XNAS:CHEV Cheviot Financial Corp Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
 
x           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended                                                  June 30, 2012                                           
 
OR
 
o          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ____________ to _______________
 
Commission File No. 0-50529
 
CHEVIOT FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
 
     Maryland
        90-0789920  
      
(State or other jurisdiction of 
incorporation or organization)
     (I.R.S. Employer
   Identification Number)
      
 
3723 Glenmore Avenue, Cincinnati, Ohio  45211
(Address of principal executive office)
 
Registrant’s telephone number, including area code: (513) 661-0457
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
 
Yes x                      No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes x                      No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one.)
 
Large accelerated filer o                  Accelerated filer   o                   Non-accelerated filer   o
 
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes o                      No  x
 
As of August 14, 2012, the latest practicable date, 7,596,537 shares of the registrant’s common stock, $.01 par value, were issued and outstanding.
 
 
Page 1 of 38

 
 
INDEX
 
     
Page
       
PART I
-
FINANCIAL INFORMATION
 
       
   
Consolidated Statements of Financial Condition
3
       
   
Consolidated Statements of Earnings
4
       
   
Consolidated Statements of Comprehensive Income
5
       
   
Consolidated Statements of Cash Flows
6
       
   
Notes to Consolidated Financial Statements
8
   
 
 
   
Management’s Discussion and Analysis of Financial Condition and Results of Operations
34
       
   
Quantitative and Qualitative Disclosures about Market Risk
44
       
   
Controls and Procedures
44
       
PART II
-
OTHER INFORMATION
45
       
SIGNATURES
    46
 
 
2

 
 
Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
(In thousands, except share data)
 
   
June 30,
   
December 31,
 
   
2012
   
2011
 
   
(Unaudited)
       
             
ASSETS
           
             
Cash and due from banks
  $ 16,231     $ 11,023  
Federal funds sold
    15,899       18,019  
Interest-earning deposits in other financial institutions
    6,441       16,098  
Cash and cash equivalents
    38,571       45,140  
                 
Investment securities available for sale - at fair value
    170,047       121,042  
Mortgage-backed securities available for sale - at fair value
    6,706       7,459  
Mortgage-backed securities held to maturity - at cost, approximate market value of $4,058 and $4,315 at June 30, 2012 and December 31, 2011, respectively
    3,886       4,167  
Loans receivable - net
    357,911       382,759  
Loans held for sale - at lower of cost or market
    3,417       1,537  
Real estate acquired through foreclosure - net
    3,647       3,795  
Office premises and equipment - at depreciated cost
    10,733       10,200  
Federal Home Loan Bank stock - at cost
    8,651       8,366  
Accrued interest receivable on loans
    1,443       1,614  
Accrued interest receivable on mortgage-backed securities
    23       27  
Accrued interest receivable on investments and interest-earning deposits
    668       498  
Goodwill
    10,309       10,309  
Core deposit intangible - net
    875       1,028  
Prepaid expenses and other assets
    4,248       4,330  
Bank-owned life insurance
    10,083       10,330  
Prepaid federal income taxes
    1,241       1,428  
Deferred federal income taxes
    1,702       2,275  
                 
Total assets
  $ 634,161     $ 616,304  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
                 
Deposits
  $ 495,705     $ 492,321  
Advances from the Federal Home Loan Bank
    26,854       31,327  
Advances by borrowers for taxes and insurance
    970       2,464  
Accrued interest payable
    100       118  
Accounts payable and other liabilities
    3,193       4,521  
Total liabilities
    526,822       530,751  
                 
Commitments and contingencies
    -       12,643  
                 
Shareholders’ equity
               
  Preferred stock - authorized 5,000,000 shares, $.01 par value; none issued
               
  Common stock - authorized 30,000,000 shares, $.01 par value;
               
7,596,557 and 9,918,751 shares issued at June 30, 2012 and December 31, 2011
    76       99  
  Additional paid-in capital
    64,288       43,866  
  Shares acquired by stock benefit plans
    (877 )     (913 )
  Treasury stock - at cost, 0 shares at June 30, 2012 and 1,053,843 shares at December 31, 2011
    -       (12,860 )
  Retained earnings - restricted
    43,315       42,440  
  Accumulated comprehensive income, unrealized gains on securities available for sale, net of related tax effects
    537       278  
Total shareholders’ equity
    107,339       72,910  
                 
Total liabilities and shareholders’ equity
  $ 634,161     $ 616,304  
                 
See accompanying notes to consolidated financial statements.
               
 
 
3

 
 
Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF EARNINGS
 
(In thousands, except per share data)
 
   
Six months ended
   
Three months ended
 
   
June 30,
   
June 30,
 
   
2012
   
2011
   
2012
   
2011
 
         
(Unaudited)
       
Interest income
                       
Loans
  $ 9,419     $ 8,853     $ 4,587     $ 5,463  
Mortgage-backed securities
    110       137       50       87  
Investment securities
    1,313       1,033       744       576  
Interest-earning deposits and other
    187       137       91       86  
Total interest income
    11,029       10,160       5,472       6,212  
                                 
Interest expense
                               
Deposits
    2,478       2,217       1,207       1,291  
Borrowings
    489       615       236       335  
Total interest expense
    2,967       2,832       1,443       1,626  
                                 
Net interest income
    8,062       7,328       4,029       4,586  
                                 
Provision for losses on loans
    400       200       250       50  
                                 
Net interest income after provision for losses on loans
    7,662       7,128       3,779       4,536  
                                 
Other income
                               
Rental
    71       58       35       38  
Gain on sale of loans
    552       226       175       180  
Gain on sale of real estate acquired through foreclosure
    39       122       10       135  
Earnings on bank-owned life insurance
    637       124       557       84  
Other operating
    855       657       402       490  
Total other income
    2,154       1,187       1,179       927  
                                 
General, administrative and other expense
                               
Employee compensation and benefits
    3,154       3,122       1,496       1,988  
Occupancy and equipment
    853       535       426       373  
Property, payroll and other taxes
    642       598       347       320  
Data processing
    311       219       154       140  
Legal and professional
    394       542       226       319  
Advertising
    150       280       75       203  
FDIC expense
    228       305       114       178  
Other operating
    1,297       969       605       749  
Total general, administrative and other expense
    7,029       6,570       3,443       4,270  
                                 
Earnings before income taxes
    2,787       1,745       1,515       1,193  
                                 
Federal income taxes
                               
Current
    258       (411 )     17       (438 )
Deferred
    439       701       290       728  
Total federal income taxes
    697       290       307       290  
                                 
NET EARNINGS
  $ 2,090     $ 1,455     $ 1,208     $ 903  
                                 
EARNINGS PER SHARE
                               
Basic
  $ .28     $ .17     $ .16     $ .10  
                                 
Diluted
  $ .28     $ .17     $ .16     $ .10  
                                 
Dividends per common share
  $ .16     $ .24     $ .08     $ .12  
                                 
See accompanying notes to consolidated financial statements.
                               
 
 
4

 
 
Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
For the six and three months ended June 30, 2012 and 2011
(In thousands)
 
   
For the six months
   
For the three months
 
   
ended June 30,
   
ended June 30,
 
   
2012
   
2011
   
2012
   
2011
 
    (Unaudited)  
Net earnings for the period
  $ 2,090     $ 1,455     $ 1,208     $ 903  
Other comprehensive income, net of tax expense:
                               
Unrealized holding gains on securities during the period, net of tax expense of $133 and $646 for the six months ended June 30, 2012 and 2011, respectively, and $430 and $543 for the three months ended June 30, 2012 and 2011, respectively
    259       1,254       835       1,054  
                                 
Comprehensive income
  $ 2,349     $ 2,709     $ 2,043     $ 1,957  
                                 
Accumulated comprehensive income
  $ 537     $ 203     $ 537     $ 203  
                                 
See accompanying notes to consolidated financial statements.
 
 
5

 

 
Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the six months ended June 30, 2012 and 2011
(In thousands)
 
   
2012
    2011  
    (Unaudited)  
Cash flows from operating activities:
           
Net earnings for the period
  $ 2,090     $ 1,455  
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
               
Amortization of premiums and discounts on investment and mortgage-backed securities, net
    (20 )     (8 )
Depreciation
    375       219  
Amortization of deferred loan origination fees - net
    11       59  
Amortization of intangible assets
    153       90  
Amortization of fair value adjustments
    (489 )     (240 )
Proceeds from sale of loans in the secondary market
    29,649       18,796  
Loans originated for sale in the secondary market
    (30,928 )     (23,032 )
Gain on sale of loans
    (552 )     (226 )
Gain on sale of real estate acquired through foreclosure
    (39 )     (122 )
Impairment on real estate acquired through foreclosure
    170       138  
Net increase in cash surrender value of bank-owned life insurance
    (156 )     (124 )
Provision for losses on loans
    400       200  
Amortization of expense related to stock benefit plans
    4       18  
Increase (decrease) in cash, net of acquisition, due to changes in:
               
Accrued interest receivable on loans
    171       (113 )
Accrued interest receivable on mortgage-backed securities
    4       13  
Accrued interest receivable on investments and interest earning deposits
    (170 )     41  
Prepaid expenses and other assets
    82       506  
Accrued interest payable
    (18 )     (676 )
Accounts payable and other liabilities
    (1,339 )     (2,713 )
Federal income taxes
               
Current
    188       445  
Deferred
    439       701  
Net cash provided by (used in) operating activities
    25       (4,573 )
                 
Cash flows (used in) provided by investing activities:
               
Principal repayments on loans
    46,458       29,839  
Loan disbursements
    (20,930 )     (12,270 )
Purchase of investment securities – available for sale
    (137,134 )     (5,000 )
Proceeds from maturity of investment securities – available for sale
    86,064       23,050  
Principal repayments on mortgage-backed securities – available for sale
    743       655  
Principal repayments on mortgage-backed securities – held to maturity
    281       290  
Proceeds from sale of real estate acquired through foreclosure
    1,406       1,878  
Additions to real estate acquired through foreclosure
    -       (100 )
Purchase of office premises and equipment
    (908 )     (677 )
Purchase of Federal Home Loan Bank stock
    (285 )     -  
Proceeds from bank-owned life insurance
    403       -  
Cash paid for acquisition, net of cash received
    -       (4,200 )
Net cash (used in) provided by investing activities
    (23,902 )     33,465  
                 
Cash flows provided by (used in) financing activities:
               
Net increase (decrease) in deposits – net of acquisition
    3,795       (4,491 )
Proceeds from Federal Home Loan Bank advances – net of acquisition
    -       11,000  
Repayments on Federal Home Loan Bank advances
    (4,426 )     (17,158 )
Advances by borrowers for taxes and insurance – net of acquisition
    (1,494 )     (1,586 )
Proceeds from stock conversion
    22,133       -  
Shares acquired by stock benefit plans
    (1,496 )     -  
Stock option expense, net
    11       10  
Dividends paid on common stock
    (1,215 )     (816 )
Net cash provided by (used in) financing activities
    17,308       (13,041 )
                 
Net (decrease) increase in cash and cash equivalents
    (6,569 )     15,851  
 
Cash and cash equivalents at beginning of period
    45,140       18,149  
 
Cash and cash equivalents at end of period
  $ 38,571     $ 34,000  
 
See accompanying notes to consolidated financial statements.
 
 
6

 
 
Cheviot Financial Corp.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 
For the six months ended June 30, 2012 and 2011
(In thousands)
             
    2012     2011  
    (Unaudited)  
             
Supplemental disclosure of cash flow information:
           
Cash paid during the period for:
           
Federal income taxes
  $ 52     $ 185  
                 
Interest on deposits and borrowings
  $ 2,985     $ 2,752  
                 
Supplemental disclosure of noncash investing activities:
               
Transfer of loans to real estate acquired through foreclosure
  $ 1,401     $ 1,065  
                 
Loans originated upon sales of real estate acquired through foreclosure
  $ -     $ 102  
                 
Recognition of mortgage servicing rights
  $ 224     $ 83  
                 
Deferred gain on real estate acquired through foreclosure
  $ 13     $ -  
 
See accompanying notes to consolidated financial statements.

 
7

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the three and six months ended June 30, 2012 and 2011
 
1.       Basis of Presentation
 
Cheviot Financial Corp. (“Cheviot Financial” or the “Corporation”) is a financial holding company, the principal asset of which consists of its ownership of Cheviot Savings Bank (the “Savings Bank”).  The Savings Bank conducts a general banking business in southwestern Ohio which consists of attracting deposits and applying those funds primarily to the origination of real estate loans.  The Savings Bank’s profitability is significantly dependent on net interest income, which is the difference between interest income from interest-earning assets and the interest expense paid on interest-bearing liabilities.  Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and the interest received or paid on these balances.
 
On January 18, 2012 we completed our second step reorganization and sale of common stock.  Prior to the completion of the second step conversion, Cheviot Financial was a federal corporation and mid-tier holding company.  Following the reorganization Cheviot Financial is the Maryland chartered holding company of the Savings Bank.  Reference to Cheviot Financial or the Corporation at December 31, 2011 or June 30, 2011 refer to the federal mid-tier corporation unless otherwise indicated shares outstanding and per share information at December 31, 2011 and June 30, 2011 has been adjusted to reflect the exchange ratio of 0.857%.
 
On March 16, 2011, the Corporation completed the acquisition of First Franklin Corporation (“First Franklin”) and its wholly-owned subsidiary, The Franklin Savings and Loan Company (“Franklin Savings”).  Accordingly, the Corporation’s unaudited consolidated financial statements for the three and six month periods ended June 30, 2011 includes the accounts of First Franklin for the period March 17, 2011 to June 30, 2011.
 
The accompanying unaudited financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America.  Accordingly, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of Cheviot Financial included in the Annual Report on Form 10-K for the year ended December 31, 2011.  However, in the opinion of management, all adjustments (consisting of only normal recurring accruals) which are necessary for a fair presentation of the consolidated financial statements have been included.  The results of operations for the three and six month periods ended June 30, 2012, are not necessarily indicative of the results which may be expected for the entire year.
 
Cheviot Financial evaluates subsequent events through the date of filing with the Securities and Exchange Commission.
 
2.       Principles of Consolidation
 
The accompanying consolidated financial statements as of and for the three and six months ended June 30, 2012 include the accounts of the Corporation and its wholly-owned subsidiary, the Savings Bank.  All significant intercompany items have been eliminated.
 
3.       Liquidity and Capital Resources
 
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business.  Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures.  Our primary sources of funds are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of securities and funds provided by our operations.  In addition, we may borrow from the Federal Home Loan Bank of Cincinnati.  At June 30, 2012 and December 31, 2011, we had $26.9 million and $31.3 million, respectively, in outstanding borrowings from the Federal Home Loan Bank of Cincinnati and had the capacity to increase such borrowings at those dates by approximately $146.6 million and $160.6 million, respectively.
 
 
8

 

Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
3.       Liquidity and Capital Resources (continued)
 
Loan repayments and maturing securities are a relatively predictable source of funds.  However, deposit flows, calls of securities and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace.  These factors reduce the predictability of these sources of funds.
 
Our primary investing activities are the origination of one- to four-family real estate loans, commercial real estate, construction and consumer loans, and the purchase of securities.  For the six months ended June 30, 2012, loan originations totaled $51.9 million, compared to $35.3 million for the six months ended June 30, 2011.
 
Total deposits increased $3.4 million and $217.0 million, including $221.5 million acquired in the acquisition of First Franklin during the six months ended June 30, 2012 and 2011, respectively. Deposit flows are affected by the level of interest rates, the interest rates and products offered by competitors and other factors.
 
The following table sets forth information regarding the Corporation’s obligations and commitments to make future payments under contract as of June 30, 2012.
 
    Payments due by period        
    Less    
More than
   
More than
   
More
       
    than     1-3     4-5    
than
       
    1 year    
years
   
years
   
5 years
   
Total
 
    (In thousands)  
                                   
Contractual obligations:
                                 
Advances from the Federal Home Loan Bank
  $ 404     $ 2,916     $ 14,302     $ 9,232     $ 26,854  
Certificates of deposit
    128,914       89,728       53,261       30       271,933  
Lease obligations
    146       150       -       -       296  
                                         
Amount of loan commitments and expiration per period:
                                       
Commitments to originate one- to four-family loans
    4,729       -       -       -       4,729  
Home equity lines of credit
    30,862       -       -       -       30,862  
Commercial lines of credit
    3,889       -       -       -       3,889  
Undisbursed loans in process
    2,481       -       -       -       2,481  
                                         
Total contractual obligations
  $ 171,425     $ 92,794     $ 67,563     $ 9,262     $ 341,044  
 
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 June 30, 2012 and 2011, we exceeded all of the applicable regulatory capital requirements.  Our core (Tier 1) capital was $77.6 million and $57.6 million, or 12.4% and 9.8% of total assets at June 30, 2012 and 2011, respectively.  In order to be classified as “well-capitalized” under federal banking regulations, we were required to have core capital of at least $38.1 million, or 6.0% of assets as of June 30, 2012.  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 June 30, 2012 and 2011, we had a total risk-based capital ratio of 25.5% and 17.8%, respectively.
 
 
9

 

Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
4.       Earnings Per Share
 
Basic earnings per share is computed based upon the weighted-average common shares outstanding during the period, less shares in the ESOP that are unallocated and not committed to be released plus shares in the ESOP that have been allocated.  Weighted-average common shares deemed outstanding gives effect to 248,206 and 107,126 unallocated shares held by the ESOP for the six months ended June 30, 2012 and 2011, respectively.  The unallocated shares at June 30, 2012 have been adjusted to reflect the exchange ratio of 0.857%.
 
   
For the six months ended
   
For the three months ended
 
    June 30,     June 30,  
   
2012
   
2011
   
2012
   
2011
 
                         
Weighted-average common shares outstanding (basic)
    7,483,336       8,757,782       7,348,351       8,757,782  
                                 
Dilutive effect of assumed exercise of stock options
    7,578       9,661       7,681       10,187  
                                 
Weighted-average common shares outstanding (diluted)
    7,490,914       8,767,443       7,356,032       8,767,969  
 
5.       Stock Incentive Plan
 
On April 26, 2005, the Corporation approved a Stock Incentive Plan that provides for grants of up to 416,517 stock options.  During 2012, 2011 and 2010 approximately 5,600, 3,771 and 7,593 stock options were granted subject to a five year vesting period.  The shares in the plan and the shares granted have been adjusted to reflect the exchange ratio of 0.857%.
 
The Corporation follows FASB Accounting Standard Codification Topic 718 (ASC 718), “Compensation – Stock Compensation,” for its stock option plans, and accordingly, the Corporation recognizes the expense of these grants as required. Stock-based employee compensation costs pertaining to stock options is reflected as a net increase in equity, for both any new grants, as well as for all unvested options outstanding at December 31, 2005, in both cases using the fair values established by usage of the Black-Scholes option pricing model, expensed over the vesting period of the underlying option.
 
The Corporation elected the modified prospective transition method in applying ASC 718. Under this method, the provisions of ASC 718 apply to all awards granted or modified after the date of adoption, as well as for all unvested options outstanding at December 31, 2005. The compensation cost recorded for unvested equity-based awards is based on their grant-date fair value. For the six months ended June 30, 2012, the Corporation recorded $11,000 in after-tax compensation cost for equity-based awards that vested during the six months ended June 30, 2012.  The Corporation has $62,000 unrecognized pre-tax compensation cost related to non-vested equity-based awards granted under its stock incentive plan as of June 30, 2012, which is expected to be recognized over a weighted-average vesting period of approximately 2.7 years.
 
 
10

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
5.       Stock Option Plan (continued)
 
A summary of the status of the Corporation’s stock option plan as of June 30, 2012 and the year ended December 31, 2011, as well as the changes during the periods then ended are presented below:
 
   
Six months ended
   
Year ended
 
   
June 30, 2012
   
December 31, 2011
 
         
Weighted-
         
Weighted-
 
         
average
         
average
 
         
exercise
         
exercise
 
   
Shares
   
price
   
Shares
   
price
 
                         
Outstanding at beginning of period
    425,600     $ 11.10       421,200     $ 11.05  
Stock conversion
    (60,861 )     1.76       -       -  
Granted
    5,600       8.30       4,400       9.04  
Exercised
    -       -       -       -  
Forfeited
    -       -       -       -  
                                 
Outstanding at end of period
    370,339     $ 12.80       425,600     $ 11.10  
                                 
Options exercisable at period-end
    353,022     $ 12.96       404,760     $ 11.14  
                                 
Fair value of options granted
          $ 1.28             $ 5.30  
                                 
The following information applies to options outstanding at June 30, 2012:
                 
                                 
Number outstanding
                            370,339  
Exercise price
                            $8.30 - $15.90  
Weighted-average exercise price
                            $12.96  
Weighted-average remaining contractual life
                         
3.2 years
 
 
The expected term of options is based on evaluations of historical and expected future employee exercise behavior.  The risk-free interest rate is based upon the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date.  Volatility is based upon the historical volatility of the Corporation’s stock.
 
The fair value of each option was estimated on the date of grant using the modified Black-Scholes options pricing model with the following weighted-average assumptions used for grants in 2012:  dividend yield of 3.86%, expected volatility of 24.10%, risk-free interest rate of 1.64% and an expected life of 10 years for each grant.
 
The effects of expensing stock options are reported in “cash provided by financing activities” in the Consolidated Statements of Cash Flows.
 
 
11

 
 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
6.       Investment and Mortgage-backed Securities
 
The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of investment securities at June 30, 2012 and December 31, 2011 are shown below.
 
         
June 30, 2012
       
         
Gross
   
Gross
   
Estimated
 
   
Amortized
   
unrealized
   
unrealized
   
fair
 
   
cost
   
gains
   
losses
   
value
 
         
(In thousands)
       
Available for Sale:
                       
U.S. Government agency securities
  $ 166,365     $ 525     $ 59     $ 166,831  
Municipal obligations
    3,038       188       10       3,216  
                                 
    $ 169,403     $ 713     $ 69     $ 170,047  
                                 
           
December 31, 2011
         
           
Gross
   
Gross
   
Estimated
 
   
Amortized
   
unrealized
   
unrealized
   
fair
 
   
cost
   
gains
   
losses
   
value
 
    (In thousands)  
Available for Sale:
                               
U.S. Government agency securities
  $ 117,731     $ 205     $ 65     $ 117,871  
Municipal obligations
    3,039       160       28       3,171  
                                 
    $ 120,770     $ 365     $ 93     $ 121,042  
 
The amortized cost of investment securities at June 30, 2012, by contractual term to maturity, are shown below.
 
   
June 30,
 
   
2012
 
   
(In thousands)
 
       
Less than one year
  $ 138,369  
One to five years
    20,140  
Five to ten years
    1,137  
More than ten years
    9,757  
         
    $ 169,403  
 
 
12

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
6.       Investment and Mortgage-backed Securities (continued)
 
The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of mortgage-backed securities at June 30, 2012 and December 31, 2011 are shown below.
      June 30, 2012  
         
Gross
   
Gross
   
Estimated
 
   
Amortized
   
unrealized
   
unrealized
   
fair
 
   
cost
   
holding gains
   
holding losses
   
value
 
      (In thousands)  
Available for sale:
                       
  Federal Home Loan Mortgage Corporation adjustable-rate participation certificates
  $ 1,047     $ 40     $ 1     $ 1,086  
  Federal National Mortgage Association adjustable-rate participation certificates
    2,134       66       3       2,197  
  Government National Mortgage Association adjustable-rate participation certificates
    3,355       108       40       3,423  
                                 
    $ 6,536     $ 214     $ 44     $ 6,706  
                                 
Held to maturity:
                               
  Federal Home Loan Mortgage Corporation adjustable-rate participation certificates
  $ 351     $ 8     $ 1     $ 358  
  Federal National Mortgage Association adjustable-rate participation certificates
    356       9       -       365  
  Government National Mortgage Association adjustable-rate participation certificates
    3,179       159       3       3,335  
                                 
    $ 3,886     $ 176     $ 4     $ 4,058  
 
 
13

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
6.      Investment and Mortgage-backed Securities (continued)
 
         
December 31, 2011
       
         
Gross
   
Gross
   
Estimated
 
   
Amortized
   
unrealized
   
unrealized
   
fair
 
   
cost
   
holding gains
   
holding losses
   
value
 
         
(In thousands)
       
Available for sale:
                       
Federal Home Loan Mortgage Corporation adjustable-rate participation certificates
  $ 1,137     $ 44     $ 1     $ 1,180  
Federal National Mortgage Association adjustable-rate participation certificates
    2,624       46       4       2,666  
Government National Mortgage Association adjustable-rate participation certificates
    3,548       93       28       3,613  
                                 
    $ 7,309     $ 183     $ 33     $ 7,459  
                                 
Held to maturity:
                               
Federal Home Loan Mortgage Corporation adjustable-rate participation certificates
  $ 382     $ 7     $ 1     $ 388  
Federal National Mortgage Association adjustable-rate participation certificates
    410       7       -       417  
Government National Mortgage Association adjustable-rate participation certificates
    3,375       137       2       3,510  
                                 
    $ 4,167     $ 151     $ 3     $ 4,315  
 
The amortized cost of mortgage-backed securities, including those designated as available for sale at June 30, 2012, by contractual terms to maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may generally prepay obligations without prepayment penalties.
 
   
June 30,
 
   
2012
 
   
(In thousands)
 
       
Due in one year or less
  $ 522  
Due in one year through five years
    2,199  
Due in five years through ten years
    3,023  
Due in more than ten years
    4,678  
         
    $ 10,422  
 
 
14

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
6.       Investment and Mortgage-backed Securities (continued)
 
The table below indicates the length of time individual securities have been in a continuous unrealized loss position at June 30, 2012:
 
   
Less than 12 months
   
12 months or longer
         
Total
       
Description of
 
Number of
   
Fair
   
Unrealized
   
Number of
   
Fair
   
Unrealized
   
Number of
   
Fair
   
Unrealized
 
securities
 
investments
   
value
   
losses
   
investments
   
value
   
losses
   
investments
   
value
   
losses
 
                     
(Dollars in thousands)
                   
U.S. Government
                                                     
  agency securities
    5     $ 23,936     $ 59       -     $ -     $ -       5     $ 23,936     $ 59  
Municipal obligations
    -       -       -       1       705       10       1       705       10  
Mortgage-backed
                                                                       
  securities
    6       177       4       14       532       44       20       709       48  
                                                                         
Total temporarily
                                                                       
  impaired securities
    11     $ 24,113     $ 63       15     $ 1,237     $ 54       26     $ 25,350     $ 117  
 
Management does not intend to sell any of the debt securities with an unrealized loss and does not believe that it is more likely than not that it will be required to sell a security in an unrealized loss position prior to a recovery in value. The fair values are expected to recover as securities approach maturity dates. The Corporation has evaluated these securities and has determined that the decline in their values is temporary.
 
7.      Income Taxes
 
The Corporation uses an asset and liability approach to accounting for income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are recognized if it is more likely than not that a future benefit will be realized. The Corporation accounts for income taxes in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, which prescribes the recognition and measurement criteria related to tax positions taken or expected to be taken in a tax return.
 
The Corporation’s principal temporary differences between financial income and taxable income result mainly from different methods of accounting for deferred loan origination fees and costs, Federal Home Loan Bank stock dividends, the general loan loss allowance, deferred compensation, stock benefit plans, goodwill and intangible assets. The Corporation has approximately $6.3 million of net operating losses to carryforward for the next 20 years. These losses are subject to the Internal Revenue Code section 382 limitations which allow approximately $1.1 million of the losses on an annual basis to offset current year taxable income.
 
The Corporation recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At adoption date, January 1, 2007 the Corporation applied the standard to all tax positions for which the statute of limitations remained open and was not required to record any liability for unrecognized tax benefits as that date. There have been no material changes in unrecognized tax benefits since January 1, 2007. The known tax attributes which can influence the Corporation’s effective tax rate is the utilization of net operating loss carryforwards subject to the limitations under Internal Revenue Code section 382.
 
 
15

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
7.      Income Taxes (continued)
 
The Corporation is subject to income taxes in the U.S. federal jurisdiction, as well as various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, the Corporation is no longer subject to U.S. federal, state and local, or non U.S. income tax examinations by tax authorities for the years before 2009.
 
The Corporation will recognize, if applicable, interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
 
Federal income tax on earnings differs from that computed at the statutory corporate tax rate for the six months ended June 30, 2012 and 2011:
 
   
2012
   
2011
 
   
(Dollars in thousands)
 
             
Federal income taxes at statutory rate of 34%
  $ 948     $ 593  
Increase (decrease) in taxes resulting primarily from:
               
Stock compensation
    (19 )     (8 )
Nontaxable interest income
    (19 )     (16 )
Cash surrender value of life insurance
    (217 )     (42 )
Utilization of net operating loss carryforwards, previously reserved
    -       (241 )
Other
    4       4  
                 
Federal income taxes per consolidated financial statements
  $ 697     $ 290  
                 
Effective tax rate
    25.0 %     16.6 %
 
8.       Disclosures about Fair Value of Assets and Liabilities
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly  transaction between market participants at the measurement date. A three-level hierarchy exists for fair value measurements based upon the inputs to the valuation of an asset or liability.
 
  Level 1 Quoted prices in active markets for identical assets or liabilities 
     
  Level 2  Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities 
     
  Level 3  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 
 
Fair value methods and assumptions are set forth below for each type of financial instrument.
 
 
16

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
8.      Disclosures about Fair Value of Assets and Liabilities (continued)
 
Securities available for sale: Fair values on available for sale securities were based upon a market approach. Securities which are fixed income instruments that are not quoted on an exchange, but are traded in active markets, are valued using prices obtained from our custodian, which used third party data service providers. Available for sale securities include U.S. agency securities, municipal bonds and mortgage-backed agency securities.
 
Fair Value Measurements at June 30, 2012 and December 31, 2011
 
   
Quoted prices
             
   
in active
   
Significant
   
Significant
 
   
markets for
   
other
   
other
 
   
identical
   
observable
   
unobservable
 
   
assets
   
inputs
   
inputs
 
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
                   
Securities available for sale at June 30, 2012:
                 
U.S. Government agency securities
    -     $ 166,831       -  
Municipal obligations
    -     $ 3,216       -  
Mortgage-backed securities
    -     $ 6,706       -  
                         
Securities available for sale at December 31, 2011:
                 
U.S. Government agency securities
    -     $ 117,871       -  
Municipal obligations
    -     $ 3,171       -  
Mortgage-backed securities
    -     $ 7,459       -  
 
The Corporation is predominately an asset-based lender with real estate serving as collateral on a substantial majority of loans. Loans which are deemed to be impaired are primarily valued on a nonrecurring basis at the fair values of the underlying real estate collateral. In addition, on the acquisition date the Corporation independently fair valued $25.0 million of First Franklin’s impaired loans, as well as $173.2 million of performing loans. First Franklin’s impaired loans subject to fair value adjustments are not included in Cheviot Financial’s non-performing loan totals. Such loans are considered performing under Topic ASC 310-30, even though the loans are contractually past due, as any nonpayment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and the resulting loss provisions or future period yield adjustments. The fair values were obtained using independent appraisals, which the Corporation considers to be Level 2 inputs. The aggregate carrying amount of the Corporation’s impaired loans at June 30, 2012 was $6.4 million, compared to $5.7 million at December 31, 2011.
 
The Corporation has real estate acquired through foreclosure totaling $3.7 million at June 30, 2012, compared to $3.8 million at December 31, 2011. Real estate acquired through foreclosure is carried at the lower of the cost or fair value less estimated selling expenses at the date of acquisition. Fair values are obtained using independent appraisals, based on comparable sales which the Corporation considers to be Level 2 inputs. The aggregate amount of real estate acquired through foreclosure that is carried at fair value was $2.9 million at June 30, 2012 and $3.1 million at December 31, 2011. The aggregate amount of real estate acquired through foreclosure which is carried at historic cost totaled $721,000 and $734,000 at June 30, 2012 and December 31, 2011, respectively.
 
 
17

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
9.      Effects of Recent Accounting Pronouncements
 
We adopted the following accounting guidance in 2012, none of which had a material effect, if any, on our consolidated financial position or results of operations.
 
In May 2011, the FASB issued ASU 2011-4, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” This Update provides guidance which is expected to result in common fair value measurement and disclosure requirements between U.S. GAAP and IFRS. It changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. It is not intended for this Update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the Board’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. We do not anticipate any material impact from this Update.
 
In June 2011, the FASB issued ASU 2011-5, “Comprehensive Income (Topic 220).” In this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. They also do not change the presentation of related tax effects, before related tax effects, or the portrayal or calculation of earnings per share. The amendments in this Update should be applied retrospectively. The amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, because compliance with the amendments is already permitted. The amendments do not require any transition disclosures. We do not anticipate any material impact from this Update.
 
In September 2011, the FASB issued ASU 2011-8, “Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” The amendments in this Update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. The amendment is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We do not anticipate any material impact from this Update.
 
 
18

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
9.      Effects of Recent Accounting Pronouncements (continued)
 
In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. Entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. This ASU is not expected to have a significant impact on the Company’s financial statements.
 
10.     Fair Value of Financial Instruments
 
Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value, is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity or contracts that convey or impose on an entity the contractual right or obligation to either receive or deliver cash for another financial instrument. These fair value estimates are based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price for which an asset could be sold or liability could be settled. However, given there is no active market or observable market transactions for many of the Corporation’s financial instruments, it has made estimates of many of these fair values which are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values.
 
The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments at June 30, 2012:
 
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.
 
 
19

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
10.     Fair Value of Financial Instruments (continued)
 
Deposits: The fair value of NOW accounts, passbook accounts, and money market demand deposits is deemed to approximate the amount payable on demand at June 30, 2012. Fair values for fixed-rate certificates of deposit have been estimated using a discounted cash flow calculation using the interest rates currently offered for deposits of similar remaining maturities.
 
Advances from the Federal Home Loan Bank: The fair value of these advances is estimated using the rates currently offered for similar advances of similar remaining maturities or, when available, quoted market prices.
 
Advances by Borrowers for Taxes and Insurance: The carrying amount of advances by borrowers for taxes and insurance is deemed to approximate fair value.
 
Commitments to extend credit: For fixed-rate loan commitments, the fair value estimate considers the difference between current levels of interest rates and committed rates. At June 30, 2012, the fair value of the derivative loan commitments was not material.
 
The estimated fair values of the Corporation’s financial instruments at June 30, 2012 and December 31, 2011 are as follows:
 
   
June 30, 2012
   
December 31, 2011
 
   
Carrying
   
Fair
   
Carrying
   
Fair
 
   
Value
   
Value
   
Value
   
Value
 
   
(In thousands)
   
(In thousands)
 
                         
Financial assets
                       
  Cash and cash equivalents
  $ 38,571     $ 38,571     $ 45,140     $ 45,140  
  Investment securities
    170,047       170,047       121,042       121,042  
  Mortgage-backed securities
    10,592       10,764       11,626       11,774  
  Loans receivable - net
    361,328       417,604       384,296       404,595  
  Accrued interest receivable
    2,134       2,134       2,139       2,139  
  Federal Home Loan Bank stock
    8,651       8,651       8,366       8,366  
                                 
    $ 591,323     $ 647,771     $ 572,609     $ 593,056  
                                 
Financial liabilities
                               
  Deposits
  $ 495,705     $ 495,295     $ 492,321     $ 492,286  
  Advances from the Federal Home Loan Bank
    26,854       28,177       31,327       32,429  
  Accrued interest payable
    100       100       118       118  
  Advances by borrowers for taxes and insurance
    970       970       2,464       2,464  
                                 
    $ 523,629     $ 524,542     $ 526,230     $ 527,297  

 
20

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
11.    Acquisition Activity
 
First Franklin Corporation
 
As previously stated, on March 16, 2011, Cheviot Financial, and its wholly owned subsidiary, Cheviot Savings Bank, completed the acquisition of First Franklin and its wholly-owned subsidiary, Franklin Savings. The acquisition was consummated in accordance with an Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 12, 2010, by and among Cheviot Financial Corp., Cheviot Savings Bank, Cheviot Merger Subsidiary, Inc., First Franklin and Franklin Savings.
 
At the effective time of the acquisition, each share of common stock, par value $0.01 per share, of First Franklin (other than shares owned by First Franklin, Cheviot Financial, Cheviot Savings Bank and Merger Subsidiary) was converted into the right to receive $14.50 in cash. Each First Franklin stock option outstanding at the time of the closing was converted into an amount of cash equal to the positive difference, if any, between $14.50 and the exercise price of such stock option. The aggregate cash consideration paid in the acquisition (including the cancellation of stock options) was approximately $24.7 million.
 
The acquired assets and assumed liabilities were measured at estimated fair values, as required by the FASB under Business Combinations. Management made significant estimates and exercised significant judgment in accounting for the acquisition. Management measured loan fair values based on loan file reviews (including borrower financial statements or tax returns), appraised collateral values, expected cash flows and historical loss factors of Franklin Savings. Real estate acquired through foreclosure was primarily valued based on appraised collateral values. The Corporation also recorded an identifiable intangible asset representing the core deposit base of Franklin Savings based on management’s evaluation of the cost of such deposits relative to alternative funding sources. Management used significant estimates including the average lives of depository accounts, future interest rate levels and the cost of servicing various depository products. Management used market quotations to fair value investment securities and FHLB advances.
 
The business combination resulted in the acquisition of loans with and without evidence of credit quality deterioration. First Franklin’s loans were deemed impaired at the acquisition date if Cheviot Financial did not expect to receive all contractually required cash flows due to concerns about credit quality. Such loans were fair valued and the difference between contractually required payments at the acquisition date and cash flows expected to be collected was recorded as a nonaccretable difference. At the acquisition date, Cheviot Financial recorded $25.0 million of purchased credit-impaired loans subject to a nonaccretable difference of $5.5 million. The method of measuring carrying value of purchased loans differs from loans originated by the Corporation (originated loans), and as such, the Corporation identifies purchased loans and purchased loans with a credit quality discount and originated loans at amortized cost.
 
First Franklin’s loans without evidence of credit deterioration were fair valued by discounting both expected principal and interest cash flows using an observable discount rate for similar instruments that a market participant would consider in determining fair value. Additionally, consideration was given to management’s best estimates of default rates and payment speeds. At acquisition, First Franklin’s loan portfolio without evidence of deterioration totaled $173.2 million and was recorded at a fair value of $171.6 million.
 
 
21

 
 
Cheviot Financial Corp.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
For the three and six months ended June 30, 2012 and 2011
 
11. Acquisition Activity (continued)
 
The following table summarizes the purchase of First Franklin as of March 16, 2011:
 
Purchase price
     
First Franklin common shares outstanding (in thousands)
    1,693  
Purchase price per share of First Franklin’s common stock
  $ 14.50  
Total value of the First Franklin’s common stock
  $ 24,549  
Fair value of outstanding employee stock awards, net of tax
    131