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    December 31, 1996
                                      -----------------
                                       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 
      incorporation or organization)                 Identification Number)

                                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 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 February 1, 1997 there were issued and outstanding 4,298,125 shares of the
Registrant's common stock, no par value.

<PAGE>

                   Green Street Financial Corp and Subsidiary

                                    CONTENTS


PART I - FINANCIAL INFORMATION                                             Pages

      Item 1.  Financial Statements

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

        Consolidated  statements of income for the three months ended  
        December 31, 1995 and December 31, 1996                               3

        Consolidated  statements  of cash flows for the three months 
        ended  December 31, 1995 and December 31, 1996                      6-7

        Notes to consolidated financial statements                          7-9

      Item 2.  Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                   9-11

PART II - OTHER INFORMATION

      Item 1.  Legal Proceedings                                             12
      Item 2.  Changes in Securities                                         12
      Item 3.  Defaults upon Senior Securities                               12
      Item 4.  Submission of Matters to a Vote of Security Holders           12
      Item 5.  Other Information                                             12
      Item 6.  Exhibits and Reports on Form 8-K                              12

      Signatures                                                             13



<PAGE>



GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1996 and December 31, 1996

 
                                                   September 30,    December 31,
ASSETS                                                 1996             1996
--------------------------------------------------------------------------------
                                                                     (Unaudited)
Cash and short-term cash investments:
   Interest-earning                                $333,107,849    $  45,838,379
   Noninterest-earning                                  249,345          237,412
Federal funds sold                                    2,124,712        1,235,138
Investment securities:
   Held to maturity , at amortized cost              14,999,179        3,000,000
   Nonmarketable equity securities                    1,170,889        1,170,889
Loans receivable, net                               123,147,779      123,532,310
Accrued interest receivable, investments                255,566          144,035
Real estate acquired in settlement of loans              34,425                -
Property and equipment, net                             330,260          322,338
Prepaid expenses and other assets                       675,084          698,000
Deferred tax assets                                     122,000                -
                                               ---------------------------------



              Total Assets                         $176,217,088    $ 176,178,501
                                               =================================

See Notes to Consolidated Financial Statements


                                       1

<PAGE>


<TABLE>
<CAPTION>


                                                                               September 30,     December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY                                                1996             1996
-------------------------------------------------------------------------------------------------------------
                                                                                                 (Unaudited)  

<S>                                                                           <C>              <C>          
   Deposits                                                                   $ 111,385,386    $ 111,887,796
   Advance payments by borrowers for taxes and insurance                            179,444          455,717
   Accrued expenses and other liabilities                                           174,607          227,058
   Special SAIF assessment                                                          792,868                -
   Dividends payable                                                              1,074,531          429,812
   Deferred compensation                                                            405,233          401,631
   Deferred income taxes                                                                  -          199,000
   Income taxes payable                                                              25,000           63,400
                                                                           ----------------------------------
              Total liabilities                                                 114,037,069      113,664,414
                                                                           ----------------------------------
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       41,802,066
   Note receivable, ESOP                                                         (2,470,000)      (2,405,000)
   Retained earnings, substantially restricted                                   22,882,793       23,117,021
                                                                           ----------------------------------
              Total  stockholders' equity                                        62,180,019       62,514,087
                                                                           ----------------------------------
              Total liabilities and stockholders' equity                      $ 176,217,088    $ 176,178,501
                                                                           ==================================
</TABLE>

                                       2


<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended December 31, 1995 and 1996

<TABLE>
<CAPTION>



                                                                                
                                                                                 1995               1996
------------------------------------------------------------------------------------------------------------
Interest and dividend income:
<S>                                                                         <C>                <C>        
   Loans                                                                    $   2,469,624      $  2,528,716
   Short-term cash investments                                                    413,021           505,940
   Investment securities                                                           77,654           221,022
                                                                          ----------------------------------
              Total interest income                                             2,960,299         3,255,678
Interest on deposits                                                            1,734,447         1,368,773
                                                                          ----------------------------------
              Net interest income                                               1,225,852         1,886,905
Provision for loan losses                                                               -                 -
                                                                          ----------------------------------
               Net interest income after provision for loan losses              1,225,852         1,886,905
                                                                          ----------------------------------
Noninterest income:
   Service charges and fees                                                           716             4,421
   Other                                                                           24,160            22,735
                                                                          ----------------------------------
                                                                                   24,876            27,156
                                                                          ----------------------------------
Noninterest expense:
   Compensation and employee benefits                                             354,630           572,745
   Deposit insurance                                                               82,142            81,080
   Occupancy expenses                                                              39,380            42,155
   Advertising                                                                     35,414            22,780
   Data processing expense                                                         23,297            21,531
   Other                                                                           79,529           129,914
                                                                          ----------------------------------
                                                                                  614,392           870,205
                                                                          ----------------------------------
              Income before income taxes                                          636,336         1,043,856
                                                                          ----------------------------------
Income taxes:
   Current                                                                        188,353            82,865
   Deferred                                                                        20,000           321,000
                                                                          ----------------------------------
                                                                                  208,353           403,865
                                                                          ----------------------------------
              Net income                                                    $     427,983      $    639,991
                                                                          ===================================

Primary earnings per share                                                  $         n/a      $       0.16
                                                                          ===================================

</TABLE>

See Notes to Consolidated Financial Statements.

                                       3


<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended December 31, 1995 and 1996

<TABLE>
<CAPTION>

                                                                                                                
                                                                                   1995             1996
------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S>                                                                             <C>             <C>       
   Net income                                                                   $   427,983     $  639,991
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and amortization                                                  10,327          9,679
      Net gain on disposal of real estate acquired
         in settlement of loans                                                           -        (12,354)
      Increase in deferred income taxes                                              20,000        321,000
      Increase (decrease) in deferred compensation                                      124         (3,602)
      ESOP compensation charged to paid-in capital                                        -         34,840
      Changes in assets and liabilities:
        (Increase) decrease in:
           Prepaid expenses and other assets                                       (66,386)        (60,617)
           Refundable income taxes                                                  12,000
           Accrued interest receivable                                             (58,370)        111,531
        Increase (decrease) in:
           Accrued expenses and other liabilities                                 (108,403)         52,451
           Accrued SAIF assessment                                                                (792,868)
           Income taxes payable                                                    195,800          38,400
                                                                            --------------------------------
              Net cash provided by operating activities                            433,075         338,451
                                                                            --------------------------------
Cash Flows From Investing Activities
   Net increase in loans receivable                                             (1,050,070)       (384,531)
   Proceeds from sale of real estate acquired in settlement of loans                     -          46,779
   Proceeds from maturities of held to maturity investment securities                    -      12,000,000
   Purchase of property and equipment                                                    -          (2,578)
                                                                            --------------------------------
              Net cash provided by (used in) investing activities               (1,050,070)     11,659,670
                                                                            --------------------------------
</TABLE>

                                       4


<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended December 31, 1995 and 1996

<TABLE>
<CAPTION>

                                                                                    1995          1996
------------------------------------------------------------------------------------------------------------

Cash Flows From Financing Activities
<S>                                                                            <C>             <C>        
   Net increase in deposits                                                    $   145,036     $   502,410
   Principal payment for ESOP debt                                                       -          65,000
   Cash dividends paid                                                                   -      (1,012,781)
   Increase (decrease) in advance payments by borrowers
       for taxes and insurance                                                    (383,499)        276,273
                                                                            --------------------------------
              Net cash used in financing activities                               (238,463)       (169,098)
                                                                            --------------------------------
              Net increase (decrease) in cash and cash equivalents                (855,458)     11,829,023
Cash and cash equivalents:
   Beginning                                                                    28,648,050      35,481,906
                                                                            --------------------------------
   Ending                                                                      $27,792,592     $47,310,929
                                                                            ================================
   Cash and cash equivalents:
      Cash and short-term investments:
        Interest-bearing                                                       $ 25,591,448    $45,838,379
        Noninterest-bearing                                                         675,144        237,412
      Federal funds sold                                                          1,526,000      1,235,138
                                                                            --------------------------------
                                                                               $ 27,792,592    $47,310,929
                                                                            ================================
Supplemental Disclosures of Cash Flow Information
   Cash payments for:
      Interest                                                                 $  1,738,089    $ 1,364,072
                                                                            ================================
      Income taxes                                                             $          -    $    19,643
                                                                            ================================
Dividends declared and accrued                                                 $          -    $   405,763
                                                                            ================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       5

<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  month  period  ended  December  31,  1996  are  not
necessarily indicative of the results of operations that may be expected for the
year ended September 30, 1997.

                                       6

<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 month period ended December
31, 1996 is based on 4,057,625  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 month period ended  December 31, 1995 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 quarter ended December
31, 1996. 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 December 31, 1996.


Note 4.  Dividends Declared

On December 23,  1996,  the Board of  Directors  of the  Corporation  declared a
dividend of $ .10 a share for  stockholders of record as of January 10, 1997 and
payable on January 22, 1997. The dividends declared were accrued and reported as
other liabilities in the December 31, 1996  consolidated  statement of financial
condition.


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  Associaton 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
December 31, 1996, 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.


                                       7

<PAGE>


GREEN STREET FINANCIAL CORP AND SUBSIDIARY

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS
--------------------------------------------------------------------------------
Comparison of Financial Condition at December 31, 1996 and September 30, 1996:

Total assets  decreased by $38,587 during the first quarter to $176.2 million at
December  31,  1996.  The  only  significant  change  in  the  component  of the
Corporation's  assets during the quarter was that approximately $12.0 million in
investment  securities  matured  or were  called and the  proceeds  were held in
short-term  interest earning assets at December 31, 1996.  Investments and other
short term  interest  earning  assets  amounted to $51.2 million at December 31,
1996. Net loans receivable increased by $385,000 during the quarter and amounted
to $123.5 million at December 31, 1996.  Approximately  99% of the Corporation's
assets were interest earning at December 31, 1996, and approximately 71% of such
interest earning assets were held in the form of loans receivable.

Savings deposits increased by $502,000 during the quarter and amounted to $111.9
million at December 31, 1996.  During the three months ended  December 31, 1996,
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 three  month  period  ended
December 31, 1996,  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 $2.4 million at December 31,
1996 net of a $65,000 principal  repayment during the quarter,  is reported as a
reduction of stockholders'  equity.  Retained earnings  increased by $234,000 to
$23.1 million at December 31, 1996,  which is attributable to the  Corporation's
consolidated  earnings  during the three  months ended  December 31, 1996,  less
dividends accrued for the quarter.

AtDecember 31, 1996, the  Corporation's  stockholders'  equity amounted to $62.5
million,  which as a  percentage  of total  assets  was  35.5%.  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 $44.6 million at December
31, 1996 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  .15% and .25% at
December 31, 1996 and September 30, 1996, respectively.  The Association's level
of  nonperforming  loans was also .25% at December 31, 1995.  During the quarter
ended December 31, 1996, 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 December 31, 1996, no additional provision for
loan losses was made during the quarter.

                                       8


<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 Months Ended December 31, 1996 and
1995:

General.  Net income for the three  month  period  ended  December  31, 1996 was
$640,000,  a 49.5%  increase over the $428,000  earned during the same period in
1995. As discussed below, the increase in net income was primarily  attributable
to an increase in net interest  income for the three month period ended December
31, 1996 as compared  to the same  period in 1995 due to the  investment  of the
Corporation's stock proceeds.

Interest income. Interest income increased by $295,000 from $3.0 million for the
three months ended  December 31, 1995 to $3.3 million for the three months ended
December  31,  1996.   The  increase  was   attributable   to  higher  level  of
interest-earning  assets  outstanding  during the first  quarter of this year in
comparison  to the same quarter a  yearearlier.  Due primarily to an infusion of
cash received in the stock offering,  interest-earning assets amounted to $174.8
million at December 31, 1996 as compared to $149.5 million at December 31, 1995.

Interest  Expense.  Interest expense decreased by $366,000 from $1.7 million for
the three  months  ended  December 31, 1995 to $1.4 million for the three months
ended  December  31, 1996.  At the time of the  Conversion,  approximately  $9.5
million in existing  deposits  were  withdrawn by customers  for the purchase of
stock in the Company,  causing a  corresponding  reduction  in  interest-bearing
liabilities.  In total, the average balance of interest bearing  liabilities was
approximately  $15.9  million  lower  during  quarter  ending  December 31, 1996
compared to the same period in 1995. In addition, the Association's average cost
of funds,  which approximated 4.90% for the quarter ended December 31, 1996, was
approximately  54 basis points lower in the quarter ended December 31, 1996 than
the same quarter a year earlier.

Net interest income. Net interest income increased by $661,000 from $1.2 million
for the three  months  ended  December  31,  1995 to $1.9  million for the three
months ended December 31, 1996.  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 in the December 1996 quarter as compared to the same quarter in 1995.

Provision for loan losses. Based on management's analysis of the adequacy of its
allowances  at December 31, 1996 and 1995,  no  provisions  for loan losses were
made during the quarters.  Provisions,  which are charged to operations, and the
resulting loan loss allowances are amounts the Association's management believes
will  be  adequate  to  absorb   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 prior periods and total loans  outstanding,  and the Association did
not charge off any loans during either of the three month periods ended December
31, 1996 and 1995.  At December 31,  1996,  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.


                                       9

<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  $27,000  for the  quarters  ended  December  31,  1995  and  1996,
respectively.

Noninterest  expense.  Noninterest expense increased by $256,000 to $870,000 for
the three month period ended  December 31, 1996 from $614,000 for the comparable
quarter in 1995.  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  current  quarter.  The ESOP and  restricted  stock  program
expense  amounted to $100,000 and $131,000,  respectively,  for the three months
ended  December 31, 1996.  The plans were not in place during the quarter  ended
December 31, 1995. On an after tax basis,  the expense for both plans during the
current quarter amounted to $156,000.  Approximately $35,000 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 $50,000 during the current quarter as compared
to the same  quarter 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 Corporation  established an ESOP that acquired
260,000 shares of the stock offered in the Conversion with funds provided in the
form of a loan from the  Corporation.  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 is reported in accordance  with
SOP 93-6 "Employers'  Accounting for Employee Stock Ownership Plans." During the
current quarter,  the  Corporation's  stockholders  approved and the Association
adopted a restricted  stock program which awarded 171,925 shares of common stock
to certain  officers,  employees and  directors.  The  restricted  stock program
shares are being  expensed over the five year vesting period based upon the fair
value of the common stock at date of grant.


Capital Resources and Liquidity:

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.


                                       10

<PAGE>

GREEN STREET FINANCIAL CORP AND SUBSIDIARY

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS
--------------------------------------------------------------------------------
Capital Resources and Liquidity (Continued):

During  the  three  month  period  ended  December  31,  1996,   cash  and  cash
equivalents, a significant source of liquidity, increased by approximately $11.8
million.  The  increase is  primarily a result of the  maturity or call of $12.0
million  in  investment  securities  during  the  quarter.   Internal  operating
activities  provided an additional $338,000 in liquidity.  Financing  activities
utilized  $169,000 of liquidity,  with  increases in savings of other sources of
financing being offset by  approximately  $1.0 million in cash dividends paid to
stockholders during the quarter.

Asa 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 December 31,
1996, 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 anticipated future loan commitments,  unexpected deposit
withdrawals, and other cash requirements.


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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

               Not applicable

      Item 3.  Defaults Upon Senior Securities

               Not applicable

      Item 4.  Submission  of Matters to a Vote of  Security  Holders On October
               17, 1996, a special meeting of stockholders  was held to consider
               and  vote  upon  the  Corporation's  stock  option  plan  and the
               Association's  restricted stock plan. Both plans were approved by
               the   stockholders   as  shown   below:  

               Vote concerning Corporation's stock option plan:

                   For            Against           Abstain           Total
               -------------------------------------------------------------
               3,132,853          300,039            67,117        3,500,009


               Vote concerning Association's restricted stock plan:

                    For            Against           Abstain           Total
               -------------------------------------------------------------
               3,114,158           333,974           51,877        3,500,009


      Item 5.  Other Information

               Not applicable

      Item 6.  Exhibits and Reports on Form 8-K

               (a)      Not applicable

               (b)      Not applicable


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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  February 1, 1997        By:      s/s H. D. Reaves, Jr.
               ----------------------            ---------------------
                                                 H. D. Reaves, Jr.
                                                 President and CEO

         Dated  February 1, 1997        By:      s/s John C. Pate
               ----------------------            ----------------
                                                 John C. Pate
                                                 Senior Vice President and CFO

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