower pursuant to the Agreement and all payments made on account of principal and interest on the Line of Credit Notes may be recorded by the Bank on its books and records; such recordation to constitute conclusive evidence in the absence of manifest error of the amount of such Loans and payments.

               2.8.2. The Borrower hereby authorizes the Bank, upon the occurrence and during the continuance of an Event of Default, to charge against the Borrower’s accounts (if any), as from time to time due and payable to the Bank under the Loan Documents (a) all accrued interest and (b) all fees, costs or expenses otherwise due and payable to the Bank under the Loan Documents or otherwise.

               2.8.3. Whenever any payment to be made under the Loan Documents shall be stated to be due on a day which is not a Banking Day, such payment shall become due on the next succeeding day which is a Banking Day and such extension of time shall be included in the computation of the amount to be paid.

          2.9. Use of Proceeds. The Borrower shall use the proceeds of all Line of Credit Loans solely (a) to fund acquisitions permitted hereunder, and (b) general working capital purposes, to the extent any use therefor is not prohibited by the remaining terms and provisions of the Loan Documents.

          2.10. Cancellation. The Borrower shall have the option at all times to permanently cancel the Total Facility, and terminate the Agreement, in whole or in part, by giving the Bank not less than 90 days prior written notice of the effective date and amount of such

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cancellation. Any such cancellation shall be irrevocable by the Borrower. On the effective date of any such cancellation, the Borrower shall pay to the Bank an amount equal to the aggregate principal then outstanding under the Line of Credit Notes, together with all interest payable with respect thereto which is accrued and unpaid as of the effective date of any such cancellation, in addition to any fee owing under Section 2.2.2 hereof. Any complete cancellation of the Total Facility shall constitute a termination of the Agreement.

          2.11. Additional Provisions and Limitations Relating to LIBOR Loans.

               2.11.1. Additions. The additional provisions and limitations set forth below shall apply with respect to LIBOR Loans:

                    (a) Deposits Unavailable. If the Bank shall, in good faith and for reasons beyond its control, determine that it is unable to reasonably ascertain the LIBOR or that the Bank is unable to acquire Eurodollar deposits on reasonable terms in an amount sufficient to meet a request for a LIBOR Loan, the Bank shall promptly notify the Borrower, whereupon until the Bank notifies the Borrower that the circumstances giving rise to such unavailability no longer exist (which the Bank shall do upon receiving notice thereof), the obligations of the Bank to make LIBOR Loans shall be suspended. In such event, the Borrower may request a Prime Rate Loan of like amount without regard to the notice requirement of Section 2.3 or may cancel such request.

                    (b) Illegality. The obligation of the Bank to make LIBOR Loans hereunder shall be suspended (to the extent necessary to remove such illegality or impossibility) if any change in any law, treaty, rule or regulation, or in any interpretation thereof by any governmental authority charged with its administration (whether or not having the force of law) including, without limitation, exchange controls, shall, in the sole opinion of the Bank, make it unlawful or impossible for the Bank to comply with its obligation to make or maintain any LIBOR Loan hereunder for the duration of such illegality. The Bank shall promptly notify the Borrower in writing of such suspension and the reasons therefor, whereupon until the Bank gives notice to the Borrower that such illegality ceases to exist, the obligations of the Bank to make LIBOR Loans shall be suspended. The Borrower shall, upon receipt of notice from the Bank, either (i) repay in full (or to the extent necessary to remove such illegality or impossibility) the outstanding principal amount of all such LIBOR Loans, plus accrued interest thereon or (ii) convert the applicable Interest Rate payable with respect to such Loan to the Interest Rate payable on a similar Prime Rate Loan (to the extent such rate is not illegal).

                    (c) Change in Law. If the Bank has LIBOR Loans outstanding and there shall occur any change in applicable law, treaty, rule, regulation or in any interpretation thereof by any governmental authority charged with its administration (whether or not having the force of law) (i) which change directly affects transactions in Eurodollars, (ii) which involves new or additional taxes, reserves or deposit requirements in regard to the LIBOR Loans or changes in the basis of taxation of payments on such Loans, or (iii) which, if the LIBOR Loans made hereunder by such Bank were to have been matched with Eurodollar deposits corresponding in amounts to such LIBOR Loans and having maturity dates which are the same as such LIBOR Loans regardless of whether or not such LIBOR Loans are in fact so matched, increases the cost to such Bank of making or maintaining the LIBOR Loans hereunder or reduces the amount of any payments (whether of principal, interest, or otherwise) receivable by such Bank as to any LIBOR Loans or requires such Bank to make any payment on or calculated by reference to the gross amount of any sum received by it as to such LIBOR Loans, then:

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                         (A) the Bank shall promptly notify the Borrower of the occurrence of such event;

                         (B) the Bank shall promptly deliver to the Borrower a certificate stating the change which has occurred, together with the date thereof and the amount of and the manner of calculating the increased cost on any outstanding LIBOR Loan; and

                         (C) upon receipt of such certificate from the Bank, the Borrower shall pay to the Bank, within 10 days, the amount or amounts of such additional cost with respect to such outstanding LIBOR Loan as additional compensation hereunder. In addition to the obligations of the Bank specified above, the Bank shall, if possible, notify the Borrower of any official proposals issued by legislative or regulatory authorities that would cause such changes.

               (d) Certificate as to Payment. The certificate of the Bank as to the additional amounts payable pursuant to Section 2.11.1(c) delivered to the Borrower shall be deemed to be correct unless such amounts are unreasonable in light of the circumstances or if the Borrower is able to prove that the Bank has made a mistake. The protection of this Section 2.11.1(d) shall be available to the Bank regardless of any possible contention of invalidity or inapplicability of the law, regulation or condition which has been imposed. However, if the Borrower has made a payment of any additional amounts pursuant to Section 2.11.1(c) and any subsequent event occurs which reduces the amount of the increased cost incurred by the Bank, then the Bank shall refund to the Borrower an amount equal to such reduction in the amount of increased cost.

               (e) Substitution. If the Borrower is required to pay to the Bank any additional amounts pursuant to Section 2.11.1(c), the Borrower shall be entitled upon giving the Bank not less than five days’ written notice, in addition to their other rights, to prepay all or any portion of an outstanding LIBOR Loan with respect to which such additional amounts of payment are required (any prohibition against prepayment of such Loans herein contained to the contrary notwithstanding) by substituting a Prime Rate Loan of equal principal amount for all or any such portion of the Loan. All such prepayments shall be accompanied by payment of interest accrued to the date of such prepayments. As a condition of such prepayments, the Bank shall notify the Borrower, and the Borrower shall promptly pay to the Bank such amount or amounts as in the reasonable good faith business judgment of the Bank will compensate the Bank for any loss, premium or penalty incurred by it because of such prepayment.

               (f) Increased Costs. In addition to the other amounts payable hereunder, the Borrower shall pay to the Bank such additional amounts as shall compensate the Bank for increased costs beyond Bank control, which the Bank reasonably and in good faith, determines to be allocable to its LIBOR Loans; provided, however, that the Bank has notified the Borrower as soon as possible regarding the need to assess such costs and has provided the Borrower an opportunity to switch from LIBOR pricing to an alternative index. Additional amounts payable under this Section 2.11.1(f) shall be paid by the Borrower to the Bank on the maturity of the respective LIBOR Loans, subject to receipt by the Borrower from the Bank of a certificate showing the amount, describing the reasons therefor and certifying to the correctness thereof.

               (g) Interest Period. With respect to LIBOR Loans, if the Interest Period selected by the Borrower (i) ends on a day which is not a LIBOR Banking Day, the period so selected shall be extended to the next succeeding LIBOR Banking Day unless such LIBOR

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Banking Day falls in another calendar month, in which case such Interest Period shall end on the next preceding LIBOR Banking Day; or (ii) begins on the last LIBOR Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the period so selected shall end on the last LIBOR Banking Day of the calendar month at the end of the Interest Period; provided, however that notwithstanding (i) or (ii) above, no period may be selected which ends after the Maturity Date.

               2.11.2. Limitation. Charges or additional expenses or otherwise to Borrower under Sections 2.4.5 or 2.11.1 shall be subject to the conditions that each is (a) the subject of written notice given to Borrower by the Bank within a reasonable time after the Bank determines that the same may exist; (b) the result of a change in law or regulation or official interpretation thereof occurring after the date hereof and (c) not reflected in the determination of any other rate or charge hereunder.

               2.11.3. Statement. The Bank’s written statement to the Borrower that items under or covered by this Section 2.11 are properly chargeable to Borrower under this Agreement, the general nature of those charges, and the amount thereof shall be deemed to be correct, unless the same are not reasonable or Borrower is able to identify any mistakes thereto.

          2.12. Confidentiality. The Bank shall take reasonable steps to maintain the confidentiality of any information about the Borrower the Bank receives from the Borrower; provided, however, that the Bank shall be entitled to share any and all information regarding the Borrower, or the Loan Documents with (a) its employees and attorneys, accountants and appraisers if required by applicable law or in connection with the negotiation or enforcement of this facility, (b) any regulatory or government official of any regulatory or governmental agency having authority over the Bank, upon a request by such official acting in such capacity, and (c) any Person with a court or arbitral order requiring the Bank to disclose such information.

     Section 3. Conditions of Borrowing.

          3.1. All Loans. The Borrower covenants that (a) at the time of disbursement of each Line of Credit Loan, the following statements shall be correct, and the receipt of each Line of Credit Loan shall be deemed to constitute the Borrower’s certification that: (i) the Borrower is in compliance with all of the provisions of the Loan Documents with which it is to comply; (ii) the representations and warranties contained in the Loan Documents are true and correct as of the date of such Line of Credit Loan as though made on and as of such date and (iii) after giving effect to such Line of Credit Loan, the aggregate amount of all Line of Credit Loans outstanding does not exceed the Line of Credit Commitment, and (b) the Borrower shall have timely delivered to the Bank evidence with respect to the Borrower or any other Person as the Bank may reasonably request to establish the consummation of the transactions contemplated by the Agreement, the taking of all corporate proceedings in connection therewith, and compliance with the conditions set forth therein.

          3.2. Closing. On the date this Agreement is executed and as a condition precedent to receiving Line of Credit Loans hereunder, the Borrower shall provide to the Bank (a) resolutions authorizing the transactions contemplated by this Agreement, and an incumbency certificates from the Secretary of the Borrower, (b) audited financial statements of the Borrower in accordance with Section 4.2 for the year ended December 31, 2005 that are satisfactory in scope and content to the Bank, and (c) such other documents or information that the Bank may reasonably request.

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     Section 4. Representations and Warranties. The Borrower hereby represents and warrants to the Bank that:

          4.1. Organization and Authority; Subsidiaries. The Borrower is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization (Delaware), with all requisite power and authority, corporate or otherwise, to execute, deliver and perform the Loan Documents and to carry on the business now conducted or presently proposed to be conducted by the Borrower. The Borrower is duly and legally qualified to do business as a foreign corporation and is in good standing in each state or jurisdiction where such qualification is required, and is duly empowered, authorized, qualified and licensed under all applicable Requirements of Law to own its properties and to carry on its business in the places and in the manner now conducted or presently proposed to be conducted except where failure to so qualify would not have a material adverse effect on the Borrower. During the preceding five years, the Borrower has not conducted business, been known by or used any corporate or fictitious name. The Borrower has taken all corporate action required to make all the provisions of the Loan Documents the valid and enforceable obligations they purport to be. The Borrower has no Subsidiaries except for Advantage Bank and Camco Title Company.

          4.2. Financial Statements. The Borrower has delivered to the Bank a complete copy of the most recent consolidated financial statements of the Borrower. The Borrower has no Indebtedness of any nature, except to the extent reflected (in a note or otherwise) and reserved against in the Financial Statements or otherwise disclosed to the Bank. The Borrower knows of no basis for the assertion against it of any Indebtedness of any nature not fully reflected and reserved against in the Financial Statements or otherwise disclosed to the Bank.

          4.3. Business Activities. Since the date of the Financial Statements, there has been no material adverse change in the business or assets or the condition, financial or otherwise, of the Borrower, and the Borrower has not entered into any material transaction outside of the ordinary course of business, except as previously disclosed in writing to the Bank.

          4.4. Title to Property. The Borrower has good, indefeasible and marketable title to all the property and assets reflected as being owned by it on the Financial Statements (except for assets disposed of in the ordinary course of business since the date of the Financial Statements), and the Borrower is not subject to a claim which has been asserted or, to the Borrower’s knowledge, which is contemplated but has not yet been asserted by another Person of infringement of patent, trademark, copyright or any other intellectual property right based on the operation of the Borrower’s business, or otherwise. The Borrower owns or possesses all patents, trademarks, service marks, trade names, copyrights and licenses, or rights with respect to the foregoing, necessary for the present and planned future conduct of its business. None of the assets or property of the Borrower, the value of which is reflected in the Financial Statements, is held by the Borrower as lessee or conditional vendee, or pursuant to a title retention agreement of any kind, except as set forth in said Financial Statements or the notes relating thereto. Other than as set forth on Schedule 4.4, no financing or continuation statement which names the Borrower as debtor has been filed in any state or other jurisdiction except as provided for herein, and the Borrower has not agreed or consented to cause or to permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien. Each Lease of a material parcel of real estate or a material item of personal property to which the Borrower is a party as lessee is valid, binding, and enforceable by the Borrower in accordance with its terms, entitles the lessee to undisturbed possession of the real estate or personal property covered thereby during the full term thereof and no event of default

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thereunder or event which with the giving of notice or lapse of time or both would constitute an event of default thereunder has occurred.

          4.5. Litigation. There is no action, suit or proceeding at law or in equity or any arbitration proceeding or investigation, inquiry or other proceeding by or before any court or governmental instrumentality or other agency pending or, to the knowledge of the Borrower, threatened, affecting the Borrower or any property or rights of the Borrower, nor is there any basis therefor, except such actions, suits or proceedings which, could not reasonably be expected to have a material adverse effect on the financial condition or operations of Borrower. No judgment, decree or order of any federal, state or municipal court, board or other governmental or administrative agency has been issued against or binds the Borrower which could reasonably be expected to have a material adverse effect on the financial condition or operations of Borrower.

          4.6. No Legal Obstacle to Agreement. The execution, delivery and performance of the Loan Documents, the consummation of any transactions herein or therein referred to or contemplated and the fulfillment of the terms thereof (a) do not and will not materially conflict with, or result in a material breach or violation of, or constitute a default (i) under any Requirement of Law on the part of the Borrower to be performed, observed or fulfilled or (ii) in the performance, observance, or fulfillment of any obligation, covenant or condition contained in any material Contractual Obligation of the Borrower (or by which any of its properties is bound), or (b) but for any requirement of notice or lapse of time or both, would constitute an event of default by the Borrower under any material Contractual Obligation of the Borrower (or by which any of its properties is bound), or (c) do not result in, or require, the creation or imposition of any Lien upon or with respect to any of the properties now owned or hereafter acquired by the Borrower.

          4.7. Burdensome Obligations. No Requirement of Law or Contractual Obligation binding upon the Borrower materially adversely affects (a) the business, properties or assets, operations or condition (financial or otherwise) of the Borrower, or (b) the ability of the Borrower to perform the Loan Documents. The Borrower is not in default under any material Contractual Obligation or Requirement of Law so as to materially affect adversely the business or assets or the condition (financial or otherwise) of the Borrower or the ability of the Borrower to perform under the Loan Documents.

          4.8. ERISA. Based upon ERISA and the regulations and published interpretations thereunder, the Borrower and all Plans are (a) fully funded, or full accruals have been made for any liabilities, and (b) in compliance in all respects with the applicable provisions of ERISA. No condition (financial or otherwise) exists and no event has occurred with respect to any Plan of the Borrower which would subject such Plan to termination under ERISA. No Reportable Event with respect to any Plan of the Borrower has occurred and is continuing. The Borrower has not incurred any liability to the Pension Benefit Guaranty Corporation other than for premiums not yet due and payable.

          4.9. Binding Obligation. The Loan Documents are (or, when executed by the appropriate officer or officers of the Borrower, will be) legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms. No default of any of the Loan Documents exists.

          4.10. Insurance. All of the properties and operations of the Borrower of a character usually insured by Persons of established reputation engaged in the same or a similar business similarly situated, and all of its assets are adequately insured, by financially sound and

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reputable insurers, against loss or damage of the kinds and in the amounts customarily insured against by such Persons; and the Borrower carries, with such insurers in customary amounts, such other insurance, including public and product liability insurance, as is usually carried by Persons of established reputation engaged in the same or a similar business similarly situated.

          4.11. Margin Activity. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System as is now and may from time to time hereafter be in effect), and no part of the proceeds of any Line of Credit Loan will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or to reduce or retire any Indebtedness incurred for any such purpose.

          4.12. Disclosure. Neither this Agreement nor any other agreement, instrument or certificate (including, but not limited to, any accounts receivable aging report) contemplated by or made or delivered pursuant to or in connection with the Loan Documents contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

          4.13. Taxes. The Borrower has filed or caused to be filed on a timely basis all tax returns which are required to be filed in accordance with any Requirement of Law, and have, or caused to be, timely paid, all taxes as shown on such returns or on any assessment received by the Borrower, as well as all other taxes, assessments, fees, liabilities or other charges imposed upon the Borrower or any of its properties by any governmental authority, except for any taxes, assessments, fees, liabilities or other charges which are being contested in good faith and with respect to which adequate reserves have been established in accordance with GAAP. The Financial Statements contain as of the date thereof reserves or provisions which are believed by the chief financial officer of the Borrower to be adequate for the payment of all taxes for any periods ending on or prior to the date thereof.

          4.14. No Governmental Approvals. No authorization, consent, approval, or exemption of, or registration, qualification or filing with, any governmental authority is required to permit the execution, delivery and performance by the Borrower of the Loan Documents, except for the filing of financing statements and termination statements as may be required by the Loan Documents. The Borrower is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

          4.15. Investments, Loans and Advances. Except for the State of Ohio/Ohio Capital Corporation housing program, the Borrower (a) except as disclosed on the Financial Statements, is not a general partner in any partnership or a member in any joint venture, (b) does not own or hold the assets, stocks, bonds, notes or other evidence of indebtedness or any other security of any Person other than as disclosed on the Financial Statements, (c) has not made any loans, advances or capital contributions to any Persons presently outstanding other than as disclosed on the Financial Statements, nor (d) is not under any Contractual Obligation relating to commodity futures, financial futures or similar investments other than as disclosed on the Financial Statements.

          4.16. Books and Records. All books and records of the Borrower are accurate, complete and maintained in accordance with GAAP.

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          4.17. Solvency. The Borrower is able to meet its debts as they become due. The present fair saleable value of the property and assets of the Borrower is greater than the amount required to pay all Indebtedness of the Borrower, including the Indebtedness incurred under this Agreement. The Borrower has capital sufficient to conduct its business.

          4.18. Capitalization. The authorized common and preferred stock of Advantage Bank is as set forth on Schedule 4.18 (the “Company Equity”). All of the Company Equity has been validly issued to the Borrower and is fully paid and nonassessable. There are no outstanding subscriptions, options, warrants, calls, rights (including, without limitation, preemptive rights) or other agreements or commitments of any nature (collectively, “Equity Rights”) relating to any equity of Advantage Bank (including, without limitation, the Company Equity).

     Section 5. Covenants. Until all Line of Credit Loans and other sums due and owing hereunder to the Bank have been paid in full and the Borrower no longer has any right to borrow hereunder, the Borrower covenants as follows:

          5.1. Insurance.

               5.1.1. The Borrower will keep insured by financially sound and reputable insurers, all properties and operations of a character usually insured by Persons engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such Persons and carry such other insurance as is usually carried by such Persons.

          5.2. Reports.

               5.2.1. The Borrower shall furnish to the Bank as soon as practicable after the end of each of the fiscal months in each fiscal quarter of the Borrower, and in any event within 45 days thereafter, (a) a copy of the Federal Deposit Insurance Corporation Call Report (and any subsequent amendments thereto) for such quarter and (b) the Borrower’s Report on Form 10-Q filed with the SEC.

               5.2.2. The Borrower shall furnish to the Bank as soon as practicable after the end of each fiscal year of the Borrower, and in any event within 120 days thereafter, the Borrower’s Report on Form 10-K filed with the SEC. On each occasion on which the Borrower is required to furnish any such Financial Statements, the Borrower shall also furnish to the Bank the certificate of the chief executive officer or the chief financial officer of the Borrower that such officer has caused the provisions of the Agreement to be reviewed and, after reasonable investigation, has no knowledge that any Default exists or has occurred, or, if any Default exists or has occurred, or, if such officer has such knowledge, a statement specifying the nature thereof, and an explanation of what action the Borrower has taken, are taking or proposes to take with respect thereto.

          5.3. Additional Reports. The Borrower will or, at the Bank’s request and (i) at the Bank’s expense prior to the occurrence and continuance of an Event of Default or (ii) at the Borrower’ expense after the occurrence and during the continuance of an Event of Default, will cause independent certified public accountants of recognized standing reasonably acceptable to the Bank to furnish to the Bank at any time and from time to time, promptly upon the Bank’s request, such reports with respect to the Borrower as the Bank may reasonably request including, without limitation reconciliations to the most recent financial statements and certificates delivered

16

to the Bank. The Borrower shall furnish to the Bank any information regarding its business affairs and financial condition within a reasonable time after receipt of a request therefor.

          5.4. Indebtedness. Except as set forth on Schedule 5.4, the Borrower shall not incur or suffer to exist any Indebtedness except (a) Indebtedness of the Borrower arising under the Loan Documents or otherwise owing to the Bank, (b) Indebtedness owing to others in an aggregate amount that does not exceed at any time $5,000,000, (c) Indebtedness disclosed on the Financial Statements as of the date hereof and any refinancings of such Indebtedness, and (d) Indebtedness that has been subordinated to the Obligations in a manner acceptable to the Bank.

          5.5. Affiliate Transactions. The Borrower shall not enter into any transaction, including, without limitation, the purchase, sale or exchange of any material property or the rendering of any material service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrower and upon fair and reasonable terms.

          5.6. Notice of Default. The Borrower shall promptly notify the Bank of any Default or Event of Default under any of the Loan Documents.

          5.7. Payment of Taxes, Etc. The Borrower shall promptly pay and discharge (a) all taxes, assessments, fees and other governmental charges or levies imposed upon it or upon any of its properties (including, without limitation, vehicles), income or profits before the same shall become delinquent, (b) all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other similar Persons for labor, materials, supplies and rentals, which, if unpaid, might by law become a Lien upon its properties, and (c) any Indebtedness heretofore or hereafter incurred by it when due, and discharge, perform and observe all covenants, provisions and conditions to be discharged, performed and observed in connection therewith, or in connection with any agreement or other instrument relating thereto or in connection with any Lien existing at any time upon any of its properties; provided, however, that the Borrower shall not be required to pay any of the foregoing if (x) the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceeding, (y) the Borrower shall have set aside on its books in accordance with GAAP, adequate reserves with respect thereto and (z) the title of the Borrower to, and their right to use their properties, is not adversely affected thereby.

          5.8. Litigation. The Borrower will promptly give the Bank notice of:

               5.8.1. all legal or arbitral proceedings, and of all proceedings by or before any governmental or regulatory authority or agency, and any material development in respect of such legal or other proceeding, affecting the Borrower, except proceedings which, if could reasonably be expected a material adverse effect on the financial condition or operations of the Borrower or on the ability of the Borrower to perform its obligations hereunder or under any other Loan Documents or the enforceability of the Loan Documents or the rights and remedies of the Bank thereunder; or

               5.8.2. the issuance by any United States federal or state court or any United States federal or state regulatory authority of any injunction, order or other restraint prohibiting, or having the effect of prohibiting or delaying, the making of Loans pursuant hereto or the institution of any litigation or similar proceedings seeking any such injunction, order or other restraint.

          5.9. Existence, Etc. The Borrower will:

17

               5.9.1. preserve and maintain its corporate existence and all of its material rights, privileges and franchises, and the existence and rights, privileges and franchises of Advantage Bank;

               5.9.2. comply with all Requirements of Law if failure to comply with such requirements would materially and adversely affect the financial condition or operations of the Borrower, or the ability of the Borrower to perform its obligations hereunder or under the other Loan Documents, or the enforceability of any of the Loan Documents or the rights or remedies of the Bank thereunder;

               5.9.3. pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained;

               5.9.4. maintain all of its properties used or useful in its business in good working order and condition, ordinary wear and tear excepted; and

               5.9.5. keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities, and permit representatives of the Bank, during normal business hours and upon five days prior notice to the Borrower, to examine, copy and make extracts from its books and records, to inspect its properties, all to the extent reasonably requested by the Bank.

          5.10. Prohibition of Fundamental Changes.

               5.10.1. Borrower shall not enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) unless the Borrower shall be the continuing or surviving entity.

               5.10.2. The Borrower shall not purchase any shares of any class or classes of its capital stock or its other equity interests with the proceeds of any Line of Credit Loans.

               5.10.3. The Borrower shall not sell, Lease, assign, transfer or otherwise dispose of all or substantially all of its business or assets (including without limitation, its equity interest in Advantage Bank), whether now owned or hereafter acquired, except in the ordinary course of business.

          5.11. Limitation on Liens. Borrower shall not create, incur, assume or suffer to exist, any Lien upon its equity interest in Advantage Bank or any other subsidiary or bank acquired with the proceeds of a Line of Credit Loan hereunder.

     Section 6. Application of Moneys.

     6.1. Payments.

          6.1.1. The crediting of items deposited to the reduction of the Obligations shall be conditioned upon final payment of the item and if any item is not so paid, the amount of any

18

credit given for it may be charged to the Obligations or to any other deposit account of the Borrower, whether or not the item is returned.

          6.1.2. Except as otherwise provided herein, all moneys which the Bank shall receive hereunder or otherwise, (a) prior to the occurrence and continuance of an Event of Default, shall be applied as directed by the Borrower, and (b) upon the occurrence and during the continuance of an Event of Default; shall be applied first, to the payment of any interest, fees or other costs accrued under the Line of Credit; second, to the payment or reimbursement of all advances, expenses and disbursements of the Bank (including, without limitation, the reasonable fees and disbursements of its counsel and agents) incurred in connection with the administration and enforcement of, or the preservation of any rights under, the Loan Documents, or in the collection of any of the Obligations; third, to satisfaction of the principal amount of the Obligations, in such order and in such manner as the Bank may direct; and, fourth, to or to the order of the Borrower, its successors or assigns, or as any court of competent jurisdiction may direct.

          6.2. Reserved Rights. The Bank shall have the continuing and exclusive right to apply or reverse and re-apply any and all payments to any portion of the Obligations. To the extent that the Borrower makes a payment or payments to the Bank or the Bank receives any payment for the Borrower’s benefit, which payment(s) or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Obligations or the part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by the Bank.

     Section 7. Events of Default.

          7.1. Events of Default. There shall exist an “Event of Default” if any of the following occurs:

               7.1.1. Any representation or warranty of the Borrower made in the Agreement shall prove to have been false or misleading in any material respect on the date as of which made.

               7.1.2. Any agreement, report, certificate, financial statement or other instrument or document referred to in and furnished to the Bank pursuant to the Agreement or the borrowings hereunder shall prove to have been false or misleading in any material respect on the date as of which delivered.

               7.1.3. A default in the payment of the principal hereunder or under any of the Line of Credit Notes, as and when due and payable that is not cured by payment within 30 days.

               7.1.4. A default in the payment of interest hereunder or under the Line of Credit Notes, as and when due and payable that is not cured by payment within 30 days.

               7.1.5. A default in the performance or observance of any of the covenants set forth in the Agreement to be performed or observed by the Borrower; provided, however, that no Event of Default shall have been deemed to occur if the Borrower shall have

19

cured any default (other than a default of the provisions of Sections 5.6 or 5.11) under Section 5 within 30 days of the occurrence of such default.

               7.1.6. The existence of a Lien upon the Borrower’s equity ownership in Advantage Bank or any other subsidiary or bank acquired with the proceeds of a Line of Credit Loan hereunder.

               7.1.7. The Borrower (a) makes an assignment for the benefit of, or enters into any composition or arrangement with, creditors; (b) (i) applies for or consents (by admission of material allegations of a petition or otherwise) to the appointment of a receiver, custodian, trustee or liquidator of the Borrower of any substantial part of the properties of the Borrower, or (ii) authorizes such application or consent, or (iii) proceedings seeking such appointment shall be commenced against the Borrower without authorization, consent or application, and shall not have been alleviated within 90 days of such commencement; (c) (i) authorizes or files a voluntary petition in bankruptcy, suffers an order for relief under any federal bankruptcy law, or applies for or consents (by admission of material allegations of a petition or otherwise) to the application of any bankruptcy, reorganization, arrangement, readjustment of debt, insolvency, dissolution, liquidation or other similar law of any jurisdiction, or (ii) authorizes such application or consent, or (iii) proceedings to such end shall be instituted against the Borrower without its authorization, application or consent and shall not have been alleviated within 90 days of the institution thereof; (d) permits or suffers all or any material part of its properties to be sequestered, attached, or subjected to a Lien through any legal proceeding or distraint which is not alleviated within 90 days of the commencement thereof; (e) generally does not pay its debts as such debts become due; or (f) conceals, removes or permits to be concealed or removed, any part of its property, with intent to hinder, delay or defraud r its creditors or any of them, or makes or suffers a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law, or makes any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid.

               7.1.8. A failure of the Borrower to pay when due (but after the running of any applicable grace period) any Indebtedness (other than as evidenced by the Line of Credit Notes) owing by the Borrower or any interest or premium thereon, whether such Indebtedness shall become due by scheduled maturity, by required prepayment, by acceleration, by demand or otherwise, and such failure has a material adverse effect on the Borrower’s financial condition or operations, or the Borrower’s ability to perform its obligations hereunder.

               7.1.9. A failure of the Borrower to perform any term, covenant or agreement on its part to be performed under any agreement or instrument (other than the Loan Documents) evidencing or securing or relating to any material Indebtedness owing by the Borrower required to be performed, if the effect of such failure is to accelerate the maturity of such Indebtedness, or to permit the holder or holders of such Indebtedness or the trustee or trustees under any such Indebtedness to cause such Indebtedness to become due prior to the stated maturity thereof, regardless of whether or not such failure to perform shall be waived by the holder or holders of such Indebtedness or such trustee or trustees, and such failure has a material adverse effect on the Borrower’s financial condition or operations, or the Borrower’s ability to perform its obligations hereunder.

               7.1.10. Any event of default occurs on the part of the Borrower under any other material agreement or instrument binding upon the Borrower; provided, however, in each case, that there has been satisfied any requirements in connection with such event for the giving of notice, or the lapse of time, or the happening of any further condition, event or act, and

20

such failure has a material adverse effect on the Borrower’s financial condition or operations, or the Borrower’s ability to perform its obligations hereunder.

               7.1.11. A final judgment or judgments for the payment of money aggregating in excess of the greater of $1,000,000 or the publicly-reported earnings of the Borrower in the most recently completed fiscal quarter shall be rendered against the Borrower which is not otherwise covered by insurance and any one of such judgments has been outstanding for more than 30 days from the date of its entry and has not been discharged in full or stayed pending appeal.

          7.2. Acceleration. At any time upon the occurrence and during the continuance of an Event of Default, the Bank shall have the right to do any or all of the following: (a) declare its obligation to make Line of Credit Loans to be terminated, whereupon the same shall forthwith terminate and (b) make a demand for payment upon the Borrower, whereupon the principal amount of all Line of Credit Loans, all accrued interest thereon, all fees, costs and all such other amounts owing under the Loan Documents shall become forthwith due and payable, without presentment, demand, protest or other notice of any kind, all of which is hereby expressly waived by the Borrower, notwithstanding anything contained in the Loan Documents to the contrary. The rights and remedies of the Bank expressly specified in the Agreement are cumulative and not exclusive of any other rights and remedies which the Bank would otherwise have. At the End of the Credit (whether by maturity, acceleration, cancellation or otherwise), the Borrower shall pay to the Bank the aggregate amount of all outstanding Obligations, including, without limitation, all unpaid principal, interest, fees and costs.

          7.3. Late Processing Fee. The Bank shall have the right to assess a late payment processing fee in the amount of $250 if a payment of principal, interest or fees is not paid within 10 days of the date such payment is due hereunder.

     Section 8. Miscellaneous.

          8.1. Survival of Covenants. Except to the extent otherwise specifically set forth herein, covenants, agreements, representations, warranties and statements made herein or in any certificate, statement, document or other instrument delivered pursuant to the Loan Documents shall survive the making of the Loans herein contemplated and the execution and delivery to the Bank of the Line of Credit Notes and shall continue in full force and effect so long as any Indebtedness or Obligation created under the Loan Documents is outstanding and unpaid.

          8.2. Successors and Assigns. All covenants, agreements, representations and warranties made in the Loan Documents by or on behalf of any of the parties hereto and all other provisions of the Agreement shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not, except that the Borrower shall not have the right to assign its rights hereunder or any interests herein, including, without limitation, the right to receive funds, without the prior written consent of the Bank.

          8.3. Notice. All notices, requests and other communications provided for hereunder shall be in writing and, if to the Borrower, mailed or delivered to the Borrower, addressed to the Borrower at the addresses set forth below the Borrower’ signatures hereto; if to the Bank, mailed or delivered to the Bank, addressed to it at the address set forth below the Bank’s signature hereto; or, as to each party, at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section. All notices, requests and other communications provided for hereunder shall be

21

effective when deposited in the mail or delivered to an overnight delivery company, addressed as aforesaid; provided, however, that a notice of change of address and of termination of the Agreement is only effective upon actual receipt.

          8.4. Waiver. No delay on the part of the Bank in exercising any right, power or privilege granted hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof. No purported waiver of any default of any term or provision contained herein shall be deemed to be a waiver of such term or provision unless the waiver is in writing and signed by the waiving party. No such waiver shall in any event be deemed a waiver of any subsequent default under the same or any other term or provision contained herein. The Borrower acknowledges that the Bank, in its sole discretion, may require the payment of a reasonable fee, in an amount to be determined by the Bank in its sole discretion, to compensate the Bank for its consent to any amendment, waiver or modification of the Loan Documents requested by the Borrower. The rights and remedies herein expressly specified are cumulative and not exclusive of any other rights and remedies which the Bank would otherwise have.

          8.5. Modification. No amendment, modification, termination, or waiver of any provision of the Loan Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.

          8.6. Expenses. All reasonable fees, costs or expenses, including reasonable fees and expenses of outside legal counsel, incurred by the Bank in connection with either the administration, amendment, modification or enforcement of the Loan Documents (including, without limitation, (a) all reasonable expenses incurred in obtaining all necessary judicial and other approvals of the transactions contemplated hereby, (b) after the occurrence and during the continuance of an Event of Default, all reasonable expenses incurred in conducting any examinations or appraisals which the Bank, in its sole discretion, deems necessary or appropriate; or (c) all expenses incurred in assigning or otherwise transferring control of post office boxes or zip codes to the Bank shall be paid by the Borrower on demand.

          8.7. Enforceability. Any provision of the Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction.

          8.8. Captions. Section headings used in the Agreement are for convenience only and shall not affect the construction of the Agreement.

          8.9. Governing Law. The Loan Documents shall be deemed to be contracts made under the laws of the State of Ohio and shall in all respects be interpreted in accordance with the laws of Ohio applicable to contracts to be performed in Ohio, except to the extent the laws of some other jurisdictions are mandatorily applicable.

          8.10. Counterparts. The Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.

22

          8.11. Entire Agreement. The Loan Documents set forth the entire understanding between the parties concerning the subject matter thereof and incorporate all prior negotiations and understandings. There are no covenants, promises, agreements, conditions or understandings, either oral or written, between them relating to the subject matter of the Loan Documents other than those set forth in the Loan Documents. No representation or warranty has been made by or on behalf of any party to the Loan Documents (or any officer, director, employee or agent thereof) to induce any other party to enter into the Loan Documents or to abide by or consummate any transactions contemplated by any terms of the Loan Documents, except representations and warranties, if any, expressly set forth or referred to in the Loan Documents. Nothing expressed or implied in any of the Loan Documents is intended or shall be construed to confer upon or give any Person other than the parties hereto and their successors or assigns, any rights or remedies under or by reason of the Loan Documents.

          8.12. Consent to Jurisdiction. The Borrower hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Ohio and of the United States of America located in the City of Columbus for any actions, suits or proceedings arising out of or relating to the Loan Documents and the transactions contemplated thereby (and the Borrower agrees not to commence any action, suit or proceeding relating thereto except in such courts). The Borrower further agrees that service of any process, summons, notice or document by U.S. registered mail to the address of the Borrower set forth herein shall be effective service of process for any action, suit or proceeding brought against the Borrower in any such court. The Borrower irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of the Loan Documents or the transactions contemplated thereby, in the courts of the State of Ohio or in the United States of America located in the City of Columbus, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.

          8.13. Indemnification. Without limiting any other rights which the Bank may have under the Loan Documents or under applicable law, the Borrower hereby indemnifies the Bank and its Affiliates and their respective directors, officers, employees and agents from and against any and all damages, losses, claims, liabilities and related costs and expenses, including reasonable attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”) awarded against or incurred by the Bank or its Affiliates or their respective directors, officers, employees and agents arising out of or as a result of the Loan Documents excluding, however, Indemnified Amounts resulting from the gross negligence, willful misconduct or unlawful acts of the Bank, its employees or authorized agents. The Borrower expressly acknowledges that the obligation of indemnification set forth in this Section 8.13 includes, without limitation, indemnification for Indemnified Amounts relating to or resulting from: (a) reliance on any representation or warranty made by the Borrower (or any of its officers) under or in connection with the Loan Documents, any other information or report delivered by the Borrower pursuant hereto, which shall have been false or incorrect in any material respect when made or deemed made; (b) the failure to keep any of the Borrower’s assets free and clear of any Lien or adverse claim whether existing at the date hereof or at any time thereafter; (c) any products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort arising out of or in connection with merchandise or services which are the subject of any Contractual Obligation; (d) the suspension or termination of operations of the Borrower; (e) any claim of copyright, trademark, trade dress or other intellectual property infringement or violation or (f) the assignment by the Borrower to any Person other than the Bank of any financing statements or other similar instrument or document filed by it naming the Borrower as the debtor.

23

          8.14. Waiver of Jury Trial. THE BANK AND THE BORROWER HEREBY VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE BANK AND THE BORROWER ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE BORROWER AND THE BANK IN CONNECTION WITH ANY LOAN DOCUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE TRANSACTIONS RELATED HERETO OR THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO ENTER INTO THE FINANCING TRANSACTIONS WITH BORROWER. IT SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE BANK’S ABILITY TO PURSUE ITS REMEDIES INCLUDING, BUT NOT LIMITED TO, ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY OTHER DOCUMENT RELATED HERETO.

          8.15. USA PATRIOT ACT NOTIFICATION. The following notification is provided to the Company pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for the Borrower: When the Borrower opens an account, the Bank will ask for the Borrower’s name, taxpayer identification number, business address, and other information that will allow Bank to identify the Borrower. The Bank may also ask to see the Borrower’s legal organizational documents or other identifying documents.

          8.16. Government Regulation. the Borrower shall not (a) be or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits the Bank from making any advance or extension of credit to the Borrower or from otherwise conducting business with the Borrower, or (b) fail to provide documentary and other evidence of the Company’s identity as may be requested by the Bank at any time to enable the Bank to verify the Borrower’s identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

24

     The parties hereto have caused this Purpose and Ability Line of Credit Agreement to be duly executed by their respective duly authorized officers as of the day and year first above written.

KEYBANK NATIONAL ASSOCIATION

By:

Name:

Its:

Address for notices:

527 Newark-Granville Road
P. O. Box 434
Granville, Ohio 43023

CAMCO FINANCIAL CORPORATION

By:

Name:

Its:

Address for notices:

25

SCHEDULE 4.4

Permitted Liens

None

26

SCHEDULE 4.18

Company Equity

[to follow from Borrower]

27

SCHEDULE 5.4

Permitted Indebtedness

[to follow from Borrower]

28

EXHIBIT 2.4.1.

LINE OF CREDIT NOTE

$	Columbus, Ohio
	, 200___

     On or before ___, for value received, the undersigned, CAMCO FINANCIAL CORPORATION, a Delaware corporation (the “Borrower”) hereby promises to pay to the order of KEYBANK NATIONAL ASSOCIATION, a national banking association (the “Bank”) or its assigns, as further provided herein, the principal amount of ___ Dollars ($___) or, if such principal is less, the aggregate unpaid principal amount of all Line of Credit Loans made by the Bank to the Borrowers pursuant to the Agreement referred to in Section 1 hereof, together with interest on the unpaid principal balance from time to time outstanding hereunder until paid in full at the rates determined in accordance with the provisions of the Agreement, payable on the last Banking Day of each month commencing ___. Both principal and interest are payable in federal funds or other immediately available money of the United States of America at an office of the Bank, 88 East Broad Street, Columbus, Ohio 43215.

     Section 1. Loan Agreement. This Line of Credit Note is one of the Line of Credit Notes referred to in the Purpose and Ability Line of Credit Agreement dated as of the date hereof between the Borrower and the Bank, as the same may be amended, modified or supplemented from time to time (the “Agreement”), which Agreement, as amended, is incorporated by reference herein. All capitalized terms used herein shall have the same meanings as are assigned to such terms in the Agreement. This Line of Credit Note is entitled to the benefits of and is subject to the terms, conditions and provisions of the Agreement. The Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events.

     This Line of Credit Note was executed at the place and on the date above stated.

CAMCO FINANCIAL CORPORATION

By:

Name:

Its:

29

EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

1.	I have reviewed this quarterly report on Form 10-Q of Camco Financial Corporation;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Camco as of, and for, the periods presented in this quarterly report;
4.	Camco’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15(f)) for Camco and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Camco, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of Camco’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluations; and
d.	Disclosed in this report any change in Camco’s internal control over financial reporting that occurred during Camco’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Camco’s internal control over financial reporting.

5. Camco’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of Camco’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in Camco’s internal control over financial reporting.

Date: November 6, 2006	/s/Richard C. Baylor
	Richard C. Baylor, Chief Executive Officer

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Mark A. Severson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Camco Financial Corporation;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Camco as of, and for, the periods presented in this quarterly report;
4.	Camco’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15(f))for Camco and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Camco, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of Camco’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this quarterly report based on such evaluations; and
d.	Disclosed in this report any change in Camco’s internal control over financial reporting that occurred during Camco’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Camco’s quarterly control over financial reporting.

5. Camco’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of Camco’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in Camco’s internal control over financial reporting.

Date: November 6, 2006	/s/Mark A. Severson
	Mark A. Severson, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Camco Financial Corporation (the “Corporation”) on Form 10-Q for the period ending September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard C. Baylor, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.

/s/Richard C. Baylor

Richard C. Baylor, Chief Executive Officer

November 6, 2006

A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Camco Financial Corporation (the “Corporation”) on Form 10-Q for the period ending September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark A. Severson, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Corporation.

/s/Mark A. Severson

Mark A. Severson, Chief Financial Officer

November 6, 2006

A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Securities and Exchange Commission or its staff upon request.