SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 For the quarter ended March 31, 2002

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
     OF   1934   For   the   transition   period   from    _______________    to
     _________________.

                                                Commission File Number   0-25933


                        SOUTHCOAST FINANCIAL CORPORATION
        (Exact Name of Small Business Issuer as Specified in its Charter)


     South Carolina                                   58-2384011
(State of Incorporation)                 (I.R.S. Employer Identification Number)



               530 Johnnie Dodds Boulevard, Mt. Pleasant, SC 29464
                    (Address of Principal Executive Offices)


                                 (843) 884-0504
                           (Issuer's Telephone Number)


         Check whether the issuer (1) has filed all reports required to be filed
by  Section  13 or 15(d) of the  Exchange  Act during the past 12 months (or for
such shorter periods that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.

         [ X ] Yes  [ ] No

         State the number of shares  outstanding of each of the issuer's classes
of common  equity,  as of the latest  practicable  date:  Common  Stock - No Par
Value: 1,200,163 Shares Outstanding on April 30, 2002.

         Transitional Small Business Disclosure Format (Check one):

         [ ]  Yes  [X]  No












                                       1
<Page>

                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                        SOUTHCOAST FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS


<Table>
<Caption>
                                                                                                 (Unaudited)
                                                                                                   March 31,            December 31,
                                                                                                      2002                  2001
                                                                                                      ----                  ----
ASSETS
<S>                                                                                             <C>                     <C>
   Cash and due from banks .........................................................            $  3,501,074            $  6,627,108
   Federal funds sold ..............................................................               6,796,000                 560,000
   Investment securities available for sale ........................................               2,910,313               8,283,358
   Loans held for sale .............................................................               2,912,199               4,125,049
   Loans, net of allowance of $1,316,803 and $1,215,164 ............................              96,067,002              95,737,280
   Property and equipment - net ....................................................               7,979,486               7,748,698
   Other assets ....................................................................               1,343,948               1,227,427
                                                                                                ------------            ------------
       Total assets ................................................................            $121,510,022            $124,308,920
                                                                                                ============            ============

LIABILITIES
   Deposits
     Noninterest-bearing ...........................................................            $ 13,593,756            $ 12,667,145
     Interest bearing ..............................................................              75,258,498              69,188,562
                                                                                                ------------            ------------
       Total deposits ..............................................................              88,852,254              81,855,707

   Other borrowings ................................................................              20,200,000              30,400,000
   Other liabilities ...............................................................                 712,882                 503,721
                                                                                                ------------            ------------

       Total liabilities ...........................................................             109,765,136             112,759,428
                                                                                                ------------            ------------
SHAREHOLDERS' EQUITY
   Common stock (no par value; 20,000,000 shares authorized;
     1,199,070 shares outstanding at March 31, 2002 and
     1,197,482 at December 31, 2001) ...............................................              11,353,875              11,339,708
   Retained deficit ................................................................                 386,792                 142,621
   Accumulated other comprehensive income (loss) ...................................                   4,219                  67,163
                                                                                                ------------            ------------
       Total shareholders' equity ..................................................              11,744,886              11,549,492
                                                                                                ------------            ------------
       Total liabilities and shareholders' equity ..................................            $121,510,022            $124,308,920
                                                                                                ============            ============
</Table>









         See notes to consolidated financial statements.




                                       2
<Page>

                        SOUTHCOAST FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

<Table>
<Caption>
                                                                                                   Three months       Three months
                                                                                                      ended                ended
                                                                                                   March 31,2002      March 31, 2001
                                                                                                   -------------      --------------

INTEREST INCOME
<S>                                                                                                <C>                    <C>
   Loans, including fees .............................................................             $1,991,784             $1,962,939
   Investment securities .............................................................                 52,311                 95,769
   Federal funds sold ................................................................                 23,964                 29,412
                                                                                                   ----------             ----------
       Total interest income .........................................................              2,068,059              2,088,120
INTEREST EXPENSE
   Deposits and borrowings ...........................................................                780,090              1,168,797
                                                                                                   ----------             ----------
       Net interest income ...........................................................              1,287,969                919,323

PROVISION FOR POSSIBLE LOAN LOSSES ...................................................                105,543                 60,000
                                                                                                   ----------             ----------
       Net interest income after provision for loan losses ...........................              1,182,426                859,323
                                                                                                   ----------             ----------

NONINTEREST INCOME
   Service fees on deposit accounts ..................................................                121,847                107,217
   Fees on loans sold ................................................................                130,560                 85,277
   Other .............................................................................                138,963                 36,881
                                                                                                   ----------             ----------
       Total non interest income .....................................................                391,370                229,375
                                                                                                   ----------             ----------

NONINTEREST EXPENSES
   Salaries and employee benefits ....................................................                701,682                558,830
   Occupancy .........................................................................                 97,658                 56,026
   Furniture and equipment ...........................................................                105,669                100,376
   Advertising and public relations ..................................................                 21,923                 14,314
   Professional fees .................................................................                 36,791                 38,612
   Travel and entertainment ..........................................................                 39,486                 52,511
   Telephone, postage and supplies ...................................................                 77,795                 55,265
   Other operating ...................................................................                 95,750                 54,236
                                                                                                   ----------             ----------
       Total non-interest expenses ...................................................              1,176,754                930,170
                                                                                                   ----------             ----------
       Income before income taxes ....................................................                397,042                158,528
INCOME TAX ...........................................................................                152,871                 54,506
                                                                                                   ----------             ----------
       Net income ....................................................................             $  244,171             $  104,022
                                                                                                   ==========             ==========
BASIC NET INCOME PER COMMON SHARE ....................................................             $      .19             $      .09
DILUTED NET INCOME  PER COMMON SHARE .................................................             $      .18             $      .09
                                                                                                   ==========             ==========

WEIGHTED AVERAGE SHARES OUTSTANDING
                  Basic ..............................................................              1,318,977              1,139,942
                  Diluted ............................................................              1,359,892              1,170,100
</Table>

       See notes to consolidated financial statements.



                                       3
<Page>

                        SOUTHCOAST FINANCIAL CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                   (Unaudited)


<Table>
<Caption>
                                                                                                       Accumulated         Total
                                                            Common Stock                                  other            share-
                                                        ------------------------         Retained      comprehensive       holders'
                                                        Shares            Amount         earnings       income/loss        equity
                                                        ------            ------         --------       -----------        ------

<S>                                                   <C>           <C>              <C>              <C>              <C>
BALANCE, JANUARY 1, 2001 ......................         947,872        9,669,155         (503,796)         (12,793)       9,152,566

   Net income .................................               -                -          104,022                -          104,022

   Other comprehensive income, net
     of tax:
     Unrealized holding losses on
       securities available for sale ..........               -                -                -           26,154           26,154
                                                                                                                       ------------


   Comprehensive income .......................               -                -                -                -          130,176

   Repurchase of stock ........................         (11,775)        (109,102)                                          (109,102)
   Employee stock purchase plan ...............           1,466           11,845                                             11,845
                                                      ---------     ------------     ------------     ------------     ------------

BALANCE, March 31, 2001 .......................         937,563     $  9,571,898     $   (399,724)    $     13,361     $  9,185,485
                                                      =========     ============     ============     ============     ============



BALANCE, JANUARY 1, 2002 ......................       1,197,482     $ 11,339,708          142,621           67,163       11,549,492

   Net income .................................               -                -          244,171                -          244,171

   Other comprehensive income, net
     of tax:
     Unrealized holding gains on
       securities available for sale ..........               -                -                -          (62,944)         (62,944)
                                                                                                                       ------------


   Comprehensive income .......................               -                -                -                -          181,227
   Employee stock purchase plan ...............           1,588           14,167                                             14,167
                                                      ---------     ------------     ------------     ------------     ------------

BALANCE, March 31, 2002 .......................       1,199,070     $ 11,353,875     $    386,792     $      4,219     $ 11,744,886
                                                      =========     ============     ============     ============     ============
</Table>





           See notes to consolidated financial statements.


                                       4
<Page>


                        SOUTHCOAST FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                       For the three months ended March 31
                                   (Unaudited)


<Table>
<Caption>

OPERATING ACTIVITIES                                                                                2002                     2001
                                                                                                    ----                     ----
<S>                                                                                           <C>                      <C>
   Net income ....................................................................            $    244,171             $    104,022
   Adjustments to reconcile net income to net
   Cash provided by operating activities:
     Income tax ..................................................................                 152,871                   54,506
     Provision for possible loan losses ..........................................                 105,543                   60,000
     Depreciation and amortization ...............................................                 115,569                  105,663
     Increase in other assets ....................................................                (234,426)                (324,608)
     Increase in other liabilities ...............................................                 209,161                  103,605
                                                                                              ------------             ------------
         Net cash provided by operating activities ...............................                 592,889                  103,188
                                                                                              ------------             ------------

INVESTING ACTIVITIES
   Increase in federal funds sold ................................................              (6,236,000)              (1,730,000)
   Purchase of investment securities available for sale ..........................               5,270,260               (1,998,710)
   Net increase in loans .........................................................                 777,585               (9,193,563)
   Purchase of property and equipment ............................................                (341,482)                 (98,277)
                                                                                              ------------             ------------
         Net cash used for investing activities ..................................                (529,637)             (13,020,550)
                                                                                              ------------             ------------

FINANCING ACTIVITIES
   (Decrease) increase in Federal Home Loan Bank borrowing .......................             (10,200,000)               1,575,000
   Purchase of common stock ......................................................                       -                 (109,102)
   Proceeds from sale of stock, net ..............................................                  14,167                   11,845
   Net increase in deposits ......................................................               6,996,547               11,515,145
                                                                                              ------------             ------------
         Net cash provided by financing activities ...............................              (3,189,286)              12,992,888
                                                                                              ------------             ------------

         Increase (decrease) in cash and due from banks ..........................              (3,126,034)                  75,726


CASH AND DUE FROM BANKS, BEGINNING OF PERIOD .....................................               6,627,108                3,942,566
                                                                                              ------------             ------------

CASH AND DUE FROM BANKS, END OF PERIOD ...........................................            $  3,501,074             $  4,018,092
                                                                                              ============             ============
</Table>







     See notes to consolidated financial statements.



                                       5
<Page>

                        SOUTHCOAST FINANCIAL CORPORATION
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

           The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim  financial  information  and with the  instructions  to Form
10-QSB  and  item  310 (b) of  Regulation  S-B of the  Securities  and  Exchange
Commission.  Accordingly  they do not  include  all  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements.  However, in the opinion of management,  all adjustments (consisting
of normal recurring  adjustments)  considered  necessary for a fair presentation
have been included.

NOTE 2 - ORGANIZATION

           Southcoast Financial  Corporation (the "Company") is a South Carolina
corporation  organized  in 1999 for the  purpose of being a holding  company for
Southcoast Community Bank (the "Bank"). On April 29, 1999, pursuant to a Plan of
Exchange approved by the shareholders,  all of the outstanding shares of capital
stock of the Bank were exchanged for shares of common stock of the Company.  The
Company  presently engages in no business other than that of owning the Bank and
has no employees.

NOTE 3 - NET INCOME  PER SHARE

           Net income per share is computed on the basis of the weighted average
number of common shares  outstanding  in accordance  with Statement of Financial
Accounting Standards No. 128, "Earnings per Share". The treasury stock method is
used to compute the effect of stock  options on the weighted  average  number of
shares outstanding for diluted earnings per share.

           In April, 2002, the Company declared a ten- percent stock dividend of
the Company's  common stock. The weighted average number of shares and all other
share data have been  restated  for all periods  presented to reflect this stock
dividend.




                                       6
<Page>


ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


         The following  discussion  and analysis  should be read in  conjunction
with the financial  statements and related notes  appearing in Company's  Annual
Report on Form 10-KSB for the year ended December 31, 2001.  This Report on Form
10-QSB  may  contain  forward-looking  statements  relating  to such  matters as
anticipated   financial   performance,    business   prospects,    technological
developments,  new products and similar  matters.  All  statements  that are not
historical  facts are  "forward-looking  statements."  Words such as "estimate,"
"project,"  "intend,"  "expect,"  "believe,"  "anticipate,"  "plan," and similar
expressions  identify   forward-looking   statements.   The  Private  Securities
Litigation  Reform  Act of  1995  provides  a safe  harbor  for  forward-looking
statements.  In order to comply with terms of the safe harbor, the Company notes
that a variety of factors  could  cause its actual  results  and  experience  to
differ materially from the anticipated  results or other expectations  expressed
in the Company's  forward-looking  statements.  The risks and uncertainties that
may  affect  the  operations,  performances,  development  and  results  of  the
Company's  business include,  but are not limited to, the following:  risks from
changes in economic and industry  conditions;  changes in interest rates;  risks
inherent in making loans,  including  repayment  risks and value of  collateral;
dependence on senior management;  and recently-enacted or proposed  legislation.
Statements  contained  in  this  filing  regarding  the  demand  for  Southcoast
Community Bank's products and services,  changing economic conditions,  interest
rates,  consumer  spending and  numerous  other  factors may be  forward-looking
statements and are subject to uncertainties and risks.

NET INTEREST INCOME

Net interest  income is the difference  between the interest  earned on interest
earning assets and the interest paid for funds acquired to support those assets.
Net  interest  income,  the  principal  source of the  Company's  earnings,  was
$1,287,969  for the three months ended March 31, 2002,  compared to $919,323 for
the three months ended March 31, 2001.

Changes that affect net  interest  income are changes in the average rate earned
on interest earning assets, changes in the average rate paid on interest bearing
liabilities,  and changes in the volume of interest  earning assets and interest
bearing liabilities.

Average earning assets for the quarter ending March 31,2002  increased to $109.6
million or 22.1 percent from the $89.4 million  reported for the quarter  ending
March  31,2001.  The increase was mainly  attributable  to the increase in loans
supported by a $17.3  million  increase in interest  bearing  liabilities  which
resulted  from the  continued  growth of the  Charleston  market  area,  and the
Company's marketing efforts.

The following  table  represents  changes in the  Company's net interest  income
which are  primarily  a result of changes  in volume  and rates of its  interest
earning assets and interest  bearing  liabilities.  The increase in net interest
income is due to  increased  volume  of  earning  assets  and  interest  bearing
liabilities  coupled  with an 84  basis  point  decrease  in the  Company's  net
interest spread.  The net interest spread is the difference between the yield on
earning assets minus the average rate of interest bearing liabilities.




                                       7
<Page>

<Table>
<Caption>
                                                           Three months ended                           Three months ended
                                                             March 31, 2002                               March 31, 2001
                                                             --------------                               --------------
                                             Average           Income/         Yield/      Average             Income/        Yield/
ASSETS                                       balance           expense          rate       balance             expense         rate
------                                       -------           -------          ----       -------             -------         ----

<S>                                      <C>               <C>                  <C>     <C>               <C>                  <C>
Federal funds sold ...................   $  6,096,971      $     23,964         1.57%      2,188,533      $     29,412         5.38%
Investments ..........................      3,482,468            52,311         6.01       5,957,407            95,769         6.43
                                         ------------      ------------                 ------------      ------------
Total investments and
   federal funds sold ................      9,579,439            76,275         3.18       8,145,940           125,181         6.15
Loans ................................     99,985,493         1,991,784         7.97      81,207,761         1,962,939         9.67
                                         ------------      ------------                 ------------      ------------
Total earning assets .................    109,561,932         2,068,059         7.55      89,353,701         2,088,120         9.35
                                                           ------------                                   ------------
Other assets .........................     11,237,101                                      8,579,925
                                         ------------                                   ------------
Total assets .........................   $120,799,033                                   $ 97,933,626
                                         ============                                   ============

LIABILITIES
Interest bearing deposits ............   $ 71,040,628      $    514,290         2.90    $ 62,620,362      $    908,940         5.81
Other borrowings .....................     26,115,333           265,800         4.07      17,253,889           259,857         6.02
                                         ------------      ------------                 ------------      ------------
Total interest bearing
   liabilities .......................     97,155,961           780,090         3.21      79,874,251         1,168,797         5.85
Non-interest bearing
   liabilities .......................     13,003,664                                      8,949,368
                                         ------------      ------------                 ------------      ------------
Total liabilities ....................    110,159,625           780,090         2.83      88,823,619         1,168,797         5.26
Equity ...............................     10,639,408                                      9,110,007
                                         ------------                                   ------------
Total liabilities and
   Equity ............................   $120,799,033                                   $ 97,933,626
                                         ============                                   ============
Net interest income/
   margin ............................                     $  1,287,969         4.70                      $    919,323         4.12
                                                           ============                                   ============
Net interest spread ..................                                          4.34                                           3.50
</Table>

As reflected  above, for the three months ended March 31, 2002 the average yield
on earning assets was 7.55 percent,  while the average cost of  interest-bearing
liabilities  was 3.21  percent.  For the three  months  ended March 31, 2001 the
average  yield on  earning  assets  was 9.35  percent  and the  average  cost of
interest-bearing  liabilities  was 5.85  percent.  The  increase in the yield on
earning assets is attributable to the increased volume of loans,  which give the
Company a greater return than the other types of earning assets,  which was only
partially  offset by a decrease in the yield on loans resulting from a declining
interest rate  environment.  The net interest  margin is computed by subtracting
interest  expense from  interest  income and dividing  the  resulting  figure by
average  interest-earning  assets.  The net interest margin for the three months
ended March 31,  2002 was 4.70  percent  compared to 4.12  percent for the three
months  ended  March  31,  2001.  The  increase  in the  net-interest  margin is
attributable to the increase in non-interest  bearing liabilities which resulted
in a decrease in the cost of total  liabilities to support earning  assets.  The
cost of total  liabilities was 2.83 percent for the three months ended March 31,
2002 compared to 5.26 percent for the three months ended March 31, 2001.

The following  table  represents  changes in the  Company's net interest  income
which  are  primarily  a  result  of  changes  in the  volume  and  rates of its
interest-earning assets and interest-bearing liabilities.




                                       8
<Page>


                   Analysis of Changes in Net Interest Income
<Table>
<Caption>
                                                                                  For  the  three  months  ended March 31, 2002
                                                                                     versus three months ended March 31, 2001
                                                                                     ----------------------------------------
                                                                                 Volume                 Rate              Net change
                                                                                 ------                 ----              ----------
<S>                                                                           <C>                   <C>                   <C>
Federal funds sold ...............................................            $  52,568             $ (58,016)            $  (5,448)
Investments ......................................................              (39,784)               (3,674)              (43,458)
                                                                              ---------             ---------             ---------
Total investments and federal funds sold .........................               12,784               (61,690)              (48,906)
Total loans ......................................................              453,879              (425,034)               28,845
                                                                              ---------             ---------             ---------
Total earning assets .............................................              466,663              (486,724)              (20,061)
Total interest-bearing liabilities ...............................              255,669              (644,376)             (388,707)
                                                                              ---------             ---------             ---------
Net interest income ..............................................            $ 210,994             $ 157,652             $ 368,646
                                                                              =========             =========             =========
</Table>


RESULTS OF OPERATIONS

The  Company's net income for the three months ended March 31, 2002 was $244,171
or $.19 per basic share,  compared to $104,022 or $.09 per basic share,  for the
three months ended March 31, 2001.

Net interest income has increased to $1,287,969 for the three months-ended March
31, 2002 compared to $919,323 for the three months ended March 31, 2001. See net
interest income analysis for the detailed explanation of the increase.



NON-INTEREST INCOME AND EXPENSES



Non-interest  income for the three  months  ended March 31,  2002 was  $391,370,
compared to $229,375 for the three months ended March 31, 2001.  The increase is
due to the  greater  volume  of loans  sold,  gains on  securities  sold and the
increase  in the number of  deposit  accounts  resulting  in  increased  fees on
deposits.


Non-interest expenses for the three months ended March 31, 2002 were $1,176,754,
compared to $930,170 for the three months ended March  31,2001.  The increase of
$246,584 is mainly attributable to increases in salaries and benefits, occupancy
cost,  furniture  and  equipment  expenses and  administrative  expenses.  These
increases  primarily  relate to expenditures  associated with the opening of the
Coleman  branch in December 2001 and the Johns Island branch in March 2002,  the
formation of a sales staff and the increase in  administrative  staff to support
the growth.


LIQUIDITY

Liquidity  is the  ability  to  meet  current  and  future  obligations  through
liquidation or maturity of existing  assets or the  acquisition of  liabilities.
The Company manages both assets and liabilities to achieve appropriate levels of
liquidity.  Cash and short-term investments are the Company's primary sources of
asset liquidity.  These funds provide a cushion against short-term  fluctuations
in cash flow from both  deposits  and loans.  The  investment  portfolio  is the
Company's   principal  source  of  secondary  asset  liquidity.   However,   the
availability  of this  source  of  funds is  influenced  by  market  conditions.
Individual  and commercial  deposits and  borrowings  from the Federal Home Loan
Bank are the  Company's  primary  source of funds  for  credit  activities.  The
Company  also has a $3 million  line of credit with the Bankers Bank of Atlanta.
Management  believes that the Company's  liquidity  sources are adequate to meet
its operating needs.




                                       9
<Page>






LOANS

Commercial  loans made up 51.1  percent of the total loan  portfolio,  including
loans held for sale, as of March 31, 2002, totaling $51.4 million. Loans secured
by real estate for construction and land development  totaled $0.1 million while
all other loans secured by real estate  totaled $44.8 million or 44.5 percent of
the total  loan  portfolio  as of March 31,  2002.  Installment  loans and other
consumer loans to individuals comprised $4.2 million or 4.2 percent of the total
loan  portfolio.  The  allowance for loan losses was 1.31 percent of loans as of
March 31, 2002 compared to 1.20 percent as of December 31, 2001. In management's
opinion,  the  allowance  for loan losses is adequate.  At March 31,  2002,  the
Company had $13,000 of loans 90 days delinquent and still accruing  interest and
$739,000 of non-accruing loans.


CAPITAL RESOURCES

The capital  base for the  Company  increased  by  $195,396  for the first three
months of 2002, due to operating income,  unrealized gains on available for sale
securities  and capital  raised  through the Employee  Stock  Purchase Plan. The
Company's equity to asset ratio was 9.7 percent as of March 31, 2002 compared to
9.3 percent as of December 31, 2001.

On May 3, 2002, the Company issued $4,125,000 of Junior Subordinated  Deferrable
Interest Debentures to a trust created and controlled by the Company.  The trust
issued $4 million of non-voting  capital  securities to an investor and $125,000
of voting  capital  securities to the Company.  The terms of the  debentures and
capital  securities are essentially  identical.  They mature in 2032 and provide
for quarterly interest payments at 3-month LIBOR plus 3.75%. The Company has the
right to defer  payments of interest for 60 months and may redeem the debentures
without  penalty  after five years and upon payment of a 2% premium  before five
years.  Any redemption  prior to maturity will require the prior approval of the
Federal  Reserve.  The net proceeds to the Company of  approximately  $3,840,000
qualify  as  capital  for  regulatory  purposes  under the rules of the  Federal
Reserve.

The Federal Deposit  Insurance  Corporation has established  risk-based  capital
requirements  for banks.  As of March 31, 2002,  the Company's  subsidiary  bank
exceeds the capital requirement levels that are to be maintained.

                                 Capital Ratios
<Table>
<Caption>
                                                                                     Well Capitalized         Adequately Capitalized
                                                               Actual                   Requirement                   Requirement
                                                               ------                   -----------                   -----------
                                                       Amount          Ratio       Amount          Ratio        Amount         Ratio
                                                       ------          -----       ------          -----        ------         -----
<S>                                                   <C>              <C>        <C>              <C>        <C>              <C>
Total capital to risk weighted
   assets ....................................        $11,698          12.65%     $ 9,250          10.00%     $ 7,400          8.00%
Tier 1 capital to risk weighted
   assets ....................................         10,590          11.39        5,550           6.00        3,700          4.00
Tier 1 capital to average assets .............         10,590           8.73        6,040           5.00        4,832          4.00
</Table>

IMPACT OF INFLATION

Unlike  most  industrial  companies,  the assets and  liabilities  of  financial
institutions  such as the Company are primarily  monetary in nature.  Therefore,
interest rates have a more significant impact on the Company's  performance than
do the  effects of changes  in the  general  rate of  inflation  and  changes in
prices.  In  addition,  interest  rates  do not  necessarily  move  in the  same
magnitude  as the  prices  of  goods  and  services.  As  discussed  previously,
management seeks to manage the relationships  between interest  sensitive assets
and  liabilities in order to protect against wide rate  fluctuations,  including
those resulting from inflation.

                                       10
<Page>

                           PART II - OTHER INFORMATION




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

a)  The Company held its annual meeting of shareholders on April 09, 2002.


c)       Election of Directors:

At the annual meeting,  Paul D. Hollen,  James H. Sexton and James P. Smith were
each elected to serve three year terms as  directors,  and L. Wayne  Pearson was
elected to serve a two year term as director.  The results of the voting were as
follow:

  Nominee:     L. Wayne Pearson  Paul D. Hollen  James H. Sexton  James P. Smith
  Votes for:         1,198,070      1,198,070         1,199,070     1,199,070
  Votes withheld:        1,000          1,000                 -             -




ITEM 6.  Exhibits and Reports on Form 8-K.

a)       Exhibits

     Exhibit No.
     From Item 601 of
     Regulation S-B                           Description


          10.1                          Purchase Agreement among the Registrant,
                                        Southcoast  Capital  Trust I and Bayview
                                        Financial Trading Group, L.P.

          10.2                          Amended  and  Restated   Declaration  of
                                        Trust among the Registrant,  Wells Fargo
                                        Delaware  Trust  Company,   Wells  Fargo
                                        Bank,  National  Association,  L.  Wayne
                                        Pearson,   Robert  A.  Daniel,  Jr.  and
                                        Robert M. Scott

         10.3                           Indenture

         10.4                           Guarantee Agreement of the Registrant

         10.5                           Registrant's  Junior Subordinated
                                        Deferrable Interest Debentures


b)       Reports on form 8-K.      None.








                                       11
<Page>

                                   SIGNATURES


In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                 Southcoast Financial Corporation
                                    Registrant


          5/14/02                       L. Wayne Pearson
Date:---------------             By:--------------------------------------------
                                      L. Wayne Pearson
                                      President and Chief Executive Officer

          5/14/02                       Robert M. Scott
Date:--------------              By:--------------------------------------------
                                      Robert M. Scott
                                      Executive Vice President and Chief
                                      Financial Officer




















                                       12
<Page>


                                  EXHIBIT INDEX

     Exhibit No.
     From Item 601 of
     Regulation S-B                         Description


          10.1                          Purchase Agreement among the Registrant,
                                        Southcoast  Capital  Trust I and Bayview
                                        Financial Trading Group, L.P.

          10.2                          Amended  and  Restated   Declaration  of
                                        Trust among the Registrant,  Wells Fargo
                                        Delaware  Trust  Company,   Wells  Fargo
                                        Bank,  National  Association,  L.  Wayne
                                        Pearson,   Robert  A.  Daniel,  Jr.  and
                                        Robert M. Scott

          10.3                          Indenture

          10.4                          Guarantee Agreement of the Registrant

          10.5                          Registrant's Junior Subordinated
                                        Deferrable Interest Debentures




                                       13