UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2007
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No. 0-50529
CHEVIOT FINANCIAL CORP.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Federal 56-2423720
---------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3723 Glenmore Avenue, Cincinnati, Ohio 45211
--------------------------------------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (513) 661-0457
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one.)
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of May 8, 2007, the latest practicable date, 9,269,826 shares of the
registrant's common stock, $.01 par value, were issued and outstanding.
Page 1 of 20
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15
Quantitative and Qualitative Disclosures about
Market Risk 18
Controls and Procedures 18
PART II - OTHER INFORMATION 19
SIGNATURES 20
2
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, December 31,
ASSETS 2007 2006
(Unaudited)
Cash and due from banks $ 2,900 $ 2,736
Federal funds sold 4,601 2,640
Interest-earning deposits in other financial institutions 1,467 114
--------- ----------
Cash and cash equivalents 8,968 5,490
Investment securities available for sale - at fair value 11,076 9,085
Investment securities held to maturity - at cost, approximate
market value of $22,860 and $24,739 at March 31, 2007
and December 31, 2006, respectively 23,099 25,099
Mortgage-backed securities available for sale - at fair value 962 1,042
Mortgage-backed securities held to maturity - at cost, approximate
market value of $13,052 and $14,251 at March 31, 2007 and
December 31, 2006, respectively 12,970 14,237
Loans receivable - net 243,179 241,013
Loans held for sale - at lower of cost or market 371 165
Real estate acquired through foreclosure - net 359 -
Office premises and equipment - at depreciated cost 5,328 5,397
Federal Home Loan Bank stock - at cost 3,238 3,238
Accrued interest receivable on loans 1,065 1,073
Accrued interest receivable on mortgage-backed securities 61 65
Accrued interest receivable on investments and interest-earning deposits 305 439
Prepaid expenses and other assets 441 183
Bank-owned life insurance 3,286 3,254
--------- ---------
Total assets $314,708 $309,780
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $212,503 $205,450
Advances from the Federal Home Loan Bank 28,054 29,236
Advances by borrowers for taxes and insurance 830 1,203
Accrued interest payable 114 115
Accounts payable and other liabilities 946 1,039
Accrued federal income taxes 175 49
Deferred federal income taxes 457 488
---------- ----------
Total liabilities 243,079 237,580
Shareholders' equity
Preferred stock - authorized 5,000,000 shares, $.01 par value; none issued
Common stock - authorized 30,000,000 shares, $.01 par value;
9,918,751 shares issued at March 31, 2007 and December 31, 2006 99 99
Additional paid-in capital 43,192 43,113
Shares acquired by stock benefit plans (4,329) (4,329)
Treasury stock - at cost, 610,573 and 568,968 shares at March 31, 2007
and December 31, 2006, respectively (7,396) (6,846)
Retained earnings - restricted 40,078 40,171
Accumulated comprehensive loss, unrealized losses on securities
available for sale, net of related tax effects (15) (8)
----------- ------------
Total shareholders' equity 71,629 72,200
----------- ------------
Total liabilities and shareholders' equity $314,708 $309,780
=========== ============
See accompanying notes to consolidated financial statements.
3
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
For the three months ended March 31, 2007 and 2006
(In thousands, except per share data)
2007 2006
Interest income
Loans $3,683 $3,323
Mortgage-backed securities 187 214
Investment securities 396 265
Interest-earning deposits and other 70 42
------- -------
Total interest income 4,336 3,844
Interest expense
Deposits 1,905 1,221
Borrowings 344 387
------- -------
Total interest expense 2,249 1,608
------- -------
Net interest income 2,087 2,236
Other income
Rental 12 11
Gain on sale of loans 14 7
Earnings on bank-owned life insurance 32 37
Other operating 71 65
------- -------
Total other income 129 120
General, administrative and other expense
Employee compensation and benefits 1,116 1,019
Occupancy and equipment 148 101
Data processing 80 67
Property, payroll and other taxes 218 206
Legal and professional 118 102
Advertising 44 44
Other operating 203 141
------- -------
Total general, administrative and other expense 1,927 1,680
------- -------
Earnings before federal income taxes 289 676
Federal income taxes
Current 110 217
Deferred (27) (2)
------- -------
Total federal income taxes 83 215
------- -------
NET EARNINGS $ 206 $ 461
======= =======
EARNINGS PER SHARE
Basic $ .02 $ .05
======= =======
Diluted $ .02 $ .05
======= =======
Dividends declared per share $ .08 $ .07
======= =======
See accompanying notes to consolidated financial statements.
4
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
For the three months ended March 31, 2007 and 2006
(In thousands)
2007 2006
Net earnings for the period $206 $461
Other comprehensive loss, net of related tax benefits:
Unrealized holding losses on securities during the period,
net of tax benefits of $(4) and $(2) for the periods
ended March 31, 2007 and 2006 (7) (3)
----- -----
Comprehensive income $199 $458
===== =====
Accumulated comprehensive loss $(15) $(11)
===== =====
See accompanying notes to consolidated financial statements.
5
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended March 31, 2007 and 2006
(In thousands)
2007 2006
Cash flows from operating activities:
Net earnings for the period $ 206 $ 461
Adjustments to reconcile net earnings to net cash (used in)
provided by operating activities:
Amortization of premiums and discounts on investment
and mortgage-backed securities, net (3) -
Depreciation 82 53
Amortization of deferred loan origination fees - net - (9)
Proceeds from sale of loans in the secondary market 1,387 744
Loans originated for sale in the secondary market (1,594) (900)
Amortization of expense related to stock benefit plans 19 11
Gain on sale of loans (14) (7)
Federal Home Loan Bank stock dividends - (43)
Net increase in cash surrender value of bank-owned life insurance (32) (37)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans 8 (68)
Accrued interest receivable on mortgage-backed securities 4 4
Accrued interest receivable on investments and interest-earning deposits 134 62
Prepaid expenses and other assets (258) (258)
Accrued interest payable (1) -
Accounts payable and other liabilities (93) (59)
Federal income taxes
Current 125 324
Deferred (27) (2)
------- -------
Net cash flows (used in) provided by operating activities (57) 276
Cash flows used in investing activities:
Principal repayments on loans 6,410 7,077
Loan disbursements (8,920) (12,725)
Purchase of investment securities (4,001) -
Proceeds from maturity of investment securities 4,000 -
Principal repayments on mortgage-backed securities 1,350 1,443
Purchase of office premises and equipment (13) (438)
------- -------
Net cash flows used in investing activities (1,174) (4,643)
Cash flows provided by financing activities:
Net increase in deposits 7,053 2,090
Proceeds from Federal Home Loan Bank advances - 2,000
Repayments on Federal Home Loan Bank advances (1,182) (1,318)
Advances by borrowers for taxes and insurance (373) (409)
Stock option expense, net 60 59
Treasury stock repurchases (550) (1,002)
Dividends paid on common stock (299) (292)
------ ------
Net cash flows provided by financing activities 4,709 1,128
------ ------
Net increase (decrease) in cash and cash equivalents 3,478 (3,239)
Cash and cash equivalents at beginning of period 5,490 9,103
------ ------
Cash and cash equivalents at end of period $8,968 $5,864
====== ======
See accompanying notes to consolidated financial statements.
6
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(CONTINUED)
For the three months ended March 31, 2007 and 2006
(In thousands)
2007 2006
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Federal income taxes $ - $ 208
===== ======
Interest on deposits and borrowings $2,250 $1,608
===== ======
Supplemental disclosure of non-cash investing activities:
Transfer from loans to real estate acquired through foreclosure $ 359 $ -
====== ======
Recognition of mortgage servicing rights in
accordance with SFAS No. 140 $ 5 $ 6
====== ======
See accompanying notes to consolidated financial statements.
7
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2007 and 2006
1. Basis of Presentation
Cheviot Financial Corp. ("Cheviot Financial" or the "Corporation") is a
financial holding company, the principal asset of which consists of its
ownership of Cheviot Savings Bank (the "Savings Bank"). The Savings Bank
conducts a general banking business in southwestern Ohio which consists of
attracting deposits and applying those funds to the origination of primarily
real estate loans. The Corporation is 55% owned by Cheviot Mutual Holding
Company. Cheviot Savings' profitability is significantly dependent on net
interest income, which is the difference between interest income from
interest-earning assets and the interest expense paid on interest-bearing
liabilities. Net interest income is affected by the relative amount of
interest-earning assets and interest-bearing liabilities and the interest
received or paid on these balances.
The accompanying unaudited financial statements were prepared in accordance with
instructions for Form 10-Q and, therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with accounting principles generally
accepted in the United States of America. Accordingly, these consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto of Cheviot Financial included in the
Annual Report on Form 10-K for the year ended December 31, 2006. However, in the
opinion of management, all adjustments (consisting of only normal recurring
accruals) which are necessary for a fair presentation of the consolidated
financial statements have been included. The results of operations for the three
month period ended March 31, 2007, are not necessarily indicative of the results
which may be expected for the entire year.
2. Principles of Consolidation
The accompanying consolidated financial statements as of and for the three
months ended March 31, 2007, include the accounts of the Corporation and its
wholly-owned subsidiary, the Savings Bank. All significant intercompany items
have been eliminated.
3. Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that arise in
the ordinary course of business. Liquidity is primarily needed to meet the
borrowing and deposit withdrawal requirements of our customers and to fund
current and planned expenditures. Our primary sources of funds are deposits,
scheduled amortization and prepayments of loan principal and mortgage-backed
securities, maturities and calls of securities and funds provided by our
operations. In addition, we may borrow from the Federal Home Loan Bank of
Cincinnati. At March 31, 2007 and December 31, 2006, we had $28.1 million and
$29.2 million, respectively, in outstanding borrowings from the Federal Home
Loan Bank of Cincinnati and had the capacity to increase such borrowings at
those dates by approximately $110.1 million and $110.3 million.
Loan repayments and maturing securities are a relatively predictable source of
funds. However, deposit flows, calls of securities and prepayments of loans and
mortgage-backed securities are strongly influenced by interest rates, general
and local economic conditions and competition in the marketplace. These factors
reduce the predictability of these sources of funds.
8
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2007 and 2006
3. Liquidity and Capital Resources (continued)
Our primary investing activities are the origination of one- to four-family real
estate loans, commercial real estate, construction and consumer loans, and, to a
lesser extent, the purchase of securities. For the three months ended March 31,
2007, loan originations totaled $10.5 million, compared to $13.6 million for the
three months ended March 31, 2006.
Total deposits increased $7.1 million and $2.1 million during the three months
ended March 31, 2007 and 2006. Deposit flows are affected by the level of
interest rates, the interest rates and products offered by competitors and other
factors.
The following table sets forth information regarding the Corporation's
obligations and commitments to make future payments under contract as of March
31, 2007.
Payments due by period
Less More than More than More
than 1-3 4-5 than
1 year years years 5 years Total
(In thousands)
Contractual obligations:
Advances from the Federal Home Loan Bank $ - $ - $- $28,054 $ 28,054
Certificates of deposit 124,947 22,454 428 - 147,829
Amount of loan commitments and expiration per period:
Commitments to originate one- to four-family
loans 2,390 - - - 2,390
Home equity lines of credit 11,015 - - - 11,015
Undisbursed loans in process 5,905 - - - 5,905
Lease obligations 3 - - - 3
-------- ------- -- ------- --------
Total contractual obligations $144,260 $22,454 $428 $28,054 $195,196
======== ======= ==== ======= ========
We are committed to maintaining a strong liquidity position. We monitor our
liquidity position on a daily basis. We anticipate that we will have sufficient
funds to meet our current funding commitments. Based on our deposit retention
experience and current pricing strategy, we anticipate that a significant
portion of maturing time deposits will be retained.
9
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2007 and 2006
3. Liquidity and Capital Resources (continued)
At March 31, 2007 and 2006, we exceeded all of the applicable regulatory capital
requirements. Our core (Tier 1) capital was $51.7 million and $49.2 million, or
16.4% and 16.8% of total assets at March 31, 2007 and 2006, respectively. In
order to be classified as "well-capitalized" under federal banking regulations,
we were required to have core capital of at least $18.9 million, or 6.0% of
assets as of March 31, 2007. To be classified as a well-capitalized bank, we
must also have a ratio of total risk-based capital to risk-weighted assets of at
least 10.0%. At March 31, 2007 and 2006, we had a total risk-based capital ratio
of 32.8% and 34.4%, respectively.
4. Earnings Per Share
Basic earnings per share is computed based upon the weighted-average common
shares outstanding during the period, less shares in the ESOP that are
unallocated and not committed to be released plus shares in the ESOP that have
been allocated. Weighted-average common shares deemed outstanding gives effect
to 249,954 and 285,661 unallocated shares held by the ESOP for the three months
ended March 31, 2007 and 2006, respectively.
For the three months ended
March 31,
2007 2006
Weighted-average common shares
outstanding (basic) 9,082,356 9,363,410
Dilutive effect of assumed exercise
of stock options 120,429 16,468
---------- -----------
Weighted-average common shares
outstanding (diluted) 9,202,785 9,379,878
========= =========
5. Stock Option Plan
On April 26, 2005, the Corporation approved a Stock Incentive Plan that provides
for grants of up to 486,018 stock options. On May 5, 2005, approximately 384,000
option shares were granted subject to five year vesting. On May 23, 2006,
approximately 6,100 option shares were granted subject to five year vesting.
In 2004, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standard ("SFAS") No. 123(R), "Share-Based Payment," which
revises SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." SFAS No. 123(R) requires that cost related to the fair value of
all equity-based awards to employees, including grants of employee stock
options, be recognized in the financial statements.
10
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2007 and 2006
5. Stock Option Plan (continued)
The Corporation adopted the provisions of SFAS No. 123(R) effective January 1,
2006, using the modified prospective transition method, and therefore has not
restated its financial statements for prior periods. Under this method, the
Corporation has applied the provisions of SFAS No. 123(R) to new equity-based
awards and to equity-based awards modified, repurchased, or cancelled after
January 1, 2006. In addition, the Corporation will recognize compensation cost
for the portion of equity-based awards for which the requisite service period
has not been rendered ("unvested equity-based awards") that are outstanding as
of January 1, 2006. The compensation cost recorded for unvested equity-based
awards is based on their grant-date fair value. For the three months ended March
31, 2007, the Corporation recorded $43,000 in after-tax compensation cost for
equity-based awards that vested during the three months ended March 31, 2007.
The Corporation has $810,000 unrecognized pre-tax compensation cost related to
non-vested equity-based awards granted under its stock incentive plan as of
March 31, 2007, which is expected to be recognized over a weighted-average
vesting period of approximately 3.2 years.
A summary of the status of the Corporation's stock option plan as of March 31,
2007, and changes during the period then ended is presented below:
Three months ended Year ended
March 31, 2007 December 31, 2006
Weighted- Weighted-
average average
exercise exercise
Shares price Shares price
Outstanding at beginning of period 389,760 $11.17 383,700 $11.15
Granted - - 6,060 12.12
Exercised - - - -
Forfeited - - - -
--------- ------- -------- -------
Outstanding at end of period 389,760 $11.17 389,760 $11.17
========= ======= ======== =======
Options exercisable at period-end 76,740 $11.15 76,740 $11.15
========= ======= ======== ======
Options expected to be exercisable at year-end
Fair value of options granted $ - $ 2.97
======= ======
The following information applies to options outstanding at March 31, 2007:
Number outstanding 389,760
Exercise price $11.15 - $12.12
Weighted-average exercise price $11.17
Weighted-average remaining contractual life 8.2 years
Aggregate intrinsic value of vested options $152,400
The expected term of options is based on evaluations of historical and expected
future employee exercise behavior. The risk free interest rate is based upon the
U.S. Treasury rates at the date of grant with maturity dates approximately equal
to the expected life at grant date. Volatility is based upon the historical
volatility of the Corporation's stock.
11
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2007 and 2006
5. Stock Option Plan (continued)
The fair value of each option was estimated on the date of grant using the
modified Black-Scholes options pricing model with the following weighted-average
assumptions used for grants in 2006: dividend yield of 2.31%, expected
volatility of 14.43%, risk-free interest rate of 5.07% and an expected life of
10 years for each grant.
The effects of expensing stock options is reported in "cash provided by
financing activities" in the Consolidated Statements of Cash Flows.
6. Income Taxes
The Corporation adopted the provisions of FASB Interpretation 48, "Accounting
for Uncertainty in Income Taxes," on January 1, 2007. Previously, the
Corporation had accounted for tax contingencies in accordance with Statement of
Financial Accounting Standards No. 5, "Accounting for Contingencies." As
required by Interpretation 48, which clarifies Statement No. 109, "Accounting
for Income Taxes," the Corporation recognizes the financial statement benefit of
a tax position only after determining that the relevant tax authority would more
likely than not sustain the position following an audit. For tax positions
meeting the more-likely-than-not threshold, the amount recognized in the
financial statements is the largest benefit that has a greater than 50 percent
likelihood of being realized upon ultimate settlement with the relevant tax
authority. At the adoption date, the Corporation applied Interpretation 48 to
all tax positions for which the stature of limitations remained open. As a
result of the implementation of Interpretation 48, the Corporation was not
required to record any liability for unrecognized tax benefits as of January 1,
2007. There have been no material changes in unrecognized tax benefits since
January 1, 2007. As stated in the Annual Report, the only known tax attribute
which can influence the Corporation's effective tax rate is the utilization of
charitable contribution carryforwards.
The Corporation is subject to income taxes in the U.S. federal jurisdiction, as
well as various state jurisdictions. Tax regulations within each jurisdiction
are subject to the interpretation of the related tax laws and regulations and
require significant judgment to apply. With few exceptions, the Corporation is
no longer subject to U.S. federal, state and local, or non U.S. income tax
examinations by tax authorities for the years before 2003.
The Corporation will recognize, if applicable, interest accrued related to
unrecognized tax benefits in interest expense and penalties in operating
expenses.
7. Effects of Recent Accounting Pronouncements
In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Instruments - an amendment of FASB Statements No. 133 and 140," to simplify and
make more consistent the accounting for certain financial instruments.
Specifically, SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," to permit fair value remeasurement for any
hybrid financial instrument with an embedded derivative that otherwise would
require bifurcation, provided that the whole instrument is accounted for on a
fair value basis. SFAS No. 155 amends SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities," to allow a
qualifying special purpose entity to hold a derivative instrument that pertains
to a beneficial interest other than another derivative financial instrument.
12
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2007 and 2006
7. Effects of Recent Accounting Pronouncements (continued)
SFAS No. 155 is effective for all financial instruments acquired or issued after
the beginning of an entity's first fiscal year that begins after September 15,
2006, or January 1, 2007 as to the Corporation, with earlier application
allowed. The Corporation adopted SFAS No. 155 as of January 1, 2007 without
material effect on the Corporation's financial position or results of
operations.
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets - an amendment of SFAS No. 140," to simplify the accounting for
separately recognized servicing assets and servicing liabilities. Specifically,
SFAS No. 156 amends SFAS No. 140 to require an entity to take the following
steps:
o Separately recognize financial assets as servicing assets or servicing
liabilities, each time it undertakes an obligation to service a financial
asset by entering into certain kinds of servicing contracts;
o Initially measure all separately recognized servicing assets and
liabilities at fair value, if practicable, and;
o Separately present servicing assets and liabilities subsequently measured
at fair value in the statement of financial position and additional
disclosures for all separately recognized servicing assets and servicing
liabilities.
Additionally, SFAS No. 156 permits, but does not require, an entity to choose
either the amortization method or the fair value measurement method for
measuring each class of separately recognized servicing assets and servicing
liabilities. SFAS No. 156 also permits a servicer that uses derivative financial
instruments to offset risks on servicing to use fair value measurement when
reporting both the derivative financial instrument and related servicing asset
or liability.
SFAS No. 156 applies to all separately recognized servicing assets and
liabilities acquired or issued after the beginning of an entity's fiscal
year that begins after September 15, 2006, or January 1, 2007 as to the
Corporation, with earlier application permitted. The Corporation adopted
SFAS No. 156 as of January 1, 2007, applying the amortization method without
financial statement effect. The Corporation's mortgage servicing rights
totaled less than $75,000 at March 31, 2007, and therefore, the remaining
disclosures required under SFAS No. 156 have been omitted based on
materiality.
In July 2006, the FASB issued FASB Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes." The interpretation clarifies the accounting
for uncertainty in income taxes recognized in a company's financial statements
in accordance with SFAS No. 109, "Accounting for Income Taxes." Specifically,
FIN 48 prescribes a recognition threshold and a measurement attribute for the
financial statement recognition and measurement of a tax provision taken or
expected to be taken on a tax return. FIN 48 also provides guidance on the
related derecognition, classification, interest and penalties, accounting for
interim periods, disclosure, and transition of uncertain tax positions. FIN 48
is effective for fiscal years beginning after December 15, 2006, or January 1,
2007 as to the Corporation. The Corporation has adopted FIN 48 without material
adverse effect on the Corporation's financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." This
Statement defines fair value, establishes a framework for measuring fair value
and expands disclosures about fair value measurements. This Statement emphasizes
that fair value is a market-based measurement and should be determined based on
assumptions that a market participant would use when pricing an asset or
liability. This Statement clarifies that
13
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2007 and 2006
7. Effects of Recent Accounting Pronouncements (continued)
market participant assumptions should include assumptions about risk as well as
the effect of a restriction on the sale or use of an asset. Additionally, this
Statement establishes a fair value hierarchy that provides the highest priority
to quoted prices in active markets and the lowest priority to unobservable data.
This Statement is effective for fiscal years beginning after November 15, 2007,
or January 1, 2008 as to the Company, and interim periods within those fiscal
years. The adoption of this Statement is not expected to have a material adverse
effect on the Company's financial position or results of operations.
In September 2006, the FASB ratified the Emerging Issues Task Force's (EITF)
Issue 06-4, "Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split-Dollar Life Insurance Arrangements," which requires
companies to recognize a liability and related compensation costs for
endorsement split-dollar life insurance policies that provide a benefit to an
employee extending to postretirement periods. The liability should be recognized
based on the substantive agreement with the employee. This Issue is effective
beginning January 1, 2008. The Issue can be applied as either a change in
accounting principle through a cumulative-effect adjustment to retained earnings
as of the beginning of the year of adoption, or a change in accounting principle
through retrospective application to all periods. The Corporation is in the
process of evaluating the impact the adoption of Issue 06-4 will have on the
financial statements.
In September 2006, the FASB ratified a consensus opinion reached by the EITF on
EITF Issue 06-5, "Accounting for Purchases of Life Insurance - Determining the
Amount that Could be Realized in Accordance with FASB Technical Bulletin No.
85-4." The guidance in EITF Issue 06-5 requires policyholders to consider other
amounts included in the contractual terms of an insurance policy, in addition to
cash surrender value, for purposes of determining the amount that could be
realized under the terms of the insurance contract. If it is probable that
contractual terms would limit the amount that could be realized under the
insurance contract, those contractual limitations should be considered when
determining the realizable amounts. The amount that could be realized under the
insurance contract should be determined on an individual policy (or certificate)
level and should include any amount realized on the assumed surrender of the
last individual policy or certificate in a group policy.
The Company holds several life insurance policies, however, the policies do not
contain any provisions that would restrict or reduce the cash surrender value of
the policies. The consensus in EITF Issue 06-5 is effective for fiscal years
beginning after December 15, 2006. The Corporation applied the guidance in EITF
Issue 06-5 effective January 1, 2007 which did not have any effect on the
Corporation's financial statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115." This Statement allows companies the choice to measure many
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This Statement is expected to expand the use of fair value
measurement, which is consistent with the Board's long-term measurement
objectives for accounting for financial instruments. This Statement is effective
as of the beginning of an entity's first fiscal year that begins after November
15, 2007, or January 1, 2008 as to the Corporation, and interim periods within
those fiscal years. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of SFAS No. 157, "Fair Value Measurements." The
Corporation is currently evaluating the impact the adoption of SFAS No. 159 will
have on the financial statements.
14
Cheviot Financial Corp.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
This report on Form 10-Q contains forward-looking statements, which can be
identified by the use of such words as estimate, project, believe, intend,
anticipate, plan, seek, expect and similar expressions. These forward-looking
statements are subject to significant risks, assumptions and uncertainties that
could affect the actual outcome of future events. Because of these
uncertainties, our actual future results may be materially different from the
results indicated by these forward-looking statements.
Discussion of Financial Condition Changes at December 31, 2006 and at March 31,
2007
--------------------------------------------------------------------------------
Total assets increased $4.9 million, or 1.6%, to $314.7 million at March 31,
2007, from $309.8 million at December 31, 2006. The increase in total assets
reflects an increase in cash and cash equivalents and loans receivable, which
were partially offset by a decrease in investment securities and mortgage-backed
securities.
Cash, federal funds sold and interest-earning deposits increased $3.5 million,
or 63.4%, to $9.0 million at March 31, 2007, from $5.5 million at December 31,
2006. The increase in cash and cash equivalents at March 31, 2007, was due to a
$164,000 increase in cash and cash due from banks, an increase in federal funds
sold of $2.0 million and an increase in interest earning deposits of $1.4
million. Investment securities decreased $9,000 to $34.2 million at March 31,
2007. At March 31, 2007, $23.1 million of investment securities were classified
as held to maturity, while $11.1 million were classified as available for sale.
Mortgage-backed securities decreased $1.3 million, or 8.8%, to $13.9 million at
March 31, 2007, from $15.3 million at December 31, 2006. The decrease in
mortgage-backed securities was due primarily to principal prepayments and
repayments totaling $1.4 million. At March 31, 2007, $13.0 million of
mortgage-backed securities were classified as held to maturity, while $962,000
were classified as available for sale. Management has focused on investing in
shorter term instruments in an effort to enhance the Corporation's liquidity in
the current inverted yield curve interest rate environment.
Loans receivable, including loans held for sale, increased $2.4 million, or
1.0%, to $243.6 million at March 31, 2007, from $241.2 million at December 31,
2006. The increase reflects loan originations totaling $10.5 million, partially
offset by loan principal repayments of $6.4 million and sales of $1.4 million.
The allowance for loan losses totaled $833,000 at both March 31, 2007 and
December 31, 2006. In determining the adequacy of the allowance for loan losses
at any point in time, management and the board of directors apply a systematic
process focusing on the risk of loss in the portfolio. First, the loan portfolio
is segregated by loan types to be evaluated collectively and loan types to be
evaluated individually. Delinquent multi-family and commercial loans are
evaluated individually for potential impairments in their carrying value.
Second, the allowance for loan losses entails utilizing our historic loss
experience by applying such loss percentage to the loan types to be collectively
evaluated in the portfolio. This segment of the loss analysis resulted in no
addition to the provision for loss for the quarter ended March 31, 2007. The
analysis of the allowance for loan losses requires an element of judgment and is
subject to the possibility that the allowance may need to be increased, with a
corresponding reduction in earnings. To the best of management's knowledge, all
known and inherent losses that are probable and that can be reasonably estimated
have been recorded at March 31, 2007.
15
Cheviot Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from December 31, 2006 to March 31,
2007 (continued)
Non-performing and impaired loans totaled $371,000 and $281,000 at March 31,
2007 and December 31, 2006, respectively. At March 31, 2007, non-performing and
impaired loans were comprised solely of six loans secured by one- to four-family
residential real estate. The allowance for loan losses represented 224.5% and
296.4 % of non-performing and impaired loans at March 31, 2007 and December 31,
2006, respectively. Although management believes that the Corporation's
allowance for loan losses conforms with generally accepted accounting principles
based upon the available facts and circumstances, there can be no assurance that
additions to the allowance will not be necessary in future periods, which would
adversely affect our results of operations.
Deposits increased $7.1 million, or 3.4%, to $212.5 million at March 31, 2007,
from $205.5 million at December 31, 2006. Advances from the Federal Home Loan
Bank of Cincinnati decreased by $1.2 million, or 4.0%, to $28.1 million at March
31, 2007, from $29.2 million at December 31, 2006. Deposit growth allowed for
the repayment of advances from the Federal Home Loan Bank.
Shareholders' equity decreased $571,000, or 0.8%, to $71.6 million at March 31,
2007, from $72.2 million at December 31, 2006. The decrease primarily resulted
from the repurchase of treasury shares of $550,000 and dividends paid of
$299,000, which were partially offset by net earnings of $206,000. At March 31,
2007, Cheviot Financial had the ability to purchase an additional 356,504 shares
under its announced stock repurchase plan.
Comparison of Operating Results for the Three-Month Periods Ended March 31, 2007
and 2006
--------------------------------------------------------------------------------
General
Net earnings for the three months ended March 31, 2007 totaled $206,000, a
$255,000 decrease from the $461,000 net earnings reported in the March 2006
period. The decrease in net earnings reflects a decrease in net interest income
of $149,000 and an increase of $247,000, in general, administrative and other
expenses, which were partially offset by an increase in other income of $9,000
and a decrease of $132,000 in federal income taxes for the 2007 quarter.
Net Interest Income
Total interest income increased $492,000, or 12.8%, to $4.3 million for the
three-months ended March 31, 2007, from the comparable quarter in 2006. Interest
income on loans increased $360,000, or 10.8%, to $3.7 million during the 2007
period from $3.3 million for the 2006 period. This increase was due primarily to
a $16.8 million, or 7.4%, increase in the average balance of loans outstanding,
and a 19 basis point increase in the weighted-average yield on loans to 6.07%
for 2007 quarter from 5.88% for the three months ended March 31, 2006.
Interest income on mortgage-backed securities decreased $27,000, or 12.6%, to
$187,000 for the three months ended March 31, 2007, from $214,000 for the 2006
quarter, due primarily to a $6.2 million decrease in the average balance of
securities outstanding, which was partially offset by a 104 basis point increase
in the average yield period to period. Interest income on investment securities
increased $131,000, or 49.4%, to $396,000 for the three months ended March 31,
2007, compared to $265,000 for the same quarter in 2006, due primarily to a 126
basis point increase in the average yield to 5.17% in the 2007 quarter, and an
increase of $3.6 million, or 13.1% in the average balance of investment
securities outstanding. Interest income on other interest-earning deposits
increased $28,000, or 66.7% to $70,000 for the three months ended March 31,
2007.
16
Cheviot Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three-Month Periods Ended March 31, 2007
and 2006 (continued)
--------------------------------------------------------------------------------
Net Interest Income (continued)
Interest expense increased $641,000, or 39.9%, to $2.2 million for the three
months ended March 31, 2007, from $1.6 million for the same period in 2006.
Interest expense on deposits increased by $684,000, or 56.0%, to $1.9 million
from $1.2 million due primarily to a 95 basis point increase in the weighted
average costs of deposits to 3.69% during the 2007 period and a $28.2 million,
or 15.8%, increase in the weighted-average balance outstanding. Interest expense
on borrowings decreased by $43,000, or 11.1%, due primarily to a $4.6 million,
or 13.8%, decrease in the average balance outstanding, which was partially
offset by a 15 basis point increase in the average cost of borrowings. The
increase in the yields on interest-earning assets and costs of interest-bearing
liabilities were due primarily to the overall increase in interest rates during
the March 2007 quarter.
As a result of the foregoing changes in interest income and interest expense,
net interest income decreased by $149,000, or 6.7%, to $2.1 million for the
three months ended March 31, 2007. The average interest rate spread decreased to
2.08% for the three months ended March 31, 2007 from 2.51% for the three months
ended March 31, 2006. The net interest margin decreased to 2.84% for the three
months ended March 31, 2007 from 3.23% for the three months ended March 31,
2006.
Provision for Losses on Loans
As a result of the allowance for loan losses analysis described elsewhere in
this document, management concluded that the allowance for loan loss was
adequate, and therefore, did not record a provision for losses on loans for the
three-months ended March 31, 2007 and 2006. There can be no assurance that the
loan loss allowance will be sufficient to cover losses on non-performing loans
in the future.
Other Income
Other income increased $9,000, or 7.5%, to $129,000 for the three months ended
March 31, 2007, compared to the same quarter in 2006, due primarily to an
increase in the gain on the sale of loans of $7,000 and an increase of $6,000 in
other operating income, which were partially offset by a decrease in earnings on
bank owned life insurance of $5,000.
General, Administrative and Other Expense
General, administrative and other expense increased $247,000, or 14.7%, to $1.9
million for the three months ended March 31, 2007, from $1.7 million for the
comparable quarter in 2006. This increase is a result of an increase of $97,000
in employee compensation and benefits, a $47,000 increase in occupancy and
equipment, a $16,000 increase in legal and professional services and an increase
of $62,000 in other operating expense. The increase in employee compensation and
benefits is due primarily to an increase in the number of employees reflecting
the growth of the Corporation's franchise. The increase in occupancy and
equipment is due primarily to expense incurred for the operation of the two new
branches opened in the latter quarters of 2006. The increase in legal and
professional services was due primarily to expenses incurred for litigation
proceedings wherein the Corporation was defending its security interest in
collateral. The Corporation has reached a settlement regarding this litigation
for $50,000, accounting for the majority of the increase in other operating
expense for the 2007 three month period.
17
Cheviot Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three-Month Periods Ended March 31, 2007
and 2006 (continued)
--------------------------------------------------------------------------------
Federal Income Taxes
The provision for federal income taxes decreased $132,000, or 61.4%, to $83,000
for the three months ended March 31, 2007, from $215,000 for the same quarter in
2006, due primarily to a $387,000, or 57.2%, decrease in pre-tax earnings. The
effective tax rate was 28.7% and 31.8% for the three month periods ended March
31, 2007 and 2006. The difference between the Corporation's effective tax rate
in the 2007 and 2006 periods and the 34% statutory corporate rate is due
primarily to the tax-exempt earnings on bank-owned life insurance.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Corporation's market risk since the
Form 10-K filed with the Securities and Exchange Commission for the year ended
December 31, 2006.
ITEM 4 CONTROLS AND PROCEDURES
The Corporation's Chief Executive Officer and Chief Financial Officer evaluated
the disclosure controls and procedures (as defined under Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of
the period covered by this quarterly report. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded that the
Corporation's disclosure controls and procedures are effective.
There were no changes in the Corporation's internal controls or in other factors
that could materially affect, or could reasonably be likely to materially
affect, these controls subsequent to the date of their evaluation by the
Corporation's Chief Executive Officer and Chief Financial Officer.
18
Cheviot Financial Corp.
PART II
ITEM 1. Legal Proceedings
None.
ITEM 1A. Risk Factors
There have been no changes to the Corporation's risk factors since the filing of
the Corporation's Annual Report on Form 10-K for the year ended December 31,
2006.
ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer
Purchases of Equity Securities
--------------------------------------------------------------------------------
The Corporation announced a repurchase plan on September 13, 2006 which provides
for the repurchase of 5% or 471,140 shares of our common stock. As of March 31,
2007, the Corporation had purchased 114,636 shares pursuant to the program.
Total # of
shares purchased
Total Average as part of publicly
# of shares price paid announced plans
Period purchased per share or programs
------ --------- --------- ------------
January 1-31, 2007 11,036 $13.15 84,067
February 1-28, 2007 9,292 $13.17 93,359
March 1 - 31, 2007 21,277 $13.26 114,636
ITEM 3. Defaults Upon Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits
31.1 Certification of Principal Executive Officer Pursuant to Rule
13a-14 of the Securities Exchange Act of 1934, As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer Pursuant to Rule
13a-14 of the Securities Exchange Act of 1934, As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Principal Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
19
Cheviot Financial Corp.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 11, 2007 By: /s/ Thomas J. Linneman
------------------------- -----------------------------------
Thomas J. Linneman
President and Chief Executive Officer
Date: May 11, 2007 By: /s/ Scott T.Smith
------------------------ --------------------------------------
Scott T. Smith
Chief Financial Officer
20
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Thomas J. Linneman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cheviot Financial
Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures or caused such
disclosure controls to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on such
evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 11, 2007 /s/Thomas J. Linneman
----------------------------------------
Thomas J. Linneman
President and Chief Executive Officer
(principal executive officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13A-14
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Scott T. Smith, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cheviot Financial
Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures or caused such
disclosure controls to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on such
evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 11, 2007 /s/Scott T. Smith
------------------------------
Scott T. Smith
Chief Financial Officer
(principal financial officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cheviot Financial Corp. (the
"Company"), on Form 10-Q for the period ended March 31, 2007, as filed with the
Securities and Exchange Commission on the date of this Certification (the
"Report"), I, Thomas J. Linneman, President and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been
provided to Cheviot Financial Corporation and will be retained by Cheviot
Financial Corporation and furnished to the Securities and Exchange Commission or
its staff upon request.
/s/Thomas J. Linneman
-----------------------------------------------------
Thomas J. Linneman
President and Chief Executive Officer
Date: May 11, 2007
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cheviot Financial Corp. (the
"Company"), on Form 10-Q for the period ended March 31, 2007, as filed with the
Securities and Exchange Commission on the date of this Certification (the
"Report"), I, Scott T. Smith, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been
provided to Cheviot Financial Corporation and will be retained by Cheviot
Financial Corporation and furnished to the Securities and Exchange Commission or
its staff upon request.
/s/Scott T. Smith
--------------------------------
Scott T. Smith
Chief Financial Officer
Date: May 11, 2007