SCHEDULE 14A INFORMATION
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CAMCO FINANCIAL CORPORATION
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CAMCO FINANCIAL CORPORATION
6901 GLENN HIGHWAY
CAMBRIDGE, OHIO 43725
(740) 435-2020
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 2005 Annual Meeting of Stockholders of Camco Financial Corporation
("Camco") will be held at Camco's Corporate Center, 6901 Glenn Highway,
Cambridge, Ohio 43725, on April 26, 2005, at 3:00 p.m., Eastern Daylight Time
(the "Annual Meeting"), for the following purposes:
1. To elect four directors of Camco for terms expiring in 2008;
2. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Only Camco stockholders of record at the close of business on March 8,
2005, will be entitled to vote at the Annual Meeting and at any adjournments
thereof. Whether or not you expect to attend the Annual Meeting, we urge you to
consider the accompanying proxy statement carefully and to SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE VOTED IN
ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF A QUORUM MAY BE ASSURED. Giving
a proxy does not affect your right to vote in person in the event you attend the
Annual Meeting.
By Order of the Board of Directors
March 16, 2005 D. Edward Rugg, Secretary
CAMCO FINANCIAL CORPORATION
6901 GLENN HIGHWAY
CAMBRIDGE, OHIO 43725
(740) 435-2020
PROXY STATEMENT
PROXIES
The Board of Directors of Camco Financial Corporation ("Camco") is
soliciting proxies in the form accompanying this Proxy Statement for use at the
2005 Annual Meeting of Stockholders of Camco to be held at Camco's Corporate
Center, 6901 Glenn Highway, Cambridge, Ohio 43725, on April 26, 2005, at 3:00
p.m., Eastern Daylight Time, and at any adjournments thereof (the "Annual
Meeting"). Only stockholders of record as of the close of business on March 8,
2005 (the "Voting Record Date"), are entitled to vote at the Annual Meeting.
Each such stockholder will be entitled to cast one vote for each share owned. As
of the Voting Record Date, there were 7,678,748 votes entitled to be cast at the
Annual Meeting.
Each properly executed proxy received prior to the Annual Meeting and not
revoked will be voted as specified thereon or, in the absence of specific
instructions to the contrary, will be voted FOR the reelection of Larry A.
Caldwell, Carson K. Miller, Samuel W. Speck and Jeffrey T. Tucker as directors
of Camco for terms expiring in 2008.
The directors, officers and other employees of Camco may solicit proxies
in person or by telephone, telegraph or mail only for use at the Annual Meeting.
Proxies may be revoked by (a) delivering a written notice expressly revoking the
proxy to the Secretary of Camco at the above address prior to the Annual
Meeting, (b) delivering a later dated proxy to Camco at the above address prior
to the Annual Meeting, or (c) attending the Annual Meeting and voting in person.
The cost of soliciting proxies will be borne by Camco.
This Proxy Statement is first being mailed to stockholders of Camco on or
about March 22, 2005.
ELECTION OF DIRECTORS
The Board of Directors proposes the reelection of the following persons to
terms that will expire in 2008:
Director
Name Age Position(s) held since
----------------- --- --------------------- --------
Larry A. Caldwell 68 Chairman of the Board 1970
Carson K. Miller 59 Director 2002
Samuel W. Speck 68 Director 1991
Jeffrey T. Tucker 47 Director 1987
LARRY A. CALDWELL is the Chairman of the Board of Directors of Camco, a
position he has held since January 1996. Mr. Caldwell was the Chief Executive
Officer of Camco from Camco's organization in 1970 until January 1, 2001. Mr.
Caldwell is the father of David S. Caldwell.
1
CARSON K. MILLER is the owner of Marietta Rare Coins & Collectibles, an
internet-based business. Mr. Miller retired in 2002 as the President of
Washington State Community College in Marietta, Ohio, a position he had held
since 1985.
SAMUEL W. SPECK is the director of the Ohio Department of Natural
Resources, a position he has held since 1999. Prior to joining the cabinet of
the Governor of Ohio, Dr. Speck served as President of Muskingum College, New
Concord, Ohio from 1986 to 1999.
JEFFREY T. TUCKER is a Certified Public Accountant and a partner in the
accounting firm of Tucker & Tucker, Cambridge, Ohio, a position he has held
since 1984.
Under Delaware law and Camco's Bylaws, the four nominees receiving the
greatest number of votes will be elected as directors. Abstentions, shares not
voted by brokers and votes withheld are not counted toward the election of
directors.
In accordance with Section 3.13 of the Bylaws, nominees for election as
directors may be proposed only by the directors or by a stockholder. Camco's
Corporate Governance and Nominating Committee recommended to Camco's Board of
Directors this year's director nominees. The Corporate Governance and Nominating
Committee believes that candidates for director should have certain minimum
qualifications, including being able to read and understand basic financial
statements, having business experience, exhibiting high moral character and
owning at least 100 shares of Camco stock. However, the Committee retains the
right to modify these minimum qualifications from time to time. The Committee
has a general process for choosing nominees, which process considers both
incumbent directors and new candidates. In evaluating an incumbent director
whose term of office is set to expire, the Committee reviews such director's
overall service to Camco during his or her term, including the number of
meetings attended, level of participation, quality of performance and any
transactions of such director with Camco during his or her term. If the
Committee chooses to evaluate new director candidates, the Committee uses its
network of contacts to compile a list of potential candidates. Then, the
Committee determines whether such candidates are independent, which
determination is based upon applicable securities laws, the rules and
regulations of the SEC, the rules of the National Association of Securities
Dealers and the advice of counsel, if necessary. Finally, the Committee meets to
discuss and consider all candidates' qualifications and then chooses the
candidates.
The Corporate Governance and Nominating Committee will consider director
candidates recommended by stockholders, provided that the stockholder is
entitled to vote for directors and has submitted a written nomination to the
Secretary of Camco by the sixtieth day before the first anniversary of the most
recent annual meeting of stockholders held for the election of directors. Each
written nomination must state the name, age, business and residence address of
the nominee, the principal occupation or employment of the nominee, the number
of each class of shares of Camco owned either beneficially or of record by each
such nominee and the length of time such shares have been so owned. The
Committee does not intend to alter the manner in which it evaluates candidates,
including the minimum criteria set forth above, when evaluating a candidate who
was recommended by a stockholder.
Camco has not implemented a formal policy regarding director attendance at
the annual meeting of stockholders. Typically, the Board of Directors holds a
meeting immediately prior to the annual meeting of stockholders, which results
in most directors being able to attend the annual meeting. In 2004, all
directors attended the annual meeting of stockholders.
2
INCUMBENT DIRECTORS
The following directors will continue to serve after the Annual Meeting
for the terms indicated:
Director Term
Name Age Position(s) held Since Expires
----------------- --- ----------------------- -------- -------
Richard C. Baylor 50 President 2001 2006
Chief Executive Officer
Chief Operating Officer
Robert C. Dix, Jr. 65 Director 1994 2006
Terry A. Feick 55 Director 2000 2007
Susan J. Insley 59 Director 2002 2007
Paul D. Leake 64 Director 1996 2006
RICHARD C. BAYLOR was named President of Camco on January 1, 2000, and
Chief Executive Officer on January 1, 2001. He has been Camco's Chief Operating
Officer since October 21, 1998. From October 21, 1998 until January 1, 2000, Mr.
Baylor was the Executive Vice President of Camco. From August 1989 to June 1998,
Mr. Baylor was employed as a Vice President of Lending by State Savings Bank,
Columbus, Ohio. Mr. Baylor is also a director of each of Camco's subsidiaries.
ROBERT C. DIX, JR. is Publisher of The Daily Jeffersonian, Cambridge,
Ohio, and is one of the five principals of the group known as Dix Communication.
Mr. Dix is President of Wooster Republican Printing Company, which owns a group
of newspapers and radio stations, and is also the Chairman of MDM Broadcasting,
a television station holding company, which is a wholly-owned subsidiary of
Wooster Republican Printing Company.
TERRY A. FEICK retired as the Superintendent of Schools for the Washington
Court House City Schools in December 2001, a position he had held since 1991.
SUSAN J. INSLEY is the Executive Vice President and Principal of Cochran
Group Inc., Columbus, Ohio, a position she has held since 1996.
PAUL D. LEAKE retired in June 2001 as the President and Chief Executive
Officer of First Bank for Savings, a position he had held since 1976.
BOARD MEETINGS, COMMITTEES AND COMPENSATION
The Board of Directors of Camco met six times for regularly scheduled
meetings during the year ended December 31, 2004. Each director attended at
least 75% of the aggregate of the total number of the Board of Directors'
meetings and the total number of meetings held by committees on which such
director served during 2004. The Board has determined that each director is
independent under Rule 4200(a)(15) of Nasdaq's listing standards, except Messrs.
Baylor and Caldwell.
The Board of Directors of Camco has a Compensation Committee whose members
are Ms. Insley and Messrs. Feick, Miller and Tucker. The Compensation Committee
establishes the compensation of the senior executive officers of Camco and its
subsidiaries after conducting a review of the performance of each of these
officers with the Board of Directors and the Corporate Governance and Nominating
Committee. The Compensation Committee's other responsibilities include
recommending the compensation to be paid to directors of Camco and its
subsidiaries each year. The Compensation
3
Committee operates pursuant to a written charter, which is posted on the
"Charters and Policies" page of Advantage Bank's website at
www.advantagebank.com/site/camco_investor.html. The Compensation Committee met
five times during 2004.
The Board of Directors of Camco has an Audit Committee whose members are
Messrs. Tucker, Dix and Miller. The Board of Directors has determined that Mr.
Tucker qualifies as a financial expert. The Audit Committee's responsibilities
include selecting an independent accounting firm to audit Camco and its
subsidiaries, overseeing the audit, and evaluating the accounting firm's
performance. A more detailed description of the Audit Committee's functions is
set forth in its charter, which is posted on the "Charters and Policies" page of
Advantage Bank's website at www.advantagebank.com/site/camco_investor.html. The
Audit Committee met four times during 2004.
The Board of Directors of Camco has a Corporate Governance and Nominating
Committee whose members are Messrs. Speck, Dix and Feick and Ms. Insley. The
Corporate Governance and Nominating Committee provides a forum for independent
directors to address issues of corporate governance, including the selection of
nominees for director. The Corporate Governance and Nominating Committee
operates pursuant to a written charter, which is posted on the "Charters and
Policies" page of Advantage Bank's website at
www.advantagebank.com/site/camco_investor.html. The Corporate Governance and
Nominating Committee met five times during 2004.
The Board of Directors of Camco has an Executive Committee whose members
are Messrs. Caldwell, Baylor, Speck and Tucker and Ms. Insley. The Executive
Committee provides a forum for exercising the power and authority of the Board
of Directors when the Board is not in session, subject to certain limitations.
The Executive Committee did not meet during 2004.
For 2005, each non-employee director of Camco will receive a retainer of
$5,000 per year for service on the board of Camco and $1,250 for Board meetings
attended, with one paid absence per year. Each director of Camco is also a
director of Advantage Bank. Each non-employee director will receive a retainer
of $6,000 per year for service on the Board of Advantage Bank and $500 per board
meeting attended, with one paid absence per year. In addition, non-employee
directors will receive a fee of $250 for each scheduled committee meeting
attended, except that if the committee meeting is unscheduled, the fee is $400.
Each chair of a committee shall receive an additional $100 per meeting attended,
except that that Audit Committee chair shall receive an additional $250 per
meeting attended. All retainers will be contributed to the Director Deferred
Compensation Plan where the amounts are allocated to each director's Camco
stock account.
EXECUTIVE OFFICERS
The following information is supplied for certain executive officers of
Camco and Advantage Bank who do not serve on Camco's Board of Directors.
D. EDWARD RUGG, 50 years, has served as the Secretary of Camco since
January 2001 and as the Executive Vice President and Chief Operating Officer of
Advantage Bank since May 2001. Mr. Rugg was President and Chief Executive
Officer of Cambridge Savings Bank from January 1996 until May 2001. Mr. Rugg
joined Camco in 1976.
MARK A. SEVERSON, 51 years, has served as the Treasurer and Chief
Financial Officer of Camco and Chief Financial Officer and Senior Vice President
of Advantage Bank since November 2001. From May 1990 to May 2001, Mr. Severson
was a Senior Vice President and Chief Financial Officer of FCNB Corp.,
Frederick, Maryland.
4
DAVID S. CALDWELL, 42 years, has served as the Senior Vice President in
charge of retail banking and financial services of Advantage Bank since December
2001. Since July 2001, Mr. Caldwell has been the Division President of Cambridge
Savings. Mr. Caldwell joined Camco in September 2000 as President and Chief
Executive Officer of Westwood Homestead Savings Bank in Cincinnati, Ohio. Prior
to joining Camco, Mr. Caldwell served for three years as a Senior Vice President
of Central Carolina Bank & Trust, Durham, North Carolina. Mr. Caldwell is the
son of Larry A. Caldwell.
EDWARD A. WRIGHT, 43 years, has served as the Senior Vice President in
charge of operations of Advantage Bank since December 2001. Previously, Mr.
Wright served as the Vice President of Operations at Advantage Bank from July
2001 until December 2001. Mr. Wright joined Cambridge Savings Bank in 1984 and
served as Vice President and Chief Operating Officer of Cambridge Savings Bank
from 1994 until July 2001.
5
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to Mr. Baylor and the
other executive officers of Camco who received cash and cash equivalent
compensation in excess of $100,000 for services rendered to Camco and its
subsidiaries (the "Named Executive Officers"):
Long term
Annual compensation compensation
------------------------------------ awards (1)
Other annual --------------------- All other
compensation Securities underlying compensation
Name and principal position Year Salary ($) Bonus ($)(1) ($) options/SARs(#) ($)
----------------------------------- ---- ---------- ----------- ------------ --------------------- ------------
Richard C. Baylor, President, Chief 2004 $237,544 $ 26,752 693 15,752 $ 220,680(2)
Executive Officer and Chief 2003 231,750 16,384 $ 1,254 5,042 $ 38,429
Operating Officer 2002 225,000 33,894 78 16,810 18,394
D. Edward Rugg, Secretary of Camco 2004 163,200 18,379 966 5,540 31,073(2)
and Executive Vice President and 2003 160,000 11,311 1,968 2,610 32,820
Chief Operating Officer of 2002 156,000 23,500 136 8,741 29,896
Advantage Bank
Mark A. Severson, Treasurer and 2004 151,700 17,085 253 3,433 26,6021(2)
Chief Financial Officer 2003 148,700 10,513 478 1,617 7,346
2002 145,000 21,843 47 5,416 -
David S. Caldwell, Senior Vice 2004 134,500 15,147 509 3,100 11,105(2)
President (Retail Banking) of 2003 131,125 9,270 1,105 1,426 9,332
Advantage Bank 2002 129,875 19,565 49 4,854 6,208
Larry A. Caldwell, 2004 125,000 500 - - -
Chairman of the Board 2003 125,000 - - - 1,193
2002 119,308 - - - 435
Edward A. Wright, 2004 111,100 12,512 242 3,100 203,725(2)
Vice President (Operations) of 2003 107,300 7,586 413 1,167 11,938
Advantage Bank 2002 104,680 15,769 15 3,910 5,053
-------------------------
(1) The 2004 bonus amounts and options to acquire shares of Camco stock are
based upon performance in fiscal year 2004, but are paid in January 2005.
(2) Consists of employer contributions to the Camco 401(k) Plan as follows:
Mr. Baylor- $7,740, Mr. Rugg- $5,248, Mr. Severson- $5,668, Mr. David
Caldwell- $4,818, and Mr. Wright- $4,133; accruals for salary continuation
agreements as follows: Mr. Baylor- $48,220, Mr. Rugg- $25,825 Mr.
Severson- $20,934, Mr. D. Caldwell- $6,287, and Mr. Wright- $7,592 and
employer contributions to deferred compensation as follows: Mr. Baylor-
$164,720 and Mr. Wright- $192,000.
6
STOCK OPTIONS
The following table sets forth information regarding all grants of
options to purchase shares of Camco made to Named Executive Officers during the
year ended December 31, 2004:
Option Grants In Last Fiscal Year
Potential Realizable
Individual Grants Value at Assumed
--------------------------------------------------------- Annual Rates of Stock
Number of % of Total Options Price Appreciation for
Securities Granted to Employees in Exercise Option Term
Underlying Options 2004 Fiscal Price Expiration ----------------------
Name Granted (#)(1) Year ($/Share) Date 5% ($) 10% ($)
----------------- ------------------ ----------------------- --------- ---------- ------- --------
Richard C. Baylor 5,042 28.5% $ 17.17 1/26/2014 $54,444 $137,972
D. Edward Rugg 2,610 14.7 17.17 1/26/2014 28,183 71,422
Mark A. Severson 1,617 9.1 17.17 1/26/2014 17,461 44,248
David S. Caldwell 1,426 8.1 17.17 1/26/2014 15,398 15,398
Larry A. Caldwell 0 - - - - -
Edward A. Wright 1,167 6.6 17.17 1/26/2014 12,601 12,601
-------------------------
(1) The options were granted on January 27, 2004 and vest at a rate of 20%
each year, beginning on the grant date.
The following table sets forth information regarding the number and value
of unexercised options held by the Named Executive Officers at December 31,
2004:
Aggregated Option/SAR Exercises in Last Fiscal Year and 12/31/04 Option/SAR Values
---------------------------------------------------------------------------------------
Number of Value of unexercised
securities underlying "in the money"
Shares unexercised options options at
acquired on Value at 12/31/04(#) 12/31/04($)(1)
Name exercise(#) realized($) Exercisable/Unexercisable Exercisable/Unexercisable
----------------- ----------- ----------- ------------------------- -------------------------
Richard C. Baylor -0- N/A 7,732/14,120 $ 0/0
D. Edward Rugg 4,000 $ 28,220 9,852/7,333 13,943/0
Mark A. Severson -0- N/A 6,290/5,743 9,382/0
David S. Caldwell -0- N/A 7,264/4,204 22,236/0
Larry A. Caldwell 4,300 24,234 14,400/0 60,372/0
Edward A. Wright -0- N/A 8,933/3,280 28,272/0
-------------------------
(1) The value of the options was determined by multiplying the number of "in
the money" options by the difference between the applicable option
exercise price and the fair market value of a share of Camco common stock,
which was $15.40 on December 31, 2004, based on the closing bid price
reported by The Nasdaq Stock Market.
7
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Camco's business consists primarily of the business of Advantage Bank and
its subsidiaries and affiliates. The financial results of Camco are primarily a
function of Advantage Bank's achievement of its goals as set forth in its
business plan. Executives are compensated for their contribution to the
achievement of these goals, which benefits the stockholders, customers,
employees, and the communities in which Camco operates.
During 2004, Larry A. Caldwell, the Chairman of the Board, received his
compensation entirely from Camco. Richard C. Baylor, the President, Chief
Executive Officer and Chief Operating Officer, and Mark A. Severson, the
Treasurer and Chief Financial Officer, each received 50% of his compensation
from Advantage Bank and 50% from Camco. All other executive officers received
their compensation from Advantage Bank. Camco's Compensation Committee (the
"Committee") recommends to Camco's Board of Directors the executive compensation
for senior executive officers. Membership of the Committee is composed
exclusively of directors who meet the independence criteria of Nasdaq. The
Committee is dedicated to the philosophy of linking executive compensation to
the achievement of Advantage Bank's goals and the resulting performance of
Camco. The Compensation Committee utilizes the principles and best practices
recommended by the National Association of Corporate Directors Blue Ribbon
Commission on Director Compensation (Washington, D.C., 2001).
Executive Compensation Process and Philosophy
Each year, the Corporate Governance and Nominating Committee conducts a
performance appraisal for the Chairman of the Board, and the Chairman conducts a
performance appraisal of the Chief Executive Officer. Performance appraisals for
other executive officers are conducted by the Chief Executive Officer. These
performance appraisals are reviewed by the Corporate Governance and Nominating
Committee and the results are reported to the Compensation Committee and the
full Board of Directors. Performance appraisals assess each executive officer's
contribution to Camco and Advantage Bank, the skills and experience of each
executive officer and the on-going potential of each executive officer.
The Compensation Committee makes recommendations regarding adjustments to
compensation for the executive officers, including the Chief Executive Officer,
to the Board of Directors based upon the recommendations of the Corporate
Governance and Nominating Committee, the performance appraisals, total corporate
return performance and independent compensation surveys of officers in banks and
other public companies, taking into account comparable asset bases and
geographic locations. The compensation surveys include rankings based on return
on average equity, return on average assets, efficiency ratio, asset quality and
total return on a company's stock price, among other factors. Compensation data
utilized for comparisons is generally annual cash compensation, including base
salary, and most forms of cash bonus and annual incentive awards. The
Compensation Committee's determinations are presented to the full Board of
Directors, but directors who are also executive officers do not participate in
discussions regarding their own compensation.
The overall objective of the executive compensation program is to provide
competitive levels of compensation that will attract and retain qualified
executives and will reward individual performance, initiative and achievement,
while enhancing overall corporate performance and stockholder value. The program
is designed to align senior management compensation with the goals of the Camco
business plan by creating strong incentives to manage business successfully from
both a financial and operating perspective. The executive compensation program
is structured to accomplish the following specific objectives:
8
1) Align the interests of management with the interests of the
stockholders;
2) Clearly motivate management to perform and succeed according to the
goals outlined in the business plan;
3) Retain key personnel critical to Camco's long-term success;
4) Emphasize formula-based components, such as incentive plans, in
order to better focus management efforts in its execution of the
business plan;
5) Maintain pay for performance as an integral component of the program
by utilizing incentive plans that emphasize corporate success;
6) Maintain a corporate environment which encourages stability and a
long-term focus for both Camco and its management; and
7) Ensure that management: (a) fulfills its overall responsibility to
its constituents, including stockholders, customers, employees, the
community and government regulatory agencies; (b) conforms its
business conduct to the highest ethical standards; (c) remains free
from any influences that could impair or appear to impair the
objectivity and impartiality of its judgement or treatment of
Camco's constituents; and (d) continues to avoid any conflict
between its responsibilities to Camco and each individual's personal
interests.
Components of the Executive Compensation Program
The program's compensation elements include cash compensation, including
base salary and an incentive-based bonus plan, and stock-based compensation. The
incentive plans have been designed to reflect corporate performance, individual
performance, and alignment with the interests of Camco's stockholders. Superior
corporate or individual performance should result in compensation which, when
combined with incentives, would place overall compensation at or above that of
the peer group median.
Base salary forms the foundation of the compensation program as it
represents income not at risk. The Committee believes that base salary should
function as an anchor: large enough that the executive is comfortable remaining
in Camco's employ, but not so large as to conflict with the executive's
motivation to work diligently to increase stockholder value. An individual's
base salary is directly related to his or her position, job responsibilities,
accountability, performance and contribution to Camco and its subsidiaries.
Camco maintains both a short-term cash bonus plan and a long-term
stock-based incentive plan. Bonus and incentive plan awards for the Named
Executive Officers are based on the achievement of corporate performance
objectives which are established annually by Camco's Compensation Committee at
the beginning of each year. For 2004, the performance objectives included four
primary elements, consisting of return on average tangible equity, earnings per
share growth, efficiency ratio improvement and net interest margin growth, which
accounted for 60% of the total performance measurement. Secondary objectives,
which accounted for 40% of the performance measurement, included deposit growth,
loan volume and non-interest income growth.
The performance objectives were modified for 2005. In 2005, the
performance objectives consist of objectives for: net income growth and its
related effect upon earnings per share; stock price appreciation; non-interest
income; net interest margin growth; efficiency ratio; deposit growth,
emphasizing checking account growth; and loan growth, emphasizing commercial and
consumer loan
9
growth. The individual objectives are then weighted as to value each year, with
net income generally having the highest weighting, demonstrating earnings per
share as one of the most important goals for management and the Board.
For 2005, the cash bonus amounts range from 0% to 50% of the Chief
Executive Officer's base salary and 0% to 30% of other executive officers' base
salaries, subject to the percentage of performance measurements achieved. For
2004, the cash bonus amounts ranged from 0% to 25% of all executive officers'
base salaries. Additional discretionary bonus amounts may also be awarded under
the cash bonus plan in recognition of other achievements, such as merger and
acquisition activities, which are not part of the established performance
objectives.
The long-term incentive plan provides for the award of stock options of
varying levels for each of the Named Executive Officers, ranging in amount from
0% to a maximum of between 100% and 200% of the officer's base salary, subject
to the percentage of performance measurements achieved. Options are issued at
market prices, have a term of ten years, and typically vest at a rate of 20%
each year beginning on the grant date, except that beginning in 2005 the Chief
Executive Officer's options will vest immediately. This element of the executive
compensation program is designed to align the interests of the executive with
corporate stockholder objectives since the price performance of Camco's common
stock directly affects the value of these long-term awards.
Determination of CEO's Compensation
The Committee determined the compensation for Mr. Baylor for 2004 pursuant
to the policies described above for executive officers. Additional factors
considered included merger and acquisition activities, continued updating and
implementation of Camco's strategic plan and subsidiary oversight and progress.
The Committee increased Mr. Baylor's base compensation by $12,456, or 5.2%,
bringing his base salary to $250,000 for 2005. Camco achieved 37.37% of the
performance targets established by the Committee for 2004. Based on that level
of achievement, Mr. Baylor was awarded a cash bonus of $22,191 and options for a
number of Camco shares having a market value on the date of grant of $260,066.
Submitted by the Compensation Committee of Camco's Board of Directors:
Susan J. Insley, Chairman
Terry A. Feick
Carson K. Miller
Jeffrey T. Tucker
COMPENSATION COMMITTEE INTERLOCKS
During 2004, no member of the Compensation Committee was a current or
former executive officer or employee of Camco or one of its subsidiaries or had
a reportable business relationship with Camco or one of its subsidiaries.
10
PERFORMANCE GRAPH
The following graph compares the cumulative total return on Camco's common
stock with the cumulative total return of an index of companies whose shares are
traded on Nasdaq and the SNL All Bank & Thrift Index for the same period.
[PERFORMANCE GRAPH]
PERIOD ENDING
-------------
INDEX 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
----- -------- -------- -------- -------- -------- --------
Camco Financial Corporation 100.00 99.92 135.79 157.80 199.24 185.41
NASDAQ Composite 100.00 60.82 48.16 33.11 49.93 54.49
SNL All Bank & Thrift Index 100.00 120.80 122.59 115.19 156.16 174.88
11
EMPLOYMENT AGREEMENTS
Camco has an employment agreement with Richard C. Baylor for a term ending
January 31, 2008. The agreement provides for a base salary of not less than
$250,000 and a performance review by the Chairman of the Board not less often
than annually, at which time the Board of Directors may extend the term of the
agreement. The agreement also provides for the inclusion of Mr. Baylor in any
formally established employee benefit, bonus, pension and profit-sharing plans
for which senior management personnel are eligible and provides for vacation and
sick leave.
Mr. Baylor's employment is terminable by Camco at any time. In the event
of termination by Camco other than for just cause or in connection with a
"change of control," as defined in the agreement, Mr. Baylor will be entitled to
(i) a continuation of salary payments for the remainder of the term of his
agreement and (ii) a continuation of health, life and disability insurance
benefits substantially equal to those being provided at the date of termination
of employment until the earliest to occur of the end of the term of the
agreement or the date Mr. Baylor becomes employed full-time by another employer.
The agreement also contains provisions with respect to the occurrence
within one year after a "change of control" of (1) the termination of Mr.
Baylor's employment for any reason other than just cause, (2) a change in the
capacity or circumstances in which Mr. Baylor is employed or (3) a material
reduction in Mr. Baylor's responsibilities, authority, compensation or other
benefits provided under the agreement without the written consent of Mr. Baylor.
In the event of any such occurrence, Mr. Baylor will be entitled to payment of
an amount equal to three times his average annual compensation for the three
taxable years immediately preceding the termination of employment. In addition,
Mr. Baylor is entitled to continued coverage under all health, life and
disability benefit plans until the earlier of the end of the term of the
agreement or the date on which Mr. Baylor is included in another employer's
benefit plans as a full-time employee. The maximum which Mr. Baylor may receive,
however, is limited to an amount which will not result in the imposition of a
penalty tax pursuant to Section 280G(b)(3) of the Internal Revenue Code.
Camco also has an employment agreement with Larry A. Caldwell for a
one-year term commencing November 9, 2004. The agreement provides for a base
salary of $125,000 and provides for the inclusion of Mr. Caldwell in any
tax-qualified employee benefit, pension and profit-sharing plans for which
senior management personnel are eligible. The agreement is terminable by Camco
at any time. In the event of termination by Camco other than for just cause or
in connection with a "change of control," as defined in the agreement, Mr.
Caldwell will be entitled to a continuation of salary payments for the remainder
of the term of his agreement. In the event of the voluntary or involuntary
termination of Mr. Caldwell's employment for any reason other than just cause
within one year after a "change of control", Mr. Caldwell would receive a change
of control payment of $250,000.
CHANGE OF CONTROL AGREEMENTS
Camco has change of control agreements with D. Edward Rugg, Mark A.
Severson, David S. Caldwell and Edward A. Wright. Each agreement is for a term
of one year and provides for annual performance reviews by the Board of
Directors, at which time the Board of Directors may extend the agreement for an
additional one-year period.
Each agreement provides that if the officer is terminated by Camco or its
successors for any reason other than just cause, within six months prior to a
change of control, as defined in the agreement, or within one year after a
change of control, Camco will pay (1) the officer an amount equal to two times
the amount of his annual salary and (2) the premiums required to maintain
coverage under the health insurance plan in which the officer is a participant
immediately prior to the change of control until the
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earlier of (i) the first anniversary of his termination or (ii) the date the
officer is included in another employer's benefit plans. The officer will also
be entitled to the above payments if he voluntarily terminates his employment
within twelve months following a change of control if (1) the capacity or
circumstances in which the officer is employed are changed; (2) the officer no
longer holds his specified office; (3) the officer is required to move his
personal residence, or perform his principal executive functions, more than
thirty-five miles from his primary office as of the date of the agreement; or
(4) Camco otherwise breaches the agreement. The maximum amount that the officer
may receive under the agreement is limited to an amount which will not result in
the imposition of a penalty tax pursuant to Section 280G(b)(3) of the Code.
SALARY CONTINUATION AGREEMENTS
Advantage Bank has entered into Salary Continuation Agreements with each
of Richard C. Baylor, D. Edward Rugg, Mark A. Severson, David S. Caldwell and
Edward A. Wright (the "Salary Continuation Agreements"). Each Salary
Continuation Agreement provides for continued monthly compensation to the
employee, or his beneficiary, for a period of 15 years following death or the
employee's termination of employment for any reason other than Early Termination
or Termination for Cause (as defined in the Salary Continuation Agreement).
Early Termination is defined in the Salary Continuation Agreements to mean
termination of employment before age 65 for reasons other than death, Disability
(as defined in the Salary Continuation Agreement), Termination for Cause or
following a Change of Control (as defined in the Salary Continuation Agreement).
Upon termination of employment after the employee reaches age 65, each
employee will receive the following maximum amounts, divided into 12 monthly
payments, annually for 15 years: Mr. Baylor - $410,100; Mr. Rugg - $98,300; Mr.
Severson - $197,400; Mr. D. Caldwell - $140,900; and Mr. Wright - $50,800. In
the event of Early Termination, termination for Disability or upon a Change of
Control, the employee will receive monthly payments for a period of 15 years, in
an amount equal to the accrual balance, which amount increases annually at a
specified rate until it reaches the maximums set forth above. If an employee is
terminated upon a Change of Control, the employee may elect to have the present
value of the monthly payments made in a single lump sum payment. An employee is
not entitled to any payments upon Termination for Cause.
SALARY CONTINUATION PLAN
In connection with the termination of its non-contributory defined benefit
pension plan in 1996, Camco implemented a non-qualified retirement plan (the
"1996 Salary Continuation Plan") for the benefit of certain executive officers.
Mr. Rugg and Mr. Wright are the only Named Executive Officers who participate in
this plan. The 1996 Salary Continuation Plan provides for continued compensation
to the participant, or his beneficiary, through 180 monthly payments following
his retirement at age 65 from Advantage Bank in the following annual amounts:
Mr. Rugg- $20,500 and Mr. Wright- $15,800. If the participant retires after age
55 or after having completed 15 years of full-time service (the "Early
Retirement Date"), and before age 65, the 1996 Salary Continuation Plan provides
for a reduced benefit. Upon a change in control of Advantage Bank and the
subsequent termination of the participant's employment, he is entitled to a lump
sum payment of a reduced amount. If the participant's employment is terminated
prior to the Early Retirement Date for any reason other than death, he is not
entitled to receive any benefits under the 1996 Salary Continuation Plan.
SPLIT-DOLLAR PLAN
Flexible payment universal life insurance policies, which are carried on
the books of Camco as tax-free earning assets, have been purchased on the lives
of certain employees, including the Named
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Executive Officers. Upon the death of any of the Named Executive Officers, a
beneficiary named by the employee will receive two times the employee's base
salary for the 12 months preceding the month in which the employee dies up to a
maximum of $300,000. The balance of the life insurance proceeds will be payable
to Camco or the applicable subsidiary and are expected to be sufficient to cover
all investment costs associated with the policy.
EXECUTIVE DEFERRED COMPENSATION AGREEMENTS
Executives may elect to defer annually a stated maximum amount of their
salary until a specified date or until they are no longer associated with Camco.
The maximum amount of deferral permitted is as follows: $30,000- Messrs. Baylor,
Severson and Rugg; $25,000- Mr. D. Caldwell; $12,500- Mr. Wright. Interest is
credited on the deferral amounts at an annual rate equal to 75% of Camco's
return on equity rate for the preceding year, not to exceed a return on equity
of 20%.
OWNERSHIP OF CAMCO SHARES
As of March 8, 2005, no persons were known by Camco to own beneficially
more than 5% of the outstanding shares of Camco's common stock.
The following table sets forth certain information regarding the number of
shares of common stock of Camco beneficially owned by each incumbent director
and nominee of Camco and by all directors and executive officers of Camco as a
group as of March 8, 2005:
Sole voting Shared voting Percentage of
and and/or shares
Name and address (1) investment power (2) investment power outstanding
---------------------------------- -------------------- ----------------- -----------
Richard C. Baylor 40,256 24,106 *
Larry A. Caldwell 96,264 134,683 3.0%
Robert C. Dix, Jr. 16,940 5,844 *
Terry A. Feick 5,000 5,977 *
Susan J. Insley 5,300 1,081 *
Paul D. Leake 88,584 21,309 1.4
Carson K. Miller 5,180 1,081 *
Samuel W. Speck 6,050 22,378 *
Jeffrey T. Tucker 21,295 1,793 *
D. Edward Rugg 99,453 24,398 1.6
Mark A. Severson 14,332 47 *
David S. Caldwell 11,453 17,998 *
Edward A. Wright 10,568 17,052 *
All directors and executive
officers as a group (13 persons) 420,675 277,747 8.9
-------------------------
* Less than 1% of the outstanding shares.
(1) Each of the persons listed in this table may be contacted at the address
of Camco, 6901 Glenn Highway, Cambridge, Ohio 43725.
(2) Includes the following number of shares that may be acquired upon the
exercise of options: Mr. Baylor - 27,854; Mr. L. Caldwell - 19,400; Mr.
Dix - 6,050; Mr. Feick - 5,000, Ms. Insley - 5,000, Mr. Leake - 34,028;
Mr. Miller - 5,000; Mr. Speck - 6,050; Mr. Tucker - 6,050; Mr. Rugg -
10,230; Mr. Severson - 7,832; Mr. D. Caldwell - 9,100; and Mr. Wright -
10,568.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Camco's
executive officers and directors, and persons who own more than ten percent of
Camco's common stock, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange Commission and to provide
Camco with a copy of such form. Based on Camco's review of the copies of such
forms it has received, Camco believes that its executive officers and directors
complied with all filing requirements applicable to them with respect to
transactions during the fiscal year ended December 31, 2004.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of Camco is comprised of
three directors, all of whom are considered "independent" under Rule 4200(a)(15)
of Nasdaq's listing standards. The Audit Committee is responsible for overseeing
Camco's accounting functions and controls, as well as selecting an accounting
firm to audit Camco's financial statements. The Audit Committee has adopted a
charter.
The Audit Committee received and reviewed the report of Grant Thornton,
LLP ("Grant Thornton") regarding the results of their audit, as well as the
written disclosures and the letter from Grant Thornton required by Independence
Standards Board Standard No. 1. The Audit Committee determined that the
provision by Grant Thornton of the services included in the table below under
"All Other Fees" is compatible with maintaining Grant Thornton's independence.
The Audit Committee reviewed the audited financial statements with the
management of Camco. A representative of Grant Thornton also discussed with the
Audit Committee the independence of Grant Thornton from Camco, as well as the
matters required to be discussed by Statement of Auditing Standards 61, as may
be amended from time to time. Discussions between the Audit Committee and the
representative of Grant Thornton included the following:
- Grant Thornton's responsibilities in accordance with generally
accepted auditing standards
- The initial selection of, and whether there were any changes in,
significant accounting policies or their application
- Management's judgments and accounting estimates
- Whether there were any significant audit adjustments
- Whether there were any disagreements with management
- Whether there was any consultation with other accountants
- Whether there were any major issues discussed with management prior
to Grant Thornton's retention
- Whether Grant Thornton encountered any difficulties in performing
the audit
- Grant Thornton's judgments about the quality of Camco's accounting
principles
- Grant Thornton's responsibilities for information prepared by
management that is included in documents containing audited
financial statements
Based on its review of the financial statements and its discussions with
management and the representative of Grant Thornton, the Audit Committee did not
become aware of any material misstatements or omissions in the financial
statements. Accordingly, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Annual Report
on Form 10-K for the year ended December 31, 2004, to be filed with the SEC.
Jeffrey T. Tucker, Chairman
Robert C. Dix, Jr.
Carson K. Miller
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AUDIT FEES
The aggregate fees billed by Grant Thornton to the Company for the years
ended December 31, 2004 and 2003 are as follows:
2004 2003
-------- -------
Audit Fees 178,130 143,125
Tax Fees (1) 12,895 11,800
All Other Fees (2) 38,702 7,340
-------- -------
Total Fees 229,727 162,265
======== =======
-------------------------
(1) Permissible tax services include tax compliance, tax planning and tax
advice that do not impair the independence of the auditor and that are
consistent with the SEC's rules on auditor independence. 2003 includes
amended tax returns and the final returns due to the acquisition of London
Financial Corporation.
(2) Assistance with strategic planning, BOLI, review of ALLL policies, tax
opinion regarding state franchise tax and current merger, assistance with
acquisition of London Financial Corporation.
PROPOSALS OF STOCKHOLDERS AND COMMUNICATION WITH THE BOARD
Any proposals of stockholders intended to be included in Camco's proxy
statement for the 2006 Annual Meeting of Stockholders (other than nominations
for directors, as explained herein at "ELECTION OF DIRECTORS") should be sent to
Camco by certified mail and must be received by Camco not later than November
22, 2005. In addition, if a stockholder intends to present a proposal at the
2006 Annual Meeting without including the proposal in the proxy materials
related to the meeting, and if the proposal is not received by February 5, 2006,
then the proxies designated by the Board of Directors of Camco for the 2006
Annual Meeting of Stockholders of Camco may vote in their discretion on any such
proposal any shares for which they have been appointed proxies without mention
of such matter in the proxy statement or on the proxy card for such meeting.
Camco's Board of Directors has adopted a formal process by which
stockholders may communicate with the Board. Stockholders who wish to
communicate with the Board may do so by sending written communications addressed
to the Board of Directors of Camco Financial Corporation, at 6901 Glenn Highway,
Cambridge, Ohio 43725.
Management knows of no other business which may be brought before the
Annual Meeting. It is the intention of the persons named in the enclosed Proxy
to vote such Proxy in accordance with their best judgment on any other matters
which may be brought before the Annual Meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN
PERSON, YOU ARE URGED TO FILL IN, SIGN AND RETURN THE PROXY IN THE ENCLOSED
SELF-ADDRESSED POSTAGE PAID ENVELOPE.
By Order of the Board of Directors
March 16, 2005 D. Edward Rugg, Secretary
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REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CAMCO FINANCIAL CORPORATION
CAMCO FINANCIAL CORPORATION ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Camco Financial Corporation ("Camco")
hereby constitutes and appoints Terry A. Feick and Paul D. Leake, or either one
of them, as the proxies of the undersigned with full power of substitution and
resubstitution, to vote at the 2005 Annual Meeting of Stockholders of Camco to
be held at Camco's Corporate Center, 6901 Glenn Highway, Cambridge, Ohio 43725,
on April 26, 2005, at 3:00 p.m. Eastern Daylight Saving Time (the "Annual
Meeting"), all of the shares of Camco common stock which the undersigned is
entitled to vote at the Annual Meeting, or at any adjournment thereof, on each
of the following proposals, all of which are described in the accompanying Proxy
Statement:
1. The election of four directors:
[ ] FOR all nominees [ ] WITHHOLD authority to
listed below vote for all nominees
(except as marked to the listed below:
contrary below):
Larry A. Caldwell
Carson K. Miller
Samuel W. Speck
Jeffrey T. Tucker
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below).
2. In their discretion, upon such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors recommends a vote "FOR" the nominees listed above.
IMPORTANT: PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE.
UNLESS THIS PROXY IS REVOKED, THE SHARES OF COMMON STOCK REPRESENTED BY THIS
PROXY WILL BE VOTED AS DIRECTED. WHERE NO INSTRUCTIONS ARE INDICATED, PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR
SET FORTH ABOVE. THIS PROXY CONFERS DISCRETIONARY AUTHORITY ON THE PERSONS NAMED
ABOVE TO VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON AS A DIRECTOR IF A
NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT
TO THE ANNUAL MEETING.
At the present time, the Board of Directors knows of no other business to be
presented at the Annual Meeting.
All Proxies previously given by the undersigned are hereby revoked.
Receipt of the Notice of the 2005 Annual Meeting of Stockholders of Camco and of
the accompanying Proxy Statement is hereby acknowledged.
Please sign exactly as your name appears on your Stock Certificate(s).
Executors, Administrators, Trustees, Guardians, Attorneys and Agents should give
their full titles.
____________________________ ______________________________
Signature Signature
____________________________ ______________________________
Print or Type Name Print or Type Name
Dated: _____________________ Dated: _______________________
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE U.S.A.