##### Table of Contents



FORM 10-Q
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the quarterly period ended March 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period
from to
 Commission
File Number 0-25196
 CAMCO FINANCIAL CORPORATION
 
  Delaware
    
    51-0110823(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
  
    þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  o þ




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##### 



PagePART I -
    
    FINANCIAL INFORMATIONConsolidated Statements of Financial Condition
    
    3Consolidated Statements of Earnings
    
    4Consolidated Statements of Comprehensive Income
    
    5Consolidated Statements of Cash Flows
    
    6Notes to Consolidated Financial Statements
    
    8Managements Discussion and Analysis of
Financial Condition and Results of
Operations
    
    14Quantitative and Qualitative Disclosures about
Market Risk
    
    20Controls and Procedures
    
    21PART II -
    
    OTHER INFORMATION
    
    22SIGNATURES
    
    23EX-31.1EX-31.2EX-32.1EX-32.2
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Camco Financial Corporation
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCash and due from banks
    
    $
    19,277
    
    
    $
    21,786Interest-bearing deposits in other financial institutions
    
    
    10,584
    
    
    
    11,299Cash and cash equivalents
    
    
    29,861
    
    
    
    33,085Investment securities available for sale  at market
    
    
    47,784
    
    
    
    47,907Investment securities held to maturity  at cost, approximate market
value of $941 and $947 as of March 31, 2006 and December 31,
2005, respectively
    
    
    918
    
    
    
    919Mortgage-backed securities available for sale  at market
    
    
    57,623
    
    
    
    61,607Mortgage-backed securities held to maturity  at cost, approximate market
value of $3,070 and $3,251 as of March 31, 2006 and December 31,
2005, respectively
    
    
    3,135
    
    
    
    3,257Loans held for sale  at lower of cost or market
    
    
    3,325
    
    
    
    1,947Loans receivable  net
    
    
    840,105
    
    
    
    846,763Office premises and equipment  net
    
    
    11,813
    
    
    
    11,569Real estate acquired through foreclosure
    
    
    1,636
    
    
    
    2,581Federal Home Loan Bank stock  at cost
    
    
    27,496
    
    
    
    27,112Accrued interest receivable
    
    
    5,219
    
    
    
    5,297Prepaid expenses and other assets
    
    
    1,851
    
    
    
    1,228Cash surrender value of life insurance
    
    
    20,981
    
    
    
    20,793Goodwill  net of accumulated amortization
    
    
    6,683
    
    
    
    6,683Prepaid federal income taxes
    
    
    
    
    
    
    500Total assets
    
    $
    1,058,430
    
    
    $
    1,071,248LIABILITIES AND STOCKHOLDERS EQUITYDeposits
    
    $
    676,376
    
    
    $
    660,242Advances from the Federal Home Loan Bank and other borrowings
    
    
    280,280
    
    
    
    307,223Advances by borrowers for taxes and insurance
    
    
    2,092
    
    
    
    3,249Accounts payable and accrued liabilities
    
    
    4,965
    
    
    
    5,331Dividends payable
    
    
    1,131
    
    
    
    1,102Accrued federal income taxes
    
    
    276
    
    
    
    Deferred federal income taxes
    
    
    3,079
    
    
    
    3,338Total liabilities
    
    $
    968,199
    
    
    
    980,485Commitments
    
    
    
    
    
    
    Stockholders equityPreferred stock  $1 par value; authorized 100,000 shares; no shares outstanding
    
    
    
    
    
    
    Common stock  $1 par value; authorized 14,900,000 shares; 8,829,839
issued at March 31, 2006 and December 31, 2005.
    
    
    8,830
    
    
    
    8,830Additional paid-in capital
    
    
    59,602
    
    
    
    59,567Retained earnings  substantially restricted
    
    
    43,119
    
    
    
    42,569Accumulated other comprehensive income (loss)  unrealized gains on securities
designated as available for sale, net of related tax effects
    
    
    (2,183
    )
    
    
    (1,663
    )Less 1,293,125 and 1,251,125 shares of treasury stock at March 31, 2006
and December 31, 2005, respectively  at cost
    
    
    (19,137
    )
    
    
    (18,540
    )Total stockholders equity
    
    
    90,231
    
    
    
    90,763Total liabilities and stockholders equity
    
    $
    1,058,430
    
    
    $
    1,071,248
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Camco Financial Corporation
 
 CONSOLIDATED STATEMENTS OF EARNINGS
 
 2006
    
    
    2005Interest incomeLoans
    
    $
    13,249
    
    
    $
    11,962Mortgage-backed securities
    
    
    633
    
    
    
    751Investment securities
    
    
    480
    
    
    
    185Interest-bearing deposits and other
    
    
    790
    
    
    
    607Total interest income
    
    
    15,152
    
    
    
    13,505Interest expenseDeposits
    
    
    4,424
    
    
    
    3,503Borrowings
    
    
    2,949
    
    
    
    2,634Total interest expense
    
    
    7,373
    
    
    
    6,137Net interest income
    
    
    7,779
    
    
    
    7,368Provision for losses on loans
    
    
    360
    
    
    
    240Net interest income after provision for losses on loans
    
    
    7,419
    
    
    
    7,128Other incomeLate charges, rent and other
    
    
    462
    
    
    
    745Loan servicing fees
    
    
    360
    
    
    
    378Service charges and other fees on deposits
    
    
    352
    
    
    
    334Gain on sale of loans
    
    
    99
    
    
    
    170Increase (decrease) in mortgage servicing rights  net
    
    
    (22
    )
    
    
    51Gain on sale of real estate acquired through foreclosure
    
    
    55
    
    
    
    9Gain on sale of mortgage-backed securities and fixed assets
    
    
    
    
    
    
    19Total other income
    
    
    1,306
    
    
    
    1,706General, administrative and other expenseEmployee compensation and benefits
    
    
    3,736
    
    
    
    3,446Deferred
loan origination costs  SFAS No. 91
    
    
    (487
    )
    
    
    (482
    )Occupancy and equipment
    
    
    780
    
    
    
    797Data processing
    
    
    393
    
    
    
    331Advertising
    
    
    303
    
    
    
    229Franchise taxes
    
    
    246
    
    
    
    79Other operating
    
    
    1,291
    
    
    
    1,165Total general, administrative and other expense
    
    
    6,262
    
    
    
    5,565Earnings before federal income taxes
    
    
    2,463
    
    
    
    3,269Federal income taxes
    
    
    784
    
    
    
    1,051NET EARNINGS
    
    $
    1,679
    
    
    $
    2,218EARNINGS PER SHAREBasic
    
    $
    .22
    
    
    $
    .29Diluted
    
    $
    .22
    
    
    $
    .29Dividends declared per share
    
    $
    .150
    
    
    $
    .145
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Camco Financial Corporation
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 2006
    
    
    2005Net earnings
    
    $
    1,679
    
    
    $
    2,218Other comprehensive income, net of tax:Unrealized holding gains (losses) on securities during the period, net of tax
effects (benefits) of $(268) and $(511) in 2006 and 2005, respectively
    
    
    (520
    )
    
    
    (992
    )Reclassification adjustment for realized gains included in earnings net
of taxes of $0 and $4 in 2006 and 2005, respectively
    
    
    0
    
    
    
    (9
    )Comprehensive income
    
    $
    1,159
    
    
    $
    1,217
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Camco Financial Corporation
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 2006
    
    
    2005Cash flows from operating activities:Net earnings for the period
    
    $
    1,679
    
    
    $
    2,218Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:Amortization of deferred loan origination fees
    
    
    56
    
    
    
    19Amortization of premiums and discounts on investment and
mortgage-backed securities  net
    
    
    76
    
    
    
    135Amortization of mortgage servicing rights  net
    
    
    191
    
    
    
    151Depreciation and amortization
    
    
    294
    
    
    
    320Amortization of loan purchase accounting adjustments, net
    
    
    (22
    )
    
    
    (22
    )Provision for losses on loans
    
    
    360
    
    
    
    240Stock Option expense
    
    
    35
    
    
    
    Loss (gain) on sale of real estate acquired through foreclosure
    
    
    (55
    )
    
    
    (9
    )Gain on sale of mortgage-backed securities
    
    
    
    
    
    
    (13
    )Federal Home Loan Bank stock dividends
    
    
    (384
    )
    
    
    (286
    )Gain on sale of loans
    
    
    (99
    )
    
    
    (170
    )Loans originated for sale in the secondary market
    
    
    (13,140
    )
    
    
    (16,150
    )Proceeds from sale of loans in the secondary market
    
    
    11,861
    
    
    
    14,541Net increase in cash surrender value of life insurance
    
    
    (188
    )
    
    
    (185
    )Tax benefits related to exercise of stock options
    
    
    
    
    
    
    32Increase (decrease) in cash due to changes in:Accrued interest receivable
    
    
    78
    
    
    
    87Prepaid expenses and other assets
    
    
    (623
    )
    
    
    214Accrued interest and other liabilities
    
    
    (366
    )
    
    
    (989
    )Federal income taxesCurrent
    
    
    776
    
    
    
    3,708Deferred
    
    
    8
    
    
    
    (8
    )Net cash provided by (used in) operating activities
    
    
    537
    
    
    
    3,833Cash flows provided by (used in) investing activities:Purchases of investment securities designated as available for sale
    
    
    
    
    
    
    (8,978
    )Proceeds from sale of investments designated as available for sale
    
    
    
    
    
    
    27Proceeds from maturities of investment securities
    
    
    
    
    
    
    5,000Principal repayments on mortgage-backed securities
    
    
    3,367
    
    
    
    4,911Purchases of mortgage-backed securities designated as available for sale
    
    
    
    
    
    
    (3,349
    )Loan principal repayments
    
    
    74,282
    
    
    
    67,526Additions to real estate acquired through foreclosure
    
    
    (20
    )
    
    
    (6
    )Loan disbursements
    
    
    (67,061
    )
    
    
    (71,156
    )Purchases of loans
    
    
    (637
    )
    
    
    (854
    )Additions to office premises and equipment
    
    
    (538
    )
    
    
    (121
    )Proceeds from sale of real estate acquired through foreclosure
    
    
    509
    
    
    
    993Net cash used in investing activities
    
    
    9,902
    
    
    
    (6,007
    )Net cash (used in) provided by operating and investing
activities balance carried forward
    
    
    10,439
    
    
    
    (2,174
    )
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Camco Financial Corporation
 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 
 2006
    
    
    2005Net cash (used in) provided by operating and investing
activities (balance brought forward)
    
    $
    10,439
    
    
    $
    (2,174
    )Cash flows provided by (used in) financing activities:Net increase (decrease) in deposits
    
    
    16,134
    
    
    
    7,075Proceeds from Federal Home Loan Bank advances
    
    
    7,000
    
    
    
    Repayment of Federal Home Loan Bank advances
    
    
    (33,943
    )
    
    
    (6,008
    )Dividends paid on common stock
    
    
    (1,100
    )
    
    
    (1,112
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    126Purchase of treasury shares
    
    
    (597
    )Decrease in advances by borrowers for taxes and insurance
    
    
    (1,157
    )
    
    
    (1,006
    )Net cash provided by (used in) financing active
    
    
    (13,663
    )
    
    
    (925
    )Increase (decrease) in cash and cash equivalents
    
    
    (3,224
    )
    
    
    (3,099
    )Cash and cash equivalents at beginning of period
    
    
    33,085
    
    
    
    42,894Cash and cash equivalents at end of period
    
    $
    29,861
    
    
    $
    39,795Supplemental disclosure of cash flow information:Cash paid during the period for:Interest on deposits and borrowings
    
    $
    7,304
    
    
    $
    6,190Cash paid for taxes
    
    
    
    
    
    
    Supplemental disclosure of noncash investing activities:Unrealized gains (losses) on securities designated as available
for sale, net of related tax effects
    
    $
    (765
    )
    
    $
    (992
    )Recognition of mortgage servicing rights in accordance with SFAS No. 140
    
    $
    169
    
    
    $
    202Transfers from mortgage loans to real estate acquired through foreclosure
    
    $
    205
    
    
    $
    1,200Dividends declared but unpaid
    
    $
    1,131
    
    
    $
    1,114
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Camco Financial Corporation
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    
    Basis of PresentationThe accompanying unaudited consolidated financial statements were prepared in accordance
with instructions for Form 10-Q and, therefore, do not include information or footnotes
necessary for a complete presentation of financial position, results of operations and cash
flows in conformity with accounting principles generally accepted in the United States of
America (US GAAP). Accordingly, these financial statements should be read in conjunction
with the consolidated financial statements and notes thereto of Camco Financial Corporation
(Camco or the Corporation) included in Camcos Annual Report on Form 10-K for the year
ended December 31, 2005. However, all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary for a fair presentation of the
consolidated financial statements, have been included. The results of operations for the
three month period ended March 31, 2006, are not necessarily indicative of the results which
may be expected for the entire year.2.
    
    Principles of ConsolidationThe accompanying consolidated financial statements include the accounts of Camco and its two
wholly-owned subsidiaries: Advantage Bank (Advantage or the Bank) and Camco Title
Agency, Inc.3.
    
    Critical Accounting PoliciesManagements Discussion and Analysis of Financial Condition and Results of Operations, as
well as disclosures found elsewhere in this quarterly report, are based upon Camcos
consolidated financial statements, which are prepared in accordance with US GAAP. The
preparation of these financial statements requires Camco to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses. Several
factors are considered in determining whether or not a policy is critical in the preparation
of financial statements. These factors include, among other things, whether the estimates
are significant to the financial statements, the nature of the estimates, the ability to
readily validate the estimates with other information including third parties or available
prices, and sensitivity of the estimates to changes in economic conditions and whether
alternative accounting methods may be utilized under US GAAP.Material estimates that are particularly susceptible to significant change in the near term
relate to the determination of the allowance for loan losses, the valuation of mortgage
servicing rights and goodwill impairment. Actual results could differ from those estimates.Allowance for Loan LossesThe procedures for assessing the adequacy of the allowance for loan losses reflect our
evaluation of credit risk after careful consideration of all information available to us.
In developing this assessment, we must rely on estimates and exercise judgment regarding
matters where the ultimate outcome is unknown such as economic factors, developments
affecting companies in specific industries and issues with respect to single borrowers.
Depending on changes in circumstances, future assessments of credit risk may yield
materially different results, which may require an increase or a decrease in the allowance
for loan losses.
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Camco Financial Corporation
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Critical Accounting Policies
 Allowance for Loan Losses(continued)The allowance is regularly reviewed by management to determine whether the amount is
considered adequate to absorb probable losses. This evaluation includes specific loss
estimates on certain individually reviewed loans, statistical loss estimates for loan pools
that are based on historical loss experience, and general loss estimates that are based upon
the size, quality, and concentration characteristics of the various loan portfolios, adverse
situations that may affect a borrowers ability to repay, and current economic and industry
conditions. Also considered as part of that judgement is a review of the Banks trends in
delinquencies and loan losses, as well as trends in delinquencies and losses for the region
and nationally, and economic factors.The allowance for loan losses is maintained at a level believed adequate by management to
absorb probable losses inherent in the loan portfolio. Managements evaluation of the
adequacy of the allowance is an estimate based on managements current judgement about the
credit quality of the loan portfolio. While the Corporation strives to reflect all known
risk factors in its evaluations, judgment errors may occur.Mortgage Servicing RightsTo determine the fair value of its mortgage servicing rights (MSRs) each reporting
quarter, the Corporation transmits information to a third party provider, representing
individual loan information in each pooling period accompanied by escrow amounts. The third
party then evaluates the possible impairment of MSRs as described below.Servicing assets are recognized as separate assets when loans are sold with servicing
retained. A pooling methodology in which loans with similar characteristics are pooled
together is applied for valuation purposes. Once pooled, each grouping of loans is
evaluated on a discounted earnings basis to determine the present value of future earnings
that a purchaser could expect to realize from the portfolio. Earnings are projected from a
variety of sources including loan service fees, interest earned on float, net interest
earned on escrow balances, miscellaneous income and costs to service the loans. The present
value of future earnings is the estimated market value for the pool, calculated using
consensus assumptions that a third party purchaser would utilize in evaluating a potential
acquisition of the servicing. Events that may significantly affect the estimates used are
changes in interest rates and the related impact on mortgage loan prepayment speeds and the
payment performance of the underlying loans. The interest rate for float, which is
supplied by management, takes into consideration the investment portfolio average yield as
well as current short duration investment yields. Management believes this methodology
provides a reasonable estimate. Mortgage loan prepayment speeds are calculated by the third
party provider utilizing the Economic Outlook as published by the Office of Chief Economist
of Freddie Mac in estimating prepayment speeds and provides a specific scenario with each
evaluation. Based on the assumptions discussed, pre-tax projections are prepared for each
pool of loans serviced. These earning figures approximate the cash flow that could be
received from the servicing portfolio. Valuation results are presented quarterly to
management.
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Camco Financial Corporation
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  3.
    
    Critical Accounting Policies (continued)At that time, management reviews the information and mortgage servicing rights are marked to
lower of amortized cost or market for the current quarter.GoodwillWe have developed procedures to test goodwill for impairment on an annual basis using June
30 financial information. This testing procedure is outsourced to a third party that
evaluates possible impairment based on the following:The test involves assigning tangible assets and liabilities, identified intangible assets
and goodwill to reporting units and comparing the fair value of each reporting unit to its
carrying value including goodwill. The value is determined assuming a freely negotiated
transaction between a willing buyer and a willing seller, neither being under any compulsion
to buy or sell and both having reasonable knowledge of relevant facts. Accordingly, to
derive the fair value of the reporting unit, the following common approaches to valuing
business combination transactions involving financial institutions are utilized by a third
party selected by Camco: (1) the comparable transactions approach  specifically based on
earnings, book, assets and deposit premium multiples received in recent sales of comparable
thrift franchises; and (2) the discounted cash flow approach. The application of the
valuation techniques take into account the reporting units operating history, the current
market environment and future prospects. As of the most recent quarter, the only reporting
unit carrying goodwill is the Bank.If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting
unit is considered not impaired and no second step is required. If not, a second test is
required to measure the amount of goodwill impairment. The second test of the overall
goodwill impairment compares the implied fair value of the reporting unit goodwill with the
carrying amount of the goodwill. The impairment loss shall equal the excess of carrying
value over fair value.After each testing period, the third party compiles a summary of the test that is then
provided to the Enterprise Risk and Audit Committee and management for review.SummaryManagement believes the accounting estimates related to the allowance for loan losses, the
capitalization, amortization, and valuation of mortgage servicing rights and the goodwill
impairment test are critical accounting estimates because: (1) the estimates are highly
susceptible to change from period to period because they require management to make
assumptions concerning the changes in the types and volumes of the portfolios, rates of
future prepayments, and anticipated economic conditions, and (2) the impact of recognizing
an impairment or loan loss could have a material effect on Camcos assets reported on the
balance sheet as well as its net earnings. Management has discussed the development and
selection of these critical accounting estimates with the Enterprise Risk and Audit
Committee of the Board of Directors and the Enterprise Risk and Audit Committee has reviewed
Camcos disclosures relating to such matters in the quarterly Managements Discussion and
Analysis.
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Camco Financial Corporation
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  4.
    
    Earnings Per ShareBasic earnings per common share are computed based upon the weighted-average number of
common shares outstanding during the period. Diluted earnings per common share include the
dilutive effect of additional potential common shares issuable under the Corporations stock
option plans. The computations are as follows:
 For the three months endedMarch 31,2006
    
    
    2005Weighted-average common shares
outstanding (basic)
    
    
    7,563,452
    
    
    
    7,677,795Dilutive effect of assumed exercise
of stock options
    
    
    3,718
    
    
    
    33,638Weighted-average common shares
outstanding (diluted)
    
    
    7,567,170
    
    
    
    7,711,433
 Anti-dilutive options to purchase 232,364 and 167,879 shares of common stock with respective
weighted-average exercise prices of $15.87 and $16.46 were outstanding at March 31, 2006 and
2005, respectively, but were excluded from the computation of common share equivalents for
those respective periods because the exercise prices were greater than the average market
price of the common shares.5.
    
    Stock Option PlansUnder the 1995 Plan, 161,488 shares were reserved for issuance. Under the 2002 Plan,
400,000 shares were reserved for issuance. Additionally, in connection with the acquisition
of First Ashland Financial Corporation, the stock options of Ashland were converted into
options to purchase 174,421 shares of the Corporations stock at an exercise price of $7.38
per share, all of which were exercisable through 2005. In connection with the 2000
acquisition of Westwood Homestead Financial Corporation, the stock options of Westwood
Homestead were converted into options to purchase 311,794 shares of the Corporations stock
at a weighted-average exercise price of $11.89 per share, which expire in 2008.Effective January 1, 2006, the Corporation adopted SFAS No. 123R, Accounting for
Stock-Based Compensation, which contains a fair-value based method for valuing stock-based
compensation that measures compensation cost at the grant date based on the fair value of
the award.
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Camco Financial Corporation
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  5.
    
    Stock Option Plans (continued)Prior to January 1, 2006, the Corporation utilized APB Opinion No. 25 and related
Interpretations in accounting for its stock option plans in 2005. Accordingly, no
compensation cost has been recognized for the plans in 2005. Had compensation cost for the
Corporations stock option plans been determined based on the fair value at the grant dates
for awards under the plans consistent with the accounting method utilized in SFAS No. 123R,
the Corporations net earnings and earnings per share for the three-month periods ended
March 31, 2006 and 2005 would have been reported as the pro forma amounts indicated below:
 2006
    
    
    2005(In thousands, except per share data)Net earningsAs reported
    
    $
    1,679
    
    
    $
    2,218Add: Stock-based compensation, expense included
in reported income, net of tax
    
    
    30
    
    
    
    Deduct: Total stock-based compensation expense
determined under fair value based method
for awards, net of tax
    
    
    (30
    )
    
    
    (21
    )$
    1,679
    
    
    $
    2,197Earnings per shareBasicAs reported
    
    $
    .22
    
    
    $
    .29Stock-based compensation, net of tax
    
    
    
    
    
    
    Pro-forma
    
    $
    .22
    
    
    $
    .29DilutedAs reported
    
    $
    .22
    
    
    $
    .29Stock-based compensation, net of tax
    
    
    
    
    
    
    (.01
    )Pro-forma
    
    $
    .22
    
    
    $
    .28
 The fair value of each option grant is estimated on the date of grant using the modified
Black-Scholes options-pricing model with the following assumptions used for grants during
2006 and 2005: dividend yield of 4.0% and 3.80%, respectively; expected volatility of
15.16% and 18.76% respectively; a risk-free interest rate of 4.57% and 4.22% respectively,
and an expected life of ten years for all grants.
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Camco Financial Corporation
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  5.
    
    Stock Option Plans (continued)A summary of the status of the Corporations stock option plans as of March 31, 2006 and
December 31, 2005, and changes during the periods ending on those dates is presented below:
 Three months ended
    
    
    
    
    
    
    Year endedMarch 31,
    
    
    
    
    
    
    December 31,2006
    
    
    
    
    
    
    2005Weighted-
    
    
    
    
    
    
    Weighted-average
    
    
    
    
    
    
    averageexercise
    
    
    
    
    
    
    exerciseShares
    
    
    price
    
    
    Shares
    
    
    priceOutstanding at beginning of period
    
    
    224,636
    
    
    $
    15.71
    
    
    
    218,324
    
    
    $
    12.91Granted
    
    
    84,513
    
    
    
    14.12
    
    
    
    87,240
    
    
    
    16.51Exercised
    
    
    
    
    
    
    
    
    
    
    (70,162
    )
    
    
    8.43Forfeited
    
    
    (442
    )
    
    
    16.43
    
    
    
    (10,766
    )
    
    
    12.85Outstanding at end of period
    
    
    308,707
    
    
    $
    15.28
    
    
    
    224,636
    
    
    $
    15.71Options exercisable at period-end
    
    
    227,016
    
    
    $
    15.34
    
    
    
    138,305
    
    
    $
    15.22Weighted-average fair value of
options granted during the period
    
    
    
    
    
    $
    2.09
    
    
    
    
    
    
    $
    2.89
 The following information applies to options outstanding at March 31, 2006:
 Number outstanding
    
    
    5,255Range of exercise prices
    
    
    8.92-9.75Number outstanding
    
    
    96,123Range of exercise prices
    
    
    11.36-14.16Number outstanding
    
    
    207,329Range of exercise prices
    
    
    14.55-17.17Weighted-average exercise price
    
    $
    15.28Weighted-average remaining contractual life
    
    7.3 years
 6.
    
    Forward Looking StatementsCertain statements contained in this report that are not historical facts are forward
looking statements that are subject to certain risks and uncertainties. When used herein,
the terms anticipates, plans, expects, believes, and similar expressions as they
relate to Camco or its management are intended to identify such forward looking statements.
Camcos actual results, performance or achievements may materially differ from those
expressed or implied in the forward-looking statements. Risks and uncertainties that could
cause or contribute to such material differences include, but are not limited to, general
economic conditions, interest rate environment, competitive conditions in the financial
services industry, changes in law, governmental policies and regulations, and rapidly changing technology affecting financial services.
 13




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##### Table of Contents



Camco Financial Corporation
 
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION AND RESULTS OF OPERATIONS
  Discussion of Financial Condition Changes from December 31, 2005 to March 31, 2006
      14




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Discussion of Financial Condition Changes from December 31, 2005 to March 31, 2006
(continued)
      To be well-capitalized underFor capital
    
    prompt correctiveActual
    
    adequacy purposes
    
    action provisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)Total capital
(to risk-weighted assets)
    
    $
    92,357
    
    
    
    12.43
    %
    
    
    3$59,425
    
    
    
    38.0
    %
    
    
    N/A
    
    
    
    N/ATier I capital
(to risk-weighted assets)
    
    $
    85,036
    
    
    
    11.45
    %
    
    
    3$29,713
    
    
    
    34.0
    %
    
    
    N/A
    
    
    
    N/ATier I leverage
    
    $
    85,036
    
    
    
    8.04
    %
    
    
    3$42,291
    
    
    
    34.0
    %
    
    
    N/A
    
    
    
    N/A
 15




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Comparison of Financial changes from December 31, 2005 to March 31, 2006 (continued)
  To be well-capitalized underFor capital
    
    prompt correctiveActual
    
    adequacy purposes
    
    action provisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)Total capital
(to risk-weighted assets)
    
    $
    83,431
    
    
    
    11.25
    %
    
    
    3$59,314
    
    
    
    38.0
    %
    
    
    3$74,142
    
    
    
    310.0
    %Tier I capital
(to risk-weighted assets)
    
    $
    76,110
    
    
    
    10.27
    %
    
    
    3$29,675
    
    
    
    34.0
    %
    
    
    3$44,485
    
    
    
    3  6.0
    %Tier I leverage
    
    $
    76,110
    
    
    
    7.27
    %
    
    
    3$41,881
    
    
    
    34.0
    %
    
    
    3$52,351
    
    
    
    3  5.0
    %
 Comparison of Results of Operations for the Three Months Ended March 31, 2006 and 2005
 General
  Net Interest Income
  16




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##### Table of Contents



AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA
  For the three months ended March 31,2006
    
    
    
    
    
    
    
    
    
    
    2005Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    Averageoutstanding
    
    
    earned/
    
    
    yield/
    
    
    outstanding
    
    
    earned/
    
    
    yield/balance
    
    
    paid
    
    
    rate
    
    
    balance
    
    
    paid
    
    
    rate(Dollars in thousands)Interest-earning assets:Loans receivable (1)
    
    
    845,557
    
    
    
    13,249
    
    
    
    6.27
    %
    
    
    840,575
    
    
    
    11,962
    
    
    
    5.69
    %Mortgage-backed securities (2)
    
    
    62,981
    
    
    
    633
    
    
    
    4.02
    %
    
    
    82,381
    
    
    
    751
    
    
    
    3.65
    %Investment securities (2)
    
    
    48,795
    
    
    
    480
    
    
    
    3.93
    %
    
    
    24,369
    
    
    
    185
    
    
    
    3.04
    %Interest-bearing deposits and other
    
    
    60,304
    
    
    
    790
    
    
    
    5.24
    %
    
    
    60,050
    
    
    
    607
    
    
    
    4.04
    %Total interest-earning assets
    
    
    1,017,637
    
    
    
    15,152
    
    
    
    5.96
    %
    
    
    1,007,375
    
    
    
    13,505
    
    
    
    5.36
    %Interest-bearing liabilities:Deposits
    
    
    630,346
    
    
    
    4,424
    
    
    
    2.81
    %
    
    
    642,359
    
    
    
    3,503
    
    
    
    2.18
    %FHLB advances and other
    
    
    300,930
    
    
    
    2,949
    
    
    
    3.92
    %
    
    
    293,551
    
    
    
    2,634
    
    
    
    3.59
    %Total interest-bearing liabilities
    
    
    931,276
    
    
    
    7,373
    
    
    
    3.17
    %
    
    
    935,910
    
    
    
    6,137
    
    
    
    2.62
    %Net interest income/Interest rate spread
    
    
    
    
    
    $
    7,779
    
    
    
    2.79
    %
    
    
    
    
    
    $
    7,368
    
    
    
    2.74
    %Net interest margin(3)
    
    
    
    
    
    
    
    
    
    
    3.06
    %
    
    
    
    
    
    
    
    
    
    
    2.93
    %
 
 (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.
   17




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Comparison of Results of Operations for the Three Months Ended March 31, 2006 and 2005
(continued)
  Provision for Losses on Loans
  Other Income
  18




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Comparison of Results of Operations for the Three Months Ended March 31, 2006 and 2005
(continued)
 General, Administrative and Other Expense
  Federal Income Taxes
  Liquidity and Capital Resources
    19




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Comparison of Results of Operations for the Three Months Ended March 31, 2006 and 2005
(continued)
  Payments due by periodLess
    
    
    
    
    
    
    
    
    
    
    Morethan
    
    
    1-3
    
    
    3-5
    
    
    than1 year
    
    
    years
    
    
    years
    
    
    5 years
    
    
    Total(In thousands)Contractual obligations:Operating lease obligations
    
    $
    152
    
    
    $
    348
    
    
    $
    263
    
    
    $
    296
    
    
    $
    1,059Advances from the Federal Home Loan Bank
    
    
    75,747
    
    
    
    93,097
    
    
    
    42,569
    
    
    
    57,982
    
    
    
    269,395Certificates of deposit
    
    
    274,417
    
    
    
    121,115
    
    
    
    26,063
    
    
    
    1,147
    
    
    
    422,742Amount of commitments expiring per periodCommitments to originate loans:Overdraft lines of credit
    
    
    698
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    698Home equity lines of credit
    
    
    77,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77,250Commercial lines of credit
    
    
    15,337
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,337One- to four-family and multi-family loans
    
    
    13,357
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,357Commercial
    
    
    25,597
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,597Non-residential real estate and land loans
    
    
    249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    249Total contractual obligations
    
    $
    482,804
    
    
    $
    214,560
    
    
    $
    68,895
    
    
    $
    59,425
    
    
    $
    825,684
 
 Quantitative and Qualitative Disclosures about Market Risk
    20




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##### Table of Contents



Change in
    
    Percentage Change inInterest Rates
    
    Net Interest Income(basis points)
    
    12 Months
    
    Policy Limit+200
    
    
    -5.86
    %
    
    
    -20.00
    %-200
    
    
    -4.23
    %
    
    
    -20.00
    %
   Change inInterest Rates(basis points)
    
    EVE Ratio
    
    Policy Limit+100
    
    
    7.13
    %
    
    
    6.00
    %0
    
    
    7.93
    %
    
    
    6.50
    %-100
    
    
    8.33
    %
    
    
    6.00
    %
 
 Controls and Procedures
   21




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##### Table of Contents



Legal Proceedings
  Risk Factors
  Unregistered Sales of Equity Securities and Use of Proceeds
  Maximum Numberof shares that mayNumber of shares
    
    Average price paid
    
    be purchased underPeriod of Repurchase
    
    purchased
    
    per share
    
    the programJanuary 1-January 31
    
    
    0
    
    
    
    N/A
    
    
    
    229,337Feb. 1  Feb. 28
    
    
    20,500
    
    
    
    14.24
    
    
    
    208,837March 1- March 31
    
    
    21,500
    
    
    
    14.19
    
    
    
    187,337
        Exhibit 31(i)
    
    Section 302 certification by Chief Executive OfficerExhibit 31(ii)
    
    Section 302 Certification by Chief Financial OfficerExhibit 32(i)
    
    Section 1350 certification by Chief Executive OfficerExhibit 32(ii)
    
    Section 1350 certification by Chief Financial Officer
 22




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##### Table of Contents



SIGNATURES
  Date: May 4, 2006
    By:

/s/ Richard C. BaylorRichard C. BaylorChief Executive Officer Date: May 4, 2006
    By:

/s/ Mark A. SeversonMark A. SeversonChief Financial Officer 23