-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EhVwAxcBIzC0oQ6gL3FXVOpWNFu9N/H2eoPbuZHdn8v5PIpgM4B/JMcJat+S7mYc Vo8egr+EvknBWXfY81a03A== /in/edgar/work/0001046386-00-000145/0001046386-00-000145.txt : 20001115 0001046386-00-000145.hdr.sgml : 20001115 ACCESSION NUMBER: 0001046386-00-000145 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMCO FINANCIAL CORP CENTRAL INDEX KEY: 0000016614 STANDARD INDUSTRIAL CLASSIFICATION: [6036 ] IRS NUMBER: 510110823 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25196 FILM NUMBER: 764257 BUSINESS ADDRESS: STREET 1: 814 WHEELING AVE CITY: CAMBRIDGE STATE: OH ZIP: 43725 BUSINESS PHONE: 7404325641 10-Q 1 0001.txt QUARTERLY FINANCIAL STATEMENTS FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ---------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _______________ Commission File Number 0-25196 CAMCO FINANCIAL CORPORATION - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 51-0110823 - ------------------------------- -------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 6901 Glenn Highway, Cambridge, Ohio 43725 - ------------------------------------------------------------------------------ (Address of principal executive office) Registrant's telephone number, including area code: (740) 435-2020 Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of November 10, 2000, the latest practicable date, 6,931,897.2 shares of the registrant's common stock, $1.00 par value, were issued and outstanding. Page 1 of 19 pages 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 11 Quantitative and Qualitative Disclosures about Market Risk 17 PART II - OTHER INFORMATION 18 SIGNATURES 19 2 Camco Financial Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands, except share data) September 30, December 31, ASSETS 2000 1999 Cash and due from banks $ 14,901 $ 16,707 Interest-bearing deposits in other financial institutions 7,688 247 --------- ------- Cash and cash equivalents 22,589 16,954 Investment securities available for sale - at market 272 273 Investment securities held to maturity - at cost, approximate market value of $17,157 and $16,452 as of September 30, 2000 and December 31, 1999 17,436 16,864 Mortgage-backed securities available for sale - at market 10,287 6,475 Mortgage-backed securities held to maturity - at cost, approximate market value of $5,349 and $5,818 as of September 30, 2000 and December 31, 1999 5,416 5,944 Loans held for sale - at lower of cost or market 5,924 3,183 Loans receivable - net 917,154 723,042 Office premises and equipment - net 14,002 11,706 Real estate acquired through foreclosure 440 419 Federal Home Loan Bank stock - at cost 18,981 14,605 Accrued interest receivable on loans 5,740 3,890 Accrued interest receivable on mortgage-backed securities 114 78 Accrued interest receivable on investment securities and interest-bearing deposits 260 252 Prepaid expenses and other assets 1,273 888 Cash surrender value of life insurance 5,932 5,657 Goodwill and other intangible assets 3,140 3,252 --------- ------- Total assets $1,028,960 $813,482 ========= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits $ 620,208 $461,787 Advances from the Federal Home Loan Bank 321,483 279,125 Advances by borrowers for taxes and insurance 2,977 3,360 Accounts payable and accrued liabilities 4,353 3,006 Dividends payable 832 832 Accrued federal income taxes 480 133 Deferred federal income taxes 1,089 2,630 --------- ------- Total liabilities 951,422 750,873 Stockholders' equity Preferred stock - $1 par value; authorized 100,000 shares; no shares outstanding - - Common stock - $1 par value; authorized 14,900,000 shares, 7,057,917 and 5,752,310 shares issued at September 30, 2000 and December 31, 1999, respectively 7,058 5,752 Additional paid-in capital 41,551 30,351 Retained earnings - substantially restricted 30,439 27,205 Less 126,019 and 41,888 shares of treasury stock - at cost (1,416) (575) Accumulated comprehensive loss, unrealized losses on securities designated as available for sale, net of related tax effects (94) (124) --------- ------- Total stockholders' equity 77,538 62,609 --------- ------- Total liabilities and stockholders' equity $1,028,960 $813,482 ========= =======
3 Camco Financial Corporation
CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) Nine months ended Three months ended September 30, September 30, 2000 1999 2000 1999 Interest income Loans $53,075 $34,526 $18,474 $12,496 Mortgage-backed securities 855 540 278 199 Investment securities 856 635 286 242 Interest-bearing deposits and other 1,382 1,157 507 370 ------ ------ ------ ------ Total interest income 56,168 36,858 19,545 13,307 Interest expense Deposits 20,820 14,211 7,616 4,794 Borrowings 15,707 7,064 5,588 3,042 ------ ------ ------ ------ Total interest expense 36,527 21,275 13,204 7,836 ------ ------ ------ ------ Net interest income 19,641 15,583 6,341 5,471 Provision for losses on loans 431 168 138 45 ------ ------ ------ ------ Net interest income after provision for losses on loans 19,210 15,415 6,203 5,426 Other income Late charges, rent and other 1,523 1,698 527 495 Loan servicing fees 540 416 135 218 Service charges and other fees on deposits 530 419 188 158 Gain on sale of loans 1,573 1,557 947 225 Loss on sale of investment and mortgage-backed securities designated as available for sale (37) - (42) - Gain (loss) on disposition of fixed assets 15 (3) 5 (4) Gain on sale of real estate acquired through foreclosure 49 12 13 26 ------ ------ ------ ------ Total other income 4,193 4,099 1,773 1,118 General, administrative and other expense Employee compensation and benefits 6,901 5,834 2,174 2,038 Office occupancy and equipment 2,271 1,835 761 628 Federal deposit insurance premiums 88 220 30 74 Data processing 1,003 636 318 187 Advertising 561 484 160 153 Franchise taxes 815 667 262 229 Amortization of goodwill 112 112 37 37 Other operating 3,040 2,989 1,026 976 ------ ------ ------ ------ Total general, administrative and other expense 14,791 12,777 4,768 4,322 ------ ------ ------ ------ Earnings before federal income taxes 8,612 6,737 3,208 2,222 Federal income taxes Current 2,731 2,002 937 752 Deferred 175 279 124 - ------ ------ ------ ------ Total federal income taxes 2,906 2,281 1,061 752 ------ ------ ------ ------ NET EARNINGS $ 5,706 $ 4,456 $ 2,147 $ 1,470 ====== ====== ====== ====== EARNINGS PER SHARE Basic $0.83 $0.78 $0.31 $0.26 ==== ==== ==== ==== Diluted $0.82 $0.76 $0.31 $0.25 ==== ==== ==== ====
4 Camco Financial Corporation
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Nine months ended Three months ended September 30, September 30, 2000 1999 2000 1999 Net earnings $5,706 $4,456 $2,147 $1,470 Unrealized gains (losses) on securities: Unrealized holding gains (losses) during the period, net of tax of $3, $(87), $(1), and $(25), respectively 6 (169) (2) (49) Reclassification adjustment for realized losses included in net earnings, net of related taxes of $(13) and $(14) for the nine and three months ended September 30, 2000, respectively 24 - 28 - ----- ----- ----- ----- Comprehensive income $5,736 $4,287 $2,173 $1,421 ===== ===== ===== ===== Accumulated comprehensive loss $ (94) $ (73) $ (94) $ (73) ===== ===== ===== =====
5 Camco Financial Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, (In thousands) 2000 1999 Cash flows from operating activities: Net earnings for the period $ 5,706 $ 4,456 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Amortization of deferred loan origination fees (273) (269) Amortization of premiums and discounts on investment and mortgage-backed securities - net 21 (4) Amortization of goodwill 112 112 Amortization of purchase accounting adjustments - net (50) 78 Depreciation and amortization 890 725 Provision for losses on loans 431 168 Gain on sale of real estate acquired through foreclosure (49) (12) Federal Home Loan Bank stock dividends (962) (518) Gain on sale of loans (634) (385) (Gain) loss on sale of premises and equipment (15) 3 Loss on sale of investment and mortgage-backed securities designated as available for sale 37 - Loans originated for sale in the secondary market (85,862) (70,622) Proceeds from sale of loans in the secondary market 83,755 78,457 Increase (decrease) in cash, net of acquisition of Westwood Homestead Financial Corporation, due to changes in: Accrued interest receivable (1,106) (645) Prepaid expenses and other assets (44) (1,151) Accrued interest and other liabilities 155 705 Federal income taxes: Current 236 (294) Deferred 25 279 ------- ------- Net cash provided by operating activities 2,373 11,083 Cash flows provided by (used in) investing activities: Proceeds from maturities of investment securities 185 5,508 Proceeds from sale of investment securities designated as available for sale - 15 Proceeds from sale of mortgage-backed securities designated as available for sale 5,045 - Purchase of investment securities designated as available for sale - (22) Purchase of investment securities designated as held to maturity (750) (10,896) Purchase of mortgage-backed securities designated as available for sale (5,087) (5,080) Purchase of mortgage-backed securities designated as held to maturity - (1,992) Purchase of loans (2,426) (21,871) Loan disbursements (173,699) (260,381) Principal repayments on loans 120,105 131,940 Principal repayments on mortgage-backed securities 1,903 2,265 Purchase of office premises and equipment (1,077) (1,316) Proceeds from sales of real estate acquired through foreclosure 1,094 583 Additions to real estate acquired through foreclosure (63) (153) Purchase of Federal Home Loan Bank stock (2,077) (4,081) Proceeds from redemption of Federal Home Loan Bank stock 504 - Purchase of cash surrender value of life insurance (80) (250) Net increase in cash surrender value of life insurance (195) (184) Purchase of Westwood Homestead Financial Corporation (1,879) - ------- ------- Net cash used in investing activities (58,497) (165,915) ------- ------- Net cash used in operating and investing activities (subtotal carried forward) (56,124) (154,832) ------- -------
6 Camco Financial Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the nine months ended September 30, (In thousands) 2000 1999 Net cash used in operating and investing activities (subtotal brought forward) $ (56,124) $(154,832) Cash flows provided by (used in) financing activities: Net increase in deposits 57,872 11,452 Proceeds from Federal Home Loan Bank advances 235,178 163,055 Repayment of Federal Home Loan Bank advances (227,461) (35,867) Dividends paid on common stock (2,495) (1,961) Proceeds from exercise of stock options 8 - Advances by borrowers for taxes and insurance (1,343) 46 Purchase of treasury shares - (341) ------- -------- Net cash provided by financing activities 61,759 136,384 ------- -------- Net increase (decrease) in cash and cash equivalents 5,635 (18,448) Cash and cash equivalents at beginning of period 16,954 35,815 ------- -------- Cash and cash equivalents at end of period $ 22,589 $ 17,367 ======= ======== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest on deposits and borrowings $ 36,943 $ 20,843 ======= ======== Income taxes $ 2,452 $ 1,594 ======= ======== Supplemental disclosure of noncash investing activities: Transfers of mortgage loans to real estate acquired through foreclosure $ 852 $ 1,064 ======= ======== Unrealized gains (losses) on investments and mortgage-backed securities designated as available for sale $ 30 $ (169) ======= ======== Recognition of mortgage servicing rights in accordance with SFAS No. 125 $ 939 $ 1,172 ======= ======== Shares issued in conjunction with 5% stock dividend $ - $ 272 ======= ======== Liabilities assumed, stock and cash paid in acquisition of Westwood Homestead Financial Corporation $159,698 $ - Less: fair value of assets received 159,698 - ------- -------- Amount assigned to goodwill $ - $ - ======= ========
7 Camco Financial Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of Camco Financial Corporation ("Camco", or the "Corporation") included in Camco's Annual Report on Form 10-K for the year ended December 31, 1999. However, all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the nine and three month periods ended September 30, 2000, are not necessarily indicative of the results which may be expected for the entire year. In January 2000, the Corporation acquired Westwood Homestead Financial Corporation ("Westwood Financial") utilizing the purchase method of accounting (the "Merger"). Westwood Financial was dissolved upon consummation of the Merger and Westwood Financial's banking subsidiary, Westwood Homestead Savings Bank, continued operations as a wholly-owned subsidiary of the Corporation. Camco paid $11.1 million in cash and issued 1,304,875 of its common shares in connection with the Merger. 2. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Camco and its six wholly-owned subsidiaries: Cambridge Savings Bank ("Cambridge Savings"), Marietta Savings Bank ("Marietta Savings"), First Federal Savings Bank of Washington Court House ("First Federal"), First Federal Bank for Savings ("First Savings"), Westwood Homestead Savings Bank ("Westwood") (collectively hereinafter "the Banks") and Camco Title Insurance Agency, Inc., as well as two second tier subsidiaries, Camco Mortgage Corporation and WestMar Mortgage Company. All significant intercompany balances and transactions have been eliminated. 3. Earnings Per Share Basic earnings per share for the nine and three month periods ended September 30, 2000, is computed based on 6,909,532 and 6,931,898 weighted-average shares outstanding during the respective periods. Basic earnings per share for the nine and three month periods ended September 30, 1999, is computed based on 5,730,981 and 5,715,774 weighted-average shares outstanding during the respective periods. 8 Camco Financial Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Earnings Per Share (continued) Diluted earnings per share is computed taking into consideration common shares outstanding and dilutive potential common shares to be issued under the Corporation's stock option plans. Weighted-average common shares deemed outstanding for purposes of computing diluted earnings per share totaled 6,951,009 and 6,978,301 for the nine and three month periods ended September 30, 2000, respectively, and 5,842,657 and 5,810,791 for the nine and three month periods ended September 30, 1999, respectively. Incremental shares related to the assumed exercise of stock options included in the computation of diluted earnings per share for the nine and three month periods ended September 30, 2000, totaled 41,477 and 46,403, and for the nine and three month periods ended September 30, 1999, totaled 111,676 and 95,017, respectively. Options to purchase 432,795 shares of common stock with a weighted-average exercise price of $12.16 were outstanding at September 30, 2000, but were excluded from the computation of common share equivalents for the nine and three month periods ended September 30, 2000, because the exercise prices were greater than the average market price of the common shares. Options to purchase 68,485 shares of common stock with a weighted-average exercise price of $14.17 were outstanding at September 30, 1999, but were excluded from the computation of common share equivalents for the nine and three month periods ended September 30, 1999, because the exercise prices were greater than the average market price of the common shares. 4. Effects of Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires entities to recognize all derivatives in their financial statements as either assets or liabilities measured at fair value. SFAS No. 133 also specifies new methods of accounting for hedging transactions, prescribes the items and transactions that may be hedged, and specifies detailed criteria to be met to qualify for hedge accounting. The definition of a derivative financial instrument is complex, but in general, it is an instrument with one or more underlyings, such as an interest rate or foreign exchange rate, that is applied to a notional amount, such as an amount of currency, to determine the settlement amount(s). It generally requires no significant initial investment and can be settled net or by delivery of an asset that is readily convertible to cash. SFAS No. 133 applies to derivatives embedded in other contracts, unless the underlying of the embedded derivative is clearly and closely related to the host contract. SFAS No. 133, as amended by SFAS No. 137, is effective for fiscal years beginning after June 15, 2000. On adoption, entities are permitted to transfer held-to-maturity debt securities to the available-for-sale or trading category without calling into question their intent to hold other debt securities to maturity in the future. SFAS No. 133 is not expected to have a material impact on the Corporation's financial statements. 9 Camco Financial Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. Effects of Recent Accounting Pronouncements (continued) In September 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", which revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but carries over most of the provisions of SFAS No. 125 without reconsideration. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Statement is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. SFAS No. 140 is not expected to have a material effect on the Corporation's financial position or results of operations. 10 Camco Financial Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the three and nine month periods ended September 30, 2000 and 1999 General Camco's profitability depends primarily on the level of its net interest income, which is the difference between interest income on interest-earning assets, principally loans, mortgage-backed securities and investment securities, and interest expense on deposit accounts and borrowings. In recent years, Camco's net earnings have been heavily influenced by the level of other income, including gains on sale of loans, loan servicing fees, and other fees. Camco's operations are also influenced by the level of general, administrative and other expenses, including employee compensation and benefits, occupancy and equipment, federal deposit insurance premiums, as well as various other operating expense categories, including federal income tax expense. Discussion of Financial Condition Changes from December 31, 1999 to September 30, 2000 At September 30, 2000, Camco's consolidated assets totaled $1.0 billion, an increase of $215.5 million, or 26.5%, over the December 31, 1999 total. The increase was primarily due to the acquisition of Westwood Financial, in January 2000, which resulted in net asset growth of approximately $159.7 million and deposit growth of $100.5. The additional increase in total assets was through internal growth, primarily in loans receivable, and was funded by deposit growth of $57.9 million and an increase of $42.4 million in advances from the Federal Home Loan Bank ("FHLB"). Cash and interest-bearing deposits in other financial institutions totaled $22.6 million at September 30, 2000, an increase of $5.6 million, or 33.2%, over December 31, 1999 levels. Investment securities totaled $17.7 million at September 30, 2000, an increase of $571,000, or 3.3%, over the total at December 31, 1999. Investment securities purchases totaled $750,000, while maturities amounted to $185,000, during the nine month period ended September 30, 2000. Mortgage-backed securities totaled $15.7 million at September 30, 2000, an increase of $3.3 million, or 26.4%, over December 31, 1999, due primarily to the $5.2 million of mortgage-backed securities acquired through the Merger, which was partially offset by principal repayments totaling $1.9 million. Loans receivable, including loans held for sale, increased by $196.9 million, or 27.1%, during the nine months ended September 30, 2000, to a total of $923.1 million. The increase resulted primarily from loans acquired through the Merger totaling $142.0 million and loan disbursements, including purchased loans, totaling $262.0 million, which were partially offset by principal repayments of $120.1 million and loan sales of $83.1 million. The volume of loans originated and purchased during the 2000 nine month period was less than that of the 1999 period by $90.9 million, or 25.8%, while the volume of loan sales increased by $5.0 million year to year. Loan origination volume has been affected during the 2000 period by the overall increase in interest rates in the economy. 11 Camco Financial Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the three and nine month periods ended September 30, 2000 and 1999 Discussion of Financial Condition Changes from December 31, 1999 to September 30, 2000 (continued) During the nine months ended September 30, 2000, continued rising interest rates shifted consumer preference from fixed-rate mortgages to adjustable-rate mortgages ("ARMs"). The majority of loans originated by Camco in 2000 have been ARMs and Camco has adopted a short term strategy of selling both fixed and adjustable rate loans to control its balance sheet growth and manage its interest rate risk. Nonperforming loans (90 days or more delinquent plus nonaccrual loans) totaled $4.4 million and $4.0 million at September 30, 2000 and December 31, 1999, respectively, constituting .47% and .55% of total net loans, including loans held for sale, at those dates. At September 30, 2000, nonperforming loans consisted primarily of one- to four-family residential properties which management believes are adequately collateralized. The consolidated allowance for loan losses totaled $2.8 million and $1.9 million at September 30, 2000 and December 31, 1999, respectively, representing 65.0% and 46.9% of nonperforming loans, respectively, at those dates. The allowance for loan losses was increased as a result of the Merger by $641,000 which represented the allowance maintained by Westwood prior to the Merger. Although management believes that its allowance for loan losses is adequate based upon the available facts and circumstances at September 30, 2000, there can be no assurance that additions to such allowance will not be necessary in future periods, which could adversely affect Camco's results of operations. Deposits totaled $620.2 million at September 30, 2000, an increase of $158.4 million, or 34.3%, over December 31, 1999 levels. The increase resulted primarily from deposits of $100.5 million acquired in the Merger coupled with deposit portfolio growth of $57.9 million, or 12.5%, which resulted primarily from management's continuing efforts to achieve growth of deposits primarily through marketing and pricing strategies. Advances from the Federal Home Loan Bank ("FHLB") increased by $42.4 million, or 15.2%, to a total of $321.5 million at September 30, 2000. The increase was due primarily to net current period borrowings totaling $7.7 million, coupled with advances of $34.7 million acquired through the Merger. The proceeds from deposit growth and FHLB advances were primarily used to fund loan originations during the nine month period. The Banks are required to maintain minimum regulatory capital pursuant to federal regulations. At September 30, 2000, the Banks' regulatory capital exceeded all regulatory capital requirements. Comparison of Results of Operations for the Nine Months Ended September 30, 2000 and 1999 General The inclusion of the accounts of Westwood, which Camco acquired in January 2000 in a transaction accounted for using the purchase method of accounting, significantly contributed to the increases in the level of income and expenses during the nine and three month periods ended September 30, 2000, compared to the nine and three month periods ended September 30, 1999. The consolidated statements of earnings for the nine and three month periods ended September 30, 1999, were not restated for the Merger. 12 Camco Financial Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the three and nine month periods ended September 30, 2000 and 1999 Comparison of Results of Operations for the Nine Months Ended September 30, 2000 and 1999 (continued) General (continued) Camco's net earnings for the nine months ended September 30, 2000 totaled $5.7 million, an increase of $1.2 million, or 28.1%, over the $4.5 million of net earnings reported in the comparable 1999 period. The increase in earnings was primarily attributable to a $4.1 million increase in net interest income and an increase in other income of $94,000, which were partially offset by a $263,000 increase in the provision for losses on loans, a $2.0 million increase in general, administrative and other expense and a $625,000 increase in the provision for federal income taxes. Net Interest Income Total interest income for the nine months ended September 30, 2000, amounted to $56.2 million, an increase of $19.3 million, or 52.4%, over the nine month period ended September 30, 1999, generally reflecting the effects of growth in average interest-earning assets of approximately $286.4 million. The acquisition of Westwood accounted for approximately $9.6 million of interest income during the nine month period ended September 30, 2000. Interest income on loans and mortgage-backed securities totaled $53.9 million for the nine months ended September 30, 2000, an increase of $18.9 million, or 53.8%, over the comparable 1999 period. The increase resulted primarily from a $286.1 million, or 45.8%, increase in the average balance outstanding year to year, and a 43 basis point increase in the average yield. Interest income on investments and other interest-bearing assets increased by $446,000, or 24.9%, due primarily to an increase of 135 basis points in the weighted-average yield, and a $213,000, or 0.5%, increase in the average balance outstanding year to year. Total interest expense amounted to $36.5 million for the nine months ended September 30, 2000, an increase of $15.3 million, or 71.7%, over the comparable nine month period in 1999. The acquisition of Westwood accounted for approximately $5.8 million of the overall increase in the 2000 period. Interest expense on deposits increased by $6.6 million, or 46.5%, to a total of $20.8 million for the nine months ended September 30, 2000, due primarily to a $129.5 million, or 28.7%, increase in average deposits outstanding over the nine month period ended September 30, 1999, and an increase of 59 basis points in the weighted-average interest rates paid. Interest expense on borrowings totaled $15.7 million for the nine months ended September 30, 2000, an increase of $8.6 million, or 122.4%, over the 1999 nine month period. The increase resulted primarily from a $149.3 million, or 83.2%, increase in the average balance outstanding year to year and an increase of 112 basis points in the weighted-average interest rates paid. As a result of the foregoing changes in interest income and interest expense, net interest income increased by $4.1 million, or 26.0%, to a total of $19.6 million for the nine months ended September 30, 2000. The interest rate spread decreased to approximately 2.49% for the nine months ended September 30, 2000, from 2.86% for the 1999 period, while the net interest margin decreased to approximately 2.74% in 2000, compared to 3.11% in 1999. 13 Camco Financial Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the three and nine month periods ended September 30, 2000 and 1999 Comparison of Results of Operations for the Nine Months Ended September 30, 2000 and 1999 (continued) Provision for Losses on Loans A provision for losses on loans is charged to earnings to bring the total allowance for loan losses to a level considered appropriate by management based on historical experience, the volume and type of lending conducted by Camco, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to Camco's market area, and other factors related to the collectibility of Camco's loan portfolio. The provision for losses on loans totaled $431,000 for the nine months ended September 30, 2000, an increase of $263,000 over the comparable period in 1999. The current period provision generally reflects the effects of loan portfolio growth. There can be no assurance that the allowance for loan losses will be adequate to cover losses on nonperforming loans in the future. Other Income Other income totaled $4.2 million for the nine months ended September 30, 2000, an increase of $94,000, or 2.3%, over the comparable 1999 period. The increase in other income was primarily attributable to an increase of $124,000, or 29.8%, in loan servicing fees, an increase of $111,000, or 26.5%, in service charges and fees on deposits and a $16,000, or 1.0%, increase in gains on sale of loans, which were partially offset by a decrease of $175,000, or 10.3%, in late charges, rent and other. The increase in loan servicing fees was due to an increase in the servicing portfolio year to year. The increase in service charges and fees on deposits was due to the growth in deposits year to year. The decrease in late charges, rent and other was primarily attributable to a $145,000 decrease in title company fees compared to the same period in 1999. General, Administrative and Other Expense General, administrative and other expense totaled $14.8 million for the nine months ended September 30, 2000, an increase of $2.0 million, or 15.8%, over the comparable period in 1999. This increase was due primarily to a $1.1 million, or 18.3%, increase in employee compensation and benefits, a $436,000, or 23.8%, increase in occupancy and equipment, a $367,000, or 57.7%, increase in data processing expense, and a $148,000, or 22.2%, increase in franchise taxes which were partially offset by a decrease in federal deposit insurance premiums of $132,000, or 60.0%. The acquisition of Westwood accounted for a $2.0 million increase in general, administrative and other expenses. Exclusive of the effects of the Merger, employee compensation and benefits increased by $69,000, or 1.2%, resulting primarily from normal merit increases. Office occupancy and equipment expense increased by $143,000, or 7.8%, which was due to increased depreciation and increased building maintenance costs, and data processing expense increased by $257,000, or 40.4%, due to costs related to a conversion to an internal wide area network. These increases were partially offset by a decrease of $132,000, or 60.0% in federal deposit insurance premiums, due to decreased premium rates. 14 Camco Financial Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the three and nine month periods ended September 30, 2000 and 1999 Comparison of Results of Operations for the Nine Months Ended September 30, 2000 and 1999 (continued) Federal Income Taxes The provision for federal income taxes totaled $2.9 million for the nine months ended September 30, 2000, an increase of $625,000, or 27.4%, over the nine months ended September 30, 1999. This increase was attributable to a $1.9 million, or 27.8%, increase in pre-tax earnings. The Corporation's effective tax rate amounted to 33.7% and 33.9% for the nine months ended September 30, 2000 and 1999, respectively. Comparison of Results of Operations for the Three Months Ended September 30, 2000 and 1999 General Camco's net earnings for the three months ended September 30, 2000 totaled $2.1 million, an increase of $677,000, or 46.1%, over the $1.5 million of net earnings reported in the comparable 1999 period. The increase in earnings was primarily attributable to an $870,000 increase in net interest income and an increase of $655,000 in other income, which were partially offset by a $93,000 increase in the provision for losses on loans, an increase in general, administrative and other expense of $446,000 and an increase in the provision for federal income taxes of $309,000. Net Interest Income Total interest income for the three months ended September 30, 2000, amounted to $19.5 million, an increase of $6.2 million, or 46.9%, over the three month period ended September 30, 1999, generally reflecting the effects of growth in average interest-earning assets outstanding of approximately $275.5 million, or 38.3%. Interest income on loans and mortgage-backed securities totaled $18.8 million for the three months ended September 30, 2000, an increase of $6.1 million, or 47.7%, over the comparable 1999 period. The increase resulted primarily from a $269.3 million, or 39.6%, increase in the average balance outstanding year to year, and a 43 basis point increase in the average yield. Interest income on investments and other interest-bearing assets increased by $181,000, or 29.6%, due primarily to an increase of 73 basis points in the weighted-average yield, coupled with a $6.3 million, or 15.8%, increase in the average balance outstanding year to year. Interest expense on deposits increased by $2.8 million, or 58.9%, to a total of $7.6 million for the three months ended September 30, 2000, due primarily to a $148.1 million, or 32.4%, increase in average deposits outstanding over the prior year and an increase of 84 basis points in the weighted-average interest rates paid. Interest expense on borrowings totaled $5.6 million for the three months ended September 30, 2000, an increase of $2.5 million, or 83.7%, over the 1999 three month period. The increase resulted primarily from a $118.1 million, or 52.6%, increase in the average balance outstanding year to year, coupled with an increase of 111 basis points in the weighted-average interest rates paid. 15 Camco Financial Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the three and nine month periods ended September 30, 2000 and 1999 Comparison of Results of Operations for the Three Months Ended September 30, 2000 and 1999 (continued) Net Interest Income As a result of the foregoing changes in interest income and interest expense, net interest income increased by $870,000, or 15.9%, to a total of $6.3 million for the three months ended September 30, 2000. The interest rate spread decreased to approximately 2.29% for the three months ended September 30, 2000, from 2.75% for the 1999 period, while the net interest margin decreased to approximately 2.55% in 2000, compared to 3.02% in 1999. Provision for Losses on Loans Management elected to record a provision for losses on loans totaling $138,000 for the three months ended September 30, 2000, an increase of $93,000 over the comparable period in 1999. The current period provision generally reflects the effects of loan portfolio growth. There can be no assurance that the allowance for loan losses will be adequate to cover losses on nonperforming loans in the future. Other Income Other income totaled $1.8 million for the three months ended September 30, 2000, an increase of $655,000, or 58.6%, over the comparable 1999 period. The increase in other income was primarily attributable to a $722,000, or 320.9%, increase in gains on sale of loans, an increase of $32,000, or 6.5%, in late charges, rent and other and a $30,000, or 19.0%, increase in service charges on deposits, which were partially offset by a decrease of $83,000, or 38.1%, in loan servicing fees and a $42,000 loss on sale of investments. The increase attributable to the gain on sale of loans was due to increased secondary market sales volume, which was precipated in large part by asset/liability restructuring at one of the Bank subsidiaries. General, Administrative and Other Expense General, administrative and other expense totaled $4.8 million for the three months ended September 30, 2000, an increase of $446,000, or 10.3%, over the comparable period in 1999. This increase was due primarily to a $136,000, or 6.7%, increase in employee compensation and benefits, a $133,000, or 21.2%, increase in occupancy and equipment, a $131,000, or 70.1%, increase in data processing expense and a $33,000, or 14.4%, increase in franchise taxes, which were partially offset by a decrease in federal deposit insurance premiums of $44,000, or 59.5%. 16 Camco Financial Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the three and nine month periods ended September 30, 2000 and 1999 Comparison of Results of Operations for the Three Months Ended September 30, 2000 and 1999 (continued) General, Administrative and Other Expense (continued) The general administrative and other expenses attributable to Westwood for the three months ended September 30, 2000, totaled $696,000. Exclusive of the effects of the Merger, general, administrative and other expense decreased by $250,000, or 5.8%. Employee compensation and benefits decreased by $232,000, or 11.4%, and federal deposit insurance premiums decreased by $49,000, or 66.2%, which were partially offset by a $93,000, or 49.7%, increase in data processing expense. The decrease in employee compensation and benefits was primarily due to closing of non-profitable loan production offices. Federal Income Taxes The provision for federal income taxes totaled $1.1 million for the three months ended September 30, 2000, an increase of $309,000, or 41.1%, over the three months ended September 30, 1999. This increase is attributable to a $986,000, or 44.4%, increase in pre-tax earnings. The Corporation's effective tax rate amounted to 33.1% and 33.8% for the three month periods ended September 30, 2000 and 1999, respectively. Quantitative and Qualitative Disclosures about Market Risk There has been no material change in the Corporation's market risk since the Corporation's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1999. 17 Camco Financial Corporation PART II ITEM 1. Legal Proceedings Not applicable ITEM 2. Changes in Securities and Use of Proceeds None ITEM 3. Defaults Upon Senior Securities Not applicable ITEM 4. Submission of Matters to a Vote of Security Holders None ITEM 5. Other Information Not applicable ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: 15 Independent Accountants' Report 27 Financial data schedule for the nine months ended September 30, 2000. (b) Reports on Form 8-K: None. 18 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 14, 2000 By: /s/Larry A. Caldwell ------------------------------ -------------------------- Larry A. Caldwell Chief Executive Officer Date: November 14, 2000 By: /s/Kristina K. Tipton ------------------------------ -------------------------- Kristina K. Tipton Assistant Controller 19 EX-15 2 0002.txt INDEPENDENT ACCOUNTANTS' REPORT Independent Accountants' Report Board of Directors Camco Financial Corporation We have reviewed the accompanying consolidated statement of financial condition of Camco Financial Corporation as of September 30, 2000, and the related consolidated statements of earnings, comprehensive income, and cash flows for the nine and three-month periods then ended. The financial statements are the responsibility of the Corporation's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated statement of financial condition as of December 31, 1999, and the related consolidated statements of earnings, stockholders' equity, and cash flows for the year then ended (not presented herein) and in our report dated February 18, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of financial condition as of December 31, 1999, is fairly stated, in all material respects, in relation to the consolidated statement of financial condition from which it has been derived. /s/GRANT THORNTON LLP Cincinnati, Ohio November 10, 2000 EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
9 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 14,901 7,688 0 0 10,559 22,852 22,506 923,078 2,837 1,028,960 620,208 0 9,731 321,483 0 0 7,058 70,480 1,028,960 53,075 1,711 1,382 56,168 20,820 36,527 19,641 431 (37) 14,791 8,612 5,706 0 0 5,706 .83 .82 2.74 2,610 1,752 0 0 1,863 96 5 2,837 0 0 2,837
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