UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 25049

                                    FORM 10-Q

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

    For the quarterly period ended    June 30, 1997
                                    --------------------------------------------

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

   For the transition period from                           to
                                  -------------------------    -----------------

                         Commission File Number 0-27620
                                                -------

                           Green Street Financial Corp
                           ---------------------------
             (Exact name of registrant as specified in its charter)

         North Carolina                              56-1951478
         --------------                              ----------
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

                                241 Green Street
                     Fayetteville, North Carolina 28301-5051
                     ---------------------------------------
               (Address of principal executive office) (Zip code)

                                 (910)-483-3681
                                 --------------
                         (Registrant's telephone number)

                                       N/A
                                       ---
              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check X whether the registrant (1) has filed all reports required to
be filed by  Section  13 or 15(d) of the  Securities  and  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes   X      No
                                        ---        ---

As of August 5, 1997 there were issued and outstanding  4,298,125  shares of the
Registrant's common stock, no par value.

<PAGE>

                   Green Street Financial Corp and Subsidiary

                                    CONTENTS



PART I - FINANCIAL INFORMATION                                             Pages
                                                                           -----

      Item 1.  Condensed Consolidated Financial Statements
        Statements of financial condition at September 30, 1996 and
        June 30, 1997 (Unaudited)                                           1-2

        Unaudited Statements of income for the three months ended 
        June 30, 1996 and 1997                                                3

        Unaudited Statements of income for the nine months ended
        June 30, 1996 and 1997                                                4

        Unaudited Statements of cash flows for the nine months ended
        June 30, 1996 and 1997                                              5-6

        Notes to consolidated financial statements                          7-8

    Item 2.  Management's Discussion and Analysis of Financial Condition
        and Results of Operations                                          9-12

PART II - OTHER INFORMATION

      Item 1.  Legal Proceedings                                             13
      Item 2.  Changes in Securities                                         13
      Item 3.  Defaults upon Senior Securities                               13
      Item 4.  Submission of Matters to a Vote of Security Holders           13
      Item 5.  Other Information                                             13
      Item 6.  Exhibits and Reports on Form 8-K                              13

      Signatures                                                             14


<PAGE>

GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1996 and June 30, 1997
<TABLE>
<CAPTION>
                                                                              September 30,        June 30,
ASSETS                                                                           1996                1997
-------------------------------------------------------------------------------------------------------------
                                                                                                 (Unaudited)
<S>                                                                          <C>            <C>             
Cash and short-term cash investments:
   Interest-earning                                                          $  333,107,849 $     21,747,685
   Noninterest-earning                                                              249,345          510,515
Federal funds sold                                                                2,124,712        1,710,000
Investment securities:
   Held to maturity , at amortized cost                                          14,999,179       21,000,000
   Nonmarketable equity securities                                                1,170,889        1,170,889
Loans receivable, net                                                           123,147,779      127,012,357
Accrued interest receivable, investments                                            255,566          453,252
Real estate acquired in settlement of loans                                          34,425                -
Property and equipment, net                                                         330,260          311,798
Prepaid expenses and other assets                                                   675,084          688,060
Deferred tax assets                                                                 122,000                -
                                                                           ----------------------------------






                                                                           ----------------------------------
              Total Assets                                                 $    176,217,088 $    174,604,556
                                                                           ==================================
</TABLE>

See Notes to Consolidated Financial Statements.


                                       1
<PAGE>

<TABLE>
<CAPTION>
                                                                              September 30,       June 30,
                                                                                  1996              1997
LIABILITIES AND STOCKHOLDERS' EQUITY                                                          
-------------------------------------------------------------------------------------------------------------
                                                                                                (Unaudited)
<S>                                                                        <C>              <C>             
Liabilities:
   Deposits                                                                $    111,385,386 $    108,429,998
   Advance payments by borrowers for taxes and insurance                            179,444        1,035,039
   Accrued expenses and other liabilities                                           174,607          701,832
   Special SAIF assessment                                                          792,868
   Dividends payable                                                              1,074,531          472,794
   Deferred compensation                                                            405,233          392,441
   Deferred income taxes                                                                             213,000
   Income taxes payable                                                              25,000           60,650
                                                                           ----------------------------------
              Total liabilities                                                 114,037,069      111,305,754
                                                                           ----------------------------------
Stockholders' equity:
   Preferred stock, no par value, authorized 1,000,000 shares;
      none issued
   Common stock, no par value, authorized 10,000,000 shares;
      issued  4,298,125 shares
   Additional paid-in capital                                                    41,767,226       41,897,031
   Note receivable, ESOP                                                        (2,470,000)      (2,275,000)
   Retained earnings, substantially restricted                                   22,882,793       23,676,771
                                                                           ----------------------------------
              Total  stockholders' equity                                        62,180,019       63,298,802
                                                                           ----------------------------------
              Total liabilities and stockholders' equity                   $    176,217,088 $    174,604,556
                                                                           ==================================
</TABLE>

                                       2
<PAGE>

GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended June 30, 1996 and 1997
<TABLE>
<CAPTION>


                                                                                   1996             1997
------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>             
Interest and dividend income:
   Loans                                                                  $      2,467,129 $      2,545,258
   Short-term cash investments                                                     776,239          393,648
   Investment securities                                                            88,791          308,928
                                                                          ----------------------------------
              Total interest income                                              3,332,159        3,247,834
Interest on deposits                                                             1,430,706        1,316,246
                                                                          ----------------------------------
              Net interest income                                                1,901,453        1,931,588
Provision for loan losses                                                           10,073
                                                                          ----------------------------------
               Net interest income after provision for loan losses               1,891,380        1,931,588
                                                                          ----------------------------------
Noninterest income:
   Service charges and fees                                                         10,413            8,605
   Other                                                                            12,743           11,994
                                                                          ----------------------------------
                                                                                    23,156           20,599
                                                                          ----------------------------------
Noninterest expense:
   Compensation and employee benefits                                              421,497          562,990
   Deposit insurance                                                                84,209           29,899
   Occupancy expenses                                                               37,910           37,378
   Advertising                                                                      26,647           46,453
   Data processing expense                                                          22,298           20,714
   Other                                                                            79,224           84,659
                                                                          ----------------------------------
                                                                                   671,785          782,093
                                                                          ----------------------------------
              Income before income taxes                                         1,242,751        1,170,094
                                                                          ----------------------------------
Income taxes:
   Current                                                                         440,350          436,050
   Deferred                                                                         10,000            6,000
                                                                          ----------------------------------
                                                                                   450,350          442,050
                                                                          ----------------------------------
              Net income                                                  $        792,401 $        728,044
                                                                          ==================================

Earnings per share                                                        $           0.19 $           0.17
                                                                          ==================================
Weighted average shares outstanding                                              4,044,625        4,070,625
                                                                          ==================================
Dividends paid per share                                                  $           0.10 $           0.11
                                                                          ==================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       3
<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended June 30, 1996 and 1997
<TABLE>
<CAPTION>


                                                                                  1996             1997
------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>             
Interest and dividend income:
   Loans                                                                  $      7,392,857 $      7,593,549
   Short-term cash investments                                                   1,679,201        1,423,913
   Investment securities                                                           244,100          691,026
                                                                          ----------------------------------
              Total interest income                                              9,316,158        9,708,488
Interest on deposits                                                             4,866,682        3,995,915
                                                                          ----------------------------------
              Net interest income                                                4,449,476        5,712,573
Provision for loan losses                                                           10,073
                                                                          ----------------------------------
               Net interest income after provision for loan losses               4,439,403        5,712,573
                                                                          ----------------------------------
Noninterest income:
   Service charges and fees                                                         46,377           21,525
   Other                                                                            54,627           59,075
                                                                          ----------------------------------
                                                                                   101,004           80,600
                                                                          ----------------------------------
Noninterest expense:
   Compensation and employee benefits                                            1,117,096        1,705,108
   Deposit insurance                                                               250,695          126,269
   Occupancy expenses                                                              121,269          121,141
   Advertising                                                                     101,597          114,382
   Data processing expense                                                          75,408           69,855
   Other                                                                           216,977          343,481
                                                                          ----------------------------------
                                                                                 1,883,042        2,480,236
                                                                          ----------------------------------
              Income before income taxes                                         2,657,365        3,312,937
                                                                          ----------------------------------
Income taxes:
   Current                                                                         901,703          924,015
   Deferred                                                                         36,000          335,000
                                                                          ----------------------------------
                                                                                   937,703        1,259,015
                                                                          ----------------------------------
              Net income                                                  $      1,719,662 $      2,053,922
                                                                          ==================================

Earnings per share                                                                     N/A $           0.50
                                                                          ==================================
Weighted average shares outstanding                                                    N/A        4,070,625
                                                                          ==================================
Dividends paid per share                                                  $           0.10 $           0.31
                                                                          ==================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       4

<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended June 30, 1996 and 1997
<TABLE>
<CAPTION>


                                                                                                                  
                                                                            1996                    1997
------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>             <C>            
Cash Flows From Operating Activities
   Net income                                                               $     1,719,662 $     2,053,922
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and amortization                                                  32,327          30,679
      Net gain on disposal of real estate acquired
         in settlement of loans                                                    (14,030)        (12,354)
      Increase in deferred income taxes                                              36,000         335,000
      Decrease in deferred compensation                                             (2,180)        (12,792)
      ESOP compensation charged to paid-in capital                                   17,160         129,805
      Changes in assets and liabilities:
        (Increase) decrease in:
           Prepaid expenses and other assets                                         66,340        (49,701)
           Refundable income taxes                                                   12,000          35,650
           Accrued interest receivable                                             (76,583)       (197,686)
        Increase (decrease) in:
           Accrued expenses and other liabilities                                    29,650         527,225
           Accrued SAIF assessment                                                                (792,868)
           Income taxes payable                                                      14,250
                                                                            --------------------------------
              Net cash provided by operating activities                           1,834,596       2,046,880
                                                                            --------------------------------
Cash Flows From Investing Activities
   Net increase in loans receivable                                             (4,549,648)     (3,864,578)
   Proceeds from sale of real estate acquired in settlement of loans                148,622          46,779
   Proceeds from maturities or calls of held to maturity
      investment securities                                                                      12,000,000
   Purchase of held to maturity investment securities                           (3,000,000)    (18,000,000)
   Purchase of property and equipment                                              (16,767)        (13,038)
                                                                            --------------------------------
              Net cash (used in) investing activities                           (7,417,793)     (9,830,837)
                                                                            --------------------------------

</TABLE>

                                       5


<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended June 30, 1996 and 1997
<TABLE>
<CAPTION>


                                                                                               
                                                                                  1996             1997  
------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>             <C>            
Cash Flows From Financing Activities
   Net decrease in deposits                                                 $  (13,360,994) $   (2,955,388)
   Proceeds received from issuance of common stock
      net of stock issuance costs incurred                                       39,126,861
   Principal payment for ESOP debt                                                   65,000         195,000
   Cash dividends paid                                                                          (1,824,956)
   Increase in advance payments by borrowers
       for taxes and insurance                                                      307,812         855,595
                                                                            --------------------------------
              Net cash provided by (used in) financing activities                26,138,679     (3,729,749)
                                                                            --------------------------------
              Net increase (decrease) in cash and cash equivalents               20,555,482    (11,513,706)
Cash and cash equivalents:
   Beginning                                                                     28,648,050      35,481,906
                                                                            --------------------------------
   Ending                                                                   $    49,203,532 $    23,968,200
                                                                            --------------------------------
   Cash and cash equivalents:
      Cash and short-term investments:
        Interest-bearing                                                    $    47,190,012 $    21,747,685
        Noninterest-bearing                                                         612,714         510,515
      Federal funds sold                                                          1,400,806       1,710,000
                                                                            --------------------------------
                                                                            $    49,203,532 $    23,968,200
                                                                            --------------------------------
Supplemental Disclosures of Cash Flow Information
   Cash payments for:
      Interest                                                              $     4,874,154 $     3,994,136
                                                                            --------------------------------
      Income taxes                                                          $       875,453 $       863,543
                                                                            --------------------------------
Dividends declared and accrued                                              $       404,463 $       447,769
                                                                            --------------------------------
Transfer from loans to real estate acquired in settlement of loans          $       175,459 $
                                                                            --------------------------------
Stock issued in exchange for note receivable from ESOP                      $     2,600,000 $
                                                                            --------------------------------
</TABLE>

See Notes to Consolidated Financial Statements.


<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

--------------------------------------------------------------------------------

Note 1. Nature of Business

GreenStreet  Financial Corp (the  "Corporation") was incorporated under the laws
of the State of North  Carolina for the purpose of becoming the savings and loan
holding company of Home Federal Savings and Loan Association (the  "Association"
or "Home  Federal")  in  connection  with the  Association's  conversion  from a
federally chartered mutual savings and loan association to a federally chartered
stock  savings and loan  association,  pursuant to its Plan of  Conversion  (the
"Conversion").  The Corporation was organized in December 1995 to acquire all of
the  common  stock  of Home  Federal  upon  its  conversion  to  stock  form.  A
subscription  offering of the  Corporation's  shares closed on April 3, 1996, at
which time the  Corporation  acquired all of the shares of the  Association  and
commenced operations.

The Corporation has no operations and conducts no business of its own other than
owning Home Federal,  investing its portion of the net proceeds  received in the
Conversion,  and lending funds to the Employee Stock Ownership Plan (the "ESOP")
which was formed in connection  with the Conversion.  The principal  business of
the  Association  is accepting  deposits from the general public and using those
deposits  and other  sources of funds to make loans  secured by real  estate and
other forms of collateral  located in the  Association's  primary market area of
Cumberland and Robeson counties in North Carolina.

Home  Federal's  results of  operations  depend  primarily  on its net  interest
income,  which is the difference  between interest income from  interest-earning
assets and interest expense on interest-bearing  liabilities.  The Association's
operations are also affected by noninterest income, such as miscellaneous income
from loans,  customer  deposit  account  service  charges,  and other sources of
revenue.  The Association's  principal operating  expenses,  aside from interest
expense,  consist of  compensation  and  associated  benefits,  federal  deposit
insurance  premiums,   occupancy  costs,  advertising,  and  other  general  and
administrative expenses.


Note 2. Basis of Presentation

The accompanying  unaudited  consolidated  financial  statements (except for the
statement of financial  condition at September 30, 1996,  which is audited) have
been prepared in accordance with generally  accepted  accounting  principles for
interim financial information and with Regulation S-X. Accordingly,  they do not
include  all  of the  disclosures  required  by  generally  accepted  accounting
principles for complete financial statements. In the opinion of management,  all
adjustments (none of which were other than normal recurring  accruals) necessary
for a fair presentation of the financial  position and results of operations for
the periods  presented  have been  included.  The  financial  statements  of the
Corporation  are presented on a  consolidated  basis with those of Home Federal,
although the  Corporation  did not own any shares of the  Association and had no
assets,  liabilities,  equity or  operations at any date prior to April 3, 1996.
Therefore,  although certain  financial  statements  presented in this Form 10-Q
include periods prior to April 3, 1996, such statements for all periods prior to
April 3, 1996 include only the accounts and operations of Home Federal. EARNINGS
PER SHARE ARE NOT  PRESENTED  FOR THE NINE MONTHS  ENDED June 30, 1996 since the
shares issued under the  Conversion  and offering were not  outstanding  for the
entire  period.  The results of operations  for the three and nine month periods
ended June 30, 1997 are not necessarily  indicative of the results of operations
that may be expected for the year ended September 30, 1997.


                                       7
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

--------------------------------------------------------------------------------


Note 2. Basis of Presentation (Continued)

The  accounting  policies  followed  are as set  forth in Note 1 of the Notes to
Consolidated Financial Statements in the September 30, 1996 annual report of the
Corporation.


Note 3. Dividends Declared

On June 25, 1997, the Board of Directors of the Corporation  declared a dividend
of $ .11 a share for  stockholders  of record as of July 11, 1997 and payable on
July 23,  1997.  The  dividends  declared  are  accrued  in the  June  30,  1997
consolidated  statement of financial condition.  In addition,  on June 25, 1997,
the Board of Directors of Home Federal declared an upstream dividend of $539,964
to Green Street Financial Corp, which was paid on July 23, 1997.


                                       8
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY

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

--------------------------------------------------------------------------------

Comparison  of  Financial  Condition  at June  30,  1997 and September 30, 1996:

Total assets  decreased by $1.6 million to $174.6  million at June 30, 1997 from
$176.2  million at September  30, 1996.  The decrease in assets  during the nine
month  period is  principally  attributable  to a decrease  in  deposits of $3.0
million to $108.4 million at June 30, 1997, from $111.4 million at September 30,
1996. Since its mutual to stock conversion,  the Corporation has elected to fund
its loan  demand  with  liquidity,  rather  than  seeking  additional  deposits.
Investments  and other  short term  interest  earning  assets  amounted to $45.6
million at June 30,  1997,  a decrease  of $5.8  million  from $51.4  million at
September 30, 1996.  Net loans  receivable  increased by $3.9 million during the
nine month period and amounted to $127.0 million at June 30, 1997. Approximately
99% of the  Corporation's  assets were  interest  earning at June 30, 1997,  and
approximately 74% of such interest earning assets were held in the form of loans
receivable.

During the nine months ended June 30,  1997,  the  Association  paid the special
Savings  Association  Insurance  Fund ("SAIF")  assessment of $793,000 which had
been accrued and expensed at September 30, 1996.  The  assessment was imposed by
the  Federal  Deposit  Insurance  Corporation  on  SAIF  insurable  deposits  to
recapitalize the SAIF. The Association had no borrowings  outstanding  during or
at the end of the nine month period ended June 30, 1997,  but has guaranteed the
repayment of the ESOP's note payable to the Corporation  which was originated on
April 3, 1996 inorder for the ESOP to purchase 260,000 shares of common stock in
the Corporation. The Corporation's note receivable from the ESOP, which amounted
to $2.3  million at June 30, 1997 is reported  as a reduction  of  stockholders'
equity.  Retained  earnings  increased by $794,000 to $23.7  million at June 30,
1997, which is attributable to the  Corporation's  consolidated  earnings during
the nine months ended June 30, 1997, less dividends  accrued and paid during the
nine month period.

At June 30,  1997,  the  Corporation's  stockholders'  equity  amounted to $63.3
million,  which as a  percentage  of total  assets  was  36.3%.  As a  Federally
chartered  savings and loan  association,  the  Association  is required to meet
three  separate   capital   standards   established  by  the  Office  of  Thrift
Supervision.  The Association's stand-alone equity was $44.7 million at June 30,
1997 and was substantially in excess of all such capital requirements.

The  Association's  level of nonperforming  loans,  defined as loans past due 90
days or more,  as a percentage of loans  outstanding,  was .22% and .25% at June
30, 1997 and  September  30,  1996,  respectively.  During the nine month period
ended June 30, 1997, the  Association's  level of  nonperforming  loans remained
consistently low in relation to prior periods and total loans  outstanding,  and
the Association did not incur any loan losses. Based on management's analysis of
the adequacy of its  allowances at June 30, 1997,  no  additional  provision for
loan losses was made during the nine month period.

                                       9
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY

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

--------------------------------------------------------------------------------

Comparison  of  Operating  Results for the Three and Nine Months  Ended June 30,
1997 and 1996:

General. Net income for the three and nine month periods ended June 30, 1997 was
$728,000 and $2.0 million,  respectively, or $64,000 less than and $334,000 more
than the $792,000 and $1.7 million  earned  during the same periods in 1996.  As
discussed  below, the decrease in net income for the three months ended June 30,
1997 was primarily due to the adoption of the restricted  stock plan,  which was
established  in the quarter  ended  December 31, 1996. As discussed  below,  the
increase  in net income for the nine months  ended June 30,  1997 was  primarily
attributable  to an increase in net interest income for the nine month period as
compared to the same period in 1996.

Interest income.  Interest income decreased by $84,000 from $3.3 million for the
three months ended June 30, 1996 to $3.2 million for the three months ended June
30, 1997.  This decrease was primarily the result of a decrease in the volume of
interest-earning assets outstanding during the three month period as compared to
the same period in 1996.  This decrease was caused by  management's  decision to
fund its loan demand with liquidity,  rather than seeking  additional  deposits.
That decision also  significantly  reduced  interest expense paid on deposits as
discussed below. Interest income increased by $390,000 from $9.3 million for the
nine months  ended June 30, 1996 to $9.7  million for the nine months ended June
30, 1997. This increase was primarily attributable to an overall increase in the
volume of  interest-earning  assets  outstanding during the first nine months of
the fiscal year in comparison to the same period a year earlier, due principally
to an infusion of cash received in the Conversion.

Interest  Expense.  Interest expense decreased by $115,000 from $1.4 million for
the three  months ended June 30, 1996 to $1.3 million for the three months ended
June 30, 1997.  Interest expense decreased by $871,000 from $4.9 million for the
nine months  ended June 30, 1996 to $4.0  million for the nine months ended June
30, 1997. At the time of the Conversion,  approximately $9.5 million in existing
deposits  were  withdrawn  by  customers  for  the  purchase  of  stock  in  the
Corporation,  causing a corresponding reduction in interest-bearing  liabilities
and interest  expense for the comparative nine month periods.  Also,  during the
period  since the  Conversion,  outstanding  deposits  have  slowly  declined as
mortgage loan demand has been funded with Conversion proceeds. In addition,  the
Association's cost of funds, which approximated 5.00% for the quarter ended June
30, 1996, has fallen to approximately 4.85% for the quarter ended June 30, 1997,
a decline of 15 basis points.

Net interest income.  Net interest income was approximately $1.9 million for the
three months ended June 30, 1997 and 1996. Net interest income increased by $1.3
million  from $4.4  million  for the nine  months  ended  June 30,  1996 to $5.7
million  for the  nine  months  ended  June 30,  1997.  This  increase  resulted
primarily from the decrease in the volume of interest-bearing  liabilities and a
lower cost of funds for the nine  months  ended June 30, 1997 as compared to the
nine months ended June 30, 1996.

                                       10
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY

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

--------------------------------------------------------------------------------

Provision for loan losses. Based on management's analysis of the adequacy of its
allowances at June 30, 1997, no provisions  for loan losses were made during the
three and nine month periods ended June 30, 1997. Provisions,  which are charged
to  operations,   and  the  resulting  loan  loss  allowances  are  amounts  the
Association's management believes will be adequate to absorb potential losses on
existing loans that may become uncollectible.  Loans are charged off against the
allowance  when  management  believes  that  collectibility  is  unlikely.   The
evaluation to adjust the  provision  and  resulting  allowances is based both on
prior loan loss experience and other factors,  such as changes in the nature and
volume of the loan portfolio,  overall portfolio  quality,  and current economic
conditions.   The  Association's  level  of  nonperforming  loans  has  remained
consistently low in relation to prior periods and total loans  outstanding,  and
the Association has not charged off any loans during either of the three or nine
month periods ended June 30, 1996 and 1997. At June 30, 1997, the  Association's
level of general  valuation  allowances  for loan losses  amounted to  $235,000,
which  management  believes is adequate to absorb  potential  losses in its loan
portfolio.

Noninterest  income.  Noninterest  income has  historically  been  immaterial in
relation to the Association's overall operations. Noninterest income amounted to
$21,000  and  $81,000 for the three and nine  months  ended June 30,  1997,  and
$23,000  and  $101,000  for the  three  and nine  months  ended  June 30,  1996,
respectively.

Noninterest  expense.  Noninterest expense increased by $111,000 to $783,000 for
the three month  period  ended June 30, 1997 from  $672,000  for the  comparable
quarter in 1996.  For the nine month  period  ended June 30,  1997,  noninterest
expense amounted to $2.5 million,  an increase of $597,000 over the $1.9 million
reported for the nine months ended June 30,  1996.  The increase in  noninterest
expense is principally  due to an increase in benefits  expense  associated with
the  establishment of an ESOP at Conversion;  and the adoption of the restricted
stock plan,  which was  established  in the quarter ended December 31, 1996. The
ESOP and  restricted  stock plan  expense  amounted  to $114,000  and  $128,000,
respectively,  for the three  months  ended  June 30,  1997,  and  $325,000  and
$394,000 for the nine months ended June 30, 1997,  respectively.  The restricted
stock plan was not in place during the three and nine month  periods  ended June
30, 1996. On an after tax basis, the expense for both plans during the three and
nine month  periods  amounted to $150,000 and  $446,000,  respectively.  For the
three and nine month  periods  ended June 30,  1997,  approximately  $49,000 and
$130,000,  respectively,  of the ESOP expense was  attributable to an adjustment
required under generally accepted accounting principles to report allocated ESOP
shares  during the  quarter at the  current  market  value of the  Corporation's
common stock. This portion of the ESOP expense does not represent funds actually
committed to fund the ESOP's purchase of the Corporation's stock and is reported
as an addition to paid in capital.

Deposit insurance expense decreased by $54,000 and $126,000 during the three and
nine month  periods ended June 30, 1997,  respectively,  as compared to the same
quarters a year earlier as a result of reduced  premium rates  subsequent to the
recapitalization of the SAIF . Other noninterest expense increased by $6,000 and
$127,000  during  the  three  and  nine  month  periods  ended  June  30,  1997,
respectively,  as compared to the same  quarters a year earlier due primarily to
certain taxes and other expenses associated with operating as a public company.

                                       11
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY

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

--------------------------------------------------------------------------------

As a part of the Conversion,  the Corporation  established an ESOP that acquired
260,000 shares of the stock offered in the Conversion with funds provided in the
form of a loan from the  Company.  The loan is  expected to be repaid over a ten
year period with funds  provided by the  Association  sufficient to amortize the
debt. The expense  associated  with the ESOP will be reported in accordance with
SOP 93-6 "Employers'  Accounting for Employee Stock Ownership Plans." During the
quarter ended December 31, 1996, the Corporation's stockholders approved and the
Association  adopted a restricted  stock program which awarded 171,925 shares of
common stock to certain officers,  employees and directors. The restricted stock
program  shares are being  expensed over the five year vesting period based upon
the fair value of the common stock at date of grant.

Capital Resources and Liquidity:

The term "liquidity"  generally refers to an organization's  ability to generate
adequate  amounts  of funds to meet its needs for cash.  More  specifically  for
financial  institutions,  liquidity ensures that adequate funds are available to
meet  deposit  withdrawals,  fund  loan  and  capital  expenditure  commitments,
maintain reserve  requirements,  pay operating  expenses,  and provide funds for
debt service,  dividends to stockholders,  and other institutional  commitments.
Funds  are  primarily  provided  through  financial   resources  from  operating
activities,  expansion  of the  deposit  base,  borrowings,  through the sale or
maturity of investments,  the ability to raise equity capital, or maintenance of
shorter term interest-earning deposits.

During the nine month period ended June 30, 1997, cash and cash  equivalents,  a
significant  source of  liquidity,  decreased by  approximately  $11.5  million,
primarily as a result of the purchase of held to maturity investment  securities
which increased by $6.0 million . Cash flows  resulting from internal  operating
activities  provided an  increase of $2.0  million in cash during the nine month
period ended June 30, 1997.  This cash was used to fund investing  activities of
$9.8 million,  including the purchase of held to maturity investment securities,
and to fund  financing  activities  of $3.8  million,  including  a decrease  in
deposits and the payment of dividends.

As a federally chartered savings association, Home Federal must maintain a daily
average balance of liquid assets equal to at least 5% of  withdrawable  deposits
and short-term borrowings.  The Association's  liquidity ratio at June 30, 1997,
as  computed  under  OTS  regulations,   was  considerable  in  excess  of  such
requirements.  Given its excess  liquidity  and its  ability to borrow  from the
Federal Home Loan Bank, the  Association  believes that it will have  sufficient
funds available to meet anticipated future loan commitments,  unexpected deposit
withdrawals, and other cash requirements.

                                       12


<PAGE>





Part II. OTHER INFORMATION

        Item 1.   Legal Proceedings

                  The Corporation is not engaged in any legal proceedings at the
                  present time. From time to time, the Association is a party to
                  legal proceedings within the normal course of business wherein
                  it  enforces  its  security  interest in loans made by it, and
                  other matters of a like kind.
  
      Item 2.   Changes in Securities

                  None

        Item 3.   Defaults Upon Senior Securities

                  None

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

                  None

        Item 5.   Other Information

                  None

        Item 6.   Exhibits and Reports on Form 8-K

                  (a)      27.  Financial Data  Schedule

                  (b)      No reports on Form 8-K were filed for the period
                           covered by this report.

                                       13
<PAGE>


SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
        Registrant has duly caused this report to be signed on its behalf by the
        undersigned thereunto duly authorized.

                                        Green Street Financial Corp

         Dated      August 5, 1997      By:  s/s H.D. Reaves, Jr.
               ----------------------        -----------------------------
                                             H. D. Reaves, Jr.
                                             President and CEO

         Dated      August 5, 1997      By:  s/s John C. Pate
               ----------------------        ---------------------------
                                             John C. Pate
                                             Senior Vice President and CFO


                                       14