Greenville Federal Financial (GVFF) 10-Q 2008 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2008

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)

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 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

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

Large accelerated filero Accelerated filero Non-accelerated filero
(Do not check if a smaller reporting company) Smaller reporting companyþ

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 May 13, 2008, 2,298,411 shares of the small business issuer’s common stock, $0.01 par value, were issued and outstanding.

Greenville Federal Financial Corporation

Index

	Page
PART I — FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets		3
Consolidated Statements of Income		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 of Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosures About Market Risk		19
Item 4T. Controls and Procedures		19
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		20
Item 3. Defaults Upon Senior Securities		20
Item 4. Submission of Matters to a Vote of Security Holders		20
Item 5. Other Information		20
Item 6. Exhibits		20
SIGNATURES		21

2

ITEM 1. Financial Statements

Greenville Federal Financial Corporation

Consolidated Balance Sheets

(In thousands, except share data)

	March 31, 2008			June 30, 2007
	(Unaudited)
ASSETS
Cash and due from banks	$	2,072		$	2,030
Interest-bearing deposits in other financial institutions		3,995			1,497
Cash and cash equivalents		6,067			3,527
Investment securities designated as available for sale — at market		17,281			17,013
Investment securities designated as held to maturity — at amortized cost		2,024			11,031
Mortgage-backed securities designated as held to maturity — at amortized cost		1,402			1,684
Loans receivable — net of allowance for loan losses of $548 and $579 at March 31, 2008 and June 30, 2007, respectively		89,770			87,413
Office premises and equipment — at depreciated cost		1,935			2,022
Real estate acquired through foreclosure		141			247
Stock in Federal Home Loan Bank — at cost		1,950			1,925
Cash surrender value of life insurance		3,963			3,849
Accrued interest receivable on loans		431			442
Accrued interest receivable on mortgage-backed securities		8			9
Accrued interest receivable on investment securities and other		88			99
Prepaid expenses and other assets		401			447
Total assets	$	125,461		$	129,708
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits	$	80,310		$	79,633
Advances from the Federal Home Loan Bank		20,979			26,125
Advances by borrowers for taxes and insurance		297			382
Accrued interest payable		169			333
Other liabilities		925			387
Deferred federal income taxes		75			104
Total liabilities		102,755			106,964
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 of $.01 par value; 2,298,411 shares issued and outstanding		23			23
Additional paid-in capital		8,979			9,145
Retained earnings — restricted		14,884			14,636
Shares acquired by Employee Stock Ownership Plan		(721	)		(721	)
Accumulated comprehensive loss — unrealized losses on securities designated as available for sale, net of related tax effects		(459	)		(339	)
Total stockholders’ equity		22,706			22,744
Total liabilities and stockholders’ equity	$	125,461		$	129,708

See notes to consolidated financial statements.

3

Greenville Federal Financial Corporation

Consolidated Statements of Income

(In thousands, except share data)

(Unaudited)

	Three months ended						Nine months ended
	March 31,						March 31,
	2008			2007			2008			2007
Interest income
Loans	$	1,500		$	1,460		$	4,541		$	4,336
Mortgage-backed securities		22			26			69			81
Investment securities		254			327			898			1,017
Interest-bearing deposits and other		45			49			149			150
Total interest income		1,821			1,862			5,657			5,584
Interest expense
Deposits		572			569			1,811			1,672
Borrowings		256			315			885			1,013
Total interest expense		828			884			2,696			2,685
Net interest income		993			978			2,961			2,899
Provision for losses on loans		––			3			––			13
Net interest income after provision for losses on loans		993			975			2,961			2,886
Other income
Customer service charges		142			130			457			408
Gain on sale of real estate acquired through foreclosure		1			––			1			––
Other operating		63			60			193			179
Total other income		206			190			651			587
General, administrative and other expense
Employee compensation and benefits		517			525			1,558			1,539
Occupancy and equipment		96			96			282	��		295
Franchise taxes		50			58			167			153
Data processing		141			120			396			339
Advertising		19			12			52			52
Other operating		189			150			511			490
Total general, administrative and other expense		1,012			961			2,966			2,868
Income before income taxes		187			204			646			605
Federal incomes taxes
Current		(19	)		(40	)		148			78
Deferred		70			98			33			92
Total federal income taxes		51			58			181			170
NET INCOME	$	136		$	146		$	465		$	435
Earnings per share — basic and diluted	$	0.06		$	0.07		$	0.21		$	0.20
Dividends declared per share	$	0.07		$	0.07		$	0.21		$	0.21

See notes to consolidated financial statements.

4

Greenville Federal Financial Corporation

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2008			2007			2008			2007
Net income	$	136		$	146		$	465		$	435
Other comprehensive income (losses), net of related tax benefits:
Unrealized holding gains (losses) on securities during the period, net of taxes (benefits) of $(62), $6, $(62) and $17 for the respective periods		(120	)		12			(120	)		34
Comprehensive income	$	16		$	158		$	345		$	469
Accumulated comprehensive loss	$	(459	)	$	(281	)	$	(459	)	$	(281	)

See notes to consolidated financial statements.

5

Greenville Federal Financial Corporation

Consolidated Statements of Cash Flows

For the nine months ended March 31, 2008 and 2007

(In thousands)

(Unaudited)

	2008			2007
Cash flows from operating activities:
Net income for the period	$	465		$	435
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion and amortization of premiums and discounts on investments and mortgage-backed securities — net		(2	)		––
Amortization of deferred loan origination fees		(33	)		(38	)
Depreciation and amortization		94			110
Stock option expense		17			––
Amortization of mortgage servicing rights		22			28
Provision for losses on loans		––			13
Provision for losses on real estate acquired through foreclosure		22			––
Gain on sale of real estate acquired through foreclosure		(1	)		––
Federal Home Loan Bank stock dividends		(25	)		(56	)
Increase in cash surrender value of life insurance		(114	)		(107	)
Increase (decrease) in cash due to changes in:
Accrued interest receivable on loans		11			3
Accrued interest receivable on mortgage-backed securities		1			2
Accrued interest receivable on investment securities and other		11			(15	)
Prepaid expenses and other assets		24			(221	)
Accrued interest payable		(164	)		(9	)
Other liabilities		538			83
Federal income taxes
Current		––			(230	)
Deferred		33			92
Net cash provided by operating activities		899			90
Cash flows used in investing activities:
Purchases of investment securities designated as available for sale		(450	)		(624	)
Proceeds from maturity of investment securities designated as held to maturity		9,007			5,007
Proceeds from repayment of mortgage-backed securities		284			347
Loan principal repayments		9,675			11,608
Loan disbursements		(11,999	)		(14,451	)
Purchase of office equipment		(7	)		(64	)
Proceeds from sale of real estate acquired through foreclosure		85			499
Net cash provided by investing activities		6,595			2,322
Net cash provided by operating and investing activities (balance carried forward)		7,494			2,412

See notes to consolidated financial statements.

6

Greenville Federal Financial Corporation
Consolidated Statements of Cash Flows (Continued)
For the nine months ended March 31, 2008 and 2007
(In thousands)
(Unaudited)

	2008			2007
Net cash provided by operating and investing activities (balance brought forward)	$	7,494		$	2,412
Cash flows provided by financing activities:
Net increase in deposit accounts		677			911
Proceeds from Federal Home Loan Bank advances		30,000			30,115
Repayments of Federal Home Loan Bank advances		(35,146	)		(32,941	)
Advances by borrowers for taxes and insurance		(85	)		(64	)
Shares acquired by 2006 Equity Plan		(183	)		(93	)
Dividends on common stock		(217	)		(217	)
Net cash used in financing activities		(4,954	)		(2,289	)
Net increase in cash and cash equivalents		2,540			123
Cash and cash equivalents at beginning of period		3,527			3,254
Cash and cash equivalents at end of period	$	6,067		$	3,377
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings	$	2,860		$	2,694
Federal income taxes	$	83		$	308
Supplemental disclosure of noncash investing activities:
Transfers from loans to real estate acquired through foreclosure	$	––		$	811
Unrealized gains (losses) on securities designated as available for sale, net of related tax effects	$	(120	)	$	34

See notes to consolidated financial statements.

7

Greenville Federal Financial Corporation
Notes to Consolidated Financial Statements
For the nine- and three-month periods ended March 31, 2008 and 2007

Note 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 (“ESOP”), and 55% of its outstanding common stock to Greenville Federal MHC, a federally chartered mutual holding company.

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-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. Accordingly, these 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, 2007. 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 nine-month and three-month periods ended March 31, 2008, are not necessarily indicative of the results which may be expected for the entire fiscal year.

Note 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.

Note 3: Earnings Per Share

Basic earnings per common share is computed based upon the weighted-average number of common shares outstanding during the period, less 67,553 and 76,563 weighted-average shares as of March 31, 2008 and 2007, respectively, in the Corporation’s Employee Stock Ownership Plan (“ESOP”) that are unallocated and not committed to be released.

8

Greenville Federal Financial Corporation
Notes to Consolidated Financial Statements
For the nine- and three-month periods ended March 31, 2008 and 2007

Weighted-average common shares deemed outstanding totaled 2,214,602 and 2,217,111 for the three months ended March 31, 2008 and 2007, respectively. Weighted-average common shares deemed outstanding totaled 2,218,787 and 2,218,025 for the nine months ended March 31, 2008 and 2007, respectively.

Diluted earnings per common share include the dilutive effect of all additional potential common shares issuable. Weighted-average common shares deemed outstanding for purposes of computing diluted earnings per share totaled 2,214,602 and 2,218,787 for the three-month and nine-month periods ended March 31, 2008, respectively. There were 74,800 options that were excluded from the computation of diluted earnings per share for the three-month and nine-month periods ended March 31, 2008, because their exercise price was greater than the average fair value. At March 31, 2007, the Corporation had no dilutive or potentially dilutive securities.

Note 4: Recent Accounting Developments

In March 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“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;

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

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

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, with earlier application permitted. The Corporation adopted SFAS No. 156, effective July 1, 2007, as required, without material effect on the Corporation’s statements of financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 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. SFAS No. 157 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, SFAS No. 157 establishes a fair value hierarchy that provides the highest priority to quoted prices in active markets and the lowest priority to unobservable data. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, or July 1, 2008 as to the Corporation, and interim periods within that fiscal year. The adoption of SFAS No. 157 is not expected to have a material adverse effect on the Corporation’s financial condition or results of operations.

9

Greenville Federal Financial Corporation
Notes to Consolidated Financial Statements
For the nine- and three-month periods ended March 31, 2008 and 2007

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115.” SFAS No. 159 allows companies the choice to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007, or July 1, 2008 as to the Corporation, and interim periods within that fiscal year. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, “Fair Value Measurements.” The Corporation is currently evaluating the impact the adoption of SFAS No. 159 will have on the financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”, which replaces SFAS No. 141. The Statement applies to all transactions or other events in which one entity obtains control of one or more businesses. It requires all assets acquired, liabilities assumed and any noncontrolling interest to be measured at fair value at the acquisition date. The Statement requires certain costs such as acquisition-related costs that were previously recognized as a component of the purchase price, and expected restructuring costs that were previously recognized as an assumed liability, to be recognized separately from the acquisition as an expense when incurred.

SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date.

Concurrent with SFAS No. 141 (revised 2007), the FASB recently issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51”. SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest (formerly known as minority interest) in a subsidiary and for the deconsolidation of a subsidiary. A subsidiary, as defined by SFAS No. 160, includes a variable interest entity that is consolidated by a primary beneficiary.

A noncontrolling interest in a subsidiary, previously reported in the statement of financial position as a liability or in the mezzanine section outside of permanent equity, will be included within consolidated equity as a separate line item upon the adoption of SFAS No. 160. Further, consolidated net income will be reported at amounts that include both the parent (or primary beneficiary) and the noncontrolling interest with separate disclosure on the face of the consolidated statement of income of the amounts attributable to the parent and to the noncontrolling interest.

SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.

10

Greenville Federal Financial Corporation
Notes to Consolidated Financial Statements
For the nine- and three-month periods ended March 31, 2008 and 2007

Note 5: Stock-Based Compensation Plan

The Greenville Federal Financial Corporation 2006 Equity Plan (the “Plan”), which was approved by shareholders on October 31, 2006, permits the grant of options to purchase shares of the Corporation’s common stock to its directors and employees for up to 112,622 shares. This Plan is intended to foster and promote the long-term financial success of the Corporation and to increase stockholder value by [1] providing employees and directors an opportunity to acquire an ownership interest in the Corporation and [2] enabling the Corporation to attract and retain the services of outstanding employees and directors upon whose judgment, interest and special efforts the successful conduct of the Corporation’s business is largely dependent. Option awards are generally granted with an exercise price equal to the market price of the Corporation’s stock at the date of grant; those option awards generally vest based on five years of continuous service and have ten-year contractual terms. Upon a change in control of the Corporation, each option will be treated as provided in a separate written agreement with the option holder or if no such agreement exists, will be cancelled in exchange for either cash or the merger or acquisition consideration, as provided in the merger or acquisition agreement. The Corporation granted stock option awards for 74,800 shares on June 29, 2007.

The fair value of the option awards was estimated on the date of grant using the Black-Scholes valuation model. Specifically, the model incorporated a stock market price at the grant date of $7.06 per share, which adjusts the market price of the stock for the effect of dividend payments of $0.28 per share annually over the expected life of the option. The option exercise price equaled $9.45 per share and the estimated time remaining before the expiration of the options equaled 10 years. The risk-free rate of return equaled 5.03%, which was based on the constant maturity yield of a U.S. Treasury note with a fixed-rate term of ten years. Expected volatility of 8.10% was derived from GFFC’s historical trading data through June 29, 2007 for the length of time that GFFC has been a public company.

Based on the foregoing assumptions, the fair value of the Corporation’s stock options granted on June 29, 2007 equaled $1.53 per share.

The Corporation recognized expense of $17,000 and $6,000 for stock option awards for the nine months and three months ended March 31, 2008, respectively.

As of March 31, 2008, there was approximately $97,000 of total unrecognized compensation cost related to nonvested share based compensation arrangements granted under the Plan. That cost is expected to be recognized over the next five fiscal years at approximately $23,000 per year.

The shares of the stock to be delivered under the Plan may consist, in whole or in part, of treasury stock or authorized but unissued shares not reserved for any other purpose; provided, however, that the use of shares purchased in the secondary market will be limited to such repurchases as are permitted by applicable regulations of the Office of Thrift Supervision.

11

Greenville Federal Financial Corporation
Notes to Consolidated Financial Statements
For the nine- and three-month periods ended March 31, 2008 and 2007

Note 6: Subsequent Event

On May 7, 2008, management of Greenville Federal received correspondence from Shay Assets Management, Inc., relative to Greenville Federal’s investment in the AMF Ultra Short Mortgage Fund (the “Fund”), indicating that (1) the Fund has been closed to new investors, due to the downgrade of certain of the Fund’s mortgage-related securities below the Fund’s investment guidelines, and (2) the Fund has implemented a “Redemption-in-Kind” provision, which provides that investors requesting redemption of their investments in the Fund will receive payment for their interest in the Fund in the form of securities held in the Fund rather than in the form of cash.

Greenville Federal’s investment in the Fund had a fair value of $17.3 million as of March 31, 2008, which represented an unrealized pretax loss of approximately $695,000. The investment is recorded on the consolidated financial statements as available-for-sale, and accordingly, the unrealized loss has been recognized, net of tax effects, as a component of other comprehensive income and recorded as a $459,000 reduction to shareholders’ equity. As of May 9, 2008, the fair value of Greenville Federal’s investment in the Fund was $16.8 million, which represented an unrealized pretax loss of approximately $1.1 million.

Management of Greenville Federal is required to assess unrealized losses on securities as either temporary or other-than-temporary. Losses on available-for-sale securities deemed temporary are accounted for through other comprehensive income as described above. The unrealized loss on the Fund was deemed temporary as of March 31, 2008. Losses assessed as other-than-temporary are required to be recognized through a charge to income and a new cost basis of the investment is established. Management will continue to evaluate assessment of the unrealized loss on the Fund taking into consideration all available information, including the information contained in the letter from Shay Assets Management received on May 7, 2008. Should a determination be made that the unrealized loss is other-than-temporary, the Corporation will be required to record that portion of the loss deemed other-than-temporary through its income statement.

12

Greenville Federal Financial Corporation

ITEM 2. Management’s Discussion and Analysis of Financial Condition
and Results 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,” “intends” and similar expressions as they relate to the Corporation or its management are intended to identify such forward looking statements. The Corporation’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 which were disclosed in the Corporation’s Form 10-KSB filing as of June 30, 2007.

Discussion of Financial Condition Changes from June 30, 2007 to March 31, 2008

The Corporation’s assets totaled $125.5 million at March 31, 2008, a decrease of $4.2 million, or 3.3%, from the $129.7 million total at June 30, 2007. The decrease in assets resulted primarily from a decrease in investment securities, partially offset by an increase in cash and cash equivalents and an increase in loans receivable.

Cash and cash equivalents increased by $2.5 million, or 72.0%, over the nine-month period ended March 31, 2008. Investment securities and mortgage-backed securities totaled $20.7 million at March 31, 2008, a decrease of $9.0 million, or 30.3%, from the total at June 30, 2007. The decrease was comprised of called or matured investment securities and repayments on mortgage-backed securities of $9.3 million, partially offset by reinvestment of dividends on the asset management fund.

Loans receivable totaled $89.8 million at March 31, 2008, compared to $87.4 million at June 30, 2007, an increase of $2.4 million, or 2.7%. The increase was primarily attributable to $1.7 million of growth in one- to four-family residential real estate loans and $504,000 in one- to four-family construction loans. Loan disbursements during the period totaling $12.0 million were partially offset by principal repayments of $9.7 million. Management intends to pursue a moderate rate of growth in the nonresidential, commercial and consumer loan portfolios, but is committed to retaining its historical focus on one- to four-family residential lending. 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. Consumer lending also may entail greater risk than residential lending. The risk of default on consumer lending increases during periods of recession, high unemployment and other adverse economic conditions.

13

Greenville Federal Financial Corporation
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

The allowance for loan losses totaled $548,000 at March 31, 2008, a decrease of $31,000, or 5.4%, from the June 30, 2007 balance of $579,000, and represented 0.60% and 0.65% of total loans at those respective dates. Greenville Federal’s nonperforming loans totaled $1.2 million and $471,000 at March 31, 2008 and June 30, 2007, respectively. 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 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 March 31, 2008. Although management believes that the allowance for loan losses at March 31, 2008, 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 $80.3 million at March 31, 2008, an increase of $677,000, or 0.9%, from June 30, 2007. Greenville Federal participates in a bidding process for short-term public deposits through the Bid Ohio program. On the first Tuesday of each month, the Ohio Treasurer’s office sponsors an online auction for eligible Ohio state depository banks to bid on interim State funds. Such short-term deposits from the State of Ohio totaled $9.9 million at March 31, 2008 down from $11.0 million at June 30, 2007. Greenville Federal also participates in a bidding process for local short-term public funds. Such short-term deposits from the Darke County Treasurer totaled $1.0 million at March 31, 2008, while the Corporation held no such deposits at June 30, 2007. Advances from the Federal Home Loan Bank totaled $21.0 million at March 31, 2008, a decrease of $5.1 million, or 19.7%, compared to June 30, 2007. The decrease was the result of funds from called and maturing investment securities being used to pay off advances.

Shareholders’ equity totaled $22.7 million at March 31, 2008, a decrease of $38,000 from June 30, 2007, as net income of $465,000 for the nine months ended March 31, 2008 was exceeded by the combination of purchases of Greenville Federal Financial stock under the Corporation’s 2006 Equity Plan of $183,000, dividends paid on common stock of $217,000, and an increase of $120,000 in unrealized losses on securities designated as available for sale.

Greenville Federal is required to maintain minimum regulatory capital pursuant to federal regulations. At March 31, 2008, Greenville Federal’s regulatory capital continued to substantially exceed all minimum regulatory capital requirements.

Comparison of Operating Results for the Three-Month Periods Ended March 31, 2008 and 2007

General

The Corporation recorded net income of $136,000 for the three months ended March 31, 2008, a decrease of $10,000, or 6.9%, compared to net income of $146,000 for the same period in 2007. The decrease was due primarily to a $51,000, or 5.3%, increase in general, administrative and other expense, partially offset by an $18,000, or 1.8%, increase in net interest income after provision for losses on loans, a $16,000, or 8.4%, increase in other income, and a $7,000, or 12.1%, decrease in federal income taxes.

14

Greenville Federal Financial Corporation
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Net Interest Income

Interest income totaled $1.8 million for the three months ended March 31, 2008, a decrease of $41,000, or 2.2%, compared to the three months ended March 31, 2007. Interest income on loans increased by $40,000, or 2.7%, due primarily to a $3.3 million increase in the average balance of loans outstanding, partially offset by a decrease in the weighted-average yield on loans from 6.82% in the 2007 three-month period to 6.75% in the 2008 three-month period. Interest income on investment securities decreased by $73,000, or 22.3%, due primarily to a $6.6 million decrease in the average balance outstanding, partially offset by an increase in the weighted-average yield on such securities from 4.45% in the 2007 three-month period to 4.46% in the 2008 three-month period. The increase in loans receivable was due primarily to growth in one- to four-family residential real estate loans and one- to four-family construction loans.

Interest expense totaled $828,000 for the three months ended March 31, 2008, a decrease of $56,000, or 6.3%, compared to the three months ended March 31, 2007. This decrease was a result of a $3.2 million decrease in the average balance of interest-bearing liabilities outstanding year to year, coupled with a decrease in the weighted-average cost of funds to 3.39% for the three months ended March 31, 2008, from 3.49% for the three months ended March 31, 2007.

As a result of the foregoing changes in interest income and interest expense, net interest income increased by $15,000, or 1.5%, compared to the same period in 2007. The interest rate spread increased to 2.78% for the three months ended March 31, 2008, compared to 2.72% for the three months ended March 31, 2007. The net interest margin increased to 3.37% for the three months ended March 31, 2008, from 3.26% for the three months ended March 31, 2007.

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 did not record a provision for losses on loans for the three months ended March 31, 2008, compared to $3,000 for the three months ended March 31, 2007. The allowance for loan losses totaled $548,000 at March 31, 2008, compared to $579,000 at June 30, 2007. Greenville Federal’s nonperforming loans, consisting of loans 90 days or more past due and nonaccrual loans, totaled $1.2 million at March 31, 2008, an increase of $685,000 compared to June 30, 2007. The increase was primarily due to eight non-owner occupied rental-property loans to one borrower totaling $586,000. Management believes all nonperforming loans are adequately collateralized; however, there can be no assurance that the allowance for loan losses 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.

15

Greenville Federal Financial Corporation
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Other Income

Other income totaled $206,000 for the three months ended March 31, 2008, an increase of $16,000, or 8.4%, compared to the same quarter in 2007. This increase was due primarily to an increase in customer service charges of $12,000, or 9.2%.

General, Administrative and Other Expense

General, administrative and other expense totaled $1.0 million for the three months ended March 31, 2008, an increase of $51,000, or 5.3%, compared to the same quarter in 2007. The increase in general, administrative and other expense was due primarily to a $39,000, or 26.0%, increase in other operating expense, and a $21,000, or 17.5%, increase in data processing expense, which were partially offset by an $8,000, or 1.5%, decrease in employee compensation and benefits expense. The increase in other operating expense was due primarily to recording a provision for loss on disposition of real estate owned of $22,000 and a $14,000 increase in professional fees expense. The increase in data processing expense was due primarily to an increase in the volume of accounts and pro-rata increases. The decrease in employee compensation and benefits expense was due primarily to a decrease in education expense as a result of seminars attended in the 2007 period and a decrease in compensation expense as a result of staffing turnover year to year, which were substantially offset by the increase attributable to stock benefit plan expense.

Federal Income Taxes

The provision for federal income taxes totaled $51,000 for the three months ended March 31, 2008, a decrease of $7,000, or 12.1%, compared to the same quarter in 2007. The decrease resulted primarily from a $17,000, or 8.3%, decrease in pre-tax earnings year to year. The effective tax rate was 27.3% for the three months ended March 31, 2008, compared to 28.4% for the three months ended March 31, 2007. The effective tax rate in both fiscal quarters was less than the statutory tax rate of 34% due primarily to the non-taxable earnings on bank-owned life insurance.

Comparison of Operating Results for the Nine-Month Periods Ended March 31, 2008 and 2007

General

The Corporation recorded net income of $465,000 for the nine months ended March 31, 2008, an increase of $30,000, or 6.9%, compared to net income of $435,000 for the same period in 2007. The increase was due primarily to an increase in net interest income after provision for losses on loans of $75,000 and an increase of $64,000 in other income, which were partially offset by a $98,000 increase in general, administrative and other expense and an $11,000 increase in federal income taxes.

16

Greenville Federal Financial Corporation
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Net Interest Income

Interest income totaled $5.7 million for the nine months ended March 31, 2008, an increase of $73,000, or 1.3%, compared to the nine months ended March 31, 2007. Interest income on loans increased by $205,000, or 4.7%, due primarily to a $3.5 million increase in the average balance of loans outstanding, and an increase in the weighted-average yield on loans to 6.82% in the 2008 nine-month period from 6.80% in the 2007 nine-month period. Interest income on investment securities decreased by $119,000, or 11.7%, due primarily to a $5.6 million decrease in the average balance outstanding, partially offset by an increase in the weighted-average yield on such securities from 4.32% in the 2007 nine-month period to 4.63% in the 2008 nine-month period. The increase in yields was due primarily to an overall increase in interest rates in the economy in the first six months of the nine-month period partially offset by a decrease in interest rates in the economy in the last three months of the nine-month period. The increase in loans receivable was comprised primarily of growth in one- to four-family residential real estate loans and one- to four-family construction loans.

Interest expense totaled $2.7 million for the nine months ended March 31, 2008, an increase of $11,000, or 0.4%, compared to the nine months ended March 31, 2007. This increase was a result of an increase in the weighted-average cost of funds to 3.59% for the nine months ended March 31, 2008, from 3.49% for the nine months ended March 31, 2007, which was partially offset by a $2.7 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 $62,000, or 2.1%, compared to the same period in 2007. The interest rate spread increased to 2.69% for the nine months ended March 31, 2008, compared to 2.63% for the nine months ended March 31, 2007. The net interest margin increased to 3.29% for the nine months ended March 31, 2008, from 3.18% for the nine months ended March 31, 2007.

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 did not record a provision for losses on loans for the nine months ended March 31, 2008, compared to $13,000 for the nine months ended March 31, 2007. The allowance for loan losses totaled $548,000 at March 31, 2008, compared to $579,000 at June 30, 2007. Greenville Federal’s nonperforming loans, consisting of loans 90 days or more past due and nonaccrual loans, totaled $1.2 million at March 31, 2008, an increase of $685,000 compared to June 30, 2007. The increase was primarily due to eight non-owner occupied rental-property loans to one borrower totaling $586,000. Management believes all nonperforming loans are adequately collateralized; however, there can be no assurance that the allowance for loan losses 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.

17

Greenville Federal Financial Corporation
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

Other Income

Other income totaled $651,000 for the nine months ended March 31, 2008, an increase of $64,000, or 10.9%, compared to the same period in 2007. This increase was due primarily to an increase in customer service charges of $49,000, or 12.0%, and an increase in other operating income of $14,000, or 7.8%. The increase in other operating income was due primarily to an $11,000 increase in debit card fee income and a $7,000 increase in bank owned life insurance, partially offset by a $7,000 decrease in rental income from real estate owned.

General, Administrative and Other Expense

General, administrative and other expense totaled $3.0 million for the nine months ended March 31, 2008, an increase of $98,000, or 3.4%, compared to the same period in 2007. The increase in general, administrative and other expense was due primarily to a $57,000, or 16.8%, increase in data processing expense, a $21,000, or 4.3%, increase in other operating expense, a $19,000, or 1.2%, increase in employee compensation and benefits, and a $14,000, or 9.2%, increase in franchise taxes, which were partially offset by a $13,000, or 4.4%, decrease in occupancy and equipment expense. The increase in employee compensation and benefits was due primarily to expense recognized for stock benefit plans, comprised of $17,000 for stock options granted and $38,000 for restricted stock awards, which were partially offset by an $18,000 decrease in education expense, an $8,000 decrease in employee stock ownership plan expense, a $6,000 decrease in group medical insurance, and a $4,000 decrease in benefit administrative expenses. The stock awards were made on June 29, 2007 and January 25, 2008, so there was no such expense for the nine months ended March 31, 2007. The increase in franchise taxes was due to the increase in the Corporation’s shareholders’ equity due to the mutual holding company formation and the stock offering. Franchise taxes for 2007 were calculated on the equity base prior to the conversion.

Federal Income Taxes

The provision for federal income taxes totaled $181,000 for the nine months ended March 31, 2008, an increase of $11,000, or 6.5%, compared to the same period in 2007. The increase resulted primarily from a $41,000, or 6.8%, increase in pre-tax earnings year to year. The effective tax rate was 28.0% for the nine months ended March 31, 2008, compared to 28.1% for the nine months ended March 31, 2007. The effective tax rate in both fiscal periods was less than the statutory tax rate of 34% due primarily to the non-taxable earnings on bank-owned life insurance.

18

Greenville Federal Financial Corporation
Management’s Discussion and Analysis of Financial Condition
and Results of Operations

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4T. 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 March 31, 2008, and have concluded that the disclosure controls and procedures in place at March 31, 2008, were effective.

There were no changes in the Corporation’s internal control over financial reporting that occurred during the quarter ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

19

Greenville Federal Financial Corporation

PART II — OTHER INFORMATION (CONTINUED)

ITEM 1. Legal Proceedings

Not applicable

ITEM 1A. Risk Factors

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

20

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: May 14, 2008	By:	/s/ David M. Kepler
		David M. Kepler
		President and Chief Executive Officer
Date: May 14, 2008	By:	/s/ Susan J. Allread
		Susan J. Allread
		Chief Financial Officer

21

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, 2006)
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, 2006)
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