SCHEDULE 14A INFORMATION
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CAMCO FINANCIAL CORPORATION
(Name of Registrant as Specified In Its Charter)
_____________________________________________________________________________
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CAMCO FINANCIAL CORPORATION
6901 GLENN HIGHWAY
CAMBRIDGE, OHIO 43725
(740) 435-2020
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 2006 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 25, 2006, 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 2009;
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,
2006, 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 17, 2006 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
2006 Annual Meeting of Stockholders of Camco to be held at Camco's Corporate
Center, 6901 Glenn Highway, Cambridge, Ohio 43725, on April 25, 2006, 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,
2006 (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 7,548,213 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 Richard C.
Baylor, Robert C. Dix, Jr., Paul D. Leake and Douglas F. Mock as directors of
Camco for terms expiring in 2009.
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, 2006.
ELECTION OF DIRECTORS
The Board of Directors proposes the reelection of the following persons to
terms that will expire in 2009:
Director Term
Name Age Position(s) held Since Expires
---- --- ----------------------- -------- -------
Richard C. Baylor 51 President 2001 2009
Chief Executive Officer
Chief Operating Officer
Robert C. Dix, Jr. 66 Director 1994 2009
Paul D. Leake 64 Director 1996 2009
Douglas F. Mock 50 Director 2005 2009
1
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.
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.
DOUGLAS F. MOCK is president of Mock Woodworking Co., Zanesville, Ohio, a
position he has held since 1986.
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.
2
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 2005, all
directors attended the annual meeting of stockholders.
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
---- --- --------------------- -------- -------
Terry A. Feick 56 Director 2000 2007
Susan J. Insley 60 Director 2002 2007
J. Timothy Young 59 Director 2005 2007
Larry A. Caldwell 69 Chairman of the Board 1970 2008
Carson K. Miller 60 Director 2002 2008
Samuel W. Speck 69 Director 1991 2008
Jeffrey T. Tucker 48 Director 1987 2008
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 retired as the Executive Vice President and Principal of
Cochran Group Inc., Columbus, Ohio, in December 2005, a position she had held
since 1996. Ms. Insley continues to serve as counsel to Cochran Group.
J. TIMOTHY YOUNG, an attorney and certified financial planner, is the
Senior Vice President of Hamilton Capital Management, Inc, Columbus, Ohio, a
position he has held since 2003. From 2000 to 2003, Mr. Young was self-employed
as an attorney and consultant representing individuals and businesses.
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.
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.
3
BOARD MEETINGS, COMMITTEES AND COMPENSATION
The Board of Directors of Camco met four times for regularly scheduled
meetings during the year ended December 31, 2005. 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 2005. 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 2005
members were Ms. Insley and Messrs. Feick, Miller and Tucker. The 2006 Committee
members are Messrs. Feick , Mock and Ms. Insley. 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 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 six times during 2005.
The Board of Directors of Camco has an Audit Committee whose 2005 members
were Messrs. Tucker, Dix and Miller. The 2006 members are Messrs. Tucker, Dix,
Miller and Young. 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 five times during 2005.
The Board of Directors of Camco has a Corporate Governance and Nominating
Committee whose 2005 members are Messrs. Speck, Dix and Feick and Ms. Insley.
The 2006 members are Ms. Insley and Messrs. Speck, Dix and Feick. 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, guiding the board in managing its affairs and coveys a purpose of
overseeing how our board should operate on behalf of the stockholders. 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 four times during 2005.
The Board of Directors of Camco has an Executive Committee whose 2005
members were Messrs. Caldwell, Baylor, Speck and Tucker and Ms. Insley. 2006
members are Messrs. Caldwell, Baylor, Insley, Feick and Tucker. 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 2005.
For 2006, 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 $300
4
for each scheduled committee meeting attended, except that if the committee
meeting is held on a different day than a Board meeting, the fee is $400. The
chair of each committee will receive an additional fee of $200 or $300 per
meeting. 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, 51 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, 52 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.
DAVID S. CALDWELL, 43 years, has served as the Senior Vice President in
charge of retail banking and financial services of Advantage Bank since December
2001. From July 2001 through November 2004, Mr. Caldwell also served as Division
President of the Cambridge Division of Advantage Bank. 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, 44 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 $100,000 for services rendered to Camco and its
subsidiaries (the "Named Executive Officers"):
Long term
compensation
Annual compensation awards (1)
---------------------------------------- ---------------
Other annual Securities All other
compensation underlying compensation
Name and principal position Year Salary ($) Bonus ($)(1) ($) options/SARs(#) ($)
--------------------------- ---- ---------- ------------ ------------ --------------- ------------
Richard C. Baylor, President, Chief 2005 $250,000 $59,734 $ -- 17,615 $ 77,849(2)
Executive Officer and Chief 2004 237,544 26,752 693 15,752 220,680
Operating Officer 2003 231,750 16,384 1,254 5,042 38,429
D. Edward Rugg, Secretary of Camco 2005 168,200 24,113 -- 8,550 29,686(2)
and Executive Vice President and 2004 163,200 18,379 966 5,540 31,073
Chief Operating Officer of 2003 160,000 11,311 1,968 2,610 32,820
Advantage Bank
Mark A. Severson, Treasurer and 2005 156,300 22,407 -- 5,297 37,853(2)
Chief Financial Officer 2004 151,700 17,085 253 3,433 26,602
2003 148,700 10,513 478 1,617 7,346
David S. Caldwell, Senior Vice 2005 138,600 19,870 -- 4,697 14,641(2)
President (Retail Banking) of 2004 134,500 15,147 509 3,500 11,105
Advantage Bank 2003 131,125 9,270 1,105 1,426 9,332
Larry A. Caldwell, 2005 125,000 475 -- 742 --
Chairman of the Board 2004 125,000 500 -- 5,000 --
2003 125,000 -- -- -- 1,193
Edward A. Wright, 2005 117,000 16,773 -- 3,965 11,314(2)
Vice President (Operations) of 2004 111,100 12,512 242 3,500 203,725
Advantage Bank 2003 107,300 7,586 413 1,167 11,938
----------
(1) The 2005 bonus amounts and options to acquire shares of Camco stock are
based upon performance in fiscal year 2005, but were paid and granted in
February 2006.
(2) Consists of employer contributions to the Camco 401(k) Plan as follows: Mr.
Baylor- $8,800, Mr. Rugg- $3,862, Mr. Severson- $5,752, Mr. David Caldwell-
$5,001, and Mr. Wright- $4,360; accruals for salary continuation agreements
as follows: Mr. Baylor- $69,049, Mr. Rugg- $25,824, Mr. Severson- $32,101,
Mr. D. Caldwell- $9,640, and Mr. Wright- $6,954.
6
STOCK OPTIONS
The following table sets forth information regarding all grants of options
to purchase shares of Camco made to Named Executive Officers during the year
ended December 31, 2005:
Option Grants In Last Fiscal Year
Potential Realizable
Value at Assumed
Individual Grants Annual Rates of
--------------------------------------------------------------------- Stock Price
Number of Appreciation for
Securities % of Total Options Exercise Option Term
Underlying Options Granted to Employees in Price Expiration --------------------
Name Granted (#) 2005 Fiscal Year ($/Share) Date 5%($) 10%($)
---- ------------------ ----------------------- --------- ---------- -------- --------
Richard C. Baylor 15,752(1) 18.1% $16.51 1/26/2015 $163,554 $414,477
D. Edward Rugg 5,540(2) 6.4% 16.51 1/26/2015 57,522 145,772
Mark A. Severson 3,433(2) 3.9% 16.51 1/26/2015 35,645 90,331
David S. Caldwell 3,100(2) 4.0% 16.51 1/26/2015 32,187 81,569
Larry A. Caldwell 5,000(1) 5.7% 16.51 1/26/2015 51,915 131,563
Edward A. Wright 3,100(2) 4.0% 16.51 1/26/2015 32,187 81,569
----------
(1) The options were granted on January 27, 2005 and are fully vested.
(2) The options were granted on January 27, 2005 and vest at a rate of 20% each
year, beginning on the grant date.
The following table sets forth information regarding the number and value
of unexercised options held by the Named Executive Officers at December 31,
2005:
Aggregated Option/SAR Exercises in Last Fiscal Year
and 12/31/05 Option/SAR Values
Number of Value of unexercised
securities underlying "in the money"
Shares unexercised options options at
acquired on Value at 12/31/05(#) 12/31/05($)(1)
Name exercise(#) realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- ----------- ------------------------- -------------------------
Richard C. Baylor -0- N/A 27,854/9,750 $ 0/0
D. Edward Rugg 3,000 15,234 10,230/9,495 0/0
Mark A. Severson -0- N/A 8,914/6,553 8,670/0
David S. Caldwell -0- N/A 9,100/5,277 18,475/0
Larry A. Caldwell 10,200 45,390 9,200/0 0/0
Edward A. Wright 5,036 22,007 5,532/4,745 0/0
----------
(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
$14.25 on December 31, 2005, 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 2005, 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 2005, the performance objectives consist of
objectives for: net income; stock price appreciation; non-interest income; net
interest margin growth; efficiency ratio; deposit growth, emphasizing checking
account growth; and loan production. The individual objectives are then weighted
as to value each year, with net income having the highest weighting.
For 2005, the cash bonus amounts ranged 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.
Additional discretionary bonus amounts may also be awarded under the cash
9
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 the Chief Executive Officer
and Chairman's options 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 2005 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.
Camco achieved 47.79% of the performance targets established by the Committee
for 2005. Based on that level of achievement, Mr. Baylor was awarded a cash
bonus of $59,734 and options for a number of Camco shares having a market value
on the date of grant of $249,428. The Committee increased Mr. Baylor's base
compensation by $12,500, or 5.0%, bringing his base salary to $262,500 for 2006.
Submitted by the 2005 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 2005, 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.
CAMCO FINANCIAL CORPORATION
TOTAL RETURN PERFORMANCE
(PERFORMANCE GRAPH)
PERIOD ENDING
---------------------------------------------------------------
INDEX 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
----- -------- -------- -------- -------- -------- --------
Camco Financial Corporation 100.00 135.89 157.92 199.39 185.55 178.88
NASDAQ Composite 100.00 79.18 54.44 82.09 89.59 91.54
SNL All Bank & Thrift Index 100.00 101.48 95.35 129.27 144.76 147.03
11
EMPLOYMENT AGREEMENTS
Camco has an employment agreement with Richard C. Baylor for a term ending
December 31, 2008. The agreement provides for a base salary of not less than
$262,500 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, 2005. 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 $125,000.
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
12
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.
13
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 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, 2006, 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, 2006:
Sole voting Shared voting Percentage of
and and/or shares
Name and address (1) investment power (2) investment power outstanding
-------------------- -------------------- ---------------- -------------
Richard C. Baylor 69,122 27,489 1.27%
Larry A. Caldwell 130,092 100,810 3.05%
Robert C. Dix, Jr. 21,306 7,831 *
Terry A. Feick 5,742 8,303 *
Susan J. Insley 8,924 1,907 *
Paul D. Leake 64,326 22,261 1.14%
Carson K. Miller 5,922 1,907 *
Douglas F. Mock 742 1,068 *
Samuel W. Speck 27,039 1,907 *
Jeffrey T. Tucker 22,037 2,649 *
J.Timothy Young 942 315 *
David S. Caldwell 22,425 11,162 *
D. Edward Rugg 108,396 25,034 1.76%
Mark A. Severson 21,235 237 *
Edward A. Wright 12,997 17,527 *
All directors and executive
officers as a group (15 persons) 521,247 230,407 9.75%
======= ======= ====
----------
* Less than 1% of the outstanding shares.
(1) Each of the persons listed in this table may be contacted at Camco, 6901
Glenn Highway, Cambridge, Ohio 43725.
(footnotes continued on next page)
14
(2) Includes the following number of shares that may be acquired upon the
exercise of options: Mr. Baylor - 45,469; Mr. L. Caldwell -9,942; Mr. Dix -
6,792; Mr. Feick - 5,742, Ms. Insley -5,742, Mr. Leake - 5,742; Mr. Miller
- 5,742; Mr. Mock - 742; Mr. Speck - 5,742; Mr. Tucker - 6,792; Mr. Rugg -
10,230; Mr. Severson - 9,581; Mr. D. Caldwell - 9,100; Mr. Wright - 5,532;
and Mr. Young - 742.
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, 2005, except that each of
Messrs. Baylor, D. Caldwell, L. Caldwell, Dix, Feick, Leake, Miller, Rugg,
Severson, Speck, Tucker, Wright and Ms. Insley filed one late Form 4 reporting
the award of stock options.
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 Plante Moran, PLLC
("Plante Moran") 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 Plante Moran of the services included in the table below under "All
Other Fees" is compatible with maintaining Plante Moran's independence. The
Audit Committee reviewed the audited financial statements with the management of
Camco. A representative of Plante Moran also discussed with the Audit Committee
the independence of Plante Moran 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
Plante Moran included the following:
- Plante Moran'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
Plante Moran's retention
- Whether Plante Moran encountered any difficulties in performing the
audit
- Plante Moran's judgments about the quality of Camco's accounting
principles
- Plante Moran'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 Plante Moran, the Audit Committee did not
become aware of any material misstatements or omissions in the financial
statements. Accordingly, the Audit Committee recommended
15
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, 2005, to be filed
with the SEC.
Jeffrey T. Tucker, Chairman
Robert C. Dix, Jr.
Carson K. Miller
CHANGE IN AUDITORS
During 2004, the Audit Committee of Camco determined that, as part of its
fiduciary duty to Camco and its shareholders, it should evaluate the costs and
audit and tax services offered by several other independent accounting firms.
Therefore, the Audit Committee directed management to obtain requests for
proposals from several independent accounting firms for audits related to fiscal
years 2005-2007. On December 15, 2004, after management discussed with Grant
Thornton LLP, Camco's current auditors ("Grant Thornton"), Camco's intent to
request such a proposal from Grant Thornton, Grant Thornton indicated that it
did not choose to participate in the proposal process and would resign as the
independent registered public accounting firm of Camco after completion of its
audit and tax services for the fiscal year ending December 31, 2004.
On February 25, 2005, the Camco's Audit Committee approved the engagement
of Plante Moran as Camco's principal independent registered public accounting
firm.
Prior to engaging Plante Moran, Camco did not consult with Plante Moran
regarding either:
1. The application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit opinion
that might be rendered on the Camco's financial statements, and either a
written report was provided to the Camco or oral advice was provided that
Plante Moran concluded was an important factor considered by Camco in
reaching a decision as to the accounting, auditing or financial reporting
issue; or
2. Any matter that was either the subject of a disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K and the related
instructions to Item 304) or a reportable event (as described in Item
304(a)(1)(v) of Regulation S-K).
Grant Thornton's reports on the financial statements for Camco's fiscal
years ended December 31, 2004 and 2003 did not contain an adverse opinion or a
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles.
During Camco's fiscal years ended December 31, 2004 and 2003, there were no
disagreements between Camco and Grant Thornton on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement, if not resolved to Grant Thornton's satisfaction,
would have caused Grant Thornton to make reference to the subject matter of the
disagreement in connection with its reports.
During the fiscal years ended December 31, 2004 and 2003, except as noted
in this paragraph, there have been no reportable events (as defined in
Regulation S-K Item 304(a)(1)(v)). In the third quarter of 2003, in connection
with Grant Thornton's review of Camco's financial statements for the quarter
ended September 30, 2003, Grant Thornton issued a written letter to Camco's
Audit Committee that it had identified significant deficiencies and material
weaknesses regarding Camco's internal controls. The deficiencies and weaknesses
noted were related to (i) the designation and recordation of loans held for sale
and (ii) the recordation of deferred loan origination fees and costs. During the
fourth
16
quarter of 2003, Camco took corrective action to address these noted
deficiencies and weaknesses, including (i) more clearly documenting Camco's
internally established exposure limitations for loans held for sale and (ii)
requiring the generation of a monthly summary of loan originations and related
deferred fees and costs to insure completeness of future financial information
in Camco's financial statements. Grant Thornton concurred with the corrective
actions taken by management.
Camco provided Grant Thornton with a copy of the above disclosure and Grant
Thornton furnished a letter addressed to the Securities and Exchange Commission,
a copy of which was attached as Exhibit 16.1 to Form 8-K filed on December 21,
2004.
AUDIT FEES
The aggregate fees billed by Plante Moran to the Company for the year ended
December 31, 2005 are as follows:
2005
--------
Audit Fees $215,823
Audit Related Fees 0
Tax Fees (1) 4,540
All Other Fees (2) 7,000
--------
Total Fees $227,363
========
----------
(1) Permissible tax services include tax compliance, tax planning, and tax
advise that do not impair the independence of the auditor and that are
consistent with the SEC's rules on auditor independence.
(2) All other fees include the audit of the Company's employee benefit plan.
PROPOSALS OF STOCKHOLDERS AND COMMUNICATION WITH THE BOARD
Any proposals of stockholders intended to be included in Camco's proxy
statement for the 2007 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, 2006. In addition, if a stockholder intends to present a proposal at the
2007 Annual Meeting without including the proposal in the proxy materials
related to the meeting, and if the proposal is not received by February 5, 2007,
then the proxies designated by the Board of Directors of Camco for the 2007
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.
17
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 17, 2006 D. Edward Rugg, Secretary
18
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 Samuel W. Speck and Jeffrey T. Tucker, or either one of
them, as the proxies of the undersigned with full power of substitution and
resubstitution, to vote at the 2006 Annual Meeting of Stockholders of Camco to
be held at Camco's Corporate Center, 6901 Glenn Highway, Cambridge, Ohio 43725,
on April 25, 2006, 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 listed [ ] WITHHOLD authority to vote for
below (except as marked to all nominees listed below:
the contrary below):
Richard C. Baylor
Robert C. Dix, Jr.
Paul D. Leake
Douglas F. Mock
(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.
19
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 2006 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.
20