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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001046386-02-000032.txt : 20020415
<SEC-HEADER>0001046386-02-000032.hdr.sgml : 20020415
ACCESSION NUMBER: 0001046386-02-000032
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020328
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CAMCO FINANCIAL CORP
CENTRAL INDEX KEY: 0000016614
STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036]
IRS NUMBER: 510110823
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-25196
FILM NUMBER: 02590836
BUSINESS ADDRESS:
STREET 1: 6901 GLENN HIGHWAY
CITY: CAMBRIDGE
STATE: OH
ZIP: 43725
BUSINESS PHONE: 7404325641
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>camco10k_123101.txt
<DESCRIPTION>CAMCO FINANCIAL CORPORATION (10-K)
<TEXT>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission File Number: 0-25196
CAMCO FINANCIAL CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0110823
-------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6901 Glenn Highway, Cambridge, Ohio 43725
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (740) 435-2020
Securities registered pursuant to Section 12(b) of the Act:
None None
---------------------------- -------------------------------------
(Title of Each Class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 par value per share
-----------------------------------------------------
(Title of Class)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act 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 X No_____
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the last sale reported as of March
21, 2002, was $103.9 million. (The exclusion from such amount of the market
value of the shares owned by any person shall not be deemed an admission by the
registrant that such person is an affiliate of the registrant.)
The registrant's revenues for the fiscal year ended December
31, 2001, were $81.5 million. 7,964,119 shares of the
registrant's common stock were outstanding on March 21, 2002.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III of Form 10-K: Portions of the Proxy Statement for the 2002 Annual
Meeting of Stockholders
-1-
<PAGE>
PART I
Item 1. Business.
General
Camco Financial Corporation ("Camco") is a savings and loan holding
company which was organized under Delaware law in 1970. Camco is engaged in the
financial services business in Ohio, Kentucky and West Virginia, through its
wholly-owned subsidiaries, Advantage Bank ("Advantage" or the "Bank") and Camco
Title Insurance Agency, Inc. ("Camco Title"), and its second-tier subsidiaries,
Camco Mortgage Corporation ("CMC") and WestMar Mortgage Company ("WestMar"). In
June 2001, Camco completed a reorganization in which it combined its banking
activities under one Ohio savings bank charter which is now known as Advantage
Bank. Prior to the reorganization, Camco operated five separate banking
subsidiaries serving distinct geographic areas. The branch office groups in each
of the regions previously served by the five subsidiary banks now operate as
divisions of Advantage Bank utilizing the names under which their respective
offices were chartered prior to the restructuring (Cambridge Savings Bank,
Marietta Savings Bank, First Savings Bank, First Bank for Savings and Westwood
Homestead Savings Bank). Hereinafter, the terms "Advantage" or the "Bank" will
be used to include all the preexisting individual financial institutions owned
by Camco.
During the periods for which financial information is presented Camco
completed several business combinations. In 1998, Camco acquired GF Bancorp,
Inc, and its wholly-owned subsidiary, Germantown Federal Savings Bank in a
combination accounted for as a pooling-of-interests ("Germantown Merger").
Accordingly, the financial information for 1997 had previously been restated to
give effect to the combination as of January 1, 1997. During 2000, Camco
completed a business combination with Westwood Homestead Financial Corporation
("WFC") and its wholly-owned subsidiary, Westwood Homestead Saving Bank
("Westwood Savings"). The acquisition was accounted for using the purchase
method of accounting and, therefore, the financial statements for prior periods
have not been restated. In November 2001, Camco completed a business combination
with Columbia Financial of Kentucky, Inc. ("Columbia Financial"), and its
wholly-owned subsidiary, Columbia Federal Savings Bank ("Columbia Federal"). The
merger was accounted for using the purchase method of accounting and, therefore,
the financial statements for prior periods have not been restated.
Advantage is regulated by the Ohio Department of Financial
Institutions, Division of Savings Banks (the "Division"), and the Federal
Deposit Insurance Corporation (the "FDIC"), as its primary regulators. Advantage
Bank is a member of the Federal Home Loan Bank (the "FHLB") of Cincinnati, and
its deposit accounts are insured up to applicable limits by the Savings
Association Insurance Fund (the "SAIF") administered by the FDIC. Camco is
regulated by the Office of Thrift Supervision (the "OTS") as a savings and loan
holding company.
Camco's primary lending activities include the origination of
conventional fixed-rate and variable-rate mortgage loans for the acquisition,
construction or refinancing of single-family homes located in Camco's primary
market areas. Camco also originates construction and permanent mortgage loans on
condominiums, two- to four-family, multi-family (over four units) and
nonresidential properties. In addition to mortgage lending, Camco makes a
variety of consumer loans.
The financial statements for Camco and its subsidiaries are prepared on
a consolidated basis. The principal source of revenue for Camco on an
unconsolidated basis has historically been dividends from the Bank. Payment of
dividends to Camco by the Bank is subject to various regulatory restrictions and
tax considerations.
References in this report to various aspects of the business,
operations and financial condition of Camco may be limited to Advantage, as the
context requires.
-2-
<PAGE>
Lending Activities
General. Camco's primary lending activities include the origination of
conventional fixed-rate and variable-rate mortgage loans for the construction,
acquisition or refinancing of single-family homes located in Advantage's primary
market areas. Construction and permanent mortgage loans on condominiums,
multifamily (over four units) and nonresidential properties are also offered by
Camco. In addition to mortgage lending, Camco makes a variety of consumer loans.
Loan Portfolio Composition. The following table presents certain
information regarding the composition of Camco's loan portfolio, including loans
held for sale, at the dates indicated:
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------------- --------------- ------------------- ----------------- ----------------
Percent Percent Percent Percent Percent
of total of total of total of total of total
Amount loans Amount loans Amount loans Amount loans Amount loans
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
(Dollars in thousands)
Type of loan:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Construction $ 42,666 4.9% $ 56,039 6.0% $ 60,565 8.3% $ 37,169 6.8% $ 14,505 3.0%
Existing residential
properties (1) 705,056 80.9 764,828 82.2 619,621 85.3 485,107 88.4 431,646 89.7
Nonresidential real estate 70,239 8.1 54,722 5.9 20,831 2.9 15,019 2.7 11,294 2.3
Developed building lots 5,908 0.7 5,640 0.6 4,649 0.6 3,895 0.7 1,870 0.4
Education loans 1,198 0.1 1,459 0.2 1,847 0.3 2,096 0.4 2,224 0.5
Consumer and other loans (2) 67,918 7.8 71,719 7.7 49,232 6.8 29,835 5.5 32,430 6.7
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total 892,985 102.5 954,407 102.6 756,745 104.2 573,121 104.5 493,969 102.6
Less:
Undisbursed loans in (15,343) (1.8) (19,911) (2.2) (27,569) (3.8) (22,262) (4.1) (10,059) (2.1)
process
Unamortized yield (1,940) (0.2) (918) (0.1) (1,088) (0.1) (407) (0.1) (813) (0.2)
adjustments
Allowance for loan losses (4,256) (0.5) (2,906) (0.3) (1,863) (0.3) (1,783) (0.3) (1,596) (0.3)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total loans, net $871,446 100.0% $930,672 100.0% $726,225 100.0% $548,669 100.0% $481,501 100.0%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- -------------------------------------
(1) Includes loans held for sale.
(2) Includes second mortgage loans.
Camco's loan portfolio was approximately $871.4 million at December 31,
2001, and represented 79.0% of total assets.
-3-
<PAGE>
Loan Maturity Schedule. The following table sets forth certain
information as of December 31, 2001, regarding the dollar amount of loans
maturing in Camco's portfolio based on the contractual terms to maturity of the
loans. Demand loans, loans having no stated schedule of repayments and loans
having no stated maturity, are reported as due in one year or less.
<TABLE>
<CAPTION>
Due during the year
ending Due in
December 31, Due in years years after
2002 2003-2007 2007 Total
---------------- ------------- -------- -------
(In thousands)
<S> <C> <C> <C> <C>
Real estate loans (1):
One- to four- family $ 7,873 $42,163 $617,797 $667,833
Multifamily and nonresidential 6,003 15,642 97,603 119,248
Consumer and other loans 13,796 31,882 23,438 69,116
------ ------ ------- -------
Total $27,672 $89,687 $738,838 $856,197
====== ====== ======= =======
</TABLE>
- --------------------------
(1) Excludes loans held for sale of $21.4 million and does not consider the
effects of unamortized yield adjustments of $1.9 million and the allowance
for loan losses of $4.3 million.
The following table sets forth at December 31, 2001, the dollar amount
of all loans due after one year from December 31, 2001, which have predetermined
interest rates and have floating or adjustable interest rates:
Due after
December 31, 2002
(In thousands)
Fixed rate of interest $319,666
Adjustable rate of interest 508,859
-------
Total $828,525
=======
Generally, loans originated by Advantage are on a fully amortized
basis. Advantage has no rollover provisions in its loan documents and
anticipates that loans will be paid in full by the maturity date.
Residential Loans. The primary lending activity of Advantage is the
origination of fixed-rate and adjustable-rate conventional loans for the
acquisition, refinancing or construction of single-family residences. At
December 31, 2001, 74.8% of the total outstanding loans consisted of loans
secured by mortgages on one- to four-family residential properties. Advantage
also originates loans on multifamily housing (over four units) and condominiums.
Each of such loans is secured by a mortgage on the underlying real estate and
improvements thereon.
Federal regulations and Ohio law limit the amount which Advantage may
lend in relationship to the appraised value of the underlying real estate at the
time of loan origination (the "Loan-to-Value Ratio" or "LTV"). In accordance
with such regulations and law, Advantage makes loans on single-family residences
up to 100% of the value of the real estate and improvements. Advantage generally
requires the borrower on each loan which has an LTV in excess of 80% to obtain
private mortgage insurance, or a guarantee by a federal agency.
-4-
<PAGE>
The interest rate adjustment periods on adjustable-rate mortgage loans
("ARMs") offered by Advantage are generally one, three, five or seven years. The
interest rates initially charged on ARMs and the new rates at each adjustment
date are determined by adding a stated margin to a designated interest rate
index. For the past several years, Advantage has used the one-year, three-year,
five-year and seven-year United States Treasury bill rates, adjusted to a
constant maturity, as the index for their one-year, three-year, five-year and
seven-year adjustable-rate loans, respectively. The initial interest rate for a
three-year, a five-year and a seven-year ARM is set slightly higher than for the
one-year ARM to compensate for the reduced interest rate sensitivity. The
maximum adjustment at each adjustment date for ARMs is usually 2%, with a
maximum adjustment of 6% over the term of the loan.
From time to time, Advantage originates ARMs which have an initial
interest rate that is lower than the sum of the specified index plus the margin.
Such loans are subject to increased risk of delinquency or default due to
increasing monthly payments as the interest rates on such loans increase to the
fully indexed level. Advantage attempts to reduce the risk by underwriting such
loans at the fully indexed rate. None of Advantage's ARMs have negative
amortization features.
Residential mortgage loans offered by Advantage are usually for terms
of 10 to 30 years, which could have an adverse effect upon earnings if the loans
do not reprice as quickly as the cost of funds. To minimize such effect,
Advantage emphasizes the origination of ARMs and sells fixed-rate loans when
conditions favor such a sale. Furthermore, experience reveals that, as a result
of prepayments in connection with refinancings and sales of the underlying
properties, residential loans generally remain outstanding for periods which are
substantially shorter than the maturity of such loans.
Of the total mortgage loans originated by Advantage during the year
ended December 31, 2001, 26.3% were ARMs and 73.7% were fixed-rate loans.
Adjustable-rate loans comprised 58.6% of Camco's total outstanding loans at
December 31, 2001.
Construction Loans. Advantage offers residential construction loans
both to owner-occupants and to builders for homes being built under contract
with owner-occupants. Advantage also makes loans to persons constructing
projects for investment purposes. At December 31, 2001, a total of $42.7
million, or approximately 4.9% of Advantage's total loans, consisted of
construction loans, primarily for one- to four-family properties.
Construction loans to owner-occupants are typically adjustable-rate
long-term loans on which the borrower pays only interest on the disbursed
portion during the construction period. Some construction loans to builders,
however, have terms of up to 24 months at fixed or adjustable rates of interest.
Construction loans for investment properties involve greater
underwriting and default risks to Advantage than do loans secured by mortgages
on existing properties or construction loans for single-family residences. Loan
funds are advanced upon the security of the project under construction, which is
more difficult to value in the case of investment properties before the
completion of construction. Moreover, because of the uncertainties inherent in
estimating construction costs, it is relatively difficult to evaluate precisely
the total loan funds required to complete a project and the related
Loan-to-Value Ratios. In the event a default on a construction loan occurs and
foreclosure follows, Camco could be adversely affected in that it would have to
take control of the project and attempt either to arrange for completion of
construction or dispose of the unfinished project. At December 31, 2001,
Advantage had 11 construction loans in the amount of $8.8 million on investment
properties.
Nonresidential Real Estate Loans. Advantage originates loans secured by
mortgages on nonresidential real estate, including retail, office and other
types of business facilities and apartment projects containing 36 or more units.
Nonresidential real estate loans are generally made on an adjustable-rate basis
for terms of up to 20 years. Nonresidential real estate loans originated by
Advantage generally have an LTV of 80% or less. The largest nonresidential real
estate loan outstanding at December 31, 2001, was a $4.5 million loan secured by
an apartment complex, commercial properties, and leasing business residuals.
Nonresidential real estate loans comprised 8.1% of total loans at December 31,
2001.
-5-
<PAGE>
Nonresidential real estate lending is generally considered to involve a
higher degree of risk than residential lending due to the relatively larger loan
amounts and the effects of general economic conditions on the successful
operation of income-producing properties. Advantage has endeavored to reduce
this risk by carefully evaluating the credit history and past performance of the
borrower, the location of the real estate, the quality of the management
constructing or operating the property, the debt service ratio, the quality and
characteristics of the income stream generated by the property and appraisals
supporting the property's valuation.
Federal law limits an association's investment in nonresidential real
estate loans to 400% of the association's capital. At December 31, 2001,
Advantage's investment in nonresidential real estate loans was approximately
80.5% of its total capital.
Consumer Loans. Advantage makes various types of consumer loans,
including loans made to depositors on the security of their savings deposits,
automobile loans, education loans, home improvement loans, home equity line of
credit loans and unsecured personal loans. Home equity loans and unsecured loans
are generally made at a variable rate of interest for terms of up to 10 years.
Most other consumer loans are generally made at fixed rates of interest for
terms of up to 10 years. The risk of default on consumer loans during an
economic recession is greater than for residential mortgage loans. At December
31, 2001, education, consumer and other loans constituted 7.9% of Camco's total
loans.
Loan Solicitation and Processing. Loan originations are developed from
a number of sources, including: solicitations by Camco's lending staff;
referrals from real estate brokers and builders; continuing business with
depositors, other borrowers and real estate developers; and walk-in customers.
Camco does not use loan brokers. Camco's management stresses the importance of
individualized attention to the financial needs of its customers.
The loan origination process is decentralized, with each of Advantage's
divisions having autonomy in loan processing and approval for its respective
market area. Mortgage loan applications from potential borrowers are taken by
one of the loan officers of the Bank originating the loan, after which they are
forwarded to the Bank's loan department for processing. On new loans, the loan
department typically obtains a credit report, verification of employment and
other documentation concerning the borrower and orders an appraisal of the fair
market value of the real estate which will secure the loan. The real estate is
thereafter physically inspected and appraised by a staff appraiser or by a
designated fee appraiser approved by the Board of Directors of Advantage. Upon
the completion of the appraisal and the receipt of all necessary information
regarding the borrower, the mortgage loan application is submitted to the Bank's
underwriter for approval. If the loan is approved, an attorney's opinion of
title or title insurance is obtained on the real estate which will secure the
loan. Borrowers are required to carry satisfactory fire and casualty insurance
and flood insurance, if applicable, and to name Advantage as an insured
mortgagee.
The procedure for approval of construction loans is the same as for
residential mortgage loans, except that the appraiser evaluates the building
plans, construction specifications and construction cost estimates. Advantage
also evaluates the feasibility of the proposed construction project and the
experience and record of the builder.
Consumer loans are underwritten on the basis of the borrower's credit
history and an analysis of the borrower's income and expenses, ability to repay
the loan and the value of the collateral, if any.
Loan Originations, Purchases and Sales. Advantage has been actively
originating new 30-year, 15-year and 10-year fixed-rate real estate loans as
well as adjustable-rate real estate loans and consumer loans. Generally all
residential fixed-rate loans made by Advantage are originated on documentation
-6-
<PAGE>
which will permit a possible sale of such loans to the Federal Home Loan
Mortgage Corporation ("FHLMC") or other secondary mortgage market participants.
When a mortgage loan is sold to the FHLMC, Advantage generally services the loan
by collecting monthly payments of principal and interest and forwarding such
payments to the FHLMC, net of a servicing fee. During the year ended December
31, 2001, Advantage also sold loans with servicing released. Fixed-rate loans
not sold to the FHLMC and substantially all of the ARMs originated by Advantage
are held in Advantage's loan portfolios. During the year ended December 31,
2001, Camco sold approximately $295.6 million in loans to the FHLMC and others.
Gross income from loans serviced by Camco for others was $1.4 million, which was
offset by the amortization and impairment of mortgage servicing rights of $2.8
million for the year ended December 31, 2001.
From time to time, Advantage sells participation interests in mortgage
loans originated by them and purchases whole loans or participation interests in
loans originated by other lenders. Advantage held whole loans and participations
in loans originated by other lenders of approximately $21.7 million at December
31, 2001. Loans which Advantage purchases must meet or exceed the underwriting
standards for loans originated by Advantage.
In recent years, Camco has purchased mortgage-backed securities insured
or guaranteed by U.S. Government agencies in order to improve Camco's asset
yield by profitably investing excess funds. Camco intends to continue to
purchase such mortgage-backed securities when conditions favor such an
investment. See "Investment Activities."
The following table presents Camco's mortgage loan origination,
purchase, sale and principal repayment activity for the periods indicated:
<TABLE>
<CAPTION>
Year ended December 31,
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Loans originated:
Construction $ 35,330 $ 71,929 $ 66,437 $ 49,152 $ 34,293
Permanent 320,973 202,004 324,648 328,046 168,519
Consumer and other 83,126 84,526 34,158 67,243 54,351
------- ------- ------- ------- -------
Total loans originated 439,429 358,459 425,243 444,441 257,163
------- ------- ------- ------- -------
Loan purchased (1) 17,755 8,639 31,430 18,982 12,514
Reductions:
Principal repayments (1) 276,060 178,663 176,804 194,594 134,794
Loans sold (1) 295,637 124,496 96,892 205,899 77,665
Transfers from loans to real estate owned 3,208 1,432 1,220 477 978
------- ------- ------- ------- -------
Total reductions 574,905 304,591 274,916 400,970 213,437
Increase (decrease) in other items, net (2) (314) (2,552) (277) (3,444) 137
Increase due to mergers (3) 81,426 147,196 - - -
------- ------- ------- ------- -------
Net increase (decrease) $(36,609) $207,151 $181,480 $ 59,009 $ 56,377
======= ======= ======= ======= =======
</TABLE>
- -----------------------
(1) Includes mortgage-backed securities.
(2) Other items primarily consist of amortization of deferred loan origination
fees, the provision for losses on loans and unrealized gains on
mortgage-backed securities designated as available for sale.
(3) The 2001 increase resulted from the merger with Columbia Financial and the
2000 increase resulted from the merger with WFC.
-7-
<PAGE>
Lending Limit. Federal regulations and Ohio law generally impose a
lending limit on the aggregate amount that a savings association can lend to one
borrower to an amount equal to 15% of the association's total capital for
risk-based capital purposes plus any loan reserves not already included in total
capital (the "Lending Limit Capital"). A savings association may loan to one
borrower an additional amount not to exceed 10% of the association's Lending
Limit Capital, if the additional amount is fully secured by certain forms of
"readily marketable collateral." Real estate is not considered "readily
marketable collateral." In applying this limit, the regulations require that
loans to certain related or affiliated borrowers be aggregated. An exception to
this limit permits loans of any type to one borrower of up to $500,000.
The largest amount which Advantage could have loaned to one borrower at
December 31, 2001, was approximately $13.1 million. The largest amount Advantage
had outstanding to one borrower and related persons or entities at December 31,
2001, was $6.8 million, which consisted of five loans secured by personal
residences, commercial properties, leasing business residuals, and an apartment
complex, a warehouse and a golf course. These loans are not in violation of the
applicable federal regulation.
Loan Origination and Other Fees. In addition to interest earned on
loans, Advantage may receive loan origination fees or "points" of up to 2.0% of
the loan amount, depending on the type of loan, plus reimbursement of certain
other expenses. Loan origination fees and other fees are a volatile source of
income, varying with the volume of lending and economic conditions. All
nonrefundable loan origination fees and certain direct loan origination costs
are deferred and recognized as an adjustment to yield over the life of the
related loan in accordance with Statement of Financial Accounting Standards
("SFAS") No. 91.
Delinquent Loans, Nonperforming Assets and Classified Assets. Advantage
attempts to minimize loan delinquencies through the assessment of late charges
and adherence to established collection procedures. Generally, after a loan
payment is 15 days delinquent, a late charge of 5% of the amount of the payment
is assessed and a collection officer contacts the borrower by mail or phone to
request payment. In certain limited instances, Advantage may modify the loan or
grant a limited moratorium on loan payments to enable the borrower to reorganize
his or her financial affairs. Advantage generally initiates foreclosure
proceedings, in accordance with applicable laws, when it appears that a
modification or moratorium would not be productive.
Real estate which has been or will be acquired by Advantage as a result
of foreclosure or by deed in lieu of foreclosure is classified as "real estate
owned" until it is sold. "Real estate owned" is recorded at the lower of the
book value of the loan or the fair value of the property less estimated selling
expenses at the date of acquisition. Periodically, "real estate owned" is
reviewed to ensure that fair value is not less than carrying value, and any
write-down resulting therefrom is charged to earnings as a provision for losses
on real estate acquired through foreclosure. All costs incurred from the date of
acquisition are expensed in the period paid.
The following table reflects the amount of loans in a delinquent status
as of the dates indicated:
<TABLE>
<CAPTION>
At December 31,
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans delinquent for:
30 to 89 days $14,238 $10,557 $13,792 $10,028 $6,723
90 or more days 7,885 4,726 3,975 4,296 1,939
------ ------ ------ ------ -----
Total delinquent loans $22,123 $15,283 $17,767 $14,324 $8,662
====== ====== ====== ====== =====
Ratio of total delinquent loans to
total net loans (1) 2.54% 1.64% 2.45% 2.61% 1.80%
==== ==== ==== ==== ====
</TABLE>
(1) Total net loans includes loans held for sale.
-8-
<PAGE>
Nonaccrual status denotes loans for which, in the opinion of
management, the collection of additional interest is unlikely, or loans that
meet nonaccrual criteria as established by regulatory authorities. Payments
received on a nonaccrual loan are either applied to the outstanding principal
balance or recorded as interest income, depending on management's assessment of
the collectibility of the loan. The following table sets forth information with
respect to Camco's nonaccruing and delinquent loans for the periods indicated.
<TABLE>
<CAPTION>
At December 31,
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on nonaccrual basis:
Real estate:
Residential $3,677 $2,068 $1,980 $1,328 $ 830
Nonresidential 367 197 429 233 27
Consumer and other 393 157 141 64 79
----- ----- ----- ----- -----
Total nonaccrual loans 4,437 2,422 2,550 1,625 936
----- ----- ----- ----- -----
Accruing loans delinquent 90 days or more:
Real estate:
Residential 2,564 1,836 1,140 2,030 710
Nonresidential 206 -- -- -- --
Consumer and other 678 468 285 641 293
----- ----- ----- ----- -----
Total loans 90 days past due 3,448 2,304 1,425 2,671 1,003
----- ----- ----- ----- -----
Total nonperforming loans $7,885 $4,726 $3,975 $4,296 $1,939
===== ===== ===== ===== =====
Allowance for loan losses $4,256 $2,906 $1,863 $1,783 $1,596
===== ===== ===== ===== =====
Nonperforming loans as a percent of total net
loans .90% .51% .55% .78% .40%
=== === === === ===
Allowance for loan losses as a percent of
nonperforming loans 54.0% 61.5% 46.9% 41.5% 82.3%
==== ==== ==== ==== ====
</TABLE>
The amount of interest income that would have been recorded had
nonaccrual loans performed in accordance with contractual terms totaled
approximately $278,000 for the year ended December 31, 2001. Interest collected
on such loans and included in net earnings was $54,000.
At December 31, 2001, there were no loans which were not classified as
nonaccrual, 90 days past due or restructured which management considered
classifying in the near future due to concerns as to the ability of the
borrowers to comply with repayment terms.
Federal regulations require the Bank to classify its assets on a
regular basis. Problem assets are to be classified as either (i) "substandard,"
(ii) "doubtful" or (iii) "loss." Substandard assets have one or more defined
weaknesses and are characterized by the distinct possibility that the insured
institution will sustain some loss if the deficiencies are not corrected.
Doubtful assets have the same weaknesses as substandard assets with the
additional characteristic that the weaknesses make collection or liquidation in
full highly questionable and improbable on the basis of existing facts,
conditions and value. Assets classified as "loss" are considered uncollectible
and of such little value that their treatment as assets without the
establishment of a specific reserve is unwarranted. Federal regulations provide
for the reclassification of real estate assets by federal examiners.
-9-
<PAGE>
At December 31, 2001, the aggregate amounts of Camco's
classified assets were as follows:
At December 31, 2001
(In thousands)
Classified assets:
Substandard $7,775
Doubtful 27
Loss 83
-----
Total classified assets $7,885
=====
The regulations also include a "special mention" category, consisting
of assets which do not currently expose an insured institution to a sufficient
degree of risk to warrant classification, but which possess credit deficiencies
or potential weaknesses deserving management's close attention. Camco had assets
in the amount of $4.4 million designated as "special mention" at December 31,
2001.
Allowance for Loan Losses. The allowance for loan losses is maintained
at 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. The following table sets forth
an analysis of Camco's allowance for loan losses:
<TABLE>
<CAPTION>
Year ended December 31,
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year $2,906 $1,863 $1,783 $1,596 $1,373
Charge-offs:
1-4 family residential real estate 66 9 82 9 30
Multifamily and nonresidential real estate 12 41 12 - 124
Consumer and other 657 122 79 61 22
----- ----- ----- ----- -----
Total charge-offs 735 172 173 70 176
----- ----- ----- ----- -----
Recoveries:
1-4 family residential real estate 3 - - - 2
Multifamily and nonresidential real estate - - 2 - 4
Consumer and other 23 6 4 7 8
----- ----- ----- ----- -----
Total recoveries 26 6 6 7 14
----- ----- ----- ----- -----
Net charge-offs (709) (166) (167) (63) (162)
Provision for losses on loans 759 568 247 250 385
Increase attributable to mergers (1) 1,300 641 - - -
----- ----- ----- ----- -----
Balance at end of year $4,256 $2,906 $1,863 $1,783 $1,596
===== ===== ===== ===== =====
Net charge-offs to average loans .08% .02% .03% .01% .04%
=== === === === ===
</TABLE>
(1) The 2001 increase resulted from the merger with Columbia Financial and the
2000 increase resulted from the merger with WFC.
-10-
<PAGE>
The following table sets forth the allocation of Camco's allowance for
loan losses by type of loan at the dates indicated:
<TABLE>
<CAPTION>
At December 31,
2001 2000 1999 1998 1997
---------------- ---------------- ---------------- ---------------- ----------------
Percent Percent Percent Percent Percent
of loans of loans of loans of loans of loans
in each in each in each in each in each
category category category category category
to total to total to total to total to total
Amount loans Amount loans Amount loans Amount loans Amount loans
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at year end
applicable to:
Mortgage loans $3,418 92.1% $2,440 92.1% $1,350 92.9% $1,340 94.1% $1,030 92.8%
Consumer and other 838 7.9 466 7.9 513 7.1 443 5.9 566 7.2
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
loans
Total $4,256 100.0% $2,906 100.0% $1,863 100.0% $1,783 100.0% $1,596 100.0%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Investment Activities
Federal regulations require that Advantage maintain a minimum amount of
liquid assets, which may be invested in United States Treasury obligations,
securities of various agencies of the federal government, certificates of
deposit at insured banks, bankers' acceptances and federal funds sold. Advantage
is also permitted to make limited investments in commercial paper, corporate
debt securities and certain mutual funds, as well as other investments permitted
by federal laws and regulations. It has generally been Camco's policy to
maintain liquid assets at Advantage in excess of regulatory requirements in
order to shorten the maturities of the investment portfolios and improve the
matching of short-term investments and interest rate sensitive savings deposit
liabilities.
The following table sets forth the composition of Camco's investment
securities portfolio, except its stock in the FHLB of Cincinnati, at the dates
indicated:
<TABLE>
<CAPTION>
At December 31,
2001 2000 1999
---------------------------------- -------------------------------- --------------------------------
Amortized % of Fair % of Amortized % of Fair % of Amortized % of Fair % of
cost total value total cost total value total cost total value total
------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Held to maturity: (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
agency obligations $18,682 33.0% $18,891 33.1% $16,482 51.4% $16,427 51.3% $16,584 55.8% $16,166 55.7%
Municipal bonds 190 .3 192 .3 190 .6 190 .6 280 .9 286 1.0
Mortgage-backed 30,765 54.2 30,744 53.9 5,273 16.4 5,247 16.4 5,944 20.0 5,818 20.0
------ ---- ------ ---- ------ ----- ------ ------ ------ ---- ------ ----
securities
Total 49,637 87.5 49,827 87.3 21,945 68.4 21,864 68.3 22,808 76.7 22,270 76.7
Available for sale:
Corporate equity 245 .4 305 .5 245 .7 309 1.0 228 .8 273 1.0
securities
Mortgage-backed
securities 6,872 12.1 6,975 12.2 9,908 30.9 9,850 30.7 6,704 22.5 6,475 22.3
------ ---- ------ ---- ------ ----- ------ ------ ------ ---- ------ ----
Total 7,117 12.5 7,280 12.7 10,153 31.6 10,159 31.7 6,932 23.3 6,748 23.3
------ ---- ------ ---- ------ ----- ------ ------ ------ ---- ------ ----
Total investments and
mortgage-backed
securities $56,754 100.0%$57,107 100.0% $32,098 100.0% $32,023 100.00% $29,740 100.0% $29,018 100.0%
====== ===== ====== ===== ====== ===== ====== ====== ====== ===== ====== =====
</TABLE>
-11-
<PAGE>
The following table presents the contractual maturities or terms to
repricing of Camco's investment securities, except its stock in the FHLB of
Cincinnati and corporate equity securities, and the weighted-average yields at
December 31, 2001:
<TABLE>
<CAPTION>
At December 31, 2001
--------------------------------------------------------------------------------------------------------
After one After five
One year or less through five years through ten years After ten years Total
------------------ ------------------ ------------------ ----------------- -------------------------
Weighted-
Amortized Average Amortized Average Amortized Average Amortized Average Amortized Fair average
cost yield cost yield cost yield cost yield cost value yield
------ ------- ------ ------- ------ ------- --------- ------ ------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
agency obligations $1,000 5.98% $16,867 5.26% $ - - % $ 815 4.75% $18,682 $18,891 5.28%
Municipal bonds 100 4.10 - - - - 90 6.66 190 192 5.31
Mortgage-backed
securities 115 7.54 8,592 5.06 7,979 5.97 20,951 6.09 37,637 37,719 5.83
----- ---- ------ ---- ----- ---- ------ ---- ------ ------ ----
Total $1,215 5.97% $25,459 5.19% $7,979 5.97% $21,856 6.04% $56,509 $56,802 5.65%
===== ==== ====== ==== ===== ==== ====== ==== ====== ====== =====
</TABLE>
Deposits and Borrowings
General. Deposits have traditionally been the primary source of Camco's
funds for use in lending and other investment activities. In addition to
deposits, Camco derives funds from interest payments and principal repayments on
loans, advances from the FHLB of Cincinnati and income on earning assets. Loan
payments are a relatively stable source of funds, while deposit inflows and
outflows fluctuate more in response to general interest rate and money market
conditions. As part of Camco's asset and liability management strategy, FHLB
advances and other borrowings are used to fund loan originations and for general
business purposes. FHLB advances are also used on a short-term basis to
compensate for reductions in the availability of funds from other sources.
Deposits. Deposits are attracted principally from within Camco's
primary market area through the offering of a broad selection of deposit
instruments, including interest and non-interest bearing checking accounts,
money market deposit accounts, regular passbook savings accounts, term
certificate accounts and retirement savings plans. Interest rates paid, maturity
terms, service fees and withdrawal penalties for the various types of accounts
are established periodically by management of Advantage based on its liquidity
requirements, growth goals and interest rates paid by competitors. Interest
rates paid by Camco on deposits are not limited by federal or state law or
regulation. Camco generally does not obtain funds through brokers or offer
premiums to attract deposits. Camco does not have a significant amount of
savings accounts from outside its primary market area.
-12-
<PAGE>
The following table sets forth the dollar amount of deposits in the
various types of savings programs offered by Advantage at the dates indicated:
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------------------------
2001 2000 1999
Weighted- ------------------- ------------------- -------------------
average Percent Percent Percent
rate at of total of total of total
12/31/01 Amount deposits Amount deposits Amount deposits
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Withdrawable accounts:
Interest and non-interest bearing
checking accounts 0.99% $111,649 15.3% $ 90,830 14.4% $ 71,582 15.5%
Money market demand accounts 3.59 64,539 8.8 45,047 7.1 26,898 5.8
Passbook and statement savings
accounts 1.70 85,443 11.7 69,706 11.0 71,128 15.4
---- ------- ----- ------- ----- ------- -----
Total withdrawable accounts 1.86 261,631 35.8 205,583 32.5 169,608 36.7
Certificates accounts:
Term:
Seven days to one year 3.49 51,472 7.0 64,693 10.2 41,093 8.9
One to two years 5.29 136,859 18.8 139,103 22.0 108,118 23.4
Two to eight years 5.95 163,226 22.4 117,146 18.5 83,299 18.1
Negotiated rate certificates 5.13 54,998 7.5 56,552 9.0 28,618 6.2
Individual retirement accounts 5.40 61,889 8.5 49,211 7.8 31,051 6.7
---- ------- ----- ------- ----- ------- -----
Total certificate accounts 5.32 468,444 64.2 426,705 67.5 292,179 63.3
---- ------- ----- ------- ----- ------- -----
Total deposits 4.08% $730,075 100.0% $632,288 100.0% $461,787 100.0%
==== ======= ===== ======= ===== ======= =====
</TABLE>
The following table presents the amount and contractual maturities of
Camco's time deposits at December 31, 2001:
<TABLE>
<CAPTION>
Amount Due
-------------------------------------------------------------------------
Up to Over
one year 1-3 years 3-5 years 5 years Total
-------- --------- --------- ------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Amount maturing $312,484 $122,891 $24,670 $8,399 $468,444
======= ======= ====== ===== =======
Average rate 5.20% 5.47% 5.56% 6.91% 5.32%
==== ==== ==== ==== ====
</TABLE>
The following table sets forth the amount and maturities of Camco's
time deposits in excess of $100,000 at December 31, 2001:
Maturity At December 31, 2001
-------- --------------------
(In thousands)
Three months or less $ 39,023
Over three to six months 26,700
Over six to twelve months 23,649
Over twelve months 33,885
-------
Total $123,257
=======
Borrowings. The twelve regional FHLBs function as central reserve
banks, providing credit for their member institutions. As a member in good
standing of the FHLB of Cincinnati, Advantage is authorized to apply for
advances from the FHLB of Cincinnati, provided certain standards of
creditworthiness have been met. Advances are made pursuant to several different
-13-
<PAGE>
programs, each having its own interest rate and range of maturities. Depending
on the program, limitations on the amount of advances are based either on a
fixed percentage of an institution's regulatory capital or on the FHLB's
assessment of the institution's creditworthiness. Under current regulations, a
member institution must meet certain qualifications to be eligible for FHLB
advances. The extent to which an association is eligible for such advances will
depend upon whether it meets the Qualified Thrift Lender ("QTL") test. If an
institution meets the QTL test, it will be eligible for 100% of the advances it
would otherwise be eligible to receive. If an institution does not meet the QTL
test, it will be eligible for such advances only to the extent it holds QTL test
assets. At December 31, 2001, Advantage met the QTL test.
The following table sets forth the maximum amount of Camco's FHLB
advances outstanding at any month end during the periods shown and the average
aggregate balances of FHLB advances for such periods:
<TABLE>
<CAPTION>
Year ended December 31,
2001 2000 1999
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Maximum amount outstanding $313,472 $357,411 $279,125
Average amount outstanding $280,747 $325,805 $200,285
Weighted-average interest cost of FHLB advances
based on month end balances 6.09% 6.37% 5.39%
</TABLE>
The following table sets forth certain information with respect to
Camco's FHLB advances at the dates indicated:
<TABLE>
<CAPTION>
At December 31,
2001 2000 1999
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Amount outstanding $258,850 $313,471 $279,125
Weighted-average interest rate 6.02% 6.20% 5.71%
</TABLE>
Competition
Advantage competes for deposits with other savings associations,
savings banks, commercial banks and credit unions and with the issuers of
commercial paper and other securities, such as shares in money market mutual
funds. The primary factors in competing for deposits are interest rates and
convenience of office location. In making loans, Advantage competes with other
savings banks, savings associations, commercial banks, consumer finance
companies, credit unions and other lenders. Advantage competes for loan
originations primarily through the interest rates and loan fees it charges and
through the efficiency and quality of the services it provides to borrowers.
Competition is affected by, among other things, the general availability of
lendable funds, general and local economic conditions, current interest rate
levels and other factors which are not readily predictable.
Service Corporation Activities
Federal regulations permit savings associations to invest an amount up
to 2% of their assets in the stock, paid-in surplus and unsecured obligations of
subsidiary service corporations engaged in certain activities. In addition,
-14-
<PAGE>
federal regulations generally authorize such institutions which meet the minimum
regulatory capital requirements to invest up to 50% of their regulatory capital
in conforming first mortgage loans made by service corporations.
At December 31, 2001, Advantage had a direct investment in the capital
stock of CMC in the amount of approximately $1.9 million. The principal business
of CMC is originating first mortgage loans on residential real estate located
primarily in Coshocton, Muskingum, Stark and Tuscarawas Counties, Ohio. Loans
originated by CMC are generally sold to Advantage. CMC originated $104.6 million
of mortgage loans in 2001, $57.9 million of which were sold to Advantage,
compared to $88.1 million which were sold in 2000.
Advantage had a direct investment in the capital stock of WestMar in
the amount of approximately $509,000 at December 31, 2001. The principal
business of WestMar is originating first mortgage loans on residential real
estate located in Wood County, West Virginia. WestMar originated $15.3 million
of mortgage loans in 2001, $13.0 million of which were sold to Advantage,
compared to $7.6 million of mortgage loans sold in 2000. Advantage is in the
process of converting the WestMar office into a limited purpose branch of
Advantage.
First S&L Corporation did not conduct any business during the year
ended December 31, 2001, and was capitalized on a nominal basis at December 31,
2001.
Employees
As of December 31, 2001, Camco had 235 full-time employees and 47
part-time employees. Camco believes that relations with its employees are good.
Camco offers health and disability benefits and a 401(k) salary savings plan.
None of the employees of Camco are represented by a collective bargaining unit.
REGULATION
General
As a savings and loan holding company within the meaning of the Home
Owners' Loan Act of 1933, as amended (the "HOLA"), Camco is subject to
regulation, examination and oversight by the OTS. Advantage is subject to
regulation by the Division and the FDIC. Camco and Advantage must file periodic
reports with these governmental agencies, as applicable, concerning their
activities and financial condition. Examinations are conducted periodically by
the applicable regulators to determine whether Camco and Advantage are in
compliance with various regulatory requirements and are operating in a safe and
sound manner. Advantage is a member of the FHLB of Cincinnati and is also
subject to certain regulations promulgated by the Board of Governors of the
Federal Reserve System ("FRB").
Ohio Regulation
As a savings bank incorporated under Ohio law, Advantage is subject to
regulation by the Division. Such regulation affects the internal organization of
Advantage, as well as its savings, mortgage lending and other investment
activities. Ohio law requires that Advantage maintain at least 60% of its assets
in housing-related and other specified investments. At December 31, 2001,
Advantage had at least 60% of its assets in such investments.
Periodic examinations by the Division are usually conducted on a joint
basis with the federal examiners. Ohio law requires that Advantage maintain
federal deposit insurance as a condition of doing business. The ability of Ohio
savings banks to engage in certain state-authorized investments is subject to
oversight and approval by the FDIC. See "Federal Deposit Insurance Corporation -
State Chartered Bank Activities."
-15-
<PAGE>
Any mergers involving, or acquisitions of control of, Ohio savings
banks must be approved by the Division. The Division may initiate certain
supervisory measures or formal enforcement actions against Ohio savings banks.
Ultimately, if the grounds provided by law exist, the Division may place an Ohio
savings bank in conservatorship or receivership.
In addition to being governed by the laws of Ohio specifically
governing savings banks, Advantage is also governed by Ohio corporate law, to
the extent such law does not conflict with the laws specifically governing
savings banks.
Federal Deposit Insurance Corporation
Supervision and Examination. The FDIC is responsible for the regulation
and supervision of all commercial banks and state savings banks that are not
members of the Federal Reserve System ("Non-member Banks"), including Advantage.
The FDIC is an independent federal agency that insures the deposits, up to
prescribed statutory limits, of federally insured banks and thrifts and
safeguards the safety and soundness of the banking and thrift industries. The
FDIC administers two separate insurance funds, the Bank Insurance Fund ("BIF")
for commercial banks and state savings banks and the SAIF for savings
associations. Advantage is a member of the SAIF and its deposit accounts are
insured by the FDIC, up to the prescribed limits.
The FDIC issues regulations governing the operations of Non-member
Banks, examines such institutions and may initiate enforcement actions against
such institutions and certain persons affiliated with them for violations of
laws and regulations or for engaging in unsafe or unsound practices. If the
grounds provided by law exist, the FDIC may appoint a conservator or a receiver
for a Non-member Bank.
Non-member Banks and savings associations are subject to regulatory
oversight under various consumer protection and fair lending laws. These laws
govern, among other things, truth-in-lending disclosure, equal credit
opportunity, fair credit reporting and community reinvestment. Failure to abide
by federal laws and regulations governing community reinvestment could limit the
ability of an institution to open a new branch or engage in a merger
transaction.
State Chartered Bank Activities. The ability of Advantage to engage in
any state-authorized activities or make any state-authorized investments, as
principal, is limited if such activity is conducted or investment is made in a
manner different than that permitted for, or subject to different terms and
conditions than those imposed on, national banks. Engaging as a principal in any
such activity or investment not permissible for a national bank is subject to
approval by the FDIC. Such approval will not be granted unless certain capital
requirements are met and there is not a significant risk to the FDIC insurance
fund. Most equity and real estate investments (excluding office space and other
real estate owned) authorized by state law are not permitted for national banks.
Certain exceptions are granted for activities deemed by the FRB to be closely
related to banking and for FDIC-approved subsidiary activities.
Liquidity. Advantage is not required to maintain a specific level of
liquidity; however, the FDIC expects it to maintain adequate liquidity to
protect safety and soundness.
Regulatory Capital Requirements. Advantage is required by applicable
law and regulations to meet certain minimum capital requirements. The capital
standards include a leverage limit, or core capital requirement, a tangible
capital requirement and a risk-based capital requirement.
The leverage capital requirement is a minimum level of Tier 1 capital
to average total consolidated assets of 3%, if Advantage has the highest
regulatory examination rating, well diversified risk and minimal anticipated
growth or expansion, and between 4% and 5% of average total consolidated assets
if it does not meet those criteria. "Tier 1" capital includes common
-16-
<PAGE>
stockholders equity, noncumulative perpetual preferred stock and minority
interest in the equity accounts of consolidated subsidiaries, less all
intangibles, other than includable purchased mortgage servicing rights and
credit card relationships.
Pursuant to the risk-based capital requirement, Advantage must maintain
total capital, which consists of core or Tier 1 capital and certain general
valuation reserves, of 8% of risk-weighted assets. For purposes of computing
risk-based capital, assets and certain off-balance sheet items are weighted at
percentage levels ranging from 0% to 100%, depending on their relative risk.
The following tables present certain information regarding compliance
by Advantage with applicable regulatory capital requirements at December 31,
2001:
<TABLE>
<CAPTION>
At December 31, 2001
--------------------------------------------------------------------------------------
To be "well-capitalized"
For capital under prompt corrective
Actual adequacy purposes action provisions
--------------------- --------------------- ------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total capital
(to risk-weighted assets) $88,017 12.5% =>$56,346 =>8.0% =>$70,433 =>10.0%
Tier I capital
(to risk-weighted assets) $83,761 11.9% =>$28,173 =>4.0% =>$42,260 => 6.0%
Tier I leverage $83,761 7.6% =>$43,868 =>4.0% =>$54,835 => 5.0%
</TABLE>
The FDIC has adopted regulations governing prompt corrective action to
resolve the problems of capital deficient and otherwise troubled savings
associations and Non-member Banks. At each successively lower defined capital
category, an institution is subject to more restrictive and numerous mandatory
or discretionary regulatory actions or limits, and the applicable agency has
less flexibility in determining how to resolve the problems of the institution.
In addition, the agency generally can downgrade an institution's capital
category, notwithstanding its capital level, if, after notice and opportunity
for hearing, the institution is deemed to be engaging in an unsafe or unsound
practice, because it has not corrected deficiencies that resulted in it
receiving a less than satisfactory examination rating on matters other than
capital or it is deemed to be in an unsafe or unsound condition. An
undercapitalized institution must submit a capital restoration plan to the
applicable agency within 45 days after it becomes undercapitalized. Such
institution will be subject to increased monitoring and asset growth
restrictions and will be required to obtain prior approval for acquisitions,
branching and engaging in new lines of business. Furthermore, critically
undercapitalized institutions must be placed in conservatorship or receivership
within 90 days of reaching that capitalization level, except under limited
circumstances. Advantage's capital level at December 31, 2001, met the standards
for well-capitalized institutions.
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. In addition, each company controlling an undercapitalized
institution must guarantee that the institution will comply with its capital
restoration plan until the institution has been adequately capitalized on
average during each of the four preceding calendar quarters and must provide
adequate assurances of performance. The aggregate liability pursuant to such
guarantee is limited to the lesser of (a) an amount equal to 5% of the
institution's total assets at the time it became undercapitalized or (b) the
amount necessary to bring the institution into compliance with all capital
standards applicable to such institution at the time the institution fails to
comply with its capital restoration plan.
-17-
<PAGE>
Transactions with Affiliates and Insiders
Loans to executive officers, directors and principal shareholders and
their related interests must conform to the lending limit on loans to one
borrower, and the total of such loans to executive officers, directors,
principal shareholders and their related interests cannot exceed the
association's Lending Limit Capital (or 200% of Lending Limit Capital for
qualifying institutions with less than $100 million in assets). Most loans to
directors, executive officers and principal shareholders must be approved in
advance by a majority of the "disinterested" members of the board of directors
of the association with any "interested" director not participating. All loans
to directors, executive officers and principal shareholders must be made on
terms substantially the same as offered in comparable transactions with the
general public or as offered to all employees in a company-wide benefit program,
and loans to executive officers are subject to additional limitations. Advantage
was in compliance with such restrictions at December 31, 2001.
All transactions between savings associations and their affiliates must
comply with Sections 23A and 23B of the Federal Reserve Act (the "FRA"). An
affiliate is any company or entity which controls, is controlled by or is under
common control with the financial institution. In a holding company context, the
parent holding company of a savings association and any companies that are
controlled by such parent holding company are affiliates of the institution.
Generally, Sections 23A and 23B of the FRA (i) limit the extent to which a
financial institution or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such institution's capital
stock and surplus for any one affiliate and 20% of such capital stock and
surplus for the aggregate of such transactions with all affiliates, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or the subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and similar types of transactions.
Exemptions from Sections 23A or 23B of the FRA may be granted only by the FRB.
Advantage was in compliance with these requirements at December 31, 2001.
Change in Control
Federal Law. The Federal Deposit Insurance Act (the "FDIA") provides
that no person, acting directly or indirectly or in concert with one or more
persons, shall acquire control of any insured depository institution or holding
company, unless 60-days prior written notice has been given to the primary
federal regulator for that institution and such regulator has not issued a
notice disapproving the proposed acquisition. Control, for purposes of the FDIA,
means the power, directly or indirectly, alone or acting in concert, to direct
the management or policies of an insured institution or to vote 25% or more of
any class of securities of such institution. Control exists in situations in
which the acquiring party has direct or indirect voting control of at least 25%
of the institution's voting shares, controls in any manner the election of a
majority of the directors of such institution or is determined to exercise a
controlling influence over the management or policies of such institution. In
addition, control is presumed to exist, under certain circumstances where the
acquiring party (which includes a group "acting in concert") has voting control
of at least 10% of the institution's voting stock. These restrictions do not
apply to holding company acquisitions. See "Holding Company Regulation".
Ohio Law. A statutory limitation on the acquisition of control of an
Ohio savings bank requires the written approval of the Division prior to the
acquisition by any person or entity of a controlling interest in an Ohio
association. Control exists, for purposes of Ohio law, when any person or entity
which, either directly or indirectly, or acting in concert with one or more
other persons or entities, owns, controls, holds with power to vote, or holds
proxies representing, 15% or more of the voting shares or rights of an
association, or controls in any manner the election or appointment of a majority
of the directors. A director will not be deemed to be in control by virtue of an
annual solicitation of proxies voted as directed by a majority of the board of
directors. Ohio law also requires that certain acquisitions of voting securities
that would result in the acquiring shareholder owning 20%, 33-1/3% or 50% of the
outstanding voting securities of Camco must be approved in advance by the
holders of at least a majority of the outstanding voting shares represented at a
meeting at which a quorum is present and a majority of the portion of the
outstanding voting shares represented at such a meeting, excluding the voting
-18-
<PAGE>
shares by the acquiring shareholder. This statute was intended, in part, to
protect shareholders of Ohio corporations from coercive tender offers. Under
certain circumstances, interstate mergers and acquisitions involving savings
banks incorporated under Ohio law are permitted by Ohio law. A financial
institution or financial institution holding company with its principal place of
business in another state may acquire a savings and loan association or savings
and loan holding company incorporated under Ohio law if, in the discretion of
the Division, the laws of such other state give an Ohio institution or an Ohio
holding company reciprocal rights.
Holding Company Regulation
As a savings and loan holding company within the meaning of the HOLA,
Camco has registered with the OTS and is subject to OTS regulations,
examination, supervision and reporting requirements.
The HOLA generally prohibits a savings and loan holding company from
controlling any other savings association or savings and loan holding company,
without prior approval of the OTS, or from acquiring or retaining more than 5%
of the voting shares of a savings association or holding company thereof, which
is not a subsidiary. Under certain circumstances, a savings and loan holding
company is permitted to acquire, with the approval of the OTS, up to 15% of the
previously unissued voting shares of an undercapitalized savings association for
cash without such savings association being deemed to be controlled by Camco.
Except with the prior approval of the OTS, no director or officer of a savings
and loan holding company or person owning or controlling by proxy or otherwise
more than 25% of such holding company's stock may also acquire control of any
savings institution, other than a subsidiary institution, or any other savings
and loan holding company.
As a unitary savings and loan holding company in existence on May 4,
1999, Camco generally has no restrictions on its activities. If the OTS
determines that there is reasonable cause to believe that the continuation by a
savings and loan holding company of an activity constitutes a serious risk to
the financial safety, soundness or stability of its subsidiary savings
association, however, the OTS may impose such restrictions as deemed necessary
to address such risk, including limiting (i) payment of dividends by the savings
association, (ii) transactions between the savings association and its
affiliates, and (iii) any activities of the savings association that might
create a serious risk that the liabilities of Camco and its affiliates may be
imposed on the savings association. Notwithstanding the foregoing rules as to
permissible business activities of a unitary savings and loan holding company,
if the savings association subsidiary of a holding company is not a qualified
thrift lender ("QTL"), then such unitary savings and loan holding company would
become subject to the activities restrictions applicable to multiple holding
companies.
In order to be a QTL, a savings association must meet one of two tests.
The first test requires a savings association to maintain a specified level of
investments in assets that are designated as qualifying thrift investments
("QTIs"). Generally, QTIs are assets related to domestic residential real estate
and manufactured housing, although they also include credit card, student and
small business loans and stock issued by any FHLB, the FHLMC or the FNMA. Under
the QTL test, 65% of an institution's "portfolio assets" (total assets less
goodwill and other intangibles, property used to conduct business and 20% of
liquid assets) must consist of QTI on a monthly average basis in nine out of
every 12 months. The second test permits a savings association to qualify as a
QTL by meeting the definition of "domestic building and loan association" under
the Internal Revenue Code of 1986, as amended (the "Code"). In order for an
institution to meet the definition of a "domestic building and loan association"
under the Code, at least 60% of its assets must consist of specified types of
property, including cash, loans secured by residential real estate or deposits,
educational loans and certain governmental obligations. The OTS may grant
exceptions to the QTL tests under certain circumstances. At December 31, 2001,
Advantage met the QTL test.
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<PAGE>
Federal Reserve Requirements
FRB regulations currently require savings associations to maintain
reserves of 3% of net transaction accounts (primarily NOW accounts) up to $41.3
million (subject to an exemption of up to $5.7 million), and of 10% of net
transaction accounts in excess of $41.3 million. At December 31, 2001, Advantage
was in compliance with its reserve requirements.
Federal Home Loan Bank System
The FHLBs provide credit to their members in the form of advances. As a
member of the FHLB of Cincinnati, Advantage is required to maintain an
investment in the capital stock of the FHLB of Cincinnati in an amount equal to
the greater of 1.0% of the aggregate outstanding principal amount of its
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or 5% of its advances from the FHLB of Cincinnati.
Advantage is in compliance with this requirement with an investment in FHLB of
Cincinnati stock of $22.5 million at December 31, 2001.
Generally, the FHLB is not permitted to make new advances to a member
without positive tangible capital. Upon the origination or renewal of a loan or
advance, the FHLB of Cincinnati is required to obtain and to maintain a security
interest in collateral in one or more of the following categories: fully
disbursed, whole first mortgage loans on improved residential property or
securities representing a whole interest in such loans; securities issued,
insured or guaranteed by the United States Government or an agency thereof;
deposits in any FHLB; or other real estate related collateral (up to 30% of the
member's capital) acceptable to the applicable FHLB, if such collateral has a
readily ascertainable value and the FHLB can perfect its security interest in
the collateral.
Each FHLB is required to establish standards of community investment or
service that its members must maintain for continued access to long-term
advances from the FHLBs. The standards take into account a member's performance
under the Community Reinvestment Act and its record of lending to first-time
home buyers. All long-term advances by each FHLB must be made only to provide
funds for residential housing finance. The FHLBs have established the
"Affordable Housing Program" to subsidize the interest rate on advances to
member associations engaged in lending for long-term, low- and moderate-income,
owner-occupied and affordable rental housing at subsidized rates. The FHLB of
Cincinnati reviews and accepts proposals for subsidies under that program twice
a year. Advantage has participated in this program.
Federal Taxation
Camco and its subsidiaries are each subject to the federal tax laws and
regulations which apply to corporations generally. In addition to the regular
income tax, Camco and its subsidiaries may be subject to the alternative minimum
tax which is imposed at a minimum tax rate of 20% on "alternative minimum
taxable income" (which is the sum of a corporation's regular taxable income,
with certain adjustments, and tax preference items), less any available
exemptions. Such tax preference items include interest on certain tax-exempt
bonds issued after August 7, 1986. In addition, 75% of the amount by which a
corporation's "adjusted current earnings" exceeds its alternative minimum
taxable income computed without regard to this preference item and prior to
reduction by net operating losses, is included in alternative minimum taxable
income. Net operating losses can offset no more than 90% of alternative minimum
taxable income. The alternative minimum tax is imposed to the extent it exceeds
the corporation's regular income tax. Payments of alternative minimum tax may be
used as credits against regular tax liabilities in future years.
Certain thrift institutions, such as Advantage, are allowed deductions
for bad debts under methods more favorable than those granted to other
taxpayers. Qualified thrift institutions may compute deductions for bad debts
using either the specific charge-off method of Section 166 of the Code or the
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<PAGE>
experience method of Section 593 of the Code. The "experience" method is also
available to small banks. Under the "experience" method, a thrift institution is
generally allowed a deduction for an addition to its bad debt reserve equal to
the greater of (i) an amount based on its actual average experience for losses
in the current and five preceding taxable years, or (ii) an amount necessary to
restore the reserve to its balance as of the close of the base year.
Thrift institutions that are treated as small banks are allowed to
utilize the experience method applicable to such institutions, while thrift
institutions that are treated as large banks are required to use only the
specific charge-off method.
A thrift institution required to change its method of computing
reserves for bad debts will treat such change as a change in the method of
accounting, initiated by the taxpayer and having been made with the consent of
the Secretary of the Treasury. Section 481(a) of the Code requires certain
amounts to be recaptured with respect to such change. Generally, the amounts to
be recaptured will be determined solely with respect to the "applicable excess
reserves" of the taxpayer. The amount of the applicable excess reserves will be
taken into account ratably over a six-taxable year period, beginning with the
first taxable year beginning after 1995, subject to the residential loan
requirement described below. In the case of a thrift institution that is treated
as a large bank, the amount of the institution's applicable excess reserves
generally is the excess of (i) the balances of its reserve for losses on
qualifying real property loans (generally loans secured by improved real estate)
and its reserve for losses on nonqualifying loans (all other types of loans) as
of the close of its last taxable year beginning before January 1, 1996, over
(ii) the balances of such reserves as of the close of its last taxable year
beginning before January 1, 1988 (i.e., the "pre-1988 reserves"). In the case of
a thrift institution that is treated as a small bank, the amount of the
institution's applicable excess reserves generally is the excess of (i) the
balances of its reserve for losses on qualifying real property loans and its
reserve for losses on nonqualifying loans as of the close of its last taxable
year beginning before January 1, 1996, over (ii) the greater of the balance of
(a) its pre-1988 reserves or (b) what the thrift's reserves would have been at
the close of its last year beginning before January 1, 1996, had the thrift
always used the experience method.
For taxable years that begin after December 31, 1995, and before
January 1, 1998, if a thrift meets the residential loan requirement for a tax
year, the recapture of the applicable excess reserves otherwise required to be
taken into account as a Code Section 481(a) adjustment for the year will be
suspended. A thrift meets the residential loan requirement if, for the tax year,
the principal amount of residential loans made by the thrift during the year is
not less than its base amount. The "base amount" generally is the average of the
principal amounts of the residential loans made by the thrift during the six
most recent tax years beginning before January 1, 1996. A residential loan is a
loan as described in Section 7701(a)(19)(C)(v) (generally a loan secured by
residential or church property and certain mobile homes), but only to the extent
that the loan is made to the owner of the property. Advantage is required to
recapture $1.9 million of its bad debt reserve for which deferred taxes have
been provided. The recapture is being effected over a six year period commencing
in 1998.
The balance of the pre-1988 reserves is subject to the provisions of
Section 593(e) which require recapture in the case of certain excessive
distributions to shareholders. The pre-1988 reserves may not be utilized for
payment of cash dividends or other distributions to a shareholder (including
distributions in dissolution or liquidation) or for any other purpose (except to
absorb bad debt losses). Distribution of a cash dividend by a thrift institution
to a shareholder is treated as made: first, out of the institution's post-1951
accumulated earnings and profits; second, out of the pre-1988 reserves; and
third, out of such other accounts as may be proper. To the extent a distribution
by Advantage to Camco is deemed paid out of its pre-1988 reserves under these
rules, the pre-1988 reserves would be reduced and the gross income of Camco for
tax purposes would be increased by the amount which, when reduced by the income
tax, if any, attributable to the inclusion of such amount in its gross income,
equals the amount deemed paid out of the pre-1988 reserves. As of December 31,
2001, the pre-1988 reserves for Advantage for tax purposes totaled approximately
$12.8 million. Camco believes Advantage had approximately $24.3 million of
accumulated earnings and profits for tax purposes as of December 31, 2001, which
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<PAGE>
would be available for dividend distributions, provided regulatory restrictions
applicable to the payment of dividends are met. No representation can be made as
to whether Advantage will have current or accumulated earnings and profits in
subsequent years.
The tax returns of Camco have been audited or closed without audit
through calendar year 1997. In the opinion of management, any examination of
open returns would not result in a deficiency which could have a material
adverse effect on the financial condition of Camco.
Ohio Taxation. Camco and Camco Title are subject to the Ohio
corporation franchise tax, which, as applied to them, is a tax measured by both
net earnings and net worth. The rate of tax is the greater of (i) 5.1% on the
first $50,000 of computed Ohio taxable income and 8.5% of computed Ohio taxable
income in excess of $50,000 or (ii) .400% times taxable net worth.
A special litter tax is also applicable to all corporations, including
Camco, subject to the Ohio corporation franchise tax other than "financial
institutions." If the franchise tax is paid on the net income basis, the litter
tax is equal to .11% of the first $50,000 of computed Ohio taxable income and
.22% of computed Ohio taxable income in excess of $50,000. If the franchise tax
is paid on the net worth basis, the litter tax is equal to .014% times taxable
net worth.
Advantage is a "financial institution" for State of Ohio tax purposes.
As such, it is subject to the Ohio corporate franchise tax on "financial
institutions," which is imposed annually at a rate of 1.3% of its book net worth
determined in accordance with generally accepted accounting principles. As a
"financial institution," Advantage is not subject to any tax based upon net
income or net profits imposed by the State of Ohio.
CMC and WestMar are subject to the Ohio Dealers in Intangibles property
tax but currently incur no liability because they are owned by an Ohio financial
institution.
Delaware Taxation. As a Delaware corporation, Camco is subject to an
annual franchise tax based on the quantity and par value of its authorized
capital stock and its gross assets. As a savings and loan holding company, Camco
is exempt from Delaware corporate income tax.
Kentucky Taxation. The Commonwealth of Kentucky imposes no income or
franchise taxes on savings institutions. Advantage is subject to an annual ad
valoreum tax which is .1% of Advantage's Kentucky deposit accounts, and
apportioned common stock and retained income, with certain deductions for
amounts borrowed by depositors and securities guaranteed by the U.S. Government
or certain of its agencies.
West Virginia Taxation. Advantage, Camco Title and WestMar are subject
to a West Virginia tax on apportioned adjusted net income and a West Virginia
franchise tax on apportioned adjusted capital. The adjusted net income of each
is taxed at a rate of 9.0%. The franchise tax rate is 0.75% of adjusted capital.
The apportionment is based solely on the ratio of gross receipts derived from
West Virginia as compared to gross receipts everywhere.
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<PAGE>
Item 2. Properties.
The following table provides the location of, and certain other
information pertaining to, Camco's office premises as of December 31, 2001:
<TABLE>
<CAPTION>
Year facility Leased
commenced or Net book
Office Location operations owned value (1)
- --------------- ---------- ------ ------
<S> <C> <C> <C>
134 E. Court Street
Washington Court House, Ohio 1963 Owned (2) $ 621,564
45 West Second Street
Chillicothe, Ohio 1994 Leased (3)
1050 Washington Ave.
Washington Court House, Ohio 1996 Owned 543,658
1 N. Plum Street
Germantown, Ohio 1998 Owned 563,951
687 West Main Street
New Lebanon, Ohio 1998 Owned 81,327
1392 Cherry Bottom Road
Gahanna, Ohio 1999 Leased (4)
3002 Harrison Avenue
Cincinnati, Ohio 2000 Owned 1,644,735
1101 St. Gregory Street
Cincinnati, Ohio 2000 Leased (5)
5071 Glencrossing Way
Cincinnati, Ohio 2000 Leased (6)
290 1/2Front St.
Marietta, Ohio 1996 Leased (7)
126 S. 9th Street
Cambridge, Ohio 1998 Owned 109,641
226 Third Street
Marietta, Ohio 1976 Owned 541,143
1925 Washington Boulevard
Belpre, Ohio 1979 Owned 133,226
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
478 Pike Street
Marietta, Ohio 1998 Leased (8) $ 628,936
814 Wheeling Avenue (9)
Cambridge, Ohio 1963 Owned 1,128,755
327 E. 3rd Street
Uhrichsville, Ohio 1975 Owned 44,219
175 N. 11th Street
Cambridge, Ohio 1981 Owned 359,845
209 Seneca Avenue
Byesville, Ohio 1978 Leased (10)
2497 Dixie Highway
Ft. Mitchell, Kentucky 2001 Owned 389,360
401-7 Pike Street
Covington, Kentucky 2001 Owned 115,996
3522 Dixie Highway
Erlanger, Kentucky 2001 Owned 23,592
612 Buttermilk Pike
Crescent Springs, Kentucky 2001 Owned 35,675
7550 Dixie Highway
Florence, Kentucky 2001 Owned 683,473
1640 Carter Avenue
Ashland, Kentucky 1996 Owned 831,914
U.S. 60A West
Summit, Kentucky 1996 Owned 664,688
280 Russell Road
Ashland, Kentucky 1996 Owned 95,675
191 Eastern Heights
Shopping Center
Huntington, West Virginia 1997 Leased (11) 2,287
</TABLE>
- --------------------------
(Footnotes on following page)
-24-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6901 Glenn Highway 1999 Owned $1,372,583
Cambridge, Ohio
1320A and 1320 D 4th Street, N.W.
New Philadelphia, Ohio 1985 Owned (12) 207,131
6269 Frank Ave.
N. Canton, Ohio 1992 Leased (13)
343 W. Milltown Road
Wooster, Ohio 2000 Leased (14)
510 Grand Central Avenue
Vienna, West Virginia 1991 Leased (15)
</TABLE>
(1) Net book value amounts are for land, buildings and improvements.
(2) The 134 E. Court Street facility also serves as the Camco Title - WCH
office.
(3) The lease expires in September 2004.
(4) The lease expires in 2004 and Advantage has the option to renew for a five
year term.
(5) The lease is currently on a month to month basis.
(6) The lease expires in April 2006. Advantage has the option to renew for a
five-year term.
(7) The lease expires in May 2002.
(8) The lease expires in 2017. Advantage has the option to renew for 2
five-year terms. The lease is for land.
(9) The Wheeling Avenue facility also serves as the Camco Title - Cambridge
office.
(10) The lease expires in 2005. Advantage has the option to renew the lease for
two five-year terms.
(11) The lease expires in March 2003.
(12) The 4th Street facility also serves as the Camco Title - New Philadelphia
office.
(13) The lease expires in June 2003, with an option to renew for a two-year
term.
(14) The lease expires in March 2003, with an option to renew for two three-year
terms.
(15) The lease expires in August 2002.
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<PAGE>
Camco also owns furniture, fixtures and equipment. The net book value
of Camco's investment in office premises and equipment totaled $14.8 million at
December 31, 2001. See Note E of Notes to Consolidated Financial Statements for
additional information.
Item 3. Legal Proceedings.
Neither Camco nor Advantage is presently engaged in any legal
proceedings of a material nature. From time to time, Advantage is involved in
legal proceedings to enforce its security interest in collateral taken as
security for its loans.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Stock and Related Security Holder
Matters.
At December 31, 2001, Camco had 8,011,020 shares of common stock
outstanding and held of record by approximately 1,300 stockholders. Price
information for Camco's common stock is quoted on The Nasdaq National Market
("Nasdaq") under the symbol "CAFI." The table below sets forth the high and low
trade information for the common stock of Camco, together with the dividends
declared per share of common stock, for each quarter of 1999, 2000 and 2001.
<TABLE>
<CAPTION>
Cash
dividends
Year ended December 31, 2001 High Low declared
- ---------------------------- -------- ------- -----------
<S> <C> <C> <C>
Quarter ending:
December 31, 2001 $13.00 $10.95 $0.1200
September 30, 2001 13.75 12.01 0.1200
June 30, 2001 12.58 10.60 0.1200
March 31, 2001 11.38 9.44 0.1200
Year ended December 31, 2000 Quarter ending:
December 31, 2000 $10.62 $ 8.52 $0.1200
September 30, 2000 10.38 8.18 0.1200
June 30, 2000 9.64 8.31 0.1200
March 31, 2000 9.51 7.67 0.1200
Year ended December 31, 1999(1) Quarter ending:
December 31, 1999 $12.38 $ 9.56 $0.1200
September 30, 1999 13.50 10.31 0.1200
June 30, 1999 13.33 12.43 0.1143
March 31, 1999 14.88 13.10 0.1071
</TABLE>
- ----------------------------
(1) Amounts have been restated to give effect to the 5% stock dividend which
was effected in July 1999.
In addition to certain federal income tax considerations, regulations
of OTS imposes limitations on the payment of dividends and other capital
distributions by savings associations.
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<PAGE>
Item 6. Selected Consolidated Financial Data.
The following tables set forth certain information concerning the
consolidated financial position and results of operations of Camco for the
periods indicated. This selected consolidated financial data should be read in
conjunction with the consolidated financial statements appearing elsewhere
herein.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED
FINANCIAL DATA:(1) At December 31,
2001 2000 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
(In thousands)
Total amount of:
<S> <C> <C> <C> <C> <C>
Assets $1,102,652 $1,037,856 $813,482 $637,135 $570,170
Interest-bearing deposits in other financial
institutions 89,299 4,916 247 22,609 10,473
Investment securities available for sale - at market 305 309 273 1,292 3,572
Investment securities held to maturity 18,872 16,672 16,864 10,962 17,489
Mortgage-backed securities available for sale - at market 6,975 9,850 6,475 3,476 8,447
Mortgage-backed securities held to maturity 30,765 5,273 5,944 5,019 8,207
Loans receivable - net (2) 871,446 930,672 726,225 548,669 481,501
Deposits 730,075 632,288 461,787 443,227 422,368
FHLB advances and other borrowings 258,850 313,471 279,125 125,483 82,319
Stockholders' equity - substantially restricted 95,171 78,750 62,609 60,139 55,331
</TABLE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED
OPERATING DATA: (1) Year ended December 31,
2001 2000 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total interest income $74,372 $75,671 $51,093 $44,283 $41,217
Total interest expense 48,433 49,609 29,907 24,852 22,778
------ ------ ------ ------ ------
Net interest income 25,939 26,062 21,186 19,431 18,439
Provision for losses on loans 759 568 247 250 385
------ ------ ------ ------ ------
Net interest income after provision for losses on loans 25,180 25,494 20,939 19,181 18,054
Other income 7,153 5,536 5,190 7,552 3,945
General, administrative and other expense 18,948 19,530 17,113 16,319 13,733
Restructuring charges related to charter consolidation 950 - - - -
------ ------ ------ ------ ------
Earnings before federal income taxes 12,435 11,500 9,016 10,414 8,266
Federal income taxes 3,891 3,848 3,076 3,410 2,922
------ ------ ------ ------ ------
Net earnings $ 8,544 $ 7,652 $ 5,940 $ 7,004 $ 5,344
====== ====== ====== ====== ======
Earnings per share: (3)
Basic $1.20 $1.11 $1.04 $1.22 $0.93
==== ==== ==== ==== ====
Diluted $1.19 $1.10 $1.02 $1.19 $0.91
==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31,
2001 2000 1999 1998 1997
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Return on average assets (4) 0.80% 0.83% 0.82% 1.16% 0.98%
Return on average assets excluding restructuring charges (4) 0.86 0.83 0.82 1.16 0.98
Return on average equity (4) 9.83 10.83 9.68 12.13 10.01
Return on average equity excluding restructuring charges (4) 10.54 10.83 9.68 12.13 10.01
Average equity to average assets (4) 8.13 7.64 8.46 9.56 9.81
Dividend payout ratio (5) 40.00 43.24 44.37 31.23 51.34
</TABLE>
- -----------------------------
(1) The information for the year ended December 31, 2001 reflects the
acquisition of Columbia Financial. The information as of December 31, 2000
reflects the acquisition of Westwood Homestead Financial Corporation. These
combinations were accounted for using the purchase method of accounting.
(Footnotes continued on following page)
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<PAGE>
(2) Includes loans held for sale.
(3) Earnings per share has been adjusted to give effect to the Germantown
Merger, and a three-for-two stock split, which were effected during 1998,
and a 5% stock dividend which was effected during the year ended December
31, 1999.
(4) Ratios are based upon the mathematical average of the balances at the
beginning and the end of the year.
(5) Represents dividends per share divided by basic earnings per share.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
Since its incorporation in 1970, Camco has evolved into a full-service
provider of financial products to the communities served by Advantage Bank.
Utilizing a common marketing theme based on Camco's commitment to personalized
customer service, Camco and its affiliates have grown from $22.4 million of
consolidated assets in 1970 to $1.1 billion of consolidated assets at December
31, 2001. Camco's rate of growth is largely attributable to its acquisitions of
Marietta Savings, First Savings, First Bank for Savings, Germantown Federal,
Westwood Homestead and Columbia Savings and its continued expansion of product
lines from the limited deposit and loan offerings which the Bank could offer in
the heavily regulated environment of the 1970s to the wider array of financial
service products that commercial banks traditionally offered. Additionally,
Camco has enhanced its operational growth by integrating its residential lending
function through establishing mortgage-banking operations in the Bank's primary
market areas and, to a lesser extent, by chartering a title insurance agency.
Management believes that continued success in the financial services
industry will be achieved by those institutions with a rigorous dedication to
building value-added customer-oriented organizations. Toward this end, each of
the Bank's divisions operate autonomously in making local decisions for customer
contacts and services, however back-office operations are being consolidated and
centralized. Based on consumer preferences, the Bank's management designs
financial service products with a view towards differentiating each of the
constituent divisions from its competition. Management believes that the Bank
divisions' ability to rapidly adapt to consumer needs and preferences is
essential to them as community-based financial institutions competing against
the larger regional and money-center bank holding companies.
Camco's profitability depends primarily on its level of net interest
income, which is the difference between interest income on interest-earning
assets, principally loans, mortgage-backed securities and investment securities,
and interest expense on deposit accounts and borrowings. In recent years,
Camco's net earnings have also been heavily influenced by its level of other
income, including mortgage banking income and other fees. Camco's operations are
also influenced by general, administrative and other expenses, including
employee compensation and benefits, occupancy expense, data processing,
franchise taxes, advertising, other operating expenses and federal income tax
expense.
Discussion of Financial Condition Changes from December 31, 2000 to December 31,
2001
At December 31, 2001, Camco's consolidated assets totaled $1.1 billion,
an increase of $64.8 million, or 6.2%, over the December 31, 2000 total. The
increase was primarily due to the acquisition of Columbia Financial in November
2001, which resulted in net asset growth of approximately $110.4 million. Before
consideration of the effects of the acquisition, total assets declined year to
year by $45.6 million, primarily due to loan sales and through principal
repayments on loans. This extra liquidity, coupled with an increase in deposits
of $16.7 million and an increase in stockholders' equity of $6.4 million, was
applied to decrease advances from the Federal Home Loan Bank by $54.6 million.
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<PAGE>
Cash and interest-bearing deposits in other financial institutions
totaled $105.0 million at December 31, 2001, an increase of $80.9 million, or
336.1%, over December 31, 2000 levels. This increase reflects the continued
payoff of loans in a low interest rate environment, which has caused borrowers
to refinance to fixed-rate loans which were sold in the secondary market.
Investment securities totaled $19.2 million at December 31, 2001, an increase of
$2.2 million, or 12.9%, over the total at December 31, 2000. During 2001,
investment securities totaling $10.5 million were purchased and $11.2 million
were acquired through the Columbia Financial acquisition, while maturities
amounted to $19.5 million. Mortgage-backed securities totaled $37.7 million at
December 31, 2001, an increase of $22.6 million, or 149.6%, over December 31,
2000, due primarily to the $12.2 million of mortgage-backed securities acquired
in the Columbia Financial acquisition and purchases of $15.2 million, which were
partially offset by principal repayments totaling $4.9 million.
Loans receivable and loans held for sale totaled $871.4 million at
December 31, 2001, a decrease of $59.2 million, or 6.4%, from the total at
December 31, 2000. The decrease resulted primarily from loan sales of $295.6
million and principal repayments of $271.2 million, which were partially offset
by loans acquired through the Columbia Financial acquisition totaling $69.2
million and loan disbursements, including loan purchases and loans originated
for sale, totaling $442.0 million. Loan origination volume, including the
purchases of loans, during 2001 exceeded 2000 volume by $79.9 million, or 22.1%,
while the volume of loan sales increased by $176.2 million year to year. The
increase in loan origination and sales volume was primarily attributable to an
increase in refinancing activity following the decrease in the overall level of
long-term interest rates during the year.
The allowance for loan losses totaled $4.3 million and $2.9 million at
December 31, 2001 and 2000, respectively, representing 54.0% and 61.5% of
nonperforming loans at those dates. The allowance for loan losses was increased
by $1.3 million as a result of the allowance maintained by Columbia Savings
prior to the acquisition. Nonperforming loans (90 days or more delinquent plus
nonaccrual loans) totaled $7.9 million and $4.7 million at December 31, 2001 and
2000, respectively, constituting .90% and .51% of total net loans, including
loans held for sale, at those dates. At December 31, 2001, nonperforming loans
were comprised of $6.5 million of loans secured by one- to four-family
residential real estate, $1.1 million of commercial loans and $278,000 of loans
secured by multi-family and nonresidential real estate. Although management
believes that its allowance for loan losses at December 31, 2001, is adequate
based upon the available facts and circumstances, 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 $730.1 million at December 31, 2001, an increase of
$97.8 million, or 15.5%, over December 31, 2000 levels. The increase resulted
primarily from deposits of $81.1 million acquired in the Columbia Financial
acquisition, coupled with deposit portfolio growth of $16.7 million, or 2.6%,
which resulted primarily from management's continuing efforts to increase
deposits through marketing and pricing strategies. Advances from the FHLB
totaled $258.9 million at December 31, 2001, a decrease of $54.6 million, or
17.4%, compared to December 31, 2000. Advances were repaid primarily with funds
generated through loan sales and through principal repayments on loans.
Stockholders' equity totaled $95.2 million at December 31, 2001, an
increase of $16.4 million, or 20.9%, over December 31, 2000. The increase was
due primarily to common shares issued in the purchase of Columbia Financial,
which resulted in a $10.0 million increase, coupled with net earnings of $8.5
million and proceeds from stock option exercises totaling $1.3 million, which
were partially offset by dividends of $3.5 million.
The Bank is required to maintain minimum regulatory capital pursuant to
federal regulations. During 2001, management was notified by its supervisory
regulators that Advantage was categorized as well-capitalized under the
regulatory framework for prompt corrective action. At December 31, 2001, the
Bank's regulatory capital exceeded all regulatory capital requirements.
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<PAGE>
Comparison of Results of Operations for the Years Ended December 31, 2001 and
December 31, 2000
General. Increases in the level of income and expenses during the year
ended December 31, 2001, compared to 2000, reflect the effects of the
acquisition of Columbia Financial, which was acquired by Camco in November 2001
in a transaction accounted for using the purchase method of accounting.
Camco's net earnings for the year ended December 31, 2001, totaled $8.5
million, an increase of $892,000, or 11.7%, over the $7.7 million of net
earnings reported in 2000. The increase in earnings was primarily attributable
to a $1.6 million increase in other income, which was partially offset by a
$123,000 decrease in net interest income, a $191,000 increase in the provision
for losses on loans, an increase in general, administrative and other expense of
$368,000 and a $43,000 increase in the provision for federal income taxes.
Net Interest Income. Total interest income for the year ended December
31, 2001, amounted to $74.4 million, a decrease of $1.3 million, or 1.7%,
compared to 2000, generally reflecting the effects of a decrease of 37 basis
points in the average yield, from 7.86% in 2000 to 7.49% in 2001, which was
partially offset by a $30.7 million, or 3.2%, increase in the average balance of
interest-earning assets outstanding year to year. The acquisition of Columbia
Financial accounted for approximately $1.2 million of interest income recorded
during 2001.
Interest income on loans and mortgage-backed securities totaled $70.5
million for the year ended December 31, 2001, a decrease of $2.1 million, or
2.9%, compared to the 2000 total. The decrease resulted primarily from a $9.4
million, or 1.0%, decrease in the weighted-average balance outstanding and a 15
basis point decrease in the average yield, to 7.75% in 2001. Interest income on
investments and interest-bearing deposits increased by $825,000, or 27.3%, due
primarily to a $40.0 million, or 91.7%, increase in the weighted-average
outstanding balance, which was partially offset by a 234 basis point decrease in
the average yield, to 4.60% in 2001.
Interest expense on deposits totaled $31.3 million for the year ended
December 31, 2001, an increase of $2.5 million, or 8.5%, over the 2000 total.
The increase was due to an increase in the weighted-average balance of deposits
outstanding of $69.7 million, or 11.8% year to year, partially offset by a 14
basis point decrease in the average cost of deposits, from 4.89% in 2000 to 4.75
% in 2001. The acquisition of Columbia Financial accounted for approximately
$559,000 of the overall increase in interest expense in the 2001 period.
Interest expense on borrowings totaled $17.1 million for the year ended December
31, 2001, a decrease of $3.6 million, or 17.5%, compared to 2000. The decrease
resulted primarily from a $45.1 million, or 13.8%, decrease in the
weighted-average balance of borrowings outstanding year to year and a decrease
of 28 basis points in the weighted-average cost of borrowings, to 6.09% in 2001.
As a result of the foregoing changes in interest income and interest
expense, net interest income decreased by $123,000, or 0.5%, to a total of $25.9
million for the year ended December 31, 2001, compared to $26.1 million in 2000.
The interest rate spread decreased to approximately 2.34% for the year ended
December 31, 2001, from 2.45% for 2000, while the net interest margin decreased
to approximately 2.61% in 2001, compared to 2.71% in 2000.
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 $759,000
for the year ended December 31, 2001, an increase of $191,000, or 33.6%, over
the provision recorded in 2000. The 2001 provision generally reflects the $3.2
million increase in the level of nonperforming loans, as well as a $3.7 million,
or 34.9%, increase in loans greater than 30 days but less than 90 days
delinquent year to year. The provision also reflects the $15.5 million, or
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<PAGE>
28.4%, increase in loans secured by nonresidential real estate during 2001.
Management believes all nonperforming loans are adequately collateralized,
however there can be no assurance that the loan loss allowance will be adequate
to absorb losses on known nonperforming assets or that the allowance will be
adequate to cover losses on nonperforming assets in the future.
Other Income. Other income totaled $7.2 million for the year ended
December 31, 2001, an increase of $1.6 million, or 29.2%, compared to 2000. The
increase in other income was primarily attributable to a $2.5 million, or
120.2%, increase in gains on sale of loans and an increase of $1.1 million, or
52.1%, in late charges, rent and other, which were partially offset by a $2.1
million decrease in loan servicing fees. The increase in gains on sale of loans
primarily reflects the increase in sales volume year to year. The increase in
late charges, rent and other operating income was due primarily to an increase
in revenues at Camco Title Insurance Agency and increased fees on loan and
deposit accounts and transactions year to year. The decrease in loan servicing
fees was due primarily to an increase in amortization and impairment charges
related to the Bank's mortgage servicing rights asset ("MSRs"). During 2001,
amortization of MSRs increased over 2000 by $931,000, or 154.6%, due primarily
to prepayments of loans associated with refinancing activity during the lower
interest rate environment. Additionally, Advantage recorded an impairment charge
in 2001 totaling $1.3 million, based upon an independent appraisal of the MSRs.
General, Administrative and Other Expense. General, administrative and
other expense totaled $19.9 million for the year ended December 31, 2001, an
increase of $368,000, or 1.9%, compared to 2000. Camco recorded a one-time
restructuring charge of $950,000 in the second quarter of 2001, which was
primarily related to compensation charges and professional fees related to
Camco's restructuring to a single bank charter, which occurred in the second
quarter of 2001. Camco anticipated that the approximate savings from the
restructuring, coupled with other 2001 personnel reductions, would add earnings
of $.14 per basic share in the four quarters immediately following the charge,
while enhancing the basic per share earnings level by $.17 in 2002. The
consolidation of operations such as data processing began in July 2001, and
total data processing conversion will be completed in May 2002.
Excluding of the effects of the restructuring charges, general,
administrative and other expense decreased year to year by $582,000, or 3.0%,
due primarily to a decrease in employee compensation and benefits of $1.1
million, or 11.9%, resulting primarily from a reduction in staffing levels, and
an increase in deferred loan origination costs attendant to the increase in loan
volume year to year. The decrease in employee compensation and benefits was
partially offset by a $108,000, or 3.5%, increase in office occupancy and
equipment expense, which was due to increased depreciation and increased
building maintenance costs, and an increase in other operating expenses of
$313,000, or 7.6%, primarily as a result of Camco's overall growth year to year.
Federal Income Taxes. The provision for federal income taxes totaled
$3.9 million for the year ended December 31, 2001, an increase of $43,000, or
1.1%, compared to the provision recorded in 2000. This increase was primarily
attributable to a $935,000, or 8.1%, increase in pre-tax earnings year to year,
partially offset by the receipt of refunds claimed for prior years' tax
liabilities. The effective tax rate amounted to 31.3% and 33.5% for the years
ended December 31, 2001 and 2000, respectively.
Comparison of Results of Operations for the Years Ended December 31, 2000 and
December 31, 1999
General. Increases in the level of income and expenses during the year
ended December 31, 2000, compared to 1999, were significantly influenced by the
inclusion of the accounts of Westwood Homestead, which was acquired by Camco in
January 2000 in a transaction accounted for using the purchase method of
accounting. Accordingly, the statement of earnings for the year ended December
31, 1999, was not restated for the acquisition.
Camco's net earnings for the year ended December 31, 2000, totaled $7.7
million, an increase of $1.7 million, or 28.8%, over the $5.9 million of net
earnings reported in 1999. The increase in earnings was primarily attributable
to a $4.9 million increase in net interest income and an increase in other
income of $346,000, which were partially offset by a $321,000 increase in the
provision for losses on loans, an increase in general, administrative and other
expense of $2.4 million and a $772,000 increase in the provision for federal
income taxes.
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<PAGE>
Net Interest Income. Total interest income for the year ended December
31, 2000, amounted to $75.7 million, an increase of $24.6 million, or 48.1%,
over 1999, generally reflecting the effects of the $272.0 million, or 39.4%, of
growth in weighted-average interest-earning assets outstanding year to year, and
the increase of 46 basis points in the average yield, from 7.40% in 1999 to
7.86% in 2000. The acquisition of Westwood Homestead accounted for approximately
$12.3 million of interest income during the year ended December 31, 2000.
Interest income on loans and mortgage-backed securities totaled $72.6
million for the year ended December 31, 2000, an increase of $24.0 million, or
49.3%, over the comparable 1999 period. The increase resulted primarily from a
$270.2 million, or 41.6%, increase in the weighted-average balance outstanding
year to year. Interest income on investments and interest-bearing deposits
increased by $597,000, or 24.6%, due primarily to an increase in the
weighted-average outstanding balances of $1.8 million, or 4.3%, and an increase
in the average yield.
Interest expense on deposits amounted to $28.9 million for the year
ended December 31, 2000, an increase of $9.8 million, or 51.0%, over the 1999
total. The increase was due to an increase in the weighted-average balance of
deposits outstanding of $137.5 million, or 30.4% year to year, and a 67 basis
point increase in the average rate paid from 4.22% in 1999 to 4.89% in 2000. The
acquisition of Westwood Homestead accounted for approximately $5.3 million of
the overall increase in the 2000 period. Interest expense on borrowings totaled
$20.7 million for the year ended December 31, 2000, an increase of $10.0
million, or 92.3%, over 1999. The increase resulted primarily from a $125.5
million increase in the weighted-average balance of borrowings outstanding year
to year and an increase of 98 basis points in the weighted-average cost of
borrowings.
As a result of the foregoing changes in interest income and interest
expense, net interest income increased by $4.9 million, or 23.0%, to a total of
$26.1 million for the year ended December 31, 2000, compared to $21.2 million in
1999. The interest rate spread decreased to approximately 2.45% for the year
ended December 31, 2000, from 2.82% for 1999, while the net interest margin
decreased to approximately 2.71% in 2000, compared to 3.07% in 1999.
Provision for Losses on Loans. The provision for losses on loans
totaled $568,000 for the year ended December 31, 2000, an increase of $321,000,
or 130.0%, over the provision recorded in 1999. The 2000 provision generally
reflects the effects of loan portfolio growth, coupled with an increase of
$751,000 in the level of nonperforming loans year to year.
Other Income. Other income totaled $5.5 million for the year ended
December 31, 2000, an increase of $346,000, or 6.7%, compared to 1999. The
increase in other income was primarily attributable to a $297,000, or 16.9%,
increase in gains on sale of loans and an increase of $159,000, or 27.7%, in
service charges and other fees on deposits, which were partially offset by a
$41,000, or 5.8%, decrease in loan servicing fees and an $87,000, or 4.1%,
decrease in late charges, rent and other. The increase in gains on sale of loans
primarily reflects an increase in sales volume year to year.
General, Administrative and Other Expense. General, administrative and
other expense totaled $19.5 million for the year ended December 31, 2000, an
increase of $2.4 million, or 14.1%, compared to 1999. The acquisition of
Westwood Homestead accounted for $2.7 million of the increase in general,
administrative and other expenses. Excluding the effects of the Westwood
Homestead acquisition, office occupancy and equipment expense increased by
$172,000, or 7.0%, which was due to increased depreciation and increased
building maintenance costs, and data processing expense increased by $354,000,
or 42.4%, due to costs related to a conversion to an internal wide area network.
These increases were partially offset by a decrease in employee compensation and
benefits of $323,000, or 4.1%, resulting primarily from a decline in staffing
levels, and a decrease of $166,000, or 63.1%, in federal deposit insurance
premiums, due to a decrease in FDIC premium rates. Other operating expenses
increased primarily as a result of the Corporation's overall growth year to
year.
Federal Income Taxes. The provision for federal income taxes totaled
$3.8 million for the year ended December 31, 2000, an increase of $772,000 or
25.1%, compared to the provision recorded in 1999. This increase was primarily
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<PAGE>
attributable to a $2.5 million, or 27.6%, increase in pre-tax earnings year to
year. The effective tax rate amounted to 33.5% and 34.1% for the years ended
December 31, 2000 and 1999, respectively.
Yields Earned and Rates Paid
The following table sets forth the weighted-average yields earned on
Camco's interest-earning assets, the weighted-average interest rates paid on
Camco's interest-bearing liabilities and the interest rate spread between the
weighted-average yields earned and rates paid by Camco at the dates indicated.
At December 31,
2001 2000 1999
Weighted-average yield on:
Loan portfolio (1) 7.28% 8.01% 7.47%
Investment portfolio (2) 3.61 6.82 6.17
Total interest-earning assets 6.63 7.92 7.39
Weighted-average rate paid on:
Deposits 4.08 5.28 4.39
FHLB advances 6.02 6.20 5.71
Total interest-bearing liabilities 4.59 5.53 4.81
---- ---- ----
Interest rate spread 2.04% 2.39% 2.58%
==== ==== ====
(1) Includes loans held for sale and excludes the allowance for loan losses.
(2) Includes interest on mortgage-backed securities and earnings on FHLB stock
and cash surrender value of life insurance.
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<PAGE>
Average Yield and Rate Analysis
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.
<TABLE>
<CAPTION>
Year ended December 31,
2001 2000 1999
----------------------------- ----------------------------- -----------------------------
Average Interest Average Average Interest Average Average Interest Average
outstanding earned/ yield/ outstanding earned/ yield/ outstanding earned/ yield/
balance paid rate balance paid rate balance paid Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1) $891,220 $69,461 7.79% $903,226 $71,524 7.92% $637,755 $47,904 7.51%
Mortgage-backed
securities(2) 18,561 1,059 5.71 15,920 1,120 7.04 11,173 759 6.79
Investment securities 11,621 696 5.99 17,529 1,141 6.51 14,963 896 5.99
Interest-bearing deposits and
other interest-earning assets 72,052 3,156 4.38 26,115 1,886 7.22 26,896 1,534 5.70
------- ------ ---- ------- ------ ---- ------- ------ ----
Total $993,454 74,372 7.49 $962,790 75,671 7.86 $690,787 51,093 7.40
======= ======= =======
interest-earning assets
Interest-bearing liabilities:
Deposits $660,106 31,324 4.75 $590,418 28,869 4.89 $452,939 19,119 4.22
FHLB advances 280,747 17,109 6.09 325,805 20,740 6.37 200,285 10,788 5.39
------- ------ ---- ------- ------ ---- ------- ------ ----
Total interest-bearing
liabilities $940,853 48,433 5.15 $916,223 49,609 5.41 $653,224 29,907 4.58
======= ------ ---- ======= ------ ---- ======= ------ ----
Net interest income/
Interest rate spread $25,939 2.34% $26,062 2.45% $21,186 2.82%
====== ==== ====== ==== ====== ====
Net interest margin(3) 2.61% 2.71% 3.07%
==== ==== ====
Average interest-earning assets
to average interest-bearing
liabilities 105.59% 105.85% 105.75%
====== ====== ======
</TABLE>
- ------------------------
(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.
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<PAGE>
Rate/Volume Analysis
The following table describes the extent to which changes in interest
rates and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected Camco's interest income and expense during the periods
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to (i) changes in
volume (change in volume multiplied by prior year rate), (ii) changes in rate
(change in rate multiplied by prior year volume) and (iii) total changes in rate
and volume.
<TABLE>
<CAPTION>
Year ended September 30,
2001 vs. 2000 2000 vs. 1999
Increase Increase
(decrease) (decrease)
due to due to
Volume Rate Total Volume Rate Total
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income attributable to:
Loans receivable (1) $ (944) $(1,119) $(2,063) $20,897 $ 2,723 $23,620
Mortgage-backed securities 170 (231) (61) 332 29 361
Investment securities (360) (85) (445) 163 82 245
Interest-bearing deposits and other (2) 2,251 (981) 1,270 (46) 398 352
----- ------ ------ ------ ------ ------
Total interest income 1,117 (2,416) (1,299) 21,346 3,232 24,578
Interest expense attributable to:
Deposits 3,327 (872) 2,455 6,407 3,343 9,750
Borrowings (2,775) (856) (3,631) 7,714 2,238 9,952
----- ------ ------ ------ ------ ------
Total interest expense 552 (1,728) (1,176) 14,121 5,581 19,702
----- ------ ------ ------ ------ ------
Increase (decrease) in net interest income $ 565 $ (688) $ (123) $ 7,225 $(2,349) $ 4,876
===== ======= ====== ====== ====== ======
</TABLE>
- ------------------------------
(1) Includes loans held for sale.
(2) Includes interest-bearing deposits.
Effect of Recent Accounting Pronouncements.
In June 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 141 "Business
Combinations," which requires that all business combinations initiated after
June 30, 2001 be accounted for using the purchase method. The
pooling-of-interests method of accounting is prohibited except for combinations
initiated before June 30, 2001. The remaining provisions of SFAS No. 141
relating to business combinations accounted for by the purchase method,
including identification of intangible assets, accounting for negative goodwill,
financial statement presentation and disclosure, are effective for combinations
completed after June 30, 2001. Management adopted SFAS No. 141 effective July 1,
2001, as required, without material effect on Camco's financial position or
results of operations.
In June 2001, the FASB issued SFAS No. 142 "Goodwill and
Intangible Assets," which prescribes accounting for all purchased goodwill and
intangible assets. Pursuant to SFAS No. 142, acquired goodwill is not amortized,
but is tested for impairment at the reporting unit level annually and whenever
an impairment indicator arises. All goodwill should be assigned to reporting
units that are expected to benefit from the goodwill. When an entity reorganizes
its reporting structure, goodwill should be reallocated to reporting units based
on the relative fair values of the units. Goodwill impairment should be tested
with a two-step approach. First, the fair value of the reporting unit should be
compared to its carrying value, including goodwill. If the reporting unit's
carrying value exceeds its fair value, then any goodwill impairment should be
measured as the excess of the goodwill's carrying value over its implied fair
value. The implied fair value of goodwill should be calculated in the same
manner as goodwill is calculated for a business combination, using the reporting
units' fair value as the "purchase price." Therefore, the goodwill's implied
fair value will be the excess of the "purchase price" over the amounts allocated
to assets, including unrecognized intangible assets, and liabilities of the
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<PAGE>
reporting unit. Goodwill impairment losses should be reported in the income
statement as a separate line item within operations, except for such losses
included in the calculation of a gain or loss from discontinued operations.
An acquired intangible asset, other than goodwill, should be
amortized over its useful economic life. The useful life of an intangible asset
is indefinite if it extends beyond the foreseeable horizon. If an asset's life
is indefinite, the asset should not be amortized until the life is determined to
be finite. Intangible assets being amortized should be tested for impairment.
Intangible assets not being amortized should be tested for impairment, annually
and whenever there are indicators of impairment, by comparing the asset's fair
value to its carrying amount.
SFAS No. 142 is effective for Camco beginning January 1, 2002. As
of the date SFAS No. 142 is adopted and based on the Corporation's current
reporting structure, reporting units will be established; net assets should be
assigned to reporting units, unless they do not relate to a reporting unit; and
goodwill should be assigned to one or more reporting units. Within nine months
of adopting SFAS No. 142, Camco must have completed the first step of the
goodwill transitional impairment test: a comparison, as of the beginning of the
fiscal year, of each reporting unit's fair value with its carrying value. If the
carrying value exceeds fair value, the second step - calculating the amount of
goodwill impairment as of the beginning of the year - would be required as soon
as possible, but no later than the end of the year. Any transitional impairment
loss would be reported as a change in accounting principle in the first interim
period financial statements of the implementation year, regardless of when the
loss measurement is completed. After completion of the first step of the
transitional test, Camco will disclose which segments might have to recognize
any impairment loss and when any potential loss would be measured. If an
impairment indicator arises before the completion of the transition testing, a
full impairment test would be required as soon as possible. Any goodwill
impairment resulting from this test should be reported as an impairment loss,
not as a change in accounting principle. The adoption of SFAS No. 142 will
result in the elimination of Camco's annual goodwill amortization charges
totaling approximately $150,000 beginning in 2002.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Net interest income, the difference between asset yields and the cost
of interest-bearing liabilities, is the principal component of Camco's net
earnings. The ability to maximize net interest income is largely dependent upon
the achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rate levels. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap," provides
an indication of the extent to which a financial institution's interest rate
spread will be affected by changes in interest rates. A gap is considered
positive when the amount of interest-rate sensitive assets exceeds the amount of
interest-rate sensitive liabilities and is considered negative when the amount
of interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets repricing during a specified interval. Generally, during a
period of rising interest rates, a negative gap within shorter maturities would
adversely affect net interest income, while a positive gap within shorter
maturities would result in an increase in net interest income. Conversely,
during a period of falling interest rates, a negative gap within shorter
maturities would result in an increase in net interest income, while a positive
gap within shorter maturities would have the opposite effect.
In recognition of the foregoing factors, the Board of Directors of each
of Advantage has implemented an asset and liability management strategy directed
toward improving each Bank's interest rate sensitivity. The principal common
elements of such strategies include (1) meeting the consumer preference for
fixed-rate loans over the past several years by selling such loans in the
secondary market, (2) originating adjustable-rate mortgage loans ("ARMs") as
demand increases coincident with the overall rise in interest rates in the
economy, (3) maintaining higher levels of liquid assets, such as cash,
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<PAGE>
short-term interest bearing deposits and short-term investment securities as a
hedge against rising interest rates in a lower interest rate environment, and
(4) utilizing FHLB advances and longer term certificates of deposit as funding
sources when available.
The following table contains information regarding the amounts of
various categories of assets and liabilities repricing within the periods
indicated:
<TABLE>
<CAPTION>
December 31, 2001
--------------------------------------------------------
Within 1 year 1-5 years Over 5 years Total
------------- ---------- ------------- -------
(In thousands)
<S> <C> <C> <C> <C>
Interest-earning assets: (1)
Interest-bearing deposits in other banks $ 89,299 $ - $ - $ 89,299
Investment securities (2) 14,919 4,000 - 18,919
Mortgage-backed securities 15,965 17,841 3,886 37,692
Loans receivable (3) 401,329 312,509 135,736 849,574
------- ------- ------- -------
Total 521,512 334,350 139,622 995,484
------- ------- ------- -------
Interest-bearing liabilities: (1)
Deposits 479,047 229,956 21,072 730,075
FHLB advances 35,732 37,669 185,449 258,850
------ ------- ------- -------
Total 514,779 267,625 206,521 988,925
------- ------- ------- -------
Excess (deficiency) of interest sensitive assets over
interest sensitive liabilities $ 6,733 $ 66,725 $(66,899) $ 6,559
======= ======= ======= =======
Cumulative excess (deficiency) of interest sensitive assets
over interest sensitive liabilities $ 6,733 $115,577 $ 6,559
======= ======= =======
Cumulative interest rate sensitivity gap to total assets 6.66% .59%
</TABLE>
- ---------------------------
(1) Interest-earning assets and interest-bearing liabilities are shown as
repricing based on contractual terms to repricing, without consideration of
loan prepayments or deposit decay assumptions.
(2) Does not include corporate equity securities or FHLB stock.
(3) Represents loans receivable totals before consideration of net items and
excluding loans held for sale.
In addition to the gap method of monitoring interest rate sensitivity,
Camco also employs computer model simulations. Interest rate risk ("IRR")
management has various sources and it is not simply the risk from rates rising
and falling. In fact, there are four sources of IRR: repricing risk, basis risk,
yield curve risk, and option risk. Gap modeling only focuses on repricing risk.
Income simulations that incorporate cash flow analysis: (1) measure the size and
direction of interest rate exposure under a variety of interest rate and yield
curve shape scenarios; (2) provides the opportunity to capture all critical
elements such as volume, maturity dates, repricing dates, prepayment volumes,
and hidden options such as caps, floors, puts, and calls; (3) utilizes the data
to clearly focus attention on critical variables; (4) are dynamic; and (5)
reflect changes in prevailing interest rates which affect different assets and
liabilities in different ways. These simulations are run on a quarterly basis
using an interest rate shocking technique to determine the effects on Camco's
net interest income, assuming an immediate change in interest rates of +/- 200
basis points. Camco has an interest rate risk management policy that limits the
amount of deterioration in net interest income associated with an assumed
interest rate shock of +/-200 points change in interest rates, to no more than a
(25)% change in net interest income. The model results as of December 31, 2001
are as follows:
Changes in Interest Rate Assumption
(Dollars in thousands)
+200bp -200bp
Net interest income - increase (decrease) $1,949 $(2,341)
Net interest income - % change 6.6 (8.0)
-37-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information contained under the captions "Board of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement
for the 2002 Annual Meeting of Stockholders to be filed by Camco no later than
120 days after the end of the fiscal year (the "Proxy Statement") is
incorporated herein by reference.
Item 11. Executive Compensation.
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information contained in the Proxy Statement under the caption
"Voting Securities and Ownership of Certain Beneficial Owners and Management" is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information contained in the Proxy Statement under the caption
"Certain Relationships and Related Transactions" is incorporated herein by
reference.
-38-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Exhibits.
3(i) Certificate of Incorporation
3(ii) Bylaws
10(i) Employment Agreement between Camco and
Richard C. Baylor
10(ii) Employment Agreement between Camco and
Larry A. Caldwell
21 Subsidiaries of Camco
23(i) Consent of Grant Thornton LLP regarding Camco's
Consolidated Financial Statements and Form S-8
23(ii) Consent of Crowe, Chizek and Company LLP regarding
Camco Financial and Subsidiaries Salary Savings Plan
Financial Statements and Form S-8
99 2001 Financial Statements of the Camco Financial and
Subsidiaries Salary Savings Plan
(b) Reports on Form 8-K.
Camco filed a Form 8-K on November 30, 2001, disclosing the
acquisition of Columbia Financial.
-39-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Camco Financial Corporation
By /s/ Richard C. Baylor
------------------------------------------------
Richard C. Baylor,
President, Chief Executive Officer and a Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been duly signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ Anthony J. Popp By /s/ Larry A. Caldwell
------------------------------- ---------------------
Anthony J. Popp, Larry A. Caldwell
Director Chairman and Director
Date: March 19, 2002 Date: March 19, 2002
By /s/ Samuel W. Speck By /s/ Robert C. Dix, Jr.
------------------------------- -----------------------
Samuel W. Speck, Robert C. Dix, Jr.,
Director Director
Date: March 19, 2002 Date: March 19, 2002
By /s/ Jeffrey T. Tucker By /s/ Paul D. Leake
------------------------------- ------------------
Jeffrey T. Tucker, Paul D. Leake,
Director Director
Date: March 19, 2002 Date: March 19, 2002
By /s/ Eric Spann By /s/ Terry A. Feick
------------------------------- -------------------
Eric Spann, Terry A. Feick,
Director Director
Date: March 19, 2002 Date: March 19, 2002
By /s/ Kenneth R. Elshoff By /s/ Susan J. Insley
------------------------------- --------------------
Kenneth R. Elshoff, Susan J. Insley,
Director Director
Date: March 19, 2002 Date: March 19, 2002
By /s/ Mark A. Severson By /s/ Carson K. Miller
------------------------------- ---------------------
Mark A. Severson, Carson K. Miller,
Chief Financial Officer Director
Date: March 19, 2002 Date: March 19, 2002
-40-
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
ITEM DESCRIPTION
<S> <C> <C>
Exhibit 3(i) Third Restated Certificate of Incorporated by reference to Camco's
Incorporation of Camco Financial Annual Report on Form 10-K for the fiscal
Corporation, as amended year ended December 31, 1999 ("1999 Form
10-K"), Exhibit 3(i)
Exhibit 3(ii) 1987 Amended and Restated By-Laws of
Camco Financial Corporation
Exhibit 10(i) Employment Agreement dated January 1,
2001, by and between Camco Financial
Corporation and Richard C. Baylor
Exhibit 10(ii) Employment Agreement dated November 9,
2001, by and between Camco Financial
Corporation and Larry A. Caldwell
Exhibit 21 Subsidiaries of Camco Incorporated by reference to the 1999 Form 10-K,
Exhibit 21
Exhibit 23(i) Consent of Grant Thornton LLP regarding
Camco's Consolidated Financial
Statements and Form S-8
Exhibit 23(ii) Consent of Crowe, Chizek and Company LLP
regarding Camco Financial & Subsidiaries
Salary Savings Plan Financial Statements
and Form S-8
Exhibit 99 2001 Financial Statements of the Camco
Financial & Subsidiaries Salary Savings
Plan
</TABLE>
-41-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>3
<FILENAME>camco10k_ex32123101.txt
<DESCRIPTION>CAMCO FINANCIAL CORPORATION, EX-3.2
<TEXT>
Exhibit 3 (ii)
1987
AMENDED AND RESTATED BY-LAWS
OF
CAMCO FINANCIAL CORPORATION
ARTICLE ONE
OFFICES
Section 1.01. Registered Office. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware or such other place
in the State of Delaware as the Directors may designate from time to time by
resolution.
Section 1.02. Business Offices. The corporation may also have offices
at such other places both within and without the State of Delaware as the board
of directors may from time to time determine or the business of the corporation
may require.
ARTICLE TWO
MEETINGS OF STOCKHOLDERS
Section 2.01. Place of Meetings. All meetings of the stockholders for
the election of directors shall be held in the City of Cambridge, State of Ohio
at such place as may be fixed from time to time by the board of directors, or at
such other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2.02. Annual Meeting. Annual meetings of stockholders,
commencing with the year 1988 shall be held on the fourth Tuesday in May in each
year, if not a legal holiday, and if a legal holiday, then on the next business
day following, at three o'clock p.m. (local time at the place of meeting), or at
such other date or time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting, for the election of directors
and to transact such other business as may properly be brought before the
meeting.
<PAGE>
Section 2.03. Notice of Annual Meeting. Written notice of the annual
meeting of stockholders stating the place, date and hour of the meeting shall be
given to each stockholder entitled to vote at such meeting not less than ten nor
more than sixty (60) days before the date of the meeting.
Section 2.04. List of Stockholders. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 2.05. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, may be called only as provided in
the certificate of incorporation.
Section 2.06. Notice of Special Meetings. Written notice of a special
meeting stating the place, date and hour of the meeting, and the purpose or
purposes for which the meeting is called, shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting.
-2-
<PAGE>
Section 2.07. Business Transacted at Special Meetings. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
Section 2.08. Quorum. The holders of not less than a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time to another time or place, without notice other than
announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present or represented; provided, however, that if the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. At such adjourned meeting at which a quorum shall be present in person
or represented by proxy, the corporation may transact any business which might
have been transacted at the original meeting.
Section 2.09. Vote Required. At all meetings for the election of
directors at which a quorum is present, the candidates receiving the greatest
number of votes shall be elected. Any other matter submitted to the stockholders
at a meeting at which a quorum is present shall be decided by the vote of the
holders of a majority of the stock having voting power, represented in person or
by proxy, unless the matter is one upon which a different vote is required by
express provision of the statutes, the certificate of incorporation or the
by-laws, in which case such express provision shall govern and control the
decision of such matter.
-3-
<PAGE>
Section 2.10. Voting Rights. Unless otherwise provided in the
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder.
Section 2.11. Proxies. Each stockholder entitled to vote at a meeting
of stockholders or to express consent and dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three (3) years from
its date, unless the proxy provides for a longer period.
Section 2.12. Action Without Meeting. Any action required or permitted
to be taken by the stockholders of the corporation must be taken pursuant to a
vote of such stockholders at an annual or special meeting of such stockholders
that is duly held pursuant to notice. No action required or permitted to be
taken by the stockholders of the corporation at any annual or special meeting of
such stockholders may be taken pursuant to one or more consents in writing
signed by the holders of all or any other portion of the outstanding stock
entitled to vote on such action.
ARTICLE THREE
DIRECTORS
Section 3.01. Number of Directors. The authorized number of directors
may be fixed or changed from time to time and at any time by a resolution
adopted by a majority of the whole authorized number of directors, but no
reduction in the number of directors shall of itself have the effect of
shortening the term of any incumbent director. Until changed in accordance with
law, the total authorized number of directors shall be nine (9). The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 3.03 of the by-laws.
Section 3.02. Classification and Term of Directors. The directors shall
be divided into three classes. If the authorized number of directors is
increased or decreased at any time, the directors may, by a resolution adopted
by the whole authorized number of directors, determine the number of directors
to be added or subtracted, as the case may be, from any class or classes of
directors, and the effect of such increase or decrease on each class need not be
uniform; provided, however, that the authorized number of directors of any class
-4-
<PAGE>
shall not exceed by more than four (4) the authorized number of directors of any
other class. The election of each class of directors shall be a separate
election. The term of office of the three directors who shall be elected at the
annual meeting of stockholders for 1977 shall expire at the annual meeting of
stockholders for 1980; the term of office of Larry A. Caldwell, David A.
Kesterson and John H. Heiby, who were elected as directors at the annual meeting
of stockholders for 1976, shall expire at the annual meeting of stockholders for
1979; and the term of office of Carl L. Ariker, J.D. Knapp, M.D. and Robert S.
Moorehead, who were elected as directors at the annual meeting of stockholders
for 1975, shall expire at the annual meeting of stockholders for 1978; and at
each annual meeting of stockholders commencing with the year 1978, directors
shall be elected to succeed the directors of the class whose terms shall expire
in that year, each to hold office for a term of three years, so that the term of
office of one class of directors shall expire in each year; provided, however,
that each director elected at any time shall hold office until his successor is
duly elected and shall qualify, or until his earlier death, resignation or
removal.
Section 3.03. Vacancies. Vacancies, and newly-created directorships
resulting from any increase in the authorized number of directors, may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and any director so chosen shall hold office until
the next annual election and until his successor is duly elected and shall
qualify, or until his earlier death, resignation or removal. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute. If, at the time of filling any vacancy or any newly-created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
-5-
<PAGE>
Court of Chancery of the State of Delaware may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the directors chosen by the directors
then in office.
Section 3.04. Authority of Board of Directors. The business of the
corporation shall be managed by its board of directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by statute or by the certificate of incorporation or by the by-laws directed or
required to be exercised or done by the stockholders.
Section 3.05. Place of Meetings. All meetings of the board of
directors, both regular and special, may be held at the principal office of the
corporation in Cambridge, Ohio or at any other place within or without the State
of Delaware.
Section 3.06. Regular Meetings. A regular meeting of the board of
directors shall be held immediately following the adjournment of each annual
meeting of stockholders at which directors are elected, and notice of such
meeting need not be given. Additional regular meetings of the board of directors
may be held at such other times and places as may from time to time be
determined by resolution by the board of directors, and notice of any such
additional regular meeting need not be given.
Section 3.07. Special Meetings. Special meetings of the board of
directors may be called only by the president upon his causing one (1) days'
notice thereof to be given to each director, either personally or by mail or by
telegram. Special meetings of the board of directors shall be called by the
president or secretary in like manner and upon the giving of like notice on the
written request of two directors.
-6-
<PAGE>
Section 3.08. Quorum. At all meetings of the board a majority of the
number of directors in office, but in no case less than one-third (1/3) of the
total number of directors authorized by, or in the manner provided in, the
certificate of incorporation or the by-laws, shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation or by the by-laws. If a quorum shall not be present
at any meeting of the board of directors, the directors present thereat may
adjourn the meeting from time to time to another time or place, without notice
other than announcement at the meeting of the time and place of the adjourned
meeting, until a quorum shall be present.
Section 3.09. Action Without Meeting. Unless otherwise restricted by
the certificate of incorporation or the by-laws, any action required or
permitted to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
Section 3.10. Committees of Directors. The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
-7-
<PAGE>
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee shall, unless otherwise specifically provided in the resolution of the
board of directors, have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation [except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation], adopting an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the by-laws of the corporation: and, unless otherwise specifically
provided in the resolution of the board of directors, the by-laws, or the
certificate of incorporation, such committee shall have the power or authority
to declare a dividend, to authorize the issuance of stock, or to adopt a
certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors.
-8-
<PAGE>
Section 3.11. Committee Minutes. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
when required.
Section 3.12. Compensation of Directors. Unless otherwise restricted by
the certificate of incorporation, the board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 3.13. Qualifications of Directors.
1. No person shall serve or be appointed, nominated or elected as a
Director of the corporation after having attained the age of seventy (70) years.
2. No person shall serve or be appointed, nominated or elected as a
Director of the corporation who is not the holder of record of at least one
hundred (100) shares of its issued and outstanding common stock.
3. Any nominee for election as a Director of the corporation may be
proposed only by the Board of Directors or by any stockholder entitled to vote
for the election of such person as a Director. No person, other than a nominee
proposed by the Board of Directors, may be nominated for election, or elected,
as a Director of the corporation unless such person shall have been proposed as
a Director in a written notice from a stockholder entitled to vote for the
election of such person as a Director, delivered or mailed by first-class United
States mail, postage prepaid, to the Secretary of the corporation at its
principal office. In the case of a nominee proposed for election as a Director
-9-
<PAGE>
at an annual meeting of stockholders, such written notice of a proposed nominee
must be received by the Secretary of the corporation on or before the later of
(A) March 31 immediately preceding such annual meeting or (B) the sixtieth
(60th) day prior to the first anniversary of the most recent annual meeting of
stockholders of the corporation held for the election of Directors; provided,
however, that if the annual anniversary, then the written notice required by
this paragraph (3) must be received by the Secretary within a reasonable time
prior to the date of such annual meeting. In the case of a nominee proposed for
election as a Director at a special meeting of stockholders at which Directors
are to be elected, such written notice of a proposed nominee must be received by
the Secretary of the corporation no later than the close of business on the
seventh day following the day on which notice of the special meeting was mailed
to stockholders. Each such written notice of a proposed nominee shall set forth
(i) the name, age, business and residence addresses of each nominee proposed in
such notice, (ii) the principal occupation or employment of each such nominee
and (iii) the number of each class of shares of the stock of the corporation
owned beneficially and/or of record by each such nominee and the length of time
such shares have been so owned.
4. If a stockholder shall attempt to nominate one or more persons for
election as a Director at any meeting of stockholders at which one or more
Directors are to be elected without having identified each such person in a
written notice given as contemplated by, and/or without having provided therein
the information specified in, paragraph (3) of this Section 3.13, each such
attempted nomination shall be invalid and shall be disregarded unless the person
acting as chairman of the meeting determines, in his sole discretion, that
acceptance of such nomination is unlikely to affect the results of such election
and should accordingly be accepted as a courtesy.
5. Nothing contained in this Section 3.13 shall be construed to
prohibit the Board of Directors to fix powers or voting or other rights of the
preferred stock, or of any series of the preferred stock, of the corporation
that are inconsistent with the provisions of this Section 3.13, and if the terms
and provisions fixing the powers or voting or other rights of any such stock
shall be inconsistent with the provisions of this Section 3.13, the terms and
provisions of such powers or voting or other rights shall govern and control.
-10-
<PAGE>
ARTICLE FOUR
NOTICES
Section 4.01. Form of Notice. Whenever, under the provisions of the
statutes or of the certificate of incorporation or of the by-laws, notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or stockholder at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram.
Section 4.02. Waiver of Notice. Whenever any notice is required to be
given under the provisions of the statutes, of the certificate of incorporation
or of the by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE FIVE
OFFICERS
Section 5.01. Officers. The officers of the corporation shall be chosen
by the board of directors and shall be a president, who must be a director; a
vice-president; a secretary; a treasurer and such additional officers and
assistant officers as the directors may from time to time elect. The board of
directors may elect a chairman of the board, who must be a director. Any number
of offices may be held by the same person, unless the certificate of
incorporation or the by-laws otherwise provide.
-11-
<PAGE>
Section 5.02. Term. Any officer of the corporation shall hold
office at the pleasure of the board of directors and until his successor is
elected and qualified, or until his earlier death, resignation or removal.
Section 5.03. Additional Officers and Agents. The board of directors
may appoint such other officers and agents as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board.
Section 5.04. Compensation. The compensation of all officers and
agents of the corporation shall be fixed by the board of directors
.
Section 5.05. Removal of Officers. Any officer elected or
appointed by the board of directors may be removed at any time by the board of
directors. Any vacancy occurring in any office of the corporation shall
be filled by the board of directors.
Section 5.06. Duties of the Chairman of the Board. The chairman of the
board, if any, shall preside at all meetings of the directors at which he is
present.
Section 5.07. Duties of the President. The president shall be the chief
executive officer of the corporation, shall preside at all meetings of the
stockholders and, in the absence of the chairman of the board, or if there is no
chairman of the board, at all meetings of the board of directors, shall have
general and active management of the business of the corporation and shall see
that all orders and resolutions of the board of directors are carried into
effect. He shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the board of directors to some other
officer or agent of the corporation.
-12-
<PAGE>
Section 5.08. Duties of the Vice-President. In the absence of the
president or in the event of his inability or refusal to act, the vice-president
(or in the event there be more than one vice-president, the vice-presidents in
the order designated by the board of directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the president, and when so acting, shall have all the powers of and be subject
to all restrictions upon the president. The vice-presidents shall perform such
other duties and have such other powers as the board of directors may from time
to time prescribe.
Section 5.09. Duties of the Secretary. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and
shall record all the proceedings of the meetings of the stockholders and of the
board of directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
board of directors, and shall perform such other duties as may be prescribed by
the board of directors or the president, under whose supervision he shall be. He
shall have custody of the corporate seal of the corporation, if any, and he, or
an assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 5.10. Duties of the Assistant Secretary. The assistant
secretary, if any, or if there be more than one, the assistant secretaries in
the order determined by the board of directors (or if there be no such
determination, then in the order of their election), shall, in the absence of
the secretary or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
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<PAGE>
Section 5.11. Duties of the Treasurer. The treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the board
of directors. The treasurer shall disburse the funds of the corporation as may
be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
If required by the board of directors, the treasurer shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 5.12. Duties of the Assistant Treasurer. The assistant
treasurer, if any, or if there shall be more than one, the assistant treasurers
in the order determined by the board of directors (or if there be no such
determination, then in the order of their election), shall, in the absence of
the treasurer or in the event of his inability or refusal to act, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
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<PAGE>
ARTICLE SIX
STOCK AND STOCKHOLDERS
Section 6.01. Certificates. Every holder of stock in the corporation
shall be entitled to have a certificate, signed by or in the name of the
corporation by the chairman of the board or the president or a vice-president,
and the treasurer or an assistant treasurer, or the secretary or an assistant
secretary of the corporation, representing the number of shares owned by him in
the corporation, which certificate may, at the option of the corporation, bear
such recitals as are required or permitted by law. Any or all of the signatures
on the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 6.02. Record Date. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the board of directors may fix, in advance,
a record date, which shall not (i) be more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action, or (ii) precede the date upon which the resolution fixing
such record date is adopted by the board of directors. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
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<PAGE>
Section 6.03. Registered Stockholders. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for such calls and assessments as are permitted by statute a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by statute.
Section 6.04. Transfers. Where a certificate evidencing stock
of the corporation is presented to the corporation or its proper agents
with a request to register transfer, the transfer shall be registered as
requested if:
1. an appropriate person signs on each certificate so
presented or signs on a separate document an
assignment or transfer of shares evidenced by each
such certificate, or signs a power to assign or
transfer such shares, or when the signature of an
appropriate person is written without more on the
back of each such certificate; and
2. reasonable assurance is given that the indorsement of
each appropriate person is genuine and effective; the
corporation or its agents may refuse to register a
transfer of shares unless the signature of each
appropriate person is guaranteed by a commercial bank
or trust company having an office or a correspondent
in the City of New York or by a firm having
membership in the New York Stock Exchange; and
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<PAGE>
3. all applicable laws relating to the collection of
transfer or other taxes have been complied with; and
4. the corporation or its agents are not otherwise
required or permitted to refuse to register such
transfer.
Section 6.05. Lost, Wrongfully Taken or Destroyed Certificates. Except
as otherwise provided by law, where the owner of a certificate evidencing stock
of the corporation claims that such certificate has been lost, destroyed or
wrongfully taken, the board of directors must cause the corporation to issue a
new certificate in place of the original certificate if the owner:
1. so requests before the corporation has notice that
such original certificate has been acquired by a bona
fide purchaser; and
2. files with the corporation, unless waived by the
board of directors, an indemnity bond, with surety
or sureties satisfactory to the corporation, in
such sum as the directors may, in their discretion,
deem reasonably sufficient as indemnity against any
loss or liabilit ythat the corporation may incur by
reason of the issuance of each such new certificate:
and
3. satisfies any other reasonable requirements which
may be imposed by the board of directors, in their
discretion.
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<PAGE>
ARTICLE SEVEN
INDEMNIFICATION AND INSURANCE
Section 7.01. Mandatory Indemnification. The corporation shall
indemnify any officer or director of the corporation, and any officer (other
than an assistant officer) or director (i) of a subsidiary of the corporation or
(ii) of a subsidiary of any such subsidiary, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, any action threatened or instituted by or in the
right of the corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or of a subsidiary of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation (domestic
or foreign, nonprofit or for profit), partnership, joint venture, trust or other
enterprise, against expenses (including, without limitation, attorneys' fees,
filing fees, court reporters' fees and transcript costs), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful. A person claiming
indemnification under this Section 7.01 shall be presumed, in respect of any act
or omission giving rise to such claim for indemnification, to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal matter, to have
had no reasonable cause to believe his conduct was unlawful, and the termination
of any action, suit or proceeding by judgment, order, settlement or conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself, rebut
such presumption.
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<PAGE>
Section 7.02. Court-Approved Indemnification. Anything contained
in the by-laws or elsewhere to the contrary notwithstanding:
(A) the corporation shall not indemnify any officer or
director of the corporation who was a party to any completed action or suit
instituted by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, in respect of any claim, issue or matter asserted in
such action or suit as to which he shall have been adjudged to be liable for
gross negligence or misconduct (other than negligence) in the performance of his
duty to the corporation unless and only to the extent that the Court of Common
Pleas of Franklin County, Ohio or the court in which such action or suit was
brought shall determine upon application that, despite such adjudication of
liability, and in view of all the circumstances of the case, he is fairly and
reasonably entitled to such indemnity as such Court of Common Pleas of Franklin
County, Ohio or such other court shall deem proper; and
(B) the corporation shall promptly make any such unpaid
indemnification as is determined by a court to be proper as contemplated by this
Section 7.02.
Section 7.03. Indemnification for Expenses. Anything contained in the
by-laws or elsewhere to the contrary notwithstanding, to the extent that an
officer or director of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
7.01, or in defense of any claim, issue or matter therein, he shall be promptly
indemnified by the corporation against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript costs)
actually and reasonably incurred by him in connection therewith.
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<PAGE>
Section 7.04. Determination Required. Any indemnification required
under Section 7.01 and not precluded under Section 7.02 shall be made by the
corporation only upon a determination that such indemnification of the officer
or director is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 7.01. Such determination may be made
only (A) by a majority vote of a quorum consisting of directors of the
corporation who were not and are not parties to any such action, suit or
proceeding, or (B) if such a quorum is not obtainable or if a majority of a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (C) by the stockholders, or (D) by the Court of Common Pleas
of Franklin County, Ohio or (if the corporation is a party thereto) the court in
which such action, suit or proceeding was brought, if any; any such
determination may be made by a court under division (D) of this Section 7.04 at
any time [including, without limitation, any time before, during or after the
time when any such determination may be requested of, be under consideration by
or have been denied or disregarded by the disinterested directors under division
(A) or by independent legal counsel under division (B) or by the stockholders
under division (C) of this Section 7.04]; and no failure for any reason to make
any such determination, and no decision for any reason to deny any such
determination, by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by stockholders under division
(C) of this Section 7.04 shall be evidence in rebuttal of the presumption
recited in Section 7.01.
Section 7.05. Advances for Expenses. Expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) incurred in defending any action, suit or proceeding referred to in
Section 7.01 shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding to or on behalf of the officer or
director promptly as such expenses are incurred by him, but only if such officer
or director shall first agree, in writing, to repay all amounts so paid in
respect of any claim, issue or other matter asserted in such action, suit or
proceeding in defense of which he shall not have been successful on the merits
or otherwise:
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<PAGE>
(A) if it shall ultimately be determined as provided in
Section 7.04 that he is not entitled to be indemnified by the corporation as
provided under Section 7.01; or
(B) if, in respect of any claim, issue or other matter
asserted by or in the right of the corporation in such action or suit, he shall
have been adjudged to be liable for gross negligence or misconduct (other than
negligence) in the performance of his duty to the corporation, unless and only
to the extent that the Court of Common Pleas of Franklin County, Ohio or the
court in which such action or suit was brought shall determine upon application
that, despite such adjudication of liability, and in view of all the
circumstances, he is fairly and reasonably entitled to all or part of such
indemnification.
Section 7.06. Article Seven Not Exclusive. The indemnification provided
by this Article Seven shall not be deemed exclusive of any other rights to which
any person seeking indemnification may be entitled under the certificate of
incorporation or any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be an officer or director of the corporation and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
Section 7.07. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee, or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the obligation or the power to
indemnify him against such liability under the provisions of this Article Seven.
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<PAGE>
Section 7.08. Certain Definitions. For purposes of this Article
Seven, and as examples and not by way of limitation:
(A) a person claiming indemnification under this Article Seven
shall be deemed to have been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Section 7.01, or in defense of any
claim, issue or other matter therein, if such action, suit or proceeding shall
be terminated as to such person, with or without prejudice, without the entry of
a judgment or order against him, without a conviction of him, without the
imposition of a fine upon him and without his payment or agreement to pay any
amount in settlement thereof (whether or not any such termination is based upon
a judicial or other determination of the lack of merit of the claims made
against him or otherwise results in a vindication of him); and
(B) references to an "other enterprise" shall include employee
benefit plans; references to a "fine" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries; and references to "a
subsidiary of the corporation" shall include another corporation if securities
representing at least a majority of the voting power of such other corporation
are owned by the corporation; and a person who acted in good faith and in a
manner he reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" within the meaning
of that term as used in this Article Seven.
Section 7.09. Venue. Any action, suit or proceeding to determine a
claim for indemnification under this Article Seven may be maintained by the
person claiming such indemnification, or by the corporation, in the Court of
Common Pleas of Franklin County, Ohio. The corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Common Pleas of Franklin County, Ohio in any
such action, suit or proceeding.
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<PAGE>
ARTICLE EIGHT
MISCELLANEOUS
Section 8.01. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, deem proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 8.02. Checks. All checks or demands for money and notes
of the corporation shall be signed by such officer or officers or such
other person or persons as the board of directors may from time to time
designate.
Section 8.03. Fiscal Year. The fiscal year of the corporation
may be fixed by resolution of the board of directors.
Section 8.04. Seal. The corporate seal, if any, may have
inscribed thereon the name of the corporation, the year of its organization
and the words "Corporate Seal, Delaware". The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE NINE
AMENDMENTS
Section 9.01. Amendments. The by-laws of the corporation may
be adopted, altered, amended or repealed only as provided in the certificate
of incorporation.
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>4
<FILENAME>camco10k_ex101123101.txt
<DESCRIPTION>CAMCO FINANCIAL CORPORATION (10-K, EX-10.1)
<TEXT>
Exhibit 10(i)
Employment Agreement
(Amended and Restated November 20, 2001)
THIS Employment Agreement (this "Agreement") is entered into effective
the 1st day of January, 2001, by and between Camco Financial Corporation, a
savings and loan holding company incorporated under the laws of the State of
Delaware ("Camco"), the principal office of which is located at 6901 Glenn
Highway, Cambridge, Ohio, and Richard C. Baylor (the "Employee"), an individual
whose residential address is 156 Hawthorne Drive, New Concord, Ohio 43762, and
is amended and restated effective November 20, 2001.
WITNESSETH:
WHEREAS, the Employee has assumed the responsibilities of President and
Chief Executive Officer of Camco effective January 1, 2001; and
WHEREAS, as a result of the skill, knowledge, experience and
performance of the Employee, Camco desires to continue to retain the services of
the Employee as President and Chief Executive Officer in accordance with the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable considerations, the receipt and
sufficiency of which is hereby acknowledged, Camco and the Employee agree as
follows:
1. Employment and Term. The Employee is employed as the President and
Chief Executive Officer of Camco, and the Employee hereby accepts employment as
the President and Chief Executive Officer of Camco, upon the terms and
conditions of this Agreement. The term of employment shall be for the period
commencing on January 1, 2001, and shall end on December 31, 2003 (the "Term").
At the end of each year of the Term, the Agreement may be extended for periods
of one year each by Camco's Board of Directors ("Board") at its sole and
exclusive discretion, subject to the Employee's acceptance thereof. Prior to
consenting to any such extension, the Board will conduct a performance
evaluation of the Employee, and the results of such review shall be noted in the
minutes of the meeting of the Board. The Term of this Agreement, together with
each extension period, is hereinafter referred to as the "Employment Term".
2. Duties of Employee.
(a) General Duties and Responsibilities. The Employee shall
serve as the President and Chief Executive Officer of Camco; shall perform the
duties and responsibilities customary for such offices to the best of his
ability and in accordance with (i) the policies established by the Board and
(ii) all applicable laws and regulations; and shall perform such other duties
not inconsistent with his position as may be assigned to him from time to time
by the Board.
<PAGE>
(b) Devotion of Time to Camco's Business. The Employee shall
devote his entire productive time, ability and attention during normal business
hours throughout the Employment Term to the faithful performance of his duties
under this Agreement subject to the direction of the Board. The Employee shall
not directly or indirectly render any services of a business, commercial or
professional nature to any person or organization without the prior written
consent of the Board; provided, however, that the Employee shall not be
precluded from: (i) vacations and other leave time in accordance with Section
3(d) hereof; (ii) reasonable participation in community, civic, charitable or
similar organizations; (iii) reasonable participation in industry-related
activities including, but not limited to, directorship of a Federal Home Loan
Bank, attending industry trade association (national and state) conventions,
conferences and committee meetings, and holding positions of responsibility
therein; (iv) serving as an officer and/or director of Camco's subsidiaries; or
(v) the pursuit of personal investments that do not interfere or conflict with
the performance of the Employee's duties for Camco.
3. Compensation, Benefits and Reimbursements.
(a) Salary. The Employee shall receive an annual salary
payable in equal installments not less often than monthly. The amount of the
annual salary shall be $160,000 until changed by the Board. Each year throughout
the Employment Term, the amount of the Employee's annual salary shall be
reviewed by the Board, and shall be set at an amount not less than $160,000,
based upon the Employee's responsibilities and individual performance and the
overall profitability and financial condition of Camco (the "Annual Review").
The result of the Annual Review shall be reflected in the minutes of the Board.
Any directors' fees received by Employee, whether paid by Camco or any other
entity, shall be in addition to the salary provided for in this Agreement and
may be retained by Employee in their entirety.
(b) Expenses. In addition to any compensation received under
Section 3(a), Camco shall pay or reimburse the Employee for all reasonable
travel, entertainment and miscellaneous expenses incurred in connection with the
performance of his duties under this Agreement including participation in
industry-related activities. Such reimbursement shall be made in accordance with
the existing policies and procedures of Camco pertaining to reimbursement of
expenses to senior management officials.
(c) Employee Benefit Program. During the Employment Term, the
Employee shall be entitled to participate in all formally established employee
benefit, bonus, pension and profit-sharing plans and similar programs that are
maintained by Camco from time to time, including programs regarding group
health, disability or life insurance, salary continuation insurance,
reimbursement of membership fees in civic, social and professional organizations
and all employee benefit plans or programs hereafter adopted in writing by the
Board, for which senior management personnel are eligible, including any
employee stock ownership plan or stock option plan (collectively, the "Benefit
Plans"). Notwithstanding the foregoing sentence, Camco may discontinue at any
time any such Benefit Plans now existing or hereafter adopted, to the extent
permitted by the terms of such plans, and shall not be required to compensate
the Employee for the elimination of any such Benefit Plans.
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<PAGE>
(d) Vacation and Sick Leave. The Employee shall be entitled,
without loss of pay, to be absent voluntarily from the performance of his duties
under this Agreement, subject to the following conditions:
(i) The Employee shall be entitled to an annual
vacation, the duration of which shall not be less than four weeks each calendar
year;
(ii) Vacation time shall be scheduled by the
Employee in a reasonable manner and shall be subject to approval by the Board.
The Employee shall not be entitled to receive any additional compensation from
Camco in the event of his failure to take the full allotment of vacation time in
any calendar year nor shall unused vacation time be carried over into any
succeeding calendar year; and
(iii) The Employee shall be entitled to annual
sick leave as established by the Board for senior management officials of Camco.
In the event that any sick leave time shall not have been used during any
calendar year, such leave shall accrue to subsequent calendar years only to the
extent authorized by the Board. Upon termination of his employment, the Employee
shall not be entitled to receive any additional compensation from Camco for
unused sick leave.
(e) Employee shall be entitled to the full-time use of a
company-owned automobile. Camco shall be responsible for the cost of obtaining
collision and liability insurance for the automobile and shall pay for all other
costs of operating the automobile including fuel, maintenance and repair.
(f) During the Employment Term, Camco shall pay Employee's
membership dues at the Cambridge Country Club and non-resident membership dues
at the Columbus Club.
4. Termination of Employment. In addition to Camco's right to terminate
the employment of the Employee at the end of the Employment Term, Camco may
terminate the employment of the Employee at any other time during the Employment
Term. In the event that Camco terminates the employment of the Employee during
the Employment Term because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure or refusal to perform the duties and responsibilities
assigned in this Agreement, willful violation of any law, rule, regulation or
final cease-and-desist order (other than traffic violations or similar
offenses), conviction of a felony or for fraud or embezzlement, or material
breach of any provision of this Agreement (collectively, "Just Cause"), the
Employee shall have no right to receive any compensation or other benefits for
any period after such termination. If Camco terminates the employment of the
Employee during the Employment Term for any reason other than Just Cause, or if
the Employee terminates his employment for Good Reason (hereinafter defined),
the Employee shall be entitled to the following:
(a) Termination After Change of Control. If, in connection
with or within one year of a Change of Control (hereinafter defined) of Camco,
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<PAGE>
Camco terminates the employment of the Employee for any reason other than Just
Cause, or if the Employee elects to terminate his employment for Good Reason,
then the following shall occur:
(i) Camco shall promptly pay to the Employee or
to his beneficiaries, dependents or estate an amount equal to three times the
Employee's "average annual compensation" as such term is defined in Section 280G
of the Internal Revenue Code of 1986, as amended.
(ii) Camco shall provide to the Employee and his
eligible dependents health, life and disability insurance benefits substantially
equal to those being provided to the Employee and his eligible dependents
immediately prior to the occurrence of the Change of Control, at Camco's expense
and as if the Employee were still employed under this Agreement for a period of
36 months.
(iii) Camco shall promptly pay to the Employee an
amount equal to all directors' fees to which the Employee would otherwise have
been entitled if he had remained a director of Camco or any of its subsidiaries
for a period of 36 months.
The Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement, whether in this paragraph
or elsewhere in this Agreement, by seeking other employment or otherwise, nor
shall any amounts received from other employment or otherwise by the Employee
offset in any manner the obligations of Camco hereunder, except as specifically
stated in subsection (ii) of this subsection (a).
A "Change of Control" shall mean any one of the
following events: (i) the acquisition of ownership or power to vote more than
25% of the voting stock of Camco; (ii) the acquisition of the ability to control
the election of a majority of the directors of Camco; (iii) during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of Camco cease for any reason to constitute at
least a majority thereof; provided, however, that any individual whose election
or nomination for election as a member of the Board of Directors of Camco was
approved by a vote of at least two-thirds of the directors then in office shall
be considered to have continued to be a member of the Board of Directors of
Camco; or (iv) the acquisition by any person or entity of "conclusive control"
of Camco within the meaning of 12 C.F.R. ss.574.4(a), or the acquisition by any
person or entity of "rebuttable control" within the meaning of 12 C.F.R.
ss.574.4(b) that has not been rebutted in accordance with 12 C.F.R. ss.574.4(c).
For purposes of this paragraph, the term "person" refers to an individual or
corporation, partnership, trust, association, or other organization, but does
not include the Employee and any person or persons with whom the Employee is
"acting in concert" within the meaning of 12 C.F.R. Part 574.
"Good Reason" shall be deemed to exist if, within one
year following a Change of Control, any of the following occurs, without the
prior written consent of the Employee: (I) the present capacity or circumstances
in which the Employee is employed are materially and adversely changed, in the
reasonable opinion of the Employee (including, without limitation, a reduction
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<PAGE>
in responsibilities or authority, the assignment of duties or responsibilities
substantially inconsistent with those normally associated with the position of
President and Chief Executive Officer or a reduction in salary); (II) the
Employee is no longer the President and Chief Executive Officer of Camco or any
successor by merger to Camco; (III) the Employee is required to move his
personal residence, or perform his principal executive functions, more than
thirty-five (35) miles from his primary office as of the date of the
commencement of the Term of this Agreement; or (IV) Camco otherwise breaches
this Agreement in any material respect.
(b) Termination without Change of Control. In the event Camco
terminates the employment of the Employee for any reason other than Just Cause
and the termination is not covered by the provisions of subsection (a) of this
Section 4, Camco shall be obligated to continue to (i) pay on a monthly basis to
the Employee, his designated beneficiaries or his estate, his annual salary
provided pursuant to Section 2 of this Agreement for the number of months
remaining in the Employment Term as of the date of the termination; and (ii)
provide to the Employee and his eligible dependents, at Camco's expense, health,
life and disability insurance benefits substantially equal to those being
provided to the Employee and his eligible dependents at the date of termination
of his employment until the earliest of (A) the end of the Employment Term under
this Agreement pursuant to Section 1 of this Agreement or (B) that date on which
the Employee is included in another employer's benefit plans as a full-time
employee. The Employee may choose, in lieu of monthly payments of the amounts
set forth above, to receive a lump sum payment equal to the present value of
such payments. For purposes of computing such lump-sum payment, the parties
shall use a discount rate of five percent (5%) per annum.
(c) Death of the Employee. The Employment Term automatically
terminates upon the death of the Employee. In the event of such death, the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which the death occurred.
5. Consolidation, Merger or Sale of Assets. Nothing in this Agreement
shall preclude Camco from voluntarily or involuntarily consolidating with,
merging into, or transferring all, or substantially all, of its assets to
another corporation that assumes all of Camco's obligations and undertakings
hereunder. Upon such a consolidation, merger or transfer of assets, the term
"Camco" as used in this Agreement, shall mean such other corporation or entity
and this Agreement shall continue in full force and effect.
6. Confidential Information. The Employee acknowledges that during his
employment he has learned, will learn and will have access to confidential
information regarding Camco and its customers and business. The Employee agrees
and covenants not to disclose or use for his own benefit or the benefit of any
other person or entity any confidential information, unless or until Camco
consents to such disclosure or use or such information becomes common knowledge
in the industry or is otherwise legally in the public domain. The Employee shall
not knowingly disclose or reveal to any unauthorized person any confidential
information relating to Camco, its subsidiaries or affiliates, or to any of the
businesses operated by them, and the Employee confirms that such information
-5-
<PAGE>
constitutes the exclusive property of Camco. The Employee shall not otherwise
knowingly act or conduct himself (i) to the material detriment of Camco, its
subsidiaries or affiliates or (ii) in a manner which is inimical or contrary to
the interests of Camco.
7. Nonassignability. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Employee, his beneficiaries or legal
representatives without Camco's prior written consent; provided, however, that
nothing in this Section 7 shall preclude (i) the Employee from designating a
beneficiary to receive any benefits payable hereunder upon his death or (ii) the
executors, administrators or other legal representatives of the Employee or his
estate from assigning any rights hereunder to the person or persons entitled
thereto.
8. No Attachment. Except as required by law, no right to receive
payment under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to
execution, attachment, levy or similar process of assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
9. Binding Agreement. This Agreement shall be binding upon, and inure
to the benefit of, the Employee and Camco and their respective permitted
successors and assigns.
10. Amendment of Agreement. This Agreement may not be modified or
amended, except by an instrument in writing signed by the parties hereto.
11. Waiver. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be an estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver, unless specifically stated therein, and each waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than the act specifically waived.
12. Severability. If, for any reason, any provision of this Agreement
is held invalid, such invalidity shall not affect the other provisions of this
Agreement not held so invalid, and each such other provision shall, to the full
extent consistent with applicable law, continue in full force and effect. If
this Agreement is held invalid or cannot be enforced, then any prior agreement
between Camco (or any predecessor thereof) and the Employee shall be deemed
reinstated to the full extent permitted by law, as if this Agreement had not
been executed.
13. Headings. The headings of the paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
14. Governing Law. This Agreement has been executed and delivered in
the State of Ohio, and its validity, interpretation, performance and enforcement
shall be governed by the laws of the State of Ohio, except to the extent that
federal or Delaware law is governing.
-6-
<PAGE>
15. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes any prior Employment
Agreement between Camco, or any predecessor of Camco, and the Employee.
IN WITNESS WHEREOF, Camco has caused this Agreement to be executed by
its duly authorized officers, and the Employee has signed this Agreement, all as
of the day and year first above written.
Attest: CAMCO FINANCIAL CORPORATION
/s/ Anita L. Frencik By: /s/ Larry A. Caldwell
Its Assistant Secretary Larry A. Caldwell,
Chairman of the Board
Witness:
/s/ Sharon K. Chorey /s/ Richard C. Baylor
Richard C. Baylor
President & CEO
-8-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>5
<FILENAME>camco10k_ex102123101.txt
<DESCRIPTION>CAMCO FINANCIAL CORPORATION (10-K, EX-10.2)
<TEXT>
Exhibit 10(ii)
Employment Agreement
THIS Employment Agreement (this "Agreement") is entered into effective
the 9th day of November, 2001, by and between Camco Financial Corporation, a
savings and loan holding company incorporated under the laws of the State of
Delaware ("Camco"), the principal office of which is located at 6901 Glenn
Highway, Cambridge, Ohio, and Larry A. Caldwell (the "Employee"), an individual
whose residential address is 10491 Rock Hill Road, Cambridge, Ohio 43725;
WITNESSETH:
WHEREAS, the Employee has been employed by Camco and/or its
subsidiaries for 44 years, most recently as the Chairman of the Board of Camco
and Chairman of the Board of Advantage Bank, a wholly-owned subsidiary of Camco;
WHEREAS, the Employee and Camco have agreed that the Employee will
retain the position of Chairman of the Board of the Company and Advantage Bank
but will reduce his responsibilities and involvement in other aspects of the
business of Camco; and
WHEREAS, as a result of the skill, knowledge, experience and
performance of the Employee, Camco desires to continue to retain the services of
the Employee as Chairman of the Board of Camco and Advantage Bank in accordance
with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable considerations, the receipt and
sufficiency of which is hereby acknowledged, Camco and the Employee agree as
follows:
1. Employment and Term. The Employee shall continue to serve as the
Chairman of the Board of Camco and Advantage Bank for the period commencing on
the date of this Agreement and ending on November 8, 2002 (the "Initial Term").
At the end of the Initial Term and each year thereafter, this Agreement may be
extended for periods of one year each by Camco's Board of Directors ("Board") at
its sole and exclusive discretion, subject to the Employee's acceptance thereof.
The Initial Term of this Agreement, together with each extension period, is
hereinafter referred to as the "Term".
2. Duties of Employee.
(a) General Duties and Responsibilities. The Employee shall
serve as the Chairman of the Board of Camco and Advantage Bank; shall perform
the duties and responsibilities hereinafter set forth to the best of his ability
and in accordance with (i) the policies established by the Board and (ii) all
applicable laws and regulations.
<PAGE>
The Employee's duties shall include (i) presiding at
meetings of the Board and the shareholders of Camco and the board of directors
of Advantage Bank; (ii) identifying merger and acquisition prospects and
evaluating, analyzing and negotiating merger and acquisition opportunities;
(iii) assisting Camco in presentations to and communications with stock
analysts, investment bankers and stockholders; (iv) advising senior management
of Camco and Advantage Bank; (v) participating in regulatory and trade
association programs and activities; (vi) advising and assisting with
legislative issues affecting Camco or Advantage Bank; and (vii) such other
matters as the Board and the Employee shall mutually agree upon.
(b) Devotion of Time to Camco's Business. The Employee shall
devote 1,000 hours per year to the faithful performance of his duties under this
Agreement. The Employee shall not directly or indirectly render any services of
a business, commercial or professional nature to any person or organization
without the prior written consent of the Board; provided, however, that the
Employee shall not be precluded from: (i) reasonable participation in community,
civic, charitable or similar organizations; (ii) reasonable participation in
industry-related activities including, but not limited to, attending
industry-related and trade association (national and state) conventions,
conferences and committee meetings, and holding positions of responsibility
therein; (iii) serving as an officer and/or director of Camco's subsidiaries and
receiving and retaining compensation, directors' fees and other benefits
therefrom; or (iv) the pursuit of personal investments that do not interfere or
conflict with the performance of the Employee's duties for Camco.
3. Compensation, Benefits and Reimbursements.
(a) Salary. The Employee shall receive an annual salary
payable in equal installments not less often than monthly. The amount of the
annual salary shall be $118,000. Any directors' fees received by Employee,
whether paid by Camco or any other entity, shall be in addition to the salary
provided for in this Agreement and may be retained by Employee in their
entirety.
(b) Expenses. In addition to any compensation received under
Section 3(a), Camco shall pay or reimburse the Employee for all reasonable
travel, entertainment and miscellaneous expenses incurred in connection with the
performance of his duties under this Agreement including participation in
industry-related activities. Such reimbursement shall be made in accordance with
the existing policies and procedures of Camco pertaining to reimbursement of
expenses to senior management officials.
(c) Employee Benefits. During the Term, the Employee shall be
entitled to participate in all tax-qualified employee benefit plans that are
maintained by Camco from time to time during the Term (collectively, the
"Benefit Plans"), unless the Employee's participation is prohibited by law or
the express terms of such Benefit Plans.
The Employee shall be entitled to a distribution under
Camco's incentive bonus plan when bonuses are awarded in 2002. The Employee's
bonus shall be pro-rated based on the Employee's service to Camco for the period
-2-
<PAGE>
beginning January 1, 2001 to the date of this Agreement. Except for the
foregoing distribution, the Employee shall not be a participant in any
non-tax-qualified benefit plan of Camco or Advantage Bank with respect to any
period after the date of this Agreement.
(d) Vacation and Sick Leave. The Employee shall not be
entitled to paid vacation or sick leave without the prior written consent of the
Board.
(e) Other Benefits. Employee shall be entitled to the
full-time use of a company-owned automobile. Camco shall be responsible for the
cost of obtaining collision and liability insurance for the automobile and shall
pay for all other costs of operating the automobile including fuel, maintenance
and repair. During the Term, Camco shall pay Employee's membership dues at the
Cambridge Country Club.
4. Termination of Employment. Camco may terminate the employment of the
Employee at any time. In the event that Camco terminates the employment of the
Employee during the Term because of the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure or refusal to perform the duties and
responsibilities assigned in this Agreement, willful violation of any law, rule,
regulation or final cease-and-desist order (other than traffic violations or
similar offenses), conviction of a felony or for fraud or embezzlement, or
material breach of any provision of this Agreement (collectively, "Just Cause"),
the Employee shall have no right to receive any compensation or other benefits
for any period after such termination. If the employment of the Employee is
terminated during the Term for any reason other than Just Cause, the Employee,
depending on the circumstances, shall be entitled to the following:
(a) Termination After Change of Control. If, in connection
with or within one year of a Change of Control (hereinafter defined) of Camco,
Camco terminates the employment of the Employee for any reason other than Just
Cause, or if the Employee elects to terminate his employment, then the following
shall occur:
(i) If the Change of Control occurs prior to
November 9, 2004 (provided this Agreement is still in effect at such time) Camco
shall promptly pay to the Employee or to his beneficiaries, dependents or estate
an amount equal to $353,999.
(ii) If the Change of Control occurs after
November 9, 2004 but before November 9, 2005 (provided this Agreement is still
in effect at such time), Camco shall promptly pay to the Employee or to his
beneficiaries, dependents or estate an amount equal to $236,000.
(iii) If the Change of Control occurs after
November 9, 2005 but before November 9, 2006 (provided this Agreement is still
in effect at such time), Camco shall promptly pay to the Employee or to his
beneficiaries, dependents or estate an amount equal to $118,000.
(iv) The Employee shall not be required to
mitigate the amount of any payment provided for in this Agreement, whether in
this paragraph or elsewhere in this Agreement, by seeking other employment or
otherwise, nor shall any amounts received from other employment or otherwise by
the Employee offset in any manner the obligations of Camco hereunder.
-3-
<PAGE>
A "Change of Control" shall mean any one of the
following events: (i) the acquisition of ownership or power to vote more than
25% of the voting stock of Camco; (ii) the acquisition of the ability to control
the election of a majority of the directors of Camco; (iii) during any period of
two consecutive years individuals who at the beginning of such period constitute
the Board cease for any reason to constitute at least a majority thereof;
provided, however, that any individual whose election or nomination for election
as a member of the Board was approved by a vote of at least two-thirds of the
directors then in office shall be considered to have continued to be a member of
the Board; or (iv) the acquisition by any person or entity of "conclusive
control" of Camco within the meaning of 12 C.F.R. ss.574.4(a), or the
acquisition by any person or entity of "rebuttable control" within the meaning
of 12 C.F.R. ss.574.4(b) that has not been rebutted in accordance with 12 C.F.R.
ss.574.4(c). For purposes of this paragraph, the term "person" refers to an
individual or corporation, partnership, trust, association, or other
organization, but does not include the Employee and any person or persons with
whom the Employee is "acting in concert" within the meaning of 12 C.F.R. Part
574.
(b) Termination without Change of Control. In the event Camco
terminates the employment of the Employee for any reason other than Just Cause
and the termination is not covered by the provisions of subsection (a) of this
Section 4, Camco shall be obligated to continue to pay on a monthly basis to the
Employee, his designated beneficiaries or his estate, his annual salary provided
pursuant to Section 3 of this Agreement for the unexpired Term. The Employee may
choose, in lieu of monthly payments of the amounts set forth above, to receive a
lump sum payment equal to the present value of such payments. For purposes of
computing such lump-sum payment, the parties shall use a discount rate of five
percent (5%).
(c) Death of the Employee. The Employment Term automatically
terminates upon the death of the Employee. In the event of such death, the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which the death occurred.
5. Consolidation, Merger or Sale of Assets. Nothing in this Agreement
shall preclude Camco from consolidating with, merging into, or transferring all,
or substantially all, of its assets to another corporation that assumes all of
Camco's obligations and undertakings hereunder. Upon such a consolidation,
merger or transfer of assets, the term "Camco" as used herein, shall mean such
other corporation or entity and this Agreement shall continue in full force and
effect.
6. Confidential Information. The Employee acknowledges that during his
employment he has learned, will learn and will have access to confidential
information regarding Camco and its customers and business. The Employee agrees
and covenants not to disclose or use for his own benefit or the benefit of any
other person or entity any confidential information, unless or until Camco
consents to such disclosure or use or such information becomes common knowledge
-4-
<PAGE>
in the industry or is otherwise legally in the public domain. The Employee shall
not knowingly disclose or reveal to any unauthorized person any confidential
information relating to Camco, its subsidiaries or affiliates, or to any of the
businesses operated by them, and the Employee confirms that such information
constitutes the exclusive property of Camco. The Employee shall not otherwise
knowingly act or conduct himself (i) to the material detriment of Camco, its
subsidiaries or affiliates or (ii) in a manner which is inimical or contrary to
the interests of Camco.
7. Nonassignability. Neither this Agreement nor any right or interest
hereunder shall be assignable by the Employee, his beneficiaries or legal
representatives without Camco's prior written consent; provided, however, that
nothing in this Section 7 shall preclude (i) the Employee from designating a
beneficiary to receive any benefits payable hereunder upon his death or (ii) the
executors, administrators or other legal representatives of the Employee or his
estate from assigning any rights hereunder to the person or persons entitled
thereto.
8. No Attachment. Except as required by law, no right to receive
payment under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to
execution, attachment, levy or similar process of assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
9. Binding Agreement. This Agreement shall be binding upon, and inure
to the benefit of, the Employee and Camco and their respective permitted
successors and assigns.
10. Amendment of Agreement. This Agreement may not be modified or
amended, except by an instrument in writing signed by the parties hereto.
11. Waiver. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be an estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver, unless specifically stated therein, and each waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than the act specifically waived.
12. Severability. If, for any reason, any provision of this Agreement
is held invalid, such invalidity shall not affect the other provisions of this
Agreement not held so invalid, and each such other provision shall, to the full
extent consistent with applicable law, continue in full force and effect. If
this Agreement is held invalid or cannot be enforced, then any prior agreement
between Camco (or any predecessor thereof) and the Employee shall be deemed
reinstated to the full extent permitted by law, as if this Agreement had not
been executed.
13. Headings. The headings of the paragraphs herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
-5-
<PAGE>
14. Governing Law. This Agreement has been executed and delivered in
the State of Ohio, and its validity, interpretation, performance and enforcement
shall be governed by the laws of the State of Ohio, except to the extent that
federal or Delaware law is governing.
15. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes any prior employment
agreement between Camco, or any predecessor of Camco, and the Employee.
IN WITNESS WHEREOF, Camco has caused this Agreement to be executed by
its duly authorized officers, and the Employee has signed this Agreement, all as
of the day and year first above written.
Attest: CAMCO FINANCIAL CORPORATION
/s/ Anita L. Frencik By: /s/ Richard C. Baylor
Richard C. Baylor
Its Assistant Secretary Its President
Witness:
/s/ Sharon K. Chorey /s/ Larry A. Caldwell
Larry A. Caldwell
-6-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>6
<FILENAME>camco10k_ex231123101.txt
<DESCRIPTION>CAMCO FINANCIAL CORPORATION (10-K, EX-23.1)
<TEXT>
EXHIBIT 23(i)
ACCOUNTANT'S CONSENT
We have issued our report dated February 22, 2002, accompanying the
consolidated financial statements of Camco Financial Corporation, which are
incorporated within the Annual Report on Form 10-K for the year ended December
31, 2001. We hereby consent to the incorporation by reference of said report in
Camco's Form S-8.
/s/GRANT THORNTON LLP
Cincinnati, Ohio
March 27, 2002
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>7
<FILENAME>camco10k_ex232123101.txt
<DESCRIPTION>CAMCO FINANCIAL CORPORATION (EX-23.2)
<TEXT>
Doc Number382044.4
EXHIBIT 23(ii)
Consent of Independent Accountants
We have issued our report dated February 13, 2002 on the financial statements of
the Camco Financial & Subsidiaries Salary Savings Plan as of December 31, 2001
and 2000 and for the year ended December 31, 2001, which are incorporated within
the Annual Report on Form 10-K for the year ended December 31, 2001 filed by
Camco Financial Corporation (Camco). We hereby consent to the incorporation by
reference of our report in Camco's Post-Effective Amendment No. 1 to Form S-8
(33-88072).
/s/ Crowe, Chizek and Company LLP
Columbus, Ohio
March 22, 2002
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>8
<FILENAME>camco10k_ex99123101.txt
<DESCRIPTION>CAMCO FINANCIAL CORPORATION (EX-99)
<TEXT>
CAMCO FINANCIAL & SUBSIDIARIES
SALARY SAVINGS PLAN
Cambridge, Ohio
FINANCIAL STATEMENTS
December 31, 2001 and 2000
<PAGE>
Cambridge, Ohio
FINANCIAL STATEMENTS
December 31, 2001 and 2000
CONTENTS
REPORT OF INDEPENDENT AUDITORS ......................................... 1
FINANCIAL STATEMENTS
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS ................... 2
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS ......... 3
NOTES TO FINANCIAL STATEMENTS ..................................... 4
SUPPLEMENTAL INFORMATION
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)..... 9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Trustees
Camco Financial & Subsidiaries
Salary Savings Plan
Cambridge, Ohio
We have audited the accompanying statements of net assets available for benefits
of the Camco Financial & Subsidiaries Salary Savings Plan as of December 31,
2001 and 2000 and the related statement of changes in net assets available for
benefits for the year ended December 31, 2001. These financial statements are
the responsibility of the plan's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2001 and 2000, and the changes in net assets available for benefits
for the year ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. The
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the financial statements and, in our opinion, is fairly stated in
all material respects in relation to the basic financial statements taken as a
whole.
/s/Crowe, Chizek and Company LLP
Columbus, Ohio
February 13, 2002
1.
<PAGE>
CAMCO FINANCIAL & SUBSIDIARIES
SALARY SAVINGS PLAN
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2001 and 2000
- ------------------------------------------------------------------------------
2001 2000
---- ----
<S> <C> <C>
ASSETS
Investments (Note 2) $8,601,589 $7,732,598
Receivables
Employee contribution 23,067 --
Employer matching contribution 12,034 --
Employer profit sharing contribution 72,209 --
--------- ---------
107,310 --
--------- ---------
NET ASSETS AVAILABLE FOR BENEFITS $8,708,899 $7,732,598
========= =========
</TABLE>
See accompanying notes to financial statements.
2.
<PAGE>
CAMCO FINANCIAL & SUBSIDIARIES
SALARY SAVINGS PLAN
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31, 2001
- ------------------------------------------------------------------------------
Additions to net assets attributed to
<S> <C>
Net appreciation in fair value of investments (Notes 2 and 4) $ 149,844
Other income 1,131
Interest and dividends 256,130
---------
407,105
Contributions
Employer 406,267
Participant 507,846
Rollovers 37,968
---------
952,081
Total additions 1,359,186
Deductions from net assets attributed to
Administrative expenses 36,483
Benefits paid to participants 346,402
---------
Total deductions 382,885
Net increase 976,301
Net assets available for benefits
Beginning of year 7,732,598
---------
End of year $8,708,899
=========
</TABLE>
See accompanying notes to financial statements.
3.
<PAGE>
CAMCO FINANCIAL & SUBSIDIARIES
SALARY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- -------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF PLAN
The following description of the Camco Financial & Subsidiaries Salary Savings
Plan (the "Plan") provides only general information. Participants should refer
to the Plan agreement for a more complete description of the Plan's provisions.
General: The Plan is a defined-contribution plan covering all full-time
employees of Camco Financial & Subsidiaries and related subsidiaries,
collectively referred to as the "Company." The Plan requires employees to
complete one year of service (1,000 hours or more) to participate in the Plan.
It is subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA).
Contributions: Each year, participants may contribute up to 15% of their pretax
annual compensation to the Plan. Participants may also contribute amounts
representing distributions from other qualified defined benefit or defined
contribution plans. The Company makes a matching contribution equal to 100% of
401(k) deferrals made up to the first 3% of base compensation and 50% of 401(k)
deferrals from 3.01% to 5% of base compensation. The Company may make an
additional employer discretionary contribution. Contributions are subject to
certain Internal Revenue Code ("IRC") limitations.
Investment Options: The Plan allows participants to direct the investment of
their plan assets, including half of their employer discretionary and all of
their employer matching contributions, among several different investment
options offered by the Plan. The other half of the employer discretionary
contribution is trustee directed and invested solely in Camco Financial
Corporation common stock.
Participant Accounts: Each participant's account is credited with the
participant's own contribution, and an allocation of (a) the Company's
contributions and (b) investment income. Allocation of the Company's
contributions and investment income is based upon participants' compensation and
account balances, respectively. The benefit to which a participant is entitled
is the benefit that can be provided from the participant's account.
Retirement, Death, and Disability: A participant is entitled to 100% of his or
her account balance upon retirement (at normal retirement age), death, or
disability.
Forfeited Accounts: Forfeitures of terminated participants' nonvested
employer profit sharing accounts are reallocated to all eligible participants.
- ------------------------------------------------------------------------------
(Continued)
4.
<PAGE>
CAMCO FINANCIAL & SUBSIDIARIES
SALARY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- -------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF PLAN (Continued)
Vesting: Participants are immediately vested in their own 401(k) contributions,
employer matching contributions made after December 31, 1997 and any Pension
Plan rollovers, plus actual earnings thereon. Vesting in the remainder of their
account is based on years of credited service. A participant is 100% vested
after six years of credited service in accordance with the table below:
Years of Service % Vested
1 0
2 20
3 40
4 60
5 80
6 100
Payment of Benefits: Upon termination of service, a participant may elect to
receive payment of their vested benefits, either as a lump-sum payment or as a
series of installment payments.
Loan Provisions: The Plan provides that participants can borrow funds against
their vested account balance. These loans are limited to the lesser of $50,000
or 50% of the participant's vested account balance. The loan must be repaid
within five years, and the loan must bear interest at a reasonable rate.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
The principles and policies that significantly affect the determination of net
assets available for benefits and results of operations are summarized below.
Accounting Method: The accounting principles followed by the Plan conform to
accounting principles generally accepted in the United States of America. The
financial statements were prepared using the accrual method of accounting.
Income and Expense Recognition: Investment income includes dividends, interest,
gains or losses realized on the sale of plan assets and unrealized gains and
losses of assets held the entire plan year. Employer and employee contributions
and expenses payable are recognized on the accrual method. Benefits to
participants are recorded when paid.
- ------------------------------------------------------------------------------
(Continued)
5.
<PAGE>
CAMCO FINANCIAL & SUBSIDIARIES
SALARY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- -------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)
Valuation of Investments: Quoted market prices are used to value the Plan's
investments in mutual funds and common stock. Participant loans are carried at
their outstanding principal balance, which approximates fair value. The Plan's
investment in the common/collective investment fund is valued based upon the
Plan's proportional share of the common/collective fund's underlying asset which
is another common/collective fund. The underlying common/collective fund is
valued based upon the fair market value of the fund's underlying assets.
Estimates: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures and actual results could differ from those estimates. It is at
least reasonably possible that a significant change may occur in the near term
for the estimates of investment valuation
NOTE 3 - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA and its related regulations. In the
event of a plan termination, participants will become 100% vested in their
accounts.
NOTE 4 - INVESTMENTS
The following table presents investments that represent 5% or more of the Plan's
net assets.
<TABLE>
<CAPTION>
December 31,
2001 2000
---- ----
<S> <C> <C>
Investments at fair value as determined by quoted market prices
Mutual funds
Dreyfus Founders Discovery Fund $ 557,857 $ 651,430
Gabelli Growth Fund 765,497 958,892
Janus Twenty Fund 363,812 464,886
Scudder Growth & Income Fund 1,003,790 1,030,931
Scudder International Fund 336,861 489,078
Common/collective funds
MCM Stable Value Portfolio 547,934 437,792
Common stock
Camco Financial & Subsidiaries 3,454,084 2,422,533
Camco Financial & Subsidiaries * 352,640 240,359
</TABLE>
* Nonparticipant directed investment
- ------------------------------------------------------------------------------
(Continued)
6.
<PAGE>
CAMCO FINANCIAL & SUBSIDIARIES
SALARY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- -------------------------------------------------------------------------------
NOTE 4 - INVESTMENTS (Continued)
During 2001, the Plan's investments earned interest and dividend income of
$256,130.
Also during 2001, the Plan's investments (including investments bought and sold,
as well as held during the year) appreciated in value by $149,844 for the year
ended December 31, 2001 as follows:
Mutual funds $(758,491)
Common/collective fund 27,964
Common stock 880,371
--------
$ 149,844
========
NOTE 5 - NONPARTICIPANT - DIRECTED INVESTMENTS
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investments is as follows.
December 31,
2001 2000
---- ----
Net assets:
Common stock $352,640 $240,359
======= =======
Year ended
December 31
Changes in net assets
Contributions 33,119
Dividends 12,525
Net appreciation 80,731
Benefits paid to participants (14,038)
Administrative expenses (56)
-------
$112,281
=======
- ------------------------------------------------------------------------------
(Continued)
7.
<PAGE>
CAMCO FINANCIAL & SUBSIDIARIES
SALARY SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
- -------------------------------------------------------------------------------
NOTE 6 - RELATED PARTY TRANSACTIONS
Parties-in-interest are defined under DOL regulations as any fiduciary of the
Plan, any party rendering service to the Plan, the employer, and certain others.
The Company pays certain administrative fees on behalf of the Plan.
The Plan held the following party-in-interest investments (at fair value) at
December 31, 2001 and 2000:
<TABLE>
<CAPTION>
2001 2000
---- ----
<S> <C> <C>
Camco Financial & Subsidiaries common stock $3,806,724 $2,662,892
</TABLE>
NOTE 7 - TAX STATUS
The Internal Revenue Service has determined and informed the Plan by a letter
dated August 9, 1995 that the Plan and related trust are designed in accordance
with applicable sections of the Internal Revenue Code (IRC). The Plan has been
restated in its entirety using a non-standardized prototype plan document
sponsored by Travelers Insurance Company since receiving the favorable
determination letter. However, the plan administrator believes that the Plan is
designed and is currently being operated in compliance with the applicable
requirements of the IRC.
There were some deficiencies noted in the Plan's operations during 2001. The
plan sponsor is currently in the process of correcting these items.
NOTE 8 - TERMINATED PARTICIPANTS
At December 31, 2001, there was $7,326 of plan assets allocated to individuals
who had withdrawn from the plan, but who had not been paid as of December 31,
2001.
- ------------------------------------------------------------------------------
(Continued)
8.
<PAGE>
SUPPLEMENTAL INFORMATION
<PAGE>
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS
(HELD AT END OF YEAR)
December 31, 2001
- ------------------------------------------------------------------------------
Name of plan sponsor: Camco Financial & Subsidiaries
------------------------------------------------
Employer identification number: 51-0110823
--------------------------------------
Three-digit plan number: 002
---------------------------------------------
<TABLE>
<CAPTION>
(c)
Description of
Investment Including
(b) Maturity Date, Rate of (e)
Identity of Issuer, Borrower, Interest, Collateral, Par (d) Current
(a) Lessor, or Similar Party or Maturity Value Cost Value
- --- ------------------------ ----------------- ---- -----
<S> <C> <C> <C> <C>
* Camco Financial & Subsidiaries Common stock,
299,699 shares @ $3,806,724
Dreyfus Founders Balanced Fund Mutual Fund @ 304,598
Dreyfus Founders Discovery Fund Mutual Fund @ 557,857
Gabilli Growth Fund Mutual Fund @ 765,497
Janus Twenty Fund Mutual Fund @ 363,812
JP Morgan Emerging Markets Equity Fund Mutual Fund @ 23
Loomis Sayles Bond Fund Mutual Fund @ 43,016
MCM Stable Value Portfolio Common/Collective
Fund @ 547,934
Neuberger Berman Genesis Trust Mutual Fund @ 387,757
Pilgrim GNMA Income Fund Mutual Fund @ 70,497
Scudder Growth & Income Fund Mutual Fund @ 1,003,790
Scudder International Fund Mutual Fund @ 366,861
Stein Roe Intermediate Bond Fund Mutual Fund @ 91,162
Warburg Pincus Global Fixed-Income Fund Mutual Fund @ 98,834
Dreyfus Premier Core Value Fund Mutual Fund @ 29,687
JP Morgan Fleming Emerging Markets Mutual Fund @ 64,160
* Participant notes Bearing interest at 6.75% to 11.5% - 99,380
---------
$8,601,589
=========
</TABLE>
* Denotes party-in-interest
@ Participant-directed investment. Cost basis disclosure is not required.
- ------------------------------------------------------------------------------
9.
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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