SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant ( )
Filed by a Party other than the Registrant ( )

Check the appropriate box:

( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

SOUTH STREET FINANCIAL CORP
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(Name of Registrant as Specified in its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

(X) No fee required

( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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( ) Fee paid previously with preliminary materials.

( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
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2) Form, Schedule, or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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Notes:

SOUTH STREET FINANCIAL CORP.
POST OFFICE BOX 489
155 WEST SOUTH STREET
ALBEMARLE, NORTH CAROLINA 28001
(704) 982-9184

NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 28, 2000

NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders
(the "Annual Meeting") of South Street Financial Corp. (the "Company") will be
held on February 28, 2000, at 4:00 p.m., Eastern Time, at the main office of the
Company at 155 West South Street, Albemarle, North Carolina.

THE PURPOSES OF THE ANNUAL MEETING ARE:

1. To elect six persons who will serve as directors of the
Company for one-year terms or until their successors are duly
elected and qualified;

2. To ratify the selection of McGladrey & Pullen, LLP as the
independent auditor for the Company for the fiscal year
ending September 30, 2000; and

3. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof. The Company's
Board of Directors ("Board of Directors") is not aware of any
other business to be considered at the Annual Meeting.

The Board of Directors has established January 13, 2000, as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting and any adjournments thereof. In the event there are not
sufficient shares present in person or by proxy to constitute a quorum at the
time of the Annual Meeting, the Annual Meeting may be adjourned in order to
permit further solicitation of proxies by the Company.

By Order of the Board of Directors

/s/ R.Ronald Swanner

R. Ronald Swanner
Secretary
Albemarle, North Carolina
January 24, 2000

A FORM OF PROXY IS ENCLOSED TO ENABLE YOU TO VOTE YOUR SHARES AT THE ANNUAL
MEETING. YOU ARE URGED, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, TO
COMPLETE, SIGN, DATE AND RETURN THE PROXY PROMPTLY. A RETURN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR YOUR
CONVENIENCE.

SOUTH STREET FINANCIAL CORP.

Proxy Statement

2000 Annual Meeting of Stockholders
February 28, 2000

SOLICITATION, VOTING AND REVOCABILITY OF PROXIES

GENERAL

These proxy materials are delivered in connection with the solicitation
by South Street Financial Corp.'s (the "Company", "we" or "our") Board of
Directors of proxies to be voted at the 2000 Annual Meeting of Stockholders and
at any adjournment or postponement. You are invited to attend our Annual Meeting
on February 28, 2000, at 4:00 p.m., Eastern Time, at the main office of the
Company at 155 West South Street, Albemarle, North Carolina. This Proxy
Statement and form of proxy are being mailed starting January 25, 2000. The
Company's telephone number is (704) 982-9184.

REVOCABILITY OF PROXY

A proxy may be revoked at any time before its exercise by (1) written
notice to the Secretary of the Company, (2) timely delivery of a valid
later-dated proxy or (3) voting by ballot at the Annual Meeting. However, if you
are a beneficial owner of shares of the Company's outstanding common stock that
are not registered in your own name, you will need appropriate documentation
from the holder of record of your shares to vote personally at the Annual
Meeting.

SOLICITATION

The Company will pay the expenses of soliciting proxies. Proxies may be
solicited on our behalf in person or by telephone, facsimile transmission or by
telegram by the directors, officers and regular employees of the Company and its
wholly-owned savings bank subsidiary, Home Savings Bank of Albemarle, Inc.,
S.S.B. (the "Bank"). We have requested brokerage houses and nominees to forward
these proxy materials to the beneficial owners of shares held of record and,
upon request, we will reimburse them for their reasonable out-of-pocket
expenses.

VOTING AT THE ANNUAL MEETING

Regardless of how many shares of common stock you own, your vote is
important to us. Since many of our stockholders cannot attend the Annual
Meeting, it is necessary that a large number be represented by proxy.
Accordingly, the Board of Directors has designated proxy holders to represent
those stockholders who cannot be present in person.

You are requested to vote by mail by completing, signing, dating and
returning the enclosed proxy in the postage-paid envelope provided by the
Company. You may vote for, against, abstain or withhold authority to vote on
matters to come before the Annual Meeting. The designated proxy holders will
vote your shares in accordance with your instructions. If you sign and return a
proxy card without giving specific voting instructions, your shares will be
voted as follows:

o FOR the nominees for election to the Board of Directors named in this
Proxy Statement

o FOR ratification of the selection of McGladrey & Pullen, LLP as the
Company's independent auditor for the fiscal year ending September 30,
2000

If instructions are given with respect to some but not all proposals, the proxy
holders will follow the instructions given and will vote FOR the proposals on
which no instructions are given. If matters not described in this Proxy
Statement are presented at the Annual Meeting, the proxy holders will use their
own judgment to determine how to vote your shares. We are not now aware of any
other matters to be presented except those described in the Proxy Statement. If
the Annual Meeting is adjourned, your common stock may be voted by the proxy
holders on the new meeting date as well, unless you have revoked your proxy
instructions.

You are entitled to vote your common stock if our records showed that
you held your shares as of January 13, 2000 (the "Record Date"). At the close of
business on January 13, 2000, a total of 3,787,852 shares of common stock were
outstanding and entitled to vote. Each share of common stock has one vote on
each matter calling for a vote of stockholders at the Annual Meeting.

The presence, in person or by proxy, of the holders of a majority of
the votes entitled to be cast by the stockholders entitled to vote at the Annual
Meeting is necessary to constitute a quorum. The Annual Meeting may be adjourned
in order to permit the further solicitation of proxies if there is an
insufficient number of stockholders present to constitute a quorum. Abstentions
and broker "non-votes" are counted as present and entitled to vote for purposes
of determining a quorum. A broker "non-vote" occurs when a nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power for that particular item and
has not received instructions from the beneficial owner.

VOTE REQUIRED FOR APPROVAL

A plurality of the votes cast is required for the election of
directors. As a result, those persons nominated for election as directors who
receive the largest number of votes will be elected directors. Abstentions and
broker "non-votes" are not counted for purposes of the election of directors. No
stockholder has the right to cumulatively vote his or her shares in the election
of directors.

The affirmative vote of a majority of the votes cast is required to
approve the appointment of McGladrey & Pullen LLP. Abstentions and broker
"non-votes" are not counted for purposes of approving this matter.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires that any person or group who acquires the beneficial ownership of more
than 5% of the common stock notify the Securities and Exchange Commission (the
"SEC") and the Company. Following is certain information, as of the Record Date,
regarding all persons or groups, as defined in the Exchange Act, who held of
record or who are known to the Company to own beneficially more than 5% of the
Company's common stock.

AMOUNT AND
NATURE OF PERCENTAGE
BENEFICIAL OF
NAME AND ADDRESS OWNERSHIP(1) CLASS(2)
- ---------------- ------------ ----------

Caldwell A. Holbrook, Jr. 563,077(3),(4),(5) 14.78%
1700 Bellamy Circle
Albemarle, NC 28001

Joel A. Huneycutt 574,643(4),(5),(6) 15.08%
P. O. Box 167 Renee Ford Road
Locust, NC 28097

Douglas Dwight Stokes 580,700(4),(5),(7) 15.24%
1009 Ridge Street
Albemarle, NC 28001

Greg E. Underwood 562,643(4),(5),(8) 14.77%
500 North Fourth Street
Albemarle, NC 28001
- ------------------------------------

(1) Voting and investment power is not shared unless otherwise indicated.
Also, unless otherwise noted, all shares are owned directly or
indirectly by the named individuals, by their spouses and minor
children, or by other entities controlled by the named individuals.

(2) Based upon a total of 3,787,852 shares of common stock outstanding at
the Record Date, plus the number of shares that such individual has the
right to purchase pursuant to the options described in the footnotes
hereto.

(3) This number includes 3,434 shares for which Mr. Holbrook shares voting
and investment power with his spouse.

(4) Includes 22,482 shares underlying options that have vested or are
exercisable within 60 days under the Company's Stock Option Plan.

(5) Mr. Holbrook, Mr. Huneycutt, Mr. Stokes and Mr. Underwood serve as a
trustees of the Home Savings Bank of Albemarle, Inc., S.S.B. Employee
Stock Ownership Plan (the "ESOP"), which holds 528,168 shares of the
Company's common stock. The trustees of the ESOP share certain voting
and investment power of such shares.

(6) This number includes 13,263 shares for which Mr. Huneycutt shares
voting and investment power with his spouse. This number also includes
1,737 shares held by Mr. Huneycutt's wife. Mr. Huneycutt disclaims
beneficial ownership of such shares.

(7) This number includes 21,057 shares for which Mr. Stokes shares voting
and investment power with his spouse.

(8) This number includes 3,000 shares for which Mr. Underwood shares voting
and investing power with his spouse.

Set forth below is certain information as of the Record Date regarding
beneficial ownership of the common stock by each of the members of the Board of
Directors (including nominees for re-election at the Annual Meeting), each of
the members of the board of directors of the Bank, each of the named executive
officers of the Company and the Bank, and the directors and all executive
officers of the Company and the Bank as a group.

AMOUNT AND
NATURE OF PERCENTAGE
BENEFICIAL OF
NAME AND ADDRESS OWNERSHIP(1) CLASS(2)
- ---------------- -------------- ----------

Caldwell A. Holbrook, Jr.
1700 Bellamy Circle 563,077(3),(4),(5) 14.78%
Albemarle, NC 28001

Joel A. Huneycutt
P. O. Box 167 Renee Ford Road 574,643(4)(5),(6) 15.08%
Locust, NC 28097

Douglas Dwight Stokes
1009 Ridge Street 580,700(4),(5),(7) 15.24%
Albemarle, NC 28001

Greg E. Underwood
500 North Fourth Street 562,643(4),(5),(8) 14.77%
Albemarle, NC 28001

Carl M. Hill, President and
Chief Executive Officer of the Company and the Bank
1415 Melchor Road 166,128(9) 4.29%
Albemarle, NC 28001

R. Ronald Swanner, Executive Vice President of the
Company and the Bank and Secretary of the Company
1415 Northridge Drive 108,188(10) 2.81%
Albemarle, NC 28001

Directors and all executive officers as a group 975,302(11) 24.20%
(7 persons)
- --------------------------------

(1) Voting and investment power is not shared unless otherwise indicated.
Unless otherwise noted all shares are owned directly or indirectly by
the named individuals, by their spouses or minor children, or by other
entities controlled by the named individuals.

(2) Based upon a total of 3,787,852 shares of the common stock outstanding
at the Record Date, plus the number of shares that such individual has
the right to purchase pursuant to the options described in the
footnotes hereto.

(3) This number includes 3,100 shares for which Mr. Holbrook shares voting
and investment power with his spouse.

(4) Includes 22,482 shares underlying options that have vested or are
exercisable within 60 days under the Company's Stock Option Plan.

(7) This number includes 21,057 shares for which Mr. Stokes shares voting
and investment power with his spouse.

(8) This number includes 3,000 shares for which Mr. Underwood shares voting
and investing power with his spouse.

(9) This number includes 3,200 shares held by Mr. Hill's wife. Mr. Hill
disclaims beneficial ownership of such shares. This number also
includes 84,309 shares underlying options that have vested or are
exercisable within 60 days under the Stock Option Plan.

(10) This number includes 10,000 shares for which Mr. Swanner shares voting
and investment power with his spouse. This number also includes 67,446
shares underlying options that have vested or are exercisable within 60
days under the Stock Option Plan.

(11) The 528,168 shares held by the ESOP for which the trustees, Messrs.
Holbrook, Huneycutt, Stokes and Underwood, share voting and investment
power, and the 23,136 shares, in the aggregate, allocated under the
ESOP and held by the Bank's executive officers, have been included only
once in the total number of shares owned beneficially by the directors
and executive officers as a group. This number includes 251,072 shares
underlying options that have vested or are exercisable within 60 days
under the Stock Option Plan.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of the common
stock, to file reports of ownership and changes in ownership with the SEC.
Executive officers, directors and greater than ten percent beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.

Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that during the fiscal year ended September 30,
1999, all of its executive officers and directors and greater than ten percent
beneficial owners complied with all applicable Section 16(a) filing
requirements.

PROPOSAL 1
ELECTION OF DIRECTORS

GENERAL

The Articles of Incorporation of the Company provide that the number of
directors of the Company shall not be less than five nor more than fifteen. The
exact number of directors shall be fixed or changed from time to time by the
Board of Directors. The Board of Directors has currently fixed the size of the
Board at six members.

The Board of Directors has nominated the six persons named below for
election as directors for terms of one year or until their earlier death,
resignation, retirement, removal or disqualification or until their successors
are elected and qualified.

The persons named in the accompanying form of proxy intend to vote any
shares of the common stock represented by valid proxies received by them to
elect the six nominees listed below as directors, unless authority to vote is
withheld or such proxies are revoked. Each of the nominees for election is
currently a member of the Board of Directors. In the event that any of the
nominees should become unavailable to accept nomination or election, it is
intended that the proxy holders will vote to elect in his stead such other
person as the present Board of Directors may recommend or to reduce the number
of directors to be elected at the Annual Meeting by the number of such persons
unable or unwilling to serve (subject to the requirements of the Company's
Articles of Incorporation). The present Board of Directors has no reason to
believe that any of the nominees named herein will be unable to serve if elected
to office. In order to be elected as a director, a nominee need only receive a
plurality of the votes cast. Accordingly, shares not voted for any reason
respecting any one or more nominees will not be counted as votes against such
nominees. No shareholder has the right to cumulatively vote his or her shares in
the election of directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE FOLLOWING
NOMINEES FOR ELECTION AS DIRECTORS.

The following table sets forth as to each nominee, his name, age,
principal occupation during the last five years and the year he was first
elected as a director of the Bank and the Company. All nominees have previously
served as directors of the Bank and Company.

AGE ON DIRECTOR DIRECTOR OF
SEPTEMBER PRINCIPAL OCCUPATION TERM OF BANK COMPANY
NAME 30, 1999 DURING LAST FIVE YEARS EXPIRES SINCE SINCE
- ---- --------- ---------------------- -------- --------- ---------

Carl M. Hill 67 President and CEO, the Company and 2001 1961 1996
the Bank

Caldwell A. Holbrook, Jr. 52 Partner, D.A. Holbrook & Sons, 2001 1985 1996
General Contractors

Joel A. Huneycutt 57 President, Locust Lumber Company, 2001 1984 1996
Inc.

Douglas Dwight Stokes 53 Owner and President, Stokes 2001 1988 1996
Construction Company

R. Ronald Swanner 51 Executive Vice President, the 2001 1981 1996
Company and the Bank; Secretary of
the Company

Greg E. Underwood 36 CPA in private practice; Owner, 2001 1995 1996
Carolina Oil Co. of Albemarle, Inc.
and Barefoot Oil Co. of Albemarle,
Inc.; Secretary/Treasurer of
Southeastern Floral Corp.

MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD

The Board of Directors is scheduled to meet quarterly and may have
additional meetings as needed. During fiscal 1999, the Board of Directors held 4
meetings. All directors attended at least 75% of the aggregate number of
meetings of the Board of Directors and committees of the Board on which they
served during the year ended September 30, 1999.

The Company's Board of Directors has one standing committee - the Audit
Committee. The Audit Committee of the Board consists of Messrs. Stokes,
Underwood and Huneycutt. This Committee is responsible for reviewing and
obtaining the annual audit report from the Company's and the Bank's independent
auditor. During the fiscal year ended September 30, 1999, the Audit Committee
met one time.

The Bank's board of directors has appointed five standing committees to
which certain responsibilities have been delegated - the Loan Committee, the
Audit Committee, the Nominating Committee, the Proxy Committee and the
Compensation Committee. The members of the Company's Audit Committee also serve
on the Bank's Audit Committee. The Bank's Audit Committee met one time during
the fiscal year ended September 30, 1999.

The Bank's Nominating Committee, composed of Messrs. Holbrook,
Huneycutt and Underwood, serves in that capacity for the Company's Board of
Directors. The Bank's Nominating Committee generally meets on an annual basis
and met one time during the fiscal year ended September 30, 1999.

The Bank's Compensation Committee, composed of Messrs. Huneycutt,
Holbrook and Stokes, also serves as the Company's compensation committee. The
Bank's Compensation Committee meets on an annual basis and met one time during
the fiscal year ended September 30, 1999. In addition, the Bank's board of
directors appoints other committees of its members to perform certain more
limited functions from time to time.

DIRECTORS' COMPENSATION

DIRECTORS' FEES. Members of the Board of Directors receive no fees or
compensation for their service. However, all members of the Board of Directors
also are directors of the Bank, and are compensated for that service. For their
service on the Bank's board of directors, members of the board, including Mr.
Hill and Mr. Swanner, receive a retainer of $2,500 per year and an additional
$600 per regular monthly board meeting attended. Mr. Stokes receives an
additional $300 per month for his service on the Loan Committee.

BANK DEFERRED COMPENSATION AGREEMENTS WITH DIRECTORS. 1985 RETIREMENT
PAYMENT AGREEMENTS. Mr. Hill and Mr. Swanner, as well as two non-employee
directors and two retired directors of the Bank, participate in a deferred
compensation plan established in 1985 under which such directors, or their
designated beneficiaries, would be paid specified amounts over a ten-year period
beginning at age 65 (or in one case, age 70) in return for the deferral of
certain amounts of the director's fees over a five-year period. If a director
dies while serving as a director but before receiving all of his benefits under
the agreement, payments will be made to his designated beneficiary, or if none,
to his estate.

As a condition of the agreement, each director has agreed not to engage
in activities in competition with the Bank and to provide consulting services to
the Bank during the period the retirement benefits are payable.

1995 RETIREMENT PAYMENT AGREEMENTS. In 1995, the Bank entered into
additional deferred compensation arrangements with all of its directors. Under
the agreements, the Bank will pay each director a specified amount per month for
a period of ten years upon the director's attainment of age 65 (or in Mr. Hill's
case, beginning in 2000), in return for the deferral of certain amounts of the
director's fees over a five-year period.

If a director dies while serving as a director but before receiving all
of his benefits under the agreement, payments will be made to his designated
beneficiary, or if none, to his estate, unless the death is by suicide within
two years of the execution of the agreement (in which case the deferred fees
will be returned, with interest). If a director becomes disabled while serving
as a director, but prior to attaining age 65 (October 1, 2000 for Mr. Hill), the
Bank will pay the same benefits that would be payable in the event of the
director's death. If a director terminates his service to the Bank for reasons
other than death or disability, he or his beneficiary shall be entitled to
receive at age 65 (or October 1, 2000 for Mr. Hill) or his prior death only the
vested portion of the benefit due under the agreement. Vesting occurs according
to a schedule contained in the agreement. If any director's termination of
service shall occur after a change in control of the Bank, the director shall be
100% vested in the retirement benefits.

BANK DIRECTORS RETIREMENT PLAN. In 1995, the Bank adopted a retirement
plan for directors after determining that such a plan would help it attract and
retain qualified directors. Under the plan all directors will be paid $1,000 per
month over a ten-year period beginning after the director attains 70 years of
age (the "Normal Retirement Date"). If a director dies while serving as a
director but before receiving all of his benefits under the plan, payments will
be made to his designated beneficiary in a lump sum or installments at the
Bank's option, unless the death is by suicide within two years of the execution
of the agreement. If a director becomes disabled while serving as a director,
but prior to his Normal Retirement Date, the Bank will pay the benefits due
under the plan, either in installments over the ten-year period or in a lump sum
payment. If a director terminates his service to the Bank before his Normal
Retirement Date for reasons other than death or disability, he or his
beneficiary shall be entitled at the Normal Retirement Date or his prior death
to receive only the vested portion of the benefits due under the plan. Vesting
occurs according to a schedule contained in the agreement. If any director's
termination of service shall occur after a change in control of the Bank, the
director shall be 100% vested in the retirement benefits.

The Bank has purchased life insurance on the lives of its directors to
fund its obligations under the deferred compensation and directors' retirement
plan agreements described above. Total expense related to the above-described
agreements was approximately $120,000 for the fiscal year ended September 30,
1999. The Bank's accrued liability for obligations under the plans amounted to
$1,582,000 at September 30, 1999.

STOCK OPTION PLAN. On October 15, 1997, the stockholders of the Company
approved the South Street Financial Corp. Stock Option Plan (the "Stock Option
Plan" or the "Plan"). The Company has reserved 449,650 shares of its common
stock for issuance upon the exercise of options that have been granted under the
Stock Option Plan. All directors, officers and employees of the Company, the
Bank, and any of the Bank's subsidiaries are eligible for participation in the
Plan. Options to purchase 449,650 shares of the common stock were granted on
January 20, 1998. Of this amount, options to purchase 22,482 shares of the
common stock were granted to each non-employee director, options to
purchase112,413 shares were granted to Mr. Hill, options to purchase 89,931
shares were granted to Mr. Swanner, and options to purchase 157,374 shares were
granted to other employees. Twenty-five percent of the aggregate number of
options granted to executive officers and employees of the Company and the Bank
vested and became exercisable on the date of grant and 25% of the aggregate
number of such options granted vest and become exercisable on each of the next
three annual anniversary dates thereafter. Nonqualified stock options granted to
the nonemployee directors of the Company and the Bank vested immediately and are
nonforfeitable. If an option granted under the Stock Option Plan is forfeited,
released, expires or is terminated unexercised, the share(s) underlying such
option shall thereafter be available for the granting of options under the Stock
Option Plan. However, if such forfeiture, expiration, release or termination
date of an option is beyond the term of existence of the Stock Option Plan, such
shares shall not be available for additional option grants.

No cash consideration was paid for the options. The option exercise
price is $12.00, the fair market value of the common stock on the date of grant
based on the average high and low selling prices of the common stock on the
Nasdaq National Market ("Nasdaq"), as provided in the Plan. Based on the closing
market price per share paid on September 30, 1999, the fair market value of the
common stock underlying the options is $6.6875 per share. The exercise price may
be paid in cash or cash equivalent or, if permitted by the Committee, by
delivery of shares of common stock with a market value equal to the exercise
price.

All options granted to participants under the Stock Option Plan shall
become vested and exercisable at the rate determined by the Committee when
making an award. Unless the Committee shall specifically state otherwise at the
time an option is granted, all options granted to participants shall become
vested and exercisable in full on the date an optionee terminates his employment
with or service to the Company, the Bank or any subsidiary because of his death,
disability or retirement; if a participant's employment with the Company, the
Bank or any subsidiary is terminated for any reason other than the participant's
death, disability or retirement, unvested options will not vest. In addition,
all stock options will become vested and exercisable in full in the event that
the optionee ceases to be an employee or director of the Company or the Bank
after a change in control of the Company, as defined in the Stock Option Plan.
Options granted under the Plan will have a term of ten years. Stock options are
non-transferable except by will or the laws of descent and distribution.

Options granted under the Plan were granted in tandem with stock
appreciation rights, pursuant to which optionees will have the right to
surrender exercisable options in exchange for payment by the Company of an
amount equal to the excess of the market value of shares of common stock subject
to the surrendered options over the exercise price of the surrendered options.
In the discretion of the Committee, this payment may be made in cash or in
shares of common stock or in some combination of cash and common stock. Stock
appreciation rights shall terminate upon the exercise of the options to which
they are attached. Stock appreciation rights will be subject to the same vesting
and termination provisions as are applicable to the stock options to which they
are attached.

The Stock Option Plan provides that the Company's Board of Directors
shall have the discretionary authority to authorize cash payments to the holders
of unexercised options, both vested and unvested, equal to the amount of
dividends which would have been paid on shares subject to options if the options
had been exercised. No such payment may be made in connection with dividends or
other distributions which result in a reduction in the option exercise price as
described below. If an optionee receives such a cash payment with respect to any
unvested option, and if such option is later forfeited, the optionee must repay
any cash payment made with respect to the forfeited option.

In the event of a stock split, reverse stock split or stock dividend,
the number of shares of common stock under the Stock Option Plan, the number of
shares to which any option relates and the exercise price per share under any
option shall be adjusted to reflect such increase or decrease in the total
number of shares of common stock outstanding. In addition, in the event the
Company declares a special cash dividend or return of capital, the per share
exercise price of all previously granted options which remain unexercised as of
the date of such declaration may be adjusted to give effect to such special cash
dividend or return of capital.

MANAGEMENT RECOGNITION PLAN. On October 15, 1997, the stockholders of
the Company approved the Home Savings Bank of Albemarle, Inc., S.S.B. Management
Recognition Plan and Trust (the "MRP"). Effective October 29, 1997, restricted
stock awards of 179,860 shares of the common stock were made to 41 directors,
officers and employees of the Bank. On October 29, 1997, non-employee directors
each received an award of 8,993 shares of restricted stock; Mr. Hill received an
award of 44,965 shares and Mr. Swanner received an award of 35,972 shares. The
shares awarded under the MRP were issued from authorized but unissued shares of
common stock. Shares issued under the MRP were issued at no cost to recipients.

The Board of Directors has appointed trustees of the MRP Trust who have
the responsibility to invest all funds contributed by the Bank to the Trust.
Recipients are entitled to direct the trustees as to the voting of MRP shares
which are not yet vested and distributed to the recipient. All dividends and
other cash and noncash distributions declared with respect to each unvested MRP
share will be held by the trustees for the benefit of each recipient, and such
dividends, including any interest earned, will be paid out proportionately by
the trustees to each recipient as soon as practicable after each recipient's MRP
shares vest. The shares granted vest at a rate of 25% on the effective date of
the award (October 29, 1997), and 25% on each of the subsequent three
anniversary dates. Awards of common stock under the MRP would immediately vest
upon the disability or death of a recipient or if the participant ceases to be
employed by the Company or the Bank after a change in control of the Company, as
defined in the MRP. The awards are not forfeitable upon vesting.

EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
persons who are executive officers of either the Company or the Bank or both.

AGE ON EMPLOYED BY
SEPTEMBER 30, POSITIONS AND OCCUPATIONS DURING THE BANK OR THE
NAME 1999 LAST FIVE YEARS COMPANY SINCE
- ---- ------ --------------------- -----------------

Carl M. Hill 67 President and Chief Executive Officer 1957
of the Company and the Bank

R. Ronald Swanner 51 Executive Vice President of the 1974
Company and the Bank and Secretary of
the Company

Christopher F. Cranford 44 Treasurer and Controller of the Bank 1987
and the Company

EXECUTIVE COMPENSATION

The executive officers of the Company are not paid any cash
compensation by the Company. However, the executive officers of the Company also
are executive officers of the Bank and receive cash compensation from the Bank.

The following table sets forth for the fiscal year ended September 30,
1999 certain information as to the cash compensation received by and the amounts
accrued for the benefit of (i) the President and (ii) the Executive Vice
President of the Bank. No other executive officer of the Bank had cash
compensation during the year ended September 30, 1999 that exceeded $100,000 for
services rendered in all capacities to the Bank.

ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS ALL OTHER
COMPENSATION
------------------------------------------- ------------------------------------ -----------------

SECURITIES
UNDERLYING
OPTIONS/STOCK
NAME AND RESTRICTED APPRECIATION
PRINCIPAL OTHER ANNUAL STOCK RIGHTS ("SARS")
POSITION YEAR SALARY(1) BONUS COMPENSATION(4) AWARDS (IN SHARES)(7)
----------- ---- ---------- ------- --------------- -------- ---------------

Carl M. Hill 1999 $189,514 $179,627(2) - - - - - - - - - $86,342(8)
President and CEO
1998 $182,197 $211,166(2) - - - $598,601(5) 112,413/112,413 $46,071(9)

1997 $173,725 $11,012(2) - - - - - - - - - $25,000(10)

1996 $164,790 $10,388(2) - - - - - - - - - $27,000(11)

R. Ronald Swanner 1999 $125,337 $171,786(3) - - - - - - - - - $61,068(12)
Executive Vice
President 1998 $120,634 $167,110(3) - - - $478,877(6) 89,931/89,931 $28,971(13)

1997 $115,180 $7,081(3) - - - - - - - - - $9,000(14)

1996 $109,420 $6,678(3) - - - - - - - - - $11,300(15)

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

(1) In addition to salary, this amount also includes $9,700, $9,700, $9,700 and
$9,700 each in directors' fees for Mr. Hill and Mr. Swanner for services on
the Company's and the Bank's board of directors for 1999, 1998, 1997 and
1996.

(2) Mr. Hill received bonuses of $179,627, $211,166, $11,012 and $10,388 in
1999, 1998, 1997 and 1996, respectively. In 1999 and 1998, this amount
includes the value at the date of grant of a stock award made to Mr. Hill
pursuant to the MRP of 11,241 shares of the common stock per year that
vested immediately upon grant. The shares granted in 1998 and 1998 had an
aggregate fair market value of $199,528 and $75,877, respectively, on the
date of grant. On September 30, 1999, the value of the shares granted in
1998 was $75,175, based on a fair market value of $6.6875 per share. See
footnote 5 below for more information on the stock grant awards made to Mr.
Hill and "Management Recognition Plan" for more information about the terms
of the MRP.

(3) Mr. Swanner received bonuses of $171,786, $167,110, $7,081 and $6,678 in
1999, 1998, 1997 and 1996, respectively. In 1999 and 1998, this amount
includes the value at the date of grant of a stock award made to Mr.
Swanner pursuant to the MRP of 8,993 shares of the common stock per year
that vested immediately upon grant. Such shares had an aggregate fair
market value of $74,754 and $60,703, respectively, on the date of grant. On
September 30, 1999, the value of the shares granted in 1998 was $60,141.
See footnote 6 below for more information on the stock grant awards made to
Mr. Swanner and "Management Recognition Plan" for more information about
the terms of the MRP.

(4) Under the "Other Annual Compensation" category, perquisites for the fiscal
years ended September 30, 1999, 1998, 1997 and 1996 did not exceed the
lesser of $50,000 or 10% of salary and bonus as reported for either Mr.
Hill or Mr. Swanner.

(5) This amount represents the fair market value on the date of the grant
(October 29, 1997) of 22,483 unvested shares awarded to Mr. Hill pursuant
to the MRP. On October 29, 1997, Mr. Hill was awarded 44,965 shares of the
common stock that had a fair market value of $17.75 on the date of the
grant. Twenty-five percent of the shares (11,241 shares) vested immediately
upon grant, another 25% (11,241 shares) vested on October 29, 1998, another
25% (11,241 shares) vested on October 29, 1999, and the remaining 25% will
vest during the next year. The 44,965 shares had a value of $300,704 on
September 30, 1999, based on a fair market value of $6.6875 per share. Mr.
Hill's unvested shares are being held in the MRP Trust. All dividends paid
on unvested shares are held by the trustees for Mr. Hill's benefit and such
dividends, with any interest earned, will be paid to Mr. Hill after the
shares vest.

(6) This amount represents the fair market value on the date of the grant
(October 29, 1997) of 17,986 unvested shares awarded to Mr. Swanner
pursuant to the MRP. On October 29, 1997, Mr. Swanner was awarded 35, 972
shares of the common stock that had a fair market value of $17.75 on the
date of the grant. Twenty-five percent of the shares (8,993 shares) vested
immediately upon grant, another 25% (8,993 shares) vested on October 29,
1998, another 25% (8,993 shares) vested on October 29, 1999, and the
remaining 25% will vest during the next year. The 35,972 shares had a value
of $240,563 on September 30, 1999, based on a fair market value of $6.6875
per share. Mr. Swanner's unvested shares are being held in the MRP Trust.
All dividends paid on unvested shares are held by the trustees for Mr.
Swanner's benefit and such dividends, with any interest earned, will be
paid to Mr. Swanner after the shares vest.

(7) These options, granted pursuant to the Company's Stock Option Plan, entitle
Mr. Hill and Mr. Swanner to purchase, at any time after vesting and before
January 20, 2008, shares of the common stock in exchange for an exercise
price of $12.00 per share, which was the fair market value of the shares on
the date of grant. These options vested 25% on January 20, 1998, and will
vest 25% each year thereafter until all such options are vested on January
20, 2001. Options become 100% vested upon death, disability, retirement or
change of control, as defined in the Stock Option Plan. In tandem with the
options, Mr. Hill and Mr. Swanner were granted Stock Appreciation Rights
("SARs"),which vest in the same quantity and on the same schedule as the
options. See "Director Compensation - Stock Option Plan" for more
information about the terms of the Stock Option Plan, including a further
description of the SARs.

(8) Includes $21,000 accrued under supplemental income agreements established
for the benefit of Mr. Hill. Such amounts accrued under the supplemental
income agreements have not been paid to Mr. Hill. See "- Bank Supplemental
Income Agreements". Also includes $65,342, the amount contributed by the
Bank for Mr. Hill's benefit under the ESOP.

(9) Includes $27,000 accrued under supplemental income agreements established
for the benefit of Mr. Hill. Such amounts accrued under the supplemental
income agreements have not been paid to Mr. Hill. See "- Bank Supplemental
Income Agreements". Also includes $19,071, the amount contributed by the
Bank for Mr. Hill's benefit under the ESOP.

(10) Includes $25,000 accrued under supplemental income agreements established
for the benefit of Mr. Hill. Such amounts accrued under the supplemental
income agreements have not been paid to Mr. Hill. See "- Bank
Supplemental Income Agreements".

(11) Includes $2,000 contributed to the Bank's 401(k) profit sharing plan for
Mr. Hill for fiscal year 1996 and $25,000 of accrued expense under
supplemental income agreements established for the benefit of Mr. Hill.
Such amounts accrued under the supplemental income agreements have not been
paid to Mr. Hill. See "- Supplemental Income Agreements".

(12) Includes $10,500 accrued under supplemental income agreements established
for the benefit of Mr. Swanner. Such amounts accrued under the supplemental
income agreements have not been paid to Mr. Swanner. See "- Bank
Supplemental Income Agreements". Also includes $50,568, the amount
contributed by the Bank for Mr. Swanner's benefit under the ESOP.

(13) Includes $9,900 accrued under supplemental income agreements established
for the benefit of Mr. Swanner. Such amounts accrued under the supplemental
income agreements have not been paid to Mr. Swanner. See "- Bank
Supplemental Income Agreements". Also includes $19,071, the amount
contributed by the Bank for Mr. Swanner's benefit under the ESOP.

(14) Includes $9,000 accrued under supplemental income agreements established
for the benefit of Mr. Swanner. Such amounts accrued under the supplemental
income agreements have not been paid to Mr. Swanner. See "- Bank
Supplemental Income Agreements".

(15) Includes $1,300 contributed to the 401(k) profit sharing plan for Mr.
Swanner for fiscal year 1996 and $10,000 of accrued expense under
supplemental income agreements established for the benefit of Mr. Swanner.
Such amounts accrued under the supplemental income agreements have not been
paid to Mr. Swanner. See "- Supplemental Income Agreements".

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES

SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ON VALUE OPTIONS/SARS AT MONEY OPTIONS/SARS AT
NAME EXERCISE REALIZED FISCAL YEAR END(1) FISCAL YEAR END(2)
---- -------- -------- ------------------ ------------------

EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------

Carl M. Hill 0 $0 56,206/56,206 56,207/56,207 $0 $0

R. Ronald Swanner 0 $0 44,965/44,965 44,966/44,966 $0 $0
- ------------------------------------

(1) All stock options were granted as of January 20, 1998.

(2) Dollar amounts shown represent the value of stock options held by Mr.
Hill and Mr. Swanner as of September 30, 1999. None of Mr. Hill's or
Mr. Swanner's options were "in-the-money" at such date. An option is
considered to be "in-the-money" if the fair market value of the
Company's common stock exceeds the exercise or base price of the shares
subject to the options as of the fiscal year end (in this case
September 30, 1999). At September 30, 1999, the exercise price of the
stock options was $12.00. On September 30, 1999, the closing market
price per share for the common stock as reported on Nasdaq was $6.6875.

BANK SUPPLEMENTAL INCOME AGREEMENTS. 1985 AGREEMENTS. The Bank entered
into Supplemental Income Agreements with Mr. Hill and Mr. Swanner on October 1,
1985. The agreements provide that the Bank will pay Mr. Hill $1,200 per month
for a continuous period of 216 months, and Mr. Swanner $861 per month for a
continuous period of 180 months. Mr. Hill's benefits will commence on the later
of his 62nd birthday or his actual retirement. Mr. Swanner's benefits will
commence on the first day of the month following his 65th birthday. If the
executive dies while employed by the Bank but before receiving any or all of the
payments due under the agreement, the remaining payments will be made to his
designated beneficiary, or, if none, to his estate. If the executive becomes
disabled prior to his retirement from the Bank, the Bank will pay him the
benefits due under the agreement. The plan also provides for an early retirement
benefit upon retirement with 25 years of service with the Bank.

As a condition of the agreements, Mr. Hill and Mr. Swanner must be
available to provide consulting services to the Bank during the period the
retirement payments are payable and must not engage in activities in Stanly
County, North Carolina in competition with the Bank.

1995 AGREEMENTS. In September 1995, the Bank also entered into
Supplemental Income Agreements with Mr. Hill and Mr. Swanner. Under the
agreements, the Bank will pay Mr. Hill $25,000 annually and Mr. Swanner $15,000
annually for a period of fifteen years upon the executive's attainment of age
65 or actual retirement, if later.

If the executive dies while employed by the Bank but before receiving
all of his benefits under the agreement, payments will be made to his designated
beneficiary, or if none, to his estate, unless the death is by suicide within
two years of the execution of the agreement. If the executive becomes disabled
while employed by the Bank, but prior to attaining age 65, the Bank will pay the
same benefits that would be payable in the event of the executive's death,
either in installments over the fifteen-year period or in a lump sum payment. If
the executive terminates his service to the Bank for reasons other than death or
disability, he or his beneficiary shall be entitled to receive at age 65 or his
prior death only the vested portion of the benefits due under the agreement.
Vesting occurs according to a schedule contained in the agreement. If the
executive's termination of service shall occur after a change in control of the
Bank, the executive shall be 100% vested in the retirement benefits.

As a condition of the agreement, each executive has agreed not to
engage in activities in competition with the Bank in Albemarle, North Carolina,
and to provide consulting services to the Bank during the period that the
retirement benefits are payable.

The Bank has purchased life insurance on the lives of Mr. Hill and Mr.
Swanner to fund its obligations under the agreements described above. Total
expense related to those agreements was $38,800 for the fiscal year ended
September 30, 1999, and the Bank's accrued liability for plan obligations
amounted to $531,000 at September 30, 1999.

RETIREMENT PLAN. The Bank maintains a non-contributory defined benefit
pension plan ("Pension Plan") for the benefit of all of its employees who have
completed one year of service and who are at least 21 years of age. Under the
Pension Plan, the Bank annually contributes an actuarially determined amount to
provide a benefit for each participant at retirement.

Participants are fully vested in amounts contributed to the Pension
Plan on their behalf by the Bank after completing five years of service.
Benefits under the plan are payable in the event of the participant's
retirement, death, disability or termination of employment.

Normal retirement age under the Pension Plan is the later of (a) age 65
or (b) the fifth anniversary of the date an employee first became a participant
in the Pension Plan ("Normal Retirement Age"). Subject to certain restrictions
on maximum benefits required by federal law, upon reaching Normal Retirement
Age, each participant will receive a retirement benefit in the form of a
straight life annuity, determined pursuant to a formula which takes into
consideration a participant's "final average compensation," years of service
with the Bank and the participant's expected benefits from Social Security. In
general, for purposes of the Pension Plan, a participant's "Final Average
Compensation" is defined as his average annual compensation for those five
consecutive years in the last ten calendar years immediately preceding Normal
Retirement Age that produce the highest average. The plan also offers early
retirement to participants who have completed fifteen years of service and who
are at least fifty-five years of age.

The following table shows the retirement benefit payable for a range of
compensation and years of service for a person who retires at Normal Retirement
Age. These are hypothetical benefits based upon the plan's normal benefit
formula.

EARNINGS CREDITED FOR
RETIREMENT BENEFITS
----------------------
YEARS OF SERVICE AT NORMAL RETIREMENT
-------------------------------------

15 20 25 30 35
-- -- -- -- --
$ 25,000....................... $4,688 $6,250 $7,813 $9,375 $10,938

$ 50,000....................... $11,038 $14,718 $18,397 $22,077 $25,756

$ 75,000....................... $18,163 $24,218 $30,272 $36,327 $42,381

$100,000....................... $25,288 $33,718 $42,147 $50,577 $59,006

$125,000....................... $32,413 $43,218 $54,022 $64,827 $75,631

$150,000....................... $39,538 $52,718 $65,897 $79,077 $92,256

The benefits listed above are annual amounts and are based on the assumption
that the participant is age 65. As of September 30, 1999, the Final Average
Compensation and years of service for Mr. Hill and Mr. Swanner would have been:
Mr. Hill - $153,680 and 42 years; Mr. Swanner - $110,273 and 25 years.

EMPLOYEE STOCK OWNERSHIP PLAN. The Bank has established the ESOP for
eligible employees of the Bank. Employees with 1,000 hours of employment in a
plan year and who have attained age 21 are eligible to participate. The ESOP
borrowed funds from the Company and used the funds to purchase 359,720 of the
shares of common stock issued in connection with the Bank's conversion from a
North Carolina-chartered mutual savings bank to a North Carolina-chartered stock
savings bank (the "Conversion.").

Collateral for the Company's loan to the ESOP is the common stock
purchased by the ESOP. The loan will be repaid principally from the Bank's
discretionary contributions to the ESOP over a period of 15 years or less.
Dividends, if any, paid on shares held by the ESOP may also be used to reduce
the loan. The loan has not been guaranteed by the Bank. On January 8, 1998, the
Company paid a $6.00 per share return of capital in the form of a special
dividend to its stockholders. As of September 30, 1999, the ESOP had purchased
168,448 shares of common stock in the open market using funds received as a
special dividend in addition to the 359,720 shares purchased in the Conversion
and now holds, net of shares allocated or committed to be allocated to
participants' accounts, in the aggregate, 528,168 shares.

Shares purchased by the ESOP are held in a suspense account for
allocation among participants as the loan is repaid. Contributions to the ESOP
and shares released from the suspense account in an amount proportional to the
repayment of the ESOP loan are allocated among ESOP participants on the basis of
relative compensation in the year of allocation. Benefits vest in annual
increments with full vesting upon attaining five years of service (with credit
given for years of service prior to the Conversion). Prior to the completion of
five years of credited service, a participant who terminates employment for
reasons other than death, retirement (or early retirement), or disability will
receive only vested benefits under the ESOP. Forfeitures are reallocated among
remaining participating employees in the same proportion as contributions.

Benefits immediately vest and are payable upon death or disability. The Bank's
contributions to the ESOP are not fixed, so benefits payable under the ESOP
cannot be estimated.
The Bank has established a committee of the board of directors to
administer the ESOP. Trustees for the ESOP were appointed prior to the
Conversion. The ESOP committee may instruct the trustees regarding investment of
funds contributed to the ESOP. Participating employees may instruct the trustees
as to the voting of all shares allocated to their respective ESOP accounts. The
unallocated shares held in the suspense account, and all allocated shares for
which voting instructions are not received, will be voted by the trustees in
their discretion subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended.

STOCK OPTION PLAN AND MANAGEMENT RECOGNITION PLAN. See "Director
Compensation - Stock Option Plan" and "-Management Recognition Plan" for a
discussion of the executive officers' benefits under those plans.

EMPLOYMENT AGREEMENTS. In 1996 the Bank entered into employment
agreements with Carl M. Hill and R. Ronald Swanner in order to establish their
duties and compensation and to provide for their continued employment with the
Bank. The agreements provide for an initial term of employment of three years.
Commencing on the first anniversary date and continuing on each anniversary date
thereafter, following a performance evaluation of the employee, each agreement
may be extended for an additional year. Each agreement provides that base salary
shall be reviewed by the board of directors of the Bank not less often than
annually. Under the terms of the agreements, Mr. Hill's annual base salary was
$181,560 for the 1999 fiscal year and Mr. Swanner's annual base salary was
$116,760 for the 1999 fiscal year. In addition, the employment agreements
provide for discretionary bonuses and participation in all other pension,
profit-sharing or retirement plans maintained by the Bank or by the Company for
employees of the Bank, as well as fringe benefits normally associated with such
employee's office, including the use of a company car. The employment agreements
provide that they may be terminated by the Bank for cause, as defined in the
agreement, and that they may otherwise be terminated by the Bank (subject to
vested rights) or by the employee. In the event of a change in control (as
defined below), the terms of each agreement shall be automatically extended for
three years from the date of the change of control, and the employee's base
salary shall be increased at least 6% annually.

The employment agreements provide that the nature of the employee's
compensation, duties or benefits may not be diminished following a change in
control of the Bank or the Company. For purposes of the employment agreements, a
change in control generally will occur if (i) after the effective date of the
employment agreement, any "person" (as such term is defined in Sections 3(a)(9)
and 13(d)(3) of the Exchange Act) directly or indirectly, acquires beneficial
ownership of voting stock, or acquires irrevocable proxies or any combination of
voting stock and irrevocable proxies, representing 25% or more of any class of
voting securities of either the Company or the Bank, or acquires in any manner
control of the election of a majority of the directors of either the Company or
the Bank, (ii) either the Company or the Bank consolidates or merges with or
into another corporation, association or entity, or is otherwise reorganized,
where neither the Company nor the Bank is the surviving corporation in such
transaction, or (iii) all or substantially all of the assets of either the
Company or the Bank are sold or otherwise transferred to, or are acquired by,
any other entity or group.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Bank's board of directors serves the
role of the Compensation Committee for the Company. The Compensation Committee
determines the compensation of the executive officers and the Bank's other
employees. During the fiscal year ended September 30, 1999, the Compensation
Committee consisted of Caldwell A. Holbrook, Jr., Joel A. Huneycutt and Douglas
D. Stokes. None of the members of the Compensation Committee were officers or
employees of the Bank or the Company during 1999 or in prior years.

REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

It is the responsibility of the Bank's Compensation Committee to review
and evaluate the performance of the Bank's executive officers. The salary of
each executive officer, including Mr. Hill, the President and Chief Executive
Officer, and Mr. Swanner, the Executive Vice President, is determined based upon
market factors, including salaries and benefits offered for similar positions by
financial institution competitors of similar size and characteristics, and the
executive officer's contributions to the Bank's overall profitability,
maintenance of regulatory compliance standards, professional leadership, and
management effectiveness in meeting the needs of day to day operations. In
addition, the executive officers of the Bank are eligible to receive
discretionary bonuses - as are all other employees - declared by the Bank's
board of directors.

Compensation Committee

Caldwell A. Holbrook, Jr.
Joel A. Huneycutt
Douglas Dwight Stokes

PERFORMANCE GRAPH

The Company is required to provide its stockholders with a line graph
comparing the Company's cumulative total shareholder return with a performance
indicator of the overall stock market and either a published industry index or a
Company-determined peer comparison. The purpose of the chart is to help
stockholders determine the reasonableness of the Compensation Committee's
decisions with respect to the setting of various levels of executive officer
compensation. Shareholder return (measured through increases in stock price and
payment of dividends) is often a benchmark used in assessing corporate
performance and the reasonableness of compensation paid executive officers.

However, the stockholders should recognize that corporations often use
a number of other performance benchmarks (in addition to shareholder return) to
set various levels of executive officer compensation. Stockholders should thus
consider other relevant performance indicators in assessing shareholder return,
such as growth in earnings per share, book value per share, and cash dividends
per share, along with other performance measures such as return on equity and
return on assets.

The following graph compares the Company's cumulative shareholder
return on the common stock with a Nasdaq (U.S. companies) index and with a
savings institution peer group whose stock is quoted on Nasdaq. The graph was
prepared using data through September 30, 1999.

Comparison of Five-Year Cumulative Total Returns
Performance Report for
South Street Financial Corp.

Prepared by the Center for Research in Security Prices
Produced on 11/24/1999 including data to 09/30/1999

Company Index: CUSIP Ticker Class Sic Exchange

84046810 SSFC 6030 NASDAQ

Fiscal Year-end is 09/30/1999

Market Index: Nasdaq Stock Market (US Companies)

Peer Index: NASDAQ Stocks (SIC 6030-6039 US Companies)
Savings Institutions

Date Company Index Market Index Peer Index

10/03/1996 100.000 100.000 100.000
10/31/1996 96.078 98.430 103.184
11/29/1996 114.706 104.538 109.853
12/31/1996 109.804 104.450 112.535
01/31/1997 109.440 111.863 118.317
02/28/1997 132.117 105.675 126.650
03/31/1997 127.958 98.787 123.304
04/30/1997 127.958 101.861 124.204
05/30/1997 124.982 113.399 131.743
06/30/1997 131.758 116.883 142.919
07/31/1997 153.718 129.201 151.493
08/29/1997 149.725 129.014 156.065
09/30/1997 156.539 136.663 171.231
10/31/1997 140.484 129.542 177.195
11/28/1997 140.484 130.229 180.634
12/31/1997 153.344 127.985 195.400
01/30/1998 156.972 132.035 187.117
02/27/1998 158.496 144.451 201.941
03/31/1998 147.486 149.784 211.989
04/30/1998 129.050 152.308 218.019
05/29/1998 119.833 143.852 210.294
06/30/1998 123.553 153.899 205.571
07/31/1998 118.891 152.099 198.542
08/31/1998 115.005 122.034 152.324
09/30/1998 105.317 138.975 165.810
10/30/1998 104.531 144.978 171.163
11/30/1998 103.745 159.643 177.243
12/31/1998 100.286 180.354 177.897
01/29/1999 101.878 206.581 176.754
02/26/1999 98.297 188.066 169.951
03/31/1999 98.387 201.742 167.733
04/30/1999 97.580 207.408 172.262
05/28/1999 95.161 202.637 172.363
06/30/1999 93.249 220.728 177.698
07/30/1999 93.249 217.520 172.407
08/31/1999 93.249 226.139 163.808
09/30/1999 87.523 225.792 158.289

The index level for all series was set to 100.0 on 10/03/1996

CERTAIN INDEBTEDNESS AND TRANSACTIONS OF MANAGEMENT

The Bank makes loans to its executive officers and directors in the
ordinary course of its business. These loans are currently made on substantially
the same terms, including interest rates, collateral and repayment terms, as
those then prevailing for comparable transactions with nonaffiliated persons,
and do not involve more than the normal risk of collectibility or present any
other unfavorable features. Applicable regulations prohibit the Bank from making
loans to its executive officers and directors at terms more favorable than could
be obtained by persons not affiliated with the Bank. The Bank's policy
concerning loans to executive officers and directors currently complies with
such regulations.

PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR

McGladrey & Pullen, LLP, the Company's and the Bank's independent
auditor for the year ended September 30, 1999, has been selected as the
Company's and the Bank's independent auditor for the 2000 fiscal year. Such
selection is being submitted to the Company's stockholders for ratification. A
representative of McGladrey & Pullen, L.L.P. is expected to attend the Annual
Meeting and will be afforded an opportunity to make a statement, if he so
desires, and to respond to appropriate questions from stockholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS
PROPOSAL.

PROPOSALS FOR 2001 ANNUAL STOCKHOLDERS' MEETING

It is presently anticipated that the 2001 Annual Meeting of
Stockholders will be held in February of 2001. In order for shareholder
proposals to be included in the proxy materials for that meeting, such proposals
must be received by the Secretary of the Company at the Company's executive
office not later than September 27, 2000, and meet all other applicable
requirements for inclusion therein.

In the alternative, a shareholder may commence his own proxy
solicitation and present a proposal from the floor at the 2001 Annual Meeting of
Shareholders of the Company. In order to do so, the shareholder must notify the
Secretary of the Company in writing, at the Company's principal executive office
no later than December 11, 2000, of his proposal. If the shareholder wants to
stop the Company from voting proxies (under the discretionary authority granted
by the form of proxy to be solicited by the Company for use at the 2001 Annual
Meeting) on his proposal, the notice must also state the shareholder's intent to
solicit the required number of votes for passage of his proposal and the
shareholder must provide evidence to the Company that the solicitation has
occurred.

The Company's bylaws provide that, in order to be eligible for
consideration at the annual meeting of stockholders, all nominations of
directors, other than those made by the Company's Board of Directors, must be
made in writing and must be delivered to the Secretary of the Company not less
than 30 days nor more than 50 days prior to the meeting at which such
nominations will be made; provided, however, if less than 21 days notice of the
meeting is given to stockholders, such nominations must be delivered to the
Secretary of the Company not later than the close of business on the seventh day
following the day on which the notice of meeting was mailed.

OTHER MATTERS

Management knows of no other matters to be presented for consideration
at the Annual Meeting or any adjournments thereof. If any other matters shall
properly come before the Annual Meeting, it is intended that the proxy holders
named in the enclosed form of proxy will vote the shares represented thereby in
accordance with their judgment, pursuant to the discretionary authority granted
therein.

MISCELLANEOUS

The Annual Report of the Company for the year ended September 30, 1999,
which includes financial statements audited and reported upon by the Company's
independent auditor, is being mailed along with this Proxy Statement; however,
it is not intended that the Annual Report be a part of this Proxy Statement or a
solicitation of proxies.

THE FORM 10-K FILED BY THE COMPANY WITH THE SEC, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO, WILL BE PROVIDED FREE OF CHARGE TO
THE COMPANY'S STOCKHOLDERS UPON WRITTEN REQUEST DIRECTED TO: SOUTH STREET
FINANCIAL CORP., POST OFFICE BOX 489, 155 WEST SOUTH STREET, ALBEMARLE, NORTH
CAROLINA 28001, ATTENTION: CARL M. HILL.

By Order of the Board of Directors,

/s/ R.Ronald Swanner

R. Ronald Swanner
Secretary

Albemarle, North Carolina
January 24, 2000