UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No. 0-50529
CHEVIOT FINANCIAL CORP.
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(Exact name of registrant as specified in its charter)
Federal 56-2423720
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3723 Glenmore Avenue, Cincinnati, Ohio 45211
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(Address of principal executive office)
Registrant's telephone number, including area code: (513) 661-0457
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of May 12, 2005, the latest practicable date, 9,918,751 shares of the
registrant's common stock, $.01 par value, were issued and outstanding.
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
Quantitative and Qualitative Disclosures about
Market Risk 12
Controls and Procedures 12
PART II - OTHER INFORMATION 13
SIGNATURES 14
2
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, December 31,
ASSETS 2005 2004
(Unaudited)
Cash and due from banks $ 5,331 $ 2,836
Federal funds sold 5,271 4,370
Interest-earning deposits in other financial institutions 831 519
---------- ----------
Cash and cash equivalents 11,433 7,725
Investment securities held to maturity - at cost, approximate market value of
$26,593 and $26,864 at March 31, 2005
and December 31, 2004, respectively 27,099 27,102
Mortgage-backed securities available for sale - at fair value 1,462 1,483
Mortgage-backed securities held to maturity - at cost, approximate
market value of $27,415 and $29,315 at March 31, 2005
and December 31, 2004, respectively 27,280 29,204
Loans receivable - net 203,300 203,842
Real estate acquired through foreclosure - net - 90
Office premises and equipment - at depreciated cost 2,944 2,947
Federal Home Loan Bank stock - at cost 2,941 2,909
Accrued interest receivable on loans 782 750
Accrued interest receivable on mortgage-backed securities 71 80
Accrued interest receivable on investments and interest-earning deposits 220 219
Bank-owned life insurance 3,011 -
Prepaid expenses and other assets 373 236
---------- ----------
Total assets $280,916 $276,587
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $179,935 $179,989
Advances from the Federal Home Loan Bank 20,690 16,199
Advances by borrowers for taxes and insurance 671 1,014
Accounts payable and other liabilities 616 1,003
Accrued federal income taxes 232 127
Deferred federal income taxes 358 315
---------- ----------
Total liabilities 202,502 198,647
Shareholders' equity
Preferred stock - authorized 5,000,000 shares, $.01 par value; none issued
Common stock - authorized 30,000,000 shares, $.01 par value;
9,918,751 shares issued and outstanding at both
March 31, 2005 and December 31, 2004 99 99
Additional paid-in capital 42,787 42,746
Retained earnings - restricted 38,745 38,374
Shares acquired by Employee Stock Ownership Plan (3,214) (3,273)
Other comprehensive income, unrealized losses on securities available
for sale, net of tax effects (3) (6)
---------- ----------
Total shareholders' equity 78,414 77,940
---------- ----------
Total liabilities and shareholders' equity $280,916 $276,587
========== ==========
See accompanying notes to consolidated financial statements.
3
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the three months ended March 31,
(In thousands, except per share data)
2005 2004
Interest income
Loans $2,953 $2,716
Mortgage-backed securities 217 175
Investment securities 218 113
Interest-earning deposits and other 41 81
------- -------
Total interest income 3,429 3,085
Interest expense
Deposits 865 844
Borrowings 202 105
------- -------
Total interest expense 1,067 949
------- -------
Net interest income 2,362 2,136
Other income (expense)
Gain on sale of loans 1 33
Loss on sale of real estate acquired through foreclosure (6) -
Other operating 84 43
------- -------
Total other income 79 76
General, administrative and other expense
Employee compensation and benefits 825 805
Occupancy and equipment 116 111
Data processing 59 66
Property, payroll and other taxes 169 171
Legal and professional 128 72
Advertising 44 39
Contribution to Charitable Foundation - 1,500
Other operating 135 108
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Total general, administrative and other expense 1,476 2,872
------- -------
Earnings (loss) before federal income taxes 965 (660)
Federal income taxes
Current 284 252
Deferred 42 (220)
------- -------
Total federal income taxes 326 32
------- -------
NET EARNINGS (LOSS) $ 639 $ (692)
======= =======
BASIC EARNINGS (LOSS) PER SHARE $ .07 $ (.07)
======= =======
See accompanying notes to consolidated financial statements.
4
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended March 31,
(In thousands)
2005 2004
Cash flows from operating activities:
Net earnings (loss) for the period $ 639 $ (692)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Amortization of premiums and discounts on investment
and mortgage-backed securities, net 20 49
Depreciation 61 58
Amortization of deferred loan origination (fees) costs - net (1) 7
Proceeds from sale of loans in the secondary market 91 1,448
Loans originated for sale in the secondary market (90) (1,081)
Amortization of expense related to ESOP 100 -
Gain on sale of loans (1) (33)
Loss on sale of real estate acquired through foreclosure 6 -
Federal Home Loan Bank stock dividends (32) (28)
Provision for losses on loans - -
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans (32) (9)
Accrued interest receivable on mortgage-backed securities 9 (2)
Accrued interest receivable on investments and interest-earning deposits (1) 46
Prepaid expenses and other assets (137) 757
Accounts payable and other liabilities (387) (286)
Federal income taxes
Current 104 51
Deferred 42 (220)
--------- --------
Net cash provided by operating activities 391 65
Cash flows used in investing activities:
Principal repayments on loans 9,557 9,584
Loan disbursements (9,014) (9,226)
Purchase of U.S. Government and agency obligations - (16,015)
Proceeds from maturity of U.S. Government and agency obligations - 14,000
Purchase of mortgage-backed securities - (3,933)
Principal repayments on mortgage-backed securities 1,933 1,330
Proceeds from sale of real estate acquired through foreclosure 84 -
Purchase of office premises and equipment (58) (38)
Purchase of bank-owned life insurance (3,000) -
Net increase in cash surrender value of life insurance (11) -
--------- -------
Net cash used in investing activities (509) (4,298)
Cash flows provided by (used in) financing activities:
Net decrease in deposits (54) (81,117)
Proceeds from Federal Home Loan Bank advances 5,000 -
Repayments on Federal Home Loan Bank advances (509) (359)
Advances by borrowers for taxes and insurance (343) (336)
Net proceeds from issuance of common stock - 39,274
Dividends paid on common stock (268) (223)
-------- --------
Net cash provided by (used in) financing activities 3,826 (42,761)
-------- --------
Net increase (decrease) in cash and cash equivalents 3,708 (46,994)
Cash and cash equivalents at beginning of period 7,725 83,776
-------- -------
Cash and cash equivalents at end of period $11,433 $36,782
======= =======
5
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(CONTINUED)
For the three months ended March 31,
(In thousands)
2005 2004
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Federal income taxes $ 200 $ 200
======= ======
Interest on deposits and borrowings $ 1,067 $ 949
======= ======
Supplemental disclosure of non-cash investing activities:
Recognition of mortgage servicing rights in
accordance with SFAS No. 140 $ 1 $ 11
======= =======
See accompanying notes to consolidated financial statements.
6
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2005 and 2004
1. Basis of Presentation
In January 2004, Cheviot Financial Corp. ("Cheviot Financial" or the
"Corporation") completed a Plan of Reorganization (the "Plan" or the
"Reorganization") pursuant to which Cheviot Savings Bank (the "Savings Bank")
reorganized into a two-tier mutual holding company structure with the
establishment of Cheviot Financial, as parent of the Savings Bank, with the
Savings Bank converting to stock form and issuing all the Savings Bank's
outstanding stock to Cheviot Financial. Pursuant to the Plan, Cheviot Financial
Corp. sold 4,388,438 common shares in a minority stock offering, representing
approximately 44% of its outstanding common stock at $10.00 per share to the
Savings Bank's depositors and a newly formed Employee Stock Ownership Plan
("ESOP"). The net proceeds of the offering totaled approximately $39.3 million.
In addition, 75,000 shares, or approximately one percent of its outstanding
shares, were issued to a charitable foundation established by Cheviot Savings
Bank. The remaining 5,455,313 shares of common stock of Cheviot Financial, were
issued to Cheviot Mutual Holding Company, the federally chartered mutual holding
company of Cheviot Financial Corp.
The accompanying unaudited financial statements were prepared in accordance with
instructions for Form 10-Q and, therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with accounting principles generally
accepted in the United States of America. Accordingly, these consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto of Cheviot Financial included in the
Annual Report on Form 10-K for the year ended December 31, 2004. However, in the
opinion of management, all adjustments (consisting of only normal recurring
accruals) which are necessary for a fair presentation of the consolidated
financial statements have been included. The results of operations for the three
month period ended March 31, 2005, is not necessarily indicative of the results
which may be expected for the entire year.
2. Principles of Consolidation
The accompanying consolidated financial statements as of and for the three
months ended March 31, 2005, include the accounts of the Corporation and its
wholly-owned subsidiary, the Savings Bank. All significant intercompany items
have been eliminated.
3. 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 totaled
9,597,383 for the three month period ended March 31, 2005, which gives effect to
321,368 unallocated ESOP shares and 35,707 allocated ESOP shares. For the three
months ended March 31, 2004, weighted-average shares deemed outstanding totaled
9,561,681, which gives effect to 357,075 unallocated ESOP shares.
Diluted earnings per share is computed taking into consideration common shares
outstanding and dilutive potential common share equivalents. The Corporation had
no dilutive or potentially dilutive securities during the three month period
ended March 31, 2005.
7
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2005 and 2004
4. Effects of Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (the "FASB") issued a
revision to Statement of Financial Accounting Standards ("SFAS") No. 123 which
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services, primarily on accounting
for transactions in which an entity obtains employee services in share-based
transactions. This Statement, SFAS No. 123 (R) "Share-Based Payment", requires a
public entity to measure the cost of employee services received in exchange for
an award of equity instruments based on the grant-date fair value of the award,
with limited exceptions. That cost will be recognized over the period during
which an employee is required to provide services in exchange for the award -
the requisite service period. No compensation cost is recognized for equity
instruments for which employees do not render the requisite service. Employee
share purchase plans will not result in recognition of compensation cost if
certain conditions are met.
Initially, the cost of employee services received in exchange for an award of
liability instruments will be measured based on current fair value; the fair
value of that award will be remeasured subsequently at each reporting date
through the settlement date. Changes in fair value during the requisite service
period will be recognized as compensation cost over that period. The grant-date
fair value of employee share options and similar instruments will be estimated
using option-pricing models adjusted for the unique characteristics of those
instruments (unless observable market prices for the same or similar instruments
are available). If an equity award is modified after the grant date, incremental
compensation cost will be recognized in an amount equal to the excess of the
fair value of the modified award over the fair value of the original award
immediately before the modification.
Excess tax benefits, as defined by SFAS 123(R) will be recognized as an addition
to additional paid in capital. Cash retained as a result of those excess tax
benefits will be presented in the statement of cash flows as financing cash
inflows. The write-off of deferred tax assets relating to unrealized tax
benefits associated with recognized compensation cost will be recognized as
income tax expense unless there are excess tax benefits from previous awards
remaining in additional paid in capital to which it can be offset.
Cheviot Financial's shareholders approved a stock incentive plan (the "Plan") at
the Corporation's Annual Meeting held on April 26, 2005. The Plan provides for
the award of restricted stock and options to purchase common stock. The
Corporation will recognize compensation costs pursuant to SFAS No. 123(R) in
calendar 2006 to the extent SFAS No. 123 (R) is implemented and options are
granted under the plan.
8
Cheviot Financial Corp.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
--------------------------
This quarterly report contains forward-looking statements, which can be
identified by the use of such words as estimate, project, believe, intend,
anticipate, plan, seek, expect and similar expressions. These forward-looking
statements are subject to significant risks, assumptions and uncertainties that
could affect the actual outcome of future events. Because of these
uncertainties, our actual future results may be materially different from the
results indicated by these forward-looking statements.
Discussion of Financial Condition Changes from December 31, 2004 to March 31,
2005
--------------------------------------------------------------------------------
Total assets increased $4.3 million, or 1.6%, to $280.9 million at March 31,
2005, from $276.6 million at December 31, 2004. The increase in total assets is
primarily due to the purchase of the bank-owned life insurance totaling $3.0
million during the three month period ended March 31, 2005, as well as increases
in cash, federal funds and interest-earning deposits, partially offset by
decreases in mortgage-backed securities and loans.
Cash, federal funds sold and interest-earning deposits in other financial
institutions increased $3.7 million, or 48.0%, to $11.4 million at March 31,
2005, from the $7.7 million total at December 31, 2004. The increase in cash and
cash equivalents was due to a $901,000 increase in federal funds sold, a
$312,000 increase in interest-earning deposits and an increase in cash and cash
due from banks of $2.5 million or 88.0% to $5.3 million at March 31, 2005.
Investment securities decreased $3,000, or 0.01%, to $27.1 million at March 31,
2005. All investment securities are classified as held to maturity.
Mortgage-backed securities decreased $1.9 million, or 6.3%, to $28.7 million at
March 31, 2005, from $30.7 million at December 31, 2004. The decrease in
mortgage-backed securities was due primarily to principal prepayments and
repayments totaling $1.9 million. At March 31, 2005, $27.3 million of
mortgage-backed securities were classified as held to maturity, while $1.5
million were classified as available for sale. Since March 2004, management has
focused on shorter term investments primarily in an effort to further enhance
the Corporation's positive interest rate risk position.
Loans receivable decreased $542,000, or 0.3%, to $203.3 million at March 31,
2005, from $203.8 million at December 31, 2004. The decrease resulted from loan
principal repayments totaling $9.6 million, partially offset by loan
originations of $9.1 million and sales of $90,000.
The allowance for loan losses totaled $732,000 at March 31, 2005 and December
31, 2004, 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.
The analysis resulted in no additional provision to the allowance at March 31,
2005.
Second, the allowance for loan losses entails utilizing our historic loss
experience by applying such loss percentage to the loan types to be collectively
evaluated in the portfolio. This segment of the loss analysis resulted in no
additional provision for loss for the quarter ended March 31, 2005. The analysis
of the allowance for loan losses requires an element of judgment and is subject
to the possibility that the allowance may need to be increased, with a
corresponding reduction in earnings. To the best of management's knowledge, all
known and inherent losses that are probable and that can be reasonably estimated
have been recorded at March 31, 2005.
9
Cheviot Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from December 31, 2004 to March 31,
2005 (continued)
-------------------------------------------------------------------------------
Non-performing and impaired loans totaled $235,000 and $251,000 at March 31,
2005 and December 31, 2004, respectively. At March 31, 2005, non-performing and
impaired loans were comprised of loans secured by one-to four-family residential
real estate totaling $141,000 and nonresidential real estate totaling $94,000.
The allowance for loan losses represented 311.5% and 291.6% of non-performing
and impaired loans at March 31, 2005 and December 31, 2004, respectively.
Although management believes that its allowance for loan losses conforms with
generally accepted accounting principles based upon the available facts and
circumstances, there can be no assurance that additions to the allowance will
not be necessary in future periods, which would adversely affect our results of
operations.
Deposits decreased $54,000, or 0.03%, to $179.9 million at March 31, 2005, from
$180.0 million at December 31, 2004. Advances from the Federal Home Loan Bank of
Cincinnati increased by $4.5 million, or 27.7%, to $20.7 million at March 31,
2005, from $16.2 million at December 31, 2004. The increase in advances was due
primarily to proceeds from new advances of $5.0 million, which was partially
offset by $509,000 in repayments.
Shareholders' equity increased $474,000, or 0.6%, to $78.4 million at March 31,
2005, from $77.9 million at December 31, 2004. The increase resulted from net
earnings during the period of $639,000 and amortization of ESOP expense totaling
$100,000, which were partially offset by dividends paid of $268,000.
Cheviot Savings Bank is required to maintain minimum regulatory capital pursuant
to federal regulations. At March 31, 2005, the Savings Bank's regulatory capital
substantially exceeded all minimum regulatory capital requirements.
Comparison of Operating Results for the Three-Month Periods Ended March 31, 2005
and 2004
--------------------------------------------------------------------------------
General
--------
Net earnings for the three months ended March 31, 2005 totaled $639,000, a $1.3
million increase from the $692,000 net loss reported in the March 2004 period.
The increase in net earnings reflects $1.4 million decrease in general and
administrative expenses in 2005 as a result of the absence of a $1.5 million
contribution to the Cheviot Savings Bank Charitable Foundation in 2004. In
addition, net interest income increased by $226,000 and other income increased
by $3,000, which were partially offset by a $294,000 increase in federal income
taxes for the 2005 quarter.
Net Interest Income
-------------------
Total interest income increased $344,000, or 11.2%, to $3.4 million for the
three-months ended March 31, 2005, from the comparable quarter in 2004. Interest
income on loans increased $237,000, or 8.7%, to $3.0 million during the 2005
period, from $2.7 million for the 2004 period. This increase was due primarily
to a $15.2 million, or 8.1%, increase in the average balance of loans
outstanding, and a 4 basis point increase in the weighted-average yield on
loans, to 5.83% for 2005 quarter from 5.79 % for the three months ended March
31, 2004.
10
Cheviot Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three-Month Periods Ended March 31, 2005
and 2004 (continued)
--------------------------------------------------------------------------------
Net Interest Income (continued)
-------------------------------
Interest income on mortgage-backed securities increased $42,000, or 24.0%, to
$217,000 for the three months ended March 31, 2005, from $175,000 for the 2004
quarter, due primarily to a $3.6 million increase in the balance of securities
outstanding, and a 23 basis point increase in the average yield year to year.
Interest income on investment securities increased $105,000, or 92.9%, to
$218,000 for the three months ended March 31, 2005, compared to $113,000 for the
same quarter in 2004, due primarily to a 142 basis point increase in the average
yield to 2.90% in the 2005 quarter, which was partially offset by a $428,000, or
1.4% decrease in the average balance of investment securities outstanding.
Interest income on other interest-earning deposits decreased $40,000, or 49.4%,
to $41,000 for the three months ended March 31, 2005, due primarily to a $20.5
million decrease in the average balance of interest-earning deposits, compared
to the same period in 2004, partially offset by a 151 basis point increase in
the weighted-average yield, to 2.73% for the three months ended March 31, 2005.
Interest expense increased $118,000, or 12.4%, to $1.1 million for the three
months ended March 31, 2005, from $949,000 for the same period in 2004. Interest
expense on deposits increased by $21,000, or 2.5%, to $865,000 from $844,000 due
primarily to a $10.3 million, or 5.5%, decline in the weighted-average balance
outstanding, which was partially offset by a 16 basis point increase in the
weighted average costs of deposits to 1.96% in the 2005 period. Interest expense
on borrowings increased by $97,000, or 92.4%, due primarily to a $9.2 million,
or 102.9%, increase in the average balance outstanding, which was partially
offset by a 24 basis point decline in the average cost of borrowings. The
increase in the yields on interest-earning assets and costs of interest-bearing
liabilities were due primarily to the overall increase in market rates in the
March 2005 quarter.
As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $226,000, or 10.6%, to $2.4 million for the
three months ended March 31, 2005, from $2.1 million for the comparable period
ended March 31, 2004. The average interest rate spread increased to 2.96% for
the three months ended March 31, 2005 from 2.66% for the three months ended
March 31, 2004. The net interest margin increased to 3.54% for the three months
ended March 31, 2005 from 3.18% for the three months ended March 31, 2004.
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
collectibility of the Savings Bank's loan portfolio, management concluded that
the allowance for loan losses was adequate, and therefore, elected not to record
a provision for losses on loans for the three-months ended March 31, 2005 and
2004. There can be no assurance that the loan loss allowance will be sufficient
to cover losses on nonperforming loans in the future.
Other Income
------------
Other income increased $3,000, or 3.9%, to $79,000 for the three months ended
March 31, 2005, compared to the same quarter in 2004, due primarily to an
increase in other operating income of $41,000, or 95.3%, to $84,000 for the
three months ended March 31, 2005 from $43,000 for the prior period, which was
partially offset by a decrease in the gain on sale of loans of $32,000, or 97.0%
and an increase in the loss on sale of real estate acquired through foreclosure
of $6,000.
11
Cheviot Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Comparison of Operating Results for the Three-Month Periods Ended March 31, 2005
and 2004 (continued)
--------------------------------------------------------------------------------
General, Administrative and Other Expense
-----------------------------------------
General, administrative and other expense decreased $1.4 million, or 48.6%, to
$1.5 million for the three months ended March 31, 2005, from $2.9 million for
the comparable quarter in 2004. This decrease is a result of a $1.5 million
expense recorded during the first quarter of 2004 in connection with the
Corporation's contribution to the Cheviot Savings Bank Charitable Foundation.
This decrease was partially offset by an increase of $56,000, or 77.8% in legal
and professional expenses, an increase of $27,000, or 25.0% in other operating
expense and an increase of $20,000, or 2.5% in employee compensation and
benefits. The increase in legal and professional expense was due primarily to
expenses associated with the reporting requirements of a public company and
professional services in connection with the implementation and design of
Sarbanes-Oxley audit documentation. The increase in employee compensation and
benefits is due primarily to an increase in contributions to the retirement plan
and an increase in the number of employees as a result of the Company's growth.
Federal Income Taxes
--------------------
The provision for federal income taxes increased $294,000, or 918.8%, to
$326,000 for the three months ended March 31, 2005, from $32,000 for the same
quarter in 2004, due primarily to a $1.6 million, or 246.2%, increase in pre-tax
earnings. The effective tax rate was 33.8% for the three month period ended
March 31, 2005. The federal income tax provision for the 2004 quarter totaled
$32,000 on a pre-tax loss of $660,000. The difference between the 2004 provision
and the tax benefits refundable at the statutory rate results the inability to
fully utilize contributions to the Cheviot Savings Bank Foundation.
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, 2004.
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 significant 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.
12
Cheviot Financial Corp.
PART II
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer
Purchases of Equity Securities
---------------------------------------------------------------------
The Corporation announced a repurchase plan on March 29, 2005. This
program provides for the repurchase of 5%, or 495,937 shares of our
common stock. As of March 31, 2005, the Corporation had not
repurchased any shares.
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
--------------------------------------------------
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.
13
Cheviot Financial Corp.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 2005 By:/s/ Thomas J. Linneman
--------------- ---------------------------
Thomas J. Linneman
President and Chief Executive Officer
Date: May 12, 2005 By:/s/ Scott T. Smith
--------------- ----------------------------------
Scott T. Smith
Chief Financial Officer
14
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Thomas J. Linneman, President and Chief Executive Officer of Cheviot
Financial Corp., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cheviot Financial
Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures or caused such
disclosure controls to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on such
evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 12, 2005 /s/Thomas J. Linneman
-------------------------------------
Thomas J. Linneman
President and Chief Executive Officer
(principal executive officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13A-14
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Scott T. Smith, Chief Financial Officer of Cheviot Financial Corp.,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cheviot Financial
Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures or caused such
disclosure controls to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on such
evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: May 12, 2005 /s/Scott T. Smith
--------------------------------
Scott T. Smith
Chief Financial Officer
(principal financial officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cheviot Financial Corp. (the
"Company"), on Form 10-Q for the period ended March 31, 2005, as filed with the
Securities and Exchange Commission on the date of this Certification (the
"Report"), I, Thomas J. Linneman, President and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
A signed original of this written statement required by Section 906 has been
provided to Cheviot Financial Corporation and will be retained by Cheviot
Financial Corporation and furnished to the Securities and Exchange Commission or
its staff upon request.
/s/Thomas J. Linneman
------------------------------------
Thomas J. Linneman
President and Chief Executive Officer
Date: May 12, 2005
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cheviot Financial Corp. (the
"Company"), on Form 10-Q for the period ended March 31, 2005, as filed with the
Securities and Exchange Commission on the date of this Certification (the
"Report"), I, Scott T. Smith, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
A signed original of this written statement required by Section 906 has been
provided to Cheviot Financial Corporation and will be retained by Cheviot
Financial Corporation and furnished to the Securities and Exchange Commission or
its staff upon request.
/s/Scott T. Smith
---------------------------
Scott T. Smith
Chief Financial Officer
Date: May 12, 2005