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, 2003

                                       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: 1,323,712 Shares Outstanding on April 30, 2003.

       Transitional Small Business Disclosure Format (Check one): [ ] Yes [X] No









                                       1
<PAGE>


                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                        SOUTHCOAST FINANCIAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                                   (Unaudited)
                                                                                                    March 31,           December 31,
                                                                                                      2003                  2002
                                                                                                      ----                  ----
ASSETS
<S>                                                                                             <C>                     <C>
   Cash and due from banks .........................................................            $ 14,877,523            $  5,489,586
   Federal funds sold ..............................................................              25,479,000              14,583,000
   Investment securities available for sale ........................................               5,946,113               5,948,452
   Federal Home Loan Bank Stock, at Cost ...........................................               1,385,000               1,315,000
   Loans held for sale .............................................................               4,918,495               8,682,559
   Loans, net of allowance of $1,769,434 and $1,656,260 ............................             140,942,675             134,729,227
   Property and equipment - net ....................................................               8,496,596               8,054,485
   Other assets ....................................................................               3,038,936               2,366,408
                                                                                                ------------            ------------
       Total assets ................................................................            $205,084,338            $181,168,717
                                                                                                ============            ============

LIABILITIES
   Deposits
     Noninterest-bearing ...........................................................            $ 19,626,187            $ 17,393,322
     Interest bearing ..............................................................             132,061,223             115,262,096
                                                                                                ------------            ------------
       Total deposits ..............................................................             151,687,410             132,655,418

   Other borrowings ................................................................              27,700,000              23,500,000
     Other liabilities .............................................................               1,639,852               1,303,847
                                                                                                ------------            ------------
       Total liabilities ...........................................................             181,027,262             157,459,265
   Trust preferred securities ......................................................              11,000,000              11,000,000

SHAREHOLDERS' EQUITY
   Common stock (no par value; 20,000,000 shares authorized;
     1,322,683 shares outstanding at March 31,2003 and
     1,321,996 at December 31, 2002) ...............................................              11,385,918              11,378,910
   Retained earnings ...............................................................               1,641,363               1,289,321
   Accumulated other comprehensive income ..........................................                  29,795                  41,221
                                                                                                ------------            ------------
       Total shareholders' equity ..................................................              13,057,076              12,709,452
                                                                                                ------------            ------------
       Total liabilities and shareholders' equity ..................................            $205,084,338            $181,168,717
                                                                                                ============            ============
</TABLE>







         See notes to condensed consolidated financial statements.


                                       2
<PAGE>


                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                               Three months            Three months
                                                                                                   Ended                   Ended
                                                                                               Mar. 31, 2003           Mar. 31, 2002
                                                                                               -------------           -------------
INTEREST INCOME
<S>                                                                                             <C>                    <C>
Loans, including fees ................................................................          $2,550,941             $1,991,784
Investment securities ................................................................              81,600                 52,311
Federal funds sold ...................................................................              52,602                 23,964
                                                                                                ----------             ----------

         Total interest income .......................................................           2,685,143              2,068,059

INTEREST EXPENSE
Deposits and borrowings ..............................................................           1,115,035                780,090
                                                                                                ----------             ----------

         Net interest income .........................................................           1,570,108              1,287,969

Provision for possible loan losses ...................................................             120,000                105,543
                                                                                                ----------             ----------

Net interest income after provision ..................................................           1,450,108              1,182,426

NON INTEREST INCOME
Service fees on deposit accounts .....................................................             213,832                121,847
Fees on loans sold ...................................................................             207,628                130,560
Other ................................................................................              39,394                138,963
                                                                                                ----------             ----------

     Total non interest income .......................................................             460,854                391,370

NON INTEREST EXPENSES
Salaries and employment benefits .....................................................             864,177                701,682
Occupancy ............................................................................              87,636                 97,658
Furniture and equipment ..............................................................             155,601                105,669
Advertising and public relations .....................................................              20,645                 21,923
Professional fees ....................................................................              30,332                 36,791
Travel and entertainment .............................................................              33,682                 39,486
Telephone, postage and supplies ......................................................              44,097                 77,795
Other operating expenses .............................................................             126,133                 95,750
                                                                                                ----------             ----------

         Total non-interest expenses .................................................           1,362,303              1,176,754
                                                                                                ----------             ----------

     Income before income tax ........................................................             548,659                397,042
     Income tax ......................................................................             196,618                152,871
                                                                                                ----------             ----------

     Net income ......................................................................          $  352,042             $  244,171
                                                                                                ==========             ==========

Basic Net income Per Common Share ....................................................          $      .24             $      .17
Diluted Net Income Per Common Share ..................................................          $      .23             $      .16

Weighted Average Shares Outstanding

     Basic ...........................................................................           1,454,951              1,450,875
     Diluted .........................................................................           1,518,701              1,495,881
</TABLE>


            See notes to condensed consolidated financial statements

                                       3
<PAGE>

      CONDENSED 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, 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 losses 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
                                                         =========     ============     ============    ============   ============

BALANCE, JANUARY 1, 2003 .........................       1,321,996     $ 11,378,910     $  1,289,321    $     41,221   $ 12,709,452


     Net income ..................................                                           352,042                        352,042

     Other comprehensive income, net
         of tax:
         Unrealized holding losses on
              securities available for sale ......                                                           (11,426)       (11,426)
                                                                                                                       ------------

     Comprehensive income ........................                                                                          340,616
     Employee stock purchase plan ................             687            7,008                                           7,008
                                                         ---------     ------------                                    ------------

BALANCE, March 31, 2003 ..........................       1,322,683     $ 11,385,918     $  1,641,363    $     29,795   $ 13,057,076
                                                         =========     ============     ============    ============   ============
</TABLE>


           See notes to condensed consolidated financial statements.






                                       4
<PAGE>


                        SOUTHCOAST FINANCIAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                                     Three months ended Mar. 31,
OPERATING ACTIVITIES                                                                                 2003                   2002
                                                                                                     ----                   ----
<S>                                                                                            <C>                     <C>
     Net income ....................................................................           $    352,042            $    244,171
     Adjustments to reconcile net income to net
     cash provided (used) by operating activities:
         Income tax ................................................................                196,618                 152,871
         Provision for possible loan losses ........................................                120,000                 105,543
         Depreciation and amortization .............................................                135,626                 115,569
         Increase in other assets ..................................................             (1,095,969)               (234,426)
         Increase in other liabilities .............................................                145,814                 209,161
                                                                                               ------------            ------------
              Net cash provided (used) by operating activities .....................               (145,869)                592,889
INVESTING ACTIVITIES

     Increase in federal funds sold ................................................            (10,896,000)             (6,236,000)
     Sale (purchase) of investment securities available for sale ...................                (90,389)              5,270,260
     Net increase in loans .........................................................             (2,569,384)                777,585
     Purchase of property and equipment ............................................               (149,421)               (341,482)
                                                                                               ------------            ------------
              Net cash used for investing activities ...............................            (13,705,194)               (529,637)

FINANCING ACTIVITIES
     Increase (decrease) in borrowings .............................................              4,200,000             (10,200,000)
     Proceeds from sale of stock, net ..............................................                  7,008                  14,167
     Net increase in deposits ......................................................             19,031,992               6,996,547
                                                                                               ------------            ------------

              Net cash provided (used) by financing activities .....................             23,239,000              (3,189,286)

              Increase (decrease) in cash and due from banks .......................              9,387,937              (3,126,034)


CASH AND DUE FROM BANKS, BEGINNING OF PERIOD .......................................              5,489,586               6,627,108

CASH AND DUE FROM BANKS, END OF PERIOD .............................................           $ 14,877,523            $  3,501,074
                                                                                               ============            ============
</TABLE>







     See notes to condensed consolidated financial statements.



                                       5
<PAGE>


                        SOUTHCOAST FINANCIAL CORPORATION
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

         The accompanying  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 notes required by generally
accepted accounting principles for complete financial statements.  The financial
statements as of March 31, 2003 and for the interim periods ended March 31, 2003
and  2002  are  unaudited  and,  in  the  opinion  of  management,  include  all
adjustments  (consisting of normal recurring  adjustments)  considered necessary
for a fair presentation.  The financial  information as of December 31, 2002 has
been derived from the audited financial  statements as of that date. For further
information,  refer  to the  financial  statements  and  notes  included  in the
company's 2002 Form 10-KSB.

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 - STOCK-BASED COMPENSATION

The Company has a stock-based employee  compensation plan which is accounted for
under the recognition and measurement  principles of Accounting Principles Board
("APB")  Opinion No. 25,  Accounting for Stock Issued to Employees,  and related
Interpretations.  No stock-based employee  compensation cost is reflected in net
income,  as all stock options  granted  under these plans had an exercise  price
equal to the market value of the  underlying  common stock on the date of grant.
The following table  illustrates the effect on net income and earnings per share
as if the Company had applied the fair value recognition provisions of Financial
Accounting  Standards  Board ("FASB") SFAS No. 123,  Accounting for  Stock-Based
Compensation, to stock-based employee compensation.

                                                         Quarter ended March 31,
                                                          2003            2002
                                                          ----            ----
                                                                (Unaudited)

Net income, as reported ............................    $ 352,042    $   244,171
Deduct: Total stock-based employee
    compensation expense determined
    under fair value based method
    for all awards, net of related tax effects .....        7,941          7,941
                                                        ---------    -----------

Pro forma net income ...............................    $ 344,101    $   236,230
                                                        =========    ===========

Earnings per share:
    Basic - as reported ............................    $    0.24    $      0.17
                                                        =========    ===========
    Basic - pro forma ..............................    $    0.24    $      0.16
                                                        =========    ===========

    Diluted - as reported ..........................    $    0.23    $      0.16
                                                        =========    ===========
    Diluted - pro forma ............................    $    0.23    $      0.16
                                                        =========    ===========

                                       6
<PAGE>

NOTE 4 - 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 and April 2003,  the Company  declared ten- percent stock
dividends in 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
these stock dividends.


NOTE 5 - TRUST PREFERRED SECURIRIES

         In May  2002 and  December  2002,  in two  separate  transactions,  the
Company  issued $11  million of Trust  Preferred  Securities.  These  securities
qualify as Tier 1 capital for  regulatory  purposes.  They have a five-year call
date with a maturity of thirty years from date of issuance. The interest rate on
the securities floats quarterly with the three-month LIBOR.



                                       7
<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 the Form 10-KSB of
Southcoast  Financial  Corporation.  Results of operations for the period ending
March 31, 2003 are not necessarily  indicative of the results to be attained for
any other period.  Statements  included in Management's  Discussion and Analysis
which are not  historical  in nature  and are  intended  to be,  and are  hereby
identified  as  "forward  looking  statements"  for  purposes of the safe harbor
provided by section 21E of the Securities Exchange Act of 1934, as amended.  The
Company  cautions  readers that forward  looking  statements  including  without
limitation,  those  relating  to the  Company's  new  offices,  future  business
prospects,  revenues,  allowance for loan losses,  working  capital,  liquidity,
capital  needs,  interest  costs,  and income,  are subject to certain risks and
uncertainties  that could cause actual results to differ from those indicated in
the  forward  looking  statements,  due  to  several  important  factors  herein
identified,  among others,  and other risks and factors  identified from time to
time in the Company's reports filed with the Securities and Exchange Commission.

RESULTS OF OPERATIONS

The  Company's net income for the three months ended March 31, 2003 was $352,042
or $.24 per basic share,  compared to $244,171 or $.17 per basic share,  for the
three months ended March 31, 2002.


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
$1,570,108 for the three months ended March 31, 2003, compared to $1,287,969 for
the three months ended March 31, 2002.

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

Average earning assets for the three months ending March 31, 2003 increased 61.0
percent to $176.4 million from the $109.6 million  reported for the three months
ending March 31, 2003. The increase was mainly  attributable  to the increase in
loans  supported by a $59.2  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  compares the average  balances,  yields and rates for the
interest sensitive segments of the Company's balance sheets for the three months
ended March 31, 2003 and 2002.  The  increase in net  interest  income is due to
increased volume of earning assets and interest bearing  liabilities offset by a
110 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  paid on  interest  bearing  liabilities.  The  decrease  in the  spread is
attributable to the temporary  increase in the first quarter of 2003 investments
and Federal funds sold and the increase in cost of funds.


                                       8
<PAGE>


<TABLE>
<CAPTION>
                                                            Three months ended                            Three months ended
                                                              March 31, 2003                                March 31, 2002
                                                              --------------                                --------------
                                                    Average      Income/       Yield/          Average         Income/        Yield/
ASSETS                                              Balance      expense      rate(1)          Balance         expense       rate(1)
                                                    -------      -------      -------          -------         -------       -------

<S>                                            <C>            <C>                <C>      <C>               <C>                <C>
Federal funds sold .........................   $ 18,345,700   $   52,602         1.15%    $  6,096,971      $   23,964         1.57%
Investments ................................     10,374,760       81,600         3.15        3,482,468          52,311         6.01
                                               ------------   ----------                  ------------      ----------
Total investments and
federal funds sold .........................     28,720,460      134,202         1.87        9,579,439          76,275         3.18
Loans ......................................    147,630,604    2,550,941         6.91       99,985,493       1,991,784         7.97
                                               ------------   ----------                  ------------      ----------
Total earning assets .......................    176,351,064    2,685,143         6.09      109,564,932       2,068,059         7.55
                                                              ----------                                    ----------
Other assets ...............................     11,903,953                                 11,234,101
                                               ------------                               ------------
Total assets ...............................   $188,255,017                               $120,799,033
                                               ============                               ============

LIABILITIES
Interest bearing deposits ..................   $124,727,975   $  744,188         2.39     $ 71,040,628      $  514,290         2.90
Other borrowings ...........................     31,637,778      370,847         4.69       26,115,333         265,800         4.07
                                               ------------   ----------                  ------------      ----------
Total interest bearing
     liabilities ...........................    156,365,753    1,115,035         2.85       97,155,961         780,090         3.21
                                                              ----------                                    ----------
Non-interest bearing liabilities ...........     18,899,563                                 13,003,664
                                               ------------                               ------------
Total liabilities ..........................    175,265,316    1,115,035         2.54      110,159,625         780,090         2.83
                                                              ----------                                    ----------
Equity .....................................     12,989,701                                 10,639,408
                                               ------------                               ------------
Total liabilities and equity ...............   $188,255,017                               $120,799,033
                                               ============                               ============
Net interest income/ margin ................                  $1,570,108         3.56                       $1,287,969         4.70
                                                              ==========                                    ==========
Net interest spread ........................                                     3.24%                                         4.34%

</TABLE>

(1)  Annualized

As reflected  above, for the three months ended March 31, 2003 the average yield
on earning assets was 6.09 percent,  while the average cost of  interest-bearing
liabilities  was 2.85  percent.  For the three  months  ended March 31, 2002 the
average  yield on  earning  assets  was 7.55  percent  and the  average  cost of
interest-bearing  liabilities  was 3.21  percent.  The  decrease in the yield on
earning  assets  and  the  rates  paid  on  interest   bearing   liabilities  is
attributable to the market rate decreases over the last year and investment of a
larger  percentage of the earning assets in Federal funds and  investments.  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, 2003 was 3.56 percent
compared to 4.70 percent for the three months ended March 31, 2002. The decrease
in the  net-interest  margin is  primarily  attributable  to the  decline in the
return on earning assets, the issuance of Trust Preferred securities,  offset by
the  repricing  of  higher  cost  deposits  at  lower  rates.  The cost of total
liabilities  was 2.54 percent for the three months ended March 31, 2003 compared
to 2.83 percent for the three months ended March 31, 2002.


                                       9
<PAGE>


The following table presents  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.



Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>

                                                                                     For the three months ended March 31, 2003
                                                                                      Versus three months ended March 31, 2002
                                                                                      ----------------------------------------
                                                                                Volume                 Rate               Net change
                                                                                ------                 ----               ----------
<S>                                                                          <C>                   <C>                    <C>
Federal funds sold ..............................................            $   48,076            $  (19,438)            $   28,638
Investments .....................................................               103,557               (74,268)                29,289
                                                                             ----------            ----------             ----------
Total investments and federal funds sold ........................               151,633               (93,706)                57,927
Total loans .....................................................               949,329              (390,172)               559,157
                                                                             ----------            ----------             ----------
Total earning assets ............................................             1,100,962              (483,878)               617,084
Total interest-bearing liabilities ..............................               445,424              (110,479)               334,945
                                                                             ----------            ----------             ----------
Net interest income .............................................            $  655,538            $ (373,399)            $  282,139
                                                                             ==========            ==========             ==========
</TABLE>


NON-INTEREST INCOME AND EXPENSES

Non-interest  income for the three  months  ended March 31,  2003 was  $460,854,
compared to $391,370 for the three months ended March 31, 2002.  The increase is
attributable  to additional  deposit  accounts that generated  increased fees on
deposits and to the increased volume of loans sold.


Non-interest  expenses for the nine months ended March 31, 2003 were $1,362,303,
compared to $1,176,754 for the three months ended March 31,2002. The increase of
$185,549 is mainly attributable to increases in salaries and benefits, furniture
and equipment expense and  administrative  expenses.  These increases  primarily
relate to expenditures associated with the opening of the Johns Island branch in
March  2002,  as well as the  increase  in  administrative  staff to support the
growth of the Company's operations.

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 $3.5 million line of credit with the Bankers Bank of Atlanta.
Management  believes that the Company's  liquidity  sources are adequate to meet
its normal operating needs.


                                       10
<PAGE>

LOANS

Commercial  loans made up 51.5  percent of the total loan  portfolio as of March
31, 2003, totaling $76.0 million.  Loans secured by real estate for construction
and land  development  totaled  $16.0  million or 10.8 percent of the  portfolio
while all other  loans  secured by real  estate  totaled  $51.5  million or 34.9
percent of the total loan portfolio as of March 31, 2003.  Installment loans and
other consumer loans to individuals comprised $4.1 million or 2.8 percent of the
total loan portfolio. The allowance for loan losses was 1.24 percent of loans as
of March  31,  2003  compared  to 1.21  percent  as of  December  31,  2002.  In
management's  opinion,  the allowance for loan losses is adequate.  At March 31,
2003,  the Company did not have any loans 90 days  delinquent and still accruing
interest and had $524,000 of non-accruing loans.


CAPITAL RESOURCES

The capital  base for the  Company  increased  by  $347,624  for the first three
months of 2003,  due to operating  income,  capital  raised through the Employee
Stock  Purchase  Plan,  offset  by  unrealized  losses  on  available  for  sale
securities. The Company's tier one capital to asset ratio was 9.30 percent as of
March 31, 2003 compared to 10.29 percent as of December 31, 2002.


The Federal Deposit  Insurance  Corporation has established  risk-based  capital
requirements  for banks.  As of March 31, 2003,  the Company's  subsidiary  bank
exceeds the capital requirement levels that are to be maintained as shown in the
following table.


                                 Capital Ratios
                             (Dollars in Thousands)

<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 .............................     $17,626         12.32%         $14.305          10.00%        $11,444          8.00%
Tier 1 capital to risk weighted
     Assets .............................     $15,857         11.08%         $ 8,583           6.00%        $ 5,722          4.00%

Tier 1 capital to average assets ........     $15,857          8.51%         $ 9,322           5.00%        $ 7,458          4.00%
</TABLE>

Off-Balance Sheet Risk

The Company makes  contractual  commitments  to extend credit and issues standby
letters  of credit in the  ordinary  course of our  business  activities.  These
commitments  are  legally  binding  agreements  to lend  money to  customers  at
predetermined  interest rates for a specified period of time. At March 31, 2003,
the company had issued  commitments to extend credit of $22,835,912  and standby
letters  of credit of  $368,032  through  various  types of  commercial  lending
arrangements.  Approximately  $17,942,000 of these  commitments to extend credit
had variable rates.


                                       11
<PAGE>

The  following  table sets forth the  length of time until  maturity  for unused
commitments to extend credit and standby letters of credit at March 31, 2003.

<TABLE>
<CAPTION>
                                                                  After One     After Three
                                                   Within         Through       Through        Within         Greater
                                                   One            Three         Twelve         One            Than
(Dollars in thousands)                             Month          Months        Months         Year           One Year       Total
                                                   -----          ------        ------         ----           --------       -----
<S>                                               <C>            <C>            <C>            <C>            <C>            <C>
Unused commitments to
  Extend credit ..........................        $   588        $ 1,060        $ 9,781        $11,429        $11,407        $22,836
Standby letters of credit ................             50             23            208            281             86            367
                                                  -------        -------        -------        -------        -------        -------
  Totals .................................        $   638        $ 1,083        $ 9,989        $11,710        $11,493        $23,203
</TABLE>

Based on historical  experience,  many of the  commitments and letters of credit
will expire unfunded.  Accordingly,  the amounts shown in the table above do not
necessarily reflect the Company's need for funds in the periods shown.

The Company  evaluates  each  customer's  credit  worthiness  on a case-by- case
basis.  The  amount  of  collateral  obtained,  if deemed  necessary  by us upon
extension  of  credit,  is  based  on our  credit  evaluation  of the  borrower.
Collateral  varies but may include  accounts  receivable,  inventory,  property,
plant and equipment, commercial and residential real estate.



                                       12
<PAGE>

Item 3.  Controls and Procedures.


(a) Based on their evaluation of the issuer's disclosure controls and procedures
(as defined in 17 C.F.R. Sections  240.13a-14(c) and 240.15d-14(c)) as of a date
within 90 days prior to the filing of this quarterly report,  the issuer's chief
executive  officer and chief financial  concluded that the effectiveness of such
controls and procedures was adequate.

(b) There were no significant  changes in the issuer's  internal  controls or in
other factors that could  significantly  affect these controls subsequent to the
date of their  evaluation,  including  any  corrective  actions  with  regard to
significant deficiencies and material weaknesses.


















                                       13
<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 11, 2003.

c)   Election of Directors

At the annual meeting,  William A. Coates was elected to serve a three year term
as director.

        Nominee                   William A. Coates
        Votes for:                     1,139,754
        Votes withheld:                      571

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

a)   Exhibits: None





b)   Reports on Form 8-K.  The Company  filed a Form 8-K dated April 10, 2003 to
     report the first quarter 2003 earnings press release.






                                       14
<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



Date:      May 13,2003                 By: s/L. Wayne Pearson
                                          --------------------------------------
                                           L. Wayne Pearson
                                           President and Chief Executive Officer


Date:      May 13,2003                 By: s/Robert M. Scott
                                          --------------------------------------
                                           Robert M. Scott
                                           Executive Vice President and Chief
                                           Financial Officer




                                       15
<PAGE>

                                  CERTIFICATION

         I, L. Wayne Pearson, certify that:

         1. I have reviewed this  quarterly  report on Form 10-QSB of Southcoast
Financial Corporation;

         2. Based on my knowledge,  this  quarterly  report does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

         3. Based on my knowledge, the financial statements, and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed  such  disclosure  controls and  procedures  to ensure that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this quarterly report is being prepared;

         b) evaluated the effectiveness of the registrant's  disclosure controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
quarterly report (the "Evaluation Date"); and

         c)  presented  in this  quarterly  report  our  conclusions  about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

         a) all significant  deficiencies in the design or operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

         b) any fraud,  whether or not  material,  that  involves  management or
other  employees  who  have a  significant  role  in the  registrant's  internal
controls; and

         6. The registrant's  other certifying  officers and I have indicated in
this quarterly report whether or not there were significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:    May 13, 2003                             s/L. Wayne Pearson
       --------------------                  -----------------------------------
                                                    L. Wayne Pearson
                                                    Chief Executive Officer



                                       16
<PAGE>

                                  CERTIFICATION

         I, Robert M. Scott, certify that:

         1. I have reviewed this  quarterly  report on Form 10-QSB of Southcoast
Financial Corporation;

         2. Based on my knowledge,  this  quarterly  report does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
quarterly report;

         3. Based on my knowledge, the financial statements, and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

         a) designed  such  disclosure  controls and  procedures  to ensure that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this quarterly report is being prepared;

         b) evaluated the effectiveness of the registrant's  disclosure controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
quarterly report (the "Evaluation Date"); and

         c)  presented  in this  quarterly  report  our  conclusions  about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

         a) all significant  deficiencies in the design or operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

         b) any fraud,  whether or not  material,  that  involves  management or
other  employees  who  have a  significant  role  in the  registrant's  internal
controls; and

         6. The registrant's  other certifying  officers and I have indicated in
this quarterly report whether or not there were significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date:    May 13, 2003                         s/Robert M. Scott
     ----------------------                   ---------------------------------
                                              Robert M. Scott
                                              Chief Financial Officer











                                       17