CHEVIOT FINANCIAL CORP
Not applicable.                                            31                                      MANAGEMENT  EXECUTIVE OFFICERS OF CHEVIOT FINANCIAL CORP.          The following individuals hold the following executive officer positions of Cheviot Financial Corp.   NAME                        AGE        POSITION - -----------------------  ---------    ------------------------------------------ Thomas J. Linneman           52        President and Chief Executive Officer Scott T. Smith               36        Chief Financial Officer   AVAILABILITY OF ANNUAL REPORT ON FORM 10-K          Our Annual Report on Form 10-K may be accessed on our website at www.cheviotsavings.com.
CHANGING INTEREST RATES MAY CAUSE NET EARNINGS TO DECLINE.          In the event that interest rates rise, our net interest margin and interest rate spread will be adversely affected by the high level of assets with fixed rates of interest which we retain in our portfolio. As market interest rates rise, we will have competitive pressures to increase the rates we pay on deposits, which will result in a decrease of our net interest income. Furthermore, the value of our loans will be less should we choose to sell such loans in the secondary market. Since as a general matter our interest-bearing liabilities reprice or mature more quickly than our interest-earning assets, an increase in interest rates generally would result in a decrease in our average interest rate spread and net interest income.  IF OUR ALLOWANCE FOR LOAN LOSSES IS NOT SUFFICIENT TO COVER ACTUAL LOAN LOSSES, OUR EARNINGS COULD DECREASE.          Our loan customers may not repay their loans according to their terms, and the collateral securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which could have a material adverse effect on our operating results. We make various assumptions and judgments about the collectibility of our portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.          In determining the amount of the allowance for loan losses, we review individual delinquent multi-family and commercial real estate loans for potential impairments in their carrying value. Additionally, we apply a factor to the loan portfolio principally based on historical loss experience as applied to the composition of the one- to-four family loan portfolio and integrated with our perception of risk in the economy related to past experience. Since we must use assumptions regarding individual loans and the economy, our current allowance for loan losses may not be sufficient to cover actual loan losses, and increases in the allowance may be necessary. Consequently, we may need to significantly increase our provision for losses on loans, particularly if one or more of our larger loans or credit relationships becomes delinquent of if we expand our non-residential, multi-family or commercial business lending. In addition, federal and state regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize loan charge-offs.  IF ECONOMIC CONDITIONS DETERIORATE, OUR EARNINGS COULD BE ADVERSELY IMPACTED AS BORROWERS' ABILITY TO REPAY LOANS DECLINES AND THE VALUE OF THE COLLATERAL SECURING OUR LOANS DECREASES.          Our financial results may be adversely affected by changes in prevailing economic conditions, including decreases in real estate values, changes in interest rates which may cause a decrease in interest rate spreads, adverse employment conditions, the monetary and fiscal policies of the federal government and other significant external events. Since we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral. Advance changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings.                                          30           In addition, substantially all of our loans are to individuals and businesses in Hamilton County, Ohio. Consequently, any decline in the economy of this market area could have an adverse impact on our earnings.  OUR PUBLIC SHAREHOLDERS DO NOT EXERCISE VOTING CONTROL OVER CHEVIOT FINANCIAL CORP.          A majority of the voting stock of Cheviot Financial Corp. will be owned by Cheviot Mutual Holding Company. Cheviot Mutual Holding Company will be controlled by its board of directors, who initially will consist of those persons who are members of the board of directors of Cheviot Financial Corp. and Cheviot Savings Bank. Cheviot Mutual Holding Company will elect all members of the board of directors of Cheviot Financial Corp., and, as a general matter, will control the outcome of all matters presented to the stockholders of Cheviot Financial Corp. for resolution by vote, except for matters that require a vote greater than a majority vote. Consequently, Cheviot Mutual Holding Company, acting through its board of directors, is able to control the business and operations of Cheviot Financial Corp. and may be able to prevent any challenge to the ownership or control of Cheviot Financial Corp. by stockholders other than Cheviot Mutual Holding Company. There is no assurance that Cheviot Mutual Holding Company will not take actions that the public stockholders believe are against their interests.  STRONG COMPETITION WITHIN OUR MARKET AREA MAY LIMIT OUR GROWTH AND PROFITABILITY.          Competition in the banking and financial services industry is intense. In our market area, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Many of these competitors have substantially greater resources and lending limits than we do and may offer certain services that we do not or cannot provide. Our profitability depends upon our continued ability to successfully compete in our market area.  WE OPERATE IN A HIGHLY REGULATED ENVIRONMENT AND MAY BE ADVERSELY AFFECTED BY CHANGES IN LAWS AND REGULATIONS.          We are subject to extensive regulation, supervision and examination by the Office of Thrift Supervision, our chartering authority, and by the Federal Deposit Insurance Corporation, as insurer of deposits. As federally chartered holding companies, Cheviot Financial Corp. and Cheviot Mutual Holding Company also will be subject to regulation and oversight by the Office of Thrift Supervision. Such regulation and supervision govern the activities in which an institution and its holding companies may engage and are intended primarily for the protection of the insurance fund and depositors. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution's allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, or legislation, including changes in the regulations governing mutual holding companies, could have a material impact on Cheviot Savings Bank, Cheviot Financial Corp., and our operations.
We conduct our business through our main banking office located in Cheviot, Ohio, and other full-service branch offices located in Hamilton County, Ohio. The aggregate net book value of our premises and equipment was $3.6 million at December 31, 2005. The following table sets forth certain information with respect to our offices at December 31, 2005.                                                                                YEAR OPENED/                   LOCATION                          LEASED OR OWNED           ACQUIRED            NET BOOK VALUE - ------------------------------------------------ ----------------------- -------------------- ------------------------                                                                                                   (IN THOUSANDS)     MAIN OFFICE 3723 Glenmore Avenue                                     Owned                  1915               $       870 Cheviot, Ohio  45211  BRANCHES 5550 Cheviot Road                                        Owned                  1982                       430 Cincinnati, Ohio  45247  6060 Bridgetown Road                                     Owned                  1991                       629 Cincinnati, Ohio  45248  1194 Stone Road                                          Owned                  1997                       668 Harrison, Ohio  45030  LENDING CENTER 8050 Beckett Center Drive, Suite 106                     Leased                 2004                        13 West Chester, Ohio 45069(1)                                                                                               ------------------------      TOTAL NET BOOK VALUE                                                                          $     2,610                                                                                               ========================  - ------------ (1)  New address effective February 1, 2006.
Cheviot Savings Bank is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, involve amounts which are believed by management to be immaterial to its financial condition or results of operations.                                          32
None.                                       PART II
The Company's Common Stock is quoted on the Nasdaq SmallCap Market under the symbol "CHEV." The Common Stock began trading on January 5, 2004.          The following table sets forth the range of the high and low bid prices of the Company's Common Stock for the prior four calendar quarters and is based upon information provided by Nasdaq.                                                    PRICES OF COMMON STOCK                                            ----------------------------------                                                  HIGH              LOW           DIVIDEND PAID                                            ----------------  ----------------  -----------------     CALENDAR QUARTER ENDED March 31, 2005..........................     $    12.98         $    11.09        $    0.06 June 30, 2005...........................          11.74              11.01             0.06 September 30, 2005......................          11.94              11.12             0.06 December 31, 2005.......................          11.80              11.12             0.06                                                   PRICES OF COMMON STOCK                                            ----------------------------------                                                  HIGH              LOW           DIVIDEND PAID                                            ----------------  ----------------  ----------------- CALENDAR QUARTER ENDED March 31, 2004..........................     $    13.75         $    13.00        $    0.05 June 30, 2004...........................          13.49              10.17             0.05 September 30, 2004......................          12.31              10.47             0.05 December 31, 2004.......................          13.24              10.91             0.05           As of December 31, 2005, the Company had 924 stockholders of record.          Set forth below is information relating to the Company's common stock repurchase activity.                                                                                                           MAXIMUM                                                                              TOTAL SHARES         NUMBER OF SHARES                                                                          PURCHASED AS PART OF      THAT MAY YET BE                              TOTAL NUMBER OF       AVERAGE PRICE PAID    A PUBLICLY ANNOUNCED    PURCHASED UNDER THE          MONTH               SHARES PURCHASED          PER SHARE           PROGRAM OR PLAN        PROGRAM OR PLAN - ------------------------  ---------------------  ---------------------  ---------------------  ---------------------      April                               35,000                11.64                    35,000              1,141,363 May                                 28,250                11.23                    63,250              1,113,113 June                                18,456                11.36                    81,706              1,094,657 July                                31,400                11.59                   113,106              1,063,257 August                               8,400                11.60                   121,506              1,054,857 September                           21,100                11.64                   142,606              1,033,757 October                             69,800                11.45                   212,406                963,957 November                           145,800                11.77                   358,206                818,157 December                            52,410                11.74                   410,616                765,747
The Selected Financial Data is incorporated by reference to the Annual Report to Shareholders included as Exhibit 13 to this Form 10-K.                                          33
Incorporated by reference to the Annual Report to Shareholders included as Exhibit 13 to the Form 10-K.
Incorporated by reference to the Annual Report to Shareholders included as Exhibit 13 to the Form 10-K.
The financial statements identified in Item 15(a)(1) hereof are incorporated by reference to the Annual Report to Shareholders included as Exhibit 13 to the Form 10-K.
None.
(a)     Evaluation of disclosure controls and procedures.          Under the supervision and with the participation of our management, including our Chief Executive Officer, President and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the fiscal year (the "Evaluation Date"). Based upon that evaluation, the Chief Executive Officer, President and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective in timely alerting them to the material information relating to us (or our consolidated subsidiaries) required to be included in our periodic SEC filings.          (b)     Changes in internal controls.          There were no significant changes made in our internal controls during the period covered by this report or, to our knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation.          See the Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
None.                                      PART III
34           Information concerning Directors of the Company is incorporated herein by reference from the Company's definitive Proxy Statement (the "Proxy Statement"), specifically the section captioned "Proposal I--Election of Directors." In addition, see "Executive Officers of Cheviot Financial Corp." in Item 1 for information concerning the Company's executive officers.          The Board of Directors has adopted a Code of Ethics, applicable to the Chief Executive Officer, President and Chief Financial Officer. The Code of Ethics may be accessed through our website at WWW.CHEVIOTSAVINGS.COM and is filed as Exhibit 14 hereto.
Information concerning executive compensation is incorporated herein by reference from the Company's Proxy Statement, specifically the section captioned "Executive Compensation."
Information concerning security ownership of certain owners and management is incorporated herein by reference from the Company's Proxy Statement, specifically the section captioned "Voting Securities and Principal Holder Thereof."
Information concerning relationships and transactions is incorporated herein by reference from the Company's Proxy Statement, specifically the section captioned "Transactions with Certain Related Persons."
Information concerning principal accountant fees and services is incorporated herein by reference from the Company's Proxy Statement.                                          35                                        PART IV
The exhibits and financial statement schedules filed as a part of this Form 10-K are as follows:          (a)(1)  FINANCIAL STATEMENTS                  o       Report of Independent Registered Public Accounting Firm.                 o       Consolidated Statements of Financial Condition at                         December 31, 2005 and 2004.                 o       Consolidated Statements of Earnings for the Years Ended                         December 31, 2005 and 2004, the Nine Months Ended                         December 31, 2003 and the Year Ended March 31, 2003.                 o       Consolidated Statements of Stockholders' Equity for the                         Years Ended December 31, 2005 and 2004, the Nine Months                         Ended December 31, 2003 and the Year Ended March 31,                         2003.                 o       Consolidated Statements of Cash Flows for the Years                         Ended December 31, 2005 and 2004, the Nine Months Ended                         December 31, 2003 and the Year Ended March 31, 2003.                 o       Notes to Consolidated Financial Statements.          (a)(2)  FINANCIAL STATEMENT SCHEDULES                  No financial statement schedules are filed because the required                 information is not applicable or is included in the consolidated                 financial statements or related notes.          (a)(3)  EXHIBITS                  13      Annual Report to Shareholders                 14      Code of Ethics*                 21      Subsidiaries of the Registrant                 23      Auditors Consent                 31.1    Certification of President and Chief Executive Officer                         pursuant to Section 302 of the Sarbanes-Oxley Act of                         2002                 31.2    Certification of Chief Financial Officer pursuant to                         Section 302 of the Sarbanes-Oxley Act of 2002                 32      Certification of Chief Executive Officer and Chief                         Financial Officer pursuant to Section 906 of the                         Sarbanes-Oxley Act of 2002          (b)     The exhibits listed under (a)(3) above are filed herewith.          (c)     Not applicable.                                          36                                      SIGNATURES          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.                                          CHEVIOT FINANCIAL CORP.   Date:   March 14, 2006                  By:     /s/ Thomas J. Linneman                                                 --------------------------------                                                 Thomas J. Linneman,                                                 President and Chief Executive                                                 Officer and Director          Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.   By:     /s/ Thomas J. Linneman          By:     /s/ Scott T. Smith         ------------------------------          --------------------------------         Thomas J. Linneman, President           Scott T. Smith, Chief Financial           and Chief Executive Officer           Officer (principal financial                                                 officer and principal accounting                                                 officer)  Date:   March 14, 2006                  Date:   March 14, 2006   By:     /s/ Edward L. Kleemeier         By:     /s/ John T. Smith         ------------------------------          --------------------------------         Edward L. Kleemeier, Director           John T. Smith, Director   Date:   March 14, 2006                  Date:   March 14, 2006   By:     /s/ Robert Thomas               By:     /s/ James E. Williamson         ------------------------------          --------------------------------         Robert Thomas, Director                 James E. Williamson, Director   Date:   March 14, 2006                  Date:   March 14, 2006   By:     /s/ Steven R. Hausfeld         ------------------------------         Steven R. Hausfeld, Director   Date:   March 14, 2006                                          37    EX-13 2 tex13-9410.txt EX-13                                          EXHIBIT 13                            ANNUAL REPORT TO SHAREHOLDERS                                       TABLE OF CONTENTS  ================================================================================                                                                               PAGE  President's Letter to Shareholders and Customers...............................1  Business of Cheviot Financial Corp.............................................2  Financial Highlights...........................................................3  Management's Discussion and Analysis of Financial Condition   and Results of Operations....................................................5  Financial Statements:        Report of Independent Registered Public Accounting Firm................22        Consolidated Statements of Financial Condition.........................23        Consolidated Statements of Earnings....................................24        Consolidated Statements of Comprehensive Income........................25        Consolidated Statements of Shareholders' Equity........................26        Consolidated Statements of Cash Flows..................................27        Notes to Consolidated Financial Statements.............................29  Directors and Officers........................................................53  Investor and Corporate Information............................................54  Office Locations..............................................................55                  LETTER FROM THE PRESIDENT AND CHIEF EXECUTIVE OFFICER  ================================================================================   To Our Shareholders and Customers:          We are pleased to present the Annual Report to Shareholders of Cheviot Financial Corp. (the "Company"), the holding company which owns 100% of the outstanding stock of Cheviot Savings Bank (the "Bank") of Cheviot, Ohio. This is the second annual report to reflect the results of operations and financial condition of Cheviot Financial Corp. as a public company.          The Company reported net earnings of $2.2 million for 2005 and ended the year with assets of $291.8 million.          Construction of a full service branch in the Delhi area is nearly complete, and should open for business in the very near future. Construction has also started on a second full service branch in the Taylor Creek area, and land is being purchased for a third new location. Directors and Management continue to explore expansion opportunities through internal growth or acquisitions.          Cheviot Savings Bank has expanded its services and products to include On-Line Banking, Bill Pay, Financial Planning and additional Investment alternatives. The Bank strives to offer excellent products and service to our customers.          Cheviot Savings Bank Charitable Foundation made numerous contributions to the local community in the past two years. The Foundation awarded over $175,000 in support of neighborhood improvements, needy causes, and higher education. The Foundation has been a supporter of Cystic Fibrosis, Hospice, Homeownership Counseling Center, Boy Scouts of America, and over 100 recipients of college scholarships from area high schools.          I want to personally thank you for your support as a shareholder and pledge to continue to advance the interests of the Company, the Bank, the community, our customers and shareholders.                                          Sincerely,                                          Cheviot Financial Corp.                                           By _____________________________________                                            Thomas J. Linneman                                            President and Chief Executive Officer                                         -1-                                CHEVIOT FINANCIAL CORP.                         BUSINESS OF CHEVIOT FINANCIAL CORP.  ================================================================================   Cheviot Savings Bank (the "Savings Bank") was established in 1911 as an Ohio chartered mutual savings and loan association. As an Ohio-chartered savings association, the Savings Bank is subject to the regulation and supervision of the Ohio Department of Financial Institutions and the Office of Thrift Supervision.  In 2004, the Savings Bank reorganized into a two-tier mutual holding company structure (the "Reorganization") and established Cheviot Financial Corp. ("Cheviot Financial" or the "Corporation") as the parent of the Savings Bank. Pursuant to the Plan, Cheviot Financial issued 9,918,751 common shares, of which approximately 55.0% was issued to Cheviot Mutual Holding Company, a federally chartered mutual holding company. Cheviot Financial sold 4,388,438 common shares, representing approximately 44.0% of the outstanding common stock to the Savings Bank's depositors and a newly formed Employee Stock Ownership Plan ("ESOP") at an initial issuance price of $10.00 per share. In addition, 75,000 shares, or approximately one percent of the outstanding shares, were issued to a charitable foundation established by the Savings Bank. Cheviot Financial's issuance of common shares resulted in proceeds, net of offering costs and shares issued to the ESOP, of $39.3 million.  The Savings Bank is a community and customer oriented savings and loan operating four full-service offices in Hamilton County, Ohio, which we consider our primary market area. We emphasize personal service and customer convenience in serving the financial needs of the individuals, families and businesses residing in our markets.  Cheviot Financial's executive offices are located at 3723 Glenmore Avenue, Cheviot, Ohio 45211-4744, and our telephone number is (513) 661-0457.  The following are highlights of Cheviot Savings Bank's operations:          o       a 94-year history of providing financial products and services                 to individuals, families and small business customers in                 southwestern Ohio;          o       a commitment to single family residential mortgage lending;          o       maintaining capital strength and exceeding regulatory "well                 capitalized" capital requirements; and          o       a business strategy designed to expand our banking relationships                 with existing and future customers.                                         -2-                                CHEVIOT FINANCIAL CORP.                          SELECTED FINANCIAL AND OTHER DATA  ================================================================================   The following tables set forth selected financial and other data of Cheviot Financial Corp. at the dates and for the periods presented.                                                                                         AT DECEMBER 31,                AT MARCH 31,                                                                              2005         2004        2003        2003       2002                                                                                                  (In thousands)       SELECTED FINANCIAL CONDITION DATA: Total assets.............................................                $291,791     $276,587    $317,399    $243,784   $229,001 Cash and cash equivalents................................                   9,103        7,725      83,776      24,408     21,195 Investment securities held to maturity - at cost.........                  27,084       27,102      17,135       6,146     11,244 Mortgage-backed securities available for sale............                   1,269        1,483           -           -          - Mortgage-backed securities held to maturity - at cost....                  20,285       29,204      21,804      23,593     22,961 Loans receivable, net (1)................................                 222,711      203,842     186,853     182,444    166,550 Deposits.................................................                 181,238      179,989     267,927     195,312    190,172 Advances from the Federal Home Loan Bank.................                  33,209       16,199       9,206      10,765      3,948 Shareholders' equity (2).................................                  74,810       77,940      37,867      35,932     33,543                                                                         FOR THE                FOR THE                  FOR THE                                                                      YEAR ENDED          NINE MONTHS ENDED          YEAR ENDED                                                                     DECEMBER 31,            DECEMBER 31,             MARCH 31,                                                                   2005       2004         2003       2002         2003       2002                                                                                           (In thousands) SELECTED OPERATING DATA: Total interest income....................................      $14,408    $12,983       $9,427    $10,718      $14,068    $14,494 Total interest expense...................................        5,129      3,881        3,278      4,639        5,926      8,355                                                                -------    -------       ------    -------      -------    ------- Net interest income......................................        9,279      9,102        6,149      6,079        8,142      6,139 Provision for losses on (recoveries of) loans............           97         -            45         (8)         250        312                                                                -------    -------       ------    -------      -------    ------- Net interest income after provision for   losses on (recoveries of) loans........................        9,182      9,102        6,104      6,087        7,892      5,827 Total other income.......................................          445        270          191        110          263        506 Total general, administrative and other expense..........        6,418      6,968        3,365      3,175        4,530      3,936                                                                -------    -------       ------    -------      -------    ------- Earnings before income taxes.............................        3,209      2,404        2,930      3,022        3,625      2,397 Federal income taxes.....................................        1,056      1,076          995      1,027        1,236        816                                                                -------    -------       ------    -------      -------    ------- Net earnings.............................................      $ 2,153    $ 1,328       $1,935    $ 1,995      $ 2,389    $ 1,581                                                                =======    =======       ======    =======      =======    =======  Earnings per share - basic and diluted...................      $  0.22    $  0.14          N/A        N/A          N/A        N/A                                                                =======    =======       ======    =======      =======    =======  - ---------------------------- (1)  Includes loans held for sale. (2)  Consists of retained earnings only for periods prior to December 31, 2004.                                         -3-                                CHEVIOT FINANCIAL CORP.                    SELECTED FINANCIAL AND OTHER DATA (CONTINUED)  ================================================================================                                                             AT OR FOR THE           AT OR FOR THE           AT OR FOR THE                                                           YEAR ENDED           NINE MONTHS ENDED          YEAR ENDED                                                           DECEMBER 31,            DECEMBER 31,              MARCH 31,                                                         2005       2004         2003       2002          2003       2002        SELECTED FINANCIAL RATIOS AND OTHER DATA:(1) PERFORMANCE RATIOS: Return on average assets.........................       0.76%      0.48%        1.02%      1.11%         0.99%      0.70% Return on average equity.........................       2.79       1.72         6.97       7.67          6.83       4.84 Average equity to average assets.................      27.17      27.91        14.64      14.48         14.56      14.55 Equity to total assets at end of period..........      25.64      28.18        11.93      14.65         14.74      14.65 Interest rate spread (2).........................       2.72       2.85         3.06       3.17          3.09       2.33 Net interest margin (2)..........................       3.39       3.39         3.39       3.54          3.50       2.85 Average interest-bearing asset to average   interest-bearing liabilities...................     135.63     137.59       118.48     113.60        115.76     113.49 Total general, administrative and other   expenses to average total assets...............       2.26       2.53         1.77       1.77          1.89       1.75 Efficiency ratio (3).............................      66.00      74.35        70.77      68.40         53.90      59.23 ASSET QUALITY RATIOS: Nonperforming loans as a percent of total   loans (4)......................................       0.07       0.12         0.25       0.04          0.13       0.37 Nonperforming assets as a percent of total   assets.........................................       0.08       0.12         0.16       0.06          0.15       0.34 Allowance for loan losses as a percent of   total loans....................................       0.36       0.36         0.41       0.26          0.40       0.29 Allowance for loan losses as a percent of   nonperforming assets...........................     339.50     214.66       151.18     327.56        195.48      62.73 REGULATORY CAPITAL RATIOS: Tangible capital.................................      16.70      21.07        11.93      14.65         14.74      14.65 Core capital.....................................      16.70      21.07        11.93      14.65         14.74      14.65 Risk-based capital...............................      34.90      47.08        30.05      29.26         32.52      30.58 NUMBER OF: Banking offices..................................          4          4            4          4             4          4  - --------------------------- (1)  With the exception of end of period ratios, all ratios are based on average      monthly balances during the periods, and have been annualized where      appropriate. (2)  Interest rate spread represents the difference between the weighted-average      yield on interest-earning assets and the weighted-average rate on      interest-bearing liabilities. Net interest margin represents net interest      income as a percentage of average interest-earning assets. (3)  Efficiency ratio represents the ratio of general, administrative and other      expenses divided by the sum of net interest income and total other income. (4)  Nonperforming loans consist of non-accrual loans and accruing loans greater      than 90 days delinquent, while nonperforming assets consist of      nonperforming loans and real estate acquired through foreclosure.                                         -4-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   This discussion and analysis reflects Cheviot Financial's financial statements and other relevant statistical data and is intended to enhance your understanding of our consolidated financial condition and results of operations. You should read the information in this section in conjunction with Cheviot Financial's consolidated financial statements and the related notes included in this Annual Report. The preparation of financial statements involves the application of accounting policies relevant to the business of Cheviot Financial. Certain of Cheviot Financial's accounting policies are important to the portrayal of Cheviot Financial's financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, but without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers.  GENERAL  Our results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on our loans and securities and our cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by the provision for losses on loans, loan sales and servicing activities, and service charges and fees collected on our loan and deposit accounts. Our general, administrative and other expense primarily consists of employee compensation and benefits, advertising expense, data processing expense, other operating expenses and federal income taxes. Results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities. In 2003, we decided to change our fiscal year end from March 31 to December 31. Consequently, changes in our results of operations for the year ended December 31, 2004 are compared against the nine month period ended December 31, 2003.  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 credit losses inherent 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 Savings Bank.  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.                                         -5-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   CRITICAL ACCOUNTING POLICIES (continued)  The analysis has two components, specific and general allocations. Specific allocations are made for 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. 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.  FORWARD LOOKING STATEMENTS  This annual 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 include:          o       statements of our goals, intentions and expectations;          o       statements regarding our business plans and prospects and growth                 and operating strategies;          o       statements regarding the asset quality of our loan and                 investment portfolios; and          o       estimates of our risks and future costs and benefits.  These forward-looking statements are subject to significant risks, assumptions and uncertainties, including, among other things, the following important factors that could affect the actual outcome of future events:          o       significantly increased competition among depository and other                 financial institutions;          o       inflation and changes in the interest rate environment that                 reduce our margins or reduce the fair value of financial                 instruments;          o       general economic conditions, either nationally or in our market                 areas, that are worse than expected;          o       adverse changes in the securities market;          o       legislative or regulatory changes that adversely affect our                 business;          o       our ability to enter new markets successfully and capitalize on                 growth opportunities;          o       changes in consumer spending, borrowing and savings habits;          o       changes in accounting policies and practices, as may be adopted                 by the bank regulatory agencies, the Financial Accounting                 Standards Board and the Public Company Accounting Oversight                 Board; and          o       changes in our organization, compensation and benefit plans.  Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.                                         -6-                                CHEVIOT FINANCIAL CORP.        AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS EARNED AND RATES PAID  ================================================================================   Net interest income represents the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Net interest income also depends on the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them, respectively.  The following tables set forth certain information for the year ended December 31, 2005 and 2004, the nine months ended December 31, 2003, and for the fiscal year ended March 31, 2003. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, is expressed both in dollars and rates. No tax equivalent adjustments were deemed necessary based on materiality. Average balances are based on monthly averages. In the opinion of management, monthly averages do not differ materially from daily averages.                                                            FOR THE YEARS ENDED DECEMBER 31,                  FOR THE NINE MONTHS ENDED                                                       2005                            2004                    DECEMBER 31, 2003                                                               AVERAGE                         AVERAGE                        AVERAGE                                            AVERAGE             YIELD/      AVERAGE             YIELD/     AVERAGE             YIELD/                                            BALANCE  INTEREST    RATE       BALANCE  INTEREST    RATE      BALANCE  INTEREST    RATE                                                                             (Dollars in thousands)           Assets: Interest-earning assets:   Loans receivable, net (1)               $211,736   $12,311    5.81%     $197,000   $11,221    5.70%    $185,149    $8,442    6.08%   Mortgage-backed securities                25,877       889    3.44        28,807       821    2.85       21,469       558    3.47   Investment securities                     29,321       981    3.35        30,449       765    2.51        9,944       217    2.91   Interest-earning deposits     and other (2)                            7,033       227    3.23        12,181       176    1.44       25,237       210    1.11                                           --------   -------              --------   -------             --------   -------      Total interest-earning assets         273,967    14,408    5.26       268,437    12,983    4.84      241,799     9,427    5.20  Total non-interest-earning assets           10,481                           7,463                         10,990                                           --------                        --------                       --------       Total assets                         $284,448                        $275,900                       $252,789                                           ========                        ========                       ========  Liabilities and Shareholders' Equity: Interest-bearing liabilities:   Deposits                                $177,614     4,029    2.27      $181,683     3,285    1.81     $194,308     2,935    2.01   FHLB advances                             24,375     1,100    4.51        13,417       596    4.44        9,772       343    4.68                                           --------   -------              --------   -------             --------   -------      Total interest-bearing liabilities    201,989     5,129    2.54       195,100     3,881    1.99      204,080     3,278    2.14                                                      -------  ------                 -------  ------                -------  ------  Total non-interest-bearing liabilities       5,171                           3,790                         11,694                                           --------                        --------                       --------       Total liabilities                     207,160                         198,890                        215,774  Shareholders' equity                        77,288                          77,010                         37,015(6)                                           --------                        --------                       --------       Total liabilities and        shareholders' equity               $284,448                        $275,900                       $252,789                                           ========                        ========                       ========  Net interest income                                  $ 9,279                         $ 9,102                         $6,149                                                      =======                         =======                        =======  Interest rate spread (3)                                        2.72%                           2.85%                          3.06%                                                               ======                          ======                         ======  Net interest margin (4)                                         3.39%                           3.39%                          3.39%                                                               ======                          ======                         ======  Average interest-earning assets to   average interest-bearing   liabilities                                                 135.63%                         137.59%                        118.48%                                                               ======                          ======                         ======  - ------------------------------------ (1)  Includes nonaccruing loans. Interest income on loans receivable, net      includes amortized loan origination fees. (2)  Includes interest-earning demand deposits, other interest-earning deposits      and FHLB stock. (3)  Interest rate spread represents the difference between the weighted-average      yield on interest-earning assets and the      weighted-average rate on interest-bearing liabilities. (4)  Net interest margin is net interest income divided by average      interest-earning assets. (5)  Annualized. (6)  Consists of only retained earnings at December 31, 2003.                                         -7-                                CHEVIOT FINANCIAL CORP.       AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS EARNED AND RATES PAID  ================================================================================                                                         YEAR ENDED MARCH 31,                                                               2003                                                                        AVERAGE                                                   AVERAGE               YIELD/                                                   BALANCE   INTEREST     RATE                                                       (Dollars in thousands) Assets: Interest-earning assets:   Loans receivable (1)                           $176,728    $11,995     6.79%   Mortgage-backed securities                       25,644      1,139     4.44   Investment securities                            12,354        588     4.76   Interest-bearing deposits and     other (2)                                      18,121        346     1.91                                                  --------    ------- Total interest-earning assets                     232,847     14,068     6.04  Total non-interest-earning assets                   7,365                                                  --------  Total assets                                     $240,212                                                  =======  Liabilities and Equity: Interest-bearing liabilities:   Deposits                                       $190,838      5,473     2.87   FHLB advances                                    10,305        453     4.40                                                  --------    ------- Total interest-bearing liabilities                201,143      5,926     2.95                                                              -------   ------  Total non-interest-bearing liabilities              4,105                                                  --------  Total liabilities                                 205,248  Retained earnings                                  34,964                                                  --------  Total liabilities and   retained earnings                              $240,212                                                  ========  Net interest income                                          $ 8,142                                                              =======  Interest rate spread (3)                                                 3.09%                                                                        ======  Net interest margin (4)                                                  3.50%                                                                        ======  Average interest-earning assets to   interest-bearing liabilities                                         115.76%                                                                        ====== - ------------------------------------ (1)  Includes nonaccruing loans. Interest income on loans receivable, net      includes amortized loan origination fees. (2)  Includes interest-bearing demand deposits, other interest-bearing deposits      and FHLB stock. (3)  Interest rate spread represents the difference between the weighted-average      yield on interest-earning assets and the weighted-average rate on      interest-bearing liabilities. (4)  Net interest margin is net interest income divided by average      interest-earning assets.                                         -8-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   RATE/VOLUME ANALYSIS.  The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected our interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.                                                    YEAR ENDED DECEMBER 31, 2005                                                   COMPARED TO THE YEAR ENDED                                                         DECEMBER 31, 2004                                                      INCREASE                                                     (DECREASE)                                                       DUE TO                                                 VOLUME        RATE         NET  Interest-earning assets: Loans receivable, net                            $867         $223        $1,090 Investment securities                             (30)         246           216 Mortgage-backed securities                        (88)         156            68 Interest-earning assets and other                 (97)         148            51                                                  ----         ----        ------ Total interest-earning assets                     652          773         1,425  Interest-bearing liabilities: Deposits                                          (74)         818           744 FHLB advances                                     495            9           504                                                  ----         ----        ------ Total interest-bearing liabilities                421          827         1,248                                                  ----         ----        ------  Increase (decrease) in net interest income       $231         $(54)       $  177                                                  ====         ====        ======                                         -9-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2005 AND DECEMBER 31, 2004  At December 31, 2005, Cheviot Financial had total assets of $291.8 million, an increase of $15.2 million, or 5.5%, from the $276.6 million total at December 31, 2004. The increase in total assets reflects an increase in advances from the Federal Home Loan Bank to fund growth in the loan portfolio totaling $18.9 million.  Cash, federal funds sold and interest-earning deposits in other financial institutions totaled $9.1 million at December 31, 2005, an increase of $1.4 million, or 17.8%, from the $7.7 million total at December 31, 2004. Investment securities totaled $27.1 million at December 31, 2005, a decrease of $18,000, or 0.1%, from $27.1 million at December 31, 2004. During the year ended December 31, 2005, investment securities purchases consisted of $4.0 million of U.S. Government agency obligations, which were offset by $4.0 million of maturities. All of our investment securities are classified as held to maturity.  Mortgage-backed securities totaled $21.6 million at December 31, 2005, a decrease of $9.1 million, or 29.8%, from $30.7 million at December 31, 2004. The decrease in mortgage-backed securities was due primarily to $9.1 million of principal repayments.  Loans receivable, including loans held for sale, totaled $222.7 million at December 31, 2005, an increase of $18.9 million, or 9.3%, from December 31, 2004. The increase resulted from loan originations of $64.6 million, which were partially offset by loan repayments of $43.9 million and loans sales of $1.6 million. Growth in the loan portfolio consisted primarily of a $13.0 million increase in loans secured by one- to four-family residential real estate. During 2003, Cheviot Savings Bank initiated a program of selling selected one- to four-family residential fixed-rate loans to the Federal Home Loan Bank of Cincinnati. Loans serviced for others totaled $5.9 million at December 31, 2005, and there were $658,000 in loans held for sale at December 31, 2005.  At December 31, 2005, the allowance for loan losses totaled $808,000, or 0.36% of net loans, compared to $732,000, or 0.36% of net loans at December 31, 2004. In determining the allowance for loan losses at any point in time, management and the board of directors apply a systematic process focusing on the risk of loss in the portfolio. First, the loan portfolio is segregated by loan types to be evaluated collectively and loan types to be evaluated individually. Delinquent multi-family and commercial loans are evaluated individually for potential impairments in their carrying value.  Second, the allowance for loan losses entails utilizing our historic loss experience by applying such loss percentage to the loan types to be collectively evaluated in the portfolio. This segment of the loss analysis resulted in an additional $97,000 provision for losses on loans for the year ended December 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 future 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 provided for at December 31, 2005.                                         -10-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2005 AND DECEMBER 31, 2004 (continued)  Nonperforming and impaired loans totaled $149,000 at December 31, 2005, compared to $251,000 at December 31, 2004. At December 31, 2005 nonperforming loans were comprised of loans secured by one- to four-family residential real estate totaling $15,000 and loans secured by multi-family residential real estate totaling $134,000. The allowance for loan losses totaled 542.3% and 291.6% of nonperforming loans at December 31, 2005 and 2004, respectively. Although management believes that the 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 totaled $181.2 million at December 31, 2005, an increase of $1.2 million, or .7%, from $180.0 million at December 31, 2004. The deposit growth was comprised of a $6.2 million increase in certificates of deposits, which was partially offset by a decrease in demand transaction and passbook accounts of $4.9 million. While management generally pursues a strategy of moderate growth in deposits, the Savings Bank has not historically offered the highest interest rates on deposits in its market area.  Advances from the Federal Home Loan Bank of Cincinnati increased by $17.0 million, or 105.0%, to a total of $33.2 million at December 31, 2005. The increase in advances was due primarily to management's decision to fund loan originations with advances to lock in a positive interest rate spread.  Shareholders' equity totaled $74.8 million at December 31, 2005, a $3.1 million, or 4.0%, decrease from December 31, 2004. The decrease resulted from the increase in shares acquired by the stock benefit plans of $1.8 million, the purchase of treasury shares totaling $2.5 million and dividends of $1.0 million paid during 2005, all of which were partially offset by net earnings of $2.2 million. At December 31, 2005, Cheviot Financial had the ability to purchase an additional 765,747 shares under its announced stock repurchase plan.  Cheviot Savings Bank is required to maintain minimum regulatory capital pursuant to federal regulations. At December 31, 2005, Cheviot Savings Bank's regulatory capital substantially exceeded all minimum regulatory capital requirements.   COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2005 AND DECEMBER 31, 2004  GENERAL  Cheviot Financial's net earnings totaled $2.2 million for the year ended December 31, 2005, an increase of $825,000, or 62.1%, compared to the net earnings recorded for the year ended December 31, 2004. The increase in net earnings reflects a $550,000 decrease in general, administrative and other expenses in 2005. During the 2004 period, Cheviot Financial contributed $1.5 million to the Cheviot Savings Bank Charitable Foundation. In addition, net interest income increased $177,000, an increase in other income of $175,000 and a decrease in the provision for federal income taxes of $20,000.                                         -11-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2005 AND DECEMBER 31, 2004 (continued)  INTEREST INCOME  Total interest income for the year ended December 31, 2005, totaled $14.4 million, an increase of $1.4 million, or 11.0%, compared to the year ended December 31, 2004. The increase in interest income reflects the impact of an increase of $5.5 million, or 2.1%, in the average balance of interest-earning assets outstanding during the year ended December 31, 2005 as compared to the year ended December 31, 2004, and an increase of 42 basis points in the average yield, from 4.84% to 5.26%.  Interest income on loans increased by $1.1 million, or 9.7%, for the year ended December 31, 2005. The increase in interest income on loans reflects the impact of a $14.7 million, or 7.5%, increase in the average balance outstanding during 2005 and an increase of 11 basis points in the average yield on loans to 5.81%. Interest income on mortgage-backed securities increased by $68,000, or 8.3%, during the year ended December 31, 2005, due primarily to an increase in the average yield of 59 basis points from the 2004 period, partially offset by a $2.9 million decrease in the average balance outstanding. Interest income on investment securities increased by $216,000, or 28.2%, during the year ended December 31, 2005, due primarily to an increase in the average yield of 84 basis points from the 2004 period, partially offset by a $1.1 million, or 3.7%, decrease in the average balance outstanding. Interest income on other interest-earning assets increased by $51,000, or 29.0%, during the year ended December 31, 2005. The increase was due primarily to a 179 basis point increase in the average yield, which was partially offset by a decrease of $5.1 million in the average balance outstanding.  INTEREST EXPENSE  Interest expense totaled $5.1 million for the year ended December 31, 2005, an increase of $1.2 million, or 32.2 %, compared to the year ended December 31, 2004. The average balance of interest-bearing liabilities outstanding increased by $6.9 million during 2005 and the average cost of funds increased by 55 basis points to 2.54% for the year ended December 31, 2005. Interest expense on deposits totaled $4.0 million for the year ended December 31, 2005, an increase of $744,000, or 22.6%, from the year ended December 31, 2004. This increase was a result of an increase in the average cost of deposits of 46 basis points to 2.27% for 2005, and the average balance outstanding decreased by $4.1 million, or 2.2%, for 2005. Interest expense on borrowings totaled $1.1 million for the year ended December 31, 2005, an increase of $504,000, or 84.6%, from the 2004 period. This increase resulted from an increase in the average balance of borrowings outstanding of $11.0 million, or 81.7%, and a 7 basis point increase in the average cost of borrowings for the year ended December 31, 2005 from the 2004 period. Increases in the average yields on interest-earning assets and the average cost of interest-bearing liabilities were due primarily to the overall increase in short term interest rates during 2005. Such increases reflect the Federal Reserve's increases in interbank rates during the period.  NET INTEREST INCOME  As a result of the foregoing changes in interest income and interest expense, net interest income increased by $177,000 million, or 1.9%, during the year ended December 31, 2005 from the year ended December 31, 2004. The average interest rate spread decreased to 2.72% for the year ended December 31, 2005 from 2.85% for the year ended December 31, 2004. The net interest margin remained the same at 3.39% for the years ended December 31, 2005 and 2004.                                         -12-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2005 AND DECEMBER 31, 2004 (continued)  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 recorded a $97,000 provision for losses on loans for the year ended December 31, 2005. Management's analysis of the allowance resulted in no provision for losses on loans for the year ended December 31, 2004. There can be no assurance that the loan loss allowance will be sufficient to cover losses on nonperforming loans in the future. At December 31, 2005, the allowance for loan losses totaled $808,000, or 0.36% of net loans, compared to $732,000, or 0.36% of net loans at December 31, 2004. Management believes all nonperforming loans are adequately collateralized; however, there can be no assurance that the loan loss allowance will be adequate to absorb losses on known nonperforming loans or that the allowance will be adequate to cover losses on nonperforming loans in the future.  OTHER INCOME  Other income totaled $445,000 for the year ended December 31, 2005, an increase of $175,000, or 64.8%, compared to the year ended December 31, 2004, due primarily to an increase in other operating income of $92,000, or 49.5%, to $278,000 for the year ended December 31, 2005 from $186,000 for the prior period, an increase of $121,000 in earnings of bank-owned life insurance and a decrease in the loss on sale of real estate acquired through foreclosure of $4,000, which were partially offset by a decrease in the gain on sale of loans of $45,000, or 78.9%.  GENERAL, ADMINISTRATIVE AND OTHER EXPENSE  General, administrative and other expense totaled $6.4 million for the year ended December 31, 2005, a decrease of $550,000, or 7.9%, compared to the year ended December 31, 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 $450,000, or 14.3% in employee compensation and benefits expenses, an increase of $264,000, or 39.3% in property, payroll and other taxes and an increase of $164,000, or 51.7% in legal and professional expenses. The increase in employee compensation and benefits is due primarily to an increase in expense related to stock benefit plans, an increase in contributions to the retirement plan and an increase in the number of employees as a result of the Corporation's growth. The increase in property, payroll and other taxes is due primarily to an increase in the Ohio franchise tax as a result of the overall increase in the Corporation's capital following the completion of the stock offering in 2004. 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 internal audit procedures and documentation.                                         -13-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2005 AND DECEMBER 31, 2004 (continued)  FEDERAL INCOME TAXES  The provision for federal income taxes totaled $1.1 million for the year ended December 31, 2005, a decrease of $20,000, or 1.9 %, compared to the provision recorded for the 2004 period. The decrease resulted primarily from the decrease in earnings before taxes excluding the effects of Cheviot Financial's non-deductible charitable contribution of $750,000 in 2004. The effective tax rates were 32.9% and 44.8% for the years ended December 31, 2005 and 2004, respectively.   COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 AND THE NINE MONTH PERIOD ENDED DECEMBER 31, 2003  As previously noted, during 2003 management elected to change its reporting year-end from March 31st to December 31st. As a result, the following discussion compares the financial results for the year ended December 31, 2004 to the nine months ended December 31, 2003.  GENERAL  Cheviot Financial's net earnings totaled $1.3 million for the year ended December 31, 2004, a decrease of $607,000, or 31.4%, compared to the net earnings recorded for the nine months ended December 31, 2003. The decrease in net earnings was primarily attributable to an increase in general, administrative and other expense of $3.6 million and an increase in the provision for federal income taxes of $81,000, which were partially offset by an increase in net interest income of $3.0 million and an increase in other income of $79,000.  INTEREST INCOME  Total interest income for the year ended December 31, 2004, totaled $13.0 million, an increase of $3.6 million, or 37.7%, compared to the nine months ended December 31, 2003. The increase in interest income reflects the impact of an increase of $26.6 million, or 11.0%, in the average balance of interest-earning assets outstanding during the year ended December 31, 2004 as compared to the nine months ended December 31, 2003, which was partially offset by a decrease of 36 basis points in the average yield, from 5.20% to 4.84%.  Interest income on loans increased by $2.8 million, or 32.9%, for the year ended December 31, 2004. The increase in interest income on loans reflects the impact of an $11.9 million, or 6.4%, increase in the average balance outstanding during 2004, which was partially offset by a decrease of 38 basis points in the average yield on loans to 5.70%. Interest income on mortgage-backed securities increased by $263,000, or 47.1%, during the year ended December 31, 2004, due primarily to a $7.3 million increase in the average balance outstanding, partially offset by a decrease in the average yield of 62 basis points from the 2003 period. Interest income on investment securities increased by $548,000, or 252.5%, during the year ended December 31, 2004, due primarily to a $20.5 million, or 206.2%, increase in the average balance outstanding, partially offset by a decrease in the average yield of 40 basis points from the 2003 period. Interest income on other interest-earning assets decreased by $34,000, or 16.2%, during the year ended December 31, 2004. The decrease was due primarily to a decrease of $13.1 million in the average balance outstanding, which was partially offset by a 33 basis point increase in the average yield.                                         -14-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 AND THE NINE MONTH PERIOD ENDED DECEMBER 31, 2003 (continued)  INTEREST EXPENSE  Interest expense totaled $3.9 million for the year ended December 31, 2004, an increase of $603,000, or 18.4%, compared to the nine months ended December 31, 2003. The average balance of interest-bearing liabilities outstanding declined by $9.0 million during 2004 and the average cost of funds decreased by 15 basis points to 1.99% for the year ended December 31, 2004. Interest expense on deposits totaled $3.3 million for the year ended December 31, 2004, an increase of $350,000, or 11.9%, from the nine months ended December 31, 2003. This increase was a result of the three additional months in the 2004 reporting period, as the average cost of deposits decreased by 20 basis points to 1.81% for 2004, and the average balance outstanding decreased by $12.6 million, or 6.5%, for 2004. Interest expense on borrowings totaled $596,000 for the year ended December 31, 2004, an increase of $253,000, or 73.8%, from the 2003 period. This increase resulted from an increase in the average balance of borrowings outstanding of $3.6 million, or 37.3%, which was partially offset by a 24 basis point decrease in the average cost of borrowings for the year ended December 31, 2004 from the 2003 period. Decreases in the average yields on interest-earning assets and the average cost of interest-bearing liabilities were due primarily to the overall decline in interest rates in the economy during 2004 and 2003.  NET INTEREST INCOME  As a result of the foregoing changes in interest income and interest expense, as well as the different terms of the comparative periods, net interest income increased by $3.0 million, or 48.0%, during the year ended December 31, 2004 from the nine month period ended December 31, 2003. The average interest rate spread decreased to 2.85% for the year ended December 31, 2004 from 3.06% for the nine months ended December 31, 2003. The net interest margin remained the same at 3.39% for the year ended December 31, 2004 and the nine months ended December 31, 2003.  PROVISION FOR LOSSES ON LOANS  There was no provision for losses on loans charged to earnings for the year ended December 31, 2004. Total allowance for loan losses is calculated by management based on historical experience, the volume and type of lending conducted by Cheviot Savings Bank, the status of past due principal and interest payments and other factors related to the collectibility of the Savings Bank's loan portfolio. Based on an analysis of these factors and the fact that nonperforming and impaired loans decreased $211,000, or 45.7%, to $251,000 at December 31, 2004, compared to $462,000 at December 31, 2003, no provision was needed despite the fact that net loans increased $17.0 million. At December 31, 2004, the allowance for loan losses totaled $732,000, or 0.36% of net loans, compared to $768,000 or 0.41% of net loans at December 31, 2003. Management believes all nonperforming loans are adequately collateralized; however, there can be no assurance that the loan loss allowance will be adequate to absorb losses on known nonperforming loans or that the allowance will be adequate to cover losses on nonperforming loans in the future.                                         -15-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   COMPARISON OF RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 AND THE NINE MONTH PERIOD ENDED DECEMBER 31, 2003 (continued)  OTHER INCOME  Other income totaled $270,000 for the year ended December 31, 2004, an increase of $79,000, or 41.4%, compared to the nine months ended December 31, 2003. While the increase in other income was primarily attributable to the different terms of the comparative periods, the Savings Bank also realized increases in service fees on deposits and in gains on sales of loans. The increase in gains on sale of loans was due to an increase in the volume of loans sold period-to-period.  GENERAL, ADMINISTRATIVE AND OTHER EXPENSE  General, administrative and other expense totaled $7.0 million for the year ended December 31, 2004, an increase of $3.6 million, or 107.1%, compared to the nine months ended December 31, 2003. The increase in general, administrative and other expense was due primarily to the three-month difference in reporting periods year to year. Significant increases in general, administrative and other expense included an increase of $1.5 million to fund our charitable foundation, a $418,000 expense recorded in connection with the Employee Stock Ownership Plan established in connection with the reorganization to a mutual holding company and expenses associated with staffing and operating our new Mason lending center.  FEDERAL INCOME TAXES  The provision for federal income taxes totaled $1.1 million for the year ended December 31, 2004, an increase of $81,000, or 8.1%, compared to the provision recorded for the 2003 period. The increase resulted primarily from the effects of Cheviot Financial's non-deductible charitable contribution of $750,000 in 2004. The effective tax rates were 44.8% and 34.0% for the year ended December 31, 2004 and the nine-month period ended December 31, 2003, respectively.                                         -16-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   MANAGEMENT OF MARKET RISK  QUALITATIVE ANALYSIS  Our most significant form of market risk is interest rate risk. The primary objective of our interest rate risk policy is to manage the exposure of net interest income to changes in interest rates. Our board of directors and management evaluates the interest rate risk inherent in certain assets and liabilities, determines the level of risk appropriate given our business strategy, operating environment, capital and liquidity requirements and performance objectives and modifies lending, investing, deposit and borrowing strategies accordingly. Our board of directors reviews management's activities and strategies, the effect of those strategies on the net portfolio value, and the effect that changes in market interest rates would have on net portfolio value.  We actively monitor interest rate risk in connection with our lending, investing, deposit and borrowing activities. We emphasize the origination of residential and multi-family fixed-rate mortgage loans, including 15, 20 and 30 year first mortgage loans, residential, multi-family and commercial real estate adjustable-rate loans, construction loans and consumer loans. Depending on market interest rates and our capital and liquidity position, we may sell our newly originated fixed-rate mortgage loans on a servicing-retained basis. We also invest in short-term securities, which generally have lower yields compared to longer-term investments. Shortening the maturities of our interest-earning assets by increasing investments in shorter-term loans and securities helps to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. These strategies may adversely impact net interest income due to lower initial yields on these investments in comparison to longer term, fixed-rate loans and investments.  QUANTITATIVE ANALYSIS  As part of its monitoring procedures, the Asset and Liability Management Committee regularly reviews interest rate risk by analyzing the impact of alternative interest rate environments on the market value of portfolio equity, which is defined as the net present value of an institution's existing assets, liabilities and off-balance sheet instruments, and evaluating such impacts against the maximum potential changes in market value of portfolio equity that are authorized by the Savings Bank's board of directors.  The Office of Thrift Supervision provides the Savings Bank with the information presented in the following tables. They present the change in the Savings Bank's net portfolio value ("NPV") at December 31, 2005 and 2004, that would occur upon an immediate change in interest rate based on Office of Thrift Supervision assumptions, but without effect to any steps that management might take to counteract that change. The application of the methodology attempts to quantify interest rate risk as the change in NPV which would result from a theoretical change in market interest rates of 100, 200 and 300 basis points. Generally, NPV is the discounted present value of the difference between incoming cash flows on interest-earning assets and outgoing cash flows on interest-bearing liabilities.                                         -17-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   QUANTITATIVE ANALYSIS (continued)                                  DECEMBER 31, 2005     CHANGE IN INTEREST RATES IN   BASIS POINTS                                             NET PORTFOLIO VALUE      ("BP")              NET PORTFOLIO VALUE(3)          AS % OF PV OF ASSETS(4)   (RATE SHOCK   IN RATES)(1)     $ AMOUNT    $ CHANGE    % CHANGE      NPV RATIO(5)   CHANGE                        (In thousands)      +300 bp         $36,337    $(19,935)     (35.4)%       13.43%       (545)bp     +200 bp          43,031     (13,240)     (23.5)        15.39        (349)     +100 bp          49,756      (6,516)     (11.6)        17.23        (165)        0 bp          56,272           -          -         18.88           -     -100 bp          59,765       3,493        6.2         19.63          75     -200 bp(2)       59,596       3,325        5.9         19.38          50                                   DECEMBER 31, 2004     CHANGE IN INTEREST RATES IN   BASIS POINTS                                             NET PORTFOLIO VALUE      ("BP")              NET PORTFOLIO VALUE(3)          AS % OF PV OF ASSETS(4)   (RATE SHOCK   IN RATES)(1)     $ AMOUNT    $ CHANGE    % CHANGE      NPV RATIO(5)   CHANGE                        (In thousands)      +300 bp         $46,602    $(21,647)     (31.7)%       17.79%       (595)bp     +200 bp          54,166     (14,083)     (20.6)        20.00        (374)     +100 bp          61,539      (6,710)      (9.8)        22.02        (172)        0 bp          68,249           -          -         23.74           -     -100 bp          71,052       2,803        4.1         24.36          62     -200 bp(2)            -           -          -             -           -  - ------------------------------------ (1)  Assumes an instantaneous uniform change in interests rates at all      maturities. (2)  Not meaningful because some market rates would compute at a rate less than      zero. (3)  Net portfolio value represents the discounted present value of the      difference between incoming cash flows on interest-earning and other assets      and outgoing cash flows on interest-bearing liabilities. (4)  Present value of assets represents the discounted present value of incoming      cash flows on interest-earning assets. (5)  NPV Ratio represents the net portfolio value divided by the present value      of assets.  The model reflects that the Savings Bank's NPV is more sensitive to an increase in interest rates than a decrease in interest rates. The above table indicates that as of December 31, 2005, in the event of a 100 basis point increase in interest rates, we would experience a 11.6%, or $6.5 million, decrease in net portfolio value. In the event of a 100 basis point decrease in interest rates, we would experience a 6.2%, or $3.5 million, increase in net portfolio value. However, given the current level of market interest rates and the low probability of further significant declines in absolute rates, we did not calculate net portfolio value for interest rate decreases of greater than 100 basis points.                                         -18-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   QUANTITATIVE ANALYSIS (continued)  Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurement. Modeling changes in net portfolio value requires the making of certain assumptions regarding prepayment and deposit decay rates, which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. While we believe such assumptions to be reasonable, there can be no assurance that assumed prepayment rates and decay rates will approximate actual future loan prepayment and deposit withdrawal activity. Moreover, the NPV table presented assumes that the composition of our interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the NPV table provides an indication of our interest rate risk exposure at a particular point in time, such measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on our net portfolio value and will differ from actual results.  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 December 31, 2005 and 2004, we had $33.2 million and $16.2 million, respectively, in outstanding borrowings from the Federal Home Loan Bank of Cincinnati and had the capacity to increase such borrowings at those dates by approximately $98.5 million.  Loan repayments and maturing securities are a relatively predictable source of funds. However, deposit flows, calls of securities and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace. These factors reduce the predictability of these sources of funds.  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 year ended December 31, 2005, loan originations totaled $64.6 million, compared to $60.6 million for the year ended December 31, 2004. Purchases of investment securities and mortgage-backed securities were $4.0 million for the year ended December 31, 2005 and $41.4 million for the year ended December 31, 2004.  Total deposits increased $1.2 million during the year ended December 31, 2005, while total deposits decreased $87.9 million during the year ended December 31, 2004. Deposit flows are affected by the level of interest rates, the interest rates and products offered by competitors and other factors.                                         -19-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   LIQUIDITY AND CAPITAL RESOURCES (continued)  The following table sets forth information regarding the Corporation's obligations and commitments to make future payments under contract as of December 31, 2005.                                                                                PAYMENTS DUE BY PERIOD                                                            LESS         MORE          MORE         MORE                                                            THAN         THAN          THAN         THAN                                                           1 YEAR      1-3 YEARS     4-5 YEARS     5 YEARS       TOTAL                                                                                 (In thousands)       Contractual obligations:   Advances from the Federal Home Loan Bank               $     -      $      -       $     -      $33,209     $  33,209   Certificates of deposit                                  75,438       34,224           396            -       110,058   Construction of branch (1)                                  794            -             -            -           794  Amount of loan commitments and expiration per period:   Commitments to originate one- to four-family loans        2,481            -             -            -         2,481   Home equity lines of credit                              11,243            -             -            -        11,243   Undisbursed loans in process                              5,849            -             -            -         5,849   Lease obligations                                             2            -             -            -             2                                                          --------     --------       -------      -------     ---------           Total contractual obligations                   $ 95,807     $ 34,224       $   396      $33,209     $ 163,636                                                          ========     ========       =======      =======     =========  - ------------------------------------  (1)  At December 31, 2005, we were in contract negotiations for the construction      of an additional new branch.  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.  At December 31, 2005 and 2004, we exceeded all of the applicable regulatory capital requirements. Our core (Tier 1) capital was $48.7 million and $58.4 million, or 16.7% and 21.1% of total assets at December 31, 2005 and 2004, respectively. In order to be classified as "well-capitalized" under federal banking regulations, we were required to have core capital of at least $17.5 million, or 6.0% of assets as of December 31, 2005. 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 December 31, 2005 and 2004, we had a total risk-based capital ratio of 34.9% and 47.1%, respectively.                                         -20-                                CHEVIOT FINANCIAL CORP.                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS  ================================================================================   IMPACT OF INFLATION AND CHANGING PRICES  The consolidated financial statements and related consolidated financial data presented herein regarding Cheviot Financial have been prepared in accordance with accounting principles generally accepted in the United States of America, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of Cheviot Financial's assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on Cheviot Financial's performance than does the effect of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, because such prices are affected by inflation to a larger extent than interest rates.                                         -21-                    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   Board of Directors Cheviot Financial Corp.  We have audited the accompanying consolidated statements of financial condition of Cheviot Financial Corp. as of December 31, 2005 and 2004, and the related consolidated statements of earnings, comprehensive income, shareholders' equity and cash flows for the years ended December 31, 2005 and 2004, for the nine month period ended December 31, 2003, and for the fiscal year ended March 31, 2003. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Corporation is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cheviot Financial Corp. as of December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for the years ended December 31, 2005 and 2004, for the nine month period ended December 31, 2003 and for the fiscal year ended March 31, 2003, in conformity with accounting principles generally accepted in the United States of America.     Cincinnati, Ohio March 9, 2006                                         -22-                                                  CHEVIOT FINANCIAL CORP.                                    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                                              December 31, 2005 and 2004                                                   (In thousands)            ASSETS                                                                          2005               2004    Cash and due from banks                                                             $   2,425          $   2,836 Federal funds sold                                                                      1,715              4,370 Interest-earning deposits in other financial institutions                               4,963                519                                                                                     ---------          ---------          Cash and cash equivalents                                                      9,103              7,725  Investment securities held to maturity - at cost, approximate   market value of $26,509 and $26,864 at December 31,   2005 and 2004, respectively                                                          27,084             27,102 Mortgage-backed securities available for sale - at fair value                           1,269              1,483 Mortgage-backed securities held to maturity - at cost, approximate   market value of $20,193 and $29,315 at December 31,   2005 and 2004, respectively                                                          20,285             29,204 Loans receivable - net                                                                222,053            203,842 Loans held for sale - at lower of cost or market                                          658                 - Real estate acquired through foreclosure - net                                             89                 90 Office premises and equipment - at depreciated cost                                     3,628              2,947 Federal Home Loan Bank stock - at cost                                                  3,057              2,909 Accrued interest receivable on loans                                                      873                750 Accrued interest receivable on mortgage-backed securities                                  72                 80 Accrued interest receivable on investments and interest-bearing deposits                  298                219 Prepaid expenses and other assets                                                         145                236 Bank-owned life insurance                                                               3,121                  - Prepaid federal income taxes                                                               56                  -                                                                                     ---------          ---------           Total assets                                                               $ 291,791          $ 276,587                                                                                     =========          =========           LIABILITIES AND SHAREHOLDERS' EQUITY  Deposits                                                                             $181,238           $179,989 Advances from the Federal Home Loan Bank                                               33,209             16,199 Advances by borrowers for taxes and insurance                                           1,063              1,014 Accounts payable and other liabilities                                                  1,090              1,003 Accrued federal income taxes                                                                -                127 Deferred federal income taxes                                                             381                315                                                                                     ---------          ---------          Total liabilities                                                            216,981            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 December 31, 2005 and 2004                  99                 99   Additional paid-in capital                                                           42,824             42,746   Shares acquired by stock benefit plans                                               (5,092)            (3,273)   Treasury stock - at cost, 216,208 shares at December 31, 2005                        (2,537)                 -   Retained earnings - restricted                                                       39,524             38,374   Accumulated comprehensive loss, unrealized losses on securities available     for sale, net of tax benefits                                                          (8)                (6)                                                                                     ---------          ---------          Total shareholders' equity                                                    74,810             77,940                                                                                     ---------          ---------           Total liabilities and shareholders' equity                                  $291,791           $276,587                                                                                     =========          =========   The accompanying notes are an integral part of these statements.                                         -23-                                                       CHEVIOT FINANCIAL CORP.                                              CONSOLIDATED STATEMENTS OF EARNINGS                                             (In thousands, except per share data)                                                                                                   NINE                                                                      YEAR ENDED              MONTHS ENDED      YEAR ENDED                                                                     DECEMBER 31,             DECEMBER 31,       MARCH 31,                                                                  2005           2004             2003              2003      Interest income   Loans                                                     $  12,311      $  11,221          $   8,442         $  11,995   Mortgage-backed securities                                      889            821                558             1,139   Investment securities                                           981            765                217               588   Interest-earning deposits and other                             227            176                210               346                                                             ---------      ---------          ---------         ---------          Total interest income                                 14,408         12,983              9,427            14,068  Interest expense   Deposits                                                      4,029          3,285              2,935             5,473   Borrowings                                                    1,100            596                343               453                                                             ---------      ---------          ---------         ---------          Total interest expense                                 5,129          3,881              3,278             5,926                                                             ---------      ---------          ---------         ---------           Net interest income                                    9,279          9,102              6,149             8,142  Provision for losses on loans                                      97              -                 45               250                                                             ---------      ---------          ---------         ---------           Net interest income after provision for            losses on loans                                      9,182          9,102              6,104             7,892  Other income   Rental                                                           43             40                 28                38   Loss on sale of real estate acquired through foreclosure         (9)           (13)                (8)              (36)   Gain on sale of loans                                            12             57                 52                14   Earnings on bank-owned life insurance                           121              -                  -                 -   Other operating                                                 278            186                119               247                                                             ---------      ---------          ---------         ---------          Total other income                                       445            270                191               263  General, administrative and other expense   Employee compensation and benefits                            3,589          3,139              1,832             2,601   Occupancy and equipment                                         428            393                269               385   Property, payroll and other taxes                               936            672                461               576   Data processing                                                 264            229                159               234   Legal and professional                                          481            317                138               202   Advertising                                                     171            188                102               135   Charitable contributions                                         -           1,500                  -                 -   Other operating                                                 549            530                404               397                                                             ---------      ---------          ---------         ---------          Total general, administrative and other expense        6,418          6,968              3,365             4,530                                                             ---------      ---------          ---------         ---------           Earnings before income taxes                           3,209          2,404              2,930             3,625  Federal income taxes   Current                                                         989          1,075                947             1,455   Deferred                                                         67              1                 48              (219)                                                             ---------      ---------          ---------         ---------          Total federal income taxes                             1,056          1,076                995             1,236                                                             ---------      ---------          ---------         ---------           NET EARNINGS                                       $   2,153      $   1,328          $   1,935         $   2,389                                                             =========      =========          =========         =========           Earnings per share - basic and diluted             $     .22      $     .14                N/A               N/A                                                             =========      =========          =========         =========   The accompanying notes are an integral part of these statements.                                                         -24-                                                       CHEVIOT FINANCIAL CORP.                                        CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                                                        (In thousands)                                                                                                   NINE                                                                      YEAR ENDED              MONTHS ENDED      YEAR ENDED                                                                     DECEMBER 31,             DECEMBER 31,       MARCH 31,                                                                  2005           2004             2003              2003       Net earnings for the period                                 $   2,153      $   1,328          $   1,935         $   2,389  Other comprehensive loss, net of tax benefits:   Unrealized holding losses on securities during the     period, net of tax benefits of $1 and $3 for the years     ended December 31, 2005 and 2004, respectively                 (2)            (6)                 -                 -                                                             ---------      ---------          ---------         ---------  Comprehensive income                                        $   2,151      $   1,322          $   1,935         $   2,389                                                             =========      =========          =========         =========  Accumulated comprehensive loss                              $      (8)     $      (6)         $       -         $       -                                                             =========      =========          =========         =========   The accompanying notes are an integral part of these statements.                                                              -25-                                                            CHEVIOT FINANCIAL CORP.                                             CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY                                  For the years ended December 31, 2005 and 2004, the nine months ended                                      December 31, 2003 and the fiscal year ended March 31, 2003                                                 (In thousands, except per share data)                                                                                                           UNREALIZED                                                                  SHARES                                 LOSSES ON                                                 ADDITIONAL    ACQUIRED BY                             ON SECURITIES      TOTAL                                        COMMON     PAID-IN    STOCK BENEFIT    TREASURY     RETAINED      AVAILABLE    SHAREHOLDERS'                                         STOCK     CAPITAL        PLANS         STOCK       EARNINGS      FOR SALE        EQUITY          Balance at April 1, 2002                $   -     $     -       $     -       $      -     $33,543       $      -       $33,543  Net earnings for the year   ended March 31, 2003                      -           -             -              -       2,389              -         2,389                                         -----     -------       -------       --------     -------       --------       -------  Balance at March 31, 2003                   -           -             -              -      35,932              -        35,932  Net earnings for the nine months   ended December 31, 2003                   -           -             -              -       1,935              -         1,935                                         -----     -------       -------       --------     -------       --------       -------  Balance at December 31, 2003                -           -             -              -      37,867              -        37,867  Proceeds from issuance of commons   stock                                    99      42,746        (3,571)             -           -              -        39,274 Net earnings for the year ended   December 31, 2004                         -           -             -              -       1,328              -         1,328 Cash dividends of $.20 per share            -           -             -              -        (821)             -          (821) Amortization expense of stock   benefit plans                             -           -           298              -           -              -           298 Unrealized losses on securities   designated as available for sale,   net of related tax benefits               -           -             -              -           -             (6)           (6)                                         -----     -------       -------       --------     -------       --------       -------  Balance at December 31, 2004               99      42,746        (3,273)             -      38,374             (6)       77,940  Net earnings for the year ended   December 31, 2005                         -           -             -              -       2,153              -         2,153 Cash dividends of $.24 per share            -           -             -              -      (1,003)             -        (1,003) Amortization expense of stock   benefit plans                             -          78           416              -           -              -           494 Shares acquired by stock benefit   plans                                     -           -        (2,235)             -           -              -        (2,235) Treasury stock repurchases                  -           -             -         (2,537)          -              -        (2,537) Unrealized losses on securities   designated as available for sale,   net of related tax benefits               -           -             -              -           -             (2)           (2)                                         -----     -------       -------       --------     -------       --------       -------  Balance at December 31, 2005            $  99     $42,824       $(5,092)      $ (2,537)    $39,524       $     (8)      $74,810                                         =====     =======       =======       ========     =======       ========       =======   The accompanying notes are an integral part of these statements.                                                                   -26-                                                        CHEVIOT FINANCIAL CORP.                                              CONSOLIDATED STATEMENTS OF CASH FLOWS                                                          (In thousands)                                                                                                        NINE                                                                            YEAR ENDED              MONTHS ENDED      YEAR ENDED                                                                           DECEMBER 31,             DECEMBER 31,       MARCH 31,                                                                        2005           2004             2003              2003      Cash flows from operating activities:   Net earnings for the period                                        $  2,153       $  1,328         $  1,935          $  2,389   Adjustments to reconcile net earnings to net cash   provided by operating activities:     Amortization of premiums and discounts on       investment and mortgage-backed securities, net                       28            131              145               292     Depreciation                                                          219            224              175               260     Amortization expense related to stock benefit plans                   494            298                -                 -     Amortization of deferred loan origination fees                        (40)           (48)            (101)              (98)     Proceeds from sale of loans in the secondary market                 1,595          2,827            2,629               491     Loans originated for sale in the secondary market                  (2,247)        (2,374)          (2,791)             (716)     Gain on sale of loans                                                 (12)           (57)             (52)              (14)     Loss on sale of real estate acquired through foreclosure                9             13                8                36     Federal Home Loan Bank stock dividends                               (148)          (117)             (82)             (119)     Net increase in cash surrender value of life insurance               (121)             -                -                 -     Provision for losses on loans                                          97              -               45               250     Increase (decrease) in cash due to changes in:       Accrued interest receivable on loans                               (123)           (95)               -               (96)       Accrued interest receivable on mortgage-backed securities             8             (9)              20                25       Accrued interest receivable on investments and interest-         bearing deposits                                                  (79)           (24)             (61)              157       Prepaid expenses and other assets                                    90            926             (718)             (150)       Accounts payable and other liabilities                               87            102              367               260       Federal income taxes         Current                                                          (183)          (132)            (143)              343         Deferred                                                           67              1               48              (219)                                                                      --------       --------         --------          --------          Net cash flows provided by operating activities                1,894          2,994            1,424             3,091  Cash flows used in investing activities:   Principal repayments on loans                                        43,884         40,605           46,669            56,260   Loan disbursements                                                  (62,345)       (58,234)         (50,853)          (70,781)   Loan participations purchased                                             -              -                -            (1,443)   Purchase of investment securities                                    (3,959)       (26,012)         (15,064)           (6,114)   Proceeds from maturity of investment securities                       4,000         16,000            4,000            11,000   Purchase of mortgage-backed securities                                    -        (15,437)          (4,984)           (8,143)   Principal repayments on mortgage-backed securities                    9,078          6,459            6,701             7,431   Additions to real estate acquired through foreclosure                     -            (40)               -               (16)   Proceeds from sale of real estate acquired through foreclosure          193            276              133               150   Purchase of office premises and equipment                              (900)          (262)             (66)             (232)   Purchase of bank-owned life insurance                                (3,000)             -                -                 -                                                                      --------       --------         --------          --------          Net cash flows used in investing activities                  (13,049)       (36,645)         (13,464)          (11,888)                                                                      --------       --------         --------          --------           Net cash flows used in operating and investing            activities balance carried forward                         (11,155)       (33,651)         (12,040)           (8,797)                                                                      --------       --------         --------          --------   The accompanying notes are an integral part of these statements.                                                                   -27-                                                            CHEVIOT FINANCIAL CORP.                                            CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)                                                             (In thousands)                                                                                                         NINE                                                                            YEAR ENDED              MONTHS ENDED      YEAR ENDED                                                                           DECEMBER 31,             DECEMBER 31,       MARCH 31,                                                                        2005           2004             2003              2003               Net cash flows used in operating and investing            activities balance brought forward                        $(11,155)      $(33,651)        $(12,040)         $ (8,797)  Cash flows provided by (used in) financing activities:   Net increase (decrease) in deposits                                   1,249        (87,938)          72,615             5,140   Proceeds from Federal Home Loan Bank advances                        20,600          9,000                -             8,000   Repayments on Federal Home Loan Bank advances                        (3,590)        (2,007)          (1,559)           (1,183)   Advances by borrowers for taxes and insurance                            49             92              352                53   Purchase of shares for stock benefit plans                           (2,235)             -                -                 -   Treasury stock repurchases                                           (2,537)             -                -                 -   Proceeds from issuance of common stock                                    -         39,274                -                 -   Dividends paid on common stock                                       (1,003)          (821)               -                 -                                                                      --------       --------         --------          --------          Net cash flows provided by (used in)            financing activities                                        12,533        (42,400)          71,408            12,010                                                                      --------       --------         --------          --------  Net increase (decrease) in cash and cash equivalents                    1,378        (76,051)          59,368             3,213  Cash and cash equivalents at beginning of period                        7,725         83,776           24,408            21,195                                                                      --------       --------         --------          --------  Cash and cash equivalents at end of period                           $  9,103       $  7,725         $ 83,776          $ 24,408                                                                      ========       ========         ========          ========   Supplemental disclosure of cash flow information:   Cash paid during the period for:     Federal income taxes                                             $  1,212       $  1,110         $  1,089          $  1,113                                                                      ========       ========         ========          ========      Interest on deposits and borrowings                              $  5,129       $  3,881         $  3,278          $  5,926                                                                      ========       ========         ========          ========   Supplemental disclosure of noncash investing activities:   Transfers from loans to real estate acquired through     foreclosure                                                      $    201       $    293         $     46          $    157                                                                      ========       ========         ========          ========    Loans originated upon sales of real estate acquired     through foreclosure                                              $      -       $    221         $      -          $      -                                                                      ========       ========         ========          ========    Recognition of mortgage servicing rights in accordance     with SFAS No. 140                                                $     13       $     23         $     21          $      4                                                                      ========       ========         ========          ========   The accompanying notes are an integral part of these statements.                                                                   -28-                                CHEVIOT FINANCIAL CORP.                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE A - SUMMARY OF ACCOUNTING POLICIES          In January 2004, the Board of Directors of Cheviot Savings Bank (the         "Savings Bank") completed a Plan of Reorganization (the "Plan" or the         "Reorganization") pursuant to which the Savings Bank reorganized into a         two-tier mutual holding company structure with the establishment of a         stock holding company, Cheviot Financial Corp. ("Cheviot Financial" or         the "Corporation"), as parent of the Savings Bank, which converted to         stock form, followed by the issuance of all the Savings Bank's         outstanding stock to Cheviot Financial. Pursuant to the Plan, Cheviot         Financial issued 9,918,751 common shares, of which approximately 55%         were issued to Cheviot Mutual Holding Company, a federally-chartered         mutual holding company. Cheviot Financial sold 4,388,438 common shares,         representing approximately 44% of the outstanding common stock to the         Savings Bank's depositors and a newly formed Employee Stock Ownership         Plan ("ESOP") at an initial issuance price of $10.00 per share. In         addition, 75,000 shares, or approximately one percent of the outstanding         shares, were issued to a charitable foundation established by Cheviot         Financial. The Reorganization and related stock offering resulted in         cash proceeds, net of offering costs and shares issued to the ESOP,         totaling approximately $39.3 million.          The Corporation conducts a general banking business in southwestern Ohio         which consists of attracting deposits from the general public and         applying those funds to the origination of loans for residential,         commercial and consumer purposes. The Corporation's profitability is         significantly dependent on net interest income, which is the difference         between interest income generated from interest-earning assets (i.e.         loans and investments) and interest expense paid on interest-bearing         liabilities (i.e. customer deposits and borrowed funds). 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 level of interest rates paid or received by the         Corporation can be significantly influenced by a number of environmental         factors, such as governmental monetary policy, that are outside of         management's control.          The financial information presented herein has been prepared in         accordance with accounting principles generally accepted in the United         States of America ("U.S. GAAP") and general accounting practices within         the financial services industry. In preparing financial statements in         accordance with U.S. GAAP, management is required to make estimates and         assumptions that affect the reported amounts of assets and liabilities         and the disclosure of contingent assets and liabilities at the date of         the financial statements and revenues and expenses during the reporting         period. Actual results could differ from such estimates.          The following is a summary of significant accounting policies which have         been consistently applied in the preparation of the accompanying         financial statements. During 2003, the Corporation elected to change its         financial reporting year to December 31 from March 31.          1.      PRINCIPLES OF CONSOLIDATION          The accompanying consolidated financial statements as of and for the         years ended December 31, 2005 and 2004, include the accounts of the         Corporation and its wholly-owned subsidiary, the Savings Bank. All         significant intercompany items have been eliminated. The accompanying         financial statements for the nine-month period ended December 31, 2003,         and the fiscal year ended March 31, 2003, are those of the Savings Bank         prior to the Reorganization.                                        -29-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)          2.      INVESTMENT AND MORTGAGE-BACKED SECURITIES          The Corporation accounts for investment and mortgage-backed securities         in accordance with Statement of Financial Accounting Standards ("SFAS")         No. 115 "Accounting for Certain Investments in Debt and Equity         Securities." SFAS No. 115 requires that investments be categorized as         held to maturity, trading, or available for sale. Securities classified         as held to maturity are carried at cost only if the Corporation has the         positive intent and ability to hold these securities to maturity.         Securities available for sale are carried at fair value with resulting         unrealized gains or losses recorded to shareholders' equity. At December         31, 2005 and 2004, one mortgage-backed security was designated as         available for sale. Realized gains or losses on sales of securities are         recognized using the specific identification method.          3.      LOANS RECEIVABLE          Loans receivable are stated at the principal amount outstanding,         adjusted for deferred loan origination fees and the allowance for loan         losses. Interest is accrued as earned unless the collectibility of the         loan is in doubt. Loans are generally placed on nonaccrual status when         they are contractually past due 90 days or more. Interest on loans that         are contractually past due more than 150 days is charged off, or an         allowance is established based on management's periodic evaluation. The         allowance is established by a charge to interest income equal to all         interest previously accrued, and income is subsequently recognized only         to the extent that cash payments are received until, in management's         judgment, the borrower's ability to make periodic interest and principal         payments has returned to normal, in which case the loan is returned to         accrual status. If the ultimate collectibility of the loan is in doubt,         in whole or in part, all payments received on nonaccrual loans are         applied to reduce principal until such doubt is eliminated.          Loans held for sale are carried at the lower of cost (less principal         payments received) or fair value (market value), calculated on an         aggregate basis. At December 31, 2005, the Corporation had $658,000 in         loans held for sale. At December 31, 2004, the Corporation had not         designated any loans as held for sale.          During 2003, the Corporation initiated a program to sell certain loans         in transactions with the Federal Home Loan Bank, retaining servicing on         loans sold. The Corporation accounts for mortgage servicing rights in         accordance with SFAS No. 140 "Accounting for Transfers and Servicing of         Financial Assets and Extinguishments of Liabilities," which requires         that the Corporation recognize, as separate assets, rights to service         mortgage loans for others, regardless of how those servicing rights are         acquired. An institution that acquires mortgage servicing rights through         either the purchase or origination of mortgage loans and sells those         loans with servicing rights retained must allocate some of the cost of         the loans to the mortgage servicing rights. SFAS No. 140 requires that         capitalized servicing rights be amortized in proportion to and over the         estimated period of servicing income.          The Corporation recorded amortization related to mortgage servicing         rights totaling $10,000 and $3,000 during the years ended December 31,         2005 and 2004, respectively. The Corporation recorded a nominal amount         of amortization related to mortgage servicing rights during the nine         months ended December 31, 2003 and the fiscal year ended March 31, 2003,         as loans sold to the Federal Home Loan Bank did not take place until the         latter part of the fiscal year. The carrying value of the Corporation's         mortgage servicing rights, which approximated fair value, totaled         approximately $50,000 and $43,000 at December 31, 2005 and 2004,         respectively.                                        -30-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)          3.      LOANS RECEIVABLE (continued)          The Corporation was servicing mortgage loans of approximately $5.9         million and $5.5 million that had been sold to the Federal Home Loan         Bank at December 31, 2005 and 2004, respectively.          4.      LOAN ORIGINATION FEES AND COSTS          The Corporation accounts for loan origination fees and costs in         accordance with the provisions of SFAS No. 91 "Accounting for         Nonrefundable Fees and Costs Associated with Originating or Acquiring         Loans and Initial Direct Costs of Leases." Pursuant to the provisions of         SFAS No. 91, origination fees received from loans, net of direct         origination costs, are deferred and amortized to interest income using         the level-yield method, giving effect to actual loan prepayments.         Additionally, SFAS No. 91 generally limits the definition of loan         origination costs to the direct costs attributable to originating a         loan, i.e., principally actual personnel costs. Fees received for loan         commitments that are expected to be drawn upon, based on the         Corporation's experience with similar commitments, are deferred and         amortized over the life of the loan using the level-yield method. Fees         for other loan commitments are deferred and amortized over the loan         commitment period on a straight-line basis.          5.      ALLOWANCE FOR LOAN LOSSES          It is the Corporation's policy to provide valuation allowances for         estimated losses on loans primarily based on past loan loss experience.         Additionally, the Corporation considers changes in the composition of         the loan portfolio, trends in the level of delinquent and problem loans,         adverse situations that may affect the borrower's ability to repay, the         estimated value of any underlying collateral and current and anticipated         economic conditions in the primary lending area. When the collection of         a loan becomes doubtful, or otherwise troubled, the Corporation records         a charge-off equal to the difference between the fair value of the         property securing the loan and the loan's carrying value. Major loans         and major lending areas are reviewed periodically to determine potential         problems at an early date. The allowance for loan losses is increased by         charges to earnings and decreased by charge-offs (net of recoveries).          The Corporation accounts for impaired loans in accordance with SFAS No.         114 "Accounting by Creditors for Impairment of a Loan." This Statement         requires that impaired loans be measured based upon the present value of         expected future cash flows discounted at the loan's effective interest         rate or, as an alternative, at the loan's observable market price or         fair value of the collateral if the loan is collateral dependent.          A loan is defined under SFAS No. 114 as impaired when, based on current         information and events, it is probable that a creditor will be unable to         collect all amounts due according to the contractual terms of the loan         agreement. In applying the provisions of SFAS No. 114, the Corporation         considers its investment in existing one- to four-family residential         loans and consumer installment loans to be homogeneous and therefore         excluded from separate identification for evaluation of impairment. With         respect to the Corporation's investment in construction, commercial and         multi-family residential real estate loans, and its evaluation of         impairment thereof, such loans are generally collateral dependent and,         as a result, are carried as a practical expedient at the lower of cost         or fair value of collateral.                                        -31-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)          5.      ALLOWANCE FOR LOAN LOSSES (continued)          Collateral dependent loans which are more than ninety days delinquent         are considered to constitute more than a minimum delay in repayment and         are evaluated for impairment under SFAS No. 114 at that time.          6.      REAL ESTATE ACQUIRED THROUGH FORECLOSURE          Real estate acquired through foreclosure is carried at the lower of the         loan's unpaid principal balance (cost) or fair value less estimated         selling expenses at the date of acquisition. A loan loss provision is         recorded for any write down in the loan's carrying value to fair value         at the date of acquisition. Real estate loss provisions are recorded if         the properties' fair value subsequently declines below the value         determined at the recording date. In determining the lower of cost or         fair value at acquisition, costs relating to development and improvement         of property are considered. Costs relating to holding real estate         acquired through foreclosure, net of rental income, are charged against         earnings as incurred.          7.      INVESTMENT IN FEDERAL HOME LOAN BANK STOCK          The Corporation is required as a condition of membership in the Federal         Home Loan Bank of Cincinnati (FHLB) to maintain an investment in FHLB         common stock. The stock is redeemable at par and, therefore, its cost is         equivalent to its redemption value. The Corporation's ability to redeem         FHLB shares is dependent on the redemption practices of the FHLB of         Cincinnati. At December 31, 2005, the FHLB of Cincinnati placed no         restrictions on redemption of shares in excess of a member's required         investment in the stock.          8.      OFFICE PREMISES AND EQUIPMENT          Office premises and equipment are carried at cost. Maintenance, repairs         and minor renewals are expensed as incurred. For financial reporting,         depreciation and amortization are provided on the straight-line and         accelerated methods over the useful lives of the assets, estimated to be         between fifteen and forty years for buildings and improvements, five to         ten years for furniture and equipment and five years for automobiles. An         accelerated method is used for tax reporting purposes.          9.      FEDERAL INCOME TAXES          The Corporation accounts for federal income taxes pursuant to SFAS No.         109, "Accounting for Income Taxes." In accordance with SFAS No. 109, a         deferred tax liability or deferred tax asset is computed by applying the         current statutory tax rates to net taxable or deductible temporary         differences between the tax basis of an asset or liability and its         reported amount in the financial statements that will result in net         taxable or deductible amounts in future periods. Deferred tax assets are         recorded only to the extent that the amount of net deductible temporary         differences or carryforward attributes may be utilized against current         period earnings, carried back against prior years' earnings, offset         against taxable temporary differences reversing in future periods, or         utilized to the extent of management's estimate of future taxable         income. A valuation allowance is provided for deferred tax assets to the         extent that the value of net deductible temporary differences and         carryforward attributes exceeds management's estimates of taxes payable         on future taxable income. Deferred tax liabilities are provided on the         total amount of net temporary differences taxable in the future.                                        -32-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)          9.      FEDERAL INCOME TAXES (continued)          The Corporation's principal temporary differences between pretax         financial income and taxable income result from different methods of         accounting for deferred loan origination fees and costs, Federal Home         Loan Bank stock dividends, the general loan loss allowance, charitable         contributions and deferred compensation and stock benefit plans.         Additional temporary differences result from depreciation computed using         accelerated methods for tax purposes.          10.     BENEFIT PLANS          The Corporation has a 401(k) retirement savings plan, which covers all         employees who have attained the age of 21 and have completed one year of         service. The Corporation is annually required to contribute 3% of         eligible employees' salaries, plus the lesser of 3% of each         participant's salary or 50% of each participant's contributions to the         plan. Additional employer contributions are made at the discretion of         the Board of Directors. Employer contributions totaled $166,000,         $123,000, $88,000, and $123,000 for the years ended December 31, 2005         and 2004, the nine months ended December 31, 2003, and the year ended         March 31, 2003, respectively.          The Corporation has a nonqualified directors deferred compensation plan         (the "compensation plan") which provides for the payment of benefits to         its directors upon termination of service with the Corporation. The         Corporation recorded expense of approximately $21,000, $20,000, $56,000         and $229,000 for the directors deferred compensation plan for the years         ended December 31, 2005 and 2004, the nine months ended December 31,         2003, and the fiscal year ended March 31, 2003, respectively.          In connection with the Reorganization, the Corporation implemented an         Employee Stock Ownership Plan ("ESOP") which provides retirement         benefits for substantially all full-time employees who have completed         one year of service and have attained the age of 21. The Corporation         accounts for the ESOP in accordance with Statement of Position ("SOP")         93-6, "Employers Accounting for Employee Stock Ownership Plans." SOP         93-6 requires that compensation expense recorded by employers equal the         fair value of ESOP shares allocated to participants during a given year.         Allocation of shares to the ESOP participants is contingent upon the         repayment of a loan to Cheviot Financial Corp. totaling $3.0 and $3.3         million at December 31, 2005 and 2004, respectively. The Corporation         recorded expense for the ESOP of approximately $414,000 and $418,000 for         the years ended December 31, 2005 and 2004.          In 2005, the Corporation initiated a Management Recognition Plan ("MRP"         or the "Plan") which provided for awards of 194,408 shares to members of         the board of directors, management and employees. Common shares awarded         under the MRP vest over a five year period, commencing with the date of         the grant. Expense recognized under the MRP totaled $260,000 for the         year ended December 31, 2005. As of December 31, 2005, 169,310 shares         under the Corporation's MRP have been awarded.                                        -33-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)          11.     FAIR VALUE OF FINANCIAL INSTRUMENTS          SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"         requires disclosure of fair value of financial instruments, both assets         and liabilities, whether or not recognized in the statement of financial         condition, for which it is practicable to estimate that value. For         financial instruments where quoted market prices are not available, fair         values are based on estimates using present value and other valuation         methods.          The methods used are greatly affected by the assumptions applied,         including the discount rate and estimates of future cash flows.         Therefore, the fair values presented may not represent amounts that         could be realized in an exchange for certain financial instruments.          The following methods and assumptions were used by the Corporation in         estimating its fair value disclosures for financial instruments at         December 31, 2005 and 2004:                  CASH AND CASH EQUIVALENTS: The carrying amounts presented in the                 consolidated statements of financial condition for cash and cash                 equivalents are deemed to approximate fair value.                  INVESTMENT AND MORTGAGE-BACKED SECURITIES: For investment and                 mortgage-backed securities, fair value is deemed to equal the                 quoted market price.                  LOANS RECEIVABLE: The loan portfolio was segregated into                 categories with similar characteristics, such as one- to                 four-family residential, multi-family residential and commercial                 real estate. These loan categories were further delineated into                 fixed-rate and adjustable-rate loans. The fair values for the                 resultant loan categories were computed via discounted cash flow                 analysis, using current interest rates offered for loans with                 similar terms to borrowers of similar credit quality. For loans                 on deposit accounts, fair values were deemed to equal the                 historic carrying values. The historical carrying amount of                 accrued interest on loans is deemed to approximate fair value.                  FEDERAL HOME LOAN BANK STOCK: The carrying amount presented in                 the consolidated statements of financial condition is deemed to                 approximate fair value.                  DEPOSITS: The fair value of NOW accounts, passbook accounts, and                 money market demand deposits is deemed to approximate the amount                 payable on demand at December 31, 2005 and 2004. Fair values for                 fixed-rate certificates of deposit have been estimated using a                 discounted cash flow calculation using the interest rates                 currently offered for deposits of similar remaining maturities.                  ADVANCES FROM THE FEDERAL HOME LOAN BANK: The fair value of                 these advances is estimated using the rates currently offered                 for similar advances of similar remaining maturities or, when                 available, quoted market prices.                  ADVANCES BY BORROWERS FOR TAXES AND INSURANCE: The carrying                 amount of advances by borrowers for taxes and insurance is                 deemed to approximate fair value.                                        -34-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)          11.     FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)                  COMMITMENTS TO EXTEND CREDIT: For fixed-rate loan commitments,                 the fair value estimate considers the difference between current                 levels of interest rates and committed rates. At December 31,                 2005 and 2004, the fair value of loan commitments was not                 material.          Based on the foregoing methods and assumptions, the carrying value and         fair value of the Corporation's financial instruments were as follows at         December 31:                                                                   2005                           2004                                                      CARRYING         FAIR         CARRYING         FAIR                                                         VALUE        VALUE            VALUE        VALUE                                                                          (In thousands)          Financial assets       Cash and cash equivalents                    $    9,103   $    9,103       $    7,725   $    7,725       Investment securities                            27,084       26,509           27,102       26,864       Mortgage-backed securities                       21,554       21,462           30,687       30,798       Loans receivable - net                          222,711      212,063          203,842      203,637       Federal Home Loan Bank stock                      3,057        3,057            2,909        2,909                                                     ---------    ---------        ---------    ---------                                                       $283,509     $272,194         $272,265     $271,933                                                      ========     ========         ========     ========      Financial liabilities       Deposits                                       $181,238     $181,256         $179,989     $180,186       Advances from the Federal Home         Loan Bank                                      33,209       33,072           16,199       16,229       Advances by borrowers for taxes         and insurance                                   1,063        1,063            1,014        1,014                                                     ---------    ---------        ---------    ---------                                                       $215,510     $215,391         $197,202     $197,429                                                      ========     ========         ========     ========           12.     ADVERTISING          Advertising costs are expensed when incurred.          13.     CASH AND CASH EQUIVALENTS          For purposes of reporting cash flows, cash and cash equivalents include         cash and due from banks, federal funds sold and interest-bearing         deposits in other financial institutions with original terms to maturity         of ninety days or less.                                        -35-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)          14.     EARNINGS PER SHARE          Basic earnings per share is computed based upon the weighted-average         common shares outstanding during the year less shares in the ESOP that         are unallocated and not committed to be released. Weighted-average         common shares deemed outstanding gives effect to a reduction for 285,661         and 357,075 unallocated shares held by the ESOP for the fiscal year         ended December 31, 2005 and 2004, respectively. Basic weighted-average         common shares totaled 9,574,837 and 9,561,676 for the years ended         December 31, 2005 and 2004, respectively.          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 year ended December 31, 2005 or 2004.          The Corporation approved a Stock Incentive Plan on April 26, 2005, which         provides for the issuance of 486,018 shares under option. On May 5,         2005, approximately 384,000 option shares were granted subject to five         year vesting. A tabular presentation of diluted earnings per share has         not been presented as diluted shares are essentially equal to basic         shares outstanding due to the proximity of the strike price and market         price.          The provisions of SFAS No. 128, "Earnings Per Share," are not applicable         to the nine month period ended December 31, 2003 and the fiscal year         ended March 31, 2003, as the Savings Bank did not complete its         Reorganization until 2004.          15.     STOCK OPTION PLAN          The Corporation has a stock option plan that provides for grants of up         to 486,018 stock options. The Corporation accounts for its stock option         plan in accordance with SFAS No. 123, "Accounting for Stock-based         Compensation," which contains a fair value based method for valuing         stock-based compensation that entities may use, which measures         compensation cost at the grant date based on the fair value of the         award. Compensation is then recognized over the service period, which is         usually the vesting period. Alternatively, SFAS No. 123 permits entities         to continue to account for stock options and similar equity instruments         under Accounting Principles Board ("APB") Opinion No. 25, "Accounting         for Stock Issued to Employees." Entities that continue to account for         stock options using APB Opinion No. 25 are required to make pro-forma         disclosures of net earnings and earnings per share, as if the fair         value-based method of accounting defined in SFAS No. 123 had been         applied.                                         -36-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003           15.     STOCK OPTION PLAN (continued)          The Corporation applies APB Opinion No. 25 and related interpretations         in accounting for its stock option plan. Accordingly, no compensation         cost has been recognized for the plan. Had compensation cost for the         Corporation's stock option plan been determined based on the fair value         at the grant dates for awards under the plan consistent with the         accounting method utilized in SFAS No. 123, the Corporation's net         earnings and earnings per share would have been reduced to the pro-forma         amounts indicated below for the year ended December 31:                                                                                                     YEAR ENDED                                                                                                  DECEMBER 31,                                                                                                      2005           Net earnings (In thousands)                  As reported                                    $2,153                             Stock-based compensation, net of tax                                      (113)                                                                                                     ------                                                         Pro-forma                                    $2,040                                                                                                     ======         Earnings per share           Basic                                      As reported                                      $.22                             Stock-based compensation, net of tax                                      (.01)                                                                                                       ----                                                         Pro-forma                                      $.21                                                                                                       ====            Diluted                                    As reported                                      $.22                             Stock-based compensation, net of tax                                      (.01)                                                                                                       ----                                                         Pro-forma                                      $.21                                                                                                       ====           The fair value of each option granted is estimated on the date of grant         using the modified Black-Scholes options-pricing model with the         following weighted-average assumptions used for grants: dividend yield         of 2.15%; expected volatility of 22.45%; risk-free interest rates of         4.19%; and expected lives of 10 years.          A summary of the status of the Corporation's stock option plan as of         December 31, 2005, and changes during the year then ended is presented         below:                                                                                                       WEIGHTED-                                                                                                     AVERAGE                                                                                                    EXERCISE                                                                                   SHARES             PRICE             Outstanding at beginning of period                                              -           $    -         Granted                                                                   383,700            11.15         Exercised                                                                       -                -         Forfeited                                                                       -                -                                                                                   -------           ------          Outstanding at end of period                                              383,700           $11.15                                                                                   =======           ======          Options exercisable at period-end                                               -           $    -                                                                                   =======           ======          Fair value of options granted                                                               $ 3.36                                                                                                     ======          Cumulative option compensation cost over service period                                     $1,121                                                                                                     ======          Remaining service period                                                                   52 MONTHS                                                                                                    =========                                         -37-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003           15.     STOCK OPTION PLAN (continued)          The following information applies to options outstanding at December 31,         2005:          Number outstanding                                               383,700         Exercise price                                                    $11.15         Weighted-average exercise price                                   $11.15         Weighted-average remaining contractual life                    9.3 years          16.     RECENT ACCOUNTING DEVELOPMENTS          In December 2004, the Financial Accounting Standards Board ("FASB")         issued a revision to 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 No. 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 consolidated         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.          Compensation cost is required to be recognized in the beginning of the         first annual period that begins after June 15, 2005, or January 1, 2006         as to the Corporation. Management believes the annual after-tax         compensation cost for 2006 will be approximately $170,000 based upon the         vesting schedule of shares granted in 2005.                                        -38-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES          The amortized cost, gross unrealized gains, gross unrealized losses and         estimated fair values of investment securities held to maturity at         December 31 are shown below.                                                                             DECEMBER 31, 2005                                                                         GROSS          GROSS     ESTIMATED                                                      AMORTIZED     UNREALIZED     UNREALIZED          FAIR                                                           COST          GAINS         LOSSES         VALUE                                                                            (In thousands)              U.S. Government agency securities              $26,984            $-            $579       $26,405         Municipal obligations                              100              4              -           104                                                        -------         ------           ----       -------                                                         $27,084         $    4           $579       $26,509                                                        =======         ======           ====       =======                                                                            DECEMBER 31, 2004                                                                         GROSS          GROSS     ESTIMATED                                                      AMORTIZED     UNREALIZED     UNREALIZED          FAIR                                                           COST          GAINS         LOSSES         VALUE                                                                            (In thousands)          U.S. Government agency securities              $27,002         $    -           $240       $26,762         Municipal obligations                              100              2              -           102                                                        -------         ------           ----       -------                                                         $27,102         $    2           $240       $26,864                                                        =======         ======           ====       =======           The amortized cost of investment securities at December 31, 2005 and         2004, by contractual term to maturity are shown below.                                                               DECEMBER 31,                                                         2005             2004          Less than one year                            $ 1,985           $7,002         One to five years                              24,999               -         Five to ten years                                  -            20,000         More than ten years                               100              100                                                       -------          -------                                                        $27,084          $27,102                                                       =======          =======                                         -39-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued)          The amortized cost, gross unrealized gains, gross unrealized losses and         estimated fair values of mortgage-backed securities at December 31, 2005         and 2004 are shown below.                                                                         DECEMBER 31, 2005                                                                     GROSS          GROSS     ESTIMATED                                                   AMORTIZED    UNREALIZED     UNREALIZED          FAIR                                                        COST         GAINS         LOSSES         VALUE                                                                        (In thousands)              AVAILABLE FOR SALE:           Government National Mortgage             Association adjustable-rate             participation certificates              $ 1,282         $   -           $ 13       $ 1,269                                                     =======         =====           ====       =======          HELD TO MATURITY:           Federal Home Loan Mortgage             Corporation adjustable-rate             participation certificates             $  1,088        $    4           $ 15      $  1,077           Federal National Mortgage             Association adjustable-rate             participation certificates                1,369             8              1         1,376           Government National Mortgage             Association adjustable-rate             participation certificates               17,828            26            114        17,740                                                     -------         -----           ----       -------                                                      $20,285         $  38           $130       $20,193                                                     =======         =====           ====       =======                                                                        DECEMBER 31, 2004                                                                     GROSS          GROSS     ESTIMATED                                                   AMORTIZED    UNREALIZED     UNREALIZED          FAIR                                                        COST         GAINS         LOSSES         VALUE                                                                        (In thousands)         AVAILABLE FOR SALE:           Government National Mortgage             Association adjustable-rate             participation certificates              $ 1,492         $   -           $  9       $ 1,483                                                     =======         =====           ====       =======          HELD TO MATURITY:           Federal Home Loan Mortgage             Corporation adjustable-rate             participation certificates              $ 1,507         $  10           $ 14       $ 1,503           Federal National Mortgage             Association adjustable-rate             participation certificates                1,684            17              1         1,700           Government National Mortgage             Association adjustable-rate             participation certificates               26,013           148             49        26,112                                                     -------         -----           ----       -------                                                      $29,204         $ 175           $ 64       $29,315                                                     =======         =====           ====       =======                                          -40-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued)          The amortized cost of mortgage-backed securities, including those         designated as available for sale, at December 31, 2005 and 2004, by         contractual terms to maturity, are shown below. Expected maturities will         differ from contractual maturities because borrowers may generally         prepay obligations without prepayment penalties.                                                                          DECEMBER 31,                                                                 2005                2004                                                                      (In thousands)            Due in one year or less                               $   506             $   754         Due in one year through five years                      2,242               3,249         Due in five years through ten years                     3,364               4,641         Due in more than ten years                             15,455              22,052                                                               -------             -------                                                                $21,567             $30,696                                                               =======             =======           The table below indicates the length of time individual securities have         been in a continuous unrealized loss position at December 31, 2005 and         2004:                                                                        DECEMBER 31, 2005                                    LESS THAN 12 MONTHS             12 MONTHS OR LONGER                       TOTAL         DESCRIPTION OF        NUMBER OF   FAIR   UNREALIZED    NUMBER OF    FAIR   UNREALIZED    NUMBER OF    FAIR   UNREALIZED           SECURITIES         INVESTMENTS  VALUE    LOSSES     INVESTMENTS   VALUE    LOSSES     INVESTMENTS   VALUE    LOSSES                                                                   (Dollars in thousands)                   U.S. Government           agency securities       -      $    -     $  -           8       $26,405    $579            8      $26,405    $579         Mortgage-backed           securities              5       3,225       11          12        11,830     132           17       15,055     143                                 ---      ------     ----          --       -------    ----           --      -------    ----          Total temporarily           impaired securities     5      $3,225     $ 11          20       $38,235    $711           25      $41,460    $722                                 ===      ======     ====          ==       =======    ====           ==      =======    ====                                                                      DECEMBER 31, 2004                                    LESS THAN 12 MONTHS             12 MONTHS OR LONGER                    TOTAL         DESCRIPTION OF        NUMBER OF   FAIR   UNREALIZED    NUMBER OF    FAIR   UNREALIZED    NUMBER OF    FAIR   UNREALIZED           SECURITIES         INVESTMENTS  VALUE    LOSSES     INVESTMENTS   VALUE    LOSSES     INVESTMENTS   VALUE    LOSSES                                                                   (Dollars in thousands)          U.S. Government           agency securities       7     $24,767     $233           1        $1,995    $  7            8      $26,762    $240         Mortgage-backed           securities              7      12,880       58           7         3,743      15           14       16,623      73                                 ---     -------     ----          --        ------    ----           --      -------    ----          Total temporarily           impaired securities    14     $37,647     $291           8        $5,738    $ 22           22      $43,385    $313                                 ===     =======     ====          ==        ======    ====           ==      =======    ====           Management has the intent and ability to hold these securities for the         foreseeable future. The decline in the fair value is primarily due to an         increase in market interest rates. The fair values are expected to         recover as securities approach maturity dates.                                         -41-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE C - LOANS RECEIVABLE          The composition of the loan portfolio, including loans held for sale, at         December 31 was as follows:                                                                          2005             2004                                                                          (In thousands)            One- to four-family residential                           $195,059         $182,016         Multi-family residential                                    11,144            9,944         Construction                                                12,360           10,718         Commercial                                                  10,883            6,750         Consumer                                                       110              133                                                                   --------         --------                                                                    229,556          209,561         Less:           Undisbursed portion of loans in process                    5,849            4,754           Deferred loan origination fees                               188              233           Allowance for loan losses                                    808              732                                                                   --------         --------                                                                    $222,711         $203,842                                                                   ========          =======           The Corporation's lending efforts have historically focused on one- to         four-family and multi-family residential real estate loans, which         comprise approximately $212.7 million, or 96% of the total loan         portfolio at December 31, 2005 and approximately $197.9 million, or 97%         of the total loan portfolio at December 31, 2004. Generally, such loans         have been underwritten on the basis of no more than an 80% loan-to-value         ratio, which has historically provided the Corporation with adequate         collateral coverage in the event of default. Nevertheless, the         Corporation, as with any lending institution, is subject to the risk         that real estate values could deteriorate in its primary lending area of         southwestern Ohio, thereby impairing collateral values. However,         management is of the belief that real estate values in the Corporation's         primary lending area are presently stable.          In the ordinary course of business, the Corporation has made loans to         its officers and directors. Loans to officers and directors, as well as         employees, are made at reduced interest rates and closing costs. These         loans do not involve more than the normal risk of collectibility. The         aggregate dollar amount of loans to officers and directors totaled         approximately $1.1 million and $1.2 million at December 31, 2005 and         2004, respectively.                                         -42-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE D - ALLOWANCE FOR LOAN LOSSES          The activity in the allowance for loan losses is as follows:                                                      YEAR ENDED           NINE MONTHS ENDED      YEAR ENDED                                                  DECEMBER 31,             DECEMBER 31,         MARCH 31,                                               2005         2004               2003                2003                                                                      (In thousands)              Beginning balance                     $732         $768               $735                $483         Provision for losses on loans           97           -                  45                 250         Charge-offs of loans                   (21)         (36)               (12)                  -         Recoveries                               -            -                  -                   2                                               ----         ----               ----                ----          Ending balance                        $808         $732               $768                $735                                               ====         ====               ====                ====           At December 31, 2005, 2004 and 2003 and March 31, 2003, the         Corporation's allowance for loan losses was comprised of a general loan         loss allowance of $794,000, $704,000, $740,000 and $707,000,         respectively, which is includible as a component of regulatory         risk-based capital, and a specific loan loss allowance totaling $14,000         at December 31, 2005 and $28,000 at December 31, 2004 and 2003, and         March 31, 2003.          Nonperforming and impaired loans totaled approximately $149,000,         $251,000, $462,000 and $235,000, at December 31, 2005, 2004 and 2003,         and March 31, 2003, respectively.          During the years ended December 31, 2005 and 2004, interest income of         approximately $5,000 and $17,000, respectively, would have been         recognized had nonperforming loans been performing in accordance with         contractual terms.          During the nine month period ended December 31, 2003, interest income of         approximately $16,000 would have been recognized had nonperforming loans         been performing in accordance with contractual terms.          During the fiscal year ended March 31, 2003, interest income of         approximately $9,000 would have been recognized had nonperforming loans         been performing in accordance with contractual terms.   NOTE E - OFFICE PREMISES AND EQUIPMENT          Office premises and equipment are comprised of the following at December         31:                                                                                     2005            2004                                                                                      (In thousands)            Land                                                                   $1,086           $  560         Buildings and improvements, including construction-in-progress          4,049            3,766         Furniture and equipment                                                 1,476            1,386         Automobiles                                                                29               29                                                                                ------           ------                                                                                 6,640            5,741         Less accumulated depreciation                                           3,012            2,794                                                                                 -----           ------                                                                                 $3,628           $2,947                                                                                ======           ======                                          -43-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE E - OFFICE PREMISES AND EQUIPMENT (continued)          At December 31, 2005, the Corporation had capitalized construction in         progress costs totaling approximately $292,000 for the construction of         two new branches.   NOTE F - DEPOSITS          Deposits consist of the following major classifications at December 31:             DEPOSIT TYPE AND WEIGHTED-AVERAGE         INTEREST RATE                                          2005                2004                                                                      (In thousands)            NOW accounts           2005 - 0.37%                                       $ 13,691           2004 - 0.24%                                                           $ 12,534         Passbook accounts           2005 - 0.94%                                         18,707           2004 - 0.70%                                                             19,573         Money market demand deposit           2005 - 1.81%                                         38,782           2004 - 1.15%                                                             44,009                                                              --------            --------              Total demand, transaction and                passbook deposits                               71,180              76,116          Certificates of deposit           Original maturities of:             Less than 12 months               2005 - 3.07%                                     21,015               2004 - 1.98%                                                         23,673             12 to 18 months               2005 - 3.43%                                     44,505               2004 - 1.96%                                                         33,487             24 months              2005 - 3.21%                                      24,980              2004 - 2.23%                                                          25,418             Over 36 months               2005 - 4.10%                                     19,558               2004 - 4.65%                                                         21,295                                                              --------            --------               Total certificates of deposit                    110,058             103,873                                                              --------            --------               Total deposits                                  $181,238            $179,989                                                              ========            ========           The Savings Bank had deposit accounts with balances in excess of         $100,000 totaling $39.3 million and $43.7 million at December 31, 2005         and 2004, respectively. Deposits issued in amounts greater than $100,000         are not federally insured.                                         -44-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE F - DEPOSITS (continued)          Interest expense on deposits is summarized as follows:                                                              YEAR ENDED      NINE MONTHS ENDED    YEAR ENDED                                                          DECEMBER 31,        DECEMBER 31,       MARCH 31,                                                      2005           2004         2003             2003                                                                             (In thousands)              Passbook savings                           $  145         $  141        $  120           $  277         NOW and money market demand deposits          601            572           466              894         Certificates of deposit                     3,283          2,572         2,349            4,302                                                    ------         ------        ------           ------                                                     $4,029         $3,285        $2,935           $5,473                                                    ======         ======        ======           ======           Maturities of outstanding certificates of deposit at December 31 are         summarized as follows:                                                                      2005           2004                                                                       (In thousands)            Less than six months                                    $ 41,134       $ 43,494         Six months to one year                                    34,304         39,578         Over one year to three years                              34,224         20,330         Over three years                                             396            471                                                                 --------       --------                                                                  $110,058       $103,873                                                                 ========       ========           In the ordinary course of business, the Corporation accepted deposits         from officers and directors. At December 31, 2005, total deposits from         officers and directors totaled approximately $535,000.   NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK          Advances from the Federal Home Loan Bank, collateralized at December 31,         2005 and 2004 by pledges of certain residential mortgage loans totaling         $41.5 million and $20.2 million, respectively, and the Savings Bank's         investment in Federal Home Loan Bank stock, are summarized as follows:                                             MATURING                                         YEAR ENDING         INTEREST RATE RANGE            DECEMBER 31,                 2005                 2004                                                                       (Dollars in thousands)              3.89% - 5.44%                     2012                     $ 6,174             $ 7,563         3.75% - 4.84%                     2014                       7,099               8,636         4.31% - 5.36%                     2015                      17,936                   -         5.25%                             2016                       2,000                   -                                                                    -------             -------                                                                     $33,209             $16,199                                                                    =======             =======                 Weighted-average interest rate                         4.70%               4.49%                                                                       ====                ====                                          -45-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE H - FEDERAL INCOME TAXES          Federal income taxes on earnings differs from that computed at the         statutory corporate tax rate for the years ended December 31, 2005 and         2004, the nine months ended December 31, 2003 and the year ended March         31, 2003, as follows:                                                                                 FOR THE             FOR THE            FOR THE                                                                            YEAR ENDED       NINE MONTHS ENDED     YEAR ENDED                                                                            DECEMBER 31,        DECEMBER 31,         MARCH 31,                                                                         2005         2004          2003               2003                                                                                                (In thousands)                  Federal income taxes at statutory rate                     $1,091       $  817         $996              $1,233             Increase (decrease) in taxes resulting primarily from:               Non-deductible charitable contributions                       -          259            -                   -               Nontaxable interest income                                   (2)          (1)          (1)                 (5)               Cash surrender value of life insurance                      (41)           -            -                   -               Other                                                         8            1            -                   8                                                                        ------       ------         ----              ------              Federal income taxes per financial statements              $1,056       $1,076         $995              $1,236                                                                        ======        =====         ====              ======              Effective tax rate                                           32.9%        44.8%        34.0%               34.1%                                                                          ====         ====         ====                ====           The composition of the Corporation's net deferred tax liability at         December 31 is as follows:            Taxes (payable) refundable on temporary                            2005            2004         differences at statutory rate:                                        (In thousands)            Deferred tax assets:           General loan loss allowance                                     $ 270            $ 239           Deferred compensation                                              99              100           Stock benefit plans                                                88               -           Charitable contributions                                           27              142           Unrealized losses on securities available for sale                  4                3           Other                                                               6                4                                                                           -----            -----              Total deferred tax assets                                      494              488          Deferred tax liabilities:           Deferred loan origination costs                                  (102)             (91)           Federal Home Loan Bank stock dividends                           (678)            (627)           Book/tax depreciation                                             (78)             (70)           Mortgage servicing rights                                         (17)             (15)                                                                           -----            -----              Total deferred tax liabilities                                (875)            (803)                                                                           -----            -----               Net deferred tax liability                                   $(381)           $(315)                                                                           =====            =====           The Corporation was allowed a special bad debt deduction, generally         limited to 8% of otherwise taxable income, subject to certain         limitations based on aggregate loans and deposit account balances at the         end of the year. If the amounts that qualified as deductions for federal         income taxes are later used for purposes other than bad debt losses,         including distributions in liquidation, such distributions will be         subject to federal income taxes at the then current corporate income tax         rate. Retained earnings at December 31, 2005 include approximately $3.0         million for which federal income taxes have not been provided. The         amount of unrecognized deferred tax liability relating to the cumulative         bad debt deduction at December 31, 2005 was approximately $1.0 million.         At December 31, 2005, the Corporation had charitable contribution         carryforwards of approximately $1.2 million.                                        -46-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE I - COMMITMENTS          The Corporation is a party to financial instruments with         off-balance-sheet risk in the normal course of business to meet the         financing needs of its customers, including commitments to extend         credit. Such commitments involve, to varying degrees, elements of credit         and interest-rate risk in excess of the amount recognized in the         statements of financial condition. The contract or notional amounts of         the commitments reflect the extent of the Corporation's involvement in         such financial instruments.          The Corporation's exposure to credit loss in the event of nonperformance         by the other party to the financial instrument for commitments to extend         credit is represented by the contractual notional amount of those         instruments. The Corporation uses the same credit policies in making         commitments and conditional obligations as those utilized for         on-balance-sheet instruments.          At December 31, 2005 and 2004, the Corporation had outstanding         commitments to originate fixed-rate loans with interest rates ranging         from 3.99% to 8.25% totaling $2.5 million and $1.3 million,         respectively, secured by one- to four-family residential real estate.         Additionally, the Corporation had unused lines of credit under home         equity loans totaling $11.2 million and $10.6 million at December 31,         2005 and 2004, respectively. In the opinion of management, all loan         commitments equaled or exceeded prevalent market interest rates as of         December 31, 2005 and 2004, and such commitments have been underwritten         on the same basis as that of the existing loan portfolio. Management         believes that all loan commitments are able to be funded through cash         flow from operations and existing excess liquidity. Fees received in         connection with these commitments have not been recognized in earnings.          At December 31, 2005, the Corporation had contractual obligations for         the development of a new branch of $794,000. In addition, the         Corporation has a small earnest money deposit for the purchase of land         for future expansion.          During 2004, the Savings Bank entered into a lease agreement for office         space under an operating lease which expired in January 2006. The lease         agreement required annual rental payments of approximately $20,000         through December 2005, and approximately $2,000 in 2006. The lease         contained three one-year renewal options which the Savings Bank opted         not to renew in 2006. The Savings Bank's rental expense for the years         ended December 31, 2005 and 2004, totaled $20,000 and $18,000.  NOTE J - REGULATORY CAPITAL          The Savings Bank is subject to minimum regulatory capital standards         promulgated by the Office of Thrift Supervision (the "OTS"). Failure to         meet minimum capital requirements can initiate certain mandatory -- and         possibly additional discretionary -- actions by regulators that, if         undertaken, could have a direct material effect on its financial         statements. Under capital adequacy guidelines and the regulatory         framework for prompt corrective action, the Savings Bank must meet         specific capital guidelines that involve quantitative measures of the         Savings Bank's assets, liabilities, and certain off-balance-sheet items         as calculated under regulatory accounting practices. The Savings Bank's         capital amounts and classification are also subject to qualitative         judgments by the regulators about components, risk weightings, and other         factors.                                        -47-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE J - REGULATORY CAPITAL (continued)          The minimum capital standards of the OTS generally require the         maintenance of regulatory capital sufficient to meet each of three         tests, hereinafter described as the tangible capital requirement, the         core capital requirement and the risk-based capital requirement. The         tangible capital requirement provides for minimum tangible capital         (defined as shareholders' equity less all intangible assets) equal to         1.5% of adjusted total assets. The core capital requirement provides for         minimum core capital (tangible capital plus certain forms of supervisory         goodwill and other qualifying intangible assets) generally equal to 4.0%         of adjusted total assets, except for those associations with the highest         examination rating and acceptable levels of risk. The risk-based capital         requirement provides for the maintenance of core capital plus general         loss allowances equal to 8.0% of risk-weighted assets. In computing         risk-weighted assets, the Corporation multiplies the value of each asset         on its statement of financial condition by a defined risk-weighting         factor, e.g., one- to four-family residential loans carry a         risk-weighted factor of 50%.          During 2005, the Savings Bank was notified by the OTS that it was         categorized as "well-capitalized" under the regulatory framework for         prompt corrective action. Additionally, management is not aware of any         recent event that would cause this classification to change. To be         categorized as "well-capitalized" the Savings Bank must maintain minimum         capital ratios as set forth in the following table.          As of December 31, 2005 and 2004, management believed that the Savings         Bank met all capital adequacy requirements to which it was subject.                                                             AS OF DECEMBER 31, 2005                                                                                          TO BE "WELL-                                                                                       CAPITALIZED" UNDER                                                                FOR CAPITAL              PROMPT CORRECTIVE                                          ACTUAL              ADEQUACY PURPOSES        ACTION PROVISIONS                                     AMOUNT     RATIO         AMOUNT     RATIO          AMOUNT      RATIO                                                            (Dollars in thousands)                Tangible capital            $48,683    16.7%      > $ 4,376     >1.5%        >$14,587      > 5.0%                                                           -             -            -             -          Core capital                $48,683    16.7%      > $11,670     >4.0%        >$17,505      > 6.0%                                                           -             -            -             -          Risk-based capital          $49,476    34.9%      > $11,333     >8.0%        >$14,166      >10.0%                                                           -             -            -             -                                                           AS OF DECEMBER 31, 2004                                                                                          TO BE "WELL-                                                                                       CAPITALIZED" UNDER                                                                FOR CAPITAL              PROMPT CORRECTIVE                                          ACTUAL              ADEQUACY PURPOSES        ACTION PROVISIONS                                     AMOUNT     RATIO         AMOUNT     RATIO          AMOUNT      RATIO                                                            (Dollars in thousands)          Tangible capital            $58,439    21.1%      > $ 4,160     >1.5%        >$13,865      >  5.0%                                                           -             -            -             -          Core capital                $58,439    21.1%      > $11,092     >4.0%        >$16,638      >  6.0%                                                           -             -            -             -          Risk-based capital          $59,143    47.1%      > $10,050     >8.0%        >$12,562      >10.0%                                                           -             -            -             -                                         -48-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE J - REGULATORY CAPITAL (continued)          The Savings Bank's management believes that, under the current         regulatory capital regulations, the Savings Bank will continue to meet         its minimum capital requirements in the foreseeable future. However,         events beyond the control of the Savings Bank, such as increased         interest rates or a downturn in the economy in the Savings Bank's market         area, could adversely affect future earnings and, consequently, the         ability to meet future minimum regulatory capital requirements.          The Savings Bank is subject to regulations imposed by the OTS regarding         the amount of capital distributions payable by the Savings Bank to         Cheviot Financial. Generally, the Savings Bank's payment of dividends is         limited, without prior OTS approval, to net earnings for the current         calendar year plus the two preceding calendar years, less capital         distributions paid over the comparable time period. Insured institutions         are required to file an application with the OTS for capital         distributions in excess of this limitation. During 2005, the Savings         Bank received approval from the OTS to declare $12.5 million in         dividends to Cheviot Financial. Such dividends were paid in 2006.          Regulations of the OTS governing mutual holding companies permit Cheviot         Mutual Holding Company (the "Holding Company") to waive the receipt by         it of any common stock dividend declared by Cheviot Financial or the         Savings Bank, provided the OTS does not object to such waiver. Pursuant         to these provisions, the Holding Company waived $1.3 million in         dividends during 2005.  NOTE K - REORGANIZATION AND CHANGE OF CORPORATE FORM          As previously stated, the Board of Directors of the Corporation         initiated a Plan of Reorganization (the "Plan" or the "Reorganization")         pursuant to which the Corporation reorganized into a two-tier mutual         holding company structure. The Reorganization was accounted for as a         change in corporate form with the historic basis of the Corporation's         assets, liabilities and equity unchanged as a result. Subsequent to the         Reorganization, the existing rights of the Corporation's depositors upon         liquidation as of the effective date were transferred with records         maintained to ensure such rights receive statutory priority in the event         of a future mutual to stock conversion, or in the more unlikely event of         the Corporation's liquidation.                                         -49-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE L - CHEVIOT FINANCIAL CORP. CONDENSED FINANCIAL INFORMATION          The following condensed financial statements summarize the financial         position of the Corporation as of December 31, 2005 and 2004, and the         results of its operations and its cash flows for the years ended         December 31, 2005 and 2004:                                                          CHEVIOT FINANCIAL CORP.                                                  STATEMENT OF FINANCIAL CONDITION                                                     December 31, 2005 and 2004                                                          (In thousands)          ASSETS                                                                               2005         2004            Cash in Cheviot Savings Bank                                                      $10,653      $15,780         Cash and due from banks                                                                13           -         Loan receivable - ESOP                                                              2,964        3,273         Investment in Cheviot Savings Bank                                                 48,679       58,437         Dividends receivable                                                               12,500           -         Prepaid expenses and other assets                                                      21          441         Prepaid federal income taxes                                                           58            9                                                                                           -------      -------                   Total assets                                                             $74,888      $77,940                                                                                           =======      =======          LIABILITIES AND SHAREHOLDERS' EQUITY          Accounts payable and other liabilities                                            $    78      $     -         Common stock                                                                           99           99         Additional paid-in capital                                                         42,824       42,746         Shares acquired by stock benefit plans                                             (5,092)      (3,273)         Treasury stock                                                                     (2,537)          -         Retained earnings                                                                  39,524       38,374         Unrealized losses on securities available for sale                                     (8)          (6)                                                                                           -------      -------                   Total shareholders' equity                                                74,810       77,940                                                                                           -------      -------                   Total liabilities and shareholders' equity                               $74,888      $77,940                                                                                           =======      =======                                                        CHEVIOT FINANCIAL CORP.                                                       STATEMENT OF EARNINGS                                               Year ended December 31, 2005 and 2004                                                          (In thousands)                                                                                               2005         2004          Income           Interest income                                                                 $   184      $   177           Equity in earnings of Cheviot Savings Bank                                        2,248        2,095                                                                                           -------      -------                  Total income                                                               2,432        2,272          General, administrative and other expense                                             328          953                                                                                           -------      -------          Earnings before federal income tax benefits                                         2,104        1,319          Federal income tax benefits                                                           (49)          (9)                                                                                           -------      -------          Net earnings                                                                      $ 2,153      $ 1,328                                                                                           =======      =======                                          -50-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE L - CHEVIOT FINANCIAL CORP. CONDENSED FINANCIAL    INFORMATION (continued)                                                    CHEVIOT FINANCIAL CORP.                                                 STATEMENT OF CASH FLOWS                                          Year ended December 31, 2005 and 2004                                                     (In thousands)                                                                                         2005            2004        Cash flows provided by (used in) operating activities:       Net earnings for the year                                                      $  2,153        $  1,328       Excess distribution from (equity in undistributed earnings of)         Cheviot Savings Bank                                                           10,065          (2,393)       Amortization of expense related to ESOP                                             494             298       Increase (decrease) in cash due to changes in         Prepaid expenses and other assets                                             (12,080)           (143)         Accounts payable and other liabilities                                             78              -         Prepaid federal income taxes                                                      (49)             (9)                                                                                      --------        --------              Net cash provided by (used in) operating activities                          661            (919)      Cash flows used in investing activities:       Investment in Cheviot Savings Bank                                                    -         (21,754)       Disbursement of loan to ESOP                                                          -          (3,571)                                                                                      --------        --------              Net cash used in investing activities                                          -         (25,325)      Cash flows provided by (used in) financing activities:       Proceeds from issuance of common stock                                                -          42,845       Purchase of shares for stock benefit plans                                       (2,235)              -       Treasury stock repurchases                                                       (2,537)              -       Dividends paid                                                                   (1,003)           (821)                                                                                      --------        --------              Net cash provided by (used in) financing activities                       (5,775)         42,024                                                                                      --------        --------               Net (decrease) increase in cash and cash equivalents                      (5,114)         15,780      Cash and cash equivalents at beginning of year                                     15,780               -                                                                                      --------        --------      Cash and cash equivalents at end of year                                         $ 10,666        $ 15,780                                                                                      ========        ========                                          -51-                                CHEVIOT FINANCIAL CORP.               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)              Years ended December 31, 2005 and 2004, nine months ended              December 31, 2003 and fiscal year ended March 31, 2003   NOTE M - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)          The following table summarizes the Corporation's quarterly results for         the years ended December 31, 2005 and 2004.                                                                                THREE MONTHS ENDED                                                        DECEMBER 31,     SEPTEMBER 30,       JUNE 30,      MARCH 31,     2005:                                                         (In thousands, except per share data)          Total interest income                                    $3,803            $3,682         $3,494         $3,429     Total interest expense                                    1,529             1,351          1,182          1,067                                                              ------            ------         ------         ------      Net interest income                                       2,274             2,331          2,312          2,362     Provision for losses on loans                                35                30             32              -                                                              ------            ------         ------         ------     Net interest income after provision for loan losses       2,239             2,301          2,280          2,362     Other income                                                141               112            113             79     General, administrative and other expense                 1,599             1,574          1,769          1,476                                                              ------            ------         ------         ------      Earnings before income taxes                                781               839            624            965     Federal income taxes                                        251               279            200            326                                                              ------            ------         ------         ------      Net earnings                                             $  530            $  560         $  424         $  639                                                              ======            ======         ======         ======      Earnings per share:       Basic and diluted                                        $.05              $.06           $.04           $.07                                                                ====              ====           ====            ===                                                                               THREE MONTHS ENDED                                                        DECEMBER 31,     SEPTEMBER 30,       JUNE 30,      MARCH 31,     2004:                                                         (In thousands, except per share data)      Total interest income                                    $3,368            $3,348         $3,182         $3,085     Total interest expense                                    1,014               991            927            949                                                              ------            ------         ------         ------      Net interest income                                       2,354             2,357          2,255          2,136     Other income                                                 72                81             41             76     General, administrative and other expense                 1,344             1,352          1,400          2,872                                                              ------            ------         ------         ------      Earnings (loss) before income taxes                       1,082             1,086            896           (660)     Federal income taxes (benefits)                             368               370            306            (32)                                                              ------            ------         ------         ------      Net earnings (loss)                                      $  714            $  716         $  590         $ (692)                                                              ======            ======         ======         ======      Earnings (loss) per share:       Basic and diluted                                        $.08             $.07            $.06          $(.07)                                                                ====             ====            ====          =====                                           -52-                                              DIRECTORS AND OFFICERS  =====================================================================================================       DIRECTORS OF CHEVIOT     FINANCIAL CORP. AND                      OFFICERS OF                     OFFICERS OF     CHEVIOT SAVINGS BANK                CHEVIOT FINANCIAL CORP.          CHEVIOT SAVINGS BANK     --------------------                -----------------------          --------------------    THOMAS J. LINNEMAN                   THOMAS J. LINNEMAN              THOMAS J. LINNEMAN    President and Chief                  President and Chief             President and Chief    Executive Officer                    Executive Officer               Executive Officer     JAMES E. WILLIAMSON                  SCOTT T. SMITH                  JEFFREY J. LENZER    Executive Secretary,                 Chief Financial Officer         Vice President, Operations    Retired District Administrator    of Oak Hills Local                                                   KEVIN M. KAPPA    School District                                                      Vice President, Compliance     EDWARD L. KLEEMEIER                                                  SCOTT T. SMITH    Retired District Fire Chief,                                         Chief Financial Officer    City of Cincinnati     JOHN T. SMITH    Secretary/Treasurer    of Hawkstone Associates     ROBERT L. THOMAS    Owner/Operator    R&R Quality Meats    and Catering     STEVEN R. HAUSFELD    CPA/Owner    Steven R. Hausfeld, CPA                                                       -53-                          INVESTOR AND CORPORATE INFORMATION  ================================================================================   ANNUAL MEETING  The Annual Meeting of shareholders will be held at 3:00 p.m., Eastern Daylight Savings Time, on April 25, 2006 at the Cheviot Savings Bank Corporate Offices located at 3723 Glenmore Avenue, Cheviot, Ohio.  STOCK LISTING  Cheviot Financial Corp. common stock is listed on The Nasdaq SmallCap Market under the symbol "CHEV".  As of March 14, 2006, there were 9,918,751 shares of Cheviot Financial Corp. common stock outstanding (including unallocated ESOP shares) and there were approximately 910 registered holders of record.  Set forth below are the high and low prices of our common stock for the prior four quarters, as well as our quarterly dividend payment history.                                                                  DIVIDEND QUARTER ENDED                        HIGH           LOW           PAID  March 31, 2005                      $12.98         $11.09         $.06 June 30, 2005                       $11.74         $11.01         $.06 September 30, 2005                  $11.94         $11.12         $.06 December 31, 2005                   $11.80         $11.12         $.06  SHAREHOLDER AND GENERAL INQUIRIES           TRANSFER AGENT  Cheviot Financial Corp.                     Registrar and Transfer Company 3723 Glenmore Avenue                        10 Commerce Drive Cincinnati, Ohio  45211                     Cranford, New Jersey (513) 661-0457                              (800) 525-7686 Attn:  Kimberly A. Siener Investor Relations  REGISTERED INDEPENDENT AUDITORS             CORPORATE COUNSEL  Grant Thornton LLP                          Luse Gorman Pomerenk & Schick, P.C. 4000 Smith Road                             5335 Wisconsin Avenue NW Suite 500                                   Suite 400 Cincinnati, Ohio  45209                     Washington, DC  20015 (513) 762-5000                              (202) 274-2000  ANNUAL REPORTS  A copy, without exhibits, of the Cheviot Financial Corp. Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the Securities and Exchange Commission, may be obtained without charge by contacting Kimberly A. Siener, Investor Relations, Cheviot Financial Corp., 3723 Glenmore Avenue, Cheviot, Ohio 45211.                                         -54-                                   OFFICE LOCATIONS  ================================================================================   FULL SERVICE BANKING LOCATIONS  Main Office: Cheviot                     Branch Offices: Monfort Heights              3723 Glenmore Avenue                        5550 Cheviot Road              Cheviot, Ohio  45211                        Cincinnati, Ohio  45247              (513) 661-0457                              (513)389-3325                                                           Bridgetown                                                          6060 Bridgetown Road                                                          Cincinnati, Ohio  45248                                                          (513) 389-3333                                                           Harrison                                                          1194 Stone Drive                                                          Harrison, Ohio  45030                                                          (513) 202-5490  LENDING CENTER               West Chester              8050 Becket Center Drive, Suite 106              West Chester, Ohio  45069              (513) 942-1237                                              -55-    EX-21 3 tex21-9410.txt EX-21                                            EXHIBIT 21                           SUBSIDIARIES OF THE REGISTRANT                             SUBSIDIARIES OF THE REGISTRANT    Subsidiary                        Ownership            State of Incorporation - ----------                        ---------            ----------------------  Cheviot Savings Bank                100%                       Federal     EX-31.1 4 tex31_1-9410.txt EX-31.1                                 EXHIBITS 31.1 AND 31.2             CERTIFICATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER,                 AND CERTIFICATION OF THE CHIEF FINANCIAL OFFICER             PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002                                                                        EXHIBIT 31.1               CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER             PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002          I, Thomas J. Linneman, certify that  1.      I have reviewed this annual report on Form 10-K of Cheviot Financial         Corp.;  2.      Based on my knowledge, this annual 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 annual report;  3.      Based on my knowledge, the financial statements, and other financial         information included in this annual 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 annual 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 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                 annual 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                 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;  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 the 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.   March 28, 2006                          /s/ Thomas J. Linneman Date                                    ----------------------------------------                                         Thomas J. Linneman                                         President and Chief Executive Officer    EX-31.2 5 tex31_2-9410.txt EX-31.2                                                                        EXHIBIT 31.2                      CERTIFICATION OF CHIEF FINANCIAL OFFICER             PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002          I, Scott T. Smith, certify that  1.      I have reviewed this annual report on Form 10-K of Cheviot Financial         Corp.;  2.      Based on my knowledge, this annual 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 annual report;  3.      Based on my knowledge, the financial statements, and other financial         information included in this annual 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 annual 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 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                 annual 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                 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;  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 the 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.   March 28, 2006                          /s/ Scott T. Smith Date                                    ----------------------------------------                                         Scott T. Smith                                         Chief Financial Officer    EX-32 6 tex32-9410.txt EX-32                                       EXHIBIT 32               CERTIFICATION OF CHIEF EXECUTIVE OFFICER, PRESIDENT AND                              CHIEF FINANCIAL OFFICER                          PURSUANT TO SECTION 906 OF THE                            SARBANES-OXLEY ACT OF 2002                                                                          EXHIBIT 32                               CERTIFICATION PURSUANT TO                              18 U.S.C. SECTION 1350,                              AS ADOPTED PURSUANT TO                   SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002           Thomas J. Linneman, President and Chief Executive Officer and Scott T. Smith, Chief Financial Officer of Cheviot Financial Corp. (the "Company") each certify in their capacity as officers of the Company that they have reviewed the annual report of the Company on Form 10-K for the fiscal ended December 31, 2005 and that to the best of their knowledge:          1.      the report fully complies with the requirements of Sections                 13(a) 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.  The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002.   March 28, 2006                  /s/ Thomas J. Linneman Date                            ------------------------------------------------                                 President and Chief Executive Officer   March 28, 2006                  /s/ Scott T. Smith Date                            ------------------------------------------------                                 Chief Financial Officer    -----END PRIVACY-ENHANCED MESSAGE-----