SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


[ X ]     QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1999

                                       OR

[   ]     TRANSITION  REPORT  PURSUANT TO SECTION 13 OT 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 Registrant as Specified in the Charter)

        South Carolina                                 58-2384011
  (State or other jurisdiction of        (I.R.S. Employer Identification Number)
   incorporation or organization)


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


                                 (843) 884-0504
              (Registrant's Telephone Number, including Area Code)


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during the  preceding  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. [ ] Yes [ X ] No (New Registrant)

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

Common Stock - No Par Value
1,047,987 Shares Outstanding on June 30, 1999

Transitional Small Business Issuer Disclosure Format: [   ]  Yes  [ X ]  No








<PAGE>


                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                        SOUTHCOAST FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                 (Unaudited)
                                                                                                  June 30,              December 31,
                                                                                                     1999                   1998
                                                                                                     ----                   ----
ASSETS
<S>                                                                                            <C>                     <C>
   Cash and due from banks .........................................................           $  3,285,758            $  1,211,451
   Federal funds sold ..............................................................              2,060,000               4,220,000
   Investment securities available for sale ........................................              4,142,828               2,732,978
   Loans, net of allowance of $775,000 and $325,000 ................................             27,306,007              10,821,975
   Property and equipment - net ....................................................              3,158,150               1,243,133
   Other assets ....................................................................              1,159,022                 453,207
                                                                                               ------------            ------------
       Total assets ................................................................           $ 41,111,765            $ 20,682,744
                                                                                               ============            ============

LIABILITIES
   Deposits
     Noninterest-bearing ...........................................................           $  3,593,360            $  2,114,621
     Interest bearing ..............................................................             23,445,192               7,444,869
                                                                                               ------------            ------------
       Total deposits ..............................................................             27,038,552               9,559,490
   Federal Home Loan Bank borrowings ...............................................              4,000,000                 950,000
Other liabilities ..................................................................                360,034                  98,670
                                                                                               ------------            ------------

       Total liabilities ...........................................................             31,398,586              10,608,160
                                                                                               ------------            ------------
SHAREHOLDERS' EQUITY
   Common stock (no par value; 20,000,000 shares authorized;
     1,047,987 shares outstanding at June 30, 1999.  $5.00 par
     value; 20,000,000 shares authorized; 952,713 shares
     outstanding at December 31, 1998) .............................................             10,520,053               4,763,565
Paid-in capital ....................................................................                      -               5,756,488
Retained deficit ...................................................................               (748,347)               (451,147)
   Accumulated other comprehensive income (loss) ...................................                (58,527)                  5,678
                                                                                               ------------            ------------
       Total shareholders' equity ..................................................              9,713,179              10,074,584
                                                                                               ------------            ------------
       Total liabilities and shareholders' equity ..................................           $ 41,111,765            $ 20,682,744
                                                                                               ============            ============
</TABLE>





         See notes to consolidated financial statements.







                                       2
<PAGE>


                        SOUTHCOAST FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       Three months     Three months    Six months
                                                                          ended            ended           ended
                                                                      March 31, 1999   June 30, 1999   June 30, 1999
                                                                      --------------   -------------   -------------

INTEREST INCOME
<S>                                                                   <C>              <C>              <C>
   Loans, including fees ........................................     $   366,146      $   608,935      $   975,081
   Investment securities ........................................          47,143           65,335          112,478
   Federal funds sold ...........................................          48,748           35,715           84,463
                                                                      -----------      -----------      -----------
       Total interest income ....................................         462,037          709,985        1,172,022

INTEREST EXPENSE
   Deposits and borrowings ......................................         139,542          257,878          397,420
                                                                      -----------      -----------      -----------
       Net interest income ......................................         322,495          452,107          774,602

PROVISION FOR POSSIBLE LOAN LOSSES ..............................         225,000          225,000          450,000
                                                                      -----------      -----------      -----------
       Net interest income after provision for loan losses ......          97,495          227,107          324,602
                                                                      -----------      -----------      -----------

NONINTEREST INCOME
   Service fees on deposit accounts .............................          18,277           24,025           42,302
   Fees on loans sold ...........................................          15,170           15,274           30,444
   Other ........................................................          24,610           12,816           37,426
                                                                      -----------      -----------      -----------
       Total noninterest income .................................          58,057           52,115          110,172
                                                                      -----------      -----------      -----------

NONINTEREST EXPENSES
   Salaries and employee benefits ...............................         252,153          324,211          576,364
   Occupancy ....................................................          13,984           16,103           30,087
   Furniture and equipment ......................................          32,577           35,189           67,766
   Advertising and public relations .............................          17,623           21,232           38,855
   Professional fees ............................................          15,715           44,150           59,865
   Travel and entertainment .....................................          15,041           24,374           39,415
   Telephone, postage and supplies ..............................          23,057           29,719           52,776
   Other operating ..............................................           8,998           12,316           21,314
                                                                      -----------      -----------      ----------
       Total noninterest expenses ...............................         379,148          507,294          886,442
                                                                      -----------      -----------      ----------
       Loss before income taxes .................................        (223,596)        (228,072)        (451,668)
INCOME TAX BENEFIT ..............................................          75,996           78,472          154,468
                                                                      -----------      -----------      ----------
       Net loss .................................................     $  (147,600)     $  (149,600)     $  (297,200)
                                                                      ===========      ===========      ===========

NET LOSS PER COMMON SHARE .......................................     $      (.14)     $      (.14)     $      (.28)
                                                                      ===========      ===========      ===========

WEIGHTED AVERAGE SHARES OUTSTANDING .............................       1,047,987        1,047,987        1,047,987
                                                                      ===========      ===========      ===========
</TABLE>


       See notes to consolidated financial statements.

                                       3
<PAGE>

                        SOUTHCOAST FINANCIAL CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                                                        Accumulated          Total
                                                Common stock                                              other              share-
                                                ------------               Paid-in       Retained      comprehensive        holders'
                                             Shares       Amount           capital        deficit         income             equity
                                             ------       ------           -------        -------         ------             ------


<S>                                         <C>         <C>             <C>             <C>            <C>            <C>
BALANCE, JANUARY 1, 1998 .............              -   $          -    $         -     $         -    $          -   $           -

   Net loss ..........................              -              -              -        (451,147)              -        (451,147)

   Other comprehensive income, net
     of tax:
     Unrealized holding gains on
       securities available for sale .              -              -              -               -           5,678           5,678
     Reclassification adjustments for
       gains included in net loss ....              -              -              -               -               -               -
                                                                                                                       ------------
   Comprehensive income (loss) .......              -              -              -               -               -        (445,469)

   Sale of stock (net of offering
     costs of $912,503) ..............        952,713      4,763,565      5,756,488               -               -      10,520,053
                                            ---------   ------------   ------------    ------------    ------------    ------------

BALANCE, DECEMBER 31, 1998 ...........        952,713      4,763,565      5,756,488        (451,147)          5,678      10,074,584

   Net loss ..........................              -              -              -        (297,200)              -        (297,200)

   Other comprehensive income, net
     of tax:
     Unrealized holding losses on
       securities available for sale .              -              -              -               -         (64,205)        (64,205)
     Reclassification adjustments for
       gains included in net loss ....              -              -              -               -               -               -
                                                                                                                       ------------

   Comprehensive income (loss) .......              -              -              -               -               -        (361,405)

   11-for-10 stock split .............         95,274        476,370       (476,370)              -               -               -

   Par value conversion ..............              -      5,280,118     (5,280,118)              -               -               -
                                            ---------   ------------   ------------    ------------    ------------    ------------

BALANCE, JUNE 30, 1999 ...............      1,047,987   $ 10,520,053    $         -    $   (748,347)   $    (58,527)   $  9,713,179
                                            =========   ============   ============    ============    ============    ============
   (Unaudited)
</TABLE>







           See notes to consolidated financial statements.


                                       4
<PAGE>

                        SOUTHCOAST FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                     For the six months ended June 30, 1999
                                   (Unaudited)

OPERATING ACTIVITIES
   Net loss ...................................................    $   (297,200)
   Adjustments to reconcile net loss to net cash provided
   by operating activities
     Deferred income taxes ....................................        (154,468)
     Provision for possible loan losses .......................         450,000
     Depreciation and amortization ............................          50,794
     Increase in other assets .................................         (64,272)
     Increase in other liabilities ............................         261,364
                                                                   ------------
         Net cash provided by operating activities ............         246,218
                                                                   ------------

INVESTING ACTIVITIES
   Decrease in federal funds sold .............................       2,160,000
   Purchase of investment securities available for sale .......      (1,961,130)
   Net increase in loans ......................................     (16,934,032)
   Purchase of property and equipment .........................      (1,965,811)
                                                                   ------------
         Net cash used for investing activities ...............     (18,700,973)
                                                                   ------------

FINANCING ACTIVITIES
   Increase in Federal Home Loan Bank borrowings ..............       3,050,000
   Net increase in deposits ...................................      17,479,062
         Net cash provided by financing activities ............      20,529,062
         Increase in cash and due from banks ..................       2,074,307

CASH AND DUE FROM BANKS, BEGINNING OF PERIOD ..................       1,211,451
                                                                   ------------

CASH AND DUE FROM BANKS, END OF PERIOD ........................    $  3,285,758
                                                                   ============

















     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 generally accepted  accounting  principles 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 Company does not have
any instruments which are dilutive;  therefore,  only basic net income per share
of common stock is presented.

           In March, 1999, the Company declared an eleven-for-ten stock split 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
split.


                                       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 the Form 10-SB of
Southcoast  Financial  Corporation.  Results of operations for the period ending
June 30, 1999 are not  necessarily  indicative of the results to be attained for
any other period.

FORWARD LOOKING STATEMENTS

           Statements included in Management's Discussion and Analysis which are
not  historical  in nature 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  response to the Year 2000 problem,  future  business
prospects,  revenues, working capital, liquidity, capital needs, interest costs,
and income,  are  subject to certain  risks and  uncertainties  that could cause
actual results to differ  materially 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.

NET INTEREST INCOME

   Net interest income is the difference  between the interest earned on 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 $774,602
   for the six months ended June 30,  1999.  For the three months ended June 30,
   1999 net  interest  income was  $452,107  compared to $322,495  for the three
   months ended March 31, 1999.

   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 June 30, 1999  increased  to
   $30.6 million or 42.7 percent from the $21.4  million  reported for the first
   quarter  ending March 31, 1999. The increase was mainly  attributable  to the
   increase in loans  supported by a $9.6 million  increase in interest  bearing
   deposits which resulted from favorable economic conditions in the Charleston,
   South Carolina market 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
   earnings  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 a 64 basis point increase 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                    Six months ended
                                      March 31, 1999                      June 30, 1999                        June 30, 1999
                                      --------------                      -------------                        -------------
                               Average     Income/   Yield/     Average       Income/    Yield/     Average        Income/    Yield/
ASSETS                         balance     expense    rate      balance       expense     rate      balance        expense     Rate
------                         -------     -------    ----      -------       -------     ----      -------        -------     ----

<S>                         <C>           <C>        <C>      <C>           <C>            <C>     <C>           <C>           <C>
Federal funds sold ......   $ 4,170,408   $ 48,748    4.68%   $ 2,910,713   $    35,715    4.91%   $ 3,540,561   $   84,463    4.77%
Investments .............     3,367,041     47,143    5.60      4,632,690        65,335    5.64      3,999,866      112,478    5.62
                            -----------   --------            -----------   -----------            -----------   ----------
Total investments and
   federal funds sold ...     7,537,449     95,891    5.09      7,543,403       101,050    5.36      7,540,426      196,941    5.22
Loans ...................    13,865,838    366,146   10.56     23,014,557       608,935   10.58     18,440,198      975,081   10.58
                            -----------   --------            -----------   -----------            -----------   ----------
Total earning assets ....    21,403,287    462,037    8.63     30,557,960       709,985    9.29     25,980,624    1,172,022    9.02
                                          --------                          -----------
Other assets ............     2,078,417                         3,370,376                            2,724,396
                            -----------                       -----------                          -----------

Total assets ............   $23,481,704                       $33,928,336                          $28,705,020
                            ===========                       ===========                          ===========

Interest bearing deposits   $11,076,050   $133,328    4.82    $19,313,760   $   233,794    4.84    $15,194,905   $  367,122    4.83

FHLB advances ...........       438,925      6,214    5.66      1,873,656        24,084    5.14      1,156,291       30,298    5.24
                            -----------   --------            -----------   -----------            -----------   ----------
Total interest bearing
   liabilities ..........    11,514,975    139,542    4.85     21,187,416       257,878    4.87     16,351,196      397,420    4.86

Non-interest bearing
   liabilities ..........     1,903,790                         2,839,435                            2,371,612
                            -----------   --------            -----------   -----------            -----------   ----------
Total liabilities .......    13,418,765    139,542    4.16     24,026,851       257,878    4.29     18,722,808      397,420    4.25

Equity ..................    10,062,939                         9,901,485                            9,982,212
                            -----------                       -----------                          -----------
Total liabilities and
   Equity ...............   $23,481,704                       $33,928,336                          $28,705,020
                            ===========                       ===========                          ===========
Net interest income/
   margin ...............                 $322,495    6.03                  $   452,107    5.92                  $  774,602    5.96
                                          ========                          ===========                          ==========
Net interest spread .....                             3.78                                 4.42                                4.16
</TABLE>


As reflected  above,  for the three months ended June 30, 1999 the average yield
on earning  assets amounts  amounted to 9.29 percent,  while the average cost of
interest-bearing  liabilities was 4.87 percent. For the three months ended March
31, 1999 the average  yield on earning  assets was 8.63  percent and the average
cost of interest-bearing liabilities was 4.85 percent. The increase in the yield
on earning assets is attributable to the increased volume of loans,  which gives
the Company a greater  return than the other  types of earning  assets.  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  June 30,  1999 was 5.92  percent
compared to 6.03 percent for the three months ended March 31, 1999. The decrease
in the net interest margin is  attributable to the increase in interest  bearing
liabilities  which  resulted in an increase in the cost of total  liabilities to
support earning assets.  The cost of total  liabilities was 4.16 percent for the
three months ended March 31, 1999  compared to 4.29 percent for the three months
ended June 30, 1999.  For the six months  ended June 30, 1999,  the net interest
margin was 5.96 percent.

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 June 30, 1999
                                                                                     versus three months ended March 31, 1999
                                                                                     ----------------------------------------
                                                                                  Volume                Rate            Net change
                                                                                  ------                ----            ----------
<S>                                                                             <C>                    <C>                <C>
Federal funds sold ................................................             $ (14,725)             $1,692             $ (13,033)
Investments .......................................................                17,721                 471                18,192
                                                                                ---------              ------             ---------
Total investments and federal funds sold ..........................                 2,996               2,163                 5,159
Total loans .......................................................               241,584               1,205               242,789
                                                                                ---------              ------             ---------
Total earning assets ..............................................               244,580               3,368               247,948
Total interest-bearing liabilities ................................               117,214               1,122               118,336
                                                                                ---------              ------             ---------
Net interest income ...............................................             $ 127,366              $2,246             $ 129,612
                                                                                =========              ======             =========
</TABLE>

RESULTS OF OPERATIONS

   The Company's net loss for the six months ended June 30, 1999 was $297,200 or
   $.28 per share.  For the three  months  ended June 30,  1999 the net loss was
   $149,600  or $.14 per share  compared  to  $147,600 or $.14 per share for the
   three months ended March 31, 1999.  The quarter  ended June 30, 1999 includes
   salaries  and other  operating  expenses  necessary to support the hiring and
   training of staff for the Savannah Highway branch that will be opening during
   the third quarter of 1999.

   Noninterest  income for the six months ended June 30, 1999 was $110,172.  For
   the three  months  ended June 30, 1999,  the  noninterest  income was $52,115
   compared to $58,057 for the three  months  ended  March 31,  1999.  The three
   months  ended  March  31,  1999  included  a  $12,591  gain  on the  sale  of
   securities.  Fees on deposits grew to $24,025 for the three months ended June
   30, 1999 from $18,277 for the three months ended March 31, 1999. The increase
   in deposit fees corresponds to the continued increase in deposits.

   Noninterest expenses for the six months ended June 30, 1999 were $886,442. Of
   this total,  $674,217  represents  salaries and benefits,  occupancy cost and
   furniture and equipment  expenses.  For the three months ended June 30, 1999,
   total non-interest expenses amounted to $507,294 compared to $379,148 for the
   three months ended March 31, 1999.  The $128,146  increase in expenses in the
   second  quarter  is  primarily  related  to the  hiring  of the staff for the
   Savannah  Highway  branch and expenses  associated  with the formation of the
   holding company.

   The  allowance  for loan losses was 2.76 percent of loans as of June 30, 1999
   compared to 2.92 percent as of December 31, 1998.  In  management's  opinion,
   the allowance for loan losses is adequate.


                                       9
<PAGE>

LIQUIDITY

   Liquidity  is the  ability to meet  current  and future  obligations  through
   liquidation or maturity of existing assets or the acquisition of liabilities.
   Southcoast  Financial  Corporation  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 are
   the  Company's  primary  source of funds for  credit  activities.  Management
   believes  that the  Company's  liquidity  sources  are  adequate  to meet its
   operating needs.

LOANS

   Commercial  financial and agricultural  loans made up 14 percent of the total
   loan portfolio as of June 30, 1999,  totaling $4.0 million.  Loans secured by
   real estate for construction and land development  totaled $2.7 million or 10
   percent of the total loan  portfolio  while all other  loans  secured by real
   estate  totaled $20.1 million or 72 percent of the total loan portfolio as of
   June 30, 1999.  Installment  loans and other  consumer  loans to  individuals
   comprised $1.3 or 5 percent of the total loan portfolio.

CAPITAL RESOURCES

   The capital  base for the Company  decreased by the $297,200 net loss for the
   six months of 1999.  The Company's  equity to asset ratio was 23.6 percent as
   of June 30, 1999 compared to 48.7 percent as of December 31, 1998.

   The  Federal  Deposit   Insurance   Corporation  has  issued  guidelines  for
   risk-based capital requirements.  As shown in the table below, as of June 30,
   1999,  the  Company  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 ..........              $10,011      42.84%     $2,337      10.00%       $1,870      8.00%
Tier 1 capital to risk weighted assets .........                9,713      41.56       1,402       6.00           935      4.00
Tier 1 capital to average assets ...............                9,713      28.63       1,696       5.00         1,357      4.00
</TABLE>

YEAR 2000 READINESS DISCLOSURE

   Many  computer-based  information systems in use today exclude the century as
   part of the date definition,  which could cause inaccurate calculations after
   December 31, 1999.  The "Year 2000  Problem" had been  recognized at the time
   company  management  was deciding  which vendor  packages to use in its daily
   operations.  Management obtained representations from all of its vendors that
   the  hardware/software  was  Year  2000  compliant.  However,  despite  these
   representations,  management  has completed  extensive  testing of all of its
   computer hardware and software which has confirmed Year 2000 compliance.  The
   estimated  total  cost of the  testing  was  $20,000.  The  Company  does not
   anticipate  incurring any additional  expenses to become Year 2000 compliant.
   Year 2000 problems encountered by customers and vendors of goods and services
   other than computer and data processing  systems could  adversely  affect the
   Company.  Management has developed  contingency  plans to deal with the types
   and extent of possible problems it can foresee. Contingency plans include the
   identification of alternate sources of computer hardware and software as well
   as plans for  carrying on  essential  business  functions  without the use of
   computers. Based on the information it has obtained and reviewed,  management
   of the Company does not believe that the most  reasonably  likely  worst-case
   scenario  the  Company  would  encounter  would be  materially  worse  than a
   substantial  inconvenience.  Nevertheless,  Year 2000  problems  could have a
   material adverse effect on the Company,  the dollar amount of which cannot be
   accurately  quantified  at  this  time  because  of  inherent  variables  and
   uncertainties.

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<PAGE>


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.


                           PART II - OTHER INFORMATION

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

         On April 20, 1999, the  shareholders of Southcoast  Community Bank (now
the wholly owned  subsidiary of the Company) held their regular annual  meeting.
At the meeting, two matters were submitted to a vote with results as follows:

1. Election of eight directors for a term of one year each.

                  DIRECTORS                                 Shares Voted
                                                        For          Abstain
                                                        ---          -------

              William A. Coates                      662,649            1,358
              Thomas E. Hamer, Sr.                   662,649            1,358
              Paul D. Hollen, III                    662,649            1,358
              L. Wayne Pearson                       662,649            1,358
              Norman T. Russell                      662,649            1,358
              Robert M. Scott                        662,649            1,358
              James H. Sexton, Jr.                   662,649            1,358
              James P. Smith                         662,649            1,358

     All of the directors also serve as initial directors of the Company.

2. Approval of the Plan of Exchange between the Company and Southcoast Community
Bank.

          FOR: 662,649 Shares     AGAINST: 1,600 Shares    ABSTAIN: 1,000 Shares


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

a)    Exhibits

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

                2                           Plan of Exchange between the Company
                                            and Southcoast Community Bank

               27                           Financial Data Schedule

b)    Reports on form 8-K.      None.





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<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
                    Name of Company


     L. Wayne Pearson
By:  -------------------------------------------------     Date: August 16, 1999
     President and Chief Executive Officer

     Robert M. Scott
By:  -------------------------------------------------     Date: August 16, 1999
     Executive Vice President and Chief
     Financial Officer
     (Principal financial officer)



























                                       12
<PAGE>



                                  EXHIBIT INDEX

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

                2                           Plan of Exchange between the Company
                                            and Southcoast Community Bank

               27                           Financial Data Schedule


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