Camco Financial Announces Fourth Quarter and 2009 Results

CAMBRIDGE, Ohio, March 1, 2010 (GLOBE NEWSWIRE) -- Camco Financial Corporation (Nasdaq:CAFI), the financial holding company for Advantage Bank, announced a loss of $11.8 million or  $1.64 per share for the three months ending December 31, 2009 as compared to a net loss of $15.8 million or $2.20 per share for the same period in 2008.  For the year ended December 31, 2009 the Company reported a loss of $11.2 million or $1.56 per share, as compared to a loss of $15.3 million or $2.14 per share, for the prior year. 

The decline in earnings during the fourth quarter reflects current economic conditions and the recognition of losses identified in certain larger impaired commercial real estate relationships. During 2009, the Company significantly increased its credit risk management efforts, addressing many of the loans that were categorized as classified and nonaccrual. These efforts also helped to identify the status of the mentioned loans during the fourth quarter. As a result of our increased focus placed in this area, strategies were developed to either return the loans to performing status or dispose of the loan and end the credit relationship. These decisions resulted in an additional provision of $19.9 million for the three months ended December 31.

"We are not proud of the earning results, but we remain committed to improving the asset quality of our institution, an effort that began this time last year. We understood that the obstacles were many; however we have maintained our focus on improving credit quality issues that have been caused by the economic effects on our customers' ability to pay and the valuations of underlying loan collateral. This focus required us to make tough decisions in charging off loans, acquiring property through foreclosure and identifying those customers that we should work with through these troubled times. Our management team and the 252 employees that support our efforts have done a commendable job focusing on all of our major initiatives," stated Jim Huston, Chief Executive Officer. 

Review of Financial Performance

Net Interest Margin:  During the fourth quarter of 2009, the net interest margin increased 13 basis points to 3.20% from 3.07% in the third quarter of 2009, and for the year increased 14 basis points from 2.77% to 2.91% at December 31, 2009 accomplished mainly through the repricing of deposits in the low rate environment and management's aggressive repayment of non-core funding sources, which typically carry a higher funding cost. Earning assets decreased by $26.6 million from third quarter 2009 totals and $152.6 million from December 31, 2008. The decrease in earning assets was primarily related to mortgage refinancing that occurred throughout the year as homeowners took advantage of historically low mortgage rates resulting in prepayments along with normal amortizations, which outpaced loan originations. Additionally, calls and maturities in the investment portfolio also contributed to lower yielding assets along with certain loans that migrated to non accrual and charge off status.

Noninterest Income: For the three months ending December 31, 2009, total noninterest income increased $812,000 or 50.4% to $2.4 million compared to $1.6 million in the third quarter 2009 primarily due to increases in the value of the company's mortgage servicing rights. A nonrecurring fee credit recognized in conjunction with changes to the company's merchant service provider and loan production related fees also contributed to the increase during the fourth quarter. Noninterest income increased significantly during 2009 driven by the one time charge taken to write down the mortgage servicing portfolio in 2008. Absent this activity, the 2009 noninterest income increases were primarily due to increased revenue from subsidiary Camco Title, gains generated on loans sold and mortgage servicing rights recognized on the loans sold.

Noninterest Expense: During the fourth quarter 2009 noninterest expense totaled $7.0 million, compared to $7.2 million for the third quarter 2009. This decrease was due mostly to the partial reversal of accruals associated with Camco's annual incentive award plan and lower medical plan expenses. For the year ended December 31, 2009 noninterest expense was significantly reduced from 2008 when goodwill impairment charges were taken. Other than the goodwill charge, expenses were down across a majority of the noninterest expense categories specifically, employee compensation, which was down $423,000 due to lower staffing and related expenses, along with reductions in advertising and occupancy and equipment. These savings were offset by increased expenses related to the management of the company's real estate owned portfolio in addition to increased FDIC insurance costs.

Balance Sheet: At December 31, 2009 total assets were $846.2 million, a decrease of $154.2 million or 15.4% from year end 2008. Loans receivable decreased $97.6 million or 12.9% as prepayments and amortizations outpaced loan production, along with the chargeoff of uncollectable loans. Cash and cash equivalents decreased $14.1 million or 27.0% and investments decreased $40.7 million or 41.2% during the year as increased liquidity levels were used to reduce certain deposits and borrowings. Specifically, deposits decreased $64.1 million or 8.8% as certain public deposits were reduced and borrowings decreased $74.6 million or 40.6% as the company reduced its reliance on FHLB borrowings. The company will focus on re-placing a portion of these funding sources with core relationship deposits (checking, savings, money market and CD accounts).

Asset Quality: Net charge-offs totaled $16.3 million for the fourth quarter 2009 compared to $3.4 million for the third quarter and $21.4 million for the full year 2009 (including recoveries of $1.4 million) compared to $5.7 million for full year 2008. Total provision for loan losses was $19.9 million for the three months ending December 31, 2009 compared to $11.0 million for the same period last year. Full year provisions totaled $21.8 million compared to $14.8 million in 2008. As previously stated, during the fourth quarter, loss was recognized on certain larger commercial real estate relationships. Subsequent to year end, the Company became aware of a fraudulent commercial loan in our Cincinnati market totaling $2.8 million. Based on accounting standards, the Company was required to evaluate this event for impact on the 2009 financial statements.

Nonperforming assets decreased $18.3 million to $42.5 million, down from $60.8 million during the third quarter. Jim Huston stated, "Our team has placed substantial efforts into re-analyzing our loan portfolios and preventing the worsening of the nonperforming assets during these challenging economic times. As mentioned, at times this required us to improve the overall quality of our portfolios by charging off balances and replacing them with high credit quality new loans. We believe that we have a complete understanding of our most troubled assets and have recognized the inherent loss within those credits. We plan to continue our aggressive efforts to prevent further deterioration in our loan portfolios and workout the existing issues."

About Camco Financial Corporation:

Camco Financial Corporation, Holding Company of Advantage Bank, is a multi-state financial services Holding Company headquartered in Cambridge, Ohio. Advantage Bank and its affiliate, Camco Title Agency, offer relationship banking that includes commercial, small business and consumer financial services, internet banking and title insurance services from 28 offices in Ohio, Kentucky and West Virginia. Additional information about Camco Financial Corporation may be found on the Company's web sites: http://www.camcofinancial.com and http://www.advantagebank.com.

The Camco Financial Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4639

The words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the Company's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demands for loans in the Company's market area and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

NOTE: This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Management uses the non-GAAP measure of net income from core operations in its analysis of the company's performance. This measure, as used by the Company, adjusts net income determined in accordance with GAAP to exclude the effects of special items that are unusual in nature.  Because certain of these items and their impact on the Company's performance are difficult to predict, management believes presentation of financial measures excluding the impact of such items provides useful supplemental information in evaluating the operating results of the Company's core businesses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.