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, 1998
                                         ---------------------------------------

                                       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 mark 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, 1998 there were issued and outstanding  4,083,219  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, 1997
     and June 30, 1998 (unaudited)                                          1-2

Statements of income for the three months ended
     June 30, 1997 (unaudited) and
     June 30, 1998 (unaudited)                                                3

Statements of income for the nine months ended
     June 30, 1997 (unaudited) and
     June 30, 1998 (unaudited)                                                4

Statements of cash flows for the nine months ended
     June 30, 1997 (unaudited) and
     June 30, 1998 (unaudited)                                              5-6

Notes to condensed consolidated financial statements                        7-8

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

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk        13

PART II - OTHER INFORMATION

  Item 1.  Legal Proceedings                                                 14

  Item 2.  Changes in Securities and Use of Proceeds                         14

  Item 3.  Defaults upon Senior Securities                                   14

  Item 4.  Submission of Matters to a Vote of Security Holders               14

  Item 5.  Other Information                                                 14

  Item 6.  Exhibits and Reports on Form 8-K                                  14

  Signatures                                                                 15



<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
June 30, 1998 and September 30, 1997
<TABLE>
<CAPTION>
                                                                                  June 30      September 30,
ASSETS                                                                             1998            1997
-------------------------------------------------------------------------------------------------------------
                                                                               (Unaudited)
<S>                                                                           <C>              <C>          
Cash and short-term cash investments:
   Interest-earning                                                           $  19,405,018    $  29,414,597
   Noninterest-earning                                                              605,066          555,043
   Federal funds sold                                                             3,257,000        3,118,000
Investment securities:
   Held to maturity, at amortized cost                                           16,500,000       13,500,000
   Nonmarketable equity securities                                                1,189,189        1,170,889
Loans receivable, net                                                           131,068,598      128,945,951
Accrued interest receivable, investments                                            245,399          222,716
Real estate acquired in settlement of loans                                          34,521                -
Property and equipment, net                                                         347,696          306,794
Prepaid expenses and other assets                                                   612,294          727,688
                                                                              -------------------------------



             Total Assets                                                     $ 173,264,781    $ 177,961,678
                                                                              ===============================
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                       1
<PAGE>


<TABLE>
<CAPTION>

                                                                                 June 30,       September 30,
LIABILITIES AND STOCKHOLDERS' EQUITY                                              1998              1997
-------------------------------------------------------------------------------------------------------------
                                                                                (Unaudited)
<S>                                                                        <C>              <C>             
Liabilities:
   Deposits                                                                $    110,201,142 $    112,641,893
   Advance payments by borrowers for taxes and insurance                          1,089,756          250,662
   Accrued expenses and other liabilities                                           641,085          618,080
   Dividends payable                                                                489,986        1,117,513
   Deferred compensation                                                            379,620          387,847
                                                                           ----------------------------------
              Total liabilities                                                 112,801,589      115,015,995
                                                                           ----------------------------------
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 4,083,219 shares at June 30, 1998; 4,298,125 at 
      September 30, 1997                                                                  -                -   
   Additional paid-in capital                                                    38,421,342       41,816,239
   Note receivable, ESOP                                                         (2,015,000)      (2,210,000)
   Retained earnings, substantially restricted                                   24,056,850       23,339,444
                                                                           ----------------------------------
              Total  stockholders' equity                                        60,463,192       62,945,683
                                                                           ----------------------------------

              Total liabilities and stockholders' equity                   $    173,264,781 $    177,961,678
                                                                           ================ ================
</TABLE>

                                       2
<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>

                                                                                                        
                                                                                  1998              1997
------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>             
Interest and dividend income:
   Loans                                                                  $      2,631,266 $      2,545,258
   Investments                                                                     641,498          702,576
                                                                          ----------------------------------
              Total interest income                                              3,272,764        3,247,834
Interest expense                                                                 1,367,282        1,316,246
                                                                          ----------------------------------
              Net interest income                                                1,905,482        1,931,588
Provision for loan losses                                                                -                - 
                                                                          ----------------------------------
              Net interest income after provision for loan losses                1,905,482        1,931,588
                                                                          ----------------------------------

Noninterest income                                                                  25,117           20,599
                                                                          ----------------------------------
Noninterest expense:
   Compensation and employee benefits                                              576,510          562,990
   Other                                                                           227,314          219,103
                                                                          ----------------------------------
                                                                                   803,824          782,093
                                                                          ----------------------------------
               Income before income taxes                                        1,126,775        1,170,094

Income taxes                                                                       425,900          442,050
                                                                          ----------------------------------
              Net income                                                  $        700,875 $        728,044
                                                                          ----------------------------------


Basic earnings per share                                                  $            .17 $            .18
                                                                          =================================

Diluted earnings per share                                                $            .17 $            .18
                                                                          =================================

Dividends paid per share                                                  $            .12 $            .11
                                                                          =================================

</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                       3
<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended June 30, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                                   
                                                                                   1998              1997
------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>             <C>            
Interest and dividend income:
   Loans                                                                    $     7,859,248 $     7,593,549
   Investments                                                                    2,049,167       2,114,939
                                                                            --------------------------------
              Total interest income                                               9,908,415       9,708,488
Interest expense                                                                  4,220,873       3,995,915
                                                                            --------------------------------
              Net interest income                                                 5,687,542       5,712,573
Provision for loan losses                                                                 -               -
                                                                            --------------------------------
              Net interest income after provision for loan losses                 5,687,542       5,712,573
                                                                            --------------------------------

Noninterest income                                                                   98,554          80,600
                                                                            --------------------------------
Noninterest expense:
   Compensation and employee benefits                                             1,746,040       1,705,108
   Other                                                                            703,081         775,128
                                                                            --------------------------------
                                                                                  2,449,121       2,480,236
                                                                            --------------------------------
              Income before income taxes                                          3,336,975       3,312,937

Income taxes                                                                      1,254,650       1,259,015
                                                                            --------------------------------
              Net income                                                    $     2,082,325 $     2,053,922
                                                                            ===============================


Basic earnings per share                                                    $           .51 $           .51
                                                                            ===============================

Diluted earnings per share                                                  $           .50 $           .50
                                                                            ===============================

Dividends paid per share                                                    $           .34 $           .31
                                                                            ===============================
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                       4
<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
                                                                                                      
                                                                                     1998           1997
-----------------------------------------------------------------------------------------------------------
<S>                                                                         <C>             <C>           
Cash Flows From Operating Activities
   Net income                                                               $     2,082,325 $    2,053,922
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and amortization                                                  27,000         30,679
      Net loss (gain) on disposal of real estate acquired
         in settlement of loans                                                       2,308        (12,354)
      Increase in deferred income taxes                                              17,000        335,000
      Decrease in deferred compensation                                              (8,227)       (12,792)
      ESOP compensation charged to paid-in capital                                  151,060        129,805
      Changes in assets and liabilities:
        (Increase) decrease in:
           Prepaid expenses and other assets                                        115,394        (49,701)
           Refundable income taxes                                                        -         35,650
           Accrued interest receivable                                              (22,683)      (197,686)
        Increase (decrease) in:
           Accrued expenses and other liabilities                                   202,405        527,225
           Accrued SAIF assessment                                                        -       (792,868)
           Income taxes payable                                                    (196,400)             -  
                                                                            -------------------------------
              Net cash provided by operating activities                           2,370,182      2,046,880
                                                                            -------------------------------
Cash Flows From Investing Activities
   Net increase in loans receivable                                              (2,174,396)    (3,864,578)
   Proceeds from sale of real estate acquired in settlement of loans                 14,920         46,779
   Proceeds from maturities of held to maturity investment securities            18,000,000     12,000,000
    Purchase of held to maturity investment securities                          (21,000,000)   (18,000,000)
   Purchase of nonmarketable equity securities                                      (18,300)             - 
   Purchase of property and equipment                                               (67,902)       (13,038)
                                                                            -------------------------------
              Net cash provided by investing activities                          (5,245,678)    (9,830,837)
                                                                            -------------------------------
</TABLE>

                                        5
<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>

                                                                                                     
                                                                                   1998            1997 
------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>              <C>            
Cash Flows From Financing Activities
   Net decrease in deposits                                                 $    (2,440,751) $   (2,955,388)
   Principal payment for ESOP debt                                                  195,000         195,000
   Cash dividends paid                                                           (1,992,446)     (1,824,956)
   Increase in advance payments by borrowers
       for taxes and insurance                                                      839,094         855,595
   Repurchase of common stock                                                    (3,545,957)              -
                                                                            --------------------------------
              Net cash used in financing activities                              (6,945,060)     (3,729,749)
                                                                            --------------------------------
              Net decrease in cash and cash equivalents                          (9,820,556)    (11,513,706)
Cash and cash equivalents:
   Beginning                                                                     33,087,640      35,481,906
                                                                            --------------------------------
   Ending                                                                   $    23,267,084  $   23,968,200
                                                                            --------------------------------
   Cash and cash equivalents:
       Cash and short-term investments:
       Interest-bearing                                                     $    19,405,018  $   21,747,685
       Noninterest-bearing                                                          605,066         510,515
       Federal funds sold                                                         3,257,000       1,710,000
                                                                            --------------------------------
                                                                            $    23,267,084  $   23,968,200
                                                                            ===============================
Supplemental Disclosures of Cash Flow Information
   Cash payments for:
      Interest                                                              $     4,220,993  $    3,994,136
                                                                            ===============================
      Income taxes                                                          $     1,451,050  $      863,543
                                                                            ===============================
Supplemental Disclosure of Noncash Investing and Financing
   Activities:
     Dividends declared and accrued                                         $       489,986  $      447,769
                                                                            ===============================
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

                                       6
<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------


Note 1.  Nature of Business

Green Street 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
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
financial  statements of the Corporation  are presented on a consolidated  basis
with those of Home Federal.

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, 1997,  which is audited) have
been prepared in accordance with generally  accepted  accounting  principles for
interim  financial  information  and  with  the  instructions  to Form  10-Q and
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  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  results of  operations  for the nine month
period  ended June 30,  1998 are not  necessarily  indicative  of the results of
operations  that may be expected  for the year ended  September  30, 1998 or any
other interim period.

The  accounting  policies  followed  are as set  forth in Note 1 of the Notes to
Consolidated Financial Statements in the 1997 annual report of the Corporation.

                                       7
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------


Note 3.  Dividends Declared

On June 25, 1998, the Board of Directors of the Corporation  declared a dividend
of $ .12 a share for  stockholders  of record as of July 10, 1998 and payable on
July 23,  1998.  The  dividends  declared  were  accrued  and  reported as other
liabilities in the June 30, 1998 consolidated statement of financial condition.

Note 4.  Earnings Per Share

As required, the Corporation adopted statement of Financial Accounting Standards
No. 128 during the quarter ended December 31, 1997. This statement requires dual
presentation of basic and diluted earnings per share (EPS) with a reconciliation
of the  numerator  and  denominator  of the EPS  computations.  Basic  per share
amounts are based on the weighted  average  shares of common stock  outstanding.
Diluted  earnings per share assume the  conversion,  exercise or issuance of all
potential  common stock  instruments  such as options,  warrants and convertible
securities,  unless  the  effect is to reduce a loss or  increase  earnings  per
share.  Accordingly,   this  presentation  has  been  adopted  for  all  periods
presented.  The basic and diluted  weighted  average shares  outstanding  are as
follows:

<TABLE>
<CAPTION>
Three months ended:
                                                                                      1998             1997        
                                                                              --------------------------------
<S>                                                                           <C>              <C>      
Weighted average shares outstanding                                                4,276,654        4,298,125
Less unallocated ESOP shares                                                         204,750          230,750
                                                                              --------------------------------
    Weighted average outstanding shares used for basic EPS                         4,071,904        4,067,375
Plus incremental shares from assumed issuance
   of stock options                                                                   47,195           63,982
                                                                              --------------------------------
    Weighted average outstanding shares used for diluted EPS                       4,119,099        4,131,357
                                                                              ================================

Nine months ended:

                                                                                      1998             1997        
                                                                              --------------------------------
Weighted average shares outstanding                                                4,290,968        4,298,125
Less unallocated ESOP shares                                                         211,250          234,000
                                                                              --------------------------------
    Weighted average outstanding shares used for basic EPS                         4,079,718        4,064,125
Plus incremental shares from assumed issuance
   of stock options                                                                   68,104           44,670
                                                                              --------------------------------
    Weighted average outstanding shares used for diluted EPS                       4,147,822        4,108,795
                                                                              ================================
</TABLE>


<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, 1998 and September 30, 1997:

Total assets  decreased by $4.7 million to $173.3  million at June 30, 1998 from
$178.0  million at September  30, 1997.  The decrease in assets  during the nine
month period is principally attributable to a 5% stock repurchase plan begun and
completed  in June  1998 of $3.5  million.  Investments  and  other  short  term
interest  earning assets  amounted to $40.4 million at June 30, 1998, a decrease
of $6.8 million from $47.2 million at September 30, 1997.  Net loans  receivable
increased  by $2.1  million  during the nine month period and amounted to $131.1
million at June 30, 1998.  Approximately  99% of the  Corporation's  assets were
interest  earning  at June 30,  1998,  and  approximately  76% of such  interest
earning assets were held in the form of loans receivable.

Savings  deposits  decreased by $2.4  million  during the period and amounted to
$110.2 million at June 30, 1998. The Association  had no borrowings  outstanding
during or at the end of the nine  month  period  ended  June 30,  1998,  but has
guaranteed the repayment of the ESOP's note payable to the Corporation which was
originated on April 3, 1996 in order 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 $2.0  million  at June  30,  1998  net of a  $195,000
principal   repayment  during  the  period,   is  reported  as  a  reduction  of
stockholders'  equity.  Retained  earnings  increased  by $.7  million  to $24.1
million  at  June  30,  1998,   which  is  attributable  to  the   Corporation's
consolidated earnings during the nine months ended June 30, 1998, less dividends
accrued for the period.

At June 30,  1998,  the  Corporation's  stockholders'  equity  amounted to $60.5
million,  which as a  percentage  of total  assets  was  34.9%.  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
(OTS). The Association's  stand-alone  equity was $45.1 million at June 30, 1998
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 .06% and .13% at June
30, 1998 and September 30, 1997, respectively. During the quarter ended June 30,
1998, the Association's level of nonperforming  loans remained  consistently low
in relation to 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,  1998,  no  additional  provision  for loan  losses was made during the
quarter.

                                       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,
1998 and 1997:

General.  Net income for the three and nine month period ended June 30, 1998 was
$700,875,  and $2,082,325,  respectively,  or $27,169 less than and $28,403 more
than the $728,044 and  $2,053,922  earned  during the same periods in 1997.  The
decrease in net income for the three  months  ended June 30, 1998 was  primarily
due to the decrease in spread between interest income and interest expense.  The
increase  in net income for the nine months  ended June 30,  1998 was  primarily
attributable  to a  decrease  in other  noninterest  expense  for the nine month
period as compared to the same period in 1997.

Interest income.  Interest income increased by $25,000 from $3.2 million for the
three months ended June 30, 1997 to $3.3 million for the three months ended June
30, 1998. This increase was primarily the result of an increase in the volume of
net loans  receivable  outstanding  during the three month period as compared to
the same period in 1997. Interest income increased by $200,000 from $9.7 million
for the nine  months  ended June 30,  1997 to $9.9  million  for the nine months
ended June 30, 1998.  This  increase was  primarily  attributable  to an overall
increase in the volume of net loans receivable outstanding during the first nine
months of the fiscal year in comparison  to the same period a year earlier.  The
yield on interest  earning  assets for the three  months ended June 30, 1998 was
7.46% compared to 7.48% for the same period ended June 30, 1997.

Interest  expense.  Interest expense  increased by $51,000 from $1.3 million for
the three  months ended June 30, 1997 to $1.4 million for the three months ended
June 30, 1998.  Interest expense increased by $225,000 from $4.0 million for the
nine months  ended June 30, 1997 to $4.2  million for the nine months ended June
30, 1998. The  Association's  cost of funds,  which  approximated  4.85% for the
quarter ended June 30, 1997 has increased to approximately 4.92% for the quarter
ended June 30, 1998, an increase of 7 basis points.

Net interest income.  Net interest income was approximately $1.9 million for the
three months ended June 30, 1998 and 1997,  and  approximately  $5.7 million for
the nine months ended June 30, 1998 and 1997.

Provision for loan losses. Based on management's analysis of the adequacy of its
allowances at June 30, 1998, no provisions  for loan losses were made during the
three and nine month periods ended June 30, 1998. 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 increase or decrease 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 total  loans  outstanding,  and the
Association  has not  charged off any loans  during  either of the three or nine
month periods ended June 30, 1998. At June 30, 1998, the Association's  level of
general  valuation  allowances  for loan  losses  amounted  to  $255,000,  which
management  believes  is  adequate  to  absorb  potential  losses  in  its  loan
portfolio.

                                       10
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY

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


Noninterest  income.  Noninterest  income has  historically  been  immaterial in
relation to the Association's overall operations. Noninterest income amounted to
$25,000  and  $99,000 for the three and nine  months  ended June 30,  1998,  and
$21,000  and  $81,000  for the  three  and nine  months  ended  June  30,  1997,
respectively.

Noninterest  expense.  Noninterest  expense increased by $22,000 to $804,000 for
the three month  period  ended June 30, 1998 from  $782,000  for the  comparable
quarter in 1997.  For the nine month  period  ended June 30,  1998,  noninterest
expense  amounted to $2.4  million,  a decrease of $31,000 from the $2.5 million
reported for the nine months ended June 30, 1997.

Deposit  insurance  expense  decreased  by $38,000  during the nine month period
ended June 30, 1998 as compared to the same period a year earlier as a result of
reduced premium rates subsequent to the recapitalization of the SAIF.

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 insures 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, 1998, cash and cash  equivalents,  a
significant  source of  liquidity,  decreased  by  approximately  $9.8  million,
primarily as a result of the purchase of held-to-maturity  investment securities
which  increased by $3.0 million and the 5% stock  redemption  completed in June
1998 for $3.5 million.  Cash flows resulting from operating  activities provided
an increase of $2.4  million in cash during the nine month period ended June 30,
1998.  This cash was used to fund  investing  activities  of $2.3 million and to
fund financing activities of $3.4 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 4% of  withdrawable  deposits
and short-term borrowings.  The Association's  liquidity ratio at June 30, 1998,
as  computed  under  OTS  regulations,   was  considerably  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 the  anticipated  future loan  commitments,  unexpected
deposit withdrawals, and other cash requirements.

                                       11
<PAGE>
GREEN STREET FINANCIAL CORP AND SUBSIDIARY

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


Year 2000 Issue.  The Year 2000 Issue relates to whether  computer  systems will
properly  recognize and process date sensitive  information on and after January
1, 2000.  Systems that do not properly recognize such information could generate
erroneous data or fail. The Association is heavily dependent on computer systems
in the conduct of substantially all of its business activities.  The Association
has conducted a comprehensive review of its computer systems, including its core
processing  systems maintained by an independent data processing service center,
to  identify  the  systems  that  could  be  affected  by the Year  2000  Issue.
Management  has identified  the  corrective  action  required to ensure that the
Association's internal and vendor-maintained systems that are date sensitive are
Year 2000 compliant.  In addition,  management is developing a contingency  plan
that will be relied upon in the event of adverse effects to the Association as a
result of Year 2000 issues.

Based on  preliminary  study,  the  Association  expects to spend  approximately
$10,000 to $70,000 from 1998  through  1999 to modify its  computer  information
systems enabling proper processing of transactions relative to the year 2000 and
beyond. The Association  continues to evaluate appropriate courses of corrective
action, including replacement of certain systems whose associated costs would be
recorded as assets and amortized.  Accordingly,  the Association does not expect
the amounts  required to be expensed  over the next two years to have a material
effect on its financial position or results of operations.

Special Note Regarding Forward-Looking  Statements.  Statements herein regarding
estimated future expense levels and other matters may constitute forward-looking
statements  under the federal  securities  laws.  Such statements are subject to
certain  risks and  uncertainties.  Undue  reliance  should not be place on this
information.   These  estimates  are  based  on  the  current   expectations  of
management,  which may change in the future due to a large  number of  potential
events, including unanticipated future developments.

                                       12
<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------------------


There were no  significant  changes for the nine months ended June 30, 1998 from
the  information  presented in the annual report on Form 10-K for the year ended
September 30, 1997,  concerning  quantitative and qualitative  disclosures about
market risk.


                                       13
<PAGE>







Part II. OTHER INFORMATION

        Item 1.   Legal Proceedings
   
                  The  Company 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 similar nature.

        Item 2.   Changes in Securities and Use of Proceeds

                  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  (electronic  filing only) 

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

                                       14
<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 12, 1998        By:   /s/  H.D. Reaves, Jr.
                                             -----------------------------------
                                             H. D. Reaves, Jr.
                                             President and CEO

         Dated  August 12, 1998        By:   /s/  John C. Pate
                                             -----------------------------------
                                             John C. Pate
                                             Senior Vice President and CFO


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