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 
June 30, 2014
 
 
OR
 
o          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)
 
Maryland
 
     90-0789920
 
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
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  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one.)
 
Large accelerated filer o                  Accelerated filer   o                  Non-accelerated filer   o
 
Small business issuer x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes o                      No  x
 
As of August 12, 2014, the latest practicable date, 6,707,803 shares of the registrant’s common stock, $.01 par value, were issued and outstanding.
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes x                      No o
 
 
 

 

 
INDEX
       
     
Page
       
PART I
-
FINANCIAL INFORMATION
 
       
   
Consolidated Statements of Financial Condition
3
       
   
Consolidated Statements of Earnings
4
       
   
Consolidated Statements of Comprehensive Income (Loss)
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
34
       
   
Quantitative and Qualitative Disclosures about Market Risk
42
       
   
Controls and Procedures
42
       
PART II
-
OTHER INFORMATION
43
       
SIGNATURES
   
45
 
2
 

 


Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
(In thousands, except share data)
 
   
June 30,
   
December 31,
 
   
2014
   
2013
 
   
(Unaudited)
       
             
ASSETS
           
             
Cash and due from banks
  $ 13,124     $ 14,129  
Federal funds sold
    17,516       3,340  
Interest-earning deposits in other financial institutions
    8,417       4,643  
Cash and cash equivalents
    39,057       22,112  
                 
Investment securities available for sale – at fair value
    144,123       153,942  
Mortgage-backed securities available for sale - at fair value
    8,667       9,361  
Mortgage-backed securities held to maturity - at cost, approximate market value of $2,987 and $3,230 at June 30, 2014 and December 31, 2013, respectively
    2,880       3,116  
Loans receivable - net
    326,996       336,134  
Loans held for sale - at lower of cost or market
    1,191       703  
Real estate acquired through foreclosure - net
    2,790       3,284  
Office premises and equipment - at depreciated cost
    11,172       11,505  
Federal Home Loan Bank stock - at cost
    8,651       8,651  
Accrued interest receivable on loans
    1,060       1,173  
Accrued interest receivable on mortgage-backed securities
    21       23  
Accrued interest receivable on investments and interest-earning deposits
    788       775  
Goodwill
    10,309       10,309  
Core deposit intangible
    459       540  
Prepaid expenses and other assets
    3,902       3,537  
Bank-owned life insurance
    15,966       15,733  
Prepaid federal income taxes
    791       1,284  
Deferred federal income taxes
    2,220       4,928  
                 
Total assets
  $ 581,043     $ 587,110  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
                 
Deposits
  $ 463,889     $ 469,387  
Advances from the Federal Home Loan Bank
    16,187       19,261  
Advances by borrowers for taxes and insurance
    1,072       2,357  
Accrued interest payable
    62       71  
Accounts payable and other liabilities
    5,492       5,107  
Total liabilities
    486,702       496,183  
                 
Shareholders’ equity
               
Preferred stock - authorized 5,000,000 shares, $.01 par value; none issued Common stock - authorized 30,000,000 shares, $.01 par value; 6,707,803 and 6,834,803 shares issued at June 30, 2014 and December 31, 2013
    76       76  
Additional paid-in capital
    55,781       57,215  
Shares acquired by stock benefit plans
    (1,545 )     (1,574 )
Retained earnings - restricted
    42,559       42,439  
Accumulated comprehensive loss, unrealized losses on securities available for sale, net of related tax benefit
    (2,530 )     (7,229 )
Total shareholders’ equity
    94,341       90,927  
                 
Total liabilities and shareholders’ equity
  $ 581,043     $ 587,110  
 
See accompanying notes to consolidated financial statements.
 
3
 

 

 
Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
 
(In thousands, except per share data)
 
   
Six months ended
   
Three months ended
 
   
June 30,
   
June 30,
 
   
2014
   
2013
   
2014
   
2013
 
                         
Interest income
                       
Loans
  $ 7,412     $ 8,018     $ 3,668     $ 3,944  
Mortgage-backed securities
    112       82       52       41  
Investment securities
    1,547       1,645       796       777  
Interest-earning deposits and other
    178       196       90       98  
Total interest income
    9,249       9,941       4,606       4,860  
                                 
Interest expense
                               
Deposits
    1,538       1,887       767       920  
Borrowings
    286       377       137       183  
Total interest expense
    1,824       2,264       904       1,103  
                                 
Net interest income
    7,425       7,677       3,702       3,757  
                                 
Provision for losses on loans
    555       340       355       285  
                                 
Net interest income after provision for losses on loans
    6,870       7,337       3,347       3,472  
                                 
Other income
                               
Rental
    56       73       31       31  
Gain on sale of real estate acquired through foreclosure
    25       69       -       71  
Loss on sale of office premises and equipment
    -       (255 )     -       (255 )
Gain on sale of loans
    167       425       101       187  
Gain on sale of investment securities designated as available-for-sale
    722       -       281       -  
Earnings on bank-owned life insurance
    233       241       117       122  
Service fee income
    771       736       401       376  
Other operating
    37       200       26       10  
Total other income
    2,011       1,489       957       542  
                                 
General, administrative and other expense
                               
Employee compensation and benefits
    2,882       3,323       1,408       1,640  
Occupancy and equipment
    732       832       354       428  
Property, payroll and other taxes
    569       727       276       359  
Data processing
    318       298       158       150  
Legal and professional
    463       492       232       277  
Advertising
    150       150       75       75  
FDIC expense
    216       219       99       111  
ATM processing expense
    183       185       95       95  
Real estate owned impairment
    493       256       297       155  
Core deposit intangible amortization
    81       112       34       47  
Other operating
    902       789       546       359  
Total general, administrative and other expense
    6,989       7,383       3,574       3,696  
                                 
Earnings before income taxes
    1,892       1,443       730       318  
                                 
Federal income taxes (benefit)
                               
Current
    145       (97 )     (210 )     (97 )
Deferred
    405       484       413       150  
Total federal income taxes
    550       387       203       53  
                                 
NET EARNINGS
  $ 1,342     $ 1,056     $ 527     $ 265  
                                 
EARNINGS PER SHARE
                               
Basic
  $ .20     $ .15     $ .08     $ .04  
Diluted
  $ .20     $ .15     $ .08     $ .04  
                                 
Dividends per common share
  $ .18     $ .18     $ .09     $ .09  
                                 
See accompanying notes to consolidated financial statements.
 
4
 

 

 
Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 
For the six and three months ended June 30, 2014 and 2013
(In thousands)
 
   
For the six months
   
For the three months
 
   
ended June 30,
   
ended June 30,
 
   
2014
   
2013
   
2014
   
2013
 
                         
Net earnings for the period
  $ 1,342     $ 1,056     $ 527     $ 265  
                                 
Other comprehensive income (loss), net of tax expense (benefit):
                               
Unrealized holding (losses) gains on securities during the period, net of tax (benefits) expense of $2,421 and $(2,813) for the six months ended June 30, 2014 and 2013, respectively, and $1,398 and $(2,660) for the three months ended June 30, 2014 and 2013, respectively
    4,699       (5,461 )     2,713       (5,164 )
                                 
Comprehensive income (loss)
  $ 6,041     $ (4,405 )   $ 3,240     $ (4,899 )
                                 
Accumulated comprehensive loss
  $ (2,530 )   $ (4,861 )   $ (2,530 )   $ (4,861 )
                                 
See accompanying notes to consolidated financial statements.

5
 

 

 
Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
For the six months ended June 30, 2014 and 2013
(In thousands)
             
   
2014
   
2013
 
Cash flows from operating activities:
           
Net earnings for the period
  $ 1,342       1,056  
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
               
Amortization of premiums and discounts on investment and mortgage-backed securities, net
    (12 )     (19 )
Depreciation
    361       370  
Charitable donation of real estate owned property
    -       32  
Amortization of deferred loan origination costs - net
    23       (13 )
Amortization of intangible assets
    81       112  
Amortization of fair value adjustments
    (215 )     (482 )
Proceeds from sale of loans in the secondary market
    10,999       27,816  
Loans originated for sale in the secondary market
    (11,425 )     (23,899 )
Gain on sale of loans
    (167 )     (425 )
Gain on sale of real estate acquired through foreclosure
    (25 )     (69 )
Impairment on real estate acquired through foreclosure
    493       256  
Loss on sale of office premises and equipment
    -       255  
Gain on sale of investment securities designated as available-for-sale
    (722 )     -  
Net increase in cash surrender value of bank-owned life insurance
    (233 )     (242 )
Amortization of expense related to stock benefit plans
    38       39  
Provision for losses on loans
    555       340  
Increase (decrease) in cash due to changes in:
               
Accrued interest receivable on loans
    113       65  
Accrued interest receivable on mortgage-backed securities
    2       2  
Accrued interest receivable on investments and interest earning deposits
    (13 )     224  
Prepaid expenses and other assets
    (364 )     825  
Accrued interest payable
    (9 )     (2 )
Accounts payable and other liabilities
    340       (1,770 )
Federal income taxes
               
Current
    493       (93 )
Deferred
    405       484  
Net cash provided by operating activities
    2,060       4,862  
                 
Cash flows provided by (used in) investing activities:
               
Principal repayments on loans
    32,298       38,641  
Loan disbursements
    (23,983 )     (37,872 )
Purchase of investment securities – available for sale
    (14,978 )     (80,928 )
Proceeds from maturity of investment securities – available for sale
    30,000       106,175  
Purchase of corporate securities
    -       (1,920 )
Proceeds from the sale of corporate securities
    2,484       -  
Principal repayments on mortgage-backed securities – available for sale
    742       682  
Principal repayments on mortgage-backed securities – held to maturity
    236       218  
Proceeds from sale of real estate acquired through foreclosure
    405       878  
Proceeds from sale of office premises and equipment
    -       1,167  
Purchase of office premises and equipment
    (28 )     (1,104 )
Net cash provided by investing activities
    27,176       25,937  
                 
Cash flows provided by (used in) financing activities:
               
Net decrease in deposits
    (5,311 )     (12,974 )
Repayments on Federal Home Loan Bank advances
    (3,030 )     (3,074 )
Advances by borrowers for taxes and insurance
    (1,285 )     (1,379 )
Stock option expense, net
    7       12  
Common stock repurchased
    (1,450 )     (8,560 )
Dividends paid on common stock
    (1,222 )     (1,282 )
Net cash used in financing activities
    (12,291 )     (27,257 )
                 
Net increase in cash and cash equivalents
    16,945       3,542  
Cash and cash equivalents at beginning of period
    22,112       25,114  
Cash and cash equivalents at end of period
  $ 39,057     $ 28,656  
 
See accompanying notes to consolidated financial statements.
 
6
 

 

 
Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
(In thousands)
             
   
2014
   
2013
 
             
Supplemental disclosure of cash flow information:
           
Cash paid during the period for:
           
Federal income taxes
  $ -     $ -  
                 
Interest on deposits and borrowings
  $ 1,833     $ 2,266  
                 
Supplemental disclosure of noncash investing activities:
               
Transfer of loans to real estate acquired through foreclosure
  $ 383     $ 2,040  
                 
Recognition of mortgage servicing rights
  $ 66     $ 204  
                 
Deferred gain on real estate acquired through foreclosure
  $ 4     $ 7  
 
See accompanying notes to consolidated financial statements.
 
7
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the six months ended June 30, 2014 and 2013
 
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 primarily to the origination of real estate loans.  The Savings Bank’s 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.
 
On January 18, 2012, Cheviot Financial completed a second step reorganization and sale of common stock.  Prior to the completion of the second step conversion, Cheviot Financial was a federal corporation and mid-tier holding company.  Following the reorganization Cheviot Financial is the Maryland chartered holding company of the Savings Bank.
 
The accompanying unaudited consolidated 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, 2013.  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 or six month period ended June 30, 2014 are not necessarily indicative of the results which may be expected for the entire year.
 
Cheviot Financial evaluates subsequent events through the date of filing with the Securities and Exchange Commission.
 
2.       Principles of Consolidation
 
The accompanying consolidated financial statements as of and for the six months ended June 30, 2014 and 2013 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 the 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 customers and to fund current and planned expenditures.  The Corporation’s 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 operations.  In addition, the Corporation may borrow from the Federal Home Loan Bank of Cincinnati.  At June 30, 2014 and December 31, 2013, the Corporation had $16.2 million and $19.3 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 $123.6 million and $121.1 million, respectively.
 
8
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June, 2014 and 2013
 
3.       Liquidity and Capital Resources (continued)
 
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.
 
The Corporation’s primary investing activities are the origination of one- to four-family real estate loans, commercial real estate, construction and consumer loans, and the purchase of securities.  For the six months ended June 30, 2014, loan originations totaled $35.4 million, compared to $61.8 million for the six months ended June 30, 2013.
 
Total deposits decreased $5.5 million during the six months ended June 30, 2014, while total deposits decreased $13.3 million during the six months ended June 30, 2013.  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 contracts as of June 30, 2014.
                               
      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
  $ 237     $ 11,623     $ 1,915     $ 2,412     $ 16,187  
 Certificates of deposit
    130,121       69,114       24,950       27       224,212  
 Lease obligations
    103       133       119       174       529  
 Purchase of leased facility
    575                         575  
 
                                       
Amount of loan commitments and expiration per period:
                                       
 Commitments to originate one- to four-family loans
    2,068                         2,068  
 Home equity lines of credit
    26,248                         26,248  
 Commercial lines of credit
    1,243                         1,243  
 Undisbursed loans in process
    2,821                         2,821  
                                         
Total contractual obligations
  $ 163,416     $ 80,870     $ 26,984     $ 2,613     $ 273,883  

Cheviot Financial is committed to maintaining a strong liquidity position and management monitors the Corporation’s liquidity position on a daily basis.  The Corporation anticipates that it will have sufficient funds to meet current funding commitments.  Based on deposit retention experience and current pricing strategy, its anticipated that a significant portion of maturing time deposits will be retained.
 
At June 30, 2014 and 2013, we exceeded all of the applicable regulatory capital requirements.  Core (Tier 1) capital was $78.3 million and $77.8 million, or 13.7% and 13.3% of total assets at June 30, 2014 and 2013, respectively.  In order to be classified as “well-capitalized” under federal banking regulations, the Savings Bank was required to have core capital of at least $34.9 million, or 6.0% of assets as of June 30, 2014.  To be classified as a well-capitalized bank, the Savings Bank must also have a ratio of total risk-based capital to risk-weighted assets of at least 10.0%.  At June 30, 2014 and 2013, the Savings Bank had a total risk-based capital ratio of 26.5% and 25.7%, respectively.
 
9
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
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 168,300 and 208,251 unallocated shares held by the ESOP for the six months ended June 30, 2014 and 2013, respectively.
 
   
For the six months ended
June 30,
   
For the three months ended
June 30,
 
   
2014
   
2013
   
2014
   
2013
 
 
                       
Weighted-average common shares outstanding (basic)
    6,630,407       7,101,890       6,607,066       6,905,946  
 
                               
Dilutive effect of assumed exercise of stock options
    4,991       6,872       5,911       7,692  
 
                               
Weighted-average common shares outstanding (diluted)
    6,635,398       7,108,762       6,612,977       6,913,638  
 
5.       Stock Option Plan
 
On April 26, 2005, the Corporation approved a Stock Incentive Plan that provides for grants of up to 416,517 stock options.  During 2012, approximately 5,600 stock options were granted subject to a five year vesting period.  The shares in the plan and the shares granted have been adjusted to reflect the exchange ratio of 0.857.
 
The Corporation follows FASB Accounting Standard Codification Topic 718 (ASC 718), “Compensation – Stock Compensation,” for its stock option plans, and accordingly, the Corporation recognizes the expense of these grants as required. Stock-based employee compensation costs pertaining to stock options is reflected as a net increase in equity, for both any new grants, as well as for all unvested options outstanding at December 31, 2005, in both cases using the fair values established by usage of the Black-Scholes option pricing model, expensed over the vesting period of the underlying option.
 
The Corporation elected the modified prospective transition method in applying ASC 718. Under this method, the provisions of ASC 718 apply to all awards granted or modified after the date of adoption, as well as for all unvested options outstanding at December 31, 2005. The compensation cost recorded for unvested equity-based awards is based on their grant-date fair value. For the six months ended June 30, 2014, the Corporation recorded $7,000 in after-tax compensation cost for equity-based awards that vested during the six months ended June 30, 2014.  The Corporation has $20,000 unrecognized pre-tax compensation cost related to non-vested equity-based awards granted under its stock incentive plan as of June 30, 2014, which is expected to be recognized over a weighted-average vesting period of approximately 1.0 months.
 
10
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
5.       Stock Option Plan (continued)
 
A summary of the status of the Corporation’s stock option plan as of June 30, 2014 and the year ended December 31, 2013 as well as the changes during the period then ended are presented below:
 
   
Six months ended
   
Year ended
 
   
June 30, 2014
   
December 31, 2013
 
         
Weighted-
         
Weighted-
 
         
average
         
average
 
         
exercise
         
exercise
 
   
Shares
   
price
   
Shares
   
price
 
                         
Outstanding at beginning of period
    369,939     $ 12.80       370,339     $ 12.80  
Granted
    -       -       -       -  
Exercised
    -       -       -       -  
Forfeited
    -       -       (400 )     8.30  
                                 
Outstanding at end of period
    369,939     $ 12.80       369,939     $ 12.80  
                                 
Options exercisable at period-end
    363,791     $ 12.74       359,177     $ 12.91  
                                 
Options expected to be exercisable at year-end
    363,791               359,177          
                                 
Fair value of options granted
         
NA
           
NA
 
 
The following information applies to options outstanding at June 30, 2014:
 
Number outstanding
  369,939  
Exercise price
  $8.30 - $15.90  
Weighted-average exercise price
  $12.80  
Weighted-average remaining contractual life
 
1.4 years
 
 
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 the grant date.  Volatility is based upon the historical volatility of the Corporation’s stock.
 
On April 23, 2013, shareholders approved the 2013 Equity Incentive Plan.  As of June 30, 2014, no shares have been granted or options awarded under this plan.
 
The effects of expensing stock options are reported in “cash provided by financing activities” in the Consolidated Statements of Cash Flows.
 
11
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
6.       Investment and Mortgage-backed Securities
 
The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of investment securities at June 30, 2014 and December 31, 2013 are shown below.
 
      June 30, 2014  
         
Gross
   
Gross
   
Estimated
 
   
Amortized
   
unrealized
   
unrealized
   
fair
 
   
cost
   
gains
   
losses
   
value
 
      (In thousands)  
Available for Sale:
                       
U.S. Government agency securities
  $ 145,066     $ 32     $ 4,377     $ 140,721  
Municipal obligations
    3,034       149       13       3,170  
Corporate securities
    158       74       -       232  
    $ 148,258     $ 255     $ 4,390     $ 144,123  
 
      December 31, 2013  
         
Gross
   
Gross
   
Estimated
 
   
Amortized
   
unrealized
   
unrealized
   
fair
 
   
cost
   
gains
   
losses
   
value
 
      (In thousands)  
Available for Sale:
                       
U.S. Government agency securities
  $ 160,063     $ -     $ 11,714     $ 148,349  
Municipal obligations
    3,035       83       103       3,015  
Corporate securities
    1,920       658       -       2,578  
    $ 165,018     $ 741     $ 11,817     $ 153,942  

Unrealized gross gains and losses on investments and mortgage backed securities are shown on the Corporation’s consolidated financial as an adjustment to shareholders’ equity.
 
The amortized cost of investment securities at June 30, 2014, by contractual term to maturity, are shown below.

   
June 30,
 
   
2014
 
   
(In thousands)
 
       
Less than one year
  $ -  
One to five years
    55,166  
Five to ten years
    67,213  
More than ten years
    25,721  
      148,100  
Corporate securities
    158  
Corporate securities
  $ 148,258  
 
12
 

 


Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
6.       Investment and Mortgage-backed Securities (continued)
 
The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of mortgage-backed securities at June 30, 2014 and December 31, 2013 are shown below.
                         
      June 30, 2014  
         
Gross
   
Gross
   
Estimated
 
   
Amortized
   
unrealized
   
unrealized
   
fair
 
   
cost
   
holding gains
   
holding losses
   
value
 
      (In thousands)  
Available for sale:
                       
Federal Home Loan Mortgage Corporation adjustable-rate participation certificates
  $ 607     $ 34     $ 1     $ 640  
Federal National Mortgage Association adjustable-rate participation certificates
    5,477       76       2       5,551  
Government National Mortgage Association adjustable-rate participation certificates
    2,400       76       -       2,476  
                                 
    $ 8,484     $ 186     $ 3     $ 8,667  
                                 
 
Held to maturity:
                       
Federal Home Loan Mortgage Corporation adjustable-rate participation certificates
  $ 228     $ 5     $ -     $ 233  
Federal National Mortgage Association adjustable-rate participation certificates
    173       3       -       176  
Government National Mortgage Association adjustable-rate participation certificates
    2,479       99       -       2,578  
    $ 2,880     $ 107     $ -     $ 2,987  
 
      December 31, 2013  
         
Gross
   
Gross
   
Estimated
 
   
Amortized
   
unrealized
   
unrealized
   
fair
 
   
cost
   
holding gains
   
holding losses
   
value
 
      (In thousands)  
Available for sale:
                       
Federal Home Loan Mortgage Corporation adjustable-rate participation certificates
  $ 677     $ 34     $ 1     $ 710  
Federal National Mortgage Association adjustable-rate participation certificates
    5,940       40       36       5,944  
Government National Mortgage Association adjustable-rate participation certificates
    2,622       85       -       2,707  
                                 
    $ 9,239     $ 159     $ 37     $ 9,361  
 
13
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
6.       Investment and Mortgage-backed Securities (continued)
 
     December 31, 2013  
         
Gross
   
Gross
   
Estimated
 
   
Amortized
   
unrealized
   
unrealized
    fair  
   
cost
   
holding gains
   
holding losses
   
value
 
      (In thousands)  
Held to maturity:
                       
Federal Home Loan Mortgage Corporation adjustable-rate participation certificates
  $ 253     $ 8     $ -     $ 261  
Federal National Mortgage Association adjustable-rate participation certificates
    212       6       -       218  
Government National Mortgage Association adjustable-rate participation certificates
    2,651       100       -       2,751  
                                 
    $ 3,116     $ 114     $ -     $ 3,230  
 
The amortized cost of mortgage-backed securities, including those designated as available for sale, at June 30, 2014, by contractual terms to maturity, are shown below.  Expected maturities will differ from contractual maturities because borrowers may generally prepay obligations without prepayment penalties.
 
   
June 30,
 
   
2014
 
   
(In thousands)
 
       
Due in one year or less
  $ 771  
Due in one year through five years
    3,257  
Due in five years through ten years
    4,491  
Due in more than ten years
    2,845  
         
    $ 11,364  
 
The table below indicates the length of time individual securities have been in a continuous unrealized loss position at June 30, 2014:

   
Less than 12 months
   
12 months or longer
         
Total
       
Description of
 
Number of
   
Fair
   
Unrealized
   
Number of
   
Fair
   
Unrealized
   
Number of
   
Fair
   
Unrealized
 
securities
 
investments
   
value
   
losses
   
investments
   
value
   
losses
   
investments
   
value
   
losses
 
      (Dollars in thousands)  
U.S. Government agency securities
    5     $ 26,478     $ 523       21     $ 109,232     $ 3,854       26     $ 135,710     $ 4,377  
Municipal obligations
    -       -       -       1       702       13       1       702       13  
Corporate stocks
    -       -       -       -       -       -       -       -       -  
Mortgage-backed securities
    18       126       2       8       98       1       26       224       3  
                                                                         
Total temporarily impaired securities
    23     $ 26,604     $ 525       30     $ 110,032     $ 3,868       53     $ 136,636     $ 4,393  
 
14
 

 

Cheviot Financial Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended June 30, 2014 and 2013

6.       Investment and Mortgage-backed Securities (continued)

Management does not intend to sell any of the debt securities with an unrealized loss and does not believe that it is more likely than not that the Corporation will be required to sell a security in an unrealized loss position prior to a recovery in value.  The decline in the fair value is primarily due to an increase in market interest rates.  The fair values are expected to recover as securities approach maturity dates. The Corporation has evaluated these securities and has determined that the decline in their values is temporary.

7.       Income Taxes

The Corporation uses an asset and liability approach to accounting for income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are recognized if it is more likely than not that a future benefit will be realized. The Corporation accounts for income taxes in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, which prescribes the recognition and measurement criteria related to tax positions taken or expected to be taken in a tax return.

The Corporation’s principal temporary differences between financial income and taxable income result mainly from different methods of accounting for Federal Home Loan Bank stock dividends, the general loan loss allowance, deferred compensation, stock benefit plans, fair value adjustments arising from the First Franklin acquisition.  The Corporation has approximately $2.5 million of net operating losses to carryforward for the next 20 years.  These losses are subject to the Internal Revenue Code section 382 limitations which allow approximately $1.5 million of the losses on an annual basis to offset current year taxable income.

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 adoption date, January 1, 2007 the Corporation applied the standard to all tax positions for which the statute of limitations remained open and was not required to record any liability for unrecognized tax benefits as that date.  There have been no material changes in unrecognized tax benefits since January 1, 2007.  The known tax attributes which can influence the Corporation’s effective tax rate is the utilization of net operating loss carryforwards subject to the limitations under Internal Revenue Code Section 382.

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 2010.

The Corporation will recognize, if applicable, interest accrued related to unrecognized tax liabilities in interest expense and penalties in operating expenses.
 
15
 

 

 
Cheviot Financial Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended June 30, 2014 and 2013

7.       Income Taxes (continued)

Federal income tax on earnings differs from that computed at the statutory corporate tax rate for the periods ended June 30, 2014 and 2013:

   
2014
   
2013
 
   
(Dollars in thousands)
 
             
Federal income taxes at statutory rate of 34%
  $ 643     $ 491  
Increase (decrease) in taxes resulting primarily from:
               
Stock compensation
    7       2  
Nontaxable interest income
    (20 )     (22 )
Cash surrender value of life insurance
    (79 )     (82 )
Other
    (1 )     (2 )
                 
Federal income taxes per financial statements
  $ 550     $ 387  
                 
Effective tax rate
    29.1 %     26.8 %
 
8.       Fair Value of Financial Instruments

Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value, is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity or contracts that convey or impose on an entity the contractual right or obligation to either receive or deliver cash for another financial instrument. These fair value estimates are based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price for which an asset could be sold or liability could be settled. However, given there is no active market or observable market transactions identical to many of the Corporation’s financial instruments, estimates of many of these fair values are based upon observable inputs which are subjective in nature, involve uncertainties and matters of significant judgment, and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimated values.

The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments at June 30, 2014:

 
Cash and cash equivalents:  The carrying amounts presented in the consolidated statements of financial condition for cash and cash equivalents are deemed to approximate fair value.

 
Investment and mortgage-backed securities:  For investment and mortgage-backed securities, fair value is deemed to equal the quoted market price.

 
Loans receivable:  The loan portfolio was segregated into categories with similar characteristics, such as one-to four-family residential, multi-family residential and commercial real estate.  These loan categories were further delineated into fixed-rate and adjustable-rate loans.  The fair values for the resultant loan categories were computed via discounted cash flow analysis, using current interest rates offered for loans with similar terms to borrowers of similar credit quality.  For loans on deposit accounts, fair values were deemed to equal the historic carrying values.  The historical carrying amount of accrued interest on loans is deemed to approximate fair value.

 
Federal Home Loan Bank stock:  The carrying amount presented in the consolidated statements of financial condition is deemed to approximate fair value.
 
16
 

 

 
Cheviot Financial Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended June 30, 2014 and 2013

8.       Fair Value of Financial Instruments (continued)

 
Deposits:  The fair value of NOW accounts, passbook accounts, and money market demand deposits is deemed to approximate the amount payable on demand at June 30, 2014.  Fair values for fixed-rate certificates of deposit have been estimated using a discounted cash flow calculation using the interest rates currently offered for deposits of similar remaining maturities.

 
Advances from the Federal Home Loan Bank:  The fair value of these advances is estimated using the rates currently offered for similar advances of similar remaining maturities or, when available, quoted market prices.

 
Advances by Borrowers for Taxes and Insurance:  The carrying amount of advances by borrowers for taxes and insurance is deemed to approximate fair value.

 
Commitments to extend credit:  For fixed-rate loan commitments, the fair value estimate considers the difference between current levels of interest rates and committed rates.  At March 31, 2014, the fair value of the derivative loan commitments was not material.
 
9.       Disclosures about Fair Value of Assets and Liabilities

The estimated fair values of the Company’s financial instruments are as follows:

   
June 30, 2014
   
December 31, 2013
 
   
Carrying
   
Fair
   
Carrying
   
Fair
 
   
value
   
value
   
value
   
value
 
      (In thousands)  
Financial assets
                       
Cash and cash equivalents
  $ 39,057     $ 39,057     $ 22,112     $ 22,112  
Investment securities
    144,123       144,123       153,942       153,942  
Mortgage-backed securities
    11,547       11,654       12,477       12,591  
Loans receivable – net and loans held for sale
    328,187       349,764       336,837       362,066  
Accrued interest receivable
    1,869       1,869       1,971       1,971  
Federal Home Loan Bank stock
    8,651       8,651       8,651       8,651  
                                 
    $ 533,434     $ 555,118     $ 535,990     $ 561,333  
                                 
Financial liabilities
                               
Deposits
  $ 463,889     $ 462,136     $ 469,387     $ 468,417  
Advances from the Federal Home Loan Bank
    16,187       16,543       19,261       20,207  
Accrued interest payable
    62       62       71       71  
Advances by borrowers for taxes and insurance
    1,072       1,072       2,357       2,357  
                                 
    $ 481,210     $ 479,813     $ 491,076     $ 491,052  
 
17
 

 


Cheviot Financial Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended June 30, 2014 and 2013

9.       Disclosures about Fair Value of Assets and Liabilities (continued)

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy exists for fair value measurements based upon the inputs to the valuation of an asset or liability.

 
  Level 1
Quoted prices in active markets for identical assets or liabilities.

 
  Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 
  Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Fair value methods and assumptions are set forth below for each type of financial instrument.

Securities available for sale:  Fair value on available for sale securities was based upon a market approach. Securities which are fixed income instruments that are not quoted on an exchange, but are traded in active markets, are valued using prices obtained from our custodian, which used third party data service providers and classified as level 2 assets.  Management compares the fair values to another third party report for reasonableness.  Available for sale securities includes U.S. agency securities, municipal bonds and mortgage-backed agency securities.

         
Quoted prices
             
         
in active
   
Significant
   
Significant
 
         
markets for
   
other
   
other
 
         
identical
   
observable
   
unobservable
 
         
assets
   
inputs
   
inputs
 
   
Total
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
    (In thousands)  
                         
Securities available for sale at June 30, 2014:
                       
U.S. Government agency securities
  $ 140,721       -     $ 140,721       -  
Municipal obligations
    3,170       -       3,170       -  
Corporate Securities
    232       -       232       -  
Mortgage-backed securities
    8,667       -       8,667       -  
                                 
Securities available for sale at December 31, 2013:
                               
U.S. Government agency securities
  $ 148,349       -     $ 148,349       -  
Municipal obligations
    3,015       -       3,015       -  
Corporate Securities
    2,578       -       2,578       -  
Mortgage-backed securities
    9,361       -       9,361       -  

The Corporation is predominately an asset-based lender with real estate serving as collateral on a substantial majority of loans.  Loans which are deemed to be impaired are primarily valued on a nonrecurring basis at the fair values of the underlying real estate collateral.  Such fair values are obtained using independent appraisals based on comparable sales, which the Corporation considers to be Level 2 inputs.  The aggregate carrying amount of impaired loans, including loans acquired from Franklin Savings with a fair value discount, at June 30, 2014 and December 31, 2013 were approximately $15.4 million and $16.5 million, respectively.
 
18
 

 


Cheviot Financial Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended June 30, 2014 and 2013

9.       Disclosures about Fair Value of Assets and Liabilities (continued)

The Corporation has real estate acquired through foreclosure totaling $2.8 million and $3.3 million at June 30, 2014 and December 31, 2013, respectively.  Real estate acquired through foreclosure is carried at the lower of the cost or fair value less estimated selling expenses at the date of acquisition. Fair values are obtained using independent appraisals, based on comparable sales which the Corporation considers to be Level 2 inputs.  The aggregate amount of real estate acquired through foreclosure that is carried at fair value was approximately $2.8 and $3.3 million at June 30, 2014 and December 31, 2013, respectively.  
 
The following table presents fair value measurements for the Company’s financial instruments which are not recognized at fair value in the accompanying statements of financial position on a recurring or nonrecurring basis.
                         
   
Total
   
Quoted prices
in active
markets for
identical assets
(Level 1)
   
Significant
other
observable
inputs
(Level 2)
   
Significant
other
unobservable
inputs
(Level 3)
 
June 30, 2014:
     
Financial assets:
                       
Cash and cash equivalents
  $ 39,057     $ 39,057     $ -     $ -  
Mortgage-backed securities
    2,987       -       2,987       -  
Loans receivable - net
    349,764       -       349,764       -  
Federal Home Loan Bank stock
    8,651       -       8,651       -  
Accrued interest receivable
    1,869       -       1,869       -  
Financial liabilities:
                               
Deposits
    462,136       -       462,136       -  
Advances from the Federal Home Loan Bank
    16,543       -       16,543       -  
Advances by borrowers for taxes and insurance
    1,072       -       1,072       -  
Accrued interest payable
    62       -       62       -  
                                 
December 31, 2013:
     
Financial assets:
                               
Cash and cash equivalents
  $ 22,112     $ 22,112     $ -     $ -  
Mortgage-backed securities
    3,230       -       3,230       -  
Loans receivable - net
    362,066       -       362,066       -  
Federal Home Loan Bank stock
    8,651       -       8,651       -  
Accrued interest receivable
    1,971       -       1,971       -  
Financial liabilities:
                               
Deposits
    468,417       -       468,417       -  
Advances from the Federal Home Loan Bank
    20,207       -       20,207       -  
Advances by borrowers for taxes and insurance
    2,357       -       2,357       -  
Accrued interest payable
    71       -       71       -  
 
19
 

 

 
Cheviot Financial Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended June 30, 2014 and 2013

10.     Effects of Recent Accounting Pronouncements

We adopted the following accounting guidance in 2014, none of which had a material effect, if any, on our consolidated financial position or results of operations.

In January 2014, the FASB issued ASU No. 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40)¸which clarifies when an in substance repossession or foreclosure has occurred and the creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. A creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan either when legal title to the residential real estate property is obtained upon completion of a foreclosure or when the borrower has conveyed all interest in the residential real property to the creditor to satisfy the loan through completion of a deed in lieu of foreclosure or similar arrangement.  The ASU also require disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure.  The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014.  We do not expect the adoption of these provisions to have a significant impact on the Company’s consolidated financial statements.
 
In June 2014, The FASB issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in the ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. We do not expect the adoption of these provisions to have a significant impact on the Company’s consolidated financial statements.
 
In June 2014, The FASB issued ASU No. 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, which changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. It also requires additional disclosures about repurchase agreements and other similar transactions. The amendments in this ASU are effective for public companies for the first interim or annual period beginning after December 15, 2014. In addition, for public companies, the disclosure for certain transactions accounted for as a sale is effective for the first interim or annual period beginning on or after December 15, 2014, and the disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015.  Early application for a public company is prohibited. We do not expect the adoption of these provisions to have a significant impact on the Company’s consolidated financial statements.
 
In May 2014, The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606. ASU 2014-09 affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). For a public entity, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We do not expect the adoption of these provisions to have a significant impact on the Company’s consolidated financial statements.
 
20
 

 


Cheviot Financial Corp.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the six months ended June 30, 2014 and 2013

11.     Intangible Assets

The Corporation recorded goodwill and other intangibles associated with the purchase of First Franklin and Franklin Savings in March 2011 totaling $11.6 million.  Goodwill is not amortized, but is periodically evaluated for impairment.  The Corporation did not recognize any impairment during the quarter ended June 30, 2014.  The carrying amount of the goodwill at June 30, 2014 was $10.3 million.

Identifiable intangibles are amortized to their estimated residual values over the expected useful lives.  Such lives are also periodically reassessed to determine if any amortization period adjustments are required.  During the quarter ended June 30, 2014, no such adjustments were recorded.  The identifiable intangible asset consists of a core deposit intangible which is being amortized on an accelerated basis over the useful life of such asset. The gross carrying amount of the core deposit intangible at June 30, 2014 was $1.3 million, with $839,000 in accumulated amortization as of that date.

As of June 30, 2014, the current year and estimated future amortization expense for the core deposit intangible was:

 
2014
  $ 68  
 
2015
    116  
 
2016
    110  
 
2017
    110  
 
2018
    55  
 
Total
  $ 459  
 
21
 

 

Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing Receivables
 
The recorded investment in loans was as follows as of June 30, 2014:
                                     
   
 One-to four-
Family
Residential
   
Multi-family
Residential
   
Construction
   
Commercial
   
Consumer
   
Total
 
   
(In thousands)
 
                                     
Purchased loans
  $ 73,312     $ 5,166     $ -     $ 25,328     $ 205     $ 104,011  
Fair value discount
    (1,217 )     (98 )     -       (520 )     (15 )     (1,850 )
Purchased loans book value
    72,095       5,068       -       24,808       190       102,161  
Originated loans (1)
    160,530       14,153       6,921 (2)     47,793       786       230,183  
                                                 
Ending balance
  $ 232,625     $ 19,221     $ 6,921     $ 72,601     $ 976     $ 332,344  
 
(1)
Includes loans held for sale
(2)
Before consideration of undisbursed Loans-in-process
 
The carrying amount of purchased loans consisting of credit-impaired purchased loans and non-impaired purchased loans is shown in the following table as of June 30, 2014.
 
         
Credit
 
   
Non-impaired
   
Impaired
 
   
Purchased Loans
   
Purchased Loans
 
   
(In thousands)
   
(In thousands)
 
             
One-to-four family residential
  $ 67,775     $ 4,320  
Multi-family residential
    4,707       361  
Construction
    -       -  
Commercial
    18,389       6,419  
Consumer
    188       2  
                 
Total
  $ 91,059     $ 11,102  
 
22
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
 
The following summarizes activity in the allowance for credit losses:
                                     
   
June 30, 2014
 
    One-to four-
Family
Residential
   
Multi-family
Residential
   
Construction
   
Commercial
   
Consumer
   
Total
 
      (In thousands)  
Allowance for loan losses:
                                   
                                     
Beginning balance
  $ 1,352     $ 194     $ 9     $ 131     $ 11     $ 1,697  
Provision
    534       (18 )     (1 )     41       (1 )     555  
Charge-offs
    (279 )     -       -       (39 )     -       (318 )
Recoveries
    19       -       -       40       -       59  
                                                 
Ending balance
  $ 1,626     $ 176     $ 8     $ 173     $ 10     $ 1,993  
                                                 
Originated loans:
                                               
Individually evaluated for impairment
  $ 189     $ 1     $ -     $ 8     $ -     $ 198  
                                                 
Purchased loans:
                                               
Individually evaluated for impairment
  $ 143     $ -     $ -     $ -     $ -     $ 143  
                                                 
Originated loans:
                                               
Collectively evaluated for impairment
  $ 831     $ 175     $ 8     $ 165     $ 10     $ 1,189  
                                                 
Purchased loans:
                                               
Loans acquired with deteriorated credit quality
  $ 463     $ -     $ -     $ -     $ -     $ 463  
                                                 
Loans receivable:
                                               
                                                 
Ending balance
  $ 232,625     $ 19,221     $ 6,921     $ 72,601     $ 976     $ 332,344  
                                                 
Ending balance:
                                               
Individually evaluated for impairment (1)
  $ 69,129     $ 4,802     $ -     $ 18,553     $ 188     $ 92,672  
                                                 
Ending balance:
                                               
Collectively evaluated for impairment
  $ 159,176     $ 14,058     $ 6,921     $ 47,629     $ 786     $ 228,570  
                                                 
Ending balance:
                                               
Loans acquired with deteriorated credit quality
  $ 4,320     $ 361     $ -     $ 6,419     $ 2     $ 11,102  
 
(1)  Includes loans acquired from First Franklin with outstanding balances of $91,059 at June 30, 2014.
 
23
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
                                     
   
December 31, 2013
 
   
One-to four-
Family
Residential
   
Multi-family
Residential
   
Construction
   
Commercial
   
Consumer
   
Total
 
   
(In thousands)
 
                                     
Allowance for loan losses:
                                   
                                     
Beginning balance
  $ 1,823     $ 172     $ 1     $ 153     $ 11     $ 2,160  
Provision
    1,426       22       8       (14 )     1       1,443  
Charge-offs
    (1,928 )     -       -       (8 )     (1 )     (1,937 )
Recoveries
    31       -       -       -       -       31  
                                                 
Ending balance
  $ 1,352     $ 194     $ 9     $ 131     $ 11     $ 1,697  
                                                 
Originated loans:
                                               
individually evaluated for impairment
  $ -     $ -     $ -     $ -     $ -     $ -  
                                                 
Purchased loans:
                                               
individually evaluated for impairment
  $ -     $ -     $ -     $ -     $ -     $ -  
                                                 
Originated loans:
                                               
collectively evaluated for impairment
  $ 939     $ 194     $ 9     $ 131     $ 11     $ 1,284  
                                                 
Purchased loans:
                                               
loans acquired with deteriorated credit quality
  $ 413     $ -     $ -     $ -     $ -     $ 413  
                                                 
Loans receivable:
                                               
                                                 
Ending balance
  $ 236,236     $ 22,805     $ 7,141     $ 72,755     $ 2,278     $ 341,215  
                                                 
Ending balance:
                                               
Individually evaluated for impairment (1)
  $ 77,380     $ 6,535     $ -     $ 21,055     $ 1,508     $ 106,478  
                                                 
Ending balance:
                                               
Collectively evaluated for impairment
  $ 155,676     $ 15,214     $ 7,141     $ 45,109     $ 770     $ 223,910  
                                                 
Ending balance:
                                               
Loans acquired with deteriorated credit quality
  $ 3,180     $ 1,056     $ -     $ 6,591     $ -     $ 10,827  
 
(1) Includes loans acquired from First Franklin with outstanding balances of $103,497 at December 31, 2013.
 
24
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
 
The Corporation assigns credit risk grades to evaluated loans using grading standards employed by regulatory agencies.  Loans judged to carry lower-risk attributes are assigned a “pass” grade, indicating a minimal likelihood of loss.  Loans judged to carry a higher-risk attributes are referred to as “classified loans” and are further disaggregated, with increasing expectations for loss recognition, as “special mention”, “substandard”, “doubtful”, and “loss”.  The Loan Classification of Assets committee assigns the credit risk grades to loans and reports to the board on a monthly basis the “classified asset” report.
 
The following table summarizes the credit risk profile by internally assigned grade:
                         
    Originated Loans at June 30, 2014  
   
One-to four-
                               
   
Family
   
Multi-family
                         
   
Residential
   
Residential
   
Construction
   
Commercial
   
Consumer
   
Total
 
    (In thousands)  
                                     
Grade:
                                   
Pass
  $ 158,852     $ 14,058     $ 6,921     $ 46,753     $ 786     $ 227,370  
Special mention
    -       -       -       -       -       -  
Substandard
    1,678       95       -       1,040       -       2,813  
Doubtful
    -       -       -       -       -       -  
Loss
    -       -       -       -       -       -  
                                                 
Total
  $ 160,530     $ 14,153     $ 6,921     $ 47,793     $ 786     $ 230,183  
                                                 
        Originated Loans at December 31, 2013  
   
One-to four-
                                         
   
Family
   
Multi-family
                                 
   
Residential
   
Residential
   
Construction
   
Commercial
   
Consumer
   
Total
 
      (In thousands)  
                                                 
Grade:
                                               
Pass
  $ 155,364     $ 15,214     $ 7,141     $ 44,218     $ 770     $ 222,707  
Special mention
    -       -       -       -       -       -  
Substandard
    2,519       95       -       1,570       -       4,184  
Doubtful
    -       -       -       -       -       -  
Loss
    -       -       -       -       -       -  
Total
  $ 157,883     $ 15,309     $ 7,141     $ 45,788     $ 770     $ 226,891  
                                                 
        Purchased Loans at June 30, 2014  
   
One-to four-
                                         
   
Family
   
Multi-family
                                 
   
Residential
   
Residential
   
Construction
   
Commercial
   
Consumer
   
Total
 
      (In thousands)  
                                                 
Grade:
                                               
Pass
  $ 68,852     $ 5,068     $ -     $ 20,704     $ 66     $ 94,690  
Special mention
    -       -       -       -       -       -  
Substandard
    3,243       -       -       4,104       124       7,471  
Doubtful
    -       -       -       -       -       -  
Loss
    -       -       -       -       -       -  
                                                 
Total
  $ 72,095     $ 5,068     $ -     $ 24,808     $ 190     $ 102,161  
 
25
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
 
    Purchased Loans at December 31, 2013  
   
One-to four-
                               
   
Family
   
Multi-family
                         
   
Residential
   
Residential
   
Construction
   
Commercial
   
Consumer
   
Total
 
    (In thousands)  
                                     
Grade:
                                   
Pass
  $ 74,410     $ 7,496     $ -     $ 25,076     $ 1,490     $ 108,472  
Special mention
    -       -       -       -       -       -  
Substandard
    3,943       -       -       1,891       18       5,852  
Doubtful
    -       -       -       -       -       -  
Loss
    -       -       -       -       -       -  
Total
  $ 78,353     $ 7,496     $ -     $ 26,967     $ 1,508     $ 114,324  
 
The following tables summarize loans by delinquency, nonaccrual status and impaired loans:
 
   
Age Analysis of Past Due Originated Loans Receivable
 
      As of June 30, 2014  
                                       
Recorded
 
                                       
Investment
 
   
>30-89 Days
   
Over
   
Total Past
   
Current &
         
Total
   
90 Days and
 
   
Past Due
   
90 Days
   
Due
   
Accruing
   
Nonaccrual
   
Loans
   
Accruing
 
      (In thousands)  
                                           
Real Estate:
                                         
1-4 family
                                         
Residential
  $ 912     $ 1,223     $ 2,135     $ 158,395     $ 1,223     $ 160,530     $ -  
Multi-family
                                                       
Residential
    -       95       95       14,058       95       14,153       -  
Construction
    -       -       -       6,921       -       6,921       -  
Commercial
    -       165       165       47,628       165       47,793       -  
Consumer
    -       -       -       786       -       786       -  
                                                         
Total
  $ 912     $ 1,483     $ 2,395     $ 227,788     $ 1,483     $ 230,183     $ -  
                                                         
   
Age Analysis of Past Due Originated Loans Receivable
 
      As of December 31, 2013  
                                                   
Recorded
 
                                                   
Investment
 
     
>30-89 Days
     
Over
      Total Past       Current &              
Total Loan
   
90 Days and
 
     
Past Due
     
90 Days
     
Due
       Accruing       Nonaccrual      
Receivables
   
Accruing
 
        (In thousands)  
Real Estate:
                                                       
1-4 family
                                                       
Residential
  $ 1,915     $ 2,207     $ 4,122     $ 153,761     $ 2,207     $ 157,883       -  
Multi-family
    -       95       95       15,214       95       15,309       -  
Construction
    -       -       -       7,141       -       7,141       -  
Commercial
    -       679       679       45,109       679       45,788       -  
Consumer
    -       -       -       770       -       770       -  
Total
  $ 1,915     $ 2,981     $ 4,896     $ 221,995     $ 2,981     $ 226,891       -  
 
26
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
 
   
Age Analysis of Past Due Purchased Loans Receivable
 
      As of June 30, 2014  
                                       
Recorded
 
                                       
Investment
 
   
>30-89 Days
   
Over
   
Total Past
   
Current &
         
Total
   
90 Days and
 
   
Past Due
   
90 Days
   
Due
   
Accruing
   
Nonaccrual
   
Loans
   
Accruing
 
                     
(In thousands)
             
Real Estate:
                                         
1-4 family
                                         
Residential
  $ 312     $ 2,707     $ 3,019     $ 69,076     $ 2,707     $ 72,095     $ -  
Multi-family
                                                       
Residential
    -       -       -       5,068       -       5,068       -  
Construction
    -       -       -       -       -       -       -  
Commercial
    -       519       519       24,289       519       24,808       -  
Consumer
    -       123       123       67       123       190       -  
Total
  $ 312     $ 3,349     $ 3,661     $ 98,500     $ 3,349     $ 102,161     $ -  
                                                         
   
Age Analysis of Past Due Purchased Loans Receivable
 
        As of December 31, 2013  
                                                   
Recorded
 
                                                   
Investment
 
   
>30-89 Days
   
Over
   
Total Past
   
Current &
           
Total Loan
   
90 Days and
 
   
Past Due
   
90 Days
   
Due
    Accruing    
Nonaccrual
   
Receivables
   
Accruing
 
                            (In thousands)                  
Real Estate:
                                                       
1-4 family
                                                       
Residential
  $ 2,221     $ 3,287     $ 5,508     $ 72,845     $ 3,287     $ 78,353     $ -  
Multi-family
    56       -       56       7,440       -       7,496       -  
Construction
    -       -       -       -       -       -       -  
Commercial
    336       676       1,012       25,955       676       26,967       -  
Consumer
    10       18       28       1,480       18       1,508       -  
Total
  $ 2,623     $ 3,981     $ 6,604     $ 107,720     $ 3,981     $ 114,324     $ -  
 
27
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
                               
   
Impaired Loans
As of June 30, 2014
 
       
         
Unpaid
         
Average
   
Interest
 
   
Recorded
   
Principal
   
Related
   
Recorded
   
Income
 
   
Investment
   
Balance
   
Allowance
   
Investment
   
Recognized
 
       (In thousands)  
Purchased loans
                             
with a fair value discount and no related allowance recorded:
                             
Real Estate:                              
1-4 family
                             
Residential
  $ 4,285     $ 4,285     $ -     $ 3,732     $ 96  
Multi-family
    361       361       -       709       35  
Construction
    -       -       -       -       -  
Commercial
    6,419       6,419       -       6,505       250  
Consumer
    2       2       -       1       -  
Total
  $ 11,067     $ 11,067     $ -     $ 10,947     $ 381  
Purchased loans
                                       
with a fair value discount and an allowance recorded:
                                       
Real Estate:
                                       
1-4 family
                                       
Residential
  $ 21     $ 35     $ 14     $ 10     $ -  
Multi-family
    -       -       -       -       -  
Construction
    -       -       -       -       -  
Commercial
    -       -       -       -       -  
Consumer
    -       -       -       -       -  
Total
  $ 21     $ 35     $ 14     $ 10     $ -  
Purchased loans
                                       
with no fair value discount and no related allowance recorded:
                                       
Real Estate:
                                       
1-4 family
  $ 1,874     $ 1,874     $ -     $ 2,260     $ 12  
Residential
                                       
Multi-family
                                       
Residential
    -       -       -       -       -  
Construction
    -       -       -       -       -  
Commercial
    519       519       -       259       7  
Consumer
    123       123       -       70       1  
Total
  $ 2,516     $ 2,516     $ -     $ 2,589     $ 20  
Purchased loans with an allowance recorded:
                                       
Real Estate:
                                       
1-4 family
  $ 411     $ 540     $ 129     $ 206     $ 8  
Residential
                                       
Multi-family
                                       
Residential
    -       -       -       -       -  
Construction
    -       -       -       -       -  
Commercial
    -       -       -       -       -  
Consumer
    -       -       -       -       -  
Total
  $ 411     $ 540     $ 129     $ 206     $ 8  
 
28
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
                               
         
Unpaid
         
Average
   
Interest
 
   
Recorded
   
Principal
   
Related
   
Recorded
   
Income
 
   
Investment
   
Balance
   
Allowance
   
Investment
   
Recognized
 
    (In thousands)  
Originated loans with no related allowance recorded
                             
Real Estate:
                             
1-4 family
  $ 924     $ 924     $ -     $ 1,566     $ 15  
Residential
                                       
Multi-family
                                       
Residential
    -       -       -       48       -  
Construction
    -       -       -       -       -  
Commercial
    118       118       -       398       5  
Consumer
    -       -       -       -       -  
Total   $ 1,042     $ 1,042     $ -     $ 2,012     $ 20  
Originated loans with an allowance recorded:
                                       
Real Estate:
                                       
1-4 family
  $ 241     $ 430     $ 189     $ 121     $ 5  
Residential
                                       
Multi-family
                                       
Residential
    94       95       1       47       -  
Construction
    -       -       -       -       -  
Commercial
    38       46       8       19       -  
Consumer
    -       -       -       -       -  
Total
  $ 373     $ 571     $ 198     $ 187     $ 5  
Total:                                        
 Real Estate:
                                       
1-4 family
  $ 7,756     $ 8,088     $ 332     $ 7,895     $ 136  
Residential
                                       
Multi-family
                                       
Residential
    455       456       1       804       35  
Construction
    -       -       -       -       -  
Commercial
    7,094       7,102       8       7,181       262  
Consumer
    125       125       -       71       1  
Total
  $ 15,430     $ 15,771     $ 341     $ 15,951     $ 434  
 
29
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
                   
    Impaired Loans
As of December 31, 2013
 
         
Unpaid
         
Average
   
Interest
 
   
Recorded
   
Principal
   
Related
   
Recorded
   
Income
 
   
Investment
   
Balance
   
Allowance
   
Investment
   
Recognized
 
    (In thousands)  
                               
Purchased loans
                             
with a fair value discount and no related allowance recorded: 
                             
Real Estate:
                             
1-4 family
                             
Residential
  $ 3,180     $ 3,180     $ -     $ 3,556     $ 192  
Multi-family
    1,056       1,056       -       1,059       22  
Construction
    -       -       -       -       -  
Commercial
    6,591       6,591       -       7,556       436  
Consumer
    -       -       -       41       -  
Total
  $ 10,827     $ 10,827     $ -     $ 12,212     $ 650  
Purchased loans
                                       
with a fair value discount and an allowance recorded:  
                                       
Real Estate:
                                       
1-4 family
                                       
Residential
  $ -     $ -     $ -     $ 7     $ -  
Multi-family
    -       -       -       -       -  
Construction
    -       -       -       -       -  
Commercial
    -       -       -       -       -  
Consumer
    -       -       -       -       -  
Total
  $ -     $ -     $ -     $ 7     $ -  
Purchased loans
                                       
with no fair value discount and no related allowance recorded:
                                       
Real Estate:
                                       
1-4 family
  $ 2,646     $ 2,646     $ -     $ 2,185     $ 107  
Residential
                                       
Multi-family
                                       
Residential
    -       -       -       -       -  
Construction
    -       -       -       -       -  
Commercial
    -       -       -       -       -  
Consumer
    16       16       -       28       1  
Total
  $ 2,662     $ 2,662     $ -     $ 2,213     $ 108  
Purchased loans with an allowance recorded:
                                       
Real Estate:
                                       
1-4 family
  $ -     $ -     $ -     $ 74     $ -  
Residential
                                       
Multi-family
                                       
Residential
    -       -       -       -       -  
Construction
    -       -       -       -       -  
Commercial
    -       -       -       -       -  
Consumer
    -       -       -       -       -  
Total
  $ -     $ -     $ -     $ 74     $ -  
 
30
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
                               
         
Unpaid
         
Average
   
Interest
 
   
Recorded
   
Principal
   
Related
   
Recorded
   
Income
 
   
Investment
   
Balance
   
Allowance
   
Investment
   
Recognized
 
    (In thousands)  
                               
Originated loans with no related allowance recorded
                             
Real Estate:
                             
1-4 family
                             
Residential
  $ 2,207     $ 2,207     $ -     $ 2,847     $ 32  
Multi-family
    95       95       -       95       -  
Construction
    -       -       -       -       -  
Commercial
    679       679       -       537       35  
Consumer
    -       -       -       -       -  
Total
  $ 2,981     $ 2,981     $ -     $ 3,479     $ 67  
Originated loans with an allowance recorded:
                                       
 Real Estate:
                                       
1-4 family
                                       
Residential
  $ -     $ -     $ -     $ 473     $ -  
Multi-family
    -       -       -       -       -  
Construction
    -       -       -       -       -  
Commercial
    -       -       -       81       -  
Consumer
    -       -       -       -       -  
Total
  $ -     $ -     $ -     $ 554     $ -  
Total:                                        
Real Estate:
                                       
1-4 family
                                       
Residential
  $ 8,033     $ 8,033     $ -     $ 9,142     $ 331  
Multi-family
    1,151       1,151       -       1,154       22  
Construction
    -       -       -       -       -  
Commercial
    7,270       7,270       -       8,174       471  
Consumer
    16       16       -       69       1  
Total
  $ 16,470     $ 16,470     $ -     $ 18,539     $ 825  
 
31
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
                   
   
Modifications
As of June 30, 2014
 
       
         
Pre-Modification
   
Post-Modification
 
          Outstanding    
Outstanding
 
   
Number of
   
Recorded
   
Recorded
 
   
Contracts
   
Investment
   
Investment
 
      (Dollars in thousands)  
Troubled Debt Restructurings
                 
Real Estate:
                 
1-4 Family Residential
    5     $ 2,320     $ 2,323  
Multi-family Residential
    -       -       -  
Construction
    -       -       -  
Commercial
    1       100       100  
Consumer
    -       -       -  
 
                         
   
Modifications
For the six months ended June 30, 2014
         
               
   
Number of
   
Recorded
         
   
Contracts
   
Investment
         
Troubled Debt Restructurings
                       
That Subsequently Defaulted
                       
                         
Real Estate:
                       
1-4 Family Residential
    4     $ 1,827          
Multi-family Residential
    -       -          
Construction
    -       -          
Commercial
    1       99          
Consumer
    -       -          
 
32
 

 

 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the six months ended June 30, 2014 and 2013
 
12. Financing receivables (continued)
                 
   
Modifications
As of December 31, 2013
 
       
       
Pre-Modification
   
Post-Modification
 
         Outstanding    
Outstanding
 
   
Number of
 
 Recorded
   
Recorded
 
   
Contracts
 
Investment
   
Investment
 
Troubled Debt Restructurings
   (Dollars in thousands)  
Real Estate:
                 
1-4 Family Residential
    4     $ 316     $ 312  
Multi-family Residential
    -       -       -  
Construction
    -       -       -  
Commercial
    4       1,863       1,849  
Consumer
    -       -       -  
                         
   
Number of
 
Recorded
         
   
Contracts
 
Investment
         
Troubled Debt Restructurings
                       
That Subsequently Defaulted
                       
                         
Real Estate:
                       
1-4 Family Residential
    -     $ -          
Multi-family Residential
    -       -          
Construction
    -       -          
Commercial
    1       754          
Consumer
    -       -          
 
The modifications related to interest only payments ranging from a three to six month period. Due to the short term cash flow deficiency, no related allowance was recorded as a result of the restructurings. The collateral value was updated with recent appraisals which gave no indication of impairment.
 
33
 

 

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, actual future results may be materially different from the results indicated by these forward-looking statements.
 
Recent Developments
 
On July 15, 2014, the Board of Directors approved a grant of 400,000 stock options in accordance with the 2013 Equity Incentive Plan.  The options have an exercise price of $12.48 and vest over five years beginning one year from the date of grant.
 
On August 8, 2014, the Bank signed an agreement to purchase the Forest Park branch location for $575,000.  This transaction is expected to close during the third quarter of 2014.
 
Critical Accounting Policies
 
Cheviot Financial considers accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies.  The Corporation considers the accounting method used for the allowance for loan losses to be a critical accounting policy.
 
The allowance for loan losses is the estimated amount considered necessary to cover inherent, but unconfirmed credit losses in the loan portfolio at the balance sheet date.  The allowance is established through the provision for losses on loans which is charged against income.  In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of the most critical for Cheviot Financial.
 
Management performs a quarterly evaluation of the allowance for loan losses.  Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan review and other relevant factors.  This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.
 
The analysis has two components, specific and general allocations.  Specific allocations are made for unconfirmed losses related to loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses.  If the fair value of the loan is less than the loan’s carrying value, a charge-off is recorded for the difference.  The general allocation is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history.  Management also analyzes historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This  analysis  establishes  factors  that are  applied  to the loan  groups  to determine  the  amount  of  the  general  allowance.   Actual loan losses may be significantly more than the allowances that has been established which could result in a material negative effect on financial results.
 
The acquired assets and assumed liabilities of First Franklin were measured at estimated fair values, as required by FASB under Business Combinations.  Management made significant estimates and exercised significant judgment in accounting for the acquisition.  Management measured loan fair values based on loan file reviews (including borrower financial statements or tax returns), appraised collateral values, expected cash flows and historical loss factors of Franklin Savings.  Real estate acquired through foreclosure was primarily valued based on appraised collateral values.
 
34
 

 

 
Cheviot Financial Corp.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
 
Critical Accounting Policies (continued)
 
The Corporation also recorded an identifiable intangible asset representing the core deposit base of Franklin Savings based on management’s evaluation of the cost of such deposits relative to alternative funding sources.  Management used significant estimates including the average lives of depository accounts, future interest rate levels, the cost of servicing various depository products and other significant estimates.  Management used market quotations to determine the fair value of investment securities and FHLB advances.
 
The acquired assets of First Franklin and Franklin Savings include loans receivable.  Loans receivable acquired with a deteriorated credit quality amounted to $25.0 million with a related credit quality discount of $5.5 million.  The method of measuring carrying value of purchased loans differs from loans originated by the Corporation, and as such, the Corporation identifies purchased loans and purchased loans with a credit quality discount.
 
The Corporation classifies investments in debt and equity securities as either held-to-maturity or available-for-sale. Securities classified as held-to maturity are recorded at cost or amortized cost. Available-for-sale securities are carried at fair value. Estimated fair values are obtained from a third party service. This service’s fair value calculations are based on quoted market prices when such prices are available. If quoted market prices are not available, estimates of fair value are computed using a variety of techniques, including extrapolation from the quoted prices of similar instruments or recent trades for thinly traded securities, fundamental analysis, or through obtaining purchase quotes. Due to the subjective nature of the valuation process, it is possible that the actual fair values of these investments could differ from the estimated amounts, thereby affecting the statements of financial position, results of operations and cash flows. If the estimated value of investments is less than the cost or amortized cost, management evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. If such an event or change has occurred and it is determined that the impairment is other-than-temporary, the impairment of the investment is expensed in the period in which the event or change occurred. Management also considers how long a security has been in a loss position in determining if it is other than temporarily impaired. Management also assesses the nature of the unrealized losses taking into consideration factors such as changes in risk-free interest rates, general credit spread widening, market supply and demand, creditworthiness of the issuer, and quality of the underlying collateral.
 
Discussion of Financial Condition Changes at June 30, 2014 and December 31, 2013
 
Total assets decreased $6.1 million, or 1.0%, to $581.0 million at June 30, 2014, from $587.1 million at December 31, 2013.  The decrease in total assets primarily reflects a $9.8 million decrease in investment securities as $30.0 million in investment securities were called at par during the six months ended June 30, 2014 and an $8.7 million decrease in loans receivable as a result of selling $11.0 million of loans in the secondary market.
 
Cash, federal funds and interest-earning deposits increased $16.9 million, or 76.6% to $39.1 million at June 30, 2014.  The increase in cash and cash equivalents at June 30, 2014 was due to a $14.2 million increase in federal funds sold and an increase of $3.8 million in interest-earning deposits, which were partially offset by a decrease of $1.0 million in cash and due from banks.  Investment securities decreased $9.8 million, or 6.4%, to $144.1 million at June 30, 2014. The decrease in investment securities was a result of calls of $30.0 million and the sale of corporate securities of $2.5 million, which were offset by an increase of $6.9 million in the fair market value of securities designated as available for sale.  At June 30, 2014, all investment securities were classified as available for sale.
 
Mortgage-backed securities decreased $930,000, or 7.5%, to $11.5 million at June 30, 2014, from $12.5 million at December 31, 2013.  The decrease in mortgage-backed securities was due primarily to $978,000 in principal repayments.  At June 30, 2014, $8.7 million of mortgage-backed securities were classified as available for sale, while $2.9 million were classified as held to maturity.  As of June 30, 2014, none of the mortgage-backed securities were considered other than temporarily impaired.
 
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Cheviot Financial Corp.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
 
Discussion of Financial Condition Changes at June 30, 2014 and December 31, 2013 (continued)
 
Loans receivable, including loans held for sale, decreased $8.7 million, or 2.6%, to $328.2 million at June 30, 2014, from $336.8 million at December 31, 2013.  The change in net loans receivable reflects loan sales totaling $11.0 million and loan principal repayments of $32.3 million, which were partially offset by loan originations of $35.4 million. The change in the composition of the Corporation’s assets reflects management’s decision to service our customer base by originating loans for sale and recording gains, while maintaining higher levels of cash and cash equivalents in order to manage interest rate risk.
 
The allowance for loan losses totaled $2.0 million and $1.7 million at June 30, 2014 and December 31, 2013, respectively.  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 the Corporation’s historic loss experience by applying such loss percentage to the loan types to be collectively evaluated in the portfolio.  The $555,000 provision for losses on loans during the six months ended June 30, 2014 reflected these factors, as well as replenishing the allowance for charge-offs totaling $262,000 and the need to provide approximately $56,000 in specific reserves for five residential properties with principal balances totaling $519,000 that were transferred to real estate owned during the six months ended June 30, 2014.  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 June 30, 2014.
 
Originated non-performing and impaired loans totaled $1.6 million and $3.0 million at June 30, 2014 and December 31, 2013, respectively.  At June 30, 2014, originated non-performing and impaired loans were comprised of nineteen loans secured by one- to four-family residential real estate totaling $1.4 million, one multi-family loan totaling $95,000 and three commercial and non-residential loans totaling $164,000. At June 30, 2014 and December 31, 2013 real estate acquired through foreclosure was $2.8 million and $3.3 million, respectively.  The allowance for loan losses represented 85.6% and 43.1% of Cheviot Financial’s originated non-performing and impaired loans at June 30, 2014 and December 31, 2013, respectively.  Although management believes that the Corporation’s allowance for loan losses conforms to 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 results of operations.
 
Deposits totaled $463.9 million at June 30, 2014, a decrease of $5.5 million, or 1.2% from $469.4 million at December 31, 2013.  Advances from the Federal Home Loan Bank of Cincinnati decreased by $3.1 million, or 16.0%, to $16.2 million at June 30, 2014, from $19.3 million at December 31, 2013.  The decrease is a result of approximately $3.0 million in repayments during the six months ended June 30, 2014.
 
Shareholders’ equity increased $3.4 million, or 3.8%, from December 31, 2013.  The increase primarily resulted from net income of $1.3 million and a decrease in the unrealized loss on securities designated as available for sale of $4.7 million, which were partially offset by repurchasing 127,000 shares through the stock buyback program at a total cost of $1.5 million and dividend payments on common stock of $1.2 million.
 
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Cheviot Financial Corp.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
 
Discussion of Financial Condition Changes at June 30, 2014 and December 31, 2013 (continued)
 
Liquidity and Capital Resources
 
The Corporation monitors its liquidity position on a daily basis using reports that summarize all deposit activity and loan commitments. A significant portion of the deposit base is comprised of time deposits.  At June 30, 2014, $130.1 million of time deposits are due to mature within one year.  The daily deposit activity report allows management to price time deposits competitively.  Because of this and the Corporation’s deposit retention experience, the Corporation anticipates that a significant portion of maturing time deposits will be retained. At June 30, 2014, the Corporation had loan commitments of $4.1 million. Loan commitments are funded or expire within 45 days from the date of the commitment.
 
Borrowings from the Federal Home Loan Bank of Cincinnati decreased $3.1 million during the six months ended June 30, 2014 and totaled $16.2 million at June 30, 2014.  At June 30, 2014, the Corporation had the ability to increase such borrowings by approximately $123.6 million. The additional borrowings can be used to offset any decrease in customer deposits or to fund loan commitments.  The Corporation’s other borrowings were primarily limited to $529,000 of lease obligations.
 
Comparison of Operating Results for the Six-Month Period Ended June 30, 2014 and 2013
 
General
 
Net earnings for the six months ended June 30, 2014 totaled $1.3 million, a $286,000 increase from the $1.1 million in net earnings reported for the June 2013 period.  The increase in net earnings reflects an increase in other income of $522,000 and a decrease of $394,000 in general, administrative and other expense, which were partially offset by a decrease in net interest income of $252,000, an increase of $215,000 in the provision for losses on loans and an increase in the provision for federal income taxes of $163,000.
 
Net Interest Income
 
Total interest income decreased $692,000, or 7.0%, to $9.2 million for the six months ended June 30, 2014, from the comparable period in 2013.   Interest income on loans decreased $606,000, or 7.6%, to $7.4 million during the 2014 period from $8.0 million for the 2013 period.  This decrease was due primarily to a $3.3 million decrease in the average balance of loans outstanding and by a 32 basis point decrease in the average yield to 4.47% from 4.79% in the 2013 period.
 
Interest income on mortgage-backed securities increased $30,000, or 36.6%, to $112,000 for the six months ended June 30, 2014, from $82,000 for the 2013 period, due primarily to an increase of $3.0 million in the average balance of securities outstanding and by a five basis point increase in yield period over period.  Interest income on investment securities decreased $98,000, or 6.0%, to $1.5 million for the six months ended June 30, 2014, compared to $1.6 million for the same period in 2013, due primarily to a decrease of $31.4 million, or 17.4%, in the average balance of investment securities outstanding, which was partially offset by a 25 basis point increase in the average yield to 2.07% for the 2014 period. Interest income on other interest-earning deposits decreased $18,000, or 9.2%, to $178,000 for the six months ended June 30, 2014, as compared to the same period in 2013.
 
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Cheviot Financial Corp.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
 
Comparison of Operating Results for the Six-Month Periods Ended June 30, 2014 and 2013 (continued)
 
Interest expense decreased $440,000, or 19.4%, to $1.8 million for the six months ended June 30, 2014, from $2.3 million for the same period in 2013.  Interest expense on deposits decreased by $349,000, or 18.5%, to $1.5 million from $1.9 million, due primarily to an $18.9 million decrease in the average balance outstanding, which was partially offset by 12 basis point decrease in the average costs of deposits to 0.66% during the 2013 period.  Interest expense on borrowings decreased by $91,000, or 24.1%, due primarily to a $4.9 million, or 21.5%, decrease in the average balance outstanding and a 11 basis point decrease in the average cost of borrowings.  As a result of the foregoing changes in interest income and interest expense, net interest income decreased by $252,000, or 3.3%, to $7.4 million for the six months ended June 30, 2014.  The average interest rate spread increased 10 basis points to 2.94% for the six months ended June 30, 2014 from 2.84% for the six months ended June 30, 2013.  The net interest margin increased to 2.97% for the six months ended June 30, 2014 from 2.88% for the six months ended June 30, 2013.
 
Provision for Losses on Loans
 
As a result of an analysis of historical experience, the volume and type of lending conducted by the Savings Bank, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Savings Bank’s market area, and other factors related to the collectability of the Savings Bank’s loan portfolio, management recorded a $555,000 provision for losses on loans for the six months ended June 30, 2014 and $340,000 for the six months ended June 30, 2013.  Non-performing originated loans were 0.7% and 1.3% of net originated loans at June 30, 2014 and December 31, 2013, respectively.  The 2014 provision for loan losses reflects the amount necessary to maintain an adequate allowance based on the Corporation’s historical loss experience and other external factors.  These other external factors, economic conditions, and collateral value changes, have had a negative impact on non-owner-occupied loans in the portfolio.  There can be no assurance that the loan loss allowance will be sufficient to cover losses on non-performing loans in the future; however, management believes they have identified all known and inherent losses that are probable and that can be reasonably estimated within the loan portfolio, and that the allowance is adequate to absorb such losses.
 
Other Income
 
Other income increased $522,000, or 35.1%, to $2.0 million for the six months ended June 30, 2014, compared to the same period in 2013, due primarily to the gain on sale of investment securities designated as available-for-sale of $722,000 and the absence during the 2014 period of a loss on sale of office premises and equipment of $255,000, which was partially offset by a $258,000 decrease in the gain on sale of loans and a decrease of $163,000 in other operating income.
 
General, Administrative and Other Expense
 
General, administrative and other expense decreased $394,000, or 5.3%, to $7.0 million for the six months ended June 30, 2014, from $7.4 million for the comparable period in 2013.  The decrease is a result of a decrease of $441,000 in employee compensation and benefits, a decrease of $100,000 in occupancy and equipment, a decrease of $158,000 in property, payroll and other taxes, which was partially offset by an increase of $237,000 in real estate owned loss expense. The increase in real estate owned loss expense is a result of the impairment of five properties acquired through foreclosure based on updated appraised values.
 
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Cheviot Financial Corp.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
 
Comparison of Operating Results for the Six-Month Periods Ended June 30, 2014 and 2013 (continued)
 
Federal Income Taxes
 
The provision for federal income taxes increased $163,000, or 42.1%, for the six months ended June 30, 2014. Cheviot Financial has approximately $2.9 million in remaining operating loss carryforwards to offset future taxable income for 20 years.  These losses are subject to the Internal Revenue Code Section 382 net operating loss limitations of $1.5 million allowed on an annual basis. The effective tax rate for the six months ended June 30, 2014 and 2013 was 29.1% and 26.8%, respectively.
 
Comparison of Operating Results for the Three-Month Periods Ended June 30, 2014 and 2013
 
General
 
Net earnings for the three months ended June 30, 2014 totaled $527,000, a $262,000 increase from the $265,000 earnings reported in the June 2013 period.  The increase in net earnings reflects an increase in other income of $415,000 and a decrease of $122,000 in general, administrative and other expenses, which were partially offset by a decrease of $55,000 in net interest income, an increase of $70,000 in the provision for losses on loans and an increase of $150,000 in the provision for federal income taxes.
 
Net Interest Income
 
Total interest income decreased $254,000, or 5.2%, to $4.6 million for the three months ended June 30, 2014, from the comparable quarter in 2013.   Interest income on loans decreased $276,000, or 7.0%, to $3.7 million during the 2014 quarter from $3.9 million for the 2013 quarter.  This decrease was due primarily to a $2.8 million, or 0.8%, decrease in the average balance of loans outstanding and a 29 basis point decrease in the average yield on loans to 4.44% for the 2014 quarter from 4.73% for the three months ended June 30, 2013.
 
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Cheviot Financial Corp.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
 
For the three and six months ended June 30, 2014 and 2013
 
Comparison of Operating Results for the Three-Month Periods Ended June 30, 2014 and 2013 (continued)
 
Net Interest Income (continued)
 
Interest income on mortgage-backed securities increased $11,000, or 26.8%, to $52,000 for the three months ended June 30, 2014, from $41,000 for the comparable 2013 quarter, due primarily to a $3.0 million, or 34.1% increase in the average balance of securities outstanding, which was partially offset by a 10 basis point decrease in the average yield.  Interest income on investment securities increased $19,000, or 2.4%, to $796,000 for the three months ended June 30, 2014, compared to $777,000 for the same quarter in 2013, due primarily to a 40 basis point increase in the average yield to 2.16% in the 2014 quarter, which was partially offset by a decrease of $29.3 million in the average balance of investment securities outstanding.  Interest income on other interest-earning deposits decreased $8,000, or 8.2% to $90,000 for the three months ended June 30, 2014.
 
Interest expense decreased $199,000, or 18.0% to $904,000 for the three months ended June 30, 2014, from $1.1 million for the same quarter in 2013.  Interest expense on deposits decreased by $153,000, or 16.6%, to $767,000, from $920,000, due primarily to a 10 basis point decrease in the average costs of deposits to 0.66% and a $15.4 million, or 3.2% decrease in the average balance of deposits outstanding.  The decrease in the average cost of deposits is due to the overall changes in the deposit composition and lower market rates for the period.  Interest expense on borrowings decreased by $46,000, or 25.1%, due primarily to a $5.0 million decrease in the average balance outstanding and due to a 11 basis point decrease in the average cost of borrowings.
 
As a result of the foregoing changes in interest income and interest expense, net interest income decreased by $55,000, or 1.5%, to $3.7 million for the three months ended June 30, 2014, as compared to the same quarter in 2013.  The average interest rate spread increased to 2.95% for the three months ended June 30, 2014 from 2.82% for the three months ended June 30, 2013.  The net interest margin increased to 2.98% for the three months ended June 30, 2014 from 2.86% for the three months ended June 30, 2013.
 
Provision for Losses on Loans
 
The Company recorded a $355,000 provision for losses on loans for the three months ended June 30, 2014, compared to a $285,000 provision for losses on loans for the three months ended June 30, 2013.  The provision for loan losses during the three months ended June 30, 2014 reflects the amount necessary to maintain an adequate allowance based on the historical loss experience and other external factors.   There can be no assurance that the loan loss allowance will be sufficient to cover losses on non-performing loans in the future, however management believes they have identified all known and inherent losses that are probable and that can be reasonably estimated within the loan portfolio, and that the allowance for loan losses is adequate to absorb such losses.
 
Other Income
 
Other income increased $415,000, or 76.6%, to $957,000 for the three months ended June 30, 2014, compared to the same quarter in 2013, due primarily to the gain on sale of investment securities designated as available-for-sale of $281,000 and the absence during the 2014 period of a loss on sale of office premises and equipment of $255,000.  During the quarter ended June 30, 2013, the Company sold the former Franklin Savings headquarters.
 
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Cheviot Financial Corp.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
 
For the three and six months ended June 30, 2014 and 2013
 
Comparison of Operating Results for the Three-Month Periods Ended June 30, 2013 and 2012 (continued)
 
General, Administrative and Other Expense
 
General, administrative and other expense decreased $122,000, or 3.3%, to $3.6 million for of the three months ended June 30, 2014.  This decrease is a result of a decrease in employee compensation and benefits of $232,000, a decrease in occupancy and equipment of $74,000, a decrease of $83,000 in property, payroll and other taxes, a decrease of $45,000 in legal and other professional expenses, which was partially offset by a $142,000 increase in the impairment of real estate owned expense.
 
Federal Income Taxes
 
The provision for federal income taxes increased $150,000 for the three months ended June 30, 2014.  Cheviot Financial has approximately $2.9 million in remaining operating loss carryforwards to offset future taxable income for 20 years.  These losses are subject to the Internal Revenue Code Section 382 net operating loss limitations of $1.5 million allowed on an annual basis. The effective tax rate for the three months ended June 30, 2013 was 27.8%.
 
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Cheviot Financial Corp.
 
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, 2013.
 
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.
 
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Cheviot Financial Corp.

PART II

ITEM 1.
Legal Proceedings

None

ITEM 1A.
Risk Factors
 
 
Not applicable, as the Corporation is a smaller reporting company.
 
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
On October 15, 2013, the Corporation amended the authorization of a stock purchase plan. Under this program the Corporation is authorized to repurchase 341,845 shares constituting 5% of the then outstanding shares of common stock.  As of June 30, 2014, the Corporation had repurchased 129,100 shares at an average price of $11.35.

The Corporation’s stock repurchases for the three months ended June 30, 2014 are as follows:
 
               
Total # of
       
               
shares purchased
   
Maximum #
 
   
Total
   
Average
   
as part of publicly
   
of shares that
 
   
# of shares
   
price paid
   
announced plans
   
may yet be
 
Period
   
purchased
   
per share
   
or programs
   
purchased
 
                         
April 1-30, 2014
    16,600     $ 10.41       59,600       282,245  
May 1-31, 2014
    -     $ -       -       282,245  
June 1-30, 2014
    69,500     $ 12.17       129,100       212,745  

ITEM 3.                  Defaults Upon Senior Securities

                                Not applicable.

ITEM 4.                  Mine Safety Disclosures

                                Not applicable

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.
 
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Cheviot Financial Corp.

PART II (Continued)

 
101
The following financial statements of the Corporation at June 30, 2014 and December 31, 3013, and for the three and six months ended June 30, 2014 and 2013 formatted in XBRL: Consolidated Statements of Financial Condition; Consolidated Statements of Earnings; Consolidated Statements of Comprehensive Income; Consolidated Statements of Cash Flows; and Notes to Consolidated Financial Statements.

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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:   August 12, 2014
By:
/s/ Thomas J. Linneman
 
   
Thomas J. Linneman
 
   
President and Chief Executive Officer
 
       
Date:   August 12, 2014
By:
/s/ Scott T. Smith
 
   
Scott T. Smith
 
   
Chief Financial Officer
 
 
45