GVFF Greenville Federal Financial Corp (PK)

Greenville Federal Financial Corporation

2009 Annual Report

Greenville Federal Financial Corporation
June 30, 2009 and 2008

Contents

Letter from the President and Chief Executive Officer			1
Business of Greenville Federal Financial Corporation			3
Selected Financial and Other Data			4
Management’s Discussion and Analysis of Financial Condition and Results of Operations			6
Financial Statements
Report of Independent Registered Public Accounting Firm			22
Consolidated Balance Sheets			23
Consolidated Statements of Operations			24
Consolidated Statements of Comprehensive Income			25
Consolidated Statements of Stockholders’ Equity			26
Consolidated Statements of Cash Flows			27
Notes to Consolidated Financial Statements			29
Management’s Report On Internal Controls			58
Directors and Officers			59
Investor and Corporate Information			60
Office Locations			61

Letter from the President and Chief Executive Officer

Dear Fellow Shareholders and Friends:

The 2009 Annual Report of Greenville Federal Financial Corporation reflects a year of challenge and transition for our company. We recorded a net loss of $3.2 million, compared to a loss of $923,000 in 2008. The increased loss was primarily attributable to a $3.3 million non-cash impairment charge on investment securities. Excluding this charge, Greenville Federal recorded net income of $176,000. Our net interest margin improved 46 basis points compared to 2008. In these unprecedented financial times, 2009 was a challenging year for most financial institutions, and we were not immune to many of these same challenges. The counties we serve experienced declining real estate values and increasing delinquency rates. We continue to monitor our loan portfolio as nonperforming loans increased $87,000 compared to 2008, yet remain manageable at 0.9% of total loans. Our prudent underwriting has enabled Greenville Federal to avoid significant increases in loan loss provisions, unlike other banks. Our core lending product is mortgage loans secured by single family homes, and we experienced an increase of $2.6 million in that loan category in 2009 even in a tough real estate market. Although the banking industry will continue to face pressure on interest rate margins, earnings and loan quality and be challenged to operate more efficiently, I am confident our company is moving in the right direction with great opportunities ahead of us.

I joined Greenville Federal in May as your new President and Chief Executive Officer with excitement and eagerness to build upon the tradition that has been established over 126 years. Prior to accepting the offer to become President and CEO, my research revealed a strong community-focused bank with loyal customers and hard-working employees and directors who are committed to the company’s success. The opportunity to be a part of such a proud community and to reclaim Greenville Federal’s positive performance history was a dynamic draw for me and my family.

In working to reclaim our positive financial performance, we have experienced progress towards improving our earnings, efficiency and customer service these past four months. This is a time for new beginnings and realizing the full potential of Greenville Federal, and we are working hard to make that a reality. To accomplish this we are also improving our products, processes and training to provide our teammates with the best possible tools for their success. Improving our processes, implementing sales and service standards, providing additional training and accepting personal accountability will be the platform for future growth and improved efficiency for our company.

As stated above, these are unprecedented times in the banking industry and despite the economic turmoil and credit concerns, Greenville Federal’s capital qualifies it to be deemed “well capitalized” by the Office of Thrift Supervision (the “OTS”). The bank’s core capital ratio, 8.6%, was more than double the OTS minimum requirement of 4%. The bank’s risk-based capital ratio was 13.8%, compared to the OTS minimum requirement of 8%, and our tangible capital ratio was 8.6%, compared to the OTS minimum requirement of 1.5%. As these key ratios indicate, Greenville Federal is financially sound and a safe and secure place for customers to do business.

Finally, I would like to express appreciation to all of our dedicated employees and directors for their commitment to moving Greenville Federal forward and also for their many hours of community service. From supporting our local schools, non-profits and The Great Darke County Fair to promoting buying from our local stores with our Generation Gold merchant discounts, Greenville Federal is a true community bank. As the oldest bank headquartered in Greenville, we are very proud of our community roots and value our customer relationships. I would also like to acknowledge David Kepler who retired as President and CEO in April. David provided many years of service to our company and was a steady hand, especially during the challenging times of these past few years.

Thank you for continuing to support Greenville Federal, your local community bank. We will work hard to earn your business each and every day.

Sincerely,

Jeff D. Kniese
President and CEO

Greenville Federal Financial Corporation
Business of Greenville Federal Financial Corporation

Greenville Federal Financial Corporation (“GFFC” or the “Corporation”) is a unitary savings and loan holding company chartered under federal law to hold all of the stock of Greenville Federal, a savings bank chartered under the laws of the United States. In January 2006, the Corporation acquired all of the common stock of Greenville Federal upon its conversion from a mutual savings and loan association into a stock savings bank, and the Corporation issued stock to Greenville Federal MHC and subscribers in its initial public offering. Since its formation, the Corporation’s activities have been limited to holding the common stock of Greenville Federal.

Greenville Federal is a savings bank headquartered in Greenville, Ohio. Greenville Federal was originally founded in 1883 as an Ohio chartered mutual savings and loan association and converted to a federal charter in 1942. Greenville Federal operates from its main office and a branch located in a Kroger store, both of which are in Greenville, Ohio.

Greenville Federal’s principal business activity is the origination of mortgage loans secured by one- to four-family residential real estate. Greenville Federal also originates construction loans, loans secured by nonresidential real estate and multi-family real estate, and consumer loans. Greenville Federal offers a variety of deposit accounts, including savings, certificate of deposit and demand accounts.

As a savings and loan holding company, the Corporation is subject to regulation, supervision and examination by the Office of Thrift Supervision of the United States Department of the Treasury (the “OTS”). As a savings bank chartered under the laws of the United States, Greenville Federal is subject to regulation, supervision and examination by the OTS and by the Federal Deposit Insurance Corporation (the “FDIC”), which insures the deposits of Greenville Federal to the maximum extent permitted by law, and is subject to certain requirements of the Board of Governors of the Federal Reserve. Federally chartered savings institutions are required to file periodic reports with the OTS and are subject to periodic examinations by the OTS and the FDIC. The investment and lending authority of savings institutions are prescribed by federal laws and regulations, and such institutions are prohibited from engaging in any activities not permitted by such laws and regulations. Such regulation and supervision primarily is intended for the protection of depositors and borrowers. Greenville Federal is also a member of the Federal Home Loan Bank of Cincinnati, which imposes certain requirements in order for Greenville Federal to borrow money from the Federal Home Loan Bank.

The main offices of both the Corporation and Greenville Federal are located at 690 Wagner Avenue, Greenville, Ohio 45331, and the telephone number for both is (937) 548-4158.

Greenville Federal Financial Corporation
Selected Financial and Other Data

The summary information presented below under “Selected Financial Condition Data,” “Selected Operations Data,” and the “Selected Financial Ratios and Other Data” as of and for each of the two years ended June 30, 2009 and 2008, is derived from our audited consolidated financial statements. The following information is only a summary and you should read it in conjunction with our financial statements and notes beginning on page 22.

		At June 30,
		2009				2008
		(In thousands)
SELECTED FINANCIAL CONDITION DATA:
Total assets		$	119,570			$	126,126
Cash and cash equivalents			4,474				7,220
Investment securities available for sale			11,888				16,157
Investment securities held to maturity			11				2,021
Mortgage-backed securities held to maturity			1,822				1,280
Loans receivable			91,663				89,851
Deposits			72,918				83,697
Advances from the Federal Home Loan Bank			26,903				19,214
Stockholders’ equity			18,614				21,856
Allowance for loan losses			577				583
Nonperforming loans			834				747

		For the year ended June 30,
		2009				2008
		(In thousands, except per share data)
SELECTED OPERATIONS DATA:
Total interest income		$	6,809			$	7,422
Total interest expense			2,511				3,416
Net interest income			4,298				4,006
Provision for loan losses			155				189
Net interest income after provision for loan losses			4,143				3,817
Total other income			843				858
Total general, administrative and other expense			8,175				5,829
Loss before income credits			(3,189	)			(1,154	)
Federal income credits			(36	)			(231	)
Net loss		$	(3,153	)		$	(923	)
Earnings (loss) per share — basic and diluted		$	(1.42	)		$	(0.42	)

Greenville Federal Financial Corporation
Selected Financial and Other Data

		At or for the year ended
		June 30,
		2009				2008
Performance Ratios:
Return on average assets			(2.59	)%			(0.72	)%
Return on average equity			(16.09	)			(4.15	)
Average equity to average assets			16.07				17.47
Equity to assets at the end of the year			15.57				17.33
Interest rate spread 1			3.46				2.80
Net interest margin 2			3.83				3.37
Average interest-earning assets to average interest-bearing liabilities			116.47				119.85
Total general, administrative and other expenses to average total assets 5			3.98				3.15
Efficiency ratio 3 6			94.27				82.43
Dividend payout ratio 4		NA				NA
Asset Quality Ratios:
Nonperforming loans as a percent of total loans			0.90				0.81
Nonperforming assets as a percent of total assets			1.17				1.14
Allowance for loan losses as a percent of total loans			0.62				0.64
Allowance for loan losses as a percent of nonperforming loans			69.18				78.05
Regulatory Capital Ratios:
Tangible capital			8.62				10.56
Core capital			8.62				10.56
Risk-based capital			13.83				16.56
Number of banking offices			2				2

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

This discussion and analysis reflects GFFC’s consolidated financial statements and other relevant statistical data and is intended to enhance your understanding of our financial condition and results of operations. You should read the information in this section in conjunction with our consolidated financial statements and their notes beginning on page 22 of this annual report, and the other statistical data provided in this report. The preparation of financial statements involves the application of accounting policies relevant to our business. Certain of our accounting policies are important to the portrayal of our 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 that could affect these judgments include, without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers.

General

GFFC’s results of operations are dependent primarily on net interest income, which is the difference between the 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 loan losses and service charges and fees collected on our deposit accounts. GFFC’s general, administrative and other expense primarily consists of employee compensation and benefits, occupancy and equipment expense, franchise taxes, data processing expense, other operating expenses and federal income taxes. For 2008 and 2009, general, administrative and other expense also consisted of an other-than-temporary impairment charge on securities. 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.

Forward-looking statements

This annual report contains forward-looking statements, which use words such as “expect,” “intend,” “anticipate,” “plan,” “estimate,” “attempt,” “seek” and “will.” These forward-looking statements discuss the following matters:

	•		our estimates of future income and expenses;
	•		our business plans, prospects and operating strategies;
	•		the quality of our assets, including loans and investments; and
	•		other goals, intentions and expectations.

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

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including the following influences that could cause actual results to differ materially from those contemplated by the forward-looking statements:

	•		general economic conditions, either in our market area or nationally, that are significantly different from what we expect;
	•		increasing foreclosures in our market area;
	•		increasing difficulty in obtaining deposits;
	•		inflation and changes in the interest rate environment that reduce our interest margins or reduce the market value of our assets;
	•		increased competition among financial institutions within our market area;
	•		adverse changes in the securities markets;
	•		changes in consumer spending, borrowing and savings habits;
	•		legislative or regulatory changes that affect our business;
	•		our ability, either due to our resources or outside factors, that affect our success in entering into or growing in new markets and cross-selling in our existing market;
	•		changes in accounting policies and practices, as may be adopted by the governmental agencies that regulate our business and the Financial Accounting Standards Board; and
	•		unexpected costs for compensation and benefits.

Because of these and possible other uncertainties that we do not foresee, actual future results may differ materially from the results indicated by the forward-looking statements contained in this report.

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. Greenville Federal considers its accounting for the allowance for loan losses and mortgage servicing rights to involve critical accounting policies.

The allowance for loan losses is the estimated amount considered necessary to cover credit losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, 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 us.

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

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 underlying collateral, the financial strength of individual borrowers, 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.

The analysis has two components, specific allocations and general allocations. Specific allocations are made for loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. Management also analyzes 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 reserves established which could have a material negative effect on financial results.

Mortgage servicing rights are recognized as separate assets when loans are sold with servicing retained. Mortgage servicing rights are subject to an impairment assessment based upon fair value estimates. A pooling methodology is applied for valuation purposes, in which loans supporting mortgage servicing rights and with similar characteristics are “pooled” together. Once pooled, each grouping of loans supporting the mortgage servicing rights is evaluated on a discounted earnings basis to determine the present value of future earnings that a purchaser could expect to realize from the portfolio. Earnings are projected from a variety of sources, including loan service fees, interest earned on float, net interest earned on escrow balances, miscellaneous income and costs to service the loans. The present value of future earnings is the estimated market value for the pool, calculated using consensus assumptions that a third-party purchaser would utilize in evaluating a potential acquisition of the servicing rights. Events that may significantly affect the estimates used are changes in interest rates and the related impact on mortgage loan prepayment speeds and the payment performance of the underlying loans. Based on the assumptions discussed, pre-tax projections are prepared for each pool of loans serviced by a third-party provider. These earning figures approximate the cash flow that could be received from the servicing portfolio. Management reviews the valuation information, and mortgage servicing rights are carried at the lower of amortized cost or fair value.

Comparison of financial condition at June 30, 2009 and June 30, 2008

At June 30, 2009, Greenville Federal had total assets of $119.6 million, a decrease of $6.6 million, or 5.2%, compared to the $126.1 million total at June 30, 2008. The decrease in total assets was due primarily to the decline in the fair value of investment securities designated as available for sale and maturing investment securities, partially offset by an increase in loans receivable.

Cash and cash equivalents, consisting of cash and due from banks and interest-bearing deposits in other financial institutions, totaled $4.5 million at June 30, 2009, a decrease of $2.7 million, or 38.0%, from June 30, 2008. Investment securities totaled $11.9 million at June 30, 2009, a decrease of $6.3 million, or 34.5%, from the $18.2 million total at June 30, 2008.

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

The decrease in investment securities was due primarily to a $3.3 million other-than-temporary impairment charge on equity securities and $2.0 million of U. S. Government sponsored entity obligations maturing during the year ended June 30, 2009.

Mortgage-backed securities totaled $1.8 million at June 30, 2009, an increase of $542,000, or 42.3%, from the $1.3 million total at June 30, 2008, due primarily to the purchase of a Gennie Mae mortgage-backed security, partially offset by principal repayments during the period. Loans receivable totaled $91.7 million at June 30, 2009, an increase of $1.8 million, or 2.0%, over June 30, 2008. The increase resulted primarily from loan disbursements of $15.2 million, which were partially offset by principal repayments of $13.0 million and loans transferred into real estate owned of $378,000. At June 30, 2009, the loan portfolio, before net items, was comprised of $82.4 million of residential real estate loans, 95.4% of which were loans secured by one- to four-family residential real estate, $5.8 million of loans secured by nonresidential real estate, $2.3 million of commercial loans and $2.7 million in consumer loans. During fiscal 2009, Greenville Federal increased its portfolio of residential real estate loans by $2.6 million, or 3.3%. However, its portfolio of commercial loans decreased by $609,000, or 21.2%. Management would like to increase nonresidential, consumer and commercial lending as a means to diversify the portfolio and to obtain an increase in yield. While these loan types generally entail a greater degree of risk than one- to four-family residential loans, management believes such loans have been conservatively underwritten. The majority of these loans have been made to existing customers. While Greenville Federal did not realize increases in nonresidential, consumer and commercial loans during the year ended June 30, 2009, management intends to pursue a limited rate of growth over the next year in these loans, but is committed to retaining its historical focus on one- to four-family residential lending.

At June 30, 2009, the allowance for loan losses totaled $577,000, or 0.62% of total loans, compared to $583,000, or 0.64% of total loans, at June 30, 2008. Nonperforming loans totaled $834,000 at June 30, 2009, compared to $747,000 at June 30, 2008. At June 30, 2009, non-performing loans were comprised primarily of one- to four-family loans. The allowance for loan losses totaled 69.2% and 78.1% of nonperforming loans at June 30, 2009 and 2008, 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.

Greenville Federal’s analysis of the allowance for loan losses as of and for the year ended June 30, 2009, included recognition of the increasing level of foreclosure actions filed in Greenville Federal’s lending area over the past year. 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 June 30, 2009. Although management believes that its 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.

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

Deposits totaled $72.9 million at June 30, 2009, a decrease of $10.8 million, or 12.9%, from the $83.7 million total at June 30, 2008. The decrease resulted primarily from a decrease in short-term certificates of deposit during the period. 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 decreased by $12.0 million to a total of $1.0 million at June 30, 2009, compared to $13.0 million at June 30, 2008. Greenville Federal also participates in a bidding process for local short-term public funds. Such short-term deposits from the City of Greenville totaled $500,000 at June 30, 2009.

Although management generally strives to maintain a moderate rate of growth in deposits, primarily through consistent marketing and pricing strategies, Greenville Federal historically has not engaged in short-term, promotional increases in interest rates on deposits, nor has it generally offered the highest interest rate on deposit products in its market area. During a period of low interest rates on loans, it has been difficult for many financial institutions to attract deposits at interest rates low enough to maintain an acceptable interest rate spread. Greenville Federal intends to continue to search for creative ways to attract deposits without paying excessive interest rates.

Advances from the Federal Home Loan Bank amounted to $26.9 million at June 30, 2009, an increase of $7.7 million, or 40.0%, compared to June 30, 2008. The increase in advances was primarily the result of low interest rates offered on advances by the Federal Home Loan Bank. During the fiscal year ended June 30, 2009, funds from advances were a more affordable option than the above mentioned short-term public deposits. The advances taken had maturities between five and ten years with rates ranging from 2.77% to 3.63%.

Stockholders’ equity totaled $18.6 million at June 30, 2009, a decrease of $6.6, or 5.2%, from June 30, 2008. The decrease resulted from a net loss of $3.2 million for the fiscal year ended June 30, 2009, and dividends paid on common stock of $272,000, which were partially offset by the effects of amortization of ESOP expense of $47,000, stock benefit plan expense of $73,000, and a $67,000 increase in the unrealized gains on securities designated as available for sale. Greenville Federal is required to maintain minimum regulatory capital pursuant to federal regulations. At June 30, 2009, Greenville Federal’s regulatory capital continued to exceed all minimum regulatory capital requirements and met the requirements for Greenville Federal to be deemed well capitalized.

Comparison of results of operations for the fiscal years ended June 30, 2009 and June 30, 2008

General. Greenville Federal recorded a net loss of $3.2 million for the fiscal year ended June 30, 2009, compared to a net loss of $923,000 recorded for the fiscal year ended June 30, 2008. The decline in net income was primarily attributable to a $3.3 million non-cash impairment charge on investment securities, an increase in other components of general, administrative, and other expense of $845,000, and a $195,000 increase in federal income taxes, which were partially offset by a $292,000 increase in net interest income and a decrease of $34,000 in the provision for losses on loans.

Excluding the $3.3 million, non-cash impairment charge on investment securities, Greenville Federal recorded net income of $176,000.

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

Interest income. Total interest income amounted to $6.8 million for the fiscal year ended June 30, 2009, a decrease of $613,000, or 8.3%, compared to the fiscal year ended June 30, 2008. The decrease in interest income primarily reflects the effect of a decrease in average interest-earning assets outstanding year to year, coupled with a decrease in the weighted-average yield from 6.24% in fiscal 2008 to 6.07% in fiscal 2009.

Interest income on loans decreased by $52,000, or 0.9%, for the fiscal year ended June 30, 2009, compared to fiscal 2008, due primarily to a decrease in the weighted-average yield on loans, to 6.59% for fiscal 2009 from 6.80% for fiscal 2008, partially offset by a $2.0 million, or 2.2%, increase in the average balance outstanding. Interest income on mortgage-backed securities increased by $8,000, or 9.0%, during the fiscal year ended June 30, 2009, due primarily to a $243,000 increase in the average balance outstanding, partially offset by a decrease in the weighted-average yield from 5.99% in fiscal 2008 to 5.61% in fiscal 2009. Interest income on investment securities decreased by $487,000, or 44.4%, during the fiscal year ended June 30, 2009, due primarily to a decrease of $10.3 million, or 42.7%, in the average balance outstanding, along with a decrease in the weighted-average yield from 4.57% in fiscal 2008 to 4.43% in fiscal 2009. All yields decreased due to lower interest rates in the economy during fiscal year 2009.

Interest expense . Interest expense totaled $2.5 million for the fiscal year ended June 30, 2009, a decrease of $905,000, or 26.5%, from interest expense of $3.4 million for fiscal 2008. This decrease resulted from a decrease in the weighted-average cost of funds, to 2.61% for fiscal 2009, compared to 3.44% for fiscal 2008, along with a $2.9 million, or 2.9%, decrease in the average balance of deposits and borrowings outstanding for the fiscal year ended June 30, 2009. Interest expense on deposits totaled $1.6 million for the fiscal year ended June 30, 2009, a decrease of $694,000, or 30.0%, from fiscal 2008. This decrease was a result of a decrease in the weighted-average cost of deposits, to 2.18% for fiscal 2009, compared to 3.06% for fiscal 2008, coupled with a decrease in the average balance of deposits outstanding of $1.2 million, or 1.6%. Interest expense on borrowings totaled $895,000 for the fiscal year ended June 30, 2009, a decrease of $211,000, or 19.1%, from fiscal 2008. This decrease was due to a decrease in the average balance outstanding of $1.7 million, or 7.1%, coupled with a decrease in the weighted-average cost of borrowings from 4.65% to 4.05%. The weighted-average cost of deposits and borrowings decreased due to lower interest rates in the economy during fiscal year 2009.

Net interest income . As a result of the foregoing changes in interest income and interest expense, net interest income increased by $292,000, or 7.3%, during the fiscal year ended June 30, 2009, compared to fiscal 2008. The average interest rate spread increased to 3.46% for the fiscal year ended June 30, 2009, from 2.80% for fiscal 2008. The net interest margin increased to 3.83% for the fiscal year ended June 30, 2009, from 3.37% for fiscal 2008.

Provision for loan losses . A provision for loan losses 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 collectability of Greenville Federal’s loan portfolio. Based upon an analysis of these factors, management recorded a provision for loan losses totaling $155,000 for the fiscal year ended June 30, 2009, a decrease of $34,000 compared to fiscal 2008. The provision recorded during the fiscal year ended June 30, 2009, generally reflects management’s perception of the risk prevalent in the economy integrated with the overall increase in the level of the loan portfolio and the decrease in charge-offs due to foreclosures or accepting deeds in lieu of foreclosure recorded in fiscal 2009. 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.

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

Other income . Other income totaled $843,000 for the fiscal year ended June 30, 2009, a decrease of $15,000, or 1.7%, compared to other income of $858,000 recorded for the fiscal year ended June 30, 2008. The decrease was primarily attributable to a decrease of $24,000, or 4.0%, in customer service charges, which were partially offset by an increase of $7,000, or 700.0%, from gain on sale of real estate owned, and an increase of $2,000, or 0.8%, in other operating income. The decrease in customer service charges was a result of customers not allowing their checking accounts to be overdrawn. Greenville Federal has not experienced material changes in the volume of real estate owned during fiscal year 2009. The property values are reevaluated from time to time and adjusted based on the appraisal findings. The ability to sell the properties has remained similar to trends from previous years.

General, administrative and other expense . General, administrative and other expense, net of the $3.3 million non-cash impairment charge on investment securities, totaled $4.8 million for the fiscal year ended June 30, 2009, an increase of $837,000, or 20.9%, compared to fiscal 2008. The increase in general, administrative and other expense was due primarily to a $425,000, or 62.1%, increase in other operating expense, a $334,000, or 16.0%, increase in employee compensation and benefits, a $180,000, or 580.6%, increase in provision for loss on real estate acquired through foreclosure, and a $57,000, or 15.1% increase in occupancy and equipment expense, which were partially offset by a $133,000 or 24.6%, decrease in data processing expense, and a $25,000, or 11.6%, decrease in franchise taxes. The increase in other operating expense was due primarily to a $193,000 increase in professional fees expense, mostly related to the Corporation’s search for a new President and Chief Executive Officer; a $127,000 increase in FDIC insurance premiums due primarily to a special assessment imposed on all insured financial institutions; and a $38,000 increase for repairs on real estate acquired through foreclosure or deed in lieu of foreclosure. Additional FDIC special assessments or increases are possible in the future. The increase in employee compensation and benefits was primarily attributable to an increase in employee compensation due to regular merit increases, final payments for sick and vacation time for past employees, and a $10,000 sign-on bonus for the new Chief Executive Officer. Accrued compensation also contributed to the increase, along with an increase in group medical insurance. The increase in occupancy and equipment expense was due primarily to a computer and server equipment upgrade that was implemented during fiscal 2009. The decrease in data processing expense was primarily attributable to a decrease in the rate structure from the data processor during the year. The decrease in franchise taxes is due to the decreased size of our capital from year to year.

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

The non-cash impairment charge on investment securities resulted from an investment by the Corporation’s subsidiary, Greenville Federal, in the AMF Ultra Short Mortgage Fund (the “Fund”). Rating agency downgrades of the underlying mortgage-related securities held in the Fund had significantly decreased the net asset value of the Fund. In May 2008, the manager of the Fund informed Greenville Federal that the “redemption in kind” feature of the Fund had been activated, meaning that any investor in the Fund wanting to redeem its investment in the Fund would receive payment mostly in the form of the securities held in the Fund’s portfolio in the amount of its representative interest in the securities held by the Fund, rather than in the form of cash. It is the policy of the Fund to pay cash in an amount not to exceed $250,000 over a ninety-day period to each investor requesting redemption. In light of the continuing decline in the fair value of the Fund, the securities downgrades and the activation of the redemption in kind feature, the Board of Directors of Greenville Federal determined that the impairment in the value of the Fund was other-than-temporary, requiring the expensing of the impairment charge.

At June 30, 2009, after several quarterly non-cash impairment charges, GFFC recorded the value of Greenville Federal’s investment in the Fund as $11.9 million. During the final quarter of fiscal year 2009, the value of the Fund began to increase slowly. As of September 18 , 2009, the net asset value of Greenville Federal’s percentage of the Fund had increased to approximately $12.0 million. Since July 2008, Greenville Federal has redeemed $1.3 million in cash from the Fund.

GFFC can provide no assurance with respect to the future net asset value of the Fund nor whether Greenville Federal will record further non-cash impairment charges if management determines that any declines in the net asset value of the Fund after June 30, 2009, are other-than-temporary. Although Greenville Federal expects to make additional cash redemptions as permitted, no assurance can be provided that it will continue to do so as such a decision will depend upon management’s analysis of the Fund and its condition from time to time.

Federal income taxes . Greenville Federal recorded a federal income tax credit provision of $36,000 for the fiscal year ended June 30, 2009, compared to a $231,000 provision recorded for fiscal 2008. The difference resulted primarily from not receiving any tax related benefits during fiscal 2009 relating to the additional $1.5 million non-cash impairment charge recorded for the Fund. The effective tax credit was 1.1% and 20.0% for the fiscal years ended June 30, 2009 and 2008, respectively, which reflected the effects of nontaxable income.

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

Average balance sheets

The following table presents certain of GFFC’s average balance sheet information and reflects the average yield on interest-earning assets and the average cost of customer deposits and Federal Home Loan Bank of Cincinnati advances for the fiscal years ended June 30, 2009 and 2008. Such yields and costs are derived by dividing annual income or expense by the average monthly balance of interest-earning assets or interest-bearing liabilities, respectively, for the years presented. Average balances are derived from daily balances, net of the allowance for loan losses.

						2009												2008
						Interest												Interest
		Average				income/				Yield/				Average				income/				Yield/
		balances				expense				rates				balances				expense				rates
		(Dollars in thousands)
Loans receivable 1		$	90,729			$	5,983				6.59	%		$	88,761			$	6,034				6.80	%
Mortgage-backed securities			1,729				97				5.63				1,485				89				5.99
Investment securities			13,778				611				4.44				24,032				1,098				4.57
Other interest-bearing deposits			5,933				118				2.00				4,594				201				4.38
Total interest-earning assets			112,169				6,809				6.07				118,872				7,422				6.24
Non-interest-earning assets			9,794												8,516
Total assets		$	121,963											$	127,388
Interest-bearing deposits:
Interest-bearing demand deposits		$	4,680				19				0.40			$	4,459				25				0.56
Savings deposits			20,971				164				0.74				19,379				215				1.11
Time deposits			48,567				1,433				2.95				51,567				2,070				4.01
Total interest-bearing deposits			74,218				1,616				2.14				75,405				2,310				3.06
Borrowings			22,092				895				4.05				23,781				1,106				4.65
Total interest-bearing liabilities			96,310				2,511				2.61				99,186				3,416				3.44
Non-interest-bearing demand deposits			4,792												4,420
Non-interest-bearing liabilities			1,263												1,525
Total liabilities			6,055												105,131
Stockholders’ equity			19,598												22,257
Total liabilities and stockholders’ equity		$	121,963											$	127,388
Net interest income						$	4,298											$	4,006
Interest rate spread											3.46	%											2.80	%
Net interest margin (net interest income as a percent of average interest-earning assets)											3.83	%											3.37	%
Average interest-earning assets to average interest- bearing liabilities											116.47	%											119.85	%

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

Yields earned and rates paid

The following table sets forth, for the years and at the date indicated, the weighted-average yields earned on GFFC’s interest-earning assets, the weighted-average interest rates paid on interest-bearing liabilities, the interest rate spread and the net interest margin on interest-earning assets. Such yields and costs are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the years presented.

		At June 30,				Year ended June 30,
		2009				2009				2008
Weighted-average yield on loan portfolio 1			6.21	%			6.59	%			6.80	%
Weighted-average yield on mortgage-backed securities			5.40				5.63				5.99
Weighted-average yield on investment securities			4.20				4.44				4.57
Weighted-average yield on interest-bearing deposits			1.97				2.00				4.38
Weighted-average yield on all interest-earning assets			5.81				6.07				6.24
Weighted-average interest rate on deposits			1.77				2.14				3.06
Weighted-average interest rate on Federal Home Loan Bank advances			3.83				4.05				4.65
Weighted-average interest rate paid on all interest-bearing liabilities			2.31				2.61				3.44
Interest rate spread (spread between weighted-average interest rate on all interest-earning assets and all interest-bearing liabilities)			3.49				3.46				2.80
Net interest margin (net interest income as a percentage of average interest-earning assets)		NA					3.83				3.37

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

The following table describes the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities have affected GFFC’s interest income and expense during the years indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (change in volume multiplied by prior year rate), (ii) changes in rate (change in rate multiplied by prior year volume) and (iii) total changes in rate and volume. The combined effects of changes in both volume and rate, which cannot be separately identified, have been allocated proportionately to the change due to volume and the change due to rate.

		Year ended June 30,
		2009 vs. 2008
		Increase
		(decrease)
		due to
		Volume				Rate				Total
		(In thousands)
Interest income attributable to:
Loans receivable		$	132			$	(184	)		$	(52	)
Mortgage-backed securities			14				(6	)			8
Investment securities			(455	)			(33	)			(488	)
Interest-earning deposits			48				(129	)			(81	)
Total interest income			(261	)			(352	)			(613	)
Interest expense attributable to:
Demand deposits			1				(7	)			(6	)
Savings deposits			16				(68	)			(52	)
Time deposits			(115	)			(521	)			(636	)
Federal Home Loan Bank advances			(75	)			(136	)			(211	)
Total interest expense			(173	)			(732	)			(905	)
Increase (decrease) in net interest income		$	(88	)		$	380			$	292

Asset and liability management

Greenville Federal, like other financial institutions, is subject to interest rate risk to the extent that our interest-earning assets reprice differently than our interest-bearing liabilities. As part of its effort to monitor and manage interest rate risk, Greenville Federal uses the net portfolio value (“NPV”) methodology adopted by the Office of Thrift Supervision.

Generally, NPV is the discounted present value of the difference between incoming cash flows on interest-earning and other assets and outgoing cash flows on interest-bearing and other liabilities. The application of the methodology attempts to quantify interest rate risk as the change in the NPV that would result from a theoretical change in market interest rates. Both increases and decreases in market interest rates are considered.

Presented below, as of June 30, 2009 and 2008, is an analysis of Greenville Federal’s interest rate risk as measured by changes in NPV for instantaneous and sustained parallel shifts in market interest rates.

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

As illustrated in the tables, Greenville Federal’s NPV is more sensitive to rising rates than declining rates. Differences in sensitivity occur principally because, as rates rise, borrowers do not prepay fixed-rate loans as quickly as they do when interest rates are declining. As a result, in a rising interest rate environment, the amount of interest Greenville Federal would receive on its loans would increase relatively slowly as loans are slowly repaid and new loans at higher rates are made. Moreover, the interest Greenville Federal would pay on deposits would increase because deposits generally have shorter periods to repricing. A possible flow of funds away from savings institutions into direct investments or other investment vehicles, such as mutual funds, which can occur for a number of reasons, may also affect our NPV. Assumptions used in calculating the amounts in this table are Office of Thrift Supervision assumptions.

		June 30, 2009
		Net portfolio value (2)
														Net portfolio value as
						Estimated increase (decrease)								a percentage of
Change in						in NPV								present value of assets (3)
interest rates		Estimated																Change in
(basis points) (1)		NPV				Amount				Percent				NPV ratio (4)				basis points
		(Dollars in thousands)
+300		$	12,150			$	(2,437	)			(17	)%			10.17	%		(140		)bp
+200			13,334				(1,253	)			(9	)			10.93				(64	)
+100			14,202				(386	)			(3	)			11.43				(14	)
0			14,587				—				—				11.57				—
-100			14,282				(305	)			(2	)			11.22				(35	)
-200 (5)

		June 30, 2008
		Net portfolio value (2)
														Net portfolio value as
						Estimated increase (decrease)								a percentage of
Change in						in NPV								present value of assets (3)
interest rates		Estimated																Change in
(basis points) (1)		NPV				Amount				Percent				NPV ratio (4)				basis points
		(Dollars in thousands)
+300		$	14,541			$	(3,933	)			(21	)%			11.58	%		(241		) bp
+200			15,791				(2,683	)			(15	)			12.37				(162	)
+100			17,295				(1,179	)			(6	)			13.31				(68	)
0			18,474				—				—				13.99				—
-100			19,095				621				3				14.29				30
-200 (5)

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

The change in our NPV that would have been caused by the respective interest rate shock was within the policy limits set by the board of directors. The board of directors considers the results of each quarterly analysis and factors the information into its decision in adjusting the pricing of loans and deposits in the future.

As with any method of measuring interest rate risk, certain shortcomings are inherent in the NPV approach. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market rates while interest rates on other types may lag behind changes in market rates. Further, in the event of a change in interest rates, expected rates of prepayment on loans and mortgage-backed securities and early withdrawal levels from certificates of deposit would likely deviate significantly from those assumed in making the risk calculations.

If interest rates rise from the current levels, Greenville Federal’s net interest income will be adversely affected. In order to maintain Greenville Federal’s net interest margin, management is continually developing and modifying Greenville Federal’s strategies to stimulate the demand for quality loans and tailoring the types of loan products available that can be adjusted to match the current market conditions.

Liquidity and capital resources

GFFC’s liquidity, primarily represented by cash and cash equivalents, is a result of its operating, investing and financing activities. These activities are summarized below for the fiscal years ended June 30, 2009 and 2008.

		Year ended June 30,
		2009				2008
		(In thousands)
Net loss		$	(3,153	)		$	(923	)
Adjustments to reconcile net loss to net cash from operating activities			3,407				2,000
Net cash provided by operating activities			254				1,077
Net cash provided by investing activities			358				5,902
Net cash used in financing activities			(3,358	)			(3,286	)
Net increase in cash and cash equivalents			(2,746	)			3,693
Cash and cash equivalents at beginning of year			7,220				3,527
Cash and cash equivalents at end of year		$	4,474			$	7,220

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

GFFC’s principal sources of funds are deposits, loan and mortgage-backed securities repayments, maturities of securities and other funds provided by operations. The Corporation also borrows from the Federal Home Loan Bank of Cincinnati. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan and mortgage-backed security prepayments are more influenced by interest rates, general economic conditions and competition. The Corporation maintains investments in liquid assets based upon management’s assessment of (i) the need for funds, (ii) expected deposit flows, (iii) the yields available on short-term liquid assets and (iv) the objectives of the asset/liability management program. The Corporation historically has not used derivative or hedging instruments, and management currently has no intention of using such instruments in the foreseeable future.

GFFC has announced its intention to conduct a tender offer for its shares. As more fully described in the Schedule TO filed with the Securities and Exchange Commission, as amended, GFFC will pay up to a maximum of $1.5 million for the repurchase of its shares. The repurchase will be funded by cash held on deposit by GFFC at Greenville Federal. GFFC anticipates that Greenville Federal will continue to exceed all regulatory requirements to be deemed well capitalized and to have adequate liquidity following such repurchases. GFFC has no other material commitments or need for capital resources or liquidity, at the holding company level, other than regular quarterly dividends, and it will continue to have substantial cash that can be contributed to Greenville Federal if necessary for Greenville Federal’s capital and liquidity requirements.

Office of Thrift Supervision regulations require Greenville Federal to maintain an average daily balance of liquid assets, which may include, but are not limited to, investments in United States Treasury obligations, federal agency obligations and other investments having maturities of five years or less, in an amount sufficient to provide a source of relatively liquid funds upon which Greenville Federal may rely if necessary to fund deposit withdrawals or other short-term funding needs. Greenville Federal considers its capital reserves sufficient to meet its outstanding short- and long-term needs. Adjustments to liquidity and capital reserves may be necessary, however, if loan demand increases more than expected or if deposits decrease substantially.

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

The following table sets forth information regarding Greenville Federal’s obligations and commitments to make future payments under contract as of June 30, 2009.

		Payments due by period
														More
		1 year or				Over 1-3				Over 3-5				than
		less				years				years				5 years				Total
		(In thousands)
Contractual obligations:
Advances from the Federal Home Loan Bank		$	8,363			$	8,811			$	4,101			$	5,628			$	26,903
Certificate of deposit maturities			23,786				10,024				7,700				11				41,521
Amount of commitments expiration per period:
Commitments to originate one- to four-family loans			1,394				—				—				—				1,394
Letters of credit			35				20				—				—				55
Home equity and commercial lines of credit			2,486				—				—				—				2,486
Undisbursed loans in process			562				—				—				—				562
Lease obligations			52				17				—				—				69
Total contractual obligations		$	36,678			$	18,872			$	11,801			$	5,639			$	72,990

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.

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

The Corporation’s capital supports business growth, provides protection to depositors and represents the investment of stockholders. The Corporation maintains capital commensurate with the overall risk profile of the Corporation and to meet all regulatory guidelines. The Corporation’s stockholders’ equity decreased from $22.3 million at June 30, 2008, to $18.6 million at June 30, 2009, primarily as a result of a $3.2 million net loss for fiscal year 2009. The Corporation’s stockholders’ equity was 15.57% of total assets at June 30, 2009 and 17.33% of total assets at June 30, 2008.

Greenville Federal is required by applicable law to meet certain minimum capital standards. Such capital standards include a tangible capital requirement, a core capital requirement or leverage ratio and a risk-based capital requirement. Greenville Federal exceeded all of its capital requirements at June 30, 2009.

The following table summarizes Greenville Federal’s regulatory capital requirements and actual capital at June 30, 2009:

										June 30, 2009
																		Excess of regulatory
																		capital over current
		Regulatory capital								Current requirement								requirement
		Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Tangible capital		$	10,288				8.6	%		$	1,791				1.5	%		$	8,498				7.1	%
Core capital		$	10,288				8.6	%		$	4,776				4.0	%		$	5,512				4.6	%
Risk-based capital		$	10,813				13.8	%		$	6,257				8.0	%		$	4,556				5.8	%

Impact of Inflation and Changing Prices

The consolidated financial statements and notes included herein have been prepared in accordance with U.S. GAAP. U.S. GAAP requires us to measure financial position and operating results in terms of historical dollars, and changes in the relative value of money due to inflation or recession are generally not considered.

In management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not change at the same rate or in the same magnitude as the inflation rate. Rather, interest rate volatility is based on changes in the expected rate of inflation, as well as on changes in monetary and fiscal policies.

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders
Greenville Federal Financial Corporation
Greenville, Ohio

We have audited the accompanying consolidated balance sheets of Greenville Federal Financial Corporation as of June 30, 2009 and 2008, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the years in the two-year period ended June 30, 2009. The Company’s management is responsible for these financial statements. 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits also included 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 and 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 financial position of Greenville Federal Financial Corporation as of June 30, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2009, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 16 to the financial statements, effective July 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements .

/s/ BKD, LLP

Cincinnati, Ohio
September 28, 2009

Greenville Federal Financial Corporation
Consolidated Balance Sheets
June 30, 2009 and 2008
(In thousands, except share data)

		2009				2008
Assets
Cash and due from banks		$	1,870			$	1,601
Interest-bearing deposits in other financial institutions			2,604				5,619
Cash and cash equivalents			4,474				7,220
Investment securities available for sale — at market			11,888				16,157
Investment securities held to maturity — at amortized cost			11				2,021
Mortgage-backed securities held to maturity — at amortized cost			1,822				1,280
Loans receivable — net of allowance for loans losses of $577 and $583 at June 30, 2009 and 2008, respectively			91,663				89,851
Office premises and equipment — at depreciated cost			1,958				1,907
Real estate acquired through foreclosure			559				687
Stock in Federal Home Loan Bank — at cost			2,003				1,976
Cash surrender value of life insurance			4,151				4,002
Accrued interest receivable			511				549
Deferred federal income taxes			176				157
Prepaid expenses and other assets			354				319
Total assets		$	119,570			$	126,126
Liabilities and Stockholders’ Equity
Deposits		$	72,918			$	83,697
Advances from the Federal Home Loan Bank			26,903				19,214
Advances by borrowers for taxes and insurance			406				398
Accrued interest payable			111				215
Other liabilities			618				691
Accrued federal income taxes			—				55
Total liabilities			100,956				104,270
Commitments and Contingencies			—				—
Common stock — authorized 8,000,000 shares, $.01 par value; 2,298,411 shares issued and 2,297,851 outstanding			23				23
Treasury Stock, at cost, 560 shares			(4	)			—
Additional paid-in capital			9,051				9,021
Retained earnings — restricted			10,018				13,443
Shares acquired by Employee Stock Ownership Plan			(541	)			(631	)
Accumulated comprehensive loss — unrealized losses on securities designated as available for sale			67				—
Total stockholders’ equity			18,614				21,856
Total liabilities and stockholders’ equity		$	119,570			$	126,126

See Notes to Consolidated Financial Statements

Greenville Federal Financial Corporation
Consolidated Statements of Operations
For the years ended June 30, 2009 and 2008
(In thousands, except share data)

		2009				2008
Interest Income
Loans		$	5,982			$	6,034
Mortgage-backed securities			97				89
Investment securities			611				1,098
Interest-bearing deposits and other			119				201
Total interest income			6,809				7,422
Interest Expense
Deposits			1,616				2,310
Borrowings			895				1,106
Total interest expense			2,511				3,416
Net Interest Income			4,298				4,006
Provision for Loan Losses			155				189
Net Interest Income After Provision for Loan Losses			4,143				3,817
Other Income
Customer service charges			572				596
Gain (loss) on sale of real estate acquired through foreclosure			6				(1	)
Other operating			265				263
Total other income			843				858
General, Administrative and Other Expense
Employee compensation and benefits			2,426				2,092
Occupancy and equipment			434				377
Franchise taxes			190				215
Data processing			408				541
Advertising			62				69
Loss on sale of investments			6				—
Other operating			1,109				684
Impairment charge on investment securities			3,329				1,820
Provision for loss on real estate acquired through foreclosure			211				31
Total general, administrative and other expense			8,175				5,829
Loss Before Federal Income Taxes (Credits)			(3,189	)			(1,154	)
Federal Income Taxes (Credits)
Current			(36	)			48
Deferred			—				(279	)
Total federal income tax credits			(36	)			(231	)
Net Loss		$	(3,153	)		$	(923	)
Loss Per Share — Basic and Diluted		$	(1.42	)		$	(0.42	)

See Notes to Consolidated Financial Statements

Greenville Federal Financial Corporation
Consolidated Statements of Comprehensive Income (Loss)
For the years ended June 30, 2009 and 2008
(In thousands)

		2009				2008
Net Loss		$	(3,153	)		$	(923	)
Other Comprehensive (Loss) Gain, Net of Related Tax Benefits:
Unrealized holding gains on securities during the year			61				—
Reclassification adjustment for realized loss on securities			6				—
Reclassification of impairment charge included in net loss, net of taxes of $175 for the year ended June 30, 2008			—				339
Comprehensive Loss		$	(3.086	)		$	(584	)
Accumulated Comprehensive Gain		$	67			$	—

See Notes to Consolidated Financial Statements

Greenville Federal Financial Corporation
Consolidated Statements of Stockholders’ Equity
For the years ended June 30, 2009 and 2008
(In thousands, except share data)

																						Unrealized
																		Shares				Gains
																		Acquired				(Losses) on
																		by Employee				Securities
										Additional								Stock				Designated
		Common				Treasury				Paid-in				Retained				Ownership				as Available
		Stock				Shares				Capital				Earnings				Plan				for Sale				Total
Balance, July 1, 2007		$	23			$	—			$	9,145			$	14,636			$	(721	)		$	(339	)		$	22,744
Impairment losses recognized on securities designated as available for sale, net of related taxes			—				—				—				—				—				339				339
Net loss for the year ended June 30, 2008			—				—				—				(923	)			—				—				(923	)
Cash dividends paid of $.28 per share			—				—				—				(270	)			—				—				(270	)
Amortization of ESOP expense			—				—				(13	)			—				90				—				77
Expense recognized for 2006 equity plan trust			—				—				74				—				—				—				74
Shares acquired by 2006 equity plan trust			—				—				(185	)			—				—				—				(185	)
Balance, June 30, 2008			23				—				9,021				13,443				(631	)			—				21,856
Unrealized gain on securities designated as available for sale, net of related taxes			—				—				—				—				—				67				67
Net loss for the year ended June 30, 2009			—				—				—				(3,153	)			—				—				(3,153	)
Cash dividends paid of $.28 per share			—				—				—				(272	)			—				—				(272	)
Repurchase of ESOP shares, now Treasury shares			—				(4	)			—				—				—				—				(4	)
Amortization of ESOP expense			—				—				(43	)			—				90				—				47
Expense recognized for 2006 equity plan trust			—				—				73				—				—				—				73
Balance, June 30, 2009		$	23			$	(4	)		$	9051			$	10,018			$	(541	)		$	67			$	18,614