updated 11/1/2010 3:45:29 AM ET 2010-11-01T07:45:29

CAMBRIDGE, Ohio, Oct. 29, 2010 (GLOBE NEWSWIRE) -- Camco Financial Corporation (Nasdaq:CAFI), the financial services holding company for Advantage Bank, announced third quarter financial results and adjusted second quarter financial results. Third quarter results ($11.6 million loss), and the revised second quarter results ($4.1 million loss) reflect a deterioration in the underlying collateral value of certain commercial and residential credits driven by the weak real estate market. The Company's year-to-date loss through September 30, 2010 is $15.6 million ($2.16 per share). The Company previously disclosed that it would be restating its second quarter financials in a Form 8-K that was filed with the Securities and Exchange Commission on October 27, 2010.

"While it is difficult to share this news, it is important to realize that we are not immune to the continued tough economic conditions and we are being upfront about the challenges we are facing," said James E. Huston, President and CEO. "This is part of the process of weathering the financial storms that we have all experienced over the last several years. We believe this difficult step will provide the necessary and critical foundation going forward."

"For example, our loan volume during third quarter 2010 was among the best quarters we have experienced since the beginning of the recession. We had $32 million in residential originations as of the end of third quarter, representing a 60 percent increase over second quarter and a 79 percent increase over the same quarter 2009," stated Mr. Huston.

Huston continued, "Lower mortgage rates have led to strong mortgage origination volume and increased gain on sale margins. In addition to traditional refinances, we have seen growth in this category based on specialty Fannie Mae and Freddie Mac refinance programs that assist borrowers who have experienced a decrease in their home equity."

"The Commercial Banking Division continues to be a key revenue driver in 2010 with approximately $102 million in new loan facilities, $550,000 in new origination fees and a significant amount of new commercial deposit relationships. We believe that some of the key attributes of the new commercial business include the opportunity to provide financial services to high net worth individuals, lower leverage real estate projects and high credit quality operating companies. The Commercial Banking Division continues to be focused on relationship banking, credit quality and the interest rate margin," Huston said.

"Like every individual and organization across the country, we have been impacted by the continuing tepid growth in the economy. We are disappointed by the results this quarter – and the need to restate last quarter. We know that this impacts not only our bottom line, but those of our shareholders as well. We are taking the necessary steps so that we are poised for profitability going forward," Huston said.

Review of Financial Performance


The third quarter 2010 net loss of $(11.6) million compares to net income of $355,000 in the third quarter of 2009. Earnings per share were $(1.61), compared with $.05 in the third quarter of 2009. Third quarter results compare to a net loss of $(4.1) million in the restated second quarter of 2010. The losses in the second and third quarter of 2010 are driven principally by the provision for loan losses of $5.2 million and $11.4 million, respectively.

Asset Quality:

Loan quality has been impacted by the sluggish economic recovery within our market areas which has caused declines in the underlying value of collateral both in commercial and residential real estate and deterioration in the financial condition of some of our borrowers. These factors have made it difficult to sustain a steady reduction in classified assets and non performing loans. The second quarter 2010 adjustment to the provision reflects management's decision to better match the directional trends in classified assets and non performing loans to the reserve as of June 30, 2010. The bulk of the third quarter provision is driven by recent appraisal information on less than ten large commercial credits and the write down of properties brought in through foreclosure.

A summary of certain key factors follows:

Net Interest Income:

Net interest income was $6.8 million, up 9.2 percent compared with the prior year and up 5.9 percent compared with the prior quarter. Net interest margin was 3.59 percent, compared to 3.07 percent with the prior year and 3.40 percent compared with the prior quarter.

Improved margins are being driven by lower cost of deposits and non-core funding sources coupled with a greater mix of new commercial loan originations.

Non-Interest Income (NII):

Non-interest income was $1.4 million, down 10.6 percent compared with the prior year and down 10.0 percent compared to the prior quarter. The decrease in the third quarter, in part, reflects the impact on the valuation of mortgage servicing rights of faster prepayment assumptions related to the low rate environment. However, mortgage loan sales to Freddie Mac and Fannie Mae have been strong. Residential originations in the third quarter were $32 million, up 79 percent over the prior year, and up 60 percent over the prior quarter. Margins have also widened; gains on sale of loans were $332,000 compared to $207,000 in the prior year, and up $71,000 compared to the prior quarter.

Non-Interest Expense (NIE):

NIE was $7.8 million, compared with $7.2 million in the prior year and $7.0 million in the prior quarter. The increase in the third quarter relates to higher loan production, operating expenses associated with real estate owned, and legal expenses relating to the resolution of problem assets.

Balance Sheet Review:

Total assets were $849.3 million at September 30, 2010, compared with $891.4 million in the prior year and $840.1 million at June 30, 2010.

Total loans were $693.4 million at September 30, 2010, compared with $696.9 million in the prior year and $691.6 million at June 30, 2010. The total loan portfolio mix has changed with a greater percentage representing commercial loans, the growth of which has been a strategic initiative for the Bank. Commercial loan balances at September 30, 2010, were $320.0 million, compared with $261.1 million at September 30, 2009 and $302.5 million at June 30, 2010.

Deposit balances were $647.9 million, compared with $670.4 million in the prior year and $652.9 million at June 30, 2010. Excluding the planned runoff of public fund and brokered deposits, our deposit base has increased from $596.8 million to $626.8 million, or 5.03 percent since September 30, 2009. Deposits in the Greater Cincinnati market have been particularly strong increasing by more than $10.8 million since September 30, 2009. 

Provision of Deferred Taxes:

The third quarter tax provision of $572,000 reflects a 100 percent valuation allowance on the Company's deferred tax asset. As the Company executes plans to return to profitability, future earnings will benefit from operating loss carry-forwards. 

About Camco Financial Corporation: Camco Financial Corporation, holding company for Advantage Bank, is a multi-state financial holding company headquartered in Cambridge, Ohio. Advantage Bank and its affiliates offer community banking that includes commercial, business and consumer financial services, internet banking and title insurance services from 26 offices. Additional information about Camco Financial may be found on the Company's web sites:www.camcofinancial.com or 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.

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