10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2006

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. 000-33405

Cheviot Financial Corp.

(Exact name of registrant as specified in its charter)

Federal	56-2423720
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
3723 Glenmore Avenue, Cheviot, Ohio	45211
(Address of Principal Executive Offices)	Zip Code

(513) 661-0457

(Registrant’s telephone number)

Securities Registered Pursuant to Section 12(b) of the Act:                  Common Stock, par value $.01 per share

                 (Title of Class)

Securities Registered Pursuant to Section 12(g) of the Act:                 None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o  NO x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such requirements for the past 90 days. YES x NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer 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 June 30, 2006, there were issued and outstanding 9,487,524 shares of the Registrant’s Common Stock.

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, computed by reference to the last sale price on June 30, 2006, as reported by the Nasdaq Global Market, was approximately $40.7 million.

DOCUMENTS INCORPORATED BY REFERENCE

(1) Proxy Statement for the 2007 Annual Meeting of Stockholders of the Registrant (Part III).

TABLE OF CONTENTS

ITEM 1.	BUSINESS	2
	REGULATION	20
	TAXATION	28
	MANAGEMENT	29
Item 1A.	Risk Factors	29
Item 1B	Unresolved Staff Comments	31
ITEM 2.	PROPERTIES	31
ITEM 3.	LEGAL PROCEEDINGS	31
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	31
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	32
ITEM 6.	SELECTED FINANCIAL DATA	34
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	34
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	34
		34
ITEM 9A.	CONTROLS AND PROCEDURES	34
ITEM 9B.	OTHER INFORMATION	34
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	35
ITEM 11.	EXECUTIVE COMPENSATION	35
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	35
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	35
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	35
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	36

PART I

ITEM 1.      BUSINESS

Forward Looking Statements

This Annual Report contains certain “forward-looking statements” which may be identified by the use of words such as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors which could cause actual results to differ materially from these estimates and most other statements that are not historical in nature. These factors include, but are not limited to, general and local economic conditions, changes in interest rates, deposit flows, demand for mortgage, commercial and other loans, real estate values, competition, changes in accounting principles, policies, or guidelines, changes in legislation or regulation, and other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing products and services.

General

Cheviot Financial Corp.

Following completion of our mutual holding company reorganization and stock offering on January 5, 2004, Cheviot Financial Corp. became the mid-tier stock holding company for Cheviot Savings Bank. The business of Cheviot Financial Corp. consists of holding all of the outstanding common stock of Cheviot Savings Bank. Cheviot Financial Corp. is chartered under Federal law. As part of our reorganization, we issued a total of 9,918,751 shares of common stock. Our mutual holding company parent, Cheviot Mutual Holding Company, received 5,455,313 of our common shares, and we sold 4,388,438 shares to our depositors and a newly formed Employee Stock Ownership Plan. In addition, 75,000 shares were issued to a charitable foundation formed by Cheviot Savings Bank. Under federal regulations, so long as Cheviot Mutual Holding Company exists, it will own at least 50.1% of the voting stock of Cheviot Financial Corp. At December 31, 2006, Cheviot Financial Corp. had total consolidated assets of $309.8 million, total deposits of $205.5 million, and stockholders’ equity of $72.2 million. Our executive offices are located at 3723 Glenmore Avenue, Cheviot, Ohio 45211, and our telephone number is (513) 661-0457.

In 2003, Cheviot Savings Bank’s board of directors decided to change the Bank’s fiscal year end from March 31 to December 31. In this regard, the Company’s fiscal year ends on December 31.

Cheviot Savings Bank

Cheviot Savings Bank was established in 1911 as an Ohio-chartered savings and loan association. Following our reorganization we became an Ohio-chartered stock savings and loan. Our primary business activity is the origination of one- to four-family real estate loans. To a lesser extent, we originate construction, multi-family, commercial real estate and consumer loans. We also invest in securities, primarily United States Government Agency securities and mortgage-backed securities.

Market Area

We conduct our operations from our executive office in Cheviot, Ohio, six full-service branches, all of which are located in the western section of Hamilton County, Ohio, and a lending center in Warren County, Ohio. Cheviot, Ohio is located in Hamilton County and is 10 miles west of downtown Cincinnati. Hamilton County, Ohio represents our primary geographic market area for loans and deposits with our remaining business operations conducted in the larger Cincinnati metropolitan area which includes Warren, Butler and Clermont Counties. We also conduct a moderate level of business in the southeastern Indiana region, primarily in Dearborn, Ripley, Franklin and Ohio Counties. We will also originate loans secured by properties in Northern Kentucky. The local economy is diversified into most economic sectors, with services, trade and manufacturing employment remaining the most prominent employment sectors in Hamilton County. Hamilton County is a primarily developed and urban county. The employment base is well diversified and there is no dependence on one area of the economy for continued employment. Our future growth opportunities will be influenced by the growth and stability of the regional, state and national economies, other demographic trends and the competitive environment.

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Hamilton County and Cincinnati have experienced a declining population since the 1990 census while the other counties in which we conduct business have experienced an increasing population. The population decline in both Hamilton County and the City of Cincinnati results from the other counties and Northern Kentucky being more successful in attracting new and existing businesses to locate within their areas through economic incentives, including less expensive real estate options for office facilities. Individuals are moving to these other areas to be closer to their place of employment, for newer, less expensive housing and more suburban neighborhoods. Median household and per capita income measures for Hamilton County are above comparable measures for both the United States and Ohio, which we believe indicates the relatively stable and diversified economy in the regional market served by Cheviot Savings Bank. Recent employment trends indicate lower levels of unemployment in Hamilton County compared to national and state-wide unemployment rates.

We believe that we have developed products and services that will meet the financial needs of our current and future customer base; however, we plan, and believe it is necessary, to expand the range of products and services that we offer to be more competitive in-our market area. Marketing strategies focus on the strength of our knowledge of local consumer and small business markets, as well as expanding relationships with current customers and reaching out to develop new, profitable business relationships.

Competition.

We face intense competition within our market both in making loans and attracting deposits. Hamilton County has a high concentration of financial institutions including large money center and regional banks, community banks and credit unions. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. Our competition for loans and deposits comes principally from commercial banks, savings institutions, mortgage banking firms, consumer finance companies and credit unions. We face additional competition for deposits from short-term money market funds, brokerage firms, mutual funds and insurance companies. Our primary focus is to build and develop profitable customer relationships across all lines of business while maintaining our position as a community bank.

Lending Activities.

General. Historically, our principal lending activity has been the origination, for retention in our portfolio, of fixed-rate and adjustable-rate mortgage loans collateralized by one- to four-family residential real estate located within our primary market area. We will sell a portion of our fixed-rate loans into the secondary market. We also originate commercial real estate loans, including multi-family residential real estate loans, construction loans, business lines of credit and consumer loans.

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Loan Portfolio Composition. Set forth below is selected information concerning the composition of our loan portfolio in dollar amounts and in percentages as of the dates indicated.

	At December 31,																At March 31,
	2006				2005				2004				2003				2003
	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
Real estate loans:	(Dollars in thousands)
One-to four-family residential(1)	$	209,996	84.06	%	$	195,059	84.97	%	$	182,016	86.86	%	$	166,998	86.11	%	$	163,232	85.91	%
Multi-family residential		11,250	4.50			11,144	4.86			9,944	4.75			7,714	3.98			7,787	4.10
Construction		19,022	7.61			12,360	5.38			10,718	5.11			13,770	7.10			12,368	6.51
Commercial(2)		9,466	3.80			10,883	4.74			6,750	3.22			5,278	2.72			6,305	3.32
Consumer(3)		82	0.03			110	0.05			133	0.06			169	0.09			303	0.16
Total loans		249,816	100.00	%		229,556	100.00	%		209,561	100.00	%		193,929	100.00	%		189,995	100.00	%
Less:
Undisbursed portion of loans in process		7,646				5,849				4,754				6,038				6,584
Deferred loan origination fees		159				188				233				270				232
Allowance for loan losses		833				808				732				768				735
Total loans, net	$	241,178			$	222,711			$	203,842			$	186,853			$	182,444

__________________________

(1) Includes home equity lines of credit, loans purchased and loans held for sale.

(2) Includes land loans.

(3) Loans secured by deposit accounts.

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Loan Maturity Schedule. The following table sets forth certain information as of December 31, 2006, regarding the amount of loans maturing in our portfolio. Demand loans and loans with no stated maturity, are reported as due within one year.

	At December 31, 2006
	Within One Year		One Through Three Years		Three Through Five Years		Five Through Ten Years		Ten Through Twenty Years		Beyond Twenty Years		Total
	(In Thousands)
Real estate loans:
One-to four-family residential	$	5,311	$	11,610	$	13,066	$	40,287	$	126,842	$	12,880	$	209,996
Multi-family residential		170		381		440		1,425		5,003		3,831		11,250
Construction		403		899		1,037		3,347		11,645		1,691		19,022
Commercial		143		320		371		1,199		4,209		3,224		9,466
Consumer		82		—		—		—		—		—		82
Total loans	$	6,109	$	13,210	$	14,914	$	46,258	$	147,699	$	21,626	$	249,816

Fixed and Adjustable-Rate Loan Schedule. The following table sets forth at December 31, 2006, the dollar amount of all fixed-rate and adjustable-rate mortgage loans and home equity lines of credit due after December 31, 2007.

	Due After December 31, 2007
	Fixed		Floating or Adjustable		Total
Real estate loans:
One-to four-family residential	$	161,271	$	43,414	$	204,685
Multi-family residential		8,730		2,350		11,080
Construction		18,619		—		18,619
Commercial		7,346		1,977		9,323
Total loans	$	195,966	$	47,741	$	243,707

Residential Mortgage Loans. Cheviot Savings Bank originates mortgage loans secured by one-to four-family properties, most of which serve as the primary residence of the owner. As of December 31, 2006, one-to four-family residential mortgage loans totaled $210.0 million, or 84.1% of our total loan portfolio. At December 31, 2006, our one-to four-family residential loan portfolio consisted of 21.0% in adjustable-rate loans and 79.0% in fixed-rate loans. Most of our loan originations result from relationships with existing or past customers, members of our local community and referrals from realtors, attorneys and builders.

Our mortgage loans generally, have terms from 15 to 30 years and amortize on a monthly basis with principal and interest due each month. As of December 31, 2006, we offered the following residential mortgage loan products:

·   Fixed-rate loans of various terms;

·   Adjustable-rate loans;

·   Home equity lines of credit;

·   Loans tailored for first time home buyers;

·   Construction/permanent loans; and

·   Short-term (bridge) loans.

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Residential real estate loans may remain outstanding for significantly shorter periods than their contractual terms as borrowers refinance or prepay loans at their option without penalty. Our residential mortgage loans customarily contain “due on sale” clauses which permit us to accelerate the indebtedness of the loan upon transfer of ownership in the mortgage property.

We currently sell a portion of our conforming fixed-rate loans in the secondary market and hold the remaining fixed-rate loans and adjustable-rate loans in our portfolio. We lend up to a maximum loan-to-value ratio of 100% on mortgage loans secured by owner-occupied properties, with the condition that private mortgage insurance is required on first mortgage loans with a loan-to-value ratio in excess of 85%. To a lesser extent, we originate non-conforming loans that are tailored to the needs of the local community.

Our adjustable-rate mortgage loans are originated with a maximum term of 30 years. Adjustable-rate loans include loans that provide for an interest rate based on the interest paid on U.S. Treasury Securities of corresponding terms, plus a margin. Our adjustable-rate mortgages include limits on the increase or decrease in the interest rate. The interest rate may increase or decrease by a maximum of 2.0% per adjustment with a ceiling rate over the life of the loan, which generally is 5.0%. We currently offer adjustable-rate loans with initial rates below those which would prevail under the foregoing computations based upon our determination of market factors and competitive rates for adjustable-rate loans in our market. For one-year adjustable-rate loans, borrowers are qualified at the initial rate and at 2.0% over the initial rate. For all other adjustable-rate loans, borrowers are qualified at the initial rate.

The retention of adjustable-rate loans in our portfolio helps reduce exposure to changes in interest rates. However, there are credit risks resulting from potential increased costs to the borrower as a result of rising interest rates. During periods of rising interest rates, the risk of default on adjustable-rate mortgages may increase due to the upward adjustment of interest cost to the borrower.

During the year ended December 31, 2006, we originated $25.0 million in adjustable-rate loans and $35.0 million in fixed-rate loans.

Home equity lines of credit are generally made for owner-occupied homes and are secured by first or second mortgages on residential properties. We are attempting to increase our originations of home equity lines of credit. We generally offer home equity lines of credit with a maximum loan to appraised value ratio of 95% including senior liens on the subject property. We currently offer these loans for terms of up to 10 years, and with adjustable rates that are tied to the prime rate. At December 31, 2006, home equity lines of credit represented $10.4 million of our one-to four-family residential loans.

Construction Loans. Cheviot Savings Bank originates construction loans for owner-occupied residential real estate, and, to a lesser extent, for commercial builders of residential real estate, improvement to existing structures, new construction for commercial purposes and residential land development.

At December 31, 2006, construction loans represented $19.0 million, or 7.6%, of Cheviot Savings Bank’s total loans. At December 31, 2006, the unadvanced portion of these constructions loans totaled $7.6 million.

Cheviot Savings Bank’s construction loans generally provide for the payment of interest only during the construction phase (12 months for single family residential and varying terms for commercial property and land development). At the end of the construction phase, the loan converts to a permanent mortgage loan. Before making a commitment to fund a construction loan, Cheviot Savings Bank requires detailed cost estimates to complete the project and an appraisal of the property by an independent licensed appraiser. Cheviot Savings Bank also reviews and inspects each property before disbursement of funds during the term of the construction loan. Loan proceeds are disbursed after inspection based on the percentage of completion method.

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Construction lending generally involves a greater degree of risk than other one-to four-family mortgage lending. The repayment of the construction loan is, to a great degree, dependent upon the successful and timely completion of construction. Various potential factors including construction delays or the financial viability of the builder may further impair the borrower’s ability to repay the loan.

Multi-Family Loans. At December 31, 2006, $11.3 million, or 4.5%, of our total loan portfolio consisted of loans secured by multi-family real estate. We originate fixed-rate and adjustable rate multi-family real estate loans with amortization schedules of up to 25 years. We generally lend up to 80% of the property’s appraised value. Appraised values are determined by an outside independent appraiser that we designate. In deciding to originate a multi-family loan, we review the creditworthiness of the borrower, the expected cash flows from the property securing the loan, the cash flow requirements of the borrower, the value of the property and the quality of the management involved with the property. We generally obtain the personal guarantee of the principals when originating multi-family real estate loans.

Multi-family real estate lending is generally considered to involve a higher degree of credit risk than one-to four-family residential lending. Such lending may involve large loan balances concentrated on a single borrower or group of related borrowers. In addition, the payment experience on loans secured by income producing properties typically depends on the successful operation of the related real estate project. Consequently, the repayment of the loan may be subject to adverse conditions in the real estate market or the economy generally.

Commercial Real Estate Loans. We originate commercial real estate loans to finance the purchase of real property, which generally consists of land and/or developed real estate. In underwriting commercial real estate loans, consideration is given to the property’s historic and projected cash flow, current and projected occupancy, location, physical condition and credit worthiness of the borrower. At December 31, 2006, our commercial real estate portfolio totaled $9.5 million, or 3.8%, of total loans. A majority of our commercial real estate loans are secured by properties in Hamilton County. Our commercial real estate portfolio is diverse as to borrower and property type.

Commercial real estate lending involves additional risks compared to one- to four-family residential lending because payments on loans secured by commercial real estate properties are often dependent on the successful operation or management of the properties, and/or the collateral value of the commercial real estate securing the loan. Repayment of such loans may be subject, to a greater extent than residential loans, to adverse conditions in the real estate market or the economy. Also, commercial real estate loans typically involve large loan balances to single borrowers or groups of related borrowers. Our policies limit the amount of loans to a single borrower or group of related borrowers to reduce this risk.

Commercial real estate loans generally have a higher rate of interest and shorter term than residential mortgage loans because of increased risks associated with commercial real estate lending. Commercial real estate loans are generally offered at one year adjustable-rates and fixed-rates with a term generally not exceeding 25 years.

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Consumer Loans. On a limited basis, we make loans secured by deposit accounts up to 90% of the amount of the depositor’s collected deposit account balance. At December 31, 2006, these loans totaled $82,000, or .03%, of total loans. Consumer loans are payable upon demand.

Loan Originations, Purchases, Sales and Servicing. While we originate both fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon relative borrower demand and the pricing levels as set in the local marketplace by competing banks, thrifts, credit unions, and mortgage banking companies. Our volume of real estate loan originations is influenced significantly by market interest rates, and, accordingly, the volume of our real estate loan originations can vary from period to period. Our volume of commercial real estate lending has decreased in recent years due to our effort to improve asset quality and to emphasize relationship banking.

The following table sets forth the loan origination, sales and repayment activities of Cheviot Savings Bank for the periods indicated.

	For the Year Ended December 31,			For the  Year Ended December 31,		For the Year Ended December 31,			For the Nine Months Ended December 31,			For the Year Ended March 31,
	2006			2005		2004			2003			2003
	(In thousands)
Balance outstanding at beginning or period	$	222,711		$	203,842	$	186,853		$	182,444		$	166,550
Originations, including purchased loans
Real estate loans:
One-to four-family residential(1)		46,924			53,174		47,736			42,667			54,106
Multi-family residential		2,791			2,974		2,406			998			3,936
Construction		8,406			7,023		8,886			9,023			11,784
Commercial(2)		1,472			1,310		1,541			926			2,922
Consumer(3)		448			111		39			30			192
Total loan originations		60,041			64,592		60,608			53,644			72,940
Less:
Principal repayments		39,175			43,884		40,605			46,669			56,260
Transfers to real estate acquired through foreclosure		—			201		293			46			157
Loans sold in the secondary market(4)		2,440			1,595		2,827			2,598			481
Other(5)		(41	)		43		(106	)		(78	)		148
Total deductions		41,574			45,723		43,619			49,235			57,046
Balance outstanding at end of period	$	241,178		$	222,711	$	203,842		$	186,853		$	182,444

  (1) Includes home equity lines of credit, loans purchased and loans held for sale.

  (2) Includes land loans.

  (3) Loans secured by deposit accounts.

  (4) Loans sold to the Federal Home Loan Bank of Cincinnati.

  (5) Other items consist of loans in process, deferred loan origination fees, unearned interest and the allowance for loan losses.

Loan Approval Procedures and Authority. The lending activities of Cheviot Savings Bank are subject to the written underwriting standards and loan origination procedures established by the board of directors and management. Loan originations are obtained through a variety of sources, primarily consisting of existing customers and referrals from real estate brokers. Written loan applications are taken by one of Cheviot Savings Bank’s loan officers. The loan officer also supervises the procurement of reports, appraisals and other documentation involved with a loan. Cheviot Savings Bank obtains property appraisals from independent appraisers on substantially all of its loans.

Cheviot Savings Bank’s loan approval process is intended to provide direction to management on all phases of real estate lending activity since such real estate mortgage lending is the single most important revenue producing investment of Cheviot Savings Bank. Therefore, Cheviot Savings Bank believes that the underwriting of mortgage loans should be consistent with safe and sound practices to ensure the financial viability of the Bank. The loan underwriting policy is also established to provide appropriate limits and standards for all extensions of credit in real estate or for the purpose of financing the construction of a building or other improvement. Cheviot Savings Bank’s loan committee has the authority to approve or deny loan applications on one-to four-family owner occupied properties up to $500,000. This committee also has the authority for approving or denying loan applications on non-owner occupied properties up to $200,000. The loan committee reviews all loan applications submitted to Cheviot Savings Bank and lists such applications on a review sheet that is submitted to the board of directors. The board of directors ratifies all loans approved by the loan committee and approves all other loans other than those specifically set forth above.

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Loans to One Borrower. State savings and loan institutions are subject to the same loans to one borrower limits as those applicable to national banks, which under current regulations restrict loans to one borrower to an amount equal to 15% of unimpaired equity on an unsecured basis, and an additional amount equal to 10% of unimpaired equity if the loan is secured by readily marketable collateral (generally, financial instruments and bullion, but not real estate). Our loans to one borrower limit under this regulation is $7.8 million. Our policy generally provides that loans to one borrower (or related borrowers) should not exceed $4.0 million (excluding the borrower’s principal residence). However, the board of directors may approve loans in greater amounts and may amend this limitation annually based on the asset growth and capital position of Cheviot Savings Bank.

At December 31, 2006, the largest aggregate credit exposure to one borrower consisted of one loan totaling $5.4 million. This loan was performing in accordance with contractual terms. There were thirteen additional credit relationships, including committed amounts, in excess of $1.0 million at December 31, 2006. All of the loans extended under these credit relationships were performing as of December 31, 2006.

Asset Quality.

General. One of our key operating objectives has been, and continues to be, to maintain a high asset quality. Our high proportion of one- to four-family mortgage loans, our maintenance of sound credit standards for new loan originations and our loan administration procedures have resulted in our impaired and non-performing loans totaling to $281,000, or 0.12% of net loans at December 31, 2006.

Collection Procedures. When a borrower fails to make required payments on a loan, we take a number of steps to induce the borrower to cure the delinquency and restore the loan to a current status. Cheviot Savings Bank has implemented certain loan tracking policies and collection procedures to ensure effective management of classified assets. Cheviot Savings Bank generally sends a written notice of non-payment to its borrower after a loan is first past due. If payment has not been received within a reasonable time period, personal contact efforts are attempted by telephone or by letter. If no payment is received the following month, a letter stating that the borrower is two months behind is mailed indicating that the borrower needs to contact our collections department, and make payment arrangements. If the borrower has missed two consecutive payments, a demand letter will be sent by certified mail. On all accounts that are not current ten days after the completion of the last step set forth above our collection manager or staff member contacts the borrower by phone at their home and if necessary, at their place of employment in order to establish communications with the borrower concerning the delinquency and to try to establish a meeting with the borrower to determine what steps are needed to bring the borrower to a current status. If contact with the borrower by telephone is unsuccessful and the loan becomes 60 days delinquent Cheviot Savings Bank sends a letter stating its intention to begin foreclosure procedures. If no satisfactory agreement has been reached with the borrower within 15 days after the foreclosure intention letter, the Board of Directors will consider the status of the delinquency and may authorize Cheviot Savings Bank’s attorney to send a letter to the borrower advising the borrower that foreclosure proceedings will be initiated and setting forth the conditions which could forestall the foreclosure. In selected cases, Cheviot Savings Bank may make an economic decision to forego foreclosure and work with the borrower to^-bring the loan current. Repayment schedules may be entered into with chronically delinquent borrowers if management determines this resolution is more advantageous to Cheviot Savings Bank.

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In connection with home equity lines of credit, when payment is first past due the collection manager or staff member attempts to contact the borrower by phone at their home. If phone contact is unsuccessful, the collection manager or staff member will mail a late notice to the borrower at the beginning of the following month indicating the need to contact the collections personnel and bring the loan current. If the preceding steps are unsuccessful then the collection manager will implement the steps described above leading to foreclosure.

Cheviot Savings Bank has implemented several credit risk measures in the loan origination process that have served to reduce potential losses. Cheviot Savings Bank also seeks to limit loan portfolio credit risk by originating in the local market generally one- to four-family permanent mortgage loans with a loan-to-value of 85% or less, and one and two family owner-occupied residential mortgage loans with a loan-to-value of 85%, with private mortgage insurance, required on first mortgage loans with loan-to-value of greater than 85%. Cheviot Savings Bank has implemented conservative loan underwriting guidelines and makes exceptions in originating such loans only if there are sound reasons for such exceptions.

Credit risk on commercial real estate loans is managed by generally limiting such lending to local markets and emphasizing sound underwriting and monitoring the financial status of the borrower. In originating such loans Cheviot Savings Bank seeks debt service coverage ratios in excess of 1.00x.

To limit the impact of loan losses in any given quarter, Cheviot Savings Bank seeks to maintain an adequate level of valuation allowances. Its management and board of director’s review the level of general valuation allowances on a quarterly basis to ensure that adequate coverage against known and inherent losses is maintained, based on the level of non-performing and classified assets, our loss history and industry trends and economic trends.

Cheviot Savings Bank has established detailed asset review policies and procedures which are consistent with generally accepted accounting principles. Quarterly reviews of the valuation allowance are conducted by the board of directors. Pursuant to these procedures, when needed, additional valuation allowances are established to cover anticipated losses in the portfolio.

We hold foreclosed property as real estate acquired through foreclosure. We carry foreclosed real estate at lower of cost or fair value less estimated selling costs. If a foreclosure action is commenced and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, we either sell the real property securing the loan at the foreclosure sale or sell the property as soon thereafter as practical.

Marketing real estate owned generally involves listing the property for sale. Cheviot Savings Bank maintains the real estate acquired through foreclosure in good condition to enhance its marketability. As of December 31, 2006, there were no loans classified as real estate owned.

Delinquent Loans and Non-performing Loans and Assets. Our policies require that the collection manager monitor the status of the loan portfolios and report to the Board on a monthly basis. These reports include information on delinquent loans, criticized and classified assets, foreclosed real estate and ourplans to cure the delinquent status of the loans.

10

It is Cheviot Savings Bank’s policy to underwrite single-family residential loans up to an 100% loan-to-value ratio and all other loans (multi-family, construction, commercial and consumer) on no more than an 80% loan-to-value ratio. It has been the Bank’s experience that interest on delinquent loans is generally recovered in ultimate settlement of the loan due to this conservative underwriting policy. We generally stop accruing interest on our one-to four-family residential, construction and commercial loans when interest or principal payments are 150 days in arrears. Consumer loans are comprised exclusively of loans secured by deposits with Cheviot Savings Bank. Suchloans are placed on non-accrual status should they become 90 days delinquent. The Bank will stop accruing interest earlier when the timely collectibility of such interest or principal is doubtful.

We designate loans on which we stop accruing interest as non-accrual loans and we reverse outstanding interest that we previously credited. We may recognize income in the period that we collect it, when the ultimate collectibility of principal is no longer in doubt. We return a non-accrual loan to accrual status when factors indicating doubtful collection no longer exist and the loan has been brought current. In accordance with industry standards and regulatory requirements, it is Cheviot Savings Bank’s policy to charge-off a loan when it becomes apparent that recovery of amounts due is not probable, either from expected payments from the borrower or from settlement of the collateral.

The following table sets forth certaininformation regarding delinquencies in our loan portfolio as of December 31, 2006.

	At December 31, 2006
	30-59 Days Delinquent				60-89 Days Delinquent				90 or More Days Delinquent
	Amount		Percent of Net Loans		Amount		Percent of Net Loans		Amount		Percent of Net Loans
		(Dollars in thousands)
Real Estate Loans:
One-to four-family residential(1)	$	506	0.21	%	$	265	0.11	%	$	468	0.19	%
Multi-family residential		—	—			—	—			—	—
Construction		—	—			—	—			—	—
Commercial(2)		—	—			—	—			—	—
Consumer(3)		—	—			—	—			—	—
Total delinquent loans	$	506	0.21	%	$	265	0.11	%	$	468	0.19	%

______________________________

(Footnotes on next page).

11

The following table sets forth information regarding impaired and non-performing loans and assets.

	At December 31,												At March 31
	2006			2005			2004			2003			2003
	(Dollars in thousands)
Non-accrual real estate loans:
One-to four-family residential(1)	$	269		$	—		$	96		$	4		$	137
Multi-family residential		—			134			—			—			—
Construction		—			—			—			—			—
Commercial(2)		—			—			94			226			—
Consumer(3)		—			—			—			—			—
Total non-accruing loans(4)		269			134			190			230			137
Impaired loans		12			15			33			38			40
Accruing loans delinquent 90 days or more		—			—			28			194			58
Total non-performing loans		281			149			251			462			235
Real estate acquired through foreclosure		—			89			90			46			141
Total non-performing assets	$	281		$	238		$	341		$	508		$	376
Non-performing assets to total assets		0.09	%		0.08	%		0.12	%		0.16	%		0.15	%
Non-performing loans to net loans		0.12	%		0.07	%		0.12	%		0.25	%		0.13	%

(1)    Includes home equity lines of credit, loans purchased and loans held for sale.

(2)   Includes loans secured by land.

(3)   Loans secured by deposit accounts.

(4)   For the year ended December 31, 2006, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $7,000. $2,000 in interest income was recorded on such loans during the year ended December 31, 2006.

Our loan review procedures are performed quarterly. With respect to multi-family and commercial loans, we consider a loan impaired when, based on current information and events, it is probable, that we will be unable to collect all amounts due according to the loan’s contractual terms.

We review all multi-family and commercial loans for impairment. These loans are individually assessed to determine whether the loan’s carrying value is in excess of the fair value of the collateral or the present value of the loan’s expected cash flows. Smaller balance homogenous loans that are collectively evaluated for impairment, such as residential mortgage loans and consumer loans, are specifically excluded from individual impairment review.

Classified Assets. Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: “substandard,” “doubtful” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a higher possibility of loss. An asset classified as a loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. Another category designated “special mention” also may be established and maintained for assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification as substandard, doubtful or loss. If a classified asset is deemed to be impaired with measurement of loss, Cheviot Savings Bank will establish a charge-off of the loan pursuant to SFAS No. 114. The following table sets forth information regarding classified assets as of December 31, 2006 and 2005.

12

	At December 31,
	2006		2005
	(In thousands)
Classification of Assets:
Special Mention	$	—	$	—
Substandard		1,192		627
Doubtful		—		—
Loss		—		—
Total	$	1,192	$	627

General loss allowances established to cover inherent, but unconfirmed losses in the portfolio may be included in determining an institution’s regulatory capital. Federal examiners may disagree with an insured institution’s classifications and amounts reserved.

Allowance for Loan Losses. We maintain the allowance through provisions for loan losses that we charge to income. We charge losses on loans against the allowance for loan losses when we believe the collection of loan principal is unlikely. Recoveries on loans charged-off are restored to the allowance for loan losses. The allowance for loan losses is maintained at a level believed, to the best of management’s knowledge, to cover all known and inherent losses in the portfolio both probable and reasonable to estimate at each reporting date. The level of allowance for loan losses is based on management’s periodic review of the collectibility of the loans principally in light of our historical experience, augmented by the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and current and anticipated economic conditions in the primary lending area.

In addition, the regulatory agencies, as an integral part of their examination and review process, periodically review our loan portfolios and the related allowance for loan losses. Regulatory agencies may require us to increase the allowance for loan losses based on their judgments of information available to them at the time of their examination, thereby adversely affecting our results of operations.

At December 31, 2006 and 2005, our allowance for loan losses was $833,000 and $808,000, respectively. Our ratio of the allowance for loan losses as a percentage of net loans receivable was 0.35% and 0.36% at December 31, 2006 and 2005.

13

The following table sets forth the analysis of the activity in the allowance for loan losses for the periods indicated:

	At or For the Year Ended December 31,			At or For the Year Ended December 31,			At or For the Year Ended December 31,			At or For the Nine Months Ended December 31,			At or For the Year Ended March 31,
	2006			2005			2004			2003			2003
	(Dollars in thousands)
Balance at beginning of year	$	808		$	732		$	768		$	735		$	483
Charge offs:
One-to four-family residential(1)		—			(21	)		—			(12	)		—
Multi-family residential		—			—			(36	)		—			—
Construction		—			—			—			—			—
Commercial(2)		—			—			—			—			—
Consumer(3)		—			—			—			—			—
Total charge-offs		—			(21	)		(36	)		(12	)		—
Recoveries:
One-to four-family residential(1)		—			—			—			—			—
Multi-family residential		—			—			—			—			—
Construction		—			—			—			—			—
Commercial(2)		—			—			—			—			2
Consumer(3)		—			—			—			—			—
Total recoveries		—			—			—			—			2
Net recoveries (charge offs)		—			(21	)		(36	)		(12	)		2
Provision for losses on loans		25			97			—			45			250
Balance at end of year	$	833		$	808		$	732		$	768		$	735
Total loans receivable, net (1)	$	241,178		$	222,771		$	203,842		$	186,853		$	182,444
Average loans receivable outstanding (1)	$	233,331		$	211,736		$	197,000		$	185,149		$	176,728
Allowance for loan losses as a percent of net loans receivable		0.35	%		0.36	%		0.36	%		0.41	%		0.40	%
Net loans charged off as a percent of average loans outstanding		0.00	%		0.01	%		0.02	%		0.01	%		0.00	%

 (1)    Includes home equity lines of credit, loans purchased and loans held for sale.

 (2)    Includes loans secured by land.

 (3)    Loans secured by deposit.

14

The following table sets forth the allocation of the allowance for loan losses by loan category for the years indicated. This allocation is based on management’s assessment, as of a given point in time, of the risk characteristics of each of the component parts of the total loan portfolio and is subject to changes as and when the risk factors of each such component part change. The allocation is neither indicative of the specific amounts or the loan categories in which future charge-offs may be taken nor is it an indicator of future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb losses in any category.

	At December 31,
	2006						2005
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Loan Category
Allocated:
Real estate - mortgage
One-to four-family residential(1)	$	318	$	209,996	84.06	%	$	200	$	195,059	84.97	%
Multi-family residential2		236		11,250	4.50			275		11,144	4.86
Construction		4		19,022	7.61			5		12,360	5.38
Commercial(2)		275		9,466	3.80			328		10,883	4.74
Consumer(3)		—		82	0.03			—		110	0.05
Total	$	833	$	249,816	100.00	%	$	808	$	229,556	100.00	%

	At December 31,
	2004						2003
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Loan Category
Allocated:
Real estate - mortgage
One-to four-family residential(1)	$	353	$	182,016	86.86	%	$	308	$	166,998	86.11	%
Multi-family residential		166		9,944	4.75			213		7,714	3.98
Construction		22		10,718	5.11			5		13,770	7.10
Commercial(2)		191		6,750	3.22			242		5,278	2.72
Consumer(3)		—		133	0.06			—		169	0.09
Total	$	732	$	209,561	100.00	%	$	768	$	193,929	100.00	%

	At March 31,
	2003
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Loan Category
Allocated:
Real estate - mortgage
One-to four-family residential(1)	$	249	$	163,232		85.91	%
Multi-family residential		242		7,787		4.10
Construction		4		12,368		6.51
Commercial(2)		240		6,305		3.32
Consumer(3)		—		303		0.16
Total	$	735	$	189,995		100.00	%

__________________________________

(1) Includes home equity lines of credit, loans purchased and loans held for sale.

(2) Includes loans secured by land.

(3) Loans secured by deposit accounts.

15

Securities Activities.

General. Our investment policy is established by the board of directors. This policy dictates that investment decisions will be made based on the safety of the investment, liquidity requirements, potential returns, cash flow targets, and consistency with our interest rate risk management. The board of directors, as a whole, acts in the capacity of an investment committee and is responsible for overseeing our investment program and evaluating on an ongoing basis our investment policy and objectives. Our president and chief financial officer have the authority to purchase securities within specific guidelines established by the investment policy. All transactions are reviewed by the board of directors at its regular meeting.

We account 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 we have the positive intent and ability to hold these securities to maturity. Trading securities and securities available for sale are carried at fair value with resulting unrealized gains or losses recorded to operations or shareholders’ equity, respectively. During 2006, we purchased 10 investment securities that were designated as available for sale. During 2004, we purchased one mortgage-backed security that was designated as available for sale. All other investment and mortgage-backed securities purchases have been designated as held-to-maturity. Realized gains or losses on sales of securities are recognized using the specific identification method.

Our current policies generally limit securities investments to U.S. Government, agency and sponsored entity securities and municipal bonds. The policy also permits investments in mortgage-backed securities guaranteed by the Federal National Mortgage Association, (FNMA) the Federal Home Loan Mortgage Corporation (FHLMC) and the Government National Mortgage Corporation (GNMA). Our investment in municipal obligations mature in more than 10 years. The majority of our investment in U.S. Government and agency obligations were scheduled to mature within one to five years, or step up in rate within one year at December 31, 2006.

Our current investment strategy uses a risk management approach of diversified investing in fixed-rate securities with short- to intermediate-term maturities, as well as adjustable-rate securities, which may have a longer term to maturity. The emphasis of this approach is to increase overall securities yields while managing interest rate risk. To accomplish these objectives, we focus on investments in mortgage-backed securities and short-term investments. As a result of the short duration of our investment portfolio, all unrealized losses on securities are viewed by management to be temporary, as the fair value will increase towards par as the securities approach maturity.

16

Amortized Cost and Estimated Fair Value of Securities. The following tables sets forth certain information regarding the amortized cost and estimated fair values of our securities as of the dates indicated.

	At December 31,
	2006				2005				2004
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(In thousands)
Investment securities held to maturity:
U.S. Government and agency securities	$	24,999	$	24,637	$	26,984	$	26,405	$	27,002	$	26,762
Municipal obligations		100		102		100		104		100		102
Total investment securities held to maturity		25,099		24,739		27,084		26,509		27,102		26,864
Mortgage-backed securities held to maturity:
FHLMC		924		923		1,088		1,077		1,507		1,503
FNMA		1,097		1,103		1,369		1,376		1,684		1,700
GNMA		12,216		12,225		17,828		17,740		26,013		26,112
Total mortgage-backed securities held to Maturity		14,237		14,251		20,285		20,193		29,204		29,315
Total investments and mortgage-backed securities held to maturity		39,336		38,990		47,369		46,702		56,306		56,179
Investment securities available for sale:
U.S. Government and agency securities	$	6,998	$	6,982		—		—		—		—
Municipal obligations		2,094		2,103		—		—		—		—
Total investment securities available for sale		9,092		9,085		—		—		—		—
Mortgage-backed securities available for sale:
GNMA		1,048		1,042		1,282		1,269		1,492		1,483
Total investment and mortgage-backed securities available for sale		10,140		10,127		1,282		1,269		1,492		1,483
Total investment and mortgage-backed securities	$	49,476	$	49,117	$	48,651	$	47,971	$	57,798	$	57,662

17

The following table sets forth certain information regarding the carrying value, weighted average yields and contractual maturities of our securities portfolio as of December 31, 2006. Adjustable-rate mortgage-backed securities are included in the period in which interest rates are next scheduled to adjust.

	At December 31, 2006
	One Year or Less					More Than One Year through Five Years					More Than Five Years through Ten Years					More Than Ten Years					Total Securities
	Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Weighted Average Yield			Amortized Cost		Estimated Fair Value		Weighted Average Yield
	(Dollars in thousands)
Investment securities held to maturity:
U.S. Government and agency obligations	$	23,000		3.34	%	$	1,999		3.25	%	$	—		—	%	$	—		—	%	$	24,999	$	24,637		3.33	%
Municipal obligations		—		—			—		—			—		—			100		5.13			100		102		5.13
Total investment securities held to maturity		23,000		3.34			1,999		3.25			—		—			100		5.13			25,099		24,739		3.34
Mortgage-backed securities held to maturity:
FHLMA		924		5.12			—		—			—		—			—		—			924		923		5.12
FNMA		1,097		5.75			—		—			—		—			—		—			1,097		1,103		5.75
GNMA		12,216		5.10			—		—			—		—			—		—			12,216		12,225		5.10
Total mortgage backed securities held to maturity		14,237		5.15			—		—			—		—			—		—			14,237		14,251		5.15
																			—
Investment securities available for sale:																			—
U.S. Government and agency obligations		5,998		6.14			1,000		5.45			—		—			—		—			6,998		6,982		6.04
Municipal obligations		—		—			—		—			—		—			2,094		4.28			2,094		2,103		4.28
Total investment securities available for sale		5,998		6.14			1,000		5.45			—		—			2,094		4.28			9,092		9,085		5.63
Mortgage-backed securities available for sale:
GNMA		1,048		5.00			—		—			—		—			—		—			1,048		1,042		5.00
Total investment and mortgage-backed securities	$	44,283		4.34	%	$	2,999		4.72	%	$	—		—	%	$	2,194		4.32	%	$	49,476	$	49,117		5.29	%

18

Sources of Funds.

General. Deposits, FHLB advances, scheduled amortization and prepayments of loan principal, maturities and calls of securities and funds provided by operations are our primary sources of funds for use in lending, investing and for other general purposes.

Deposits. We offer deposit products having a range of interest rates and terms. We currently offer passbook and statement savings accounts, interest-bearing demand accounts, non-interest-bearing demand accounts, money market accounts and certificates of deposit.

Deposit flows are significantly influenced by general and local economic conditions, changes in prevailing interest rates, internal pricing decisions and competition. Our deposits are primarily obtained from areas surrounding our branch offices. In order to attract and retain deposits we rely on paying competitive interest rates and providing quality service.

Savings, NOW and money market rates are generally determined monthly by the board of directors. Certificates of deposit rates are generally determined weekly by the Savings Bank’s President. When we determine our deposit rates, we consider liquidity needs, local competition, FHLB advance rates and rates charged on other sources of funds. Core deposits, defined as savings accounts, money market accounts and demand deposit accounts, represented 32.1% and 39.3% of total deposits at December 31, 2006 and 2005. At December 31, 2006 and 2005, certificates of deposit with remaining terms to maturity of less than one year amounted to $117.0 million and $75.4 million, respectively.

The following tables set forth the various types of deposit accounts offered by us at the dates indicated.

	At December 31,
	2006						2005						2004
	Amount		Percent		Weighted Average Rate		Amount		Percent		Weighted Average Rate		Amount		Percent		Weighted Average Rate
	(Dollars in Thousands)
NOW accounts	$	13,993	6.81	%	0.56	%	$	13,691	7.55	%	0.37	%	$	12,534	6.96	%	0.24	%
Passbook accounts		16,970	8.26		1.02			18,707	10.32		0.94			19,573	10.88		0.70
Money market demand deposits		34,952	17.01		2.15			38,782	21.40		1.81			44,009	24.45		1.15
Total demand, transaction and Passbook deposits		65,915	32.08		1.40			71,180	39.27		1.30			76,116	42.29		0.85
Certificates of deposit
Due within one year		116,963	56.93		4.86			75,438	41.63		3.07			83,072	46.15		1.98
Over 1 year through 3 years		22,054	10.74		4.25			34,224	18.88		3.35			20,330	11.30		2.08
Over 3 years		518	0.25		4.14			396	0.22		4.10			471	0.26		4.65
Total certificates of deposit		139,535	67.92		3.43			110,058	60.73		3.43			103,873	57.71		2.01
Total	$	205,450	100.00	%	3.72	%	$	181,238	100.00	%	2.59	%	$	179,989	100.00	%	1.47	%

The following table presents our deposit activity for the years indicated.

	For the Year Ended December 31,		For the Year Ended December 31,			For the Year Ended December 31,
	2006		2005			2004
	(In thousands)
Net deposits (withdrawals)	$	17,907	$	(2,780	)	$	(91,223	)
Interest credited on deposit account		6,305		4,029			3,285
Total increase (decrease) in deposit accounts	$	24,212	$	1,249		$	(87,938	)

___________________

⁽¹⁾A substantial amount of the decrease depicted for the year ended December 31, 2004 was comprised of the return of funds for common stock orders and the reclassification of net offering proceeds to shareholders’ equity.

19

Maturities of Certificates of Deposit Accounts. The following table sets forth the amount and maturities of certificates of deposit accounts at the dates indicated.

	At December 31, 2006
	Less than Six Months		Six Months to One Year		Over One Year to Three Years		Over Three Years		Total		Percent of Total
	(Dollars in thousands)
2.00% and below	$	—	$	—	$	—	$	—	$	—		—	%
2.01% to 3.00%		1,896		392		146		—		2,434		1.74
3.01% to 4.00%		14,137		6,958		5,349		—		26,444		18.95
4.01% to 5.00%		32,205		20,749		15,936		438		69,329		49.69
5.01% to 6.00%		34,484		6,142		623		80		41,328		29.62
6.01% to 7.00%		—		—		—		—		—		—
Total	$	82,722	$	34,241	$	17,456	$	5,117	$	139,535		100.00	%

As of December 31, 2006, the aggregate amount of outstanding certificates of deposit at Cheviot Savings Bank in amounts greater than or equal to $100,000, was approximately $23.9 million. The following table presents the maturity of these certificates of deposit at such date.

	At December 31, 2006
Maturity Period	Amount
		(In thousands)
Less than three months	$	6,439
Three to six months		6,783
Six months to one year		6,995
Over one year to three years		2,805
Over three years		835
Total	$	23,857

Borrowed Funds. As a member of the FHLB of Cincinnati, Cheviot Savings Bank is eligible to obtain advances upon the security of the FHLB common stock owned and certain residential mortgage loans, provided certain standards related to credit-worthiness have been met. FHLB advances are available pursuant to several credit programs, each of which has its own interest rate and range of maturities.

	For the Year Ended December 31,			For the Year Ended December 31,			For the Year  nEnded December 31,
	2006			2005			2004
FHLB Advances:	(Dollars in thousands)
Maximum month end-end balance	$	35,128		$	33,209		$	17,090
Balance at the end of year		29,236			33,209			16,199
Average balance		30,848			24,375			13,417
Weighted average interest rate at the end of year		4.77	%		4.70	%		4.49	%
Weighted average interest rate during year		4.79	%		4.51	%		4.44	%

REGULATION

Regulation

Loans-to-One-Borrower. Federal savings banks generally may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and unimpaired surplus. An additional amount may be lent, equal to 10% of unimpaired capital and unimpaired surplus, if the loan is secured by readily marketable collateral, which is defined to include certain securities and bullion, but generally does not include real estate. As of December 31, 2006, we were in compliance with our loans-to-one-borrower limitations.

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Qualified Thrift Lender Test.As a federal savings bank, we are required to satisfy a qualified thrift lender test whereby we must maintain at least 65% of our “portfolio assets” in “qualified thrift investments.” These consist primarily of residential mortgages and related investments, including mortgage-backed and related securities. “Portfolio assets” generally means total assets less specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used to conduct business. A savings bank that fails the qualified thrift lender test must either convert to a commercial bank charter or operate under specified restrictions. As of December 31, 2006, we maintained 91% of our portfolio assets in qualified thrift investments and, therefore, we met the qualified thrift lender test.

Capital Distributions.Office of Thrift Supervision regulations govern capital distributions by savings institutions, which include cash dividends, stock repurchases and other transactions charged to the capital account of a savings institution. A savings institution must file an application for Office of Thrift Supervision approval of the capital distribution if either (1) the total capital distributions for the applicable calendar year exceed the sum of the institution’s net income for that year to date plus the institution’s retained net income for the preceding two years that is still available for dividend, (2) the institution would not be at least adequately capitalized following the distribution, (3) the distribution would violate any applicable statute, regulation, agreement or Office of Thrift Supervision-imposed condition, or (4) the institution is not eligible for expedited review of its filings. If an application is not required to be filed, savings institutions which are a subsidiary of a holding company, as well as certain other institutions, must file a notice with the Office of Thrift Supervision at least 30 days before the board of directors declares a dividend or approves a capital distribution.

Any additional capital distributions would require prior regulatory approval. In the event our capital falls below our adequately capitalized requirement or the Office of Thrift Supervision notifies us that we are in need of more than normal supervision, our ability to make capital distributions could be restricted. In addition, the Office of Thrift Supervision could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if it determines that the distribution would constitute an unsafe or unsound practice.

Community Reinvestment Act and Fair Lending Laws.Savings banks have a responsibility under the Community Reinvestment Act and related regulations of the Office of Thrift Supervision to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. An institution’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in regulatory restrictions on its activities, and failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the Office of Thrift Supervision, as well as other federal regulatory agencies and the Department of Justice. We received a “Satisfactory” Community Reinvestment Act rating in our most recent examination by the Office of Thrift Supervision.

Transactions with Related Parties. Our authority to engage in transactions with related parties or “affiliates” is limited by Sections 23A and 23B of the Federal Reserve Act and its implementing regulation, Regulation W. The term “affiliate” for these purposes generally means any company that controls or is under common control with an institution, including Cheviot Financial Corp. and its non-savings institution subsidiaries. Regulation W limits the aggregate amount of certain “covered” transactions with any individual affiliate to 10% of the capital and surplus of the savings institution and also limits the aggregate amount of covered transactions with all affiliates to 20% of the savings institution’s capital and surplus. Covered transactions with affiliates are required to be secured by collateral in an amount and of a type described in Regulation W, and purchasing low quality assets from affiliates is generally prohibited. Regulation W also provides that covered transactions with affiliates, including loans and asset purchases, must be on terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies. In addition, savings institutions are prohibited by Office of Thrift Supervision regulations from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary.

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Our authority to extend credit to executive officers, directors and 10% or greater stockholders, as well as entities controlled by these persons, is governed by Sections 22(g) and 22(h) of the Federal Reserve Act and its implementing regulation, Regulation O. Among other things, these regulations generally require these loans to be made on terms substantially the same as those offered to unaffiliated individuals and do not involve more than the normal risk of repayment. However, executive officers and directors may receive beneficial treatment available on a bank-wide basis to all participating employees. Regulation O also places individual and aggregate limits on the amount of loans we may make to these persons based, in part, on our capital position, and requires that prior approval procedures be followed. At December 31, 2006, we were in compliance with these regulations.

Enforcement. The Office of Thrift Supervision has primary enforcement responsibility over savings institutions and has the authority to bring enforcement action against all “institution-related parties,” including stockholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution, receivership, conservatorship or the termination of deposit insurance. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1.0 million per day. The Federal Deposit Insurance Corporation also has the authority to recommend to the Director of the Office of Thrift Supervision that enforcement action be taken with respect to a particular savings institution. If action is not taken by the Director, the Federal Deposit Insurance Corporation has authority to take action under specified circumstances.

Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe for all insured depository institutions standards relating to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation, and other operational and managerial standards as the agency deems appropriate. The federal banking agencies adopted Interagency Guidelines Prescribing Standards for Safety and Soundness to implement the safety and soundness standards required under the Federal law. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. The guidelines address internal controls and information systems; internal audit systems; credit underwriting; loan documentation; interest rate risk exposure; asset growth; and compensation, fees and benefits. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to submit a compliance plan.

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Capital Requirements

Office of Thrift Supervision capital regulations require savings institutions to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS rating system) and an 8% risk-based capital ratio. In addition, the prompt corrective action standards discussed below also establish, in effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS financial institution rating system), and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. Office of Thrift Supervision regulations also require that in meeting the tangible, leverage and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries engaged in activities as principal that are not permissible for a national bank.

The risk-based capital standard for savings institutions requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100%, assigned by the Office of Thrift Supervision capital regulation based on the risks believed inherent in the type of asset. Core capital is defined as common stockholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital currently include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets, and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital.

The capital regulations also incorporate an interest rate risk component. Savings institutions with “above normal” interest rate risk exposure are subject to a deduction from total capital for purposes of calculating their risk-based capital requirements. For the present time, the Office of Thrift Supervision has deferred implementation of the interest rate risk capital charge. At December 31, 2006, Cheviot Savings Bank met each of its capital requirements.

Prompt Corrective Regulatory Action

Under the Office of Thrift Supervision Prompt Corrective Action regulations, the Office of Thrift Supervision is required to take supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s level of capital. Generally, a savings institution that has total risk-based capital of less than 8.0% or a leverage ratio or a Tier 1 core capital ratio that is less than 4.0% is considered to be undercapitalized. A savings institution that has total risk-based capital less than 6.0%, a Tier 1 core risk-based capital ratio of less than 3.0% or a leverage ratio that is less than 3.0% is considered to be “significantly undercapitalized.” A savings institution that has a tangible capital to assets ratio equal to or less than 2.0% is deemed to be “critically undercapitalized.” Generally, the banking regulator is required to appoint a receiver or conservator for an institution that is “critically undercapitalized.” The regulation also provides that a capital restoration plan must be filed with the Office of Thrift Supervision within 45 days of the date an institution receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” In addition, numerous mandatory supervisory actions become immediately applicable to the institution, including, but not limited to, restrictions on growth, investment activities, capital distributions, and affiliate transactions. The Office of Thrift Supervision may also take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive and the replacement of senior executive officers and directors.

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Insurance of Deposit Accounts

Deposit accounts in Cheviot Savings are insured by the Federal Deposit Insurance Corporation generally up to a maximum of $100,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. Cheviot Savings Bank’s deposits, therefore, are subject to Federal Deposit Insurance Corporation deposit insurance assessments.

On February 15, 2006, federal legislation to reform federal deposit insurance was enacted. This new legislation required, among other things, that the Federal Deposit Insurance Corporation adopt regulations increasing the maximum amount of federal deposit insurance coverage per separately insured depositor beginning in 2010 (with a cost of living adjustment to become effective in five years) and modifying the deposit fund’s reserve ratio for a range between 1.15% and 1.50% of estimated insured deposits.

On November 2, 2006, the Federal Deposit Insurance Corporation adopted final regulations establishing a risk-based assessment system that will enable the Federal Depoist Insurance Corporation to more closely tie each financial institution’s premiums to the risk it poses to the deposit insurance fund. Under the new risk-based assessment system, which becomes effective in the beginning of 2007, the Federal Deposit Insurance Corporation will evaluate the risk of each financial institution based on three primary sources of information: (1) its supervisory rating, (2) its financial ratios, and (3) its long-term debt issuer rating, if the institution has one. The new rates for nearly all of the financial institution industry will vary between five and seven cents for every $100 of domestic deposits. At the same time, the Federal Deposit Insurance Corporation also adopted final regulations designating the reserve ratio for the deposit insurance fund during 2007 at 1.25% of estimated insured deposits.

Effective March 31, 2006, the Federal Deposit Insurance Corporation merged the Bank Insurance Fund and the Savings Association Insurance Fund into a single insurance fund called the Deposit Insurance Fund. The merger of the two separate insurance funds did not affect the authority of the Financing Corporation, a mix-ownership government corporation, to impose and collect, with approval of the Federal Deposit Insurance Corporation, assessments for anticipated payments, insurance costs and custodial fees on bonds issued by the Financing Corporation in the 1980s to recapitalize the Federal Savings and Loan Insurance Corporation. The bonds issued by the Financing Corporation are due to mature in 2017 through 2019. For the quarter ended December 31, 2006, the Financing Corporation assessment was equal to 1.24 basis points for each $100 in domestic deposits maintained at an institution.

Federal Home Loan Bank System

We are a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. As a member of the Federal Home Loan Bank of Cincinnati we are required to acquire and hold shares of capital stock in the Federal Home Loan Bank in an amount equal to at least 1% of the aggregate principal amount of our unpaid residential mortgage loans and similar obligations at the beginning of each year, or 1/20 of our borrowings from the Federal Home Loan Bank, whichever is greater. As of December 31, 2006, we were in compliance with this requirement. The Federal Home Loan Banks are required to provide funds for the resolution of insolvent thrifts and to contribute funds for affordable housing programs. These requirements could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and could also result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members.

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Ohio Savings and Loan Law

The Ohio Division of Financial Institutions is responsible for the regulation and supervision of Ohio savings institutions in accordance with the laws of the State of Ohio. Ohio law prescribes the permissible investments and activities of Ohio savings and loan associations, including the types of lending that such associations may engage in and the investments in real estate, subsidiaries, and corporate or government securities that such associations may make.

The Ohio Division of Financial Institutions also has approval authority over the payment of dividends and any mergers involving or acquisitions of control of Ohio savings institutions. The Ohio Division of Financial Institutions may initiate certain supervisory measures or formal enforcement actions against Ohio associations. Ultimately, if the grounds provided by law exist, the Ohio Division of Financial Institutions may place an Ohio association in conservatorship or receivership.

The Ohio Division of Financial Institutions conducts regular examinations of Cheviot Savings Bank approximately once every eighteen months. Such examinations are usually conducted jointly with one or both federal regulators. The Ohio Division of Financial Institutions imposes assessments on Ohio associations based on their asset size to cover the cost of supervision and examination.

Holding Company Regulation

General. Cheviot Mutual Holding Company and Cheviot Financial Corp. are nondiversified mutual savings and loan holding companies within the meaning of the Home Owners’ Loan Act. As such, Cheviot Mutual Holding Company and Cheviot Financial Corp. are registered with the Office of Thrift Supervision and are subject to Office of Thrift Supervision regulations, examinations, supervision and reporting requirements. In addition, the Office of Thrift Supervision has enforcement authority over Cheviot Financial Corp. and Cheviot Mutual Holding Company and their subsidiaries. Among other things, this authority permits the Office of Thrift Supervision to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. As federal corporations, Cheviot Financial Corp. and Cheviot Mutual Holding Company are generally not subject to state business organization laws.

Permitted Activities. Pursuant to Section 10(o) of the Home Owners’ Loan Act and Office of Thrift Supervision regulations and policy, a mutual holding company, such as Cheviot Mutual Holding Company, and a federally chartered mid-tier holding company such as Cheviot Financial Corp. may engage in the following activities: (i) investing in the stock of a savings association; (ii) acquiring a mutual association through the merger of such association into a savings association subsidiary of such holding company or an interim savings association subsidiary of such holding company; (iii) merging with or acquiring another holding company, one of whose subsidiaries is a savings association; (iv) investing in a corporation, the capital stock of which is available for purchase by a savings association under federal law or under the law of any state where the subsidiary savings association or associations share their home offices; (v) furnishing or performing management services for a savings association subsidiary of such company; (vi) holding, managing or liquidating assets owned or acquired from a savings subsidiary of such company; (vii) holding or managing properties used or occupied by a savings association subsidiary of such company; (viii) acting as trustee under deeds of trust; (ix) any other activity (A) that the Federal Reserve Board, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956, unless the Director, by regulation, prohibits or limits any such activity for savings and loan holding companies; or (B) in which multiple savings and loan holding companies were authorized (by regulation) to directly engage on March 5, 1987; (x) any activity permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act, including securities and insurance underwriting; and (xi) purchasing,

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holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock by such savings and loan holding company is approved by the Director. If a mutual holding company acquires or merges with another holding company, the holding company acquired or the holding company resulting from such merger or acquisition may only invest in assets and engage in activities listed in (i) through (xi) above, and has a period of two years to cease any nonconforming activities and divest of any nonconforming investments.

The Home Owners’ Loan Act prohibits a savings and loan holding company, including Cheviot Financial Corp. and Cheviot Mutual Holding Company, directly or indirectly, or through one or more subsidiaries, from acquiring another savings institution or holding company thereof, without prior written approval of the Office of Thrift Supervision. It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a nonsubsidiary savings institution, a nonsubsidiary holding company, or a nonsubsidiary company engaged in activities other than those permitted by the Home Owners’ Loan Act; or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Office of Thrift Supervision must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance fund, the convenience and needs of the community and competitive factors.

The Office of Thrift Supervision is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies, and (ii) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Waivers of Dividends by Cheviot Mutual Holding Company. Office of Thrift Supervision regulations require Cheviot Mutual Holding Company to notify the Office of Thrift Supervision of any proposed waiver of its receipt of dividends from Cheviot Financial Corp. The Office of Thrift Supervision reviews dividend waiver notices on a case-by-case basis, and, in general, does not object to any such waiver if: (i) the mutual holding company’s board of directors determines that such waiver is consistent with such directors’ fiduciary duties to the mutual holding company’s members; (ii) for as long as the savings association subsidiary is controlled by the mutual holding company, the dollar amount of dividends waived by the mutual holding company are considered as a restriction on the retained earnings of the savings association, which restriction, if material, is disclosed in the public financial statements of the savings association as a note to the financial statements; (iii) the amount of any dividend waived by the mutual holding company is available for declaration as a dividend solely to the mutual holding company, and, in accordance with SFAS 5, where the savings association determines that the payment of such dividend to the mutual holding company is probable, an appropriate dollar amount is recorded as a liability; and (iv) the amount of any waived dividend is considered as having been paid by the savings association in evaluating any proposed dividend under Office of Thrift Supervision capital distribution regulations. Cheviot Mutual Holding Company may waive dividends paid by Cheviot Financial Corp. Under Office of Thrift Supervision regulations, our public stockholders would not be diluted because of any dividends waived by Cheviot Mutual Holding Company (and waived dividends would not be considered in determining an appropriate exchange ratio) in the event Cheviot Mutual Holding Company converts to stock form.

Conversion of Cheviot Mutual Holding Company to Stock Form. Office of Thrift Supervision regulations permit Cheviot Mutual Holding Company to convert from the mutual form of organization to the capital stock form of organization (a “Conversion Transaction”). There can be no assurance when, if ever, a Conversion Transaction will occur, and the Board of Directors has no current intention or plan to

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undertake a Conversion Transaction. In a Conversion Transaction a new holding company would be formed as the successor to Cheviot Financial Corp. (the “New Holding Company”), Cheviot Mutual Holding Company’s corporate existence would end, and certain depositors of Cheviot Savings Bank would receive the right to subscribe for additional shares of the New Holding Company. In a Conversion Transaction, each share of common stock held by stockholders other than Cheviot Mutual Holding Company (“Minority Stockholders”) would be automatically converted into a number of shares of common stock of the New Holding Company determined pursuant an exchange ratio that ensures that Minority Stockholders own the same percentage of common stock in the New Holding Company as they owned in Cheviot Financial Corp. immediately prior to the Conversion Transaction. Under Office of Thrift Supervision regulations, Minority Stockholders would not be diluted because of any dividends waived by Cheviot Mutual Holding Company (and waived dividends would not be considered in determining an appropriate exchange ratio), in the event Cheviot Mutual Holding Company converts to stock form. The total number of shares held by Minority Stockholders after a Conversion Transaction also would be increased by any purchases by Minority Stockholders in the stock offering conducted as part of the Conversion Transaction.

The USA PATRIOT Act

In response to the events of September 11, 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, was signed into law on October 26, 2001. The USA PATRIOT Act gives the Federal Government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 was enacted in response to public concerns regarding corporate accountability in connection with a number of accounting scandals. The stated goals of the Sarbanes-Oxley Act were to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the SEC, under the Securities Exchange Act of 1934.

The Sarbanes-Oxley Act includes very specific additional disclosure requirements and new corporate governance rules requiring the SEC and securities exchanges to adopt extensive additional disclosure, corporate governance and other related rules, and mandates further studies of certain issues by the SEC. The Sarbanes-Oxley Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.

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Although we anticipate that we will incur additional expense in complying with the provisions of the Sarbanes-Oxley Act and the regulations that have been promulgated to implement the Sarbanes-Oxley Act, management does not expect that such compliance will have a material impact on our results of operations or financial condition.

TAXATION

Federal Taxation

For federal income tax purposes, Cheviot Financial Corp. and Cheviot Savings Bank file separate federal income tax returns on a calendar year basis using the accrual method of accounting.

As a result of the enactment of the Small Business Job Protection Act of 1996, all savings banks and savings associations may convert to a commercial bank charter, diversify their lending, or merge into a commercial bank without having to recapture any of their pre-1988 tax bad debt reserve accumulations. However, transactions which would require recapture of the pre-1988 tax bad debt reserve include redemption of Cheviot Savings Bank’s stock, payment of dividends or distributions in excess of earnings and profits, or failure by the institution to qualify as a bank for federal income tax purposes. At December 31, 2006, Cheviot Savings Bank had pre-1988 bad debt reserves totaling approximately $3.0 million. A deferred tax liability has not been provided on this amount as management does not intend to make distributions, redeem stock or fail certain bank tests that would result in recapture of the reserve.

Deferred income taxes arise from the recognition of items of income and expense for tax purposes in years different from those in which they are recognized in the consolidated financial statements. Cheviot Financial Corp. will account for deferred income taxes by the asset and liability method, applying the enacted statutory rates in effect at the balance sheet date to differences between the book basis and the tax basis of assets and liabilities. The resulting deferred tax liabilities and assets will be adjusted to reflect changes in the tax laws.

Cheviot Financial Corp. is subject to the corporate alternative minimum tax to the extent it exceeds Cheviot Financial Corp.’s regular income tax for the year. The alternative minimum tax will be imposed at the rate of 20% of a specially computed tax base. Included in this base are a number of preference items, including interest on certain tax-exempt bonds issued after August 7, 1986, and an “adjusted current earnings” computation which is similar to a tax earnings and profits computation. In addition, for purposes of the alternative minimum tax, the amount of alternative minimum taxable income that may be offset by net operating losses is limited to 90% of alternative minimum taxable income.

Cheviot Savings Bank’s income tax returns have not been audited by the Internal Revenue Service within the past five years.

State Taxation

Cheviot Financial Corp. and Cheviot Savings Bank are subject to Ohio taxation in the same general manner as other corporations. In particular, Cheviot Financial Corp. and Cheviot Savings Bank are subject to the Ohio corporation franchise tax, which is an excise tax imposed on corporations for the privilege of doing business in Ohio, owning capital or property in Ohio, holding a charter or certificate of compliance authorizing the corporation to do business in Ohio, or otherwise having nexus with Ohio during a calendar year. The franchise tax is imposed on the value of a corporation’s issued and outstanding shares of stock. Financial institutions determine the value of their issued and outstanding shares based upon the net worth of the shares. For Ohio franchise tax purposes, savings institutions are currently taxed at a rate equal to 1.3% of taxable net worth. Cheviot Savings Bank is not currently under audit with respect to its Ohio franchise tax returns.

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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	53	President and Chief Executive Officer
Scott T. Smith	37	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.

ITEM 1A.     RISK FACTORS

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.

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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.

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. is owned by Cheviot Mutual Holding Company. Cheviot Mutual Holding Company is controlled by its board of directors, who consist of those persons who are members of the board of directors of Cheviot Financial Corp. and Cheviot Savings Bank. Cheviot Mutual Holding Company elects all members of the board of directors of Cheviot Financial Corp., and, as a general matter, controls 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.

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ITEM 1.B     UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

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 $5.4 million at December 31, 2006. The following table sets forth certain information with respect to our offices at December 31, 2006.

Location	Leased or Owned	Year Opened/ Acquired	Net Book Value
			(In thousands)
Main Office
3723 Glenmore Avenue Cheviot, Ohio 45211	Owned	1915	$	839
Branches
5550 Cheviot Road Cincinnati, Ohio 45247	Owned	1982		405
6060 Bridgetown Road Cincinnati, Ohio 45248	Owned	1991		554
1194 Stone Road Harrison, Ohio 45030	Owned	1997		631
585 Anderson Ferry Road Cincinnati, Ohio 45238	Owned	2006		1,284
7072 Harrison Avenue Cincinnati, Ohio 45247	Owned	2006		1,675
Lending Center
8050 Beckett Center Drive, Suite 106 West Chester, Ohio 45069	Leased	2004		9
Total Net Book Value			$	5,397

ITEM 3.     LEGAL PROCEEDINGS

Cheviot Savings Bankis 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.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5.     MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s Common Stock is quoted on the Nasdaq Capital 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 eight calendar quarters and is based upon information provided by Nasdaq.

	Prices of Common Stock
	High		Low		Dividends Paid
Calendar Quarter Ended
March 31, 2006	$	11.99	$	11.34	$	0.07
June 30, 2006		12.20		11.71		0.07
September 30, 2006		12.55		11.57		0.07
December 31, 2006		13.30		12.31		0.07

	Prices of Common Stock
	High		Low		Dividends 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

As of December 31, 2006, the Company had 865 stockholders of record.

Set forth below is information relating to the Company’s common stock repurchase activity during the fourth quarter of 2006.

Month	Total Number of Shares Purchased		Average Price Paid per share		Total shares purchased as part of a publicly announced program or plan		Maximum number of shares that may yet be purchased under the program or plan
October		3,310	$	12.81		499,247		467,830
November		7,157		12.92		506,404		460,673
December		62,564		13.09		568,968		398,109

Set forth below is information as of December 31, 2005 regarding equity compensation plans. Other than the ESOP, the Company does not have any equity compensation plans that were not approved by its stockholders.

Plan	Number of securities to be issued upon exercise of outstanding options and rights	Weighted average exercise price	Number of securities remaining available for issuance under plan
Equity compensation plans approved by stockholders	680,426	$11.15	119,231
Equity compensation plans not approved by stockholders	—	—	—
Total	680,426	$11.15	119,231

32

Set forth below is a stock performance graph comparing our cumulative total return on our common stock since we commenced trading with the Nasdaq market index and the SNL MHC Thrift index.

Cheviot Financial Corp.

Index	01/06/04	12/31/04	06/30/05	12/31/05	06/30/06	12/31/06
Cheviot Financial Corp.	100.00	128.14	117.66	121.39	125.89	140.45
NASDAQ Composite	100.00	106.80	100.81	108.75	107.57	106.41
SNL MHC Thrift Index	100.00	114.35	114.38	117.48	133.12	160.88

33

ITEM 6.     SELECTED FINANCIAL DATA

The Selected Financial Data is incorporated by reference to the Annual Report to Shareholders included as Exhibit 13 to this Form 10-K.

ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Incorporated by reference to the Annual Report to Shareholders included as Exhibit 13 to the Form 10-K.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Incorporated by reference to the Annual Report to Shareholders included as Exhibit 13 to the Form 10-K.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.     CONTROLS AND PROCEDURES

(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.

ITEM 9B.     OTHER INFORMATION

None.

34

PART III

ITEM 10.     DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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. Information concerning corporate governance matters is incorporated by reference from the Company’s Proxy Statement.

The Board of Directors has adopted a Code of Ethics, applicable to the Chief Executive Officer 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.

ITEM 11.     EXECUTIVE COMPENSATION

Information concerning executive compensation is incorporated herein by reference from the Company’s Proxy Statement, specifically the section captioned “Executive Compensation.”

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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.”

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Information concerning relationships and transactions, and director independence, is incorporated herein by reference from the Company’s Proxy Statement, specifically the sections captioned “Transactions with Certain Related Persons” and “Proposal I-Election of Directors.”

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning principal accountant fees and services is incorporated herein by reference from the Company’s Proxy Statement under the caption “Proposal II-Ratification of Independent Registered Public Accountants.”

35

PART IV

ITEM 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The exhibits and financial statement schedules filed as a part of this Form 10-K are as follows:

(a)(1)     Financial Statements

• Report of Independent Registered Public Accounting Firm.

• Consolidated Statements of Financial Condition at December 31, 2006 and 2005.

• Consolidated Statements of Earnings for the Years Ended December 31, 2006, 2005 and 2004.

• Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2006, 2005 and 2004.

• Consolidated Statements of Shareholders Equity for the Years Ended December 31, 2006, 2005 and 2004.

• Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004.

• 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 29, 2007	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 capacitiesand on the dates indicated.

By:  /s/ Thomas J. Linneman	By:  /s/ Scott T. Smith
Thomas J. Linneman, President	Scott T. Smith, Chief Financial Officer
and Chief Executive Officer	(principal financial officer and principal accounting officer)

Date:      March 29, 2007 Date:      March 29, 2007

By:    /s/ Edward L. Kleemeier	By:  /s/ John T. Smith
Edward L. Kleemeier, Director	John T. Smith, Director

Date:      March 29, 2007 Date:     March 29, 2007

By:      /s/ Robert Thomas	By:  /s/ James E. Williamson
Robert Thomas, Director	James E. Williamson, Director

Date:    March 29, 2007 Date: March 29, 2007

By:/s/ Steven R. Hausfeld

Steven R. Hausfeld, Director

Date:   March 29, 2007

37

EX-13

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	21
Consolidated Statements of Financial Condition	22
Consolidated Statements of Earnings	23
Consolidated Statements of Comprehensive Income	24
Consolidated Statements of Shareholders’ Equity	25
Consolidated Statements of Cash Flows	26
Notes to Consolidated Financial Statements	28
Directors and Officers	55
Investor and Corporate Information	56
Stock Performance Graph	57
Office Locations	58

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”).  This is the third 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 $1.7 million for 2006 and ended the year with assets of $309.8 million.

         During the year, two full service branches opened for business.  The Delhi branch opened in May and the branch in Taylor Creek opened in December.  A third branch in Crosby Township is still planned.  Directors and management continue to explore expansion opportunities through internal growth or acquisitions.

         The mission of Cheviot Savings Bank has always been to offer the best financial services and products with the expertise and friendliness a customer wants.  With the addition of the Delhi and Taylor Creek branches, Cheviot Savings Bank is now providing its services and products at six branches on the west side of Cincinnati, as well as our lending center in West Chester.

          The Directors, Management and employees of Cheviot Savings Bank are committed to the community.  Through our Charitable Foundation, numerous contributions have been awarded in the past three years.  During this time, the Foundation has awarded over $265,000.00 in support of the local community.

         I want to personally thank you for your support as a shareholder.  Your board and management team are committed to advancing the interests of the Company, the Bank, the community, our customers and shareholders.

	Sincerely,
	Cheviot Financial Corp.
By	/s/ Thomas J. Linneman
	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 proce eds, net of offering costs and shares issued to the ESOP, totaling $39.3 million.

The Savings Bank is a community and customer oriented savings and loan operating six full-service offices and our lending center, all of which are located 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:

• a 95-year history of providing financial products and services to individuals, families and small business customers in southwestern Ohio;

• a commitment to single family residential mortgage lending;

• maintaining capital strength and exceeding regulatory “well capitalized” capital requirements; and

• 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,
	2006		2005		2004		2003		2003
	(In thousands)
Selected Financial Condition Data:
Total assets	$	309,780	$	291,791	$	276,587	$	317,399	$	243,784
Cash and cash equivalents		5,490		9,103		7,725		83,776		24,408
Investment securities available for sale		9,085		—		—		—		—
Investment securities held to maturity – at cost		25,099		27,084		27,102		17,135		6,146
Mortgage-backed securities available for sale		1,042		1,269		1,483		—		—
Mortgage-backed securities held to maturity – at cost		14,237		20,285		29,204		21,804		23,593
Loans receivable, net (1)		241,178		222,711		203,842		186,853		182,444
Deposits		205,450		181,238		179,989		267,927		195,312
Advances from the Federal Home Loan Bank		29,236		33,209		16,199		9,206		10,765
Shareholders’ equity (2)		72,200		74,810		77,940		37,867		35,932
	For the Year Ended December 31,						For the Nine Months Ended December 31,		For the Year Ended March 31,
	2006		2005		2004		2003		2003
	(In thousands, except per share data)
Selected Operating Data:
Total interest income	$	16,509	$	14,408	$	12,983	$	9,427	$	14,068
Total interest expense		7,782		5,129		3,881		3,278		5,926
Net interest income		8,727		9,279		9,102		6,149		8,142
Provision for losses on loans		25		97		—		45		250
Net interest income after provision for losses on loans		8,702		9,182		9,102		6,104		7,892
Total other income		538		445		270		191		263
Total general, administrative and other expense		6,770		6,418		6,968		3,365		4,530
Earnings before income taxes		2,470		3,209		2,404		2,930		3,625
Federal income taxes		774		1,056		1,076		995		1,236
Net earnings	$	1,696	$	2,153	$	1,328	$	1,935	$	2,389
Earnings per share – basic and diluted	$	0.18	$	0.22	$	0.14		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 Year Ended December 31,						At or For the Nine Months Ended December 31,						At or For the Year Ended March 31, 2003
	2006			2005			2004			2003
Selected Financial Ratios and Other Data:(1)
Performance Ratios:
Return on average assets		0.56	%		0.76	%		0.48	%		1.02	%		0.99	%
Return on average equity		2.32			2.79			1.72			6.97			6.83
Average equity to average assets		24.21			27.17			27.91			14.64			14.56
Equity to total assets at end of period		23.31			25.64			28.18			11.93			14.74
Interest rate spread (2)		2.27			2.72			2.85			3.06			3.09
Net interest margin (2)		3.03			3.39			3.39			3.39			3.50
Average interest-bearing asset to average interest-bearing liabilities		128.42			135.63			137.59			118.48			115.76
Total general, administrative and other expenses to average total assets		2.24			2.26			2.53			1.77			1.89
Efficiency ratio (3)		73.07			66.00			74.35			70.77			53.90
Asset Quality Ratios:
Nonperforming loans as a percent of total loans (4)		0.12			0.07			0.12			0.25			0.13
Nonperforming assets as a percent of total assets		0.09			0.08			0.12			0.16			0.15
Allowance for loan losses as a percent of total loans		0.35			0.36			0.36			0.41			0.40
Allowance for loan losses as a percent of nonperforming assets		296.44			339.50			214.66			151.18			195.48
Regulatory Capital Ratios:
Tangible capital		16.60			16.70			21.07			11.93			14.74
Core capital		16.60			16.70			21.07			11.93			14.74
Risk-based capital		33.29			34.90			47.08			30.05			32.52
Number of:
Banking offices		6			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. 

Critical Accounting Policies

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies.  We consider the accounting method used for the allowance for loan losses to be a critical accounting policy.

The allowance for loan losses is the estimated amount considered necessary to cover inherent, but unconfirmed credit losses in the loan portfolio at the balance sheet date.  The allowance is established through the provision for losses on loans which is charged against income.  In determining the allowance for loan losses, management makes significant estimates and has identified this policy as one of the most critical for Cheviot Financial.

Management performs a quarterly evaluation of the allowance for loan losses.  Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlining collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors.  This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.

- 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 percentage allocations can be made for unconfirmed losses related to loans that are determined to be impaired.  Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. If the fair value of the loan is less than the loan’s carrying value, a charge-off is recorded for the difference. The general allocation is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history.  We also analyze historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations.  This analysis establishes factors that are applied to the loan groups to determine the amount of the general reserve.  Actual loan losses may be significantly more than the allowances we have established which could result in a material negative effect on our financial results.

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:

• statements of our goals, intentions and expectations;

• statements regarding our business plans and prospects and growth and operating strategies;

• statements regarding the asset quality of our loan and investment portfolios; and

• 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:

• significantly increased competition among depository and other financial institutions;

• inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

• general economic conditions, either nationally or in our market areas, which are worse than expected;

• adverse changes in the securities markets;

• legislative or regulatory changes that adversely affect our business;

• our ability to enter new markets successfully and capitalize on growth opportunities;

• changes in consumer spending, borrowing and savings habits;

• 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

• 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 anticipated 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 years ended December 31, 2006, 2005 and 2004.  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,
	2006							2005							2004
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans receivable, net (1)	$	233,331	$	14,014		6.01	%	$	211,736	$	12,311		5.81	%	$	197,000	$	11,221		5.70	%
Mortgage-backed securities		18,173		838		4.46			25,877		889		3.44			28,807		821		2.85
Investment securities		31,053		1,395		4.49			29,321		981		3.35			30,449		765		2.51
Interest-earning deposits and other (2)		5,070		262		5.17			7,033		227		3.23			12,181		176		1.44
Total interest-earning assets		287,627		16,509		5.74			273,967		14,408		5.26			268,437		12,983		4.84
Total non-interest-earning assets		14,882							10,481							7,463
Total assets	$	302,509						$	284,448						$	275,900
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Deposits	$	193,130		6,305		3.26		$	177,614		4,029		2.27		$	181,683		3,285		1.81
FHLB advances		30,848		1,477		4.79			24,375		1,100		4.51			13,417		596		4.44
Total interest-bearing liabilities		223,978		7,782		3.47			201,989		5,129		2.54			195,100		3,881		1.99
Total non-interest-bearing liabilities		5,300							5,171							3,790
Total liabilities		229,278							207,160							198,890
Shareholders’ equity		73,231							77,288							77,010
Total liabilities and shareholders’ equity	$	302,509						$	284,448						$	275,900
Net interest income			$	8,727						$	9,279						$	9,102
Interest rate spread (3)						2.27	%						2.72	%						2.85	%
Net interest margin (4)						3.03	%						3.39	%						3.39	%
Average interest-earning assets to average interest-bearing liabilities						128.42	%						135.63	%						137.59	%

(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.

- 7 -

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,
	2006 vs. 2005									2005 vs. 2004
	Increase (decrease) due to									Increase (decrease) due to
	Volume			Rate			Total			Volume			Rate			Total
		(In thousands)
Interest earnings assets:
Loans receivable, net	$	1,273		$	430		$	1,703		$	867		$	223		$	1,090
Investment securities		61			353			414			(30	)		246			216
Mortgage-backed securities		(307	)		256			(51	)		(88	)		156			68
Interest-earning assets		(75	)		110			35			(97	)		148			51
Total interest-earning assets		952			1,149			2,101			652			773			1,425
Interest-bearing liabilities:
Deposits		380			1,896			2,276			(74	)		818			744
FHLB advances		306			71			377			495			9			504
Total interest-bearing liabilities		686			1,967			2,653			421			827			1,248
Increase (decrease) in net interest income	$	266		$	(818	)	$	(552	)	$	231		$	(54	)	$	177

- 8 -

Cheviot Financial Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Financial Condition at December 31, 2006 and December 31, 2005

At December 31, 2006, Cheviot Financial had total assets of $309.8 million, an increase of $18.0 million, or 6.2%, from the $291.8 million total at December 31, 2005.  The increase in total assets reflects the increase in deposits which funded growth in the loan portfolio totaling $18.5 million.

Cash, federal funds sold and interest-earning deposits in other financial institutions totaled $5.5 million at December 31, 2006, a decrease of $3.6 million, or 39.7%, from the $9.1 million total at December 31, 2005.  Investment securities totaled $34.2 million at December 31, 2006, an increase of $7.1 million, or 26.2%, from $27.1 million at December 31, 2005.  During the year ended December 31, 2006, investment securities purchases consisted of $9.0 million of U.S. Government agency obligations and $2.1 million in municipal obligations,  which were partially offset by $4.0 million of maturities in the portfolio. 

Mortgage-backed securities totaled $15.3 million at December 31, 2006, a decrease of $6.3 million, or 29.1%, from $21.6 million at December 31, 2005.  The decrease in mortgage-backed securities was due to $6.3 million of principal repayments. 

Loans receivable, including loans held for sale, totaled $241.2 million at December 31, 2006, an increase of $18.5 million, or 8.3%, from December 31, 2005.  The increase resulted from loan originations of $60.0 million, which were partially offset by loan repayments of $39.2 million and loans sales of $2.4 million.  Growth in the loan portfolio consisted primarily of a $14.9 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 sold and serviced under this program totaled $7.9 million at December 31, 2006. There were $165,000 in loans held for sale at December 31, 2006.

At December 31, 2006, the allowance for loan losses totaled $833,000, or 0.35% of net loans, compared to $808,000, or 0.36% of net loans at December 31, 2005.  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 $25,000 provision for losses on loans for the year ended December 31, 2006.  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, 2006.

- 9 -

Cheviot Financial Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Financial Condition at December 31, 2006 and December 31, 2005 (continued)

Nonperforming and impaired loans totaled $281,000 at December 31, 2006, compared to $149,000 at December 31, 2005.  At December 31, 2006, nonperforming loans were comprised of loans secured by one- to four-family residential real estate. The allowance for loan losses totaled 296.4% and 542.3% of nonperforming loans at December 31, 2006 and 2005, 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 $205.5 million at December 31, 2006, an increase of $24.2 million, or 13.4%, from $181.2 million at December 31, 2005.  The deposit growth was comprised of a $29.5 million increase in certificates of deposits, which was partially offset by a decrease in demand transaction and passbook accounts of $5.3 million. 

Advances from the Federal Home Loan Bank of Cincinnati decreased by $4.0 million, or 12.0%, to a total of $29.2 million at December 31, 2006.  The decrease in advances was due primarily to repayments on Federal Home Loan Bank advances of $9.5 million, which was offset by proceeds of $5.5 million.

Shareholders’ equity totaled $72.2 million at December 31, 2006, a $2.6 million, or 34.9%, decrease from December 31, 2005.  The decrease resulted from the purchase of shares totaling $4.3 million under its stock repurchase plan and dividends of $1.1 million paid during 2006, which were partially offset by net earnings of $1.7 million.  At December 31, 2006, Cheviot Financial had the ability to purchase an additional 398,109 shares under its announced stock repurchase plan.

Cheviot Savings Bank is required to maintain minimum regulatory capital pursuant to federal regulations.  At December 31, 2006, Cheviot Savings Bank’s regulatory capital substantially exceeded all minimum regulatory capital requirements.

Comparison of Results of Operations for the Years Ended December 31, 2006 and December 31, 2005

General

Cheviot Financial’s net earnings totaled $1.7 million for the year ended December 31, 2006, a decrease of $457,000, or 21.2%, compared to the net earnings recorded for the year ended December 31, 2005.  The decrease in net earnings reflects $552,000 decrease in net interest income and a $352,000 increase in general, administrative and other expenses which was partially offset by a $93,000, increase in other income and a decrease in the provision for federal income taxes of $282,000. 

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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, 2006 and December 31, 2005 (continued)

Interest Income

Total interest income for the year ended December 31, 2006, totaled $16.5 million, an increase of $2.1 million, or 14.6%, compared to the year ended December 31, 2005.  The increase in interest income reflects the impact of an increase of $13.7 million, or 5.0%, in the average balance of interest-earning assets outstanding during the year ended December 31, 2006 as compared to the year ended December 31, 2005, and an increase of 48 basis points in the average yield, to 5.74% from 5.26%.

Interest income on loans increased by $1.7 million, or 13.8%, for the year ended December 31, 2006.  The increase in interest income on loans reflects the impact of a $21.6 million, or 10.2%, increase in the average balance outstanding during 2006 and an increase of 20 basis points in the average yield on loans to 6.01%.  Interest income on mortgage-backed securities decreased by $51,000, or 5.7%, during the year ended December 31, 2006, due primarily to a decrease in the  average balance outstanding of $7.7 million, partially offset by an increase in the average yield of 117 basis points from the 2005 period.  Interest income on investment securities increased by $414,000, or 42.2%, during the year ended December 31, 2006, due primarily to an increase in the average yield of   114   basis points from the 2005 period and a $1.7 million, or 5.9%, increase in the average balance outstanding.  Interest income on other interest-earning assets increased by $35,000, or 15.4%, during the year ended December 31, 2006.  The increase was due primarily to a 194 basis point increase in the average yield, which was partially offset by a decrease of $2.0 million in the average balance outstanding.

Interest Expense

Interest expense totaled $7.8 million for the year ended December 31, 2006, an increase of $2.7 million, or 51.7%, compared to the year ended December 31, 2005.  The average balance of interest-bearing liabilities outstanding increased by $22.0 million during 2006 and the average cost of funds increased by 93 basis points to 3.47% for the year ended December 31, 2006.  Interest expense on deposits totaled $6.3 million for the year ended December 31, 2006, an increase of $2.3 million, or 56.5%, from the year ended December 31, 2005.  This increase was a result of an increase  in the average cost of deposits of 99 basis points to 3.26% for 2006, and the average balance outstanding increased by $15.5 million, or 8.7%, for 2006.  During 2006 our customers showed a preference for higher cost certificate of deposit accounts as compared to lower cost demand, transaction and passbook deposits.  If the yield curve remains inverted, we expect our cost of funds to increase as maturing certificates of deposit are renewed at higher rates of interest.  Interest expense on borrowings totaled $1.5 million for the year ended December 31, 2006, an increase of $377,000 , or 34.3%, from the 2005 period.  This increase resulted from an increase in the average balance of borrowings outstanding of $6.5 million, or 26.6%, and a 28 basis point increase in the average cost of borrowings for the year ended December 31, 2006 from the 2005 period.   Increases in the average cost of interest-bearing liabilities were due primarily to the overall increase in short term interest rates during 2006.  Such increases reflect the Federal Reserve’s increases in interbank rates during the period.

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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, 2006 and December 31, 2005 (continued)

Net Interest Income

As a result of the foregoing changes in interest income and interest expense, net interest income decreased by $552,000, or 5.9%, during the year ended December 31, 2006 from the year ended December 31, 2005.  The average interest rate spread decreased to 2.27% for the year ended December 31, 2006 from 2.72% for the year ended December 31, 2005.  The net interest margin decreased to 3.03% for the year ended December 31, 2005 from 3.39% for the year ended December 31, 2005.

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 $25,000 provision for losses on loans for the year ended December 31, 2006.  Management’s analysis of the allowance resulted in a $97,000 provision for losses on loans for the year ended December 31, 2005.  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, 2006, the allowance for loan losses totaled $833,000, or 0.35% of net loans, compared to $808,000, or 0.36% of net loans at December 31, 2005.  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 $538,000 for the year ended December 31, 2006, an increase of $93,000, or 20.9%, compared to the year ended December 31, 2005,  due primarily to an increase in other operating income of $16,000, or 5.8%, to $294,000 for the year ended December 31, 2006 from $278,000 for the prior period, an increase of $12,000 in earnings of bank-owned life insurance, an increase in the gain on sale of office premises and equipment of $44,000 and an increase in the gain on sale of loans of $32,000, which were partially offset by an increase in the loss on sale of real estate acquired through foreclosure of $12,000.

General, Administrative and Other Expense

General, administrative and other expense totaled $6.8 million for the year ended December 31, 2006, an increase of $352,000 , or 5.5%, compared to the year ended December 31, 2005.  This increase is a result of a $627,000 , or 17.5% increase in employee compensation and benefits expenses which was partially offset by a decrease of $158,000, or 16.9% in property, payroll, and other taxes and a decrease of $99,000 or 20.6% 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 our growth.  The decrease in property, payroll and other taxes is due primarily to a decrease in the Ohio franchise tax.  The decrease in legal and professional expense was due primarily to the amount of professional services provided during the 2006 period.

- 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, 2006 and December 31, 2005 (continued)

Federal Income Taxes

The provision for federal income taxes totaled $774,000  for the year ended December 31, 2006, a decrease of $282,000, or 26.7%, compared to the provision recorded for the 2005 period.  The decrease resulted primarily from the decrease in earnings before taxes of $739,000, or 23.0%.  The effective tax rates were 31.3% and 32.9% for the years ended December 31, 2006 and 2005, respectively.

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. 

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, to 5.26% from 4.84%.

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.

- 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)

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, 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.

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.

- 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, 2005 and December 31, 2004 (continued)

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.

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.

- 15 -

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.  During 2006, the yield curve was substantially inverted with short term interest rates which are used to price our deposit products and which are used in determining our cost of borrowings, higher than medium and long term interest rates, which are used to determine the pricing of our loan products.  This has resulted in a compression of our interest rate spread and net interest margin.  Consequently, our net interest income was lower in 2006 as compared to 2005.

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, 2006 and 2005, 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.

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Cheviot Financial Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Quantitative Analysis (continued)

	December 31, 2006
	Net Portfolio Value(3)								Net Portfolio Value as% of PV of Assets(4)
Change in Interest Rates in Basis Points (“bp”)  (Rate Shock in Rates)(1)	$ Amount		$ Change			% Change			NPV Ratio(5)			Change
	(In thousands)
+300 bp	$	39,112	$	(21,772	)		(35.8	)%		13.46	%		(569	)bp
+200 bp		46,894		(13,990	)		(23.0	)		15.63			(352	)
+100 bp		54,265		(6,619	)		(10.9	)		17.54			(160	)
0 bp		60,884		—			—			19.15			—
-100 bp		64,716		3,832			6.3			19.97			82
-200 bp(2)		66,685		5,801			9.5			20.31			116
	December 31, 2005
	Net Portfolio Value(3)								Net Portfolio Value as% of PV of Assets(4)
Change in Interest Rates in Basis Points (“bp”)  (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

(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, 2006, in the event of a 100 basis point increase in interest rates, we would experience a 10.9% or $6.6 million, decrease in net portfolio value.  In the event of a 100 basis point decrease in interest rates, we would experience a 6.3%, or $3.8 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 200 basis points.

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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, 2006 and 2005, we had $29.2 million and $33.2 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 $110.3 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, 2006, loan originations totaled $60.0 million, compared to $64.6 million for the year ended December 31, 2005.  Purchases of investment securities were $11.1 million for the year ended December 31, 2006 and $4.0 million for the year ended December 31, 2005.

Total deposits increased $24.2 million during the year ended December 31, 2006, while total deposits increased $1.2 million during the year ended December 31, 2005.  Deposit flows are affected by the level of interest rates, the interest rates and products offered by competitors and other factors.  At December 31, 2006, certificates of deposit scheduled to mature within one year totaled $117.0 million. Our ability to retain these deposits will be determined in part by the interest rates we are willing to pay on such deposits.

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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, 2006.

	Payments due by period
	Less than 1 year		More than 1-3 years		More than 3-5 years		More than 5 years		Total
	(In thousands)
Contractual obligations:
Advances from the Federal Home Loan Bank	$	—	$	—	$	—	$	29,236	$	29,236
Certificates of deposit		116,963		22,054		518		—		139,535
Amount of loan commitments and expiration per period:
Commitments to originate one- to four-family loans		2,673		—		—		—		2,673
Home equity lines of credit		11,059		—		—		—		11,059
Undisbursed loans in process		7,646		—		—		—		7,646
Lease obligations		4		—		—		—		4
Total contractual obligations	$	138,345	$	22,054	$	518	$	29,236	$	190,153

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, 2006 and 2005, we exceeded all of the applicable regulatory capital requirements.  Our core (Tier 1) capital was $51.5 million and $48.7 million, or 16.6% and 16.7% of total assets at December 31, 2006 and 2005, respectively.  In order to be classified as “well-capitalized” under federal banking regulations, we were required to have core capital of at least $18.6 million, or 6.0% of assets as of December 31, 2006.  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, 2006 and 2005, we had a total risk-based capital ratio of 33.3% and 34.9%, respectively. 

- 19 - 

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.

- 20 -

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, 2006 and 2005, and the related consolidated statements of earnings, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2006.  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, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

As more fully described in Note A-15, the Corporation changed its method of accounting for share based stock benefit compensation in accordance with Statement of Financial Accounting Standards SFAS No. 123(R) as of January 1, 2006.

/s/ GRANT THORNTON LLP

Cincinnati, Ohio
March 28, 2007

- 21 -

CHEVIOT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

December 31, 2006 and 2005
(In thousands)

	2006			2005
ASSETS
Cash and due from banks	$	2,736		$	2,425
Federal funds sold		2,640			1,715
Interest-earning deposits in other financial institutions		114			4,963
Cash and cash equivalents		5,490			9,103
Investment securities available for sale – at fair value		9,085			—
Investment securities held to maturity - at cost, approximate market value of $24,739 and $26,509 at December 31, 2006 and 2005, respectively		25,099			27,084
Mortgage-backed securities available for sale - at fair value		1,042			1,269
Mortgage-backed securities held to maturity - at cost, approximate market value of $14,251 and $20,193 at December 31, 2006 and 2005, respectively		14,237			20,285
Loans receivable - net		241,013			222,053
Loans held for sale - at lower of cost or market		165			658
Real estate acquired through foreclosure - net		—			89
Office premises and equipment - at depreciated cost		5,397			3,628
Federal Home Loan Bank stock - at cost		3,238			3,057
Accrued interest receivable on loans		1,073			873
Accrued interest receivable on mortgage-backed securities		65			72
Accrued interest receivable on investments and interest-bearing deposits		439			298
Prepaid expenses and other assets		183			145
Bank-owned life insurance		3,254			3,121
Prepaid federal income taxes		—			56
Total assets	$	309,780		$	291,791
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	205,450		$	181,238
Advances from the Federal Home Loan Bank		29,236			33,209
Advances by borrowers for taxes and insurance		1,203			1,063
Accrued interest payable		115			—
Accounts payable and other liabilities		1,039			1,090
Accrued federal income taxes		49			—
Deferred federal income taxes		488			381
Total liabilities		237,580			216,981
Shareholders’ equity
Preferred stock - authorized 5,000,000 shares, $.01 par value; none issued Common stock - authorized 30,000,000 shares, $.01 par value; 9,918,751 shares issued at December 31, 2006 and 2005		99			99
Additional paid-in capital		43,113			42,824
Shares acquired by stock benefit plans		(4,329	)		(5,092	)
Treasury stock - at cost, 568,968 and 216,208 shares at December 31, 2006 and 2005		(6,846	)		(2,537	)
Retained earnings - restricted		40,171			39,524
Accumulated comprehensive loss, unrealized losses on securities available for sale, net of tax benefits		(8	)		(8	)
Total shareholders’ equity		72,200			74,810
Total liabilities and shareholders’ equity	$	309,780		$	291,791

The accompanying notes are an integral part of these statements.

- 22 -

CHEVIOT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF EARNINGS

For the years ended December 31, 2006, 2005 and 2004
(In thousands, except per share data)

	2006			2005			2004
Interest income
Loans	$	14,014		$	12,311		$	11,221
Mortgage-backed securities		838			889			821
Investment securities		1,395			981			765
Interest-earning deposits and other		262			227			176
Total interest income		16,509			14,408			12,983
Interest expense
Deposits		6,305			4,029			3,285
Borrowings		1,477			1,100			596
Total interest expense		7,782			5,129			3,881
Net interest income		8,727			9,279			9,102
Provision for losses on loans		25			97			—
Net interest income after provision for losses on loans		8,702			9,182			9,102
Other income
Rental		44			43			40
Loss on sale of real estate acquired through foreclosure		(21	)		(9	)		(13	)
Gain on sale of office premises and equipment		44			—			—
Gain on sale of loans		44			12			57
Earnings on bank-owned life insurance		133			121			—
Other operating		294			278			186
Total other income		538			445			270
General, administrative and other expense
Employee compensation and benefits		4,216			3,589			3,139
Occupancy and equipment		445			428			393
Property, payroll and other taxes		778			936			672
Data processing		281			264			229
Legal and professional		382			481			317
Advertising		164			171			188
Charitable contributions		—			—			1,500
Other operating		504			549			530
Total general, administrative and other expense		6,770			6,418			6,968
Earnings before income taxes		2,470			3,209			2,404
Federal income taxes
Current		667			989			1,075
Deferred		107			67			1
Total federal income taxes		774			1,056			1,076
NET EARNINGS	$	1,696		$	2,153		$	1,328
Earnings per share - basic and diluted	$	.18		$	.22		$	.14

The accompanying notes are an integral part of these statements.

- 23 -

CHEVIOT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended December 31, 2006, 2005 and 2004
(In thousands)

	2006			2005			2004
Net earnings	$	1,696		$	2,153		$	1,328
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	$	1,696		$	2,151		$	1,322
Accumulated comprehensive loss	$	(8	)	$	(8	)	$	(6	)

The accompanying notes are an integral part of these statements.

- 24 -

CHEVIOT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the years ended December 31, 2006, 2005 and 2004
(In thousands, except per share data)

	Common stock		Additional paid-in capital		Shares acquired by stock benefit plans			Treasury stock			Retained earnings			Unrealized losses on on securities available for sale			Total shareholders’ equity
Balance at January 1, 2004	$	—	$	—	$	—		$	—		$	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
Net earnings for the year ended December 31, 2006		—		—		—			—			1,696			—			1,696
Cash dividends of $.28 per share		—		—		—			—			(1,049	)		—			(1,049	)
Amortization expense of stock benefit plans		—		50		763			—			—			—			813
Stock option expense		—		239		—			—			—			—			239
Treasury stock repurchases		—		—		—			(4,309	)		—			—			(4,309	)
Balance at December 31, 2006	$	99	$	43,113	$	(4,329	)	$	(6,846	)	$	40,171		$	(8	)	$	72,200

The accompanying notes are an integral part of these statements.

- 25 -

CHEVIOT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2006, 2005 and 2004
(In thousands)

	2006			2005			2004
Cash flows from operating activities:
Net earnings for the period	$	1,696		$	2,153		$	1,328
Adjustments to reconcile net earnings to net cash provided by operating activities:
Amortization of premiums and discounts on investment and mortgage-backed securities, net		(18	)		28			131
Depreciation		265			219			224
Amortization expense related to stock benefit plans		813			494			298
Amortization of deferred loan origination fees		(22	)		(40	)		(48	)
Proceeds from sale of loans in the secondary market		2,440			1,595			2,827
Loans originated for sale in the secondary market		(2,417	)		(2,247	)		(2,374	)
Gain on sale of loans		(44	)		(12	)		(57	)
Loss on sale of real estate acquired through foreclosure		21			9			13
Gain on sale of office premises and equipment		(44	)		—			—
Federal Home Loan Bank stock dividends		(181	)		(148	)		(117	)
Earnings on bank-owned life insurance		(133	)		(121	)		—
Provision for losses on loans		25			97			—
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans		(200	)		(123	)		(95	)
Accrued interest receivable on mortgage-backed securities		7			8			(9	)
Accrued interest receivable on investments and interest- bearing deposits		(141	)		(79	)		(24	)
Prepaid expenses and other assets		(38	)		90			926
Accrued interest payable		115			—			—
Accounts payable and other liabilities		(51	)		87			102
Federal income taxes
Current		105			(183	)		(132	)
Deferred		107			67			1
Net cash flows provided by operating activities		2,305			1,894			2,994
Cash flows used in investing activities:
Principal repayments on loans		39,175			43,884			40,605
Loan disbursements		(57,624	)		(62,345	)		(58,234	)
Purchase of investment securities		(8,998	)		(3,959	)		(26,012	)
Proceeds from maturity of investment securities		4,000			4,000			16,000
Purchase of municipal obligations		(2,080	)		—			—
Purchase of mortgage-backed securities		—			—			(15,437	)
Principal repayments on mortgage-backed securities		6,271			9,078			6,459
Additions to real estate acquired through foreclosure		—			—			(40	)
Proceeds from sale of real estate acquired through foreclosure		68			193			276
Purchase of office premises and equipment		(2,075	)		(900	)		(262	)
Proceeds from the sale of office premises and equipment		85			—			—
Purchase of bank-owned life insurance		—			(3,000	)		—
Net cash flows used in investing activities		(21,178	)		(13,049	)		(36,645	)
Net cash flows used in operating and investing activities balance carried forward		(18,873	)		(11,155	)		(33,651	)

- 26 -

CHEVIOT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the years ended December 31, 2006, 2005 and 2004
(In thousands)

	2006			2005			2004
Net cash flows used in operating and investing activities balance brought forward	$	(18,873	)	$	(11,155	)	$	(33,651	)
Cash flows provided by (used in) financing activities:
Net increase (decrease) in deposits		24,212			1,249			(87,938	)
Proceeds from Federal Home Loan Bank advances		5,500			20,600			9,000
Repayments on Federal Home Loan Bank advances		(9,473	)		(3,590	)		(2,007	)
Advances by borrowers for taxes and insurance		140			49			92
Purchase of shares for stock benefit plans		—			(2,235	)		—
Stock option expense, net		239			—			—
Treasury stock repurchases		(4,309	)		(2,537	)		—
Proceeds from issuance of common stock		—			—			39,274
Dividends paid on common stock		(1,049	)		(1,003	)		(821	)
Net cash flows provided by (used in) financing activities		15,260			12,533			(42,400	)
Net increase (decrease) in cash and cash equivalents		(3,613	)		1,378			(76,051	)
Cash and cash equivalents at beginning of period		9,103			7,725			83,776
Cash and cash equivalents at end of period	$	5,490		$	9,103		$	7,725
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Federal income taxes	$	704		$	1,212		$	1,110
Interest on deposits and borrowings	$	7,667		$	5,129		$	3,881
Supplemental disclosure of noncash investing activities:
Transfers from loans to real estate acquired through foreclosure	$	—		$	201		$	293
Loans originated upon sales of real estate acquired through foreclosure	$	—		$	—		$	221
Recognition of mortgage servicing rights in accordance with SFAS No. 140	$	19		$	13		$	23

The accompanying notes are an integral part of these statements.

- 27 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2006, 2005 and 2004

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, with the exception of the policy described in Note A-15, have been consistently applied in the preparation of the accompanying financial statements.

1.  Principles of Consolidation

The accompanying consolidated financial statements as of and for the years ended December 31, 2006,  2005 and 2004, include the accounts of the Corporation and its wholly-owned subsidiary, the Savings Bank.  All significant intercompany items have been eliminated.

- 28 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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 in shareholders’ equity.  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, 2006 and 2005, the Corporation’s loans held for sale were carried at cost.

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 $16,000, $10,000 and $3,000 during the years ended December 31, 2006, 2005 and 2004, respectively.  The carrying value of the Corporation’s mortgage servicing rights, which approximated fair value, totaled approximately $66,000 and $50,000 at December 31, 2006 and 2005, respectively.

- 29 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

3.  Loans Receivable (continued)

The Corporation was servicing mortgage loans of approximately $7.9 million and $5.9 million at December 31, 2006 and 2005, respectively, all of which had been sold to the Federal Home Loan Bank of Cincinnati.

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.

- 30 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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, 2006, 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.

- 31 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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, 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 $172,000, $166,000, and $123,000 for the years ended December 31, 2006, 2005 and 2004, 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, $21,000 and $20,000 for the directors deferred compensation plan for the years ended December 31, 2006, 2005 and  2004, 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 predicated upon the repayment of a loan to Cheviot Financial Corp. totaling $2.6 million and $3.0 million at December 31, 2006 and 2005, respectively.  The Corporation recorded expense related to the ESOP of approximately $432,000, $414,000 and $418,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

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 certain 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 $408,000 and $260,000 for the years ended December 31, 2006 and 2005, respectively.  During  the years ended December 31, 2006 and 2005, 2,125 and 169,310 shares under the Corporation’s MRP were awarded, of which 35,290 shares vested during the current year at a cost of $11.95 per share.

- 32 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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, 2006 and 2005:

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, 2006 and 2005.  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.

- 33 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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, 2006 and 2005, 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:

	2006				2005
	Carrying value		Fair value		Carrying value		Fair value
	(In thousands)
Financial assets
Cash and cash equivalents	$	5,490	$	5,490	$	9,103	$	9,103
Investment securities		34,184		33,824		27,084		26,509
Mortgage-backed securities		15,279		15,293		21,554		21,462
Loans receivable - net		241,178		238,315		222,711		212,063
Federal Home Loan Bank stock		3,238		3,238		3,057		3,057
	$	299,369	$	296,160	$	283,509	$	272,194
Financial liabilities
Deposits	$	205,450	$	205,508	$	181,238	$	181,256
Advances from the Federal Home Loan Bank		29,236		30,033		33,209		33,072
Advances by borrowers for taxes and insurance		1,203		1,203		1,063		1,063
	$	235,889	$	236,744	$	215,510	$	215,391

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.

- 34 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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 249,954, 285,661 and 357,075 unallocated shares held by the ESOP for the fiscal year ended December 31, 2006, 2005 and 2004, respectively.

	December 31,
	2006		2005		2004
Weighted-average common shares outstanding (basic)		9,225,311		9,574,837		9,561,676
Dilutive effect of assumed exercise of stock options		31,117		14,885		—
Weighted-average common shares outstanding (diluted)		9,256,428		9,589,722		9,561,676

15.  Stock Option Plan

During 2005, the Corporation approved a Stock Incentive Plan that provides for grants of up to 486,018 stock options.  During 2005, approximately 384,000 option shares were granted subject to five year vesting.  During 2006, approximately 6,100 option shares were granted subject to five year vesting.

In 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting  Standard (“SFAS”) No. 123(R), “Share-Based Payment,” which revises SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123(R) requires that cost related to the fair value of all equity-based awards to employees, including grants of employee stock options, be recognized in the financial statements.

The Corporation adopted the provisions of SFAS No. 123(R) effective January 1, 2006, using the modified prospective transition method, and therefore has not restated its financial statements for prior periods. Under this method, the Corporation has applied the provisions of SFAS No. 123(R) to new equity-based awards and to equity-based awards modified, repurchased, or cancelled after January 1, 2006. In addition, the Corporation compensation cost for the portion of equity-based awards for which the requisite service period has not been rendered (“unvested equity-based awards”) that are outstanding as of January 1, 2006. The compensation cost recorded for unvested equity-based awards is based on their grant-date fair value.  For the year ended December 31, 2006, the Corporation recorded $260,000, ($239,000 after-tax)  compensation cost for equity-based awards that vested during the year ended December 31, 2006.  The Corporation has $875,000  unrecognized pre-tax compensation cost related to non-vested equity-based awards granted under its stock incentive plan as of December 31, 2006, which is expected to be recognized over a weighted-average vesting period of approximately 3.4 years. The aggregate intrinsic value of outstanding options totaled approximately $807,000.

- 35 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

15.  Stock Option Plan (continued)

Prior to January 1, 2006,  the Corporation accounted for its stock option plan in accordance with SFAS No. 123, “Accounting for Stock-based Compensation,” which contained a fair value based method for valuing stock-based compensation that entities may have used, which measured compensation cost at the grant date based on the fair value of the award.  Compensation was then recognized over the service period, which was usually the vesting period.  Alternatively, SFAS No. 123 permitted entities to continued 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 were 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.

The Corporation applied APB Opinion No. 25 and related interpretations in accounting for its stock option plan.  Accordingly, no compensation cost had 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

- 36 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

15.  Stock Option Plan (continued)

A summary of the status of the Corporation’s stock option plan as of December 31, 2006 and 2005, and changes during the year then ended is presented below:

	2006				2005
	Shares			Weighted- average exercise price		Shares		Weighted- average exercise price
Outstanding at beginning of year		383,700	$	11.15		—	$	—
Granted		6,060		12.12		383,700		11.15
Exercised		—		—		—		—
Forfeited		—		—		—		—
Outstanding at end of year		389,760	$	11.17		383,700	$	11.15
Options exercisable at year-end		76,740	$	11.15		—	$	—
Fair value of options granted during the year			$	2.97			$	2.82
Cumulative option compensation cost over service period			$	1,135			$	1,121
Remaining service period				41 months				52 months

          The following information applies to options outstanding at December 31, 2006:

Number outstanding	389,760
Exercise price	$11.15 - $12.12
Weighted-average exercise price	$11.17
Weighted-average remaining contractual life	8.4 years

The expected term of options is based on evaluations of historical and expected future employee exercise behavior.  The risk-free interest rate is based upon the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date.  Volatility is based upon the historical volatility of the Corporation’s stock.

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 in 2006 and 2005:  dividend yield of 2.31% and 2.15%; expected volatility of 14.43% and 22.45%; risk-free interest rates of 5.07% and 4.19%; and expected lives of 10 years.

- 37 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

16.  Recent Accounting Developments

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Instruments – an amendment of FASB Statements No. 133 and 140,” to simplify and make more consistent the accounting for certain financial instruments. Specifically, SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,” to allow a qualifying special purpose entity to hold a derivative instrument that pertains to a beneficial interest other than another derivative financial instrument.

SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006, or January 1, 2007 as to the Corporation, with earlier application allowed. The Corporation is currently evaluating SFAS No. 155, but does not expect it to have a material effect on the Corporation’s financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets – an amendment of SFAS No. 140,” to simplify the accounting for separately recognized servicing assets and servicing liabilities. Specifically, SFAS No. 156 amends SFAS No. 140 to require an entity to take the following steps:

•    Separately recognize financial assets as servicing assets or servicing liabilities, each time it undertakes an obligation to service a financial asset by entering into certain kinds of servicing contracts;

•    Initially measure all separately recognized servicing assets and liabilities at fair value, if practicable, and;

•    Separately present servicing assets and liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

Additionally, SFAS No. 156 permits, but does not require, an entity to choose either the amortization method or the fair value measurement method for measuring each class of separately recognized servicing assets and servicing liabilities. SFAS No. 156 also permits a servicer that uses derivative financial instruments to offset risks on servicing to use fair value measurement when reporting both the derivative financial instrument and related servicing asset or liability.

SFAS No. 156 applies to all separately recognized servicing assets and liabilities acquired or issued after the beginning of an entity’s fiscal year that begins after September 15, 2006, or January 1, 2007 as to the Corporation, with earlier application permitted. The Corporation is currently evaluating SFAS No. 156, but does not expect it to have a material effect on the Corporation’s financial position or results of operations.

- 38 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

16.  Recent Accounting Developments (continued)

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement emphasizes that fair value is a market-based measurement and should be determined based on assumptions that a market participant would use when pricing an asset or liability. This Statement clarifies that market participant assumptions should include assumptions about risk as well as the effect of a restriction on the sale or use of an asset. Additionally, this Statement establishes a fair value hierarchy that provides the highest priority to quoted prices in active markets and the lowest priority to unobservable data. This Statement is effective for fiscal years beginning after November 15, 2007, or January 1, 2008 as to the Company, and interim periods within those fiscal years. The adoption of this Statement is not expected to have a material adverse effect on the Company’s financial position or results of operations.

In September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.”  SAB 108 was issued to provide consistency between how registrants quantify financial statement misstatements.

Historically, there have been two widely-used methods for quantifying the effects of financial statement misstatements.  These methods are referred to as the “roll-over” and “iron curtain” method.  The roll-over method quantifies the amount by which the current year income statement is misstated.  Exclusive reliance on an income statement approach can result in the accumulation of errors on the balance sheet that may not have been material to any individual income statement, but which may misstate one or more balance sheet accounts.  The iron curtain method quantifies the error as the cumulative amount by which the current year balance sheet is misstated.   Exclusive reliance on a balance sheet approach can result in disregarding the effects of errors in the current year income statement that results from the correction of an error existing in previously issued financial statements.  We have historically used the roll-over method for quantifying identified financial statement misstatements.

SAB 108 establishes an approach that requires quantification of financial statement misstatements based on the effects of the misstatement on each of the company’s financial statements and the related financial statement disclosures.  This approach is commonly referred to as the “dual approach” because it requires quantification of errors under both the roll-over and iron curtain methods.

SAB 108 allows registrants to initially apply the dual approach either by (1) retroactively adjusting prior financial statements as if the dual approach had always been used, or by (2) recording the cumulative effect of initially applying the dual approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006, with an offsetting adjustment recorded to the opening balance of retained earnings.  Use of this “cumulative effect” transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose.

Management adopted the requirements of SAB 108 without effect on the Company’s financial position or results of operations.

- 39 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

	16.  Recent Accounting Developments (continued)
	In July 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.”  The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.”  Specifically, FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax provision taken or expected to be taken on a tax return.  FIN 48 also provides guidance on the related derecognition, classification, interest and penalties, accounting for interim periods, disclosure, and transition of uncertain tax positions.  FIN 48 is effective for fiscal years beginning after December 15, 2006, or January 1, 2007 as to the Company.  The Company adopted FIN 48 in 2007 without effect on the Company’s financial position or results of operations.
	In September 2006, the FASB ratified the Emerging Issues Task Force’s (EITF) Issue 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements,” which requires companies to recognize a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to an employee extending to postretirement periods.  The liability should be recognized based on the substantive agreement with the employee.  This Issue is effective beginning January 1, 2008.  The Issue can be applied as either a change in accounting principle through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, or a change in accounting principle through retrospective application to all periods.  Management does not currently expect the adoption of Issue 06-4 will have a material adverse effect on the Company’s financial position and results of operations.
NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES
	The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of investment securities at December 31 are shown below.

	December 31, 2006
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
	(In thousands)
Available for Sale:
U.S. Government agency securities	$	6,998	$	4	$	20	$	6,982
Municipal obligations		2,094		10		1		2,103
	$	9,092	$	14	$	21	$	9,085
Held to Maturity:
U.S. Government agency securities	$	24,999	$	—	$	362	$	24,637
Municipal obligations		100		2		—		102
	$	25,099	$	2	$	362	$	24,739

- 40 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued)

	December 31, 2005
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
	(In thousands)
U.S. Government agency securities	$	26,984	$	—	$	579	$	26,405
Municipal obligations		100		4		—		104
	$	27,084	$	4	$	579	$	26,509

          The amortized cost of investment securities at December 31, 2006 and 2005, by contractual term to maturity are shown below.

	December 31,
	2006		2005
	(In thousands)
Less than one year	$	—	$	1,985
One to five years		29,999		24,999
Five to ten years		—		—
More than ten years		4,192		100
	$	34,191	$	27,084

The amortized cost, gross unrealized gains, gross unrealized losses and estimated fair values of mortgage-backed securities at December 31, 2006 and 2005 are shown below.

	December 31, 2006
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
	(In thousands)
Available for sale:
Government National Mortgage
Association adjustable-rate participation certificates	$	1,048	$	—	$	6	$	1,042
Held to maturity:
Federal Home Loan Mortgage
Corporation adjustable-rate participation certificates	$	924	$	5	$	6	$	923
Federal National Mortgage
Association adjustable-rate participation certificates		1,097		7		1		1,103
Government National Mortgage
Association adjustable-rate participation certificates		12,216		34		25		12,225
	$	14,237	$	46	$	32	$	14,251

- 41 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued)

	December 31, 2005
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair 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

The amortized cost of mortgage-backed securities, including those designated as available for sale, at December 31, 2006 and 2005, 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,
	2006		2005
	(In thousands)
Due in one year or less	$	322	$	506
Due in one year through five years		1,461		2,242
Due in five years through ten years		2,306		3,364
Due in more than ten years		11,196		15,455
	$	15,285	$	21,567

- 42 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE B - 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 December 31, 2006 and 2005:

	December 31, 2006
	Less than 12 months						12 months or longer						Total
Description of securities	Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses
	(Dollars in thousands)
U.S. Government agency securities		3	$	3,948	$	20		7	$	24,637	$	362		10	$	28,585	$	382
Municipal obligations		1		711		1		—		—		—		1		711		1
Mortgage-backed securities		5		317		1		9		7,854		37		14		8,171		38
Total temporarily impaired securities		9	$	4,976	$	22		16	$	32,491	$	399		25	$	37,467	$	421

	December 31, 2005
	Less than 12 months						12 months or longer						Total
Description of securities	Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized 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

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.

- 43 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE C - LOANS RECEIVABLE

The composition of the loan portfolio, including loans held for sale, at December 31 was as follows:

	2006		2005
	(In thousands)
One- to four-family residential	$	209,996	$	195,059
Multi-family residential		11,250		11,144
Construction		19,022		12,360
Commercial		9,466		10,883
Consumer		82		110
		249,816		229,556
Less:
Undisbursed portion of loans in process		7,646		5,849
Deferred loan origination fees		159		188
Allowance for loan losses		833		808
	$	241,178	$	222,711

The Corporation’s lending efforts have historically focused on one- to four-family and multi-family residential real estate loans, which comprise approximately $232.6 million, or 96% of the total loan portfolio at December 31, 2006 and approximately $212.7 million, or 96% of the total loan portfolio at December 31, 2005.  Generally, such loans have been underwritten on the basis of no more than an 85% 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 $972,000 and $1.1 million at December 31, 2006 and 2005, respectively.

- 44 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE D - ALLOWANCE FOR LOAN LOSSES

          The activity in the allowance for loan losses is as follows:

	2006		2005			2004
	(In thousands)
Beginning balance	$	808	$	732		$	768
Provision for losses on loans		25		97			—
Charge-offs of loans		—		(21	)		(36	)
Recoveries		—		—			—
Ending balance	$	833	$	808		$	732

	At December 31, 2006, 2005 and 2004, the Corporation’s allowance for loan losses was comprised of a general loan loss allowance of $822,000, $794,000 and $704,000, respectively, which is includible as a component of regulatory risk-based capital, and a specific loan loss allowance totaling $11,000 at December 31, 2006, $14,000 at December 31, 2005 and $28,000 at December 31, 2004.
	Nonperforming and impaired loans totaled approximately $281,000, $149,000 and $251,000 at December 31, 2006, 2005 and 2004, respectively.
	During the years ended December 31, 2006, 2005 and 2004, interest income of approximately $7,000, $5,000 and $17,000, respectively, 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:

	2006		2005
	(In thousands)
Land	$	1,045	$	1,086
Buildings and improvements, including construction-in-progress		5,834		4,049
Furniture and equipment		1,751		1,476
Automobiles		45		29
		8,675		6,640
Less accumulated depreciation		3,278		3,012
	$	5,397	$	3,628

At December 31, 2006, the Corporation had capitalized interest costs of approximately $12,000 related to the construction of branch offices.

- 45 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE F - DEPOSITS

          Deposits consist of the following major classifications at December 31:

Deposit type and weighted-average interest rate	2006		2005
	(In thousands)
NOW accounts
2006 - 0.56%	$	13,993
2005 - 0.37%			$	13,691
Passbook accounts
2006 - 1.02%		16,970
2005 - 0.94%				18,707
Money market demand deposit
2006 - 2.15%		34,952
2005 - 1.81%				38,782
Total demand, transaction and  passbook deposits		65,915		71,180
Certificates of deposit
Original maturities of:
Less than 12 months
2006 - 4.86%		75,005
2005 - 3.07%				21,015
12 to 18 months
2006 - 4.40%		23,004
2005 - 3.43%				44,505
24 months
2006 - 4.10%		23,589
2005 - 3.21%				24,980
Over 36 months
2006 - 4.14%		17,937
2005 - 4.10%				19,558
Total certificates of deposit		139,535		110,058
Total deposits	$	205,450	$	181,238

The Savings Bank had deposit accounts with balances in excess of $100,000 totaling $53.1 million and $39.3 million at December 31, 2006 and 2005, respectively.  Deposits issued in amounts greater than $100,000 are not federally insured.

- 46 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE F - DEPOSITS (continued)

          Interest expense on deposits is summarized as follows at December 31:

	2006		2005		2004
	(In thousands)
Passbook savings	$	150	$	145	$	141
NOW and money market demand deposits		781		601		572
Certificates of deposit		5,374		3,283		2,572
	$	6,305	$	4,029	$	3,285

Maturities of outstanding certificates of deposit at December 31 are summarized as follows:

	2006		2005
	(In thousands)
Less than six months	$	82,722	$	41,134
Six months to one year		34,241		34,304
Over one year to three years		22,054		34,224
Over three years		518		396
	$	139,535	$	110,058

	In the ordinary course of business, the Corporation accepted deposits from officers and directors.  At December 31, 2006, total deposits from officers and directors totaled approximately $650,000.
NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK
	Advances from the Federal Home Loan Bank, collateralized at December 31, 2006 and 2005 by pledges of certain residential mortgage loans totaling $36.5 million and $41.5 million, respectively, and the Savings Bank’s investment in Federal Home Loan Bank stock, are summarized as follows:

Interest rate range	Maturing year ending December 31,	2006			2005
		(Dollars in thousands)
3.89% - 5.44%	2012	$	4,972		$	6,174
3.75% - 4.84%	2014		5,829			7,099
4.31% - 5.36%	2015		14,775			17,936
5.25%	2016		1,660			2,000
5.27%	2017		2,000			—
		$	29,236		$	33,209
Weighted-average interest rate			4.77	%		4.70	%

- 47 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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, 2006, 2005 and 2004 as follows:

	2006			2005			2004
	(Dollars in thousands)
Federal income taxes at statutory rate	$	840		$	1,091		$	817
Increase (decrease) in taxes resulting primarily from:
Stock option expense		68			—			—
Charitable contributions carryforwards		(67	)		—			259
Nontaxable interest income		(20	)		(2	)		(1	)
Cash surrender value of life insurance		(45	)		(41	)		—
Other		(2	)		8			1
Federal income taxes per financial statements	$	774		$	1,056		$	1,076
Effective tax rate		31.3	%		32.9	%		44.8	%

The composition of the Corporation’s net deferred tax liability at December 31 is as follows:

	2006			2005
	(In thousands)
Taxes (payable) refundable on temporary differences at statutory rate:
Deferred tax assets:
General loan loss allowance	$	279		$	270
Deferred compensation		99			99
Stock benefit plans		117			88
Charitable contributions		—			27
Unrealized losses on securities available for sale		4			4
Other		4			6
Total deferred tax assets		503			494
Deferred tax liabilities:
Deferred loan origination costs		(141	)		(102	)
Federal Home Loan Bank stock dividends		(740	)		(678	)
Book/tax depreciation		(88	)		(78	)
Mortgage servicing rights		(22	)		(17	)
Total deferred tax liabilities		(991	)		(875	)
Net deferred tax liability	$	(488	)	$	(381	)

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, 2006 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, 2006 was approximately $1.0 million.  During 2006, the Corporation elected to file a consolidated federal tax return with the Bank.  This enabled the Corporation to utilize $199,000 of charitable contribution carryforwards.  At December 31, 2006, the Corporation had remaining charitable contribution carryforwards of approximately $500,000.  At December 31, 2006, the Corporation had remaining charitable contribution carryforwards of approximately $500,000, the benefits of which, in the absence of tax planning strategies, have been fully reserved.

- 48 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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, 2006 and 2005, the Corporation had outstanding commitments to originate fixed-rate loans with interest rates ranging from 5.75% to 9.75% totaling $2.7 million and $2.5 million, respectively, secured by one- to four-family residential real estate.  Additionally, the Corporation had unused lines of credit under home equity loans totaling $11.1 million and  $11.2 million at December 31, 2006 and 2005, respectively.  In the opinion of management, all loan commitments equaled or exceeded prevalent market interest rates as of December 31, 2006 and 2005, 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, 2006 and 2005, Corporation had deposited earnest money for the purchase of land at a total cost of $1,000.

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.  In January 2006, the Savings Bank entered into a new one year operating lease agreement which the Savings Bank opted to renew in January 2007.  The Savings Bank’s rental expense for the years ended December 31, 2006 and 2005, totaled $5,000 and $20,000, respectively.

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.

- 49 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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 2006, 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, 2006 and 2005, management believed that the Savings Bank met all capital adequacy requirements to which it was subject.

As of December 31, 2006

Actual

For capital adequacy purposes

To be “well- capitalized” under prompt corrective action provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

Tangible capital

$

51,452

16.6%

>$

4,647

>1.5%

>$

15,490

>5.0%

Core capital

$

51,452

16.6%

>$

12,392

>4.0%

>$

18,588

>6.0%

Risk-based capital

$

52,273

33.3%

>$

12,558

>8.0%

>$

15,698

>10.0%

As of December 31, 2005

Actual

For capital adequacy purposes

To be “well- capitalized” under prompt corrective 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%

- 50 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

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.  As a result of such dividend, the Savings Bank is required to receive prior OTS before declaring dividends.
	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 $1.5 million in dividends during 2006.
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.

- 51 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE L - CHEVIOT FINANCIAL CORP. CONDENSED FINANCIAL INFORMATION

The following condensed financial statements summarize the financial position of the Corporation as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years ended December 31, 2006, 2005 and 2004:

CHEVIOT FINANCIAL CORP.
STATEMENT OF FINANCIAL CONDITION
December 31, 2006 and 2005
(In thousands)

	2006			2005
ASSETS
Cash in Cheviot Savings Bank	$	18,137		$	10,653
Cash and due from banks		38			13
Loan receivable - ESOP		2,643			2,964
Investment in Cheviot Savings Bank		51,426			48,679
Dividends receivable		—			12,500
Prepaid expenses and other assets		10			21
Prepaid federal income taxes		56			58
Total assets	$	72,310		$	74,888
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and other liabilities	$	110		$	78
Common stock		99			99
Additional paid-in capital		43,113			42,824
Shares acquired by stock benefit plans		(4,329	)		(5,092	)
Treasury stock		(6,846	)		(2,537	)
Retained earnings		40,171			39,524
Accumulated comprehensive loss		(8	)		(8	)
Total shareholders’ equity		72,200			74,810
Total liabilities and shareholders’ equity	$	72,310		$	74,888

CHEVIOT FINANCIAL CORP.
STATEMENT OF EARNINGS
Year ended December 31, 2006, 2005 and 2004
(In thousands)

	2006		2005			2004
Income
Interest income	$	208	$	184		$	177
Equity in earnings of Cheviot Savings Bank		1,693		2,248			2,095
Total income		1,901		2,432			2,272
General, administrative and other expense		203		328			953
Earnings before federal income tax benefits		1,698		2,104			1,319
Federal income taxes (benefits)		2		(49	)		(9	)
Net earnings	$	1,696	$	2,153		$	1,328

- 52 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE L - CHEVIOT FINANCIAL CORP. CONDENSED FINANCIAL INFORMATION (continued)

CHEVIOT FINANCIAL CORP.
STATEMENT OF CASH FLOWS
Year ended December 31, 2006, 2005 and 2004
(In thousands)

	2006			2005			2004
Cash flows provided by (used in) operating activities:
Net earnings for the year	$	1,696		$	2,153		$	1,328
Excess distribution from (equity in undistributed earnings of) Cheviot Savings Bank		(2,426	)		10,065			(2,393	)
Amortization of expense related to stock benefit plans		813			494			298
Increase (decrease) in cash due to changes in
Prepaid expenses and other assets		12,511			(12,080	)		(143	)
Accounts payable and other liabilities		32			78			—
Prepaid federal income taxes		2			(49	)		(9	)
Net cash provided by (used in) operating activities		12,628			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	)		—
Stock option expense, net		239			—			—
Treasury stock repurchases		(4,309	)		(2,537	)		—
Dividends paid		(1,049	)		(1,003	)		(821	)
Net cash provided by (used in) financing activities		(5,119	)		(5,775	)		42,024
Net (decrease) increase in cash and cash equivalents		7,509			(5,114	)		15,780
Cash and cash equivalents at beginning of year		10,666			15,780			—
Cash and cash equivalents at end of year	$	18,175		$	10,666		$	15,780

- 53 -

CHEVIOT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Years ended December 31, 2006, 2005 and 2004

NOTE M - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table summarizes the Corporation’s quarterly results for the years ended December 31, 2006 and 2005.

	Three Months Ended
	December 31,		September 30,		June 30,		March 31,
2006:	(In thousands, except per share data)
Total interest income	$	4,358	$	4,283	$	4,024	$	3,844
Total interest expense		2,222		2,131		1,821		1,608
Net interest income		2,136		2,152		2,203		2,236
Provision for losses on loans		25		—		—		—
Net interest income after provision for loan losses		2,111		2,152		2,203		2,236
Other income		139		176		103		120
General, administrative and other expense		1,698		1,690		1,702		1,680
Earnings before income taxes		552		638		604		676
Federal income taxes		160		201		198		215
Net earnings	$	392	$	437	$	406	$	461
Earnings per share:
Basic and diluted	$	.04	$	.05	$	.04	$	.05
	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

- 54 -

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		Deborah A. Fischer
Retired District Fire Chief,		Vice President, Lending
City of Cincinnati
		Scott T. Smith
John T. Smith		Chief Financial Officer
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

- 55 -

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 24, 2007 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, 2007, there were 9,918,751 shares of Cheviot Financial Corp. common stock issued (including unallocated ESOP shares) and there were approximately 862 registered holders of record.

Set forth below are the high and low prices of our common stock for the year, as well as our quarterly dividend payment history.

Quarter Ended	High		Low		Dividend paid
March 31, 2006	$	11.99	$	11.34	$	.07
June 30, 2006	$	12.20	$	11.71	$	.07
September 30, 2006	$	12.55	$	11.57	$	.07
December 31, 2006	$	13.30	$	12.31	$	.07

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, 2006, 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.

- 56 -

PERFORMANCE GRAPH

Index	01/06/04		12/31/04		06/30/05		12/31/05		06/30/06		12/31/06
Cheviot Financial Corp.		100.00		128.14		117.66		121.39		125.89		140.45
NASDAQ Composite		100.00		106.80		100.81		108.75		107.57		106.41
SNL MHC Thrift Index		100.00		114.35		114.38		117.48		133.12		160.88

Note:  Cheviot Financial Corp. data based upon original $10.00 IPO price.

Note:  NASDAQ Composite and SNL MHC Thrift Index values based upon closing values on 1/5/04.

- 57 -

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
			Delhi
			585 Anderson Ferry Road
			Cincinnati, Ohio  45238
			(513) 347-4992
			Taylor Creek
			7072 Harrison Avenue
			Cincinnati, Ohio  45247
			(513) 353-5140
Lending Centers
	West Chester
	8050 Becket Center Drive, Suite 106
	West Chester, Ohio  45069
	(513) 942-1237

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EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Subsidiary	Ownership	State of Incorporation
Cheviot Savings Bank	100%	Federal

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 28, 2007, accompanying the consolidated financial statements in the Annual Report on Form 10-K of Cheviot Financial Corp. for the year ended December 31, 2006. We hereby consent to the incorporation by reference of said reports in the Registration Statements of Cheviot Financial Corp. on Forms S-8, File Nos. 333-113919 and 333-125620.

/s/ GRANT THORNTON LLP

Cincinnati, Ohio

March 28, 2007

EX-31.1

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 29, 2007	/s/ Thomas J. Linneman
Date	Thomas J. Linneman
	President and Chief Executive Officer

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 29, 2007	/s/ Scott T. Smith
Date	Scott T. Smith Chief Financial Officer

EX-32

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, 2006 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.

Date
March 29, 2007	/s/ Thomas J. Linneman
	President and Chief Executive Officer
Date
March 29, 2007	/s/ Scott T. Smith
	Chief Financial Officer