##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 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)
 6901 Glenn Highway, Cambridge, Ohio 43725-9757(Address of principal executive office) (Zip code)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company 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
    
    
    13Quantitative and Qualitative Disclosures about
Market Risk
    
    
    21Controls and Procedures
    
    
    22PART II   OTHER INFORMATION
    
    
    22SIGNATURES
    
    
    24EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



Camco Financial Corporation
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCash and due from banks
    
    $
    20,284
    
    
    $
    17,013Interest-bearing deposits in other financial institutions
    
    
    35,724
    
    
    
    35,272Cash and cash equivalents
    
    
    56,008
    
    
    
    52,285Securities available for sale, at fair value
    
    
    85,168
    
    
    
    85,352Securities held to maturity, at cost, approximate fair value of $10,421 and
$13,530 as of March 31, 2009 and December 31, 2008, respectively
    
    
    10,338
    
    
    
    13,406Loans held for sale  at lower of cost or fair value
    
    
    4,340
    
    
    
    2,185Loans receivable  net
    
    
    723,575
    
    
    
    756,641Office premises and equipment  net
    
    
    11,651
    
    
    
    11,868Real estate acquired through foreclosure
    
    
    6,041
    
    
    
    5,841Federal Home Loan Bank stock  at cost
    
    
    29,888
    
    
    
    29,888Accrued interest receivable
    
    
    4,414
    
    
    
    4,118Mortgage servicing rights  at lower of cost or fair value
    
    
    3,790
    
    
    
    3,731Prepaid expenses and other assets
    
    
    7,020
    
    
    
    10,785Cash surrender value of life insurance
    
    
    22,749
    
    
    
    22,532Prepaid and refundable federal income taxes
    
    
    1,907
    
    
    
    1,814Total assets
    
    $
    966,889
    
    
    $
    1,000,446LIABILITIES AND STOCKHOLDERS EQUITYDeposits
    
    $
    720,264
    
    
    $
    723,956Advances from the Federal Home Loan Bank and other borrowings
    
    
    158,564
    
    
    
    183,833Advances by borrowers for taxes and insurance
    
    
    917
    
    
    
    2,458Accounts payable and accrued liabilities
    
    
    13,213
    
    
    
    16,942Deferred federal income taxes  net
    
    
    1,669
    
    
    
    1,557Total liabilities
    
    $
    894,627
    
    
    $
    928,746Commitments
    
    
    
    
    
    
    Stockholders equity:Preferred stock  $1 par value; authorized 100,000 shares; no shares outstanding
    
    $
    
    
    
    $
    Common stock  $1 par value; authorized 14,900,000 shares; 8,884,509 and
8,834,508 shares issued at March 31, 2009 and December 31, 2008
    
    
    8,885
    
    
    
    8,835Unearned compensation; 50,000 shares
    
    
    (100
    )
    
    
    Additional paid-in capital
    
    
    60,124
    
    
    
    59,896Retained earnings
    
    
    26,218
    
    
    
    26,055Accumulated other comprehensive income net of related tax effects
    
    
    1,249
    
    
    
    1,028Treasury stock - 1,678,913 shares at March 31, 2009 and December 31, 2008, at cost
    
    
    (24,114
    )
    
    
    (24,114
    )Total stockholders equity
    
    
    72,262
    
    
    
    71,700Total liabilities and stockholders equity
    
    $
    966,889
    
    
    $
    1,000,446
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##### Table of Contents



Camco Financial Corporation
 
 CONSOLIDATED STATEMENTS OF EARNINGS
 
 2009
    
    
    2008Interest and dividend incomeLoans
    
    $
    10,567
    
    
    $
    13,524Investment securities
    
    
    975
    
    
    
    1,076Other interest-earning accounts
    
    
    345
    
    
    
    484Total interest and dividend income
    
    
    11,887
    
    
    
    15,084Interest ExpenseDeposits
    
    
    4,473
    
    
    
    6,401Borrowings
    
    
    1,569
    
    
    
    2,203Total interest expense
    
    
    6,042
    
    
    
    8,604Net interest income
    
    
    5,845
    
    
    
    6,480Provision for losses on loans
    
    
    648
    
    
    
    2,322Net interest income after provision for losses on loans
    
    
    5,197
    
    
    
    4,158Other incomeLate charges, rent and other
    
    
    461
    
    
    
    352Loan servicing fees
    
    
    316
    
    
    
    330Service charges and other fees on deposits
    
    
    501
    
    
    
    581Gain on sale of loans
    
    
    369
    
    
    
    119Mortgage servicing rights  net
    
    
    60
    
    
    
    (309
    )Gain on sale of mortgage-backed securities and fixed assets
    
    
    
    
    
    
    3Income on cash surrender value life
    
    
    256
    
    
    
    243Total other income
    
    
    1,963
    
    
    
    1,319General, administrative and other expensesEmployee compensation and benefits
    
    
    3,476
    
    
    
    3,569Occupancy and equipment
    
    
    782
    
    
    
    893Data processing
    
    
    307
    
    
    
    228Advertising
    
    
    172
    
    
    
    196Franchise taxes
    
    
    268
    
    
    
    346Postage, supplies and office expenses
    
    
    360
    
    
    
    370Travel, training and insurance
    
    
    347
    
    
    
    249Professional services
    
    
    444
    
    
    
    408Transaction processing
    
    
    274
    
    
    
    246Real estate owned and other expenses
    
    
    277
    
    
    
    336Loan expenses
    
    
    296
    
    
    
    298Total general, administrative and other expense
    
    
    7,003
    
    
    
    7,139Earnings (Loss) before federal income taxes
    
    
    157
    
    
    
    (1,662
    )Federal income taxes
    
    
    (78
    )
    
    
    (659
    )NET EARNINGS (LOSS)
    
    $
    235
    
    
    $
    (1,003
    )EARNINGS (LOSS) PER SHAREBasic
    
    $
    .03
    
    
    $
    (.14
    )Diluted
    
    $
    .03
    
    
    $
    (.14
    )Dividends declared per share
    
    $
    .01
    
    
    $
    .15
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Camco Financial Corporation
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 2009
    
    
    2008Net earnings (loss)
    
    $
    235
    
    
    $
    (1,003
    )Other comprehensive income, net of tax:Unrealized holding gains on securities during the period, net of tax
effects of $114 and $350 in 2009 and 2008, respectively
    
    
    221
    
    
    
    679Reclassification adjustment for realized gains included in
net earnings, net of taxes of $0 and $1 in 2009 and 2008, respectively
    
    
    
    
    
    
    (2
    )Comprehensive income (loss)
    
    $
    456
    
    
    $
    (326
    )
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Camco Financial Corporation
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 2009
    
    
    2008Cash flows from operating activities:Net earnings (loss) for the period
    
    $
    235
    
    
    $
    (1,003
    )Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:Amortization of deferred loan origination fees
    
    
    150
    
    
    
    54Amortization of premiums and discounts on investment and mortgage-backed securities 
net
    
    
    (24
    )
    
    
    35Amortization of mortgage servicing rights  net
    
    
    224
    
    
    
    425Depreciation and amortization
    
    
    317
    
    
    
    343Provision for losses on loans
    
    
    648
    
    
    
    2,322Stock option expense
    
    
    228
    
    
    
    52Restricted stock / unearned compensation
    
    
    (50
    )
    
    
    Deferred federal income taxes
    
    
    (1
    )
    
    
    (48
    )(Gain) loss on sale of real estate acquired through foreclosure
    
    
    5
    
    
    
    74Gain on sale of investments and fixed assets
    
    
    
    
    
    
    (3
    )Federal Home Loan Bank stock dividends
    
    
    
    
    
    
    (375
    )Gain on sale of loans
    
    
    (369
    )
    
    
    (119
    )Loans originated for sale in the secondary market
    
    
    (28,166
    )
    
    
    (11,233
    )Proceeds from sale of loans in the secondary market
    
    
    26,380
    
    
    
    13,092Net increase in cash surrender value of life insurance
    
    
    (217
    )
    
    
    (200
    )Increase (decrease) in cash due to changes in:Accrued interest receivable
    
    
    198
    
    
    
    354Prepaid expenses and other assets
    
    
    (1,538
    )
    
    
    (457
    )Accrued interest and other liabilities
    
    
    1,021
    
    
    
    (589
    )Federal income taxesCurrent
    
    
    (93
    )
    
    
    (802
    )Net cash provided by (used in) operating activities
    
    
    (1,052
    )
    
    
    1,922Cash flows provided by (used in) investing activities:Proceeds from sale of investment securities
    
    
    
    
    
    
    4,254Principal repayments, maturities on securities
    
    
    15,111
    
    
    
    14,177Purchases of investment securities designated as available for sale
    
    
    (11,501
    )
    
    
    (20,471
    )Loan principal repayments
    
    
    74,966
    
    
    
    72,126Loan disbursements
    
    
    (44,751
    )
    
    
    (60,562
    )Proceeds from sale of office premises and equipment
    
    
    
    
    
    
    2Additions to office premises and equipment
    
    
    (100
    )
    
    
    (165
    )Proceeds from sale of real estate acquired through foreclosure
    
    
    1,624
    
    
    
    1,840Net cash provided by investing activities
    
    
    35,349
    
    
    
    11,201Net cash provided by operating and investing activities balance carried forward
    
    
    34,297
    
    
    
    13,123
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Camco Financial Corporation
 CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 
 2009
    
    
    2008Net cash provided by operating and investing activities (balance brought forward)
    
    $
    34,297
    
    
    $
    13,123Cash flows provided by (used in) financing activities:Net increase(decrease) in deposits
    
    
    (3,692
    )
    
    
    38,596Proceeds from Federal Home Loan Bank advances
    
    
    15,000
    
    
    
    51,739Repayment of Federal Home Loan Bank advances
    
    
    (40,269
    )
    
    
    (78,060
    )Dividends paid on common stock
    
    
    (72
    )
    
    
    (1,074
    )Decrease in advances by borrowers for taxes and insurance
    
    
    (1,541
    )
    
    
    (1,375
    )Net cash provided by (used) in financing activities
    
    
    (30,574
    )
    
    
    9,826Increase (decrease) in cash and cash equivalents
    
    
    3,723
    
    
    
    22,949Cash and cash equivalents at beginning of period
    
    
    52,285
    
    
    
    23,004Cash and cash equivalents at end of period
    
    $
    56,008
    
    
    $
    45,953Supplemental disclosure of cash flow information:Cash paid during the period for interest on deposits and borrowings
    
    $
    6,266
    
    
    $
    8,391Supplemental disclosure of noncash investing activities:Recognition of mortgage servicing rights in accordance with SFAS No. 140
    
    $
    284
    
    
    $
    172Transfers from loans to real estate acquired through foreclosure
    
    
    1,917
    
    
    
    2,538Dividends declared but unpaid
    
    
    
    
    
    
    1,073
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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, 2008. 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, 2009, 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 PoliciesMaterial estimates that are particularly susceptible to significant change in the near term
relate to the determination of the allowance for loan losses and the valuation of mortgage
servicing rights. 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 and interpretation of relevant
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.The allowance is regularly reviewed by management to determine whether the amount is
considered adequate to absorb probable, incurred losses. This evaluation includes specific
loss estimates on certain individually reviewed loans, statistical loss estimates for loan
pools that are based on historical loss experience, and general loss estimates that are
based upon the size, quality, and concentration characteristics of the various loan
portfolios, adverse situations that may affect a borrowers ability to repay, and current
economic and industry conditions. Also considered as part of that judgment is a review of
the Banks trends in delinquencies and loan losses, as well as trends in delinquencies and
losses for the region and nationally, and economic factors.The allowance for loan losses is maintained at a level that management believes to be
adequate to absorb probable, incurred losses inherent in the loan portfolio at the balance
sheet dates presented. Our evaluation of the adequacy of the allowance for loan losses is an
estimate based on managements current judgment about the credit quality of the loan
portfolio. While we strive to reflect all known risk factors in our evaluations, actual
results may differ significantly from our estimates.Mortgage Servicing RightsTo determine the fair value of our mortgage servicing rights (MSRs) each reporting
quarter, we provide information to a third party valuation firm who assists us with
determining the possible impairment of MSRs, as described below.
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Camco Financial Corporation
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Mortgage Servicing Rights (continued)MSRs are recognized as separate assets when loans are sold with servicing retained. A
pooling methodology to the servicing valuation, in which loans with similar characteristics
are pooled together, is applied for valuation purposes. Once pooled, each grouping of
loans is evaluated on a discounted earnings basis to determine the present value of future
earnings that the bank 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 fair 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 we estimate, takes into consideration
the investment portfolio average yield as well as current short duration investment yields.
We believe 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 earnings figures
approximate the cash flow that could be received from the servicing portfolio. Valuation
results are presented quarterly to management. At that time, we review the information and
MSRs are marked to the lower of amortized cost or fair value for the current quarter.4.
    
    Earnings (Loss) Per ShareBasic earnings per common share is computed based upon the weighted-average number of common
shares outstanding during the year. Diluted earnings per common share is computed including
the dilutive effect of additional potential common shares issuable under outstanding stock
options. Diluted earnings per share is not computed for periods in which an operating loss
is sustained. The computations were as follows for the period ended March 31:
 For the three months endedMarch 31,(in thousands, except per share information)
    
    2009
    
    
    2008BASIC:Net earnings (loss)
    
    $
    235
    
    
    $
    (1,003
    )Weighted average common shares outstanding
    
    
    7,193
    
    
    
    7,155Earnings (Loss) per share  Basic
    
    $
    0.03
    
    
    $
    (.14
    )DILUTED:Net earnings (loss)
    
    $
    235
    
    
    $
    (1,003
    )Weighted average common shares outstanding
    
    
    7,193
    
    
    
    7,155Dilutive effect of stock options
    
    
    
    
    
    
    Total common shares and dilutive potential common shares
    
    
    7,193
    
    
    
    7,155Earnings (Loss) per share  Diluted
    
    $
    0.03
    
    
    $
    (.14
    )
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Camco Financial Corporation
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  5.
    
    Stock Option PlansIn accordance with SFAS No. 123R, Accounting for Stock-Based Compensation, stock-based
compensation is recognized based on fair value of the award.The fair value of each option grant is estimated on the date of grant using the modified
Black-Scholes options-pricing model. The following table details the fair value and
assumptions used to value stock options as of the grant date that were granted during the
three months ended March 31, 2009 and 2008:
 2009
    
    2008Fair value, calculated
    
    $
    1.43
    
    
    $
    0.58Exercise Price
    
    $
    2.46
    
    
    $
    8.92Risk-free interest rate
    
    
    2.66
    %
    
    
    3.52
    %Expected stock price volatility
    
    
    61.00
    %
    
    
    15.75
    %Expected dividend yield
    
    
    1.63
    %
    
    
    6.00
    %Expected Life
    
    10 years
    
    
    10 years
 A summary of the status of the Corporations stock option plans as of March 31, 2009 and
December 31, 2008, and changes during the periods ending on those dates is presented below:
 Three Months ended
    
    
    Year endedMarch 31, 2009
    
    
    December 31, 2008Weighted-
    
    
    
    
    
    
    Weighted-average
    
    
    
    
    
    
    averageexercise
    
    
    
    
    
    
    exerciseShares
    
    
    price
    
    
    Shares
    
    
    priceOutstanding at beginning of period
    
    
    260,703
    
    
    $
    14.11
    
    
    
    318,238
    
    
    $
    15.10Granted
    
    
    80,000
    
    
    
    2.46
    
    
    
    47,167
    
    
    
    9.07Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (16,302
    )
    
    
    10.18
    
    
    
    (104,702
    )
    
    
    14.84Outstanding at end of period
    
    
    324,401
    
    
    $
    11.44
    
    
    
    260,703
    
    
    $
    14.11Options exercisable at period end
    
    
    221,753
    
    
    $
    11.23
    
    
    
    195,717
    
    
    $
    15.01Weighted-average fair value of
options granted during the year
    
    
    
    
    
    $
    1.43
    
    
    
    
    
    
    $
    0.74
  Options outstanding
    
    
    Options ExercisableWeighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Remaining
    
    
    Average
    
    
    
    
    
    
    AverageRange of Exercise
    
    Number
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExercisePrices
    
    Outstanding
    
    
    Life (Years)
    
    
    Price
    
    
    Exercisable
    
    
    Price$1.89  2.50
    
    
    80,000
    
    
    
    9.9
    
    
    $
    2.46
    
    
    
    80,000
    
    
    $
    2.468.92-11.15
    
    
    31,045
    
    
    
    6.9
    
    
    $
    8.99
    
    
    
    16,864
    
    
    
    9.0411.36-14.20
    
    
    93,297
    
    
    
    4.5
    
    
    
    13.52
    
    
    
    79,830
    
    
    
    13.5814.55-18.19
    
    
    120,059
    
    
    
    4.0
    
    
    
    16.42
    
    
    
    120,059
    
    
    
    16.42324,401
    
    
    
    4.5
    
    
    
    11.44
    
    
    
    221,753
    
    
    
    11.23
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Camco Financial Corporation
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  6.
    
    Fair ValueSFAS No. 157 establishes a fair value hierarchy which requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring fair value.
SFAS No. 157 describes three levels of inputs that Camco uses to measure fair value:
 Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active
markets that the entity has the ability to access as of the measurement date.Level 2: Level 1 inputs for assets or liabilities that are not actively traded. Also
consists of an observable market price for a similar asset or liability. This
includes the use of matrix pricing used to value debt securities absent the
exclusive use of quoted prices.Level 3: Consists of unobservable inputs that are used to measure fair value when
observable market inputs are not available. This could include the use of internally
developed models, financial forecasting, etc.
 Fair value is defined as the price that would be received to sell an asset or transfer a
liability between market participants at the balance sheet date. When possible, the
Corporation looks to active and observable markets to price identical assets or liabilities.
When identical assets and liabilities are not traded in active markets, the Corporation
looks to observable market data for similar assets and liabilities. However, certain assets
and liabilities are not traded in observable markets and Camco must use other valuation
methods to develop a fair value. The fair value of impaired loans is based on the fair value
of the underlying collateral, which is estimated through third party appraisals or internal
estimates of collateral values.The following table presents financial assets and liabilities measured on a recurring basis:
 Fair Value Measurements at Reporting Date Using(in thousands)
    
    March 31, 2009
    
    Level 1
    
    Level 2
    
    Level 3Securities available for sale
    
    $
    85,168
    
    
    $
    
    
    
    $
    85,168
    
    
    $
    
 The following table presents financial assets and liabilities measured on a non-recurring
basis:
 Fair Value Measurements at Reporting Date Using(in thousands)
    
    March 31, 2009
    
    Level 1
    
    Level 2
    
    Level 3Impaired loans
    
    $
    44,799
    
    
    $
    
    
    
    $
    
    
    
    $
    44,799Loans held for sale
    
    
    4,340
    
    
    
    
    
    
    
    
    
    
    
    4,340Mortgage servicing rights
    
    
    3,790
    
    
    
    
    
    
    
    
    
    
    
    3,790Real estate acquired through foreclosure
    
    
    6,041
    
    
    
    
    
    
    
    
    
    
    
    6,041
 Impaired loans, which are measured for impairment using the fair value of the collateral at
March 31, 2009, had a carrying amount of $50.9 million, with a valuation allowance of $6.1
million, resulting in an additional provision for loan losses of $500,000 during the first
quarter of 2009.Loans held for sale are originated on forward commitment contracts and are reported at the
lower of cost or fair value. All loans held for sale at March 31, 2009, are secured by liens
on 1-4 family residential properties.Mortgage servicing rights are recognized as separate assets when loans are sold with
servicing retained. A pooling methodology to the servicing valuation, in which loans with
similar characteristics are pooled together, is applied for valuation purposes. Once
pooled, each grouping of loans is evaluated on a discounted earnings basis to determine the
 11




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##### Table of Contents



Camco Financial Corporation
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  present value of future earnings that the bank 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 fair value for the
pool, calculated using consensus assumptions that a third party purchaser would utilize in
evaluating a potential acquisition of the servicing.Fair value for real estate acquired through foreclosure is determined by obtaining recent
appraisals on the properties. The fair value under such appraisals is determined by using
one of the following valuation techniques: income, cost or comparable sales. The fair value
is then reduced by managements estimate for the direct costs expected to be incurred in
order to sell the property. Holding costs or maintenance expenses are recorded as period
costs when occurred and are not included in the fair value estimate.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operation
 Forward Looking Statements
  
    
    anticipated changes in industry conditions created by state and federal legislation and
regulations;
    
    anticipated changes in general interest rates and the impact of future interest rate
changes on our profitability, capital adequacy and the fair value of our financial assets
and liabilities;
    
    retention of our existing customer base and our ability to attract new customers;
    
    the development of new products and services and their success in the marketplace;
    
    the adequacy of the allowance for loan losses; and
    
    statements regarding our anticipated loan and deposit account growth, expense levels,
liquidity and capital resources and projections of earnings.
  
    
    competition in the industry and markets in which we operate;
    
    changes in general interest rates;
    
    rapid changes in technology affecting the financial services industry;
    
    changes in government regulation; and
    
    general economic and business conditions
 12




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
   Discussion of Financial Condition Changes from December 31, 2008 to March 31, 2009
  
  
   13




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
    March 31, 2009
    
    
    December 31, 200890+ days
    
    
    
    
    
    
    
    
    
    
    90+ days30 - 89 days
    
    
    delinquent,
    
    
    
    
    
    
    30 - 89 days
    
    
    delinquent,In thousands
    
    delinquent
    
    
    accruing
    
    
    Nonaccrual
    
    
    delinquent
    
    
    accruing
    
    
    NonaccrualConstruction and development
    
    
    37
    
    
    
    
    
    
    
    9,180
    
    
    $
    253
    
    
    $
    
    
    
    $
    8,603HELOC and second mortgage
    
    
    2,195
    
    
    
    
    
    
    
    5,815
    
    
    
    2,434
    
    
    
    
    
    
    
    4,9621-4 Family
    
    
    6,792
    
    
    
    
    
    
    
    21,051
    
    
    
    6,419
    
    
    
    44
    
    
    
    17,203Multifamily
    
    
    729
    
    
    
    351
    
    
    
    3,559
    
    
    
    30
    
    
    
    
    
    
    
    3,139Commercial and agricultural
    
    
    432
    
    
    
    
    
    
    
    17,944
    
    
    
    759
    
    
    
    
    
    
    
    19,450Consumer and other
    
    
    55
    
    
    
    
    
    
    
    102
    
    
    
    89
    
    
    
    
    
    
    
    127Total
    
    $
    10,240
    
    
    $
    351
    
    
    $
    57,651
    
    
    $
    9,984
    
    
    $
    44
    
    
    $
    53,484
   March 31, 2009
    
    
    December 31, 2008
    
    
    ChangeBalance
    
    
    Rate
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateNoninterest-bearing demand
    
    $
    34,562
    
    
    
    0.00
    %
    
    $
    37,526
    
    
    
    0.00
    %
    
    $
    (2,964
    )
    
    
    0.00
    %Interest-bearing demand
    
    
    91,416
    
    
    
    0.72
    
    
    
    87,199
    
    
    
    0.91
    
    
    
    4,217
    
    
    
    (0.19
    )Money market
    
    
    110,871
    
    
    
    0.69
    
    
    
    112,749
    
    
    
    1.35
    
    
    
    (1,878
    )
    
    
    (0.66
    )Savings
    
    
    36,641
    
    
    
    0.25
    
    
    
    33,838
    
    
    
    0.26
    
    
    
    2,803
    
    
    
    (0.01
    )Certificates of deposit  retail
    
    
    400,856
    
    
    
    3.40
    
    
    
    413,134
    
    
    
    3.75
    
    
    
    (12,278
    )
    
    
    (0.35
    )Certificates of deposit  brokered
    
    
    45,918
    
    
    
    3.36
    
    
    
    39,510
    
    
    
    4.23
    
    
    
    6,408
    
    
    
    (0.87
    )Total deposits
    
    $
    720,264
    
    
    
    2.32
    %
    
    $
    723,956
    
    
    
    2.71
    %
    
    $
    (3,692
    )
    
    
    (0.39
    )%
  14




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
      Comparison of Results of Operations for the Three Months Ended March 31, 2009 and 2008
  Net Interest Income
    15




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
  Three Months Ended March 31,
    
    2009
    
    
    2008(Dollars in thousands)
    
    Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    Averageoutstanding
    
    
    earned
    
    
    yield/
    
    
    outstanding
    
    
    earned
    
    
    yield/balance
    
    
    / paid
    
    
    rate
    
    
    balance
    
    
    / paid
    
    
    rateInterest-earning assets:Loans receivable (1)
    
    
    704,211
    
    
    
    10,567
    
    
    
    6.00
    %
    
    $
    787,903
    
    
    
    13,524
    
    
    
    6.87
    %Securities
    
    
    94,220
    
    
    
    975
    
    
    
    4.14
    %
    
    
    93,409
    
    
    
    1,076
    
    
    
    4.61
    %FHLB stock
    
    
    29,888
    
    
    
    338
    
    
    
    4.52
    %
    
    
    28,816
    
    
    
    375
    
    
    
    5.21
    %Other Interest-bearing accounts
    
    
    64,493
    
    
    
    7
    
    
    
    0.04
    %
    
    
    12,196
    
    
    
    109
    
    
    
    3.57
    %Total interest-earning assets
    
    
    892,812
    
    
    
    11,887
    
    
    
    5.33
    %
    
    
    922,324
    
    
    
    15,084
    
    
    
    6.54
    %Noninterest-earning assets (2)
    
    
    92,221
    
    
    
    
    
    
    
    
    
    
    
    103,551Total average assets
    
    $
    985,033
    
    
    
    
    
    
    
    
    
    
    $
    1,025,875Interest-bearing liabilities:Deposits
    
    
    685,870
    
    
    
    4,473
    
    
    
    2.61
    %
    
    
    674,181
    
    
    
    6,401
    
    
    
    3.80
    %FHLB advances and other
    
    
    169,723
    
    
    
    1,569
    
    
    
    3.70
    %
    
    
    203,526
    
    
    
    2,203
    
    
    
    4.33
    %Total interest-bearing liabilities
    
    
    855,593
    
    
    
    6,042
    
    
    
    2.82
    %
    
    
    877,707
    
    
    
    8,604
    
    
    
    3.92
    %Noninterest-bearing deposits
    
    
    38,064
    
    
    
    
    
    
    
    
    
    
    
    38,631Noninterest-bearing liabilities
    
    
    19,447
    
    
    
    
    
    
    
    
    
    
    
    21,737Total average liabilities
    
    
    913,104
    
    
    
    
    
    
    
    
    
    
    
    938,075Total average shareholders equity
    
    
    71,929
    
    
    
    
    
    
    
    
    
    
    
    87,800Total liabilities and shareholders equity
    
    $
    985,033
    
    
    
    
    
    
    
    
    
    
    $
    1,025,875Net interest income/Interest rate spread
    
    
    
    
    
    $
    5,845
    
    
    
    2.51
    %
    
    
    
    
    
    $
    6,480
    
    
    
    2.62
    %Net interest margin (3)
    
    
    
    
    
    
    
    
    
    
    2.62
    %
    
    
    
    
    
    
    
    
    
    
    2.81
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    107.88
    %
    
    
    
    
    
    
    
    
    
    
    107.57
    %
 
 (1)
    
    Includes loans held for sale. Loan fees are immaterial.(2)
    
    Includes nonaccrual loans, mortgage servicing rights and allowance for loan losses(3)
    
    Net interest income as a percent of average interest-earning assets     16




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
    Provision for Losses on Loans
   Other Income
   General, Administrative and Other Expense
   17




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
  Federal Income Taxes
  Liquidity and Capital Resources
    
   18




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
     Payments due by periodLessthan
    
    
    1  3
    
    
    3  5
    
    
    More than1 year
    
    
    Years
    
    
    years
    
    
    5 years
    
    
    Total(In thousands)Contractual obligations:Operating lease obligations
    
    $
    204
    
    
    $
    411
    
    
    $
    284
    
    
    $
    312
    
    
    $
    1,211Advances from the FHLB
    
    
    68,293
    
    
    
    23,000
    
    
    
    25,527
    
    
    
    27,046
    
    
    
    143,866Repurchase agreements
    
    
    9,697
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,697Certificates of deposit
    
    
    206,179
    
    
    
    220,603
    
    
    
    18,920
    
    
    
    1,073
    
    
    
    446,775Subordinated debentures (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    5,000Ohio equity funds for housing
    
    
    1,189
    
    
    
    959
    
    
    
    301
    
    
    
    227
    
    
    
    2,676Amount of commitments expiring per period:Commitments to originate loans:Overdraft lines of credit
    
    $
    60,368
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    60,368Home equity lines of credit
    
    
    483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    483One- to four-family and multi-familyLoans(includes loans in process)
    
    
    20,420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,420Commercial (includes loans in process & lines
of credit)
    
    
    4,188
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,188Letters of credit
    
    
    682
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    682Total contractual obligations
    
    $
    371,703
    
    
    $
    244,973
    
    
    $
    45,032
    
    
    $
    33,658
    
    
    $
    695,366
 
 (1)
    
    The subordinated debentures are redeemable, at Camcos option.The debentures mature on September 15, 2037. 19




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##### Table of Contents



Camco Financial Corporation
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
   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:Camco Financial Corporation
    
    $
    83,778
    
    
    
    12.99
    %
    
    >$
    51,612
    
    
    
    >8.0
    %
    
    >$
    64,515
    
    
    
    10.0
    %Advantage Bank
    
    $
    78,468
    
    
    
    12.19
    %
    
    >$
    51,502
    
    
    
    >8.0
    %
    
    >$
    64,377
    
    
    
    10.0
    %Tier I capital to risk-weighted assets:Camco Financial Corporation
    
    $
    75,634
    
    
    
    11.72
    %
    
    >$
    25,806
    
    
    
    >4.0
    %
    
    >$
    38,709
    
    
    
    6.0
    %Advantage Bank
    
    $
    70,324
    
    
    
    10.92
    %
    
    >$
    25,751
    
    
    
    >4.0
    %
    
    >$
    38,626
    
    
    
    6.0
    %Tier I leverage to average assets:Camco Financial Corporation
    
    $
    75,634
    
    
    
    7.70
    %
    
    >$
    39,290
    
    
    
    >4.0
    %
    
    >$
    49,112
    
    
    
    5.0
    %Advantage Bank
    
    $
    70,324
    
    
    
    7.19
    %
    
    >$
    39,135
    
    
    
    >4.0
    %
    
    >$
    48,919
    
    
    
    5.0
    %
    20




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
      21




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##### Table of Contents




 
  
 PART II
 Legal Proceedings
  Risk Factors
 There are no material changes from the risk factors previously disclosed in the
Corporations form 10-K for the year ended December 31, 2008.
 Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    On January 23, 2009, Camco awarded Mr. James E. Huston 50,000 shares of
restricted stock in connection with his employment as Chief Executive Officer and
President of Camco. The restricted stock vests over four years in equal installments of
12,500 shares each year, beginning on the first anniversary of the date of the
restricted stock award. The restricted stock award was a private placement exempt from
the registration requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof.(b)
    
    Not applicable(c)
    
    Not applicable
 Defaults Upon Senior Securities
  Submission of Matters to a Vote of Security Holders
  Other Information
  22




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##### Table of Contents



Exhibits
 Exhibit 10(i)
    
    Salary Continuation Agreement with James E. HustonExhibit 10(ii)
    
    Change of Control Agreement with James E. Brooks
    
    Incorporated by reference to
Camcos Form 8-K filed on
January 21, 2009, film no.
09537302 (2009 8-K)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
 23




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##### Table of Contents



SIGNATURES
  Date:
    
    May 7, 2009
    
    
    
    By:
    
    /s/ James E. Huston

James E. HustonChief Executive OfficerDate:
    
    May 7, 2009
    
    
    
    By:
    
    /s/ James E. Brooks

James E. BrooksChief Financial Officer
 24