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 March 31, 1997
                                                 ---------------------------

                                       OR

 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 

         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 
            incorporation or organization)               Idenitification No.)

                                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 May 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

<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION                                                     Pages

<S>                                                                                 <C>                     
       Item 1.  Financial Statements

       Consolidated  statements of financial condition at September 30, 1996 and
       March 31, 1997                                                                1-2

       Consolidated  statements  of income for the three  months ended March 31,
       1996 and March 31, 1997                                                         3

       Consolidated statements of income for the six months ended March 31, 1996
       and March 31, 1997                                                              4

       Consolidated  statements of cash flows for the six months ended March 31,
       1996 and March 31, 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


</TABLE>

<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1996 and March 31, 1997

<TABLE>
<CAPTION>

                                                        September 30,         March 31,
ASSETS                                                      1996                1997
------------------------------------------------------------------------------------------
                                                                             (Unaudited)
Cash and short-term cash investments:
<S>                                                     <C>               <C>            
    Interest-earning                                    $  33,107,849     $    33,998,331
    Noninterest-earning                                       249,345             311,138
Federal funds sold                                          2,124,712           1,388,586
Investment securities:
    Held to maturity , at amortized cost                   14,999,179          12,000,000
    Nonmarketable equity securities                         1,170,889           1,170,889
Loans receivable, net                                     123,147,779         124,289,412
Accrued interest receivable, investments                      255,566             169,826
Real estate acquired in settlement of loans                    34,425                   -
Property and equipment, net                                   330,260             318,244
Prepaid expenses and other assets                             675,084             718,923
Deferred tax assets                                           122,000                   -
                                                       ----------------------------------






                Total Assets                            $176,217,088      $  174,365,349
                                                      ------------------------------------

</TABLE>

See Notes to Consolidated Financial Statements.




                                       1

<PAGE>

<TABLE>
<CAPTION>
                                                                                    
                                                                           September 30,          March 31, 
LIABILITIES AND STOCKHOLDERS' EQUITY                                             1996                1997
--------------------------------------------------------------------------------------------------------------
                                                                                                 (Unaudited)
Liabilities:
<S>                                                                       <C>                 <C>            
    Deposits                                                              $   111,385,386     $   109,122,947
    Advance payments by borrowers for taxes and insurance                         179,444             789,035
    Accrued expenses and other liabilities                                        174,607             455,466
    Special SAIF assessment                                                       792,868                   -
    Dividends payable                                                           1,074,531             429,813
    Deferred compensation                                                         405,233             397,036
    Deferred income taxes                                                               -             207,000
    Income taxes payable                                                           25,000              59,600
                                                                      ----------------------------------------
                Total liabilities                                             114,037,069         111,460,897
                                                                      ----------------------------------------
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          41,847,956
    Note receivable, ESOP                                                      (2,470,000)         (2,340,000)
    Retained earnings, substantially restricted                                22,882,793          23,396,496
                                                                      ----------------------------------------
                Total  stockholders' equity                                    62,180,019          62,904,452
                                                                      ----------------------------------------
                Total liabilities and stockholders' equity                $   176,217,088     $   174,365,349
                                                                      ----------------------------------------

</TABLE>


                                       2



<PAGE>



GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended March 31, 1996 and 1997

<TABLE>
<CAPTION>

                                                                                  1996                1997
-----------------------------------------------------------------------------------------------------------------
Interest and dividend income:
<S>                                                                          <C>                 <C>            
    Loans                                                                    $     2,456,104     $     2,519,575
    Short-term cash investments                                                      489,941             524,325
    Investment securities                                                             77,655             161,076
                                                                            -------------------------------------
                Total interest income                                              3,023,700           3,204,976
Interest on deposits                                                               1,701,529           1,311,896
                                                                            -------------------------------------
                Net interest income                                                1,322,171           1,893,080
Provision for loan losses                                                                  -                   -
                                                                            -------------------------------------
                 Net interest income after provision for loan losses               1,322,171           1,893,080
                                                                            -------------------------------------
Noninterest income:
    Service charges and fees                                                          35,248               8,499
    Other                                                                             17,724              24,346
                                                                            -------------------------------------
                                                                                      52,972              32,845
                                                                            -------------------------------------
Noninterest expense:
    Compensation and employee benefits                                               340,969             569,373
    Deposit insurance                                                                 84,344              15,290
    Occupancy expenses                                                                43,979              41,608
    Advertising                                                                       39,536              45,149
    Data processing expense                                                           29,813              27,610
    Other                                                                             58,224             127,908
                                                                            -------------------------------------
                                                                                     596,865             826,938
                                                                            -------------------------------------
                Income before income taxes                                           778,278           1,098,987
                                                                            -------------------------------------
Income taxes:
    Current                                                                          273,000             405,100
    Deferred                                                                           6,000               8,000
                                                                            -------------------------------------
                                                                                     279,000             413,100
                                                                            -------------------------------------
                Net income                                                   $       499,278     $       685,887
                                                                            -------------------------------------

Primary earnings per share                                                   $           n/a     $          0.17
                                                                            -------------------------------------

</TABLE>

See Notes to Consolidated Financial Statements.

                                       3

<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Six Months Ended March 31, 1996 and 1997

<TABLE>
<CAPTION>

                                                                                  1996                1997
----------------------------------------------------------------------------------------------------------------
Interest and dividend income:
<S>                                                                         <C>                 <C>            
    Loans                                                                   $     4,925,728     $     5,048,291
    Short-term cash investments                                                     902,962           1,030,265
    Investment securities                                                           155,309             382,098
                                                                            ------------------------------------
                Total interest income                                             5,983,999           6,460,654
Interest on deposits                                                              3,435,976           2,680,669
                                                                            ------------------------------------
                Net interest income                                               2,548,023           3,779,985
Provision for loan losses                                                                 -                   -
                                                                            ------------------------------------
                 Net interest income after provision for loan losses              2,548,023           3,779,985
                                                                            ------------------------------------
Noninterest income:
    Service charges and fees                                                         35,964              12,920
    Other                                                                            41,884              47,081
                                                                            ------------------------------------
                                                                                     77,848              60,001
                                                                            ------------------------------------
Noninterest expense:
    Compensation and employee benefits                                              695,599           1,142,118
    Deposit insurance                                                               166,486              96,370
    Occupancy expenses                                                               83,359              83,763
    Advertising                                                                      74,950              67,929
    Data processing expense                                                          53,110              49,141
    Other                                                                           137,753             257,822
                                                                            ------------------------------------
                                                                                  1,211,257           1,697,143
                                                                            ------------------------------------
                Income before income taxes                                        1,414,614           2,142,843
                                                                            ------------------------------------
Income taxes:
    Current                                                                         461,353             487,965
    Deferred                                                                         26,000             329,000
                                                                            ------------------------------------
                                                                                    487,353             816,965
                                                                            ------------------------------------
                Net income                                                  $       927,261     $     1,325,878
                                                                            ------------------------------------

Primary earnings per share                                                  $           n/a     $          0.33
                                                                            ------------------------------------

</TABLE>


See Notes to Consolidated Financial Statements.


                                       4

<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended March 31, 1996 and 1997

<TABLE>
<CAPTION>
                                                                                 
                                                                               1996              1997
----------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S>                                                                       <C>                <C>         
    Net income                                                            $     927,261      $  1,325,878
    Adjustments to reconcile net income to net
       cash provided by operating activities:
       Depreciation and amortization                                             21,327            20,179
       Net gain on disposal of real estate acquired
           in settlement of loans                                                     -           (12,354)
       Increase in deferred income taxes                                         26,000           329,000
       Decrease in deferred compensation                                           (538)           (8,197)
       ESOP compensation charged to paid-in capital                                   -            80,730
       Changes in assets and liabilities:
          (Increase) decrease in:
             Prepaid expenses and other assets                               (1,214,854)          (82,189)
             Refundable income taxes                                             12,000                 -
             Accrued interest receivable                                         (2,946)           85,740
          Increase (decrease) in:
             Accrued expenses and other liabilities                             858,168           280,860
             Accrued SAIF assessment                                                  -          (792,868)
             Income taxes payable                                                28,000            34,600
                                                                        ----------------------------------
                Net cash provided by operating activities                       654,418         1,261,379
                                                                        ----------------------------------
Cash Flows From Investing Activities
    Net increase in loans receivable                                           (878,765)       (1,141,633)
    Proceeds from sale of real estate acquired in settlement of loans                 -            46,779
    Proceeds from maturities or calls of held to maturity
       investment securities                                                          -        12,000,000
    Purchase of held to maturity investment securities                                -        (9,000,000)
    Purchase of property and equipment                                          (14,289)           (8,984)
                                                                        ----------------------------------
                Net cash provided by (used in) investing activities            (893,054)        1,896,162
                                                                        ----------------------------------
</TABLE>


                                       5


<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended March 31, 1996 and 1997

<TABLE>
<CAPTION>
                                                                                1996              1997
------------------------------------------------------------------------------------------------------------

Cash Flows From Financing Activities
<S>                                                                       <C>               <C>            
    Net increase (decrease) in deposits                                   $   60,469,226    $   (2,262,439)
    Principal payment for ESOP debt                                                    -           130,000
    Cash dividends paid                                                                -        (1,418,544)
    Increase (decrease) in advance payments by borrowers
        for taxes and insurance                                                  (51,426)          609,591
                                                                          ----------------------------------
                Net cash provided by (used in) financing activities           60,417,800        (2,941,392)
                                                                          ----------------------------------
                Net increase in cash and cash equivalents                     60,179,164           216,149
Cash and cash equivalents:
    Beginning                                                                 28,648,050        35,481,906
                                                                          ----------------------------------
    Ending                                                                $   88,827,214    $   35,698,055
                                                                          ----------------------------------
    Cash and cash equivalents:
       Cash and short-term investments:
          Interest-bearing                                                $   87,239,108    $   33,998,331
          Noninterest-bearing                                                          -           311,138
       Federal funds sold                                                      1,588,106         1,388,586
                                                                          ----------------------------------
                                                                          $   88,827,214    $   35,698,055
                                                                          ----------------------------------
Supplemental Disclosures of Cash Flow Information
    Cash payments for:
       Interest                                                           $    3,423,714    $    2,675,434
                                                                          ----------------------------------
       Income taxes                                                       $     421,353     $      428,543
                                                                          ----------------------------------
Dividends declared and accrued                                            $           -     $      406,412
                                                                          ----------------------------------

</TABLE>


See Notes to Consolidated Financial Statements.

                                       6

<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


NOTES TO 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 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  the  instructions  to  Form  10-Q of
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 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. The results of
operations  for the three and six month  periods  ended  March 31,  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 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 1996 annual report of the Corporation.


Note 3.  Earnings Per Share

The  Corporation's  earnings per share for the three and six month periods ended
March 31, 1997 is based on 4,064,125  shares assumed to be  outstanding  for the
period.  Earnings per share has been  calculated in accordance with Statement of
Position  93-6  "Employers'  Accounting  for Employee  Stock  Ownership  Plans."
Earnings per share for the three and six month  periods ended March 31, 1996 has
not  been  presented  in the  consolidated  statements  of  income  because  the
Association  had  not  converted  to  stock  form  and the  Corporation  had not
completed  its stock  offering  at any time during that  period.  Stock  options
granted on October 17, 1996 did not have a dilutive effect on earnings per share
for the three or six month periods ended March 31, 1997. In addition, although a
restricted  stock plan was adopted on October 17,  1996,  and stock  awards have
been  granted on such date,  no shares have been issued or acquired  pursuant to
the plan as of March 31, 1997.


Note 4.  Dividends Declared

On March 26, 1997, the Board of Directors of the Corporation declared a dividend
of $ .10 a share for  stockholders of record as of April 11, 1997 and payable on
April 23,  1997.  The  dividends  declared  are  accrued  in the March 31,  1997
consolidated  statement of financial condition.  In addition, on March 26, 1997,
the Board of Directors of Home Federal declared an upstream dividend of $533,188
to Green Street Financial Corp, which was paid on April 23, 1997.


Note 5.  Adoption of Stock Option Plan and Restricted Stock Plan

At a special meeting of stockholders  held on October 17, 1996, the stockholders
voted  to  approve  the  Corporation's   proposed  stock  option  plan  and  the
Association's  restricted  stock plan. The stock option plan  authorizes and the
Corporation  has granted as of such date 429,812  stock  options to officers and
directors either in the form of incentive stock options or  non-incentive  stock
options.  The  exercise  price of the stock  options is equal to the fair market
value of the  Corporation's  common stock at the date of grant.  The  restricted
stock plan  authorizes and the  Association has granted 171,925 shares of common
stock to  officers,  directors  and key  employees.  At the  present  time,  the
Association  intends to provide funds to the restricted stock plan trust fund in
order for the trust to acquire common stock in open market  purchases.  At March
31, 1997, none of the shares awarded  pursuant to the restricted  stock plan had
been  acquired.  The stock options and the  restricted  common stock vest at the
rate of 20% annually, beginning one year from October 17, 1996.

                                       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 March 31, 1997 and September 30, 1996:

Total assets  decreased by $1.8 million to $174.4 million at March 31, 1997 from
$176.2  million at  September  30, 1996.  The decrease in assets  during the six
month  period is  principally  attributable  to a decrease  in  deposits of $2.3
million to $109.1  million at March 31, 1997,  from $111.4  million at September
31, 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 $48.6
million at March 31,  1997,  a decrease of $2.8  million  from $51.4  million at
September 30, 1996.  Net loans  receivable  increased by $1.1 million during the
six month period and amounted to $124.3 million at March 31, 1997. Approximately
99% of the  Corporation's  assets were interest  earning at March 31, 1997,  and
approximately 72% of such interest earning assets were held in the form of loans
receivable.

During the six months ended March 31,  1997,  the  Association  paid the special
Savings  Association  Insurance  Fund ("SAIF")  assessment of $792,868 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 six month period ended March 31, 1997,  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 $2.3  million  at March 31,  1997 is  reported  as a  reduction  of
stockholders'  equity.  Retained earnings increased by $514,000 to $23.4 million
at March 31,  1997,  which is  attributable  to the  Corporation's  consolidated
earnings during the six months ended March 31, 1997, less dividends  accrued and
paid during the six month period.

At March 31, 1997,  the  Corporation's  stockholders'  equity  amounted to $62.9
million,  which as a  percentage  of total  assets  was  36.1%.  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 March 31,
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 .19% and .25% at March
31, 1997 and  September  30,  1996,  respectively.  The  Association's  level of
nonperforming  loans was .28% at March 31,  1996.  During  the six month  period
ended March 31, 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 March 31, 1997,  no additional  provision for
loan losses was made during the six 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 Six Months  Ended March 31,
1997 and 1996:

General. Net income for the three and six month periods ended March 31, 1997 was
$686,000 and  $1,326,000,  respectively,  or $187,000 and $399,000 more than the
$499,000  and  $927,000  earned  during the same  periods in 1996.  As discussed
below,  the increase in net income was primarily  attributable to an increase in
net interest  income for the three and six month periods ended March 31, 1997 as
compared to the same periods in 1996.

Interest income. Interest income increased by $181,000 from $3.0 million for the
three  months  ended March 31, 1996 to $3.2  million for the three  months ended
March 31, 1997.  Interest income increased by $477,000 from $6.0 million for the
six months  ended March 31, 1996 to $6.5  million for the six months ended March
31, 1997. These increases were  principally  attributable to an overall increase
in the volume of interest-earning assets outstanding during the first six 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 $390,000 from $1.7 million for
the three months ended March 31, 1996 to $1.3 million for the three months ended
March 31, 1997. Interest expense decreased by $755,000 from $3.4 million for the
six months  ended March 31, 1996 to $2.7  million for the six months ended March
31, 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.
Also, during the period since the Conversion,  outstanding  deposits have slowly
declined as mortgage  loandemand has been funded with  Conversion  proceeds.  In
addition,  the  Association's  cost of funds  which  approximated  4.90% for the
quarter  ended  December  31,  1996,  over 50 basis  points  lower  than for the
corresponding  quarter in 1995 has fallen to approximately 4.75% for the quarter
ended March 31, 1997.

Net interest income. Net interest income increased by $571,000 from $1.3 million
for the three  months  ended March 31, 1996 to $1.9 million for the three months
ended March 31, 1997.  Net interest  income  increased by $1.2 million from $2.6
million  for the six months  ended  March 31,  1996 to $3.8  million for the six
months ended March 31, 1997.  This increase  resulted from the combination of an
increase in the volume of  interest-earning  assets and a decrease in the volume
of  interest-bearing  liabilities between the quarters and a lower cost of funds
for the three and six months  ended  March 31, 1997 as compared to the three and
six months ended March 31, 1996.

Provision for loan losses. Based on management's analysis of the adequacy of its
allowances at March 31, 1997 and 1996,  no provisions  for loan losses were made
during  the  three  and six  month  periods  ended  March  31,  1997  and  1996.
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 

                                       10

<PAGE>

GREEN STREET FINANCIAL CORP AND SUBSIDIARY

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS
--------------------------------------------------------------------------------
prior periods and total loans  outstanding,  and the Association has not charged
off any loans during  either of the three or six month  periods  ended March 31,
1996 and 1997. At March 31, 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
$33,000  and  $60,000 for the three and six months  ended  March 31,  1997,  and
$53,000  and  $78,000  for the  three  and six  months  ended  March  31,  1996,
respectively.

Noninterest  expense.  Noninterest expense increased by $230,000 to $827,000 for
the three month  period ended March 31, 1997 from  $597,000  for the  comparable
quarter in 1996.  For the six month  period  ended March 31,  1997,  noninterest
expense amounted to $1.7 million,  an increase of $486,000 over the $1.2 million
reported for the six months ended March 31,  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 program, which was established in the quarter ended December 31, 1996. The
ESOP and  restricted  stock program  expense  amounted to $111,000 and $135,000,
respectively,  for the three  months  ended March 31,  1997,  and  $211,000  and
$266,000 for the six months ended March 31, 1997,  respectively.  The plans were
not in place during the three and six month  periods ended March 31, 1996. On an
after tax  basis,  the  expense  for both  plans  during the three and six month
periods amounted to $156,000 and $326,000,  respectively.  For the three and six
month  periods  ended  March  31,  1997,   approximately  $46,000  and  $81,000,
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.  Other  noninterest  expense  increased  by
$70,000 and $120,000 during the three and six month period ended March 31, 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.

As a part of the  Conversion,  the  Company  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.

                                       11

<PAGE>

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

Capital Resources and Liquidity:

Theterm  "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 six month period ended March 31, 1997, cash and cash  equivalents,  a
significant  source  of  liquidity,  remained  fairly  constant,  increasing  by
approximately  $216,000. Cash flows resulting from internal operating activities
provided an increase of $1.3  million in cash during the six month  period ended
March  31,  1997.  This  cash was  combined  with net  proceeds  from  investing
activities  of $1.9  million,  to fund  financing  activities  of $2.9  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 March 31, 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 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 like kind.

          Item 2.    Changes in Securities

                     Not applicable

          Item 3.    Defaults Upon Senior Securities

                     Not applicable

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

                     On January 29, 1997, the annual meeting of stockholders was
                     held to  consider  and  vote  upon  the  election  of three
                     directors of the Company,  and to ratify the appointment of
                     McGladrey & Pullen,  LLP as  independent  auditors  for the
                     Company for the fiscal year ending  September 30, 1997. All
                     items were approved by the stockholders as shown below:

                     Vote concerning the election of directors of the Company:

<TABLE>
<CAPTION>

                                              For           Against           Abstain        Total
                                         -----------------------------------------------------------
<S>                                         <C>              <C>                 <C>      <C>      
                     Bryan                  3,855,797        31,352              0        3,887,149
                     Hollinshed             3,817,297        69,852              0        3,887,149
                     Holt                   3,857,297        29,852              0        3,887,149



</TABLE>

                     Vote concerning  ratification of McGladrey & Pullen, LLP as
                     independent auditors for the year ended September 30, 1997:

<TABLE>
<CAPTION>
                                              For           Against           Abstain        Total
                                         -----------------------------------------------------------
<S>                                         <C>             <C>                 <C>       <C>      
                                            3,840,104       21,123              25,922    3,887,149
</TABLE>




          Item 5.    Other Information

                     Not applicable

          Item 6.    Exhibits and Reports on Form 8-K

                     (a)       Not applicable

                     (b)       Not applicable

                                       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.

<TABLE>
<CAPTION>


                                                               Green Street Financial Corp

<S>                                                 <C>   
           Dated      May 5, 1997                   By:        s/s H. D. Reaves, Jr.
                 ----------------------------                  ---------------------
                                                               H. D. Reaves, Jr.
                                                               President and CEO

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

</TABLE>


                                       14