UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-25196

CAMCO FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		51-0110823
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

814 Wheeling Avenue, Cambridge, Ohio 43725
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (740) 435-2020
Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $1 par value per share		NASDAQ Global Market
(Title of Each Class)		(Name of exchange on which registered)

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant (1) has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o		Accelerated Filer o		Non-Accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the last sale reported as of June 30, 2009, was $16.8 million. There were 7,205,595 shares of the registrant’s common stock outstanding on March 26, 2010.

DOCUMENTS INCORPORATED BY REFERENCE:

     Part III of Form 10-K: Portions of the Proxy Statement for the 2010 Annual Meeting of Stockholders

 

 

PART I

Item 1. Business.

General

Camco Financial Corporation (“Camco” or the “Corporation”) is a financial services holding company that was organized under Delaware law in 1970. Camco is engaged in the financial services business in Ohio, Kentucky and West Virginia, through its wholly-owned subsidiaries, Advantage Bank and Camco Title Agency, Inc. In June 2001, Camco completed a reorganization in which it combined its banking activities under one Ohio savings bank charter known as Advantage Bank (“Advantage” or the “Bank”). Prior to the reorganization, Camco operated five separate banking subsidiaries serving distinct geographic areas. The branch office groups in each of the regions previously served by the subsidiary banks, except for the Bank’s Ashland, Kentucky, division, which was sold in 2004, now operate as regions of Advantage. In 2003, Camco dissolved its second tier subsidiary, Camco Mortgage Corporation, and converted its offices into branch offices of the Bank. In August 2004, Camco completed a business combination with London Financial Corporation of London, Ohio, and its wholly-owned subsidiary, The Citizens Bank of London. The acquisition was accounted for using the purchase method of accounting and, therefore, the financial statements for prior periods have not been restated. At the time of the merger, Advantage Bank merged into The Citizens Bank of London and changed the name of the resulting institution to Advantage Bank. As a result, Camco’s subsidiary financial institution is now an Ohio-chartered commercial bank. Further, Camco converted from a regulated thrift holding company to a Federal Reserve Board financial services holding company.

Advantage is primarily regulated by the State of Ohio Department of Commerce, Division of Financial Institutions (the “Division”), and the Federal Deposit Insurance Corporation (the “FDIC”). Advantage is a member of the Federal Home Loan Bank (the “FHLB”) of Cincinnati, and its deposit accounts are insured up to applicable limits by the Deposit Insurance Fund (the “DIF”) administered by the FDIC. Camco is regulated by the Federal Reserve Board.

Advantage’s lending activities include the origination of commercial real estate and business loans, consumer loans, and residential conventional fixed-rate and variable-rate mortgage loans for the acquisition, construction or refinancing of single-family homes located in Camco’s primary market areas. Camco also originates construction and permanent mortgage loans on condominiums, two- to four-family, multi-family (over four units) and nonresidential properties. Camco continues to diversify the balance sheet through increasing commercial, commercial real estate, and consumer loan portfolios as well as retail and business checking and money market deposit accounts.

The financial statements for Camco and its subsidiaries are prepared on a consolidated basis. The principal source of revenue for Camco on an unconsolidated basis has historically been dividends from the Bank. Payment of dividends to Camco by the Bank is subject to various regulatory restrictions and tax considerations.

References in this report to various aspects of the business, operations and financial condition of Camco may be limited to Advantage, as the context requires.

Camco’s Internet site, http://www.camcofinancial.com, provides Camco’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 free of charge as soon as reasonably practicable after Camco has filed the report with the Securities and Exchange Commission.

Lending Activities

General. Camco’s lending activities include the origination of commercial real estate and business loans, consumer loans, and conventional fixed-rate and adjustable-rate mortgage loans for the construction, acquisition or refinancing of single-family residential homes located in Advantage’s primary market areas. Construction and permanent mortgage loans on condominiums, multifamily (over four units) and nonresidential properties are also offered by Camco.

Loan Portfolio Composition. The following table presents certain information regarding the composition of Camco’s loan portfolio at the dates indicated:

		At December 31,
		2009								2008								2007								2006								2005
						Percent								Percent								Percent								Percent								Percent
						of								of								of								of								of
						Total								Total								Total								Total								Total
		Amount				Loans				Amount				Loans				Amount				Loans				Amount				Loans				Amount				Loans
		(Dollars in thousands)
Type of loan:
Residential properties		$	332,323				50.4	%		$	402,736				53.2	%		$	435,431				53.6	%		$	474,110				58.0	%		$	474,401				56.5	%
Multi-family			39,027				5.9				38,633				5.1				40,589				5.0				43,392				5.3				51,475				6.1
Nonresidential real estate			124,245				18.8				129,334				17.1				126,437				15.6				105,577				12.9				105,380				12.5
Construction			16,384				2.5				31,097				4.1				45,677				5.6				42,654				5.2				64,601				7.7
Commercial & development			36,392				5.5				40,616				5.4				41,551				5.1				35,287				4.3				20,958				2.5
Home equity lines of credit			109,163				16.6				125,442				16.6				121,619				15.0				116,436				14.2				108,086				12.9
Consumer & other loans			17,743				2.7				4,176				.6				7,255				.9				7,851				1.0				22,114				2.6
Total		$	675,277				102.4			$	772,034				102.1			$	818,559				100.8			$	825,307				100.9			$	847,015				100.8
Less:
Unamortized yield adjustments			(156	)			(0.0	)			354				0.0				166				(0.0	)			(8	)			(0.0	)			(266	)			(0.0	)
Allowance for loan losses			(16,099	)			(2.4	)			(15,747	)			(2.1	)			(6,623	)			(0.8	)			(7,144	)			(0.9	)			(6,959	)			(0.8	)
Total loans, net		$	659,022				100.0	%		$	756,641				100.0	%		$	812,102				100.0	%		$	818,154				100.0	%		$	839,790				100.0	%

Loan Maturity Schedule. The following table sets forth certain information as of December 31, 2009, regarding the dollar amount of loans maturing in Camco’s portfolio based on the contractual terms to maturity of the loans. Demand loans, loans having no stated schedule of repayments and loans having no stated maturity, are reported as due in one year or less.

						Due after
		Due in one year				one through				Due after five
		or less				five years				years				Total
		(In thousands)
Loans:
Residential properties		$	16,662			$	45,495			$	270,166			$	332,323
Multifamily			843				22,805				15,379				39,027
Nonresidential real estate			5,467				42,809				75,969				124,245
Construction			3,602				9,065				3,717				16,384
Commercial and development			10,789				15,494				10,109				36,392
Home equity lines of credit			11,664				62,349				35,150				109,163
Consumer and other loans			7,054				4,946				5,743				17,743
Total		$	56,081			$	202,963			$	416,233			$	675,277

		Due after
		December 31, 2010
		(In thousands)
Fixed rate of interest		$	183,526
Adjustable rate of interest			435,670
Total		$	619,196

Generally, loans originated by Advantage are on a fully-amortized basis. Advantage has no rollover provisions in its loan documents and anticipates that loans will be paid in full by the maturity date.

Residential Loans. A large portion of the lending activity of Advantage is the origination of fixed-rate and adjustable-rate conventional loans for the acquisition, refinancing or construction of single-family residences. Excluding construction loans and home equity line of credit, approximately 49.2% of total loans as of December 31, 2009, consisted of loans secured by mortgages on one- to four-family residential properties.

Federal regulations and Ohio law limit the amount which Advantage may lend in relationship to the appraised value of the underlying real estate at the time of loan origination (the “Loan-to-Value Ratio” or “LTV”). In accordance with such regulations and law, Advantage generally makes loans for its own portfolio on single-family residences up to 95% of the value of the real estate and improvements. Advantage generally requires the borrower on each loan with an LTV in excess of 80% to obtain private mortgage insurance, loan default insurance or a guarantee by a federal agency. Advantage permits, on an exception basis, borrowers to exceed a LTV of 80% without private mortgage insurance, loan default insurance or a guarantee by a federal agency.

The interest rate adjustment periods on adjustable-rate mortgage loans (“ARMs”) offered by Advantage are generally one, three and five years. The interest rates initially charged on ARMs and the new rates at each adjustment date are determined by adding a stated margin to a designated interest rate index. Advantage has generally used one-year and three-year United States Treasury note yields, adjusted to a constant maturity, as the index for one-year and three-year adjustable-rate loans, respectively. Advantage has used the London Interbank Offered Rate (“LIBOR”) and FHLB advance rates as additional indices on certain loan programs to diversify its concentrations of indices that may prove beneficial during repricing of loans throughout changing economic cycles. The maximum adjustment on residential loans at each adjustment date for ARMs is usually 2%, with a maximum adjustment of 6% over the term of the loan.

From time to time, Advantage originates ARMs which have an initial interest rate that is lower than the sum of the specified index plus the margin. Such loans are subject to increased risk of delinquency or default due to increasing monthly payments as the interest rates on such loans increase to the fully indexed level. Advantage attempts to reduce the risk by underwriting one—year ARMs at the fully-indexed rate and three-year and five-year ARMs utilizing the note rates. None of Advantage’s ARMs have negative amortization or “payment option” features.

Residential mortgage loans offered by Advantage are usually for terms of up to 30 years, which could have an adverse effect upon earnings if the loans do not reprice as quickly as the cost of funds. To minimize such effect, Advantage generally sells fixed-rate loans to Freddie Mac and Fannie Mae. Furthermore, experience reveals that, as a result of prepayments in connection with refinancings and sales of the underlying properties, residential loans generally remain outstanding for periods which are substantially shorter than the maturity of such loans.

At December 31, 2009, fixed-rate loans comprised 32.1% of the 1-4 family residential loan portfolio. Approximately 67.9% of the 1-4 family residential loan portfolio had adjustable rates tied to U.S. Treasury note yields and LIBOR.

Construction and Development Loans. Advantage offers residential construction loans both to owner-occupants and to builders for homes being built under contract with owner-occupants. Advantage also makes loans to persons constructing projects for investment purposes. Loans for developed building lots are generally made on an adjustable-rate basis were for terms of up to three years with an LTV of 80% in the first half of 2009 with policy changes of two years with an LTV of 65% or less in the second half of 2009.

Advantage offers construction loans to owner-occupants at adjustable-rate term loans on which the borrower pays only interest on the disbursed portion during the construction period, which is usually 9 months. At December 31, 2009, approximately $3.2 million, of Advantage’s total loans consisted of construction loans for 1-4 family properties of which $734,000 was undisbursed.

Construction loans for investment properties involve greater underwriting and default risks than loans secured by mortgages on existing properties or construction loans for single-family residences. Loan funds are advanced upon the security of the project under construction, which is more difficult to value in the case of investment properties before the completion of construction. Moreover, because of the uncertainties inherent in estimating construction costs, it is relatively difficult to evaluate precisely the total loan funds required to complete a project and the related LTV ratios. In the event a default on a construction loan occurs and foreclosure follows, Advantage could be adversely affected because it would have to take control of the project and either arrange for completion of construction or dispose of the unfinished project. Advantage mitigates these risks by working with experienced developers which have substantial personal liquidity. At December 31, 2009, Advantage had $13.2 million of multi-family and non-residential loans, of which $11.3 million was undisbursed and $9.9 million of land development loans, with $1.0 million undisbursed and of which $4.8 million were classified as impaired and on nonaccrual status.

Nonresidential Real Estate Loans. Advantage originates loans secured by mortgages on nonresidential real estate, including retail, office and other types of business facilities. Nonresidential real estate loans are made on an adjustable-rate or fixed-rate basis for terms of up to 10 years. Nonresidential real estate loans originated by Advantage generally have an LTV of 80% in the first half of 2009 with policy changes of 75% or less. The largest nonresidential real estate loan outstanding at December 31, 2009, was a $3.8 million loan secured by a nursing home. Nonresidential real estate loans comprised $124.2 million, or 18.4% of total loans at December 31, 2009.

Nonresidential real estate lending is generally considered to involve a higher degree of risk than residential lending due to the relatively larger loan amounts and the effects of general economic conditions on the successful operation of income-producing properties. Advantage has endeavored to reduce this risk by carefully evaluating the credit history and past performance of the

borrower, the location of the real estate, the quality of the management operating the property, the debt service ratio and cash flow analysis, the quality and characteristics of the income stream generated by the property and appraisals supporting the property’s valuation.

Consumer and Other Loans. Advantage makes various types of consumer loans, including loans made to depositors on the security of their savings deposits, automobile loans, home improvement loans, home equity line of credit loans and unsecured personal loans. Home equity loans are made at fixed and variable rates of interest for terms of up to 15 years. Most other consumer loans are generally made at fixed rates of interest for terms of up to 10 years. The risk of default on consumer loans during an economic recession is greater than for residential mortgage loans.

Advantage’s home equity line of credit loan portfolio totaled $109.2 million, or 16.2%, of the total loan portfolio at December 31, 2009. During 2009, management continued to tighten lending standards on home equity lines of credit in response to significant economic weakness and declining home values. These actions included increasing minimum credit scores and reducing the combined LTV on new loans. At December 31, 2009, education, consumer and other loans constituted $17.7 million, or 2.6% of Advantage’s total loans.

Loan Solicitation and Processing. Loan originations are developed from a number of sources, including: solicitations by Advantage’s lending staff; referrals from real estate brokers, loan brokers and builders; participations with other banks; continuing business with depositors, other business borrowers and real estate developers; and walk-in customers. Advantage’s management stresses the importance of individualized attention to the financial needs of its customers.

The loan origination process for each of Advantage’s regions is centralized in the processing and underwriting of loans. Mortgage loan applications from potential borrowers are taken by loan officers originating loans, and then forwarded to the loan department for processing. The Bank typically obtains a credit report, verification of employment and other documentation concerning the borrower and orders an appraisal of the fair market value of the collateral which will secure the loan. The collateral is thereafter physically inspected and appraised by a staff appraiser or by a designated fee appraiser approved by the Board of Directors of Advantage. Upon the completion of the appraisal and the receipt of all necessary information regarding the borrower, the loan is reviewed by an underwriter with appropriate loan approval authority. If the loan is approved, an attorney’s opinion of title or title insurance is obtained on the real estate which will secure the loan. Borrowers are required to carry satisfactory fire and casualty insurance and, if applicable, flood and private mortgage insurance, and to name Advantage as an insured mortgagee.

The procedure for approval of construction loans is the same as for residential mortgage loans, except that the appraiser evaluates the building plans, construction specifications and construction cost estimates. Advantage also evaluates the feasibility of the proposed construction project.

Consumer loans are underwritten on the basis of the borrower’s credit history and an analysis of the borrower’s income and expenses, ability to repay the loan and the value of the collateral. Centralized processing and underwriting are utilized to add adequate controls over the credit review process.

Loan Originations, Purchases and Sales. Generally all residential fixed-rate loans made by Advantage are originated with documentation which will permit a possible sale of such loans to secondary mortgage market investors. When a mortgage loan is sold to the investor, Advantage services the loan by collecting monthly payments of principal and interest and forwarding such payments to the investor, net of a servicing fee. Fixed-rate loans not sold and generally all of the ARMs originated by Advantage are held in Advantage’s loan portfolio. During the year ended December 31, 2009, Advantage sold approximately $108.5 million in loans. Loans serviced by Advantage for others totaled $497.0 million at December 31, 2009.

The Corporation’s lending efforts have historically focused on loans secured by existing 1-4 family residential properties. Generally, such loans have been underwritten on the basis of no more than an 80% loan-to-value ratio, which has historically provided the Corporation with adequate collateral coverage in the event of default. Nevertheless, Advantage, as with any lending institution, is subject to the risk that residential real estate values could deteriorate in its primary lending areas within Ohio, West Virginia, and northern Kentucky, thereby impairing collateral values.

Of the total loans originated by Advantage during the year ended December 31, 2009, 45.1% were ARM and 54.9% were fixed-rate loans. Adjustable-rate loans comprised 68.0% of Advantage’s total loans outstanding at December 31, 2009.

From time to time, Advantage sells participation interests in mortgage loans, business loans and commercial loans originated by it and purchases whole loans or participation interests in loans originated by other lenders. Advantage held whole loans and participations in loans originated by other lenders of approximately $20.1 million at December 31, 2009. Loans which Advantage purchases must meet or exceed the underwriting standards for loans originated by Advantage.

The following table presents Advantage’s mortgage loan origination, purchase, sale and principal repayment activity for the periods indicated:

		Year ended December 31,
		2009				2008				2007				2006				2005
		(In thousands)
Loans originated:
Construction (purchased and originated)		$	2,310			$	7,774			$	41,323			$	23,752			$	45,066
Permanent			190,662				107,776				80,900				86,613				121,033
Consumer and other			55,243				127,604				173,070				172,403				234,214
Total loans originated			245,905				243,154				295,293				282,768				400,313
Loans purchased			7,035				249				3,021				3,698				11,141
Reductions:
Principal repayments			204,502				229,330				249,922				250,409				323,314
Loans sold			108,481				45,330				49,953				50,924				69,734
Transfers from loans to real estate owned			9,631				6,574				5,490				4,092				3,725
Total reductions			(322,614	)			(281,234	)			(305,365	)			(305,425	)			(396,773	)
Increase (decrease) in other items, net (1)			(29,655	)			(18,614	)			505				(959	)			(2,656	)
Net increase (decrease)		$	(99,329	)		$	(56,445	)		$	(6,546	)		$	(19,918	)		$	12,025

Lending Limit. Federal regulations and Ohio law generally impose a lending limit on the aggregate amount that a depository institution can lend to one borrower to an amount equal to 15% of the institution’s total capital for risk-based capital purposes plus any loan reserves not already included in total capital (the “Lending Limit Capital”). A depository institution may loan to one borrower an additional amount not to exceed 10% of the institution’s Lending Limit Capital, if the additional amount is fully secured by certain forms of “readily marketable collateral.” Real estate is not considered “readily marketable collateral.” In applying this limit, the regulations require that loans to certain related or affiliated borrowers be aggregated.

The largest amount which Advantage could have loaned to one borrower at December 31, 2009, was approximately $10.1 million. The largest amount Advantage had outstanding to one borrower and related persons or entities at December 31, 2009, was $9.1 million, which consisted of loans secured by 1-4 units within seven subdivisions.

Loan Concentrations. Advantage has historically originated loans secured by real estate. At December 31, 2009, approximately 90.0% of total loans were secured by real estate, with 65.4% of total loans secured by 1-4 family residential real estate. Home equity lines of credit comprised 16.2% of total loans at December 31, 2009. There were no concentrations of loans to specific industries that exceeded 8.6% of total loans at December 31, 2009.

Regulatory guidance suggests that financial institutions not exceed 3x risk based capital in a concentration of commercial real estate. At December 31, 2009, Camco’s ratio for this concentration was 2.25x risk based capital approximately $50.8 million under the guidance limitation.

Loan Origination and Other Fees. In addition to interest earned on loans, Advantage may receive loan origination fees or “points” relating to the loan amount, depending on the type of loan, plus reimbursement of certain other expenses. Loan origination fees and other fees are a volatile source of income, varying with the volume of lending and economic conditions. All nonrefundable loan origination fees and certain direct loan origination costs are deferred and recognized as an adjustment to yield over the life of the related loan.

Delinquent Loans, Nonperforming Assets and Classified Assets. Generally, after a loan payment is 15 days delinquent, a late charge of 5% of the amount of the payment is assessed and a collection officer contacts the borrower to request payment. In certain limited instances, Advantage may modify the loan or grant a limited moratorium on loan payments to enable the borrower to reorganize his or her financial affairs. Advantage generally initiates foreclosure proceedings, in accordance with applicable laws, when it appears that a modification or moratorium would not be effective.

Real estate which has been acquired by Advantage as a result of foreclosure or by deed in lieu of foreclosure is classified as “real estate owned” until it is sold. “Real estate owned” is recorded at the lower of the book value of the loan or the fair value of the property less estimated selling expenses at the date of acquisition. Periodically, “real estate owned” is reviewed to ensure that fair

value is not less than carrying value, and any write-down resulting from the review is charged to earnings as a provision for losses on real estate acquired through foreclosure. All costs incurred from the date of acquisition are expensed in the period paid.

The following table reflects the amount of loans in a delinquent status as of the dates indicated:

		At December 31,
		2009				2008				2007				2006				2005
		(Dollars in thousands)
Loans delinquent for:
one — two payments		$	12,590			$	13,338			$	18,210			$	13,833			$	9,490
three or more payments			29,543				25,202				19,070				18,536				13,922
Total delinquent loans		$	42,133			$	38,540			$	37,280			$	32,369			$	23,412
Ratio of total delinquent loans to total net loans (1)			6.39	%			5.09	%			4.59	%			3.91	%			2.76	%

Nonaccrual status denotes loans greater than three payments past due, loans for which, in the opinion of management, the collection of additional interest is unlikely, or loans that meet nonaccrual criteria as established by regulatory authorities. Payments received on a nonaccrual loan are either applied to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the collectability of the loan.

The following table sets forth information with respect to Advantage’s nonaccrual and delinquent loans for the periods indicated.

		At December 31,
		2009				2008				2007				2006				2005
		(Dollars in thousands)
Loans accounted for on nonaccrual basis:
Real estate:
Residential(1)		$	19,190			$	20,616			$	8,411			$	9,618			$	7,576
Multi-family			2,341				3,139				871				4,682				2,300
Nonresidential			3,857				18,057				6,908				1,989				3,109
Construction			4,382				8,603				5,568				92				—
Commercial			515				1,393				455				398				387
Home equity lines of credit			2,415				1,549				925				750				391
Consumer and other			148				127				857				136				159
Total nonaccrual loans			32,848				53,484				23,995				17,665				13,922
Accruing loans delinquent three months or more
Real estate:
Residential			—				44				1,520				728				—
Multi-family			—				—				—				143				—
Nonresidential			2,853				—				—				—				—
Construction			638				—				—				—				—
Commercial			110				—				—				—				—
Total loans 90 days past due and accruing			3,601				44				1,520				871				—
Total nonperforming loans			36,449				53,528				25,515				18,536				13,922
Other real estate owned			9,660				5,841				5,034				3,956				2,581
Total nonperforming assets		$	46,109			$	59,369			$	30,549			$	22,492			$	16,503
Allowance for loan losses		$	16,099			$	15,747			$	6,623			$	7,144			$	6,959
Nonperforming loans as a percent of total net loans (2)			5.40	%			6.91	%			3.13	%			2.23	%			1.64	%
Nonperforming assets to total assets			5.47	%			5.93	%			2.99	%			2.15	%			1.54	%
Allowances for loan losses as a percent of nonperforming loans			44.2	%			29.4	%			26.0	%			38.5	%			50.0	%
Memo section:
Troubled debt restructurings
Loans and leases restructured and in compliance with modified terms		$	16,645			$	11,440				—				—				—
Loans and leases restructured and not in compliance with modified terms		$	4,783			$	12,882				—				—				—

The amount of interest income that would have been recorded had nonaccrual loans performed in accordance with contractual terms totaled approximately $2.1 million for the year ended December 31, 2009. Interest collected on such loans and included in net earnings was $1.4 million.

Federal regulations require the Bank to classify its assets on a regular basis. Problem assets are to be classified as either (i) “substandard,” (ii) “doubtful” or (iii) “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss of principal and or interest if the deficiencies are not corrected. Doubtful assets have the same weaknesses as substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of existing facts, conditions and value. Assets classified as “loss” are considered uncollectible and of such little value that their treatment as assets without the establishment of a specific reserve is unwarranted. Loans classified and generally charged off in the month are identified as a loss. Regulations provide for the reclassification of assets by examiners. At December 31, 2009, the aggregate amounts of Advantage’s classified assets were as follows:

		December 31, 2009
		(In thousands)
Classified loans:
Substandard		$	48,231
Doubtful			735
Loss			117
Total classified assets		$	49,083

The interpretive guidance of the regulations also includes a “special mention” category, consisting of assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification, but which possess credit deficiencies or potential weaknesses deserving management’s close attention. Advantage had assets in the amount of $22.6 million designated as “special mention” at December 31, 2009 compared to $9.8 million at December 31, 2008.

Allowance for Loan Losses

Lending money is a substantial part of our business. However, every loan we make carries a risk of non-payment. This risk is affected by, among other things: cash flow of the borrower and/or the project being financed; in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral; the credit history of a particular borrower; changes in economic and industry conditions; and the duration of the loan.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make significant estimates that affect the financial statements. One of our most critical estimates is the level of the allowance for loan losses. Due to the inherent nature of these estimates, we cannot provide absolute assurance that we will not be required to charge earnings for significant unexpected loan losses.

We maintain an allowance for loan losses that we believe is a reasonable estimate of known and inherent losses within the loan portfolio. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for loan losses by considering general market conditions, credit quality of the loan portfolio, the collateral supporting the loans and performance of customers relative to their financial obligations with us. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed current estimates. We cannot fully predict the amount or timing of losses or whether the loan loss allowance will be adequate in the future.

In originating loans, the Bank recognizes that credit losses will be experienced and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the security for the loan. It is management’s policy to maintain an adequate allowance for loan losses based on, among other things, the Bank’s historical loan loss experience, evaluation of economic conditions and regular reviews of delinquencies and loan portfolio quality. The Bank increases its allowance for loan losses by charging provisions for loan losses against the Bank’s income.

General allowances are made pursuant to management’s assessment of risk in the Bank’s loan portfolio as a whole. Specific allowances are provided for individual loans when ultimate collection is considered questionable by management after reviewing the current status of loans which are contractually past due and considering the net realizable value of the security for the loan. Management continues to actively monitor the Bank’s asset quality and to charge off loans against the allowance for loan losses when appropriate or to provide specific loss reserves when necessary. Although management believes it uses the best information available to make determinations with respect to the allowance for loan losses, future adjustments may be necessary if economic conditions differ substantially from the economic conditions in the assumptions used in making the initial determinations.

		December 31,				December 31,
		2009				2008
		(Dollars in thousands)
General allowance		$	11,700			$	10,138
Specific allowance			4,399				5,609
Total allowance		$	16,099			$	15,747

Management’s approach includes establishing a specific valuation allowance by evaluating individual non-performing loans for probable losses based on a systematic approach involving estimating the realizable value of the underlying collateral. Additionally, management established a general valuation allowance for pools of performing loans segregated by collateral type. For the general valuation allowance, management is applying a prudent loss factor based on our historical loss experience, while considering trends based on changes to non-performing loans and foreclosure activity, and our subjective evaluation of the economic environment. The loan portfolio is segregated into categories based on collateral type and a loss factor is applied to each category. The initial basis for each loss factor is the Corporation’s loss experience for each category. Historical loss percentages are calculated and adjusted by taking charge-offs (net of recoveries) in each risk category during the past 12 consecutive quarters and dividing the total by the balance of each category.

The following table sets forth an analysis of Advantage’s allowance for loan losses historical loss experience:

		Year ended December 31,
		2009				2008				2007				2006				2005
		(Dollars in thousands)
Balance at beginning of year		$	15,747			$	6,623			$	7,144			$	6,959			$	6,476
Charge-offs:
1-4 family residential real estate (1)			8,267				3,568				1,049				646				702
Multifamily and nonresidential real estate			2,548				836				743				562				133
Nonresidential real estate			7,116				354				173				—				—
Other Construction and Land			2,484				703				—				—				—
Consumer			20				21				76				212				117
Commercial			2,052				964				25				—				321
Agriculture Loans			41				112				27				11				—
Overdraft Protection			18				9				134				8				7
Total charge-offs			22,546				6,567				2,097				1,439				1,280
Recoveries:
1-4 family residential real estate (1)			445				373				27				25				265
Multifamily and nonresidential real estate			608				19				3				25				—
Nonresidential real estate			13				235				4				2				—
Other Construction and Land			—				1				2				—				—
Consumer			—				46				19				102				17
Commercial			22				223				1				30				—
Agriculture Loans			—				—				22				—				—
Overdraft Protection			18				1				3				—				1
Total recoveries			1,106				898				81				184				283
Net (charge-offs) recoveries			(21,440	)			(5,669	)			(2,016	)			(1,255	)			(997	)
Provision for losses on loans			21,792				14,793				1,495				1,440				1,480
Balance at end of year		$	16,099			$	15,747			$	6,623			$	7,144			$	6,959
Net (charge-offs) recoveries to average loans			(3.21	)%			(.74	)%			(.25	)%			(.15	)%			(.12	)%

(1) Includes home equity lines of credit.

The following table sets forth the allocation of Advantage’s allowance for loan losses by type of loan at the dates indicated:

		At December 31,
		2009								2008								2007								2006								2005
						Percent								Percent								Percent								Percent								Percent
						Of loans								Of loans								Of loans								Of loans								Of loans
						In each								In each								In each								In each								In each
						Category								Category								Category								Category								Category
						To total								To total								To total								To total								To total
		Amount				Loans				Amount				Loans				Amount				Loans				Amount				Loans				Amount				Loans
		(Dollars in thousands)
Real estate:
Residential		$	4,912				49.2	%		$	3,842				52.2	%		$	2,723				53.2	%		$	2,367				57.4	%		$	2,470				56.0	%
Multi-family			1,527				5.8				1,725				5.0				1,413				5.0				1,168				5.3				512				6.1
Nonresidential			4,066				18.4				2,783				16.8				791				15.4				1,883				12.8				1,970				12.4
Construction			863				2.4				1,306				4.0				665				5.6				239				5.2				276				7.6
Commercial & development			2,906				5.4				3,170				5.3				268				5.1				952				4.3				1,035				2.5
Home equity lines of credit			1,185				16.2				983				16.2				690				14.9				252				14.1				232				12.8
Consumer & other			640				2.6				1,938				0.5				73				.8				283				0.9				464				2.6
Total		$	16,099				100.0	%		$	15,747				100.0	%		$	6,623				100.0	%		$	7,144				100.0	%		$	6,959				100.0	%

Investment and Mortgage-Backed Securities Activities

Federal regulations permit Camco to invest liquid assets, in United States Treasury obligations, securities of various U.S. Government sponsored enterprises, certificates of deposit at FDIC insured banks, corporate debt and equity securities or obligations of state and local political subdivision’s and municipalities. Camco is also permitted to make limited investments in commercial paper and certain mutual funds.

The following table sets forth the composition of Camco’s investment securities portfolio, except its stock in the FHLB of Cincinnati, at the dates indicated:

		At December 31,
		2009																2008																2007
		Amortized				% of				Fair				% of				Amortized				% of				Fair				% of				Amortized				% of				Fair				% of
		Cost				Total				Value				total				Cost				Total				Value				total				Cost				Total				Value				total
		(Dollars in thousands)
Held to maturity:
U.S. Government sponsored enterprises		$	—				0.0	%		$	—				0.0	%		$	10,955				11.3	%		$	11,044				11.2	%		$	—				0.0	%		$	—				0.0	%
Municipal bonds			501				.9				558				1.0				541				0.6				574				0.6			$	567				0.6			$	591				0.6
Mortgage-backed Securities			1,612				2.8				1,642				2.8				1,910				1.9				1,912				1.9				2,202				2.4				2,202				2.4
Total			2,113				3.7				2,200				3.8				13,406				13.8				13,530				13.7				2,769				3.0				2,793				3.0
Available for sale:
U.S. Government sponsored enterprises			14,514				25.7				14,564				25.0				28,318				29.1				28,639				29.0				37,519				40.9				37,782				41.2
Municipal bonds			—				—				—				—				100				0.1				101				1.2				210				0.2				212				0.2
Corporate equity securities			157				.3				88				.2				157				0.2				143				0.1				157				0.2				164				0.2
Mortgage-backed securities			39,690				70.3				41,298				71.0				55,218				56.8				56,469				57.1				51,051				55.7				50,761				55.4
Total			54,361				96.3				55,950				96.2				83,793				86.2				85,352				86.3				88,937				97.0				88,919				97.0
Total investments and mortgage-backed securities		$	56,474				100.0	%		$	58,150				100.0	%		$	97,199				100.0	%		$	98,882				100.0	%		$	91,706				100.0	%		$	91,712				100.0	%

The following table presents the contractual maturities of Advantage’s investment securities, except its stock in the FHLB of Cincinnati and corporate equity securities, and the weighted-average yields for each range of maturities:

		At December 31, 2009
										After one								After five
		One year or less								through five years								through ten years								After ten years								Total
																																										Weighted-
		Amortized				Average				Amortized				Average				Amortized				Average				Amortized				Average				Amortized				Fair				Average
		Cost				Yield				Cost				Yield				Cost				Yield				Cost				Yield				cost				Value				yield
		(Dollars in thousands)
U.S. Government Sponsored enterprises		$	11,514				2.58	%		$	—				—	%		$	3,000				3.00	%		$	—				—	%		$	14,514			$	14,564				2.67	%
Municipal bonds			—								411				4.20				—				—				90				6.66				501				558				4.64
Mortgage-backed Securities			953				4.48				7,731				4.13				7,488				4.79				25,130				5.25				41,302				42,940				4.88
Total		$	12,467				2.73	%		$	8,142				4.13	%		$	10,488				4.28	%		$	25,220				5.26	%		$	56,317			$	58				4.30	%

Deposits and Borrowings

General. Deposits are a primary source of Advantage’s funds for use in lending and other investment activities. In addition to deposits, Advantage derives funds from interest payments and principal repayments on loans, advances from the FHLB of Cincinnati and income on earning assets. Loan payments are a relatively stable source of funds, while deposit inflows and outflows fluctuate more in response to general interest rate and money market conditions. As part of Advantage’s asset and liability management strategy, FHLB advances and other borrowings are used to fund loan originations and for general business purposes. FHLB advances are also used on a short-term basis to compensate for reductions in the availability of funds from other sources.

Deposits. Deposits are attracted principally from within Advantage’s primary market area through the offering of a broad selection of deposit instruments, including interest-bearing and non-interest bearing checking accounts, money market deposit accounts, regular savings accounts, health savings accounts, term certificate accounts and retirement savings plans. In 2006 we began offering brokered certificates of deposit as an alternative to advances from the FHLB, these offerings were discontinued in the latter half of 2009. In 2010, we began offerings with Qwick Rate as part of the bank’s contingency funding plan. Qwick Rate is a non-brokered deposit listing service that provides the Bank with access to institutional certificate of deposits. The Bank pays an annual subscription fee to access the listing service. Interest rates paid, maturity terms, service fees and withdrawal penalties for the various types of accounts are established periodically by management of Advantage based on its liquidity requirements, growth goals and interest rates paid by competitors.

Effective January 1, 2010 interest rates paid by Advantage on deposits became subject to limitations as a result of a consent order Advantage entered into with the FDIC and Ohio Division of Financial Institutions in July 2009 (“Consent Order”). See “Regulation_Regulatory Agreements” below. Deposits solicited by the Bank cannot significantly exceed the prevailing rates in our market areas. The FDIC has implemented by regulation the statutory language “significantly exceeds” as meaning more than 75 basis points. Although the rule became effective January 1, 2010, Advantage has utilized these standards since mid year 2009.

The following table sets forth the dollar amount of deposits in the various types of savings programs offered by Advantage at the dates indicated:

		At December 31,
		2009								2008								2007
						Weighted-								Weighted-								Weighted-
		Amount				average rate				Amount				average rate				Amount				average rate
										(Dollars in thousands)
Non-interest bearing demand		$	38,911				—	%		$	37,526				—	%		$	35,755				—	%
Interest-bearing demand			70,564				0.43				87,199				0.91				91,132				1.57
Money market demand accounts			96,172				0.68				112,749				1.35				111,740				3.57
Passbook and statement savings accounts			36,638				0.25				33,838				0.26				36,963				0.27
Total certificate accounts			417,617				2.73				452,644				3.79				416,594				4.80
Total deposits		$	659,902				1.89	%		$	723,956				2.71	%		$	692,184				3.68	%

The following table sets forth the amount and maturities of Advantage’s time deposits in excess of $100,000 at December 31, 2009:

		(In thousands)
Three months or less		$	26,444
Over three to six months			18,369
Over six to twelve months			45,787
Over twelve months			45,716
Total		$	136,316

Borrowings. The twelve regional FHLBs function as central reserve banks, providing credit for their member institutions. As a member in good standing of the FHLB of Cincinnati, Advantage is authorized to apply for advances from the FHLB of Cincinnati, provided certain standards of creditworthiness have been met. Advances are made pursuant to several different programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s regulatory capital or on the FHLB’s assessment of the institution’s creditworthiness. Under current regulations, a member institution must meet certain qualifications to be eligible for FHLB advances. FHLB advances are secured by a blanket pledge on Advantage’s 1-4 family and multifamily residential loans, home equity lines of credit, junior mortgages and FHLB stock. Advantage currently provides their 1-4 family residential notes as collateral without recourse or warranty.

Borrowings also include repurchase agreements and subordinated debentures. Repurchase agreements are collateralized by a portion of Advantage’s investment portfolio.

Competition

Advantage competes for deposits with other commercial banks, savings associations, savings banks, insurance companies and credit unions and with the issuers of commercial paper and other securities, such as shares in money market mutual funds. The primary factors in competing for deposits are interest rates and convenience of office location. In making loans, Advantage competes with other commercial banks, savings banks, savings associations, consumer finance companies, credit unions and other lenders. Advantage competes for loan originations primarily through the interest rates and loan fees it charges and through the efficiency and quality of the services it provides to borrowers. Competition is affected by, among other things, the general availability of lendable funds, general and local economic conditions, current interest rate levels and other factors which are not readily predictable.

Service Corporation Activities

Advantage has no operating subsidiaries. First S&L Corporation, a subsidiary of Advantage, is inactive and was capitalized on a nominal basis at December 31, 2009.

Employees

As of December 31, 2009, Camco had 224 full-time employees and 28 part-time employees. Camco believes that relations with its employees are stable. None of the employees of Camco are represented by a collective bargaining unit.

REGULATION

General

As a financial services holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), Camco is subject to regulation, examination and oversight by the Board of Governors of the Federal Reserve System (“FRB”). Although Camco is recognized as a financial holding company, most regulations pertaining to bank holding companies also apply to it. Advantage is a non-member of the FRB and is primarily subject to regulation by the State of Ohio, Department of Commerce, Division of Ohio Financial Institution and the FDIC. Camco and Advantage must file periodic reports with these governmental agencies, as applicable, concerning their activities and financial condition. Examinations are conducted annually by the applicable regulators to determine whether Camco and Advantage are in compliance with various regulatory requirements and are operating in a safe and sound manner. Advantage is also subject to certain regulations promulgated by the FRB.

Ohio Regulation

Regulation by the Division affects the internal organization of Advantage, as well as its depository, lending and other investment activities. Periodic examinations by the Division are usually conducted on a joint basis with the FDIC. Ohio law requires that Advantage maintain federal deposit insurance as a condition of doing business. The ability of Ohio chartered banks to engage in

certain state-authorized investments is subject to oversight and approval by the FDIC. See “Federal Deposit Insurance Corporation — State Chartered Bank Activities.”

Any mergers involving, or acquisitions of control of, Ohio banks must be approved by the Division. The Division may initiate certain supervisory measures or formal enforcement actions against Ohio chartered banks. Ultimately, if the grounds provided by law exist, the Division may place an Ohio chartered bank in conservatorship or receivership.

In addition to being governed by the laws of Ohio specifically governing banks, Advantage is also governed by Ohio corporate law, to the extent such law does not conflict with the laws specifically governing banks.

Federal Deposit Insurance Corporation

Supervision and Examination. The FDIC is responsible for the regulation and supervision of all commercial banks that are not members of the FRB (“Non-member Banks”). The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of federally insured banks and thrifts and safeguards the safety and soundness of the bank and thrift industries.

Non-member Banks are subject to regulatory oversight under various state and federal consumer protection and fair lending laws. These laws govern, among other things, truth-in-lending and truth-in-savings disclosure, equal credit opportunity, fair credit reporting and community reinvestment. Failure to abide by federal laws and regulations governing community reinvestment could limit the ability of an institution to open a new branch or engage in a merger transaction.

State Chartered Bank Activities. The ability of Advantage to engage in any state-authorized activities or make any state-authorized investments, as principal, is limited if such activity is conducted or investment is made in a manner different than that permitted for, or subject to different terms and conditions than those imposed on, national banks. Engaging as a principal in any such activity or investment not permissible for a national bank is subject to approval by the FDIC. Such approval will not be granted unless certain capital requirements are met and there is not a significant risk to the FDIC insurance fund. Most equity and real estate investments (excluding office space and other real estate owned) authorized by state law are not permitted for national banks. Certain exceptions are granted for activities deemed by the FRB to be closely related to banking and for FDIC-approved subsidiary activities.

Liquidity. Advantage is not required to maintain a specific level of liquidity; however, the FDIC expects it to maintain adequate liquidity to protect safety and soundness.

Regulatory Capital Requirements. Camco and Advantage are required by applicable law and regulations to meet certain minimum capital requirements. The capital standards include a leverage limit, or core capital requirement, a tangible capital requirement and a risk-based capital requirement.

The leverage capital requirement is a minimum level of Tier 1 capital to average total consolidated assets of 4%. “Tier 1” capital includes common stockholders equity, noncumulative perpetual preferred stock and minority interest in the equity accounts of consolidated subsidiaries, less all intangibles, other than includable purchased mortgage servicing rights and credit card relationships.

Regulatory Agreements.

On March 4, 2009, Camco entered into a Memorandum of Understanding (the “MOU”) with the FRB. The MOU prohibits Camco from engaging in certain activities while the MOU is in effect, including, without the prior written approval of the FRB, (1) the declaration or payment of dividends to stockholders or (2) the repurchase of Camco’s stock.

On August 5, 2009 Camco, entered into a written agreement with the FRB. The written agreement requires Camco to obtain FRB approval prior to: (i) declaring or paying any dividends; (ii) receiving dividends or any other form of payment representing a reduction in capital from Advantage; (iii) making any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities; (iv) incurring, increasing or guaranteeing any debt; or (v) repurchasing any Camco stock. The written agreement also required Camco to develop a capital plan and submit it to the FRB for approval.

Advantage entered into a consent agreement with the FDIC and the Ohio Division of Financial Institutions that provided for the issuance of an order by the FDIC and the Ohio Division. That order was executed by the FDIC and Ohio Division on July 31, 2009 (the “Consent Order”). The Consent Order requires Advantage to, among other things, (i) increase its Tier 1 risk based capital to 8%; and (ii) seek regulatory approval prior to declaring or paying any cash dividend. As a result of the Consent Order, Advantage is disqualified as a public depository under Ohio law and will incur higher premiums for FDIC insurance of its accounts.

For purposes of computing risk-based capital, assets and certain off-balance sheet items are weighted at percentage levels ranging from 0% to 100%, depending on their relative risk. Advantage did not meet this 8% requirement at December 31, 2009.

As a result of the Consent Order, the Bank will be considered “adequately capitalized” until the Consent Order is removed by the FDIC and the Ohio Division of Financial Institutions.

A material failure to comply with the provisions of either the Consent Order or the MOU could result in additional enforcement actions by the FDIC, the Ohio Division or the FRB.

Transactions with Affiliates and Insiders

All transactions between banks and their affiliates must comply with Sections 23A and 23B of the Federal Reserve Act (the “FRA”) and the FRB’s Regulation W. An affiliate is any company or entity which controls, is controlled by or is under common control with the financial institution. In a holding company context, the parent holding company of a bank and any companies that are controlled by such parent holding company are affiliates of the institution. Generally, Sections 23A and 23B of the FRA (i) limit the extent to which a financial institution or its subsidiaries may engage in “covered transactions” with any one affiliate up to an amount equal to 10% of such institution’s capital stock and surplus for any one affiliate and 20% of such capital stock and surplus for the aggregate of such transactions with all affiliates, and (ii) require that all such transactions be on terms substantially the same, or at least as favorable to the institution or the subsidiary, as those provided to a non-affiliate. The term “covered transaction” includes the making of loans, purchase of assets, issuance of a guarantee and similar types of transactions. Exemptions from Sections 23A or 23B of the FRA may be granted only by the FRB. Advantage was in compliance with these requirements at December 31, 2009.

Change in Control

Federal Law. The Federal Deposit Insurance Act (the “FDIA”) provides that no person, acting directly or indirectly or in concert with one or more persons, shall acquire control of any insured depository institution or holding company, unless 60-days prior written notice has been given to the primary federal regulator for that institution and such regulator has not issued a notice disapproving the proposed acquisition. Control, for purposes of the FDIA, means the power, directly or indirectly, alone or acting in concert, to direct the management or policies of an insured institution or to vote 25% or more of any class of securities of such institution. Control exists in situations in which the acquiring party has direct or indirect voting control of at least 25% of the institution’s voting shares, controls in any manner the election of a majority of the directors of such institution or is determined to exercise a controlling influence over the management or policies of such institution. In addition, control is presumed to exist, under certain circumstances where the acquiring party (which includes a group “acting in concert”) has voting control of at least 10% of the institution’s voting stock. These restrictions do not apply to holding company acquisitions. See “Holding Company Regulation”.

Ohio Law. A statutory limitation on the acquisition of control of an Ohio bank requires the written approval of the Division prior to the acquisition by any person or entity of a controlling interest. Control exists, for purposes of Ohio law, when any person or entity which, either directly or indirectly, or acting in concert with one or more other persons or entities, owns, controls, holds with power to vote, or holds proxies representing, 15% or more of the voting shares or rights of an association, or controls in any manner the election or appointment of a majority of the directors. Ohio law also requires that certain acquisitions of voting securities that would result in the acquiring shareholder owning 20%, 33-1/3% or 50% of the outstanding voting securities of Camco must be approved in advance by the holders of at least a majority of the outstanding voting shares represented at a meeting at which a quorum is present and a majority of the portion of the outstanding voting shares represented at such a meeting, excluding the voting shares by the acquiring shareholder. This statute was intended, in part, to protect shareholders of Ohio corporations from coercive tender offers.

Holding Company Regulation

As a financial holding company, Camco has registered with the FRB and is subject to FRB regulations, examination, supervision and reporting requirements. Because Camco is a bank holding company that has elected to become a financial services holding company, some of the restrictions on its activities are reduced. Camco’s financial services holding company status allows Advantage to associate or have management interlocks with business organizations engaged in securities activities. In order to maintain status as a financial holding company, Advantage must be well capitalized and well managed, and must meet Community Reinvestment Act obligations. Failure to maintain such standards may ultimately permit the FRB to take certain enforcement actions against Camco.

Federal Reserve Requirements

FRB regulations currently require banks to maintain reserves of 3% of net transaction accounts (primarily NOW accounts) up to $44.4 million (subject to an exemption of up to $10.3 million). At December 31, 2009, Advantage was in compliance with its reserve requirements.

Item 1A. Risk Factors.

Like all financial companies, Camco’s business and results of operations are subject to a number of risks, many of which are outside of our control. In addition to the other information in this report, readers should carefully consider that the following important factors, among others, could materially impact our business and future results of operations.

     We expect to continue to be subject to restrictions and conditions of Consent Order issued by the Federal Deposit Insurance Corporation and the Ohio Division of Financial Institutions. We have incurred and expect to continue to incur significant additional regulatory compliance expense in connection with the Consent Order. Failure to comply with the expected Consent Order could result in additional enforcement action against us, including the imposition of monetary penalties.

The Bank continues to be under the conditions of the Consent Order as a result of various regulatory concerns as of December 31, 2009. The management team has made significant progress on numerous directives provided in the consent order. If we fail to comply with the terms and conditions of the Consent Order, the FDIC or the Ohio Division of Financial Institutions could take additional enforcement action against us, including the imposition of monetary penalties as well as further operating restrictions. We have incurred and expect to continue to incur significant additional regulatory compliance expense in connection with the Consent Order, and we will incur ongoing expenses attributable to compliance with the terms of the Consent Order. Although we do not expect it, it is possible regulatory compliance expenses related to the Consent Order could have a materially adverse impact on us in the future. While we believe that we will be able to take actions that will result in the Consent Order being terminated in the future, such actions may not result in the FDIC and Ohio Division of Financial Institutions terminating the Consent Order.

     Our capital levels currently are not sufficient to achieve compliance with the higher capital requirements we must meet as defined in the Consent Order.

Under the Consent Order the FDIC required the Bank to raise its tier I capital to 8% by February 28, 2010. While we did achieve the required capital position during 2009, we did not maintain the levels of capital required at February 28, 2010. As of December 31, 2009, the Bank would have needed approximately $8.2 million in additional capital based on assets at such date to meet this requirement. The Corporation currently does not have any capital available to invest in the Bank. We are considering various strategies to help us achieve the required capital level, but there is no assurance that any capital raising strategy can be completed successfully in the near future. Moreover, any further increases to our allowance for loan losses and operating losses would negatively impact our capital levels and make it more difficult to achieve the capital level directed by the FDIC and Ohio Division of Financial Institutions. Based on our failure to meet the required capital level, the FDIC or the Ohio Division of Financial Institutions could take additional enforcement action against us.

     We have a relatively high percentage of non-performing loans and classified assets relative to our total assets. If our allowance for loan losses is not sufficient to cover our actual loan losses, our ability to become profitable will be adversely affected.

At December 31, 2009, our non-performing loans totaled $42.5 million, representing 5.4% of total loans and 5.0% of total assets. In addition, loans which management has classified as either substandard, doubtful or loss totaled $49.1 million, representing 7.3% of total loans and 5.8% of total assets. At December 31, 2009, our allowance for loan losses was $16.1 million, representing 49.0% of non-performing loans. In the event our loan customers do not repay their loans according to their terms and the collateral securing the payment of these loans is insufficient to pay any remaining loan balance, we may experience significant loan losses, which could have a materially adverse effect on our operating results. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover probable losses in our loan portfolio, resulting in additions to our allowance. The additions to our allowance for loan losses would be made through increased provision for loan losses, which would reduce our income.

Since 2008, our loan quality has been negatively impacted by deteriorating conditions within the commercial real estate market and economy as a whole, which has caused declines in commercial real estate values and deterioration in financial condition of various commercial borrowers. Additionally, increases in delinquent real estate mortgage loans have occurred as a result of deteriorating economic conditions and a decline in the housing market across our geographic footprint that reflected declining home prices and increasing inventories of houses for sale. These conditions have led Camco to downgrade the loan quality ratings on various commercial real estate loans through its normal loan review process. In addition, several impaired loans have become under-collateralized due to reductions in the estimated net realizable fair value of the underlying collateral. As a result,

Camco’s provision for loans losses, net charge-offs and nonperforming loans in recent quarters have continued to be higher than historical levels. The additional provisions for loan losses in this period were largely attributed to the aforementioned issues.

     The Corporation and the Bank operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.

Advantage Bank is subject to extensive regulation, supervision and examination by the FDIC, our primary regulator, and by the Ohio Division of Financial Institutions. The Corporation also is subject to regulation and supervision by the FRB. Such regulation and supervision govern the activities in which an institution and its holding Company may engage, and are intended primarily for the protection of the insurance fund and for the depositors and borrowers of the Bank. The regulation and supervision by regulatory authorities are not intended to protect the interests of investors in our common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.

     The enactment of recent legislation may significantly affect our financial condition, results of operation, liquidity or stock price.

The Emergency Economic Stabilization Act of 2008 (“EESA”) was signed into law on October 3, 2008. As part of EESA, the Treasury established the Troubled Assets Relief Program, including the Capital Purchase Program (“CPP”), to provide up to $700 billion of funding to eligible financial institutions through the purchase of capital stock and other financial instruments for the purpose of stabilizing and providing liquidity to the U.S. financial markets. Then, on February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (“ARRA”), as a sweeping economic recovery package intended to stimulate the economy and provide for broad infrastructure, energy, health, and education needs. There can be no assurance as to the actual impact that EESA or its programs, including the CPP, and ARRA or its programs, will have on the national economy or financial markets. The failure of these significant legislative measures to help stabilize the financial markets and a continuation or worsening of current financial market conditions could materially and adversely affect our business, financial condition, results of operations, access to credit or the trading price of our common shares.

There have been numerous actions undertaken in connection with or following EESA and ARRA by the FRB, Congress, the Treasury, the FDIC, the SEC and others in efforts to address the current liquidity and credit crisis in the financial industry that followed the sub-prime mortgage market meltdown which began in late 2007. These measures include homeowner relief that encourages loan restructuring and modification; the establishment of significant liquidity and credit facilities for financial institutions and investment banks; the lowering of the federal funds rate; emergency action against short selling practices; a temporary guaranty program for money market funds; the establishment of a commercial paper funding facility to provide back-stop liquidity to commercial paper issuers; and coordinated international efforts to address illiquidity and other weaknesses in the banking sector. The purpose of these legislative and regulatory actions is to help stabilize the U.S. banking system. EESA, ARRA and the other regulatory initiatives described above may not have their desired effects. If the volatility in the markets continues and economic conditions fail to improve or worsen, our business, financial condition and results of operations could be materially and adversely affected.

FDIC insurance premiums have increased substantially in 2009, and Advantage expects to pay higher FDIC premiums in the future because bank failures have significantly reduced the deposit insurance fund’s ratio of reserves to insured deposits. The FDIC adopted a revised risk-based deposit insurance assessment schedule on February 27, 2009, which raised deposit insurance premiums. On May 22, 2009, the FDIC also implemented a special assessment, which totaled $436,000 for Advantage. Additional special assessments may be imposed by the FDIC for future periods. On November 12, 2009, the FDIC adopted a final rule that requires insured depository institutions to prepay on December 30, 2009, their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011, and 2012. Advantage’s deposit insurance premiums will also increase because of the Consent Order. Additional bank failures may require additional significant deposit insurance premium increases, which would affect Advantage’s income. On November 12, 2009, Advantage received an exemption from prepaying its quarterly risk-based assessment for the fourth quarter of 2009, and all of 2010, 2011, and 2012. As a result, Advantage will continue to pay on a quarterly basis.

     Difficult economic conditions and market volatility have adversely impacted the banking industry and financial markets generally and may significantly affect our business, financial condition, or results of operation.

The continued deteriorating economic conditions in our markets may negatively affect the Corporation. The Midwest’s falling home prices and increasing foreclosures, unemployment and underemployment, have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs of asset values by financial institutions. The resulting write-downs to assets of financial institutions have caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to seek government assistance or bankruptcy protection.

Many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers, including to other financial institutions because of concern about the stability of the financial markets and the strength of counterparties. It is difficult to predict how long these economic conditions will exist, which of our markets, products or other businesses will ultimately be affected, and whether management’s actions will effectively mitigate these external factors. Accordingly, the resulting lack of available credit, lack of confidence in the financial sector, decreased consumer confidence, increased volatility in the financial markets and reduced business activity could materially and adversely affect the Camco’s business, financial condition and results of operations.

As a result of the challenges presented by economic conditions, we may face the following risks in connection with these events:

	•		Inability of borrowers to make timely repayments of their loans, or decreases in value of real estate collateral securing the payment of such loans resulting in significant credit losses, which could result in increased delinquencies, foreclosures and customer bankruptcies, any of which could have a material adverse effect on our operating results.
	•		Increased regulation of the financial services industry, including heightened legal standards and regulatory requirements or expectations. Compliance with such regulation will likely increase costs and may limit Camco’s ability to pursue business opportunities.
	•		Further disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations, may result in an inability to borrow on favorable terms or at all from other financial institutions.
	•		Increased competition among financial services companies due to the recent consolidation of certain competing financial institutions and the conversion of certain investment banks to bank holding companies, which may adversely affect the Camco’s ability to market our products and services.

Volatility in the economy may negatively impact the fair value of our stock.

The market price for Camco’s common stock has been volatile in the past, and several factors could cause the price to fluctuate substantially in the future, including:

	•		announcements of developments related to our business;
	•		fluctuations in our results of operations;
	•		sales of substantial amounts of our securities into the marketplace;
	•		general conditions in our markets or the worldwide economy;
	•		a shortfall in revenues or earnings compared to securities analysts’ expectations;
	•		our inability to pay cash dividends
	•		changes in analysts’ recommendations or projections; and
	•		our announcement of new acquisitions or other projects.

Changes in interest rates could adversely affect our financial condition and results of operations.

Our results of operations depend substantially on our net interest income, which is the difference between (i) interest income on interest-earning assets, principally loans and investment securities, and (ii) interest expense on deposit accounts and borrowings. These rates are highly sensitive to many factors beyond our control, including general economic conditions, inflation, recession, unemployment, money supply and the policies of various governmental and regulatory authorities. While we have taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that these measures will be effective in avoiding undue interest rate risk.

Increases in interest rates can affect the value of loans and other assets, including our ability to realize gains on the sale of assets. We originate loans for sale and for our portfolio. Increasing interest rates may reduce the volume of origination of loans for sale and consequently the volume of fee income we earn on such sales. Further, increasing interest rates may adversely affect the ability of borrowers to pay the principal or interest on loans and leases, resulting in an increase in non-performing assets and a reduction of income recognized.

In contrast, decreasing interest rates have the effect of causing clients to refinance mortgage loans faster than anticipated. This causes the value of assets related to the servicing rights on loans sold to be lower than originally anticipated. If this happens, we may need to write down the value of our servicing assets faster, which would accelerate our expense and lower our earnings.

The Corporation relies, in part, on external financing to fund its operations and the availability of such funds in the future could adversely impact its growth strategy and prospects.

The Bank relies on deposits, advances from the FHLB and other borrowings to fund its operations. The Corporation also has previously issued subordinated debentures to raise additional capital to fund its operations. Although the Corporation considers such sources of funds adequate for its current capital needs, the Corporation may seek additional debt or equity capital in the future to achieve its long-term business objectives. The sale of equity or convertible debt securities in the future may be dilutive to the Corporation shareholders, and debt refinancing arrangements may require the Corporation to pledge some of its assets and enter into covenants that would restrict its ability to incur further indebtedness. Additional financing sources, if sought, might be unavailable to the Corporation or, if available, could be on terms unfavorable to it. If additional financing sources are unavailable, not available on reasonable terms or the Corporation is unable to obtain any required regulatory approval for additional debt, the Corporation’s growth strategy and future prospects could be adversely impacted.

Credit risks could adversely affect our results of operations.

There are inherent risks associated with our lending activities, including credit risk, which is the risk that borrowers may not repay outstanding loans or that the value of the collateral securing loans will decrease. We extend credit to a variety of customers based on internally set standards and judgment. We attempt to manage credit risk through a program of underwriting standards, the review of certain credit decisions and an on-going process of assessment of the quality of the credit already extended. However, conditions such as inflation, recession, unemployment, changes in interest rates, money supply and other factors beyond our control may increase our credit risk. Such adverse changes in the economy may have a negative impact on the ability of borrowers to repay their loans. Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral. In addition, substantially all of our loans are to individuals and businesses in Ohio. Consequently, any decline in the economy of this market area could have a materially adverse effect on our financial condition and results of operations.

We operate in an extremely competitive market, and our business will suffer if we are unable to compete effectively.

In our market area, we encounter significant competition from other commercial banks, savings associations, savings banks, insurance companies, consumer finance companies, credit unions, other lenders and with the issuers of commercial paper and other securities, such as shares in money market mutual funds. The increasingly competitive environment is a result primarily of changes in regulation and the accelerating pace of consolidation among financial service providers. Many of our competitors have substantially greater resources and lending limits than we do and may offer services that we do not or cannot provide.

Our ability to pay cash dividends is subject to prior FRB approval.

In March 2009, we entered into a memorandum of understanding (“MOU”) with the FRB that prohibits the Corporation from paying dividends without the FRB’s prior approval. We do not know how long this restriction will remain in place. Even if we are permitted to pay a dividend, we are dependent primarily upon the earnings of our operating subsidiaries for funds to pay dividends on our common stock. The payment of dividends by our subsidiaries is subject to certain regulatory restrictions. Currently, Advantage is prohibited from paying any dividends to Camco without the prior approval of the FDIC and the Ohio Division of Financial Institutions. As a result, any payment of dividends in the future by Camco will be dependent, in large part, on our subsidiaries’ ability to satisfy these regulatory restrictions and our subsidiaries’ earnings, capital requirements, financial condition and other factors. Although, in the past, our financial earnings and financial condition have allowed us to declare and pay periodic cash dividends to our stockholders, there can be no assurance that our dividend policy or size of dividend distribution will continue in the future.

The preparation of financial statements requires management to make estimates about matters that are inherently uncertain.

Management’s accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods in order to ensure that they comply with generally accepted accounting principles and reflect management’s judgment as to the

most appropriate manner in which to record and report our financial condition and results of operations. Two of the most critical estimates are the level of the allowance of loan losses and the valuation of mortgage servicing rights. Due to the inherent nature of these estimates, we cannot provide absolute assurance that we will not significantly increase the allowance for loan losses or sustain loan losses that are significantly higher than the provided allowance, nor that we will not recognize a significant provision for the impairment of mortgage servicing rights.

Our organizational documents may have the effect of discouraging a third party from acquiring us.

Our certificate of incorporation and bylaws contain provisions that make it more difficult for a third party to gain control or acquire us. These provisions also could discourage proxy contests and may make it more difficult for dissident stockholders to elect representatives as directors and take other corporate actions. These provisions of our governing documents may have the effect of delaying, deferring or preventing a transaction or a change in control that might be in the best interest of our stockholders.

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to utilize alternative methods to complete financial transactions that historically have involved banks. For example, consumers can now maintain funds in brokerage accounts or mutual funds that would have historically been held as bank deposits. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our financial condition and results of operations.

Camco may be named as a defendant from time to time in a variety of litigation and other actions.

Camco or one of its subsidiaries may be named as a defendant from time to time in a variety of litigation arising in the ordinary course of their respective businesses. Such litigation is normally covered by errors and omissions or other appropriate insurance. However, significant litigation could cause Camco to devote substantial time and resources to defending its business or result in judgments or settlements that exceed insurance coverage, which could have a material adverse effect on Camco’s financial condition and results of operation. Further, any claims asserted against Camco, regardless of merit or eventual outcome, may harm Camco’s reputation and result in loss of business. In addition, Camco may not be able to obtain new or difference insurance coverage, or adequate replacement policies with acceptable terms.

The Corporation’s allowance for loan losses may not be adequate to cover actual losses.

The Corporation maintains an allowance for loan losses to provide for loan defaults and non-performance. The Corporation’s allowance for loan losses may not be adequate to cover actual loan losses, and future provisions for loan losses could materially and adversely affect the Corporation’s operating results. The Corporation’s allowance for loan losses is based on its historical loss experience, as well as an evaluation of the risks associated with its loans held for investment. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates that may be beyond the Corporation’s control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review the Corporation’s loans and allowance for loan losses. While the Corporation believes that its allowance for loan losses is adequate to cover current losses, the Corporation could need to increase its allowance for loan losses or regulators could require it to increase this allowance. Either of these occurrences could materially and adversely affect the Corporation’s earnings and profitability.

A material breach in Camco’s security systems may have a significant effect on Camco’s business and reputation.

Camco collects, processes and stores sensitive consumer data by utilizing computer systems and telecommunications networks operated by both Camco and third party service providers. Camco has security and backup and recovery systems in place, as well as a business continuity plan, to ensure the computer systems will not be inoperable, to the extent possible. Camco also has security to prevent unauthorized access to the computer systems and requires its third party service providers to maintain similar controls. However, management cannot be certain that these measures will be successful. A security breach of the computer systems and loss of confidential information, such as customer account numbers and related information, could result in a loss of customers’ confidence and, thus, loss of business.

Item 1B. Unresolved Staff Comments.

     None.

Item 2. Properties.

The following table provides the location of, and certain other information pertaining to, Camco’s office premises as of December 31, 2009, with dollars in thousands:

		Year facility				Leased		Net
		commenced				or		book
Office Location		operations				owned		value (1)
134 E. Court Street Washington Court House, Ohio			1963			Owned (2)		$	532.1
1050 Washington Ave. Washington Court House, Ohio			1996			Owned			476.7
1 N. Plum Street Germantown, Ohio			1998			Owned			450.2
687 West Main Street New Lebanon, Ohio			1998			Owned			56.9
2 East High Street London, Ohio			2004			Owned			530.9
3002 Harrison Avenue Cincinnati, Ohio			2000			Owned			1,040.5
1111 St. Gregory Street Cincinnati, Ohio			2000			Leased (3)			12.7
5071 Glencrossing Way Cincinnati, Ohio			2000			Leased (4)			7.3
126 S. 9th Street Cambridge, Ohio			1998			Owned			74.2
226 Third Street Marietta, Ohio			1976			Owned (5)			521.6
1925 Washington Boulevard Belpre, Ohio			1979			Owned			214.5
478 Pike Street Marietta, Ohio			1998			Leased (6)			495.5
814 Wheeling Avenue Cambridge, Ohio			1963			Owned			1,026.0
327 E. 3rd Street Uhrichsville, Ohio			1975			Owned			59.8
175 N. 11th Street Cambridge, Ohio			1981			Owned			301.4
209 Seneca Avenue Byesville, Ohio			1978			Leased (7)			2.0
547 S. James Street Dover, Ohio			2002			Owned(8)			361.7

		Year facility				Leased				Net
		commenced				or				book
Office Location		operations				owned				value (1)
2497 Dixie Highway Ft. Mitchell, Kentucky			2001			Owned					529.6
401-7 Pike Street Covington, Kentucky			2001			Owned					81.0
7550 Dixie Highway Florence, Kentucky			2001			Owned					409.0
6901 Glenn Highway Cambridge, Ohio			1999			Owned		(9)			1,126.5
1500 Grand Central Ave.- Suite #102 Vienna, West Virginia			2004			Leased		(10)			149.0
123 Southgate Parkway Cambridge, Ohio			2005			Leased		(11)			50.9
6360 Tylersville Road Mason, Ohio			2006			Leased		(12)			131.5
1104 Eagleton Blvd. London, Ohio			2006			Leased		(13)			255.0
828 Wheeling Avenue Cambridge, Ohio			2007			Leased		(14)			12.5
440 Polaris Parkway Westerville, OH 43082			2009			Leased		(15)			0.0