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, 2009
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File No. 0-50529
CHEVIOT FINANCIAL CORP.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Federal 56-2423720
-------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3723 Glenmore Avenue, Cincinnati, Ohio 45211
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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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one.)
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ]
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 [ ] No [X]
As of May 8, 2009, the latest practicable date, 8,868,706 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 [ ] No [ ]
Page 1 of 24
INDEX
Page
PART I - FINANCIAL INFORMATION
Consolidated Statements of Financial Condition 3
Consolidated Statements of Earnings 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 16
Quantitative and Qualitative Disclosures about
Market Risk 21
Controls and Procedures 21
PART II - OTHER INFORMATION 22
SIGNATURES 23
2
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
March 31, December 31,
ASSETS 2009 2008
(Unaudited)
Cash and due from banks $ 4,108 $ 4,192
Federal funds sold 8,616 4,063
Interest-earning deposits in other financial institutions 13,511 1,758
---------- ---------
Cash and cash equivalents 26,235 10,013
Investment securities available for sale - at fair value 23,826 23,909
Investment securities held to maturity - at cost, approximate
market value of $5,011 and $7,074 at March 31, 2009
and December 31, 2008, respectively 5,000 7,000
Mortgage-backed securities available for sale - at fair value 4,415 648
Mortgage-backed securities held to maturity - at cost, approximate
market value of $6,709 and $6,830 at March 31, 2009 and
December 31, 2008, respectively 6,662 6,915
Loans receivable - net 255,302 267,754
Loans held for sale - at lower of cost or market 3,384 729
Real estate acquired through foreclosure - net 2,097 1,064
Office premises and equipment - at depreciated cost 4,962 4,969
Federal Home Loan Bank stock - at cost 3,369 3,369
Accrued interest receivable on loans 1,125 1,159
Accrued interest receivable on mortgage-backed securities 43 32
Accrued interest receivable on investments and interest-earning deposits 383 466
Prepaid expenses and other assets 631 297
Bank-owned life insurance 3,550 3,516
Prepaid federal income taxes 74 160
---------- ----------
Total assets $341,058 $332,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $227,492 $216,048
Advances from the Federal Home Loan Bank 43,000 44,604
Advances by borrowers for taxes and insurance 962 1,464
Accrued interest payable 165 172
Accounts payable and other liabilities 945 1,069
Deferred federal income taxes 325 412
---------- ----------
Total liabilities 272,889 263,769
Shareholders' equity
Preferred stock - authorized 5,000,000 shares, $.01 par value; none issued
Common stock - authorized 30,000,000 shares, $.01 par value;
9,918,751 shares issued at March 31, 2009 and December 31, 2008 99 99
Additional paid-in capital 43,667 43,625
Shares acquired by stock benefit plans (2,829) (2,829)
Treasury stock - at cost, 1,046,247 shares at March 31, 2009
and December 31, 2008, respectively (12,799) (12,799)
Retained earnings - restricted 40,229 40,276
Accumulated comprehensive income, unrealized gains on securities
available for sale, net of related tax effects (198) (141)
------------ -----------
Total shareholders' equity 68,169 68,231
--------- ---------
Total liabilities and shareholders' equity $341,058 $332,000
======= =======
See accompanying notes to consolidated financial statements.
3
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
For the three months ended March 31, 2009 and 2008
(In thousands, except per share data)
2009 2008
Interest income
Loans $3,848 $3,806
Mortgage-backed securities 105 139
Investment securities 369 554
Interest-earning deposits and other 10 32
------- -------
Total interest income 4,332 4,531
Interest expense
Deposits 1,374 2,010
Borrowings 471 375
------ ------
Total interest expense 1,845 2,385
----- -----
Net interest income 2,487 2,146
Provision for losses on loans 337 263
-------- -----
Net interest income after provision for
losses on loans 2,150 1,883
Other income
Rental 13 12
Loss on sale of real estate acquired through foreclosure (20) (58)
Gain on sale of loans 131 4
Earnings on bank-owned life insurance 34 32
Other operating 73 72
------- -------
Total other income 231 62
General, administrative and other expense
Employee compensation and benefits 1,118 1,018
Occupancy and equipment 143 150
Property, payroll and other taxes 251 240
Data processing 85 83
Legal and professional 131 124
Advertising 50 50
Other operating 202 144
------ ------
Total general, administrative and other expense 1,980 1,809
----- -----
Earnings before federal income taxes 401 136
Federal income taxes
Current 166 52
Deferred (58) (13)
------- -------
Total federal income taxes 108 39
------- -------
NET EARNINGS $ 293 $ 97
======= =======
EARNINGS PER SHARE
Basic $ .03 $ .01
======= =======
Diluted $ .03 $ .01
======= =======
Dividends declared per share $ .10 $ .09
======= =======
See accompanying notes to consolidated financial statements.
4
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
For the three months ended March 31, 2009 and 2008
(In thousands)
2009 2008
Net earnings for the period $ 293 $ 97
Other comprehensive income (loss), net of related tax expense (benefit):
Unrealized holding gains (losses) on securities during the period,
net of tax expense (benefit) of $(29) and $53 for the periods
ended March 31, 2009 and 2008, respectively (57) 103
---- ---
Comprehensive income $ 236 $ 200
=== ===
Accumulated comprehensive income (loss) $ (198) $ 149
=== ===
See accompanying notes to consolidated financial statements.
5
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended March 31, 2009 and 2008
(In thousands)
2009 2008
Cash flows from operating activities:
Net earnings for the period $ 293 $ 97
Adjustments to reconcile net earnings to net cash (used in)
provided by operating activities:
Amortization of premiums and discounts on investment
and mortgage-backed securities, net (3) (2)
Depreciation 75 69
Amortization of deferred loan origination fees - net (5) (4)
Proceeds from sale of loans in the secondary market 9,132 798
Loans originated for sale in the secondary market (9,001) (937)
Gain on sale of loans (131) (4)
Amortization of expense related to stock benefit plans (19) (2)
Provision for losses on loans 337 263
Federal Home Loan Bank stock dividends - (42)
Loss on real estate acquired through foreclosure 20 58
Net increase in cash surrender value of bank-owned life insurance (34) (32)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans 34 (2)
Accrued interest receivable on mortgage-backed securities (11) 7
Accrued interest receivable on investments and interest-earning deposits 83 (105)
Prepaid expenses and other assets (334) (284)
Accrued interest payable (7) 14
Accounts payable and other liabilities (124) (19)
Federal income taxes
Current 86 32
Deferred (58) (13)
------- -------
Net cash flows provided by (used in) operating activities 333 (108)
Cash flows used in investing activities:
Principal repayments on loans 21,071 13,949
Loan disbursements (12,746) (15,082)
Purchase of investment securities - available for sale - (11,981)
Proceeds from maturity of investment securities - held to maturity 2,000 11,000
Purchase of mortgage-backed securities - available for sale (4,055) -
Principal repayments on mortgage-backed securities - available for sale 288 68
Principal repayments on mortgage-backed securities - held to maturity 253 1,030
Proceeds from the sale of real estate acquired through foreclosure 104 223
Additions to real estate acquired through foreclosure (17) -
Purchase of office premises and equipment (68) (5)
------- ------
Net cash flows provided by (used in) investing activities 6,830 (798)
Cash flows provided by financing activities:
Net increase in deposits 11,444 300
Proceeds from Federal Home Loan Bank advances - 7,500
Repayments on Federal Home Loan Bank advances (1,604) (4,618)
Advances by borrowers for taxes and insurance (502) (392)
Stock option expense, net 61 60
Treasury stock repurchases - (381)
Dividends paid on common stock (340) (310)
------ ------
Net cash flows provided by financing activities 9,059 2,159
----- -----
Net increase in cash and cash equivalents 16,222 1,253
Cash and cash equivalents at beginning of period 10,013 9,450
------ -----
Cash and cash equivalents at end of period $ 26,235 $ 10,703
====== ======
See accompanying notes to consolidated financial statements.
6
Cheviot Financial Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(CONTINUED)
For the three months ended March 31, 2009 and 2008
(In thousands)
2009 2008
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Federal income taxes $ 75 $ 25
====== ========
Interest on deposits and borrowings $1,838 $2,371
===== =====
Supplemental disclosure of non-cash investing activities:
Transfer from loans to real estate acquired through foreclosure $1,140 $ 218
===== ======
Recognition of mortgage servicing rights in
accordance with SFAS No. 140 $ 72 $ -
===== ========
See accompanying notes to consolidated financial statements.
7
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2009 and 2008
1. Basis of Presentation
---------------------
Cheviot Financial Corp. ("Cheviot Financial" or the "Corporation") is a
financial holding company, the principal asset of which consists of its
ownership of Cheviot Savings Bank (the "Savings Bank"). The Savings Bank
conducts a general banking business in southwestern Ohio which consists of
attracting deposits and applying those funds to the origination of primarily
real estate loans. The Corporation is 61% owned by Cheviot Mutual Holding
Company. Earnings per share is reported including all shares held by Cheviot
Mutual Holding Company. Cheviot Mutual Holding Company has waived the receipt of
dividends declared by the Corporation. Cheviot Savings' profitability is
significantly dependent on net interest income, which is the difference between
interest income from interest-earning assets and the interest expense paid on
interest-bearing liabilities. Net interest income is affected by the relative
amount of interest-earning assets and interest-bearing liabilities and the
interest received or paid on these balances.
The accompanying unaudited financial statements were prepared in accordance with
instructions for Form 10-Q and, therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations and cash flows in conformity with accounting principles generally
accepted in the United States of America. Accordingly, these consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto of Cheviot Financial included in the
Annual Report on Form 10-K for the year ended December 31, 2008. 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, 2009 are not necessarily indicative of the results
which may be expected for the entire year.
2. Principles of Consolidation
---------------------------
The accompanying consolidated financial statements as of and for the three
months ended March 31, 2009 include the accounts of the Corporation and its
wholly-owned subsidiary, the Savings Bank. All significant intercompany items
have been eliminated.
3. Liquidity and Capital Resources
-------------------------------
Liquidity describes our ability to meet the financial obligations that arise in
the ordinary course of business. Liquidity is primarily needed to meet the
borrowing and deposit withdrawal requirements of our customers and to fund
current and planned expenditures. Our primary sources of funds are deposits,
scheduled amortization and prepayments of loan principal and mortgage-backed
securities, maturities and calls of securities and funds provided by our
operations. In addition, we may borrow from the Federal Home Loan Bank of
Cincinnati. At March 31, 2009 and December 31, 2008, we had $43.0 million and
$44.6 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 $100.1 million and $99.3 million, respectively.
Loan repayments and maturing securities are a relatively predictable source of
funds. However, deposit flows, calls of securities and prepayments of loans and
mortgage-backed securities are strongly influenced by interest rates, general
and local economic conditions and competition in the marketplace. These factors
reduce the predictability of these sources of funds.
8
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2009 and 2008
3. Liquidity and Capital Resources (continued)
-------------------------------
Our primary investing activities are the origination of one- to four-family real
estate loans, commercial real estate, construction and consumer loans, and, to a
lesser extent, the purchase of securities. For the three months ended March 31,
2009, loan originations totaled $21.7 million, compared to $16.0 million for the
three months ended March 31, 2008.
Total deposits increased $11.4 million and $300,000 during the three months
ended March 31, 2009 and 2008, respectively. 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 March
31, 2009.
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 $ 3,000 $ 9,745 $ 1,967 $ 28,288 $ 43,000
Certificates of deposit 109,724 20,144 14,038 - 143,906
Amount of loan commitments and expiration per period:
Commitments to originate one- to four-family
loans 2,829 - - - 2,829
Home equity lines of credit 11,843 - - - 11,843
Undisbursed loans in process 7,054 - - - 7,054
-------- -------- -------- -------- --------
Total contractual obligations $134,450 $ 29,889 $ 16,005 $ 28,288 $208,632
======== ======== ======== ======== ========
We are committed to maintaining a strong liquidity position. We monitor our
liquidity position on a daily basis. We anticipate that we will have sufficient
funds to meet our current funding commitments. Based on our deposit retention
experience and current pricing strategy, we anticipate that a significant
portion of maturing time deposits will be retained.
9
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2009 and 2008
3. Liquidity and Capital Resources (continued)
-------------------------------
At March 31, 2009 and 2008, we exceeded all of the applicable regulatory capital
requirements. Our core (Tier 1) capital was $56.3 million and $53.4 million, or
16.5% and 16.8% of total assets at March 31, 2009 and 2008, respectively. In
order to be classified as "well-capitalized" under federal banking regulations,
we were required to have core capital of at least $20.5 million, or 6.0% of
assets as of March 31, 2009. To be classified as a well-capitalized bank, we
must also have a ratio of total risk-based capital to risk-weighted assets of at
least 10.0%. At March 31, 2009 and 2008, we had a total risk-based capital ratio
of 33.0% and 32.6%, respectively.
4. Earnings Per Share
------------------
Basic earnings per share is computed based upon the weighted-average common
shares outstanding during the period, less shares in the ESOP that are
unallocated and not committed to be released plus shares in the ESOP that have
been allocated. Weighted-average common shares deemed outstanding gives effect
to 178,540 and 214,247 unallocated shares held by the ESOP for the three months
ended March 31, 2009 and 2008, respectively.
For the three months ended
March 31,
2009 2008
Weighted-average common shares
outstanding (basic) 8,693,964 8,717,914
Dilutive effect of assumed exercise
of stock options 46,216 58,574
--------- ---------
Weighted-average common shares
outstanding (diluted) 8,740,180 8,776,488
========= =========
5. Stock Option Plan
-----------------
On April 26, 2005, the Corporation approved a Stock Incentive Plan that provides
for grants of up to 486,018 stock options. During 2008, 2007 and 2006
approximately 8,060, 6,460 and 6,100 options shares were granted subject to five
year vesting.
In 2004, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standard ("SFAS") No. 123(R), "Share-Based Payment," which
revises SFAS No. 123, "Accounting for Stock-Based Compensation," and supersedes
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." SFAS No. 123(R) requires that cost related to the fair value of
all equity-based awards to employees, including grants of employee stock
options, be recognized in the financial statements.
10
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2009 and 2008
5. Stock Option Plan (continued)
-----------------
The Corporation adopted the provisions of SFAS No. 123(R) effective January 1,
2006, using the modified prospective transition method, and therefore has not
restated its financial statements for prior periods. Under this method, the
Corporation has applied the provisions of SFAS No. 123(R) to new equity-based
awards and to equity-based awards modified, repurchased, or cancelled after
January 1, 2006. In addition, the Corporation will recognize compensation cost
for the portion of equity-based awards for which the requisite service period
has not been rendered ("unvested equity-based awards") that is outstanding as of
January 1, 2006. The compensation cost recorded for unvested equity-based awards
is based on their grant-date fair value. For the three months ended March 31,
2009, the Corporation recorded $61,000 in after-tax compensation cost for
equity-based awards that vested during the three months ended March 31, 2009.
The Corporation has $311,000 unrecognized pre-tax compensation cost related to
non-vested equity-based awards granted under its stock incentive plan as of
March 31, 2009, which is expected to be recognized over a weighted-average
vesting period of approximately 1.3 years.
A summary of the status of the Corporation's stock option plan as of March 31,
2009, and changes during the period then ended is presented below:
Three months ended Year ended
March 31, 2009 December 31, 2008
Weighted- Weighted-
average average
exercise exercise
Shares price Shares price
Outstanding at beginning of period 404,280 $11.16 396,220 $11.21
Granted - - 8,060 9.03
Exercised - - - -
Forfeited - - - -
--------- ------- ------- ------
Outstanding at end of period 404,280 $11.16 404,280 $11.16
======= ====== ======= ======
Options exercisable at period-end 233,936 $11.17 233,936 $11.17
======= ====== ======= ======
Options expected to be exercisable at year-end
Fair value of options granted NA $ 1.93
== ======
The following information applies to options outstanding at March 31, 2009:
Number outstanding 404,280
Exercise price $9.03 - $13.63
Weighted-average exercise price $11.16
Weighted-average remaining contractual life 6.3 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.
11
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2009 and 2008
5. Stock Option Plan (continued)
The fair value of each option was estimated on the date of grant using the
modified Black-Scholes options pricing model with the following weighted-average
assumptions used for grants in 2008: dividend yield of 3.65%, expected
volatility of 26.13%, risk-free interest rate of 3.78% and an expected life of
10 years for each grant.
The effects of expensing stock options are reported in "cash provided by
financing activities" in the Consolidated Statements of Cash Flows.
6. Income Taxes
------------
The Corporation adopted the provisions of FASB Interpretation 48, "Accounting
for Uncertainty in Income Taxes," on January 1, 2007. Previously, the
Corporation had accounted for tax contingencies in accordance with Statement of
Financial Accounting Standards No. 5, "Accounting for Contingencies." As
required by Interpretation 48, which clarifies Statement No. 109, "Accounting
for Income Taxes," the Corporation recognizes the financial statement benefit of
a tax position only after determining that the relevant tax authority would more
likely than not sustain the position following an audit. For tax positions
meeting the more-likely-than-not threshold, the amount recognized in the
financial statements is the largest benefit that has a greater than 50 percent
likelihood of being realized upon ultimate settlement with the relevant tax
authority. At the adoption date, the Corporation applied Interpretation 48 to
all tax positions for which the stature of limitations remained open. As a
result of the implementation of Interpretation 48, the Corporation was not
required to record any liability for unrecognized tax benefits as of January 1,
2007. There have been no material changes in unrecognized tax benefits since
January 1, 2007. As stated in the Annual Report, the only known tax attribute
which can influence the Corporation's effective tax rate is the utilization of
charitable contribution carryforwards.
The Corporation is subject to income taxes in the U.S. federal jurisdiction, as
well as various state jurisdictions. Tax regulations within each jurisdiction
are subject to the interpretation of the related tax laws and regulations and
require significant judgment to apply. With few exceptions, the Corporation is
no longer subject to U.S. federal, state and local, or non U.S. income tax
examinations by tax authorities for the years before 2004.
The Corporation will recognize, if applicable, interest accrued related to
unrecognized tax benefits in interest expense and penalties in operating
expenses.
7. Disclosures About Fair Value of Assets and Liabilities
------------------------------------------------------
Effective January 1, 2008, the Corporation adopted Statement of Financial
Accounting Standards No. 157, Fair Value Measurements (FAS 157). FAS 157 defines
fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. FAS 157 has been applied
prospectively as of the beginning of the year.
FAS 157 defines fair value 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. FAS 157 also establishes a fair value
hierarchy which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. The standard
describes three levels of inputs that may be used to measure fair value:
12
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2009 and 2008
7. Disclosures About Fair Value of Assets and Liabilities (continued)
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 values on available for sale securities were
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.
Available for sale securities include U.S. agency securities, municipal bonds
and mortgage-backed agency securities.
Fair Value Measurements at
March 31, 2009
Quoted prices
in active Significant Significant
markets for other other
identical observable unobservable
assets inputs inputs
March 31, 2009 (Level 1) (Level 2) (Level 3)
-------------- --------- --------- ---------
Securities available for sale $28,241 $28,241
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 and other real estate owned 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, which the Corporation
considers to be Level 2 inputs. The aggregate carrying amount of impaired loans
at March 31, 2009 was approximately $688,000, with total loss recognized of
$225,000. At March 31, 2009, the carrying value of other real estate owned was
$2.1 million.
13
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2009 and 2008
8. Effects of Recent Accounting Pronouncements
-------------------------------------------
In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 157, "Fair Value Measurements". SFAS No. 157 defines fair value, establishes
a framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value estimates. In February 2008, the FASB
issued FASB Staff Position ("FSP") No. FAS 157-2 which delayed the effective
date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis, to fiscal years beginning after November 15,
2008. The Corporation elected to defer the adoption of SFAS No. 157 for its
nonfinancial assets and nonfinancial liabilities until January 1, 2009. Adoption
of this standard on January 1, 2009 had no impact on the Corporation's results
of operations and financial position.
In April 2009, the Financial Accounting Standards Board ("FASB") issued FASB
Staff Position ("FSP") No. FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly. This FSP provides additional
guidance for estimating fair value in accordance with FASB Statement No. 157,
Fair Value Measurements ("FAS 157"), when the volume and level of activity for
the asset or liability have significantly decreased and also includes guidance
on identifying circumstances that indicate a transaction is not orderly. This
FSP emphasizes that even if there has been a significant decrease in the volume
and level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction (that is, not a forced
liquidation or distressed sale) between market participants at the measurement
date under current market conditions. This FSP is effective for interim and
annual reporting periods ending after June 15, 2009, and is not expected to have
a material impact on the Corporation's consolidated financial statements.
In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments. This FSP amends the
other-than-temporary impairment guidance in U.S. GAAP for debt securities to
make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in
the financial statements. This FSP does not amend existing recognition and
measurement guidance related to other-than-temporary impairments of equity
securities. This FSP is effective for interim and annual reporting periods
ending after June 15, 2009, and is not expected to have a material impact on the
Corporation's consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations". SFAS
No. 141(R) establishes principles and requirements for how the acquirer in a
business combination recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed and any noncontrolling
interest in the acquiree. SFAS No. 141(R) significantly changes the accounting
for business combinations in a number of areas, including the treatment of
contingent consideration, preacquisition contingencies, transaction costs and
restructuring costs. In addition, under SFAS No. 141(R), changes in an acquired
entity's deferred tax assets and uncertain tax positions after the measurement
period will impact income tax expense. SFAS No. 141(R) is effective for fiscal
years beginning on or after December 15, 2008. This standard requires the
immediate expensing of acquisition related costs. This standard is effective for
acquisitions completed after December 31, 2008. This standard has not had a
material impact on the Corporation's consolidated financial statements.
14
Cheviot Financial Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the three months ended March 31, 2009 and 2008
8. Effects of Recent Accounting Pronouncements (continued)
-------------------------------------------
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities". SFAS No. 161 will require enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133"), and its related interpretations and (c) how derivative instruments and
related hedged items affect an entity's financial position, financial
performance and cash flows. SFAS No. 161 is effective for fiscal years and
interim periods beginning after November 15, 2008. The Corporation adopted SFAS
No. 161 on January 1, 2009 with no significant impact to the Corporation's
results of operations and financial position.
In April 2008, the FASB issued FSP No. FAS 142-3, "Determination of the Useful
Life of Intangible Assets". This FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142,
"Goodwill and Other Intangible Assets". FSP No. FAS 142-3 is effective for
fiscal years beginning on or after December 15, 2008 and will apply only to
intangible assets acquired after the effective date.
In June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities". This FSP addresses whether instruments granted in share-based
payment transactions are participating securities prior to vesting and,
therefore, need to be included in the earnings allocation in computing earnings
per share ("EPS") under the two-class method described in paragraphs 60 and 61
of FASB Statement No. 128, "Earnings per Share". FSP No. EITF 03-6-1 is
effective for fiscal years beginning on or after December 15, 2008. All prior
period EPS data presented after adoption is to be adjusted retrospectively to
conform with the provisions of FSP No. EITF 03-6-1. Adoption of this standard on
January 1, 2009 had no impact on the Corporation's results of operations and
financial position.
In January 2009, the FASB released Proposed Staff Position SFAS No. 107-b and
Accounting Principles Board ("APB") Opinion No. 28-a, "Interim Disclosures about
Fair Value of Financial Instruments" ("SFAS 107-b" and "APB 28-a"). This
proposal amends FASB Statement No. 107, "Disclosures about Fair Values of
Financial Instruments," to require disclosures about fair value of financial
instruments in interim financial statements as well as in annual financial
statements. The proposal also amends APB Opinion No. 28, "Interim Financial
Reporting," to require those disclosures in all interim financial statements.
This proposal is effective for interim periods ending after June 15, 2009, but
early adoption is permitted for interim periods ending after March 15, 2009. The
Corporation plans to adopt SFAS 107-b and APB 28-a and provide the additional
disclosure requirements in the second quarter 2009.
15
Cheviot Financial Corp.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
--------------------------
This report on Form 10-Q contains forward-looking statements, which can be
identified by the use of such words as estimate, project, believe, intend,
anticipate, plan, seek, expect and similar expressions. These forward-looking
statements are subject to significant risks, assumptions and uncertainties that
could affect the actual outcome of future events. Because of these
uncertainties, our actual future results may be materially different from the
results indicated by these forward-looking statements.
Critical Accounting Policies
----------------------------
We consider 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. We consider
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
underlining collateral, the financial strength of the borrower, results of
internal loan reviews 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
percentage allocations can be 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. We also analyze 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 reserve. Actual loan losses may be
significantly more than the allowances we have established which could result in
a material negative effect on our financial results.
Discussion of Financial Condition Changes at December 31, 2008 and at March 31,
2009
--------------------------------------------------------------------------------
Total assets increased $9.1 million, or 2.7%, to $341.1 million at March 31,
2009, from $332.0 million at December 31, 2008. The increase in total assets
reflects increases in cash and cash equivalents and mortgage-backed securities,
which was partially offset by a decrease in loans receivable and investment
securities. The change in the composition of our interest earning assets
reflects management's decision to increase its liquidity during a period of low
interest rates during the economic downturn.
Cash, federal funds sold and interest-earning deposits increased $16.2 million,
or 162.0%, to $26.2 million at March 31, 2009, from $10.0 million at December
31, 2008. The increase in cash and cash equivalents at March 31, 2009, was due
to a $11.8 million increase in interest earning deposits and a $4.6 million
increase in federal funds sold, which was partially offset by a decrease in cash
and due from banks of $84,000. Investment securities decreased $2.1 million, or
6.7%, to $28.8 million at March 31, 2009. At March 31, 2009, $5.0 million of
investment securities were classified as held to maturity, while $23.8 million
were classified as available for sale.
16
Cheviot Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from December 31, 2008 to March 31,
2009 (continued)
----------------------------------------------------------------------------
Mortgage-backed securities increased $3.5 million, or 46.5%, to $11.1 million at
March 31, 2009, from $7.6 million at December 31, 2008. The increase in
mortgage-backed securities was due primarily to purchases of $4.1 million, which
was partially offset by principal prepayments and repayments totaling $541,000.
At March 31, 2009, $6.7 million of mortgage-backed securities was classified as
held to maturity, while $4.4 million was classified as available for sale. As of
March 31, 2009, none of the mortgage-backed securities are considered other than
temporarily impaired.
Loans receivable, including loans held for sale, decreased $9.8 million, or
3.6%, to $258.7 million at March 31, 2009, from $268.5 million at December 31,
2008. The decrease reflects loan sales totaling $9.1 million and loan principal
repayments of $21.1 million, which was partially offset by loan originations of
$21.7 million.
The allowance for loan losses totaled $1.0 million and $709,000 at March 31,
2009 and December 31, 2008. In determining the adequacy of the allowance for
loan losses at any point in time, management and the board of directors apply a
systematic process focusing on the risk of loss in the portfolio. First, the
loan portfolio is segregated by loan types to be evaluated collectively and loan
types to be evaluated individually. Delinquent multi-family and commercial loans
are evaluated individually for potential impairments in their carrying value.
Second, the allowance for loan losses entails utilizing our historic loss
experience by applying such loss percentage to the loan types to be collectively
evaluated in the portfolio. The $337,000 provision for losses on loans during
the quarter ended March 31, 2009 is a reflection of these factors, weaker
economic conditions in the greater Cincinnati area, and the need to allocate
approximately $32,000 in specific reserves for two residential properties
totaling $131,000 which were acquired through foreclosure during the quarter
ended March 31, 2009. 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, 2009.
Non-performing and impaired loans totaled $688,000 and $1.8 million at March 31,
2009 and December 31, 2008, respectively. At March 31, 2009, non-performing and
impaired loans were comprised solely of loans secured by one- to four-family
residential real estate. The decrease in impaired loans was mainly the result of
transferring $1.2 million of impaired loans to other real estate owned. At March
31, 2009, and December 31, 2008 real estate acquired through foreclosure totaled
$2.1 million and $1.1 million, respectively. The allowance for loan losses
represented 147.4% and 38.4% of non-performing and impaired loans at March 31,
2009 and December 31, 2008, respectively. Although management believes that the
Corporation's allowance for loan losses conforms with generally accepted
accounting principles based upon the available facts and circumstances, there
can be no assurance that additions to the allowance will not be necessary in
future periods, which would adversely affect our results of operations.
Deposits increased $11.4 million or 5.3%, to $227.5 million at March 31, 2009,
from $216.0 million at December 31, 2008. Advances from the Federal Home Loan
Bank of Cincinnati decreased by $1.6 million, or 3.6%, to $43.0 million at March
31, 2009, from $44.6 million at December 31, 2008.
17
Cheviot Financial Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Discussion of Financial Condition Changes from December 31, 2008 to March 31,
2009 (continued)
-----------------------------------------------------------------------------
Shareholders' equity decreased $62,000, or 0.1%, from December 31, 2008. The
decrease primarily resulted from dividends paid of $340,000, which was partially
offset by net earnings of $293,000. Dividends declared by the Corporation were
waived by the Corporation's mutual holding company parent. At March 31, 2009,
Cheviot Financial had the ability to purchase an additional 368,414 shares under
its announced stock repurchase plan.
Liquidity and Capital Resources
-------------------------------
We monitor our liquidity position on a daily basis using reports that recap all
deposit activity and loan commitments. A significant portion of our deposit base
is made up of time deposits. At March 31, 2009, $109.7 million of time deposits
are due to mature within twelve months. The daily deposit activity report allows
us to price our time deposits competitively. Because of this and our deposit
retention experience, we anticipate that a significant portion of maturing time
deposits will be retained.
Borrowings from the Federal Home Loan Bank of Cincinnati decreased $1.6 million
during the three months ended March 31, 2009. We have the ability to increase
such borrowings by approximately $100.1 million. The additional borrowings can
be used to offset any decrease in customer deposits or to fund loan commitments.
Comparison of Operating Results for the Three-Month Periods Ended March 31, 2009
and 2008
--------------------------------------------------------------------------------
General
-------
Net earnings for the three months ended March 31, 2009 totaled $293,000, a
$196,000 increase from the $97,000 net earnings reported in the March 2008
period. The increase in net earnings reflects an increase in net interest income
of $341,000 and an increase in other income of $169,000, which was partially
offset by an increase in the provision for losses on loans of $74,000, an
increase in general, administrative and other expense of $171,000 and an
increase in federal income taxes of $69,000 for the 2009 quarter.
Net Interest Income
-------------------
As discussed below, the interest received from our interest earning assets
decreased less than our cost of interest bearing liabilities reflecting the
impact of a steepened yield curve on our net interest income. Total interest
income decreased $199,000, or 4.4%, to $4.3 million for the three-months ended
March 31, 2009, from the comparable quarter in 2008. Interest income on loans
increased $42,000, or 1.1%, to $3.8 million during the 2009 period from $3.8
million for the 2008 period. This increase was due primarily to an $11.5
million, or 4.6%, increase in the average balance of loans outstanding, which
was partially offset by a 20 basis point decrease in the weighted-average yield
on loans to 5.87% at March 31, 2009.
Interest income on mortgage-backed securities decreased $34,000, or 24.5%, to
$105,000 for the three months ended March 31, 2009, from $139,000 for the 2008
quarter, due primarily to a 157 basis point decrease in the average yield, which
was partially offset by a $362,000 increase in the average balance of securities
outstanding period to period. Interest income on investment securities decreased
$185,000, or 33.4%, to $369,000 for the three months ended March 31, 2009,
compared to $554,000 for the same quarter in 2008, due primarily to a decrease
of $14.7 million, or 35.9% in the average balance of investment securities
outstanding, which was partially offset by a 21 basis point increase in the
average yield to 5.63% in the 2009 quarter. Interest income on other
interest-earning deposits decreased $22,000, or 68.8%, to $10,000 for the three
months ended March 31, 2009.
18
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, 2009
and 2008 (continued)
--------------------------------------------------------------------------------
Net Interest Income (continued)
-------------------
Interest expense decreased $540,000, or 22.6%, to $1.8 million for the three
months ended March 31, 2009, from $2.4 million for the same period in 2008.
Interest expense on deposits decreased by $636,000, or 31.6%, to $1.4 million
from $2.0 million due primarily to a 118 basis point decrease in the weighted
average costs of deposits to 2.53% during the 2009 period, which was partially
offset by a $1.1 million, or 0.5%, increase in the weighted-average balance
outstanding. Interest expense on borrowings increased by $96,000, or 25.6%, due
primarily to a $11.1 million, or 34.2%, increase in the average balance
outstanding, which was partially offset by a 31 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 increased by $341,000, or 15.9%, to $2.5 million for the
three months ended March 31, 2009. The average interest rate spread increased 55
basis points to 2.63% for the three months ended March 31, 2009 from 2.08% for
the three months ended March 31, 2008. The net interest margin increased to
3.13% for the three months ended March 31, 2009 from 2.80% for the three months
ended March 31, 2008.
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
$337,000 provision for losses on loans for the three months ended March 31,
2009, compared to $263,000 for the same period in 2008. The decision to make a
larger provision for loan losses during the quarter ended March 31, 2009, as
compared to recent periods, reflects the amount necessary to maintain an
adequate allowance based on our 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 $169,000, or 272.5%, to $231,000 for the three months
ended March 31, 2009, compared to the same quarter in 2008, due primarily to an
increase in the gain on sale of loans of $127,000 and a decrease of $38,000 in
the loss on sale of real estate acquired through foreclosure.
General, Administrative and Other Expense
-----------------------------------------
General, administrative and other expense increased $171,000, or 9.5%, to $2.0
million for the three months ended March 31, 2009, from $1.8 million for the
comparable quarter in 2008. This increase is a result of an increase of $100,000
in employee compensation and benefits and a $58,000 increase in other operating
expense. The increase in employee compensation and benefits is a result of the
increase in compensation expense for additional employees and an increase in
health insurance costs as a result of overall company growth. The increase in
other operating expense is a result of $15,000 of cost incurred from a security
breach with an electronic payments processor which affected some of our debit
card customers and approximately $15,000 in real estate taxes on real estate
owned.
19
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, 2009
and 2008 (continued)
--------------------------------------------------------------------------------
FDIC Premiums
-------------
The Federal Deposit Insurance Corporation ("FDIC") imposes an assessment against
institutions for deposit insurance. This assessment is based on the risk
category of the institution and currently ranges from 5 to 43 basis points of
the institution's deposits. Federal law requires that the designated reserve
ratio for the deposit insurance fund be established by the FDIC at 1.15% to
1.50% of estimated insured deposits. If this reserve ratio drops below 1.15% or
the FDIC expects that it to do so within six months, the FDIC must, within 90
days, establish and implement a plan to restore the designated reserve ratio to
1.15% of estimated insured deposits within five years (absent extraordinary
circumstances). On December 22, 2008, the FDIC issued final rules increasing the
current assessment rates for all institutions by 7 basis points and up to 50
basis points for certain financial institutions for the first quarter of 2009.
It is expected that the FDIC will adopt a new risk based assessment system.
In addition, the Emergency Economic Stabilization Act of 2008 (EESA) temporarily
increased the limit on FDIC insurance coverage for deposits to $250,000 through
December 31, 2009, and the FDIC took action to provide coverage for newly-issued
senior unsecured debt and non-interest bearing transaction accounts in excess of
the $250,000 limit, for which institutions will be assessed additional premiums.
These actions increased our FDIC insurance premiums in the first quarter of 2009
to $9,000 from $7,000 for the same period in 2008. On February 27, 2009, the
FDIC announced an amendment to its restoration plan for the Deposit Insurance
Fund by imposing an emergency special assessment on all insured financial
institutions. This special assessment of 20 basis points will occur on June 30,
2009, and will be payable by us on September 30, 2009. The FDIC may impose an
additional special assessment of up to 10 basis points if necessary to maintain
public confidence in federal deposit insurance. Subsequently, the FDIC has
announced its willingness to lower the special assessment to 10 basis points,
but as of May 8, 2009, no final determination has been made. Based on our
deposits as of March 31, 2009, we anticipate our special assessment, based on
the current guidance from the FDIC, of between a 10 and 20 basis points special
assessment, to be between $227,500 and $455,000. Federal Income Taxes
The provision for federal income taxes increased $69,000, or 176.9%, to $108,000
for the three months ended March 31, 2009, from $39,000 for the same quarter in
2008, due primarily to a $265,000, or 194.9%, increase in pre-tax earnings. The
effective tax rate was 26.9% and 28.7% for the three month periods ended March
31, 2009 and 2008. The difference between the Corporation's effective tax rate
in the 2009 and 2008 periods and the 34% statutory corporate rate is due
primarily to the tax-exempt earnings on bank-owned life insurance, tax exempt
interest on municipal obligations and tax benefits for the contribution to the
Cheviot Savings Bank Foundation.
20
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, 2008.
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.
21
Cheviot Financial Corp.
PART II
ITEM 1. Legal Proceedings
None.
ITEM 1A. Risk Factors
There have been no changes to the Corporation's risk factors since the
filing of the Corporation's Annual Report on Form 10-K for the year
ended December 31, 2008.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
------------------------------------------------------------
The Corporation announced a repurchase plan on January 16, 2008 which
provides for the repurchase of 5% or 447,584 shares of our common
stock. As of March 31, 2009, the Corporation had purchased 79,170
shares at an average price of $9.16 pursuant to the program. There
were no repurchases during the three months ended March 31, 2009.
ITEM 3. Defaults Upon Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits
31.1 Certification of Principal Executive Officer Pursuant to Rule
13a-14 of the Securities Exchange Act of 1934, As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer Pursuant to Rule
13a-14 of the Securities Exchange Act of 1934, As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Principal Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
22
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 8, 2009 By: /s/Thomas J. Linneman
----------------------- ------------------------------------
Thomas J. Linneman
President and Chief Executive Officer
Date: May 8, 2009 By: /s/Scott T. Smith
----------------------- ------------------------------------
Scott T. Smith
Chief Financial Officer
23
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Thomas J. Linneman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cheviot Financial
Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) 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. Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c. 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
d. 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 8, 2009 /s/Thomas J. Linneman
-------------------------------------
Thomas J. Linneman
President and Chief Executive Officer
(principal executive officer)
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13A-14
OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Scott T. Smith, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Cheviot Financial
Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) 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. Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c. 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
d. 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 8, 2009 /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, 2009, 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 8, 2009
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, 2009, 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 8, 2009