Greenville Federal Financial (GVFF) 10QSB 2007 Q1 Quarterly report (small business)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedSeptember 30, 2006

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from                    to                    

Commission File Number:000-51668

GREENVILLE FEDERAL FINANCIAL CORPORATION

(Exact name of small business issuer as specified in its charter)

Ohio	20-3742295
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

690 Wagner Avenue, Greenville, Ohio 45331

(Address of principal executive offices)

(937) 548-4158

(Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yesþ      Noo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yeso      Noþ

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 9, 2006, 2,298,411 shares of the small business issuer’s common stock, $0.01 par value, were issued and outstanding.

Transitional Small Business Disclosure Format (Check one): Yeso      Noþ

INDEX

			Page
PART I	—	FINANCIAL INFORMATION
	ITEM 1	Financial Statements
		Consolidated Statements of Financial Condition		3
		Consolidated Statements of Earnings		4
		Consolidated Statements of Comprehensive Income		5
		Consolidated Statements of Cash Flows		6
		Notes to Consolidated Financial Statements		8
	ITEM 2	Management’s Discussion and Analysis or Plan of Operations		12
	ITEM 3	Controls and Procedures		15
PART II	—	OTHER INFORMATION		16
	ITEM 1	Legal Proceedings
	ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds
	ITEM 3	Defaults Upon Senior Securities
	ITEM 4	Submission of Matters to a Vote of Security Holders
	ITEM 5	Other Information
	ITEM 6	Exhibits
SIGNATURES				17
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

ITEM 1. FINANCIAL STATEMENTS

GREENVILLE FEDERAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except share data)

	September 30,			June 30,
	2006			2006
	(Unaudited)
ASSETS
Cash and due from banks	$	2,260		$	2,225
Interest-bearing deposits in other financial institutions		956			1,029
Cash and cash equivalents		3,216			3,254
Investment securities designated as available for sale — at market		16,472			16,204
Investment securities designated as held to maturity — at amortized cost, approximate market value of $15,762 and $16,596 at September 30, 2006 and June 30, 2006, respectively		16,038			17,041
Mortgage-backed securities designated as held to maturity — at amortized cost, approximate market value of $2,100 and $2,164 at September 30, 2006 and June 30, 2006, respectively		2,081			2,172
Loans receivable — net		85,330			83,452
Office premises and equipment — at depreciated cost		2,075			2,069
Real estate acquired through foreclosure		499			—
Stock in Federal Home Loan Bank — at cost		1,896			1,869
Cash surrender value of life insurance		3,740			3,705
Accrued interest receivable on loans		431			418
Accrued interest receivable on mortgage-backed securities		10			11
Accrued interest receivable on investment securities and other		159			146
Prepaid expenses and other assets		301			367
Total assets	$	132,248		$	130,708
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	79,290		$	78,782
Advances from the Federal Home Loan Bank		29,012			28,177
Advances by borrowers for taxes and insurance		269			355
Accrued interest payable		296			271
Other liabilities		508			440
Accrued federal income taxes		127			60
Deferred federal income taxes		51			41
Total liabilities		109,553			108,126
Commitments and contingencies		—			—
Stockholders’ equity
Preferred stock — authorized 1,000,000 shares, $.01 par value; no shares issued		—			—
Common stock — authorized 8,000,000 shares, $.01 par value; 2,298,411 shares issued and outstanding		23			23
Additional paid-in capital		9,400			9,400
Retained earnings — restricted		14,353			14,285
Shares acquired by Employee Stock Ownership Plan		(811	)		(811	)
Accumulated comprehensive loss — unrealized losses on securities designated as available for sale, net of related tax benefits		(270	)		(315	)
Total stockholders’ equity		22,695			22,582
Total liabilities and stockholders’ equity	$	132,248		$	130,708

3

GREENVILLE FEDERAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

For the three months ended September 30, 2006 and 2005
(In thousands, except per share data)
(Unaudited)

	2006			2005
Interest income
Loans	$	1,418		$	1,310
Mortgage-backed securities		28			18
Investment securities		342			293
Interest-bearing deposits and other		51			38
Total interest income		1,839			1,659
Interest expense
Deposits		548			418
Borrowings		340			368
Total interest expense		888			786
Net interest income		951			873
Provision for losses on loans		2			8
Net interest income after provision for losses on loans		949			865
Other income
Customer service charges		131			136
Gain on redemption of investment security		—			16
Other operating		60			54
Total other income		191			206
General, administrative and other expense
Employee compensation and benefits		496			477
Occupancy and equipment		102			115
Franchise taxes		57			45
Data processing		110			98
Advertising		20			17
Other operating		160			108
Total general, administrative and other expense		945			860
Earnings before income taxes		195			211
Federal income taxes
Current		67			93
Deferred		(13	)		(36	)
Total federal income taxes		54			57
NET EARNINGS	$	141		$	154
Earnings per share — basic and diluted	$	0.06			N/A
Dividends declared per share	$	0.07			N/A

4

GREENVILLE FEDERAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three months ended September 30, 2006 and 2005
(In thousands)
(Unaudited)

	2006			2005
Net earnings	$	141		$	154
Other comprehensive income, net of related tax effects:
Unrealized holding gains (losses) on securities during the period, net of taxes (benefits) of $23 and $(22) for the periods ended September 30, 2006 and 2005, respectively		45			(42	)
Comprehensive income	$	186		$	112
Accumulated comprehensive loss	$	(270	)	$	(249	)

5

GREENVILLE FEDERAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended September 30, 2006 and 2005
(In thousands)
(Unaudited)

	2006			2005
Cash flows from operating activities:
Net earnings for the period	$	141		$	154
Adjustments to reconcile net earnings to net cash provided by operating activities:
Accretion and amortization of premiums and discounts on investment and mortgage-backed securities — net		—			1
Amortization of deferred loan origination fees		(24	)		(15	)
Depreciation and amortization		40			53
Amortization of mortgage servicing rights		8			9
Provision for losses on loans		2			8
Federal Home Loan Bank stock dividends		(27	)		(22	)
Increase in cash surrender value of life insurance		(35	)		(33	)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans		(13	)		8
Accrued interest receivable on mortgage-backed securities		1			1
Accrued interest receivable on investment securities and other		(13	)		(17	)
Prepaid expenses and other assets		58			(33	)
Accrued interest payable		25			25
Other liabilities		69			(113	)
Federal income taxes
Current		67			93
Deferred		(13	)		(36	)
Net cash provided by operating activities		286			83
Cash flows used in investing activities:
Purchases of investment securities designated as available for sale		(201	)		(144	)
Proceeds from maturity of investment securities designated as held to maturity		1,003			2
Proceeds from repayment of mortgage-backed securities		91			179
Loan principal repayments		2,983			6,165
Loan disbursements		(5,338	)		(7,875	)
Purchase of office premises and equipment		(46	)		(17	)
Net cash used in investing activities		(1,508	)		(1,690	)
Cash flows provided by financing activities:
Net increase in deposit accounts		508			2,433
Proceeds from Federal Home Loan Bank advances		8,500			6,500
Repayment of Federal Home Loan Bank advances		(7,665	)		(6,550	)
Advances by borrowers for taxes and insurance		(86	)		(81	)
Dividends paid on common stock		(73	)		—
	��
Net cash provided by financing activities		1,184			2,302
Net increase (decrease) in cash and cash equivalents		(38	)		695
Cash and cash equivalents at beginning of period		3,254			3,716
Cash and cash equivalents at end of period	$	3,216		$	4,411

6

GREENVILLE FEDERAL FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the three months ended September 30, 2006 and 2005
(In thousands)
(Unaudited)

	2006		2005
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings	$	863	$	811
Supplemental disclosure of noncash investing activities:
Transfers from loans to real estate acquired through foreclosure	$	499	$	—
Loans originated upon sale of real estate acquired through foreclosure	$	—	$	83
Unrealized gains (losses) on securities designated as available for sale, net of related tax effects	$	45	$	(42	)

7

GREENVILLE FEDERAL FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three- month periods ended September 30, 2006 and 2005

1.Basis of Presentation

Greenville Federal Financial Corporation (the “Corporation” or “GFFC”) is the federally chartered savings and loan holding company of Greenville Federal and was formed upon the completion of the conversion of Greenville Federal into the stock form of organization and its reorganization into the mutual holding company structure (the “Reorganization”) pursuant to Greenville Federal’s Third Amended Plan of Reorganization and Stock Issuance Plan (the “Plan”). Pursuant to the Plan, on January 4, 2006, Greenville Federal converted into the stock form of ownership and issued all of its outstanding stock to the Corporation, and the Corporation sold 45% of its outstanding common stock, at $10.00 per share, to Greenville Federal’s depositors and others, including a newly formed employee stock ownership plan, and 55% of its outstanding common stock to Greenville Federal MHC, a federally chartered mutual holding company. The costs of the Reorganization and sale of the common stock were deducted from the proceeds of the offering.

Greenville Federal, located in Greenville, Ohio, conducts a general banking business in west-central Ohio, which consists of attracting deposits from the general public and applying those funds to the origination of loans for residential, consumer and nonresidential purposes. Greenville Federal’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 Greenville Federal can be significantly influenced by a number of environmental factors, such as governmental monetary policy, that are outside of management’s control.

The accompanying unaudited consolidated financial statements were prepared in accordance with the instructions for Form 10-QSB and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of GFFC included in the Form 10-KSB as of and for the year ended June 30, 2006. However, in the opinion of management, all adjustments (consisting of only normal recurring accruals) which are necessary for a fair presentation of the financial statements have been included. The results of operations for the three-month period ended September 30, 2006, are not necessarily indicative of the results which may be expected for the entire fiscal year.

2.Principles of Consolidation

The consolidated financial statements include the accounts of GFFC and Greenville Federal. All significant intercompany balances and transactions have been eliminated in consolidation.

3.Earnings Per Share

Basic earnings per share is computed based upon the weighted-average common shares outstanding during the period less shares in the ESOP that are unallocated and not committed to be released. Weighted-average common shares deemed outstanding, which gives effect to 81,088 unallocated ESOP shares, totaled 2,217,323 for the three-month period ended September 30, 2006. The provisions of SFAS No. 128, “Earnings Per Share,” are not applicable to the three-month period ended September 30, 2005, as the Corporation did not complete the conversion to stock form until January 2006.

8

GREENVILLE FEDERAL FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-month periods ended September 30, 2006 and 2005

4.Recent Accounting Developments

In December 2004, the Financial Accounting Standards Board (“FASB”) issued a revision to SFAS No. 123 which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily on accounting for transactions in which an entity obtains employee services in share-based transactions. This Statement, SFAS No. 123(R) “Share Based Payment”, requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, with limited exceptions. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award – the requisite service period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Employee share purchase plans will not result in recognition of compensation cost if certain conditions are met.

Initially, the cost of employee services received in exchange for an award of liability instruments will be measured based on current fair value; the fair value of that award will be remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.

Excess tax benefits, as defined by SFAS No. 123(R), will be recognized as an addition to additional paid-in capital. Cash retained as a result of those excess tax benefits will be presented in the statement of cash flows as financing cash inflows. The write-off of deferred tax assets relating to unrealized tax benefits associated with recognized compensation cost will be recognized as income tax expense unless there are excess tax benefits from previous awards remaining in additional paid-in capital to which it can be offset.

Compensation cost is required to be recognized in the beginning of the first interim or annual period that begins after December 15, 2005, or January 1, 2006 as to the Corporation. The Corporation had no stock option or other share-based incentive plans subject to the provisions of SFAS No. 123(R) as of or for periods prior to September 30, 2006. However, the Greenville Federal Financial Corporation 2006 Equity Plan was approved by the stockholders at the Annual Meeting of Stockholders on October 31, 2006. The Corporation will be required to expense future stock option grants under the plan pursuant to SFAS No. 123(R).

9

GREENVILLE FEDERAL FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-month periods ended September 30, 2006 and 2005

4.Recent Accounting Developments (continued)

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 July 1, 2007 as to the Corporation. The Corporation is currently evaluating SFAS No. 156, but does not expect it to have a material effect on the Corporation’s consolidated statements financial position or results of operations.

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 July 1, 2007 as to the Company. The Company is currently evaluating the effects of FIN 48.

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.

10

GREENVILLE FEDERAL FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the three-month periods ended September 30, 2006 and 2005

4.Recent Accounting Developments (continued)

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 currently use the roll-over method for quantifying identified financial statement misstatements.

SAB 108 established 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 July 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 is currently evaluating the requirements of SAB 108 but does not expect it to have a material adverse effect on the Company’s consolidated statement of financial position or results of operations.

11

GREENVILLE FEDERAL FINANCIAL CORPORATION

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN
	OF OPERATIONS

Forward Looking Statements

Certain statements contained in this report that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties. When used herein, the terms “anticipates,” “plans,” “expects,” “believes,” and similar expressions as they relate to Greenville Federal or its management are intended to identify such forward looking statements. Greenville Federal’s actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general and local economic conditions, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, and rapidly changing technology affecting financial services.

Critical Accounting Policies

There were no material changes to the Corporation’s critical accounting policies since that disclosed in the Corporation’s Form 10-KSB filing as of June 30, 2006.

Discussion of Financial Condition Changes from June 30, 2006 to September 30, 2006

Greenville Federal’s assets totaled $132.2 million at September 30, 2006, an increase of $1.5 million, or 1.2%, from the $130.7 million total at June 30, 2006. The increase in assets resulted primarily from an increase in loans receivable.

Cash and cash equivalents decreased by $38,000, or 1.2%, from the three-month period ended September 30, 2006. Investment securities and mortgage-backed securities totaled $34.6 million at September 30, 2006, a decrease of $826,000, or 2.3%, from the total at June 30, 2006. The decrease was comprised of maturities and repayments on investment and mortgage-backed securities of $1.1 million, partially offset by reinvestment of dividends on the asset management fund.

Loans receivable totaled $85.3 million at September 30, 2006, compared to $83.5 million at June 30, 2006, an increase of $1.9 million, or 2.3%. The increase was primarily attributable to $1.6 million of growth in one- to four-family residential real estate loans and $169,000 of growth in nonresidential real estate loans. Loan disbursements during the period totaling $5.3 million were partially offset by principal repayments of $3.0 million. During the three-month period ended September 30, 2006, loan originations were comprised of $4.2 million of one- to four-family residential real estate loans, $625,000 of consumer loans, $265,000 of commercial loans, and $200,000 of nonresidential real estate loans. Nonresidential real estate, multi-family residential real estate and commercial lending generally involves a higher degree of risk than one- to four-family residential real estate lending due to the relatively larger loan amounts and the effects of general economic conditions on the successful operation of income-producing properties and businesses. Greenville Federal endeavors to reduce such risk by evaluating the credit history and past performance of the borrower, the location of the real estate, the quality of the management operating the property or business, the debt service ratio, the quality and characteristics of the income stream generated by the property or business and appraisals supporting the real estate or collateral valuation. The majority of these loans have been made to existing customers. Management intends to pursue a moderate rate of growth in the nonresidential and commercial loan portfolios, but is committed to retaining its historical focus on one- to four-family residential lending.

The allowance for loan losses totaled $578,000 at September 30, 2006, a decrease of $1,000 or 0.2%, from the June 30, 2006 balance of $579,000, and represented 0.66% and 0.67% of total loans at each of those respective dates. Greenville Federal’s nonperforming loans totaled $490,000 and $529,000 at September 30, 2006 and June 30, 2006, respectively. In determining the allowance for loan losses at any point in time, management and the board of

12

GREENVILLE FEDERAL FINANCIAL CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATIONS (CONTINUED)

Discussion of Financial Condition Changes from June 30, 2006 to September 30, 2006 (continued)

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 nonresidential loans are evaluated individually for potential impairment. Second, the allowance for loan losses is evaluated using Greenville Federal’s historic loss experience, adjusted for changes in economic trends in Greenville Federal’s lending area, by applying these adjusted loss percentages to the loan types to be evaluated collectively in the portfolio. To the best of management’s knowledge, all known and inherent losses that are probable and that can be reasonably estimated have been recorded at September 30, 2006. Although management believes that the allowance for loan losses at September 30, 2006, was adequate 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 could adversely affect Greenville Federal’s results of operations.

Deposits totaled $79.3 million at September 30, 2006, an increase of $508,000, or 0.6%, over the $78.8 million total at June 30, 2006. The increase in deposits was due primarily to an increase in public deposits offset by a decrease in wholesale jumbo certificates of deposit, and by a decrease in retail deposits.

Advances from the Federal Home Loan Bank totaled $29.0 million at September 30, 2006, an increase of $835,000, or 3.0%, from June 30, 2006. Proceeds from advances were used to fund new loan originations.

Shareholders’ equity totaled $22.7 million at September 30, 2006, an increase of $113,000, or 0.5%, over the $22.6 million total at June 30, 2006. The increase resulted from net earnings of $141,000 for the three months ended September 30, 2006 and a decrease in the unrealized losses on securities designated as available for sale of $45,000, which was partially offset by dividends paid on common stock of $73,000.

Greenville Federal is required to maintain minimum regulatory capital pursuant to federal regulations. At September 30, 2006, Greenville Federal’s regulatory capital continued to substantially exceed all minimum regulatory capital requirements.

Comparison of Operating Results for the Three-Month Periods Ended September 30, 2006 and 2005

General

The Corporation recorded net earnings of $141,000 for the three months ended September 30, 2006, a decrease of $13,000, or 8.4%, compared to net earnings of $154,000 for the same period in 2005. The decrease resulted from a decrease in other income of $15,000 and an $85,000 increase in general, administrative and other expenses, offset by a $78,000 increase in net interest income, a $6,000 decrease in the provision for losses on loans and a $3,000 decrease in federal income taxes.

13

GREENVILLE FEDERAL FINANCIAL CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATIONS (CONTINUED)

Comparison of Operating Results for the Three-Month Periods Ended September 30, 2006 and 2005(continued)

Net Interest Income

Interest income totaled $1.8 million for the three months ended September 30, 2006, an increase of $180,000, or 10.8%, compared to the three months ended September 30, 2005. Interest income on loans increased by $108,000, or 8.2%, due primarily to a $4.7 million increase in the average balance of loans outstanding coupled with an increase in the weighted-average yield on loans from 6.61% to 6.75%. Interest income on investment securities increased by $49,000, or 16.7%, due primarily to an increase in the weighted-average yield on such securities from 3.47% to 4.19%, which was partially offset by a $1.2 million decrease in the average balance outstanding. The increases in yields were due primarily to overall rising interest rates in the economy. The increase in loans receivable was comprised primarily of growth in one- to four-family residential real estate loans and commercial loans.

Interest expense totaled $888,000 for the three months ended September 30, 2006, an increase of $102,000, or 13.0%, compared to the three months ended September 30, 2005. This increase was a result of an increase in the weighted-average cost of funds to 3.40% for the three months ended September 30, 2006, from 2.90% for the three months ended September 30, 2005, offset by a $4.7 million decrease in the average balance of interest-bearing liabilities outstanding year to year.

As a result of the foregoing changes in interest income and interest expense, net interest income increased by $78,000, or 8.9%, compared to the same period in 2005. The interest rate spread decreased to 2.63% for the three months ended September 30, 2006, compared to 2.72% for the three months ended September 30, 2005. The net interest margin increased to 3.12% for the three months ended September 30, 2006, from 2.96% for the three months ended September 30, 2005.

Provision for Losses on Loans

A provision for losses on loans is charged to earnings to maintain the total allowance for loan losses at a level calculated by management based on historical experience, the volume and type of lending conducted by Greenville Federal, the status of past due principal and interest payments and management’s assessment of economic factors in Greenville Federal’s lending area that may affect the collectibility of Greenville Federal’s loan portfolio. Management recorded a provision for losses on loans of $2,000 for the three months ended September 30, 2006, compared to $8,000 for the three months ended September 30, 2005. The allowance for loan losses totaled $578,000 at September 30, 2006, compared to $579,000 at June 30, 2006. Greenville Federal’s nonperforming loans, consisting of loans 90 days or more past due and nonaccrual loans, totaled $490,000 at September 30, 2006, a decrease of $34,000 compared to June 30, 2006. 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 assets or that the allowance will be adequate to cover losses on nonperforming assets in the future.

Other Income

Other income totaled $191,000 for the three months ended September 30, 2006, a decrease of $15,000, or 7.3% compared to the same quarter in 2005. The decrease in other income was due primarily to the fact that Greenville Federal had a $16,000 gain on redemption of the shares of Intrieve, Inc., Greenville Federal’s data processor in the first quarter of 2005 that was not repeated in the first quarter of 2006.

14

GREENVILLE FEDERAL FINANCIAL CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATIONS (CONTINUED)

Comparison of Operating Results for the Three-Month Periods Ended September 30, 2006 and 2005(continued)

General, Administrative and Other Expense

General, administrative and other expense totaled $945,000 for the three months ended September 30, 2006, an increase of $85,000, or 9.9%, compared to the same quarter in 2005. The increase in general, administrative and other expense was due primarily to a $46,000 increase in professional fees expense, mostly related to the Corporation’s public company reporting requirements and the adoption of the Corporation’s 2006 Equity Plan, a $19,000 increase in compensation expense, due primarily to costs associated with the Employee Stock Ownership Plan, a $12,000 increase in state franchise taxes and a $12,000 increase in data processing expense, all of which were partially offset by a $13,000 decrease in occupancy and equipment expense. The decrease in occupancy and equipment expense was due primarily to a reduction in depreciation expense, as leasehold improvements became fully depreciated.

Federal Income Taxes

The provision for federal income taxes totaled $54,000 for the three months ended September 30, 2006, a decrease of $3,000, or 5.3%, compared to the same quarter in 2005. The decrease resulted primarily from a $16,000, or 7.6%, decrease in pre-tax earnings year to year. The effective tax rate was 27.7% for the three months ended September 30, 2006 compared to 27.0% for the three months ended September 30, 2005. The effective tax rate in both fiscal quarters were less than the statutory tax rate of 34% due primarily to the non-taxable earnings on bank-owned life insurance.

ITEM 3:Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer of the Registrant have evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of September 30, 2006, and have concluded that the disclosure controls and procedures in place at September 30, 2006, were effective.

There were no changes in the Corporation’s internal control over financial reporting that occurred during the quarter ended September 30, 2006, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

15

Greenville Federal Financial Corporation

PART II – OTHER INFORMATION

ITEM 1.Legal Proceedings

          Not applicable

ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds

          (a) None

          (b) None

          (c) None

ITEM 3.Defaults Upon Senior Securities

          Not applicable

ITEM 4.Submission of Matters to a Vote of Security Holders

          Not applicable

ITEM 5.Other Information

          Not applicable

ITEM 6.Exhibits

3.1	Greenville Federal Financial Corporation Federal Stock Subsidiary Holding Company Charter
3.2	Greenville Federal Financial Corporation Federal Stock Subsidiary Holding Company Bylaws
31.1	Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Chief Executive Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

16

Greenville Federal Financial Corporation

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GREENVILLE FEDERAL FINANCIAL CORPORATION
Date:November 10, 2006	By:	/s/ David M. Kepler
		David M. Kepler
		President and Chief Executive Officer
Date:November 10, 2006	By:	/s/ Susan J. Allread
		Susan J. Allread
		Chief Financial Officer

17

INDEX TO EXHIBITS

3.1	Greenville Federal Financial Corporation Federal Stock Subsidiary Holding Company Charter (Incorporated by reference to Exhibit 2 to the Registration Statement on Form 8-A filed by the Registrant with the Securities and Exchange Commission on December 14, 2005)
3.2	Greenville Federal Financial Corporation Federal Stock Subsidiary Holding Company Bylaws (Incorporated by reference to Exhibit 3 to the Registration Statement on Form 8-A filed by the Registrant with the Securities and Exchange Commission on December 14, 2005)
31.1	Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Chief Executive Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002