SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB

                                       OR

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

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 For the quarter ended September 30, 2003


                                                  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: 1,532,998 Shares Outstanding on October 31, 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)
                                                                                                September 30,           December 31,
                                                                                                    2003                    2002
                                                                                                    ----                    ----
ASSETS
<S>                                                                                           <C>                      <C>
   Cash and due from banks ........................................................           $   5,954,958            $   5,489,586
   Federal funds sold .............................................................               5,686,000               14,583,000
   Investment securities available for sale .......................................              15,184,213                5,948,452
   Federal Home Loan Bank Stock, at cost ..........................................               1,930,000                1,315,000
   Loans held for sale ............................................................               4,025,961                8,682,559
   Loans, net of allowance of $2,250,631 and $1,656,260 ...........................             189,102,793              134,729,227
   Property and equipment - net ...................................................               8,595,862                8,054,485
   Other assets ...................................................................               2,938,780                2,366,408
                                                                                              -------------            -------------
       Total assets ...............................................................           $ 233,418,567            $ 181,168,717
                                                                                              =============            =============

LIABILITIES
   Deposits
     Noninterest-bearing ..........................................................              19,616,029            $  17,393,322
     Interest bearing .............................................................             148,772,896              115,262,096
                                                                                              -------------            -------------
       Total deposits .............................................................             168,388,925              132,655,418

   Other borrowings ...............................................................              38,600,000               23,500,000
   Other liabilities ..............................................................               1,672,358                1,303,847
                                                                                              -------------            -------------
       Total liabilities ..........................................................             208,661,283              157,459,265
   Trust preferred debt ...........................................................              11,000,000               11,000,000

SHAREHOLDERS' EQUITY
   Common stock (no par value; 20,000,000 shares authorized;
     1,532,199 shares outstanding at September 30, 2003 and
     1,321,996 at December 31, 2002) ..............................................              11,336,318               11,378,910
   Retained earnings ..............................................................               2,451,763                1,289,321
   Accumulated other comprehensive income (loss) ..................................                 (30,797)                  41,221
                                                                                              -------------            -------------
       Total shareholders' equity .................................................              13,757,284               12,709,452
                                                                                              -------------            -------------
       Total liabilities and shareholders' equity .................................           $ 233,418,567            $ 181,168,717
                                                                                              =============            =============
</TABLE>







         See notes to unaudited condensed consolidated financial statements.


                                       2
<PAGE>


                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                      Nine months      Nine months      Three months    Three months
                                                                         Ended            Ended            Ended            Ended
                                                                    Sept 30, 2003      Sept 30, 2002    Sept 30, 2003  Sept 30, 2002
                                                                    -------------      -------------    -------------  -------------

INTEREST INCOME
<S>                                                                    <C>              <C>              <C>              <C>
Loans, including fees ..............................................   $8,629,159       $6,466,157       $3,146,144       $2,340,002
Investment securities ..............................................      257,038          242,513           91,498           95,204
Federal funds sold .................................................      105,883          115,929           19,383           36,909
                                                                       ----------       ----------       ----------       ----------

         Total interest income .....................................    8,992,080        6,824,599        3,257,025        2,472,115

INTEREST EXPENSE
Deposits and borrowings ............................................    3,401,624        2,841,092        1,175,727        1,081,559
                                                                       ----------       ----------       ----------       ----------

         Net interest income .......................................    5,590,456        3,983,507        2,081,298        1,390,556

Provision for  loan losses .........................................      605,000          364,301          180,000          105,129
                                                                       ----------       ----------       ----------       ----------

Net interest income after provision ................................    4,985,456        3,619,206        1,901,298        1,285,427

NONINTEREST INCOME
Service fees on deposit accounts ...................................      677,733          444,617          235,317          171,337
Fees on loans sold .................................................      587,143          409,055          192,243          136,255
Other ..............................................................      157,489          480,009           10,514          150,983
                                                                       ----------       ----------       ----------       ----------

     Total noninterest income  .....................................    1,422,365        1,333,681          438,074          458,575

NONINTEREST EXPENSES
Salaries and employment benefits ...................................    2,810,314        2,167,915          981,581          737,579
Occupancy ..........................................................      298,252          281,076           92,384           95,172
Furniture and equipment ............................................      487,224          356,145          171,287          132,521
Advertising and public relations ...................................       69,413           74,722           42,123           22,985
Professional fees ..................................................      199,197           96,027           97,223           32,400
Travel and entertainment ...........................................      143,725          111,088           57,843           37,222
Telephone, postage and supplies ....................................      198,564          207,728           95,203           69,397
Other operating expenses ...........................................      383,034          314,790          130,131          113,027
                                                                       ----------       ----------       ----------       ----------

         Total noninterest expenses  ...............................    4,589,723        3,609,491        1,667,775        1,240,303
                                                                       ----------       ----------       ----------       ----------

     Income before income tax ......................................    1,818,098        1,343,396          671,597          503,699
     Income tax ....................................................      655,656          525,985          243,216          197,504
                                                                       ----------       ----------       ----------       ----------

     Net income ....................................................   $1,162,442       $  817,411          428,381       $  306,195
                                                                       ==========       ==========       ==========       ==========

Basic Net income Per Common Share ..................................   $      .76       $      .54       $      .28       $      .20
Diluted Net Income Per Common Share ................................   $      .73       $      .52       $      .27       $      .19

Weighted Average Shares Outstanding

     Basic .........................................................    1,531,457        1,524,113        1,535,489        1,524,807
     Diluted .......................................................    1,601,472        1,584,417        1,610,454        1,587,325
</TABLE>

         See notes to unaudited 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 .....................................                                        817,411                        817,411
     Other comprehensive income, net
         of tax:
         Unrealized holding losses on
              securities available for sale .........                                                       (20,750)        (20,750)

     Comprehensive income ...........................                                                                       796,661

     Stock  dividend ................................        120,016
     Employee stock purchase plan ...................          3,654          30,560                                         30,560
                                                           ---------    ------------    ------------   ------------    ------------

BALANCE, September 30, 2002 .........................      1,321,152    $ 11,370,268    $    960,032   $     46,413    $ 12,376,713
                                                           =========    ============    ============   ============    ============



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


     Net income .....................................                                      1,162,442                      1,162,442

     Other comprehensive income, net
         of tax:
         Unrealized holding losses on
              securities available for sale .........                                                       (72,018)        (72,018)
                                                                                                                       ------------

     Comprehensive income ...........................                                                                     1,090,824

       Stock dividend ...............................        205,016
       Stock redemption .............................         (6,000)       (112,500)                                      (112,500)
       Exercise of stock options ....................          8,850          43,750                                         43,750
     Employee stock purchase plan ...................          2,337          26,154                                         26,154
                                                           ---------    ------------    ------------   ------------    ------------

BALANCE, September 30, 2003 .........................      1,532,199    $ 11,336,318    $  2,451,763   $    (30,797)   $ 13,757,284
                                                           =========    ============    ============   ============    ============
</TABLE>

           See notes to unuadited condensed consolidated financial statements.






                                       4
<PAGE>


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


<TABLE>
<CAPTION>
                                                                                                     Nine months ended September 30,
                                                                                                     -------------------------------
OPERATING ACTIVITIES                                                                                     2003                2002
                                                                                                         ----                ----
<S>                                                                                                <C>                 <C>
     Net income ............................................................................       $  1,162,442        $    847,411

     Adjustments  to  reconcile  net income to net cash  provided  by  operating
        activities:
         Income tax ........................................................................            655,656             525,985
         Provision for loan losses .........................................................            605,000             364,301
         Depreciation and amortization .....................................................            484,669             385,131
         Increase in other assets ..........................................................           (572,372)         (1,092,093)
         Increase in other liabilities .....................................................           (245,596)          1,170,710
                                                                                                   ------------        ------------
              Net cash provided by operating activities ....................................          2,089,799           2,171,445
                                                                                                   ------------        ------------

INVESTING ACTIVITIES

     (Increase) decrease in federal funds sold .............................................          8,897,000         (19,755,000)
     Sale (purchase) of investment securities available for sale ...........................         (9,987,250)          1,263,497
     Net increase in loans .................................................................        (50,321,968)        (24,428,820)
     Purchase of property and equipment ....................................................         (1,003,124)         (1,030,716)
                                                                                                   ------------        ------------
              Net cash used for investing activities .......................................        (52,415,342)        (43,951,039)
                                                                                                   ------------        ------------

FINANCING ACTIVITIES
     Increase (decrease) in borrowings .....................................................         15,100,000          (9,100,000)
     Increase in trust preferred debt ......................................................                  -           4,000,000
     Proceeds from sale (redemption) of stock, net .........................................            (42,592)             30,560
     Net increase in deposits ..............................................................         35,733,507          48,797,574
                                                                                                   ------------        ------------
              Net cash provided by financing activities ....................................         50,790,915          43,728,134
                                                                                                   ------------        ------------

              Increase  in cash and due from banks .........................................            465,372           1,948,540


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

CASH AND DUE FROM BANKS, END OF PERIOD .....................................................       $  5,954,958        $  8,575,648
                                                                                                   ============        ============
</TABLE>







     See notes to unaudited condensed consolidated financial statements.



                                       5
<PAGE>



                        SOUTHCOAST FINANCIAL CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1   -  BASIS  OF PRESENTATION

             The accompanying  unaudited financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim  financial  information and with the instructions to Form
10-QSB  and  Item  310 (b) of  Regulation  S-B of the  Securities  and  Exchange
Commission.  Accordingly, they do not include all information and notes 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
has two  securities  subsidiaries  that  purchase  securities in relation to its
trust preferred debt. The Company does not have any 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") Statement of Financial Accounting Standards
("SFAS")  No. 123,  Accounting  for  Stock-Based  Compensation,  to  stock-based
employee compensation.


(Dollars in thousands,                           Nine months ended September 30,
 except for per share data)                      -------------------------------
                                                       2003            2002
                                                       ----            ----
(Unaudited)

Net income, as reported ........................   $    1,162,442  $     817,411
Deduct: Total stock-based employee
  compensation expense determined
  under fair value based method
  for all awards, net of related tax effects ...           23,823         23,823
                                                    -------------    -----------

Pro forma net income ...........................    $   1,138,619  $     793,588
                                                    =============    ===========

Earnings per share:
  Basic - as reported ..........................    $        0.76    $      0.54
                                                    =============    ===========
  Basic - pro forma ............................    $        0.74    $      0.52
                                                    =============    ===========

  Diluted - as reported ........................    $        0.74    $      0.52
                                                    =============    ===========
   Diluted - pro forma .........................    $        0.71    $      0.50
                                                    =============    ===========


                                       6
<PAGE>


(Dollars in thousands,                               Quarter ended September 30,
 except for per share data)                          ---------------------------
                                                           2003         2002
                                                           ----         ----
                                                                     (Unaudited)

Net income, as reported ..........................   $    428,381    $   306,195
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 .............................   $    420,440    $   298,254
                                                      ===========    ===========

Earnings per share:
  Basic - as reported ............................    $      0.28    $      0.20
                                                      ===========    ===========
  Basic - pro forma ..............................    $      0.27    $      0.20
                                                      ===========    ===========

  Diluted - as reported ..........................    $      0.27    $      0.19
                                                      ===========    ===========
  Diluted - pro forma ............................    $      0.26    $      0.19
                                                      ===========    ===========
















                                       7
<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 SFAS 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
on the Company's common stock. In July, 2003 the Company declared a special five
percent  stock  dividend.  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 DEBT

In May 2002 and December 2002, in two separate transactions,  the Company issued
an aggregate $11 million of trust preferred debt.  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 fluctuates quarterly with the three-month LIBOR.
..
NOTE 6 - RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2003, the American Institute of Certified Public  Accountants  ("AICPA")
issued an exposure draft of a proposed Statement of Position ("SOP"), "Allowance
for Credit  Losses".  The proposed SOP addresses the recognition and measurement
by creditors of the allowance for credit  losses  related to all loans,  as that
term is defined in SFAS No. 114,  "Accounting  by Creditors for  Impairment of a
Loan".  The proposed SOP provides that the allowance for credit losses  reported
on a  creditor's  balance  sheet  should  consist  only of (1) a  component  for
individual loan impairment  recognized and measured pursuant to SFAS No. 114 and
(2) one or more components of collective loan impairment  recognized pursuant to
SFAS No. 5, "Accounting for Contingencies",  and measured in accordance with the
guidance in the  proposed  SOP.  The  provisions  of the  proposed  SOP would be
effective for financial statements for fiscal years beginning after December 15,
2003, with earlier application  permitted.  The effect of initially applying the
provisions  of the  proposed  SOP would be  reported  as a change in  accounting
estimate.  Comments on the exposure  draft were due by September  19, 2003.  The
effects on the financial  condition or operating  results of the Company related
to the adoption of this  proposed SOP have not been  determined,  but would most
likely be material.

Other  accounting   pronouncements  proposed  or  adopted  by  standards-setting
authorities are not expected to have a material effect on the financial position
or results of operations of the Company.

NOTE 7 - RECENT DEVELOPMENTS

On November 6, 2003, the Company signed an underwriting  agreement to sell up to
1,104,000  shares of its  common  stock to the public at $18.50 per share with a
price to the  underwriters of $17.21 per share.  All of the shares were sold and
settled on November 12, 2003.  The proceeds will be used to support  future loan
production  and asset  growth,  branch  expansion in new and  existing  markets,
potential acquisitions and for other general corporate purposes.



                                       8
<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
September 30, 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 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 nine  months  ended  September  30,  2003 was
$1,162,442  or $.76 per basic  share,  compared  to  $817,411  or $.54 per basic
share,  for the nine months  ended  September  30, 2002.  For the quarter  ended
September 30, 2003,  net income was $428,381 or $.28 per basic share compared to
$306,195 or $.20 per basic share for the quarter ended September 30, 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
$5,590,456 for the nine months ended September 30, 2003,  compared to $3,983,507
for the nine months ended  September 30, 2002.  For the quarter ended  September
30, 2003,  net interest  income was  $2,081,298  compared to $1,390,556  for the
quarter ended September 30, 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 nine months ending  September 30, 2003 increased
60.5  percent to $193.1  million from the $120.3  million  reported for the nine
months ending  September 30, 2002. The increase was mainly  attributable  to the
increase in loans  supported  by a $64.2  million  increase in interest  bearing
liabilities  which resulted from the continued  growth of the Charleston  market
area, growth in the Company's branches, 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 nine months
ended September 30, 2003 and 2002. The increase in net interest income is due to
increased volume of earning assets and interest bearing  liabilities offset by a
21 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  in
investments   and  federal  funds  sold  and  the  increase  in  cost  of  funds
attributable  to the issuance of $7 million of trust  preferred debt in December
2002.




                                       9
<PAGE>



<TABLE>
<CAPTION>
                                                      Nine months ended                             Nine months ended
                                                        September 30, 2003                            September 30, 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 .................      $ 12,691,036    $    105,883       1.11%      $  9,212,295    $     115,929          1.68%
Investments ........................        10,770,479         257,038       3.18          7,191,420          294,369          5.46
                                          ------------    ------------                  ------------     ------------
Total investments and
federal funds sold .................        23,461,515         362,921       2.06         16,403,715          410,298          3.34
Loans ..............................       169,668,913       8,629,159       6.78        112,057,763        6,466,157          7.69
                                          ------------    ------------                  ------------     ------------
Total earning assets ...............       193,130,428       8,992,080       6.21        128,461,478        6,876,455          7.14
                                                          ------------                  ------------     ------------
Other assets .......................        12,705,850                                    10,640,492
                                          ------------                                  ------------
Total assets .......................      $205,836,278                                  $139,101,970
                                          ============                                  ============

LIABILITIES
Interest bearing deposits ..........      $134,501,151       2,196,342       2.18       $ 91,643,541        2,183,441          3.18
Other borrowings ...................        35,658,638       1,205,282       4.51         22,301,256          709,507          4.24
                                          ------------    ------------                  ------------     ------------
Total interest bearing
     liabilities ...................       170,159,789       3,401,624       2.67        113,944,797        2,892,948          3.39
Non-interest bearing
     liabilities ...................        22,295,385                                    14,264,530
                                          ------------                                  ------------
Total liabilities ..................       192,455,174       3,401,624       2.38        128,209,327        2,892,948          3.01
                                                          ------------                  ------------     ------------
Equity .............................        13,381,104                                    10,892,643
                                          ------------                                  ------------
Total liabilities and
     equity ........................      $205,836,278                                  $139,101,970
                                          ============                                  ============
Net interest income/margin .........                      $  5,590,456       3.86                        $  3,983,507          4.13
                                                          ============                                   ============
Net interest spread ................                                         3.54%                                             3.75%

</TABLE>

(1)  Annualized

As reflected  above,  for the nine months ended  September  30, 2003 the average
yield on earning  assets was 6.21  percent,  while the average  cost of interest
bearing  liabilities  was 2.67 percent.  For the nine months ended September 30,
2002 the average  yield on earning  assets was 7.14 percent and the average cost
of interest-bearing  liabilities was 3.39 percent.  The decrease in the yield on
earning  assets  and  the  rates  paid  on  interest   bearing   liabilities  is
attributable  to the  market  interest  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 nine months ended September 30,
2003 was 3.86  percent  compared  to 4.13  percent  for the  nine  months  ended
September  30,  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  debt,  offset by the repricing of higher cost deposits at lower
rates. The cost of total  liabilities was 2.38 percent for the nine months ended
September 30, 2003 compared to 3.01 percent for the nine months ended  September
30, 2002.








                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                       Three months ended                             Three months ended
                                                        September 30, 2003                            September 30, 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 .................      $ 11,541,402   $     33,898       1.17%     $  8,418,213      $     36,909         1.75%
Investments ........................        10,953,270         83,940       3.07        11,095,591           147,060         5.30
Total investments and
federal funds sold .................        22,494,672        117,838       2.10        19,513,804           183,969         3.77
Loans ..............................       170,863,531      2,932,074       6.86       125,278,208         2,340,002         7.47
                                          ------------   ------------                 ------------      ------------
Total earning assets ...............       193,358,203      3,049,912       6.31       144,792,012         2,523,971         6.97
                                                         ------------                 ------------      ------------
Other assets .......................        13,543,273                                  10,044,130
                                          ------------                                ------------
Total assets .......................      $206,901,476                                $154,836,142
                                          ============                                ============

LIABILITIES
Interest bearing deposits ..........      $133,853,205        703,693       2.10      $108,487,151           945,565         3.49
Other borrowings ...................        35,744,445        407,169       4.56        21,422,222           187,850         3.51
                                          ------------   ------------                 ------------      ------------
Total interest bearing
     liabilities ...................       169,597,650      1,110,862       2.62       129,909,373         1,133,415         3.49
                                                         ------------                 ------------      ------------
Non-interest bearing
     liabilities ...................        24,032,648                                  13,703,615
                                          ------------                               ------------
Total liabilities ..................       193,630,298      1,110,862       2.29       143,612,988         1,133,415         3.16
                                           -----------   ------------                                   ------------
Equity .............................        13,271,178                                  11,223,154
                                          ------------                               ------------
Total liabilities and
     equity ........................      $206,901,476                                $154,836,142
                                          ============                                ============
Net interest income/margin..........                     $  1,939,050       4.01                        $  1,390,556         3.84
                                                         ============                                   ============
 Net interest spread ................                                       3.69%                                            3.48%
</TABLE>


(1)  Annualized

As reflected  above,  for the three months ended  September 30, 2003 the average
yield on earning  assets was 6.31%  percent,  while the average cost of interest
bearing  liabilities was 2.62 percent.  For the three months ended September 30,
2002 the average  yield on earning  assets was 6.97 percent and the average cost
of interest-bearing  liabilities was 3.49 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. The net interest
margin for the three months ended  September 30, 2003 was 4.01 percent  compared
to 3.84 percent for the three months ended  September 30, 2002. The stability of
the net interest margin  reflects the company's  positive  interest  sensitivity
position.  The cost of total  liabilities  was 2.29 percent for the three months
ended  September  30, 2003  compared to 3.16  percent for the three months ended
September 30, 2002.








                                       11
<PAGE>





The following  tables present 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 nine months ended September 30, 2003
                                                                                     Versus nine months ended September 30, 2002
                                                                                     -------------------------------------------
                                                                                  Volume                Rate              Net change
                                                                                  ------                ----              ----------
<S>                                                                              <C>                  <C>                   <C>
Federal funds sold ................................................              $    43              $   (53)              $   (10)
Investments .......................................................                  147                 (184)                  (37)
                                                                                 -------              -------               -------
Total investments and federal funds sold ..........................                  190                 (237)                  (47)
Total loans .......................................................                3,323               (1,160)                2,163
                                                                                 -------              -------               -------
Total earning assets ..............................................                3,513               (1,397)                2,116
Total interest-bearing liabilities ................................                1,447                 (938)                  509
                                                                                 -------              -------               -------
Net interest income ...............................................              $ 2,066              $  (459)              $ 1,607
                                                                                 =======              =======               =======
</TABLE>


Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>
                                                                                     For the three months ended September 30, 2003
                                                                                     Versus three months ended September 30, 2002
                                                                                     --------------------------------------------
                                                                                  Volume                Rate              Net change
                                                                                  ------                ----              ----------
<S>                                                                               <C>                  <C>                  <C>
Federal funds sold ..................................................             $    (1)             $   (17)             $   (18)
Investments .........................................................                  (1)                 (54)                 (55)
                                                                                  -------              -------              -------
Total investments and federal funds sold ............................                  (2)                 (71)                 (73)
Total loans .........................................................               1,218                 (412)                 806
                                                                                  -------              -------              -------
Total earning assets ................................................               1,216                 (483)                 733
Total interest-bearing liabilities ..................................                 487                 (435)                  42
                                                                                  -------              -------              -------
Net interest income .................................................             $   739              $   (48)             $   691
                                                                                  =======              =======              =======
</TABLE>









                                       12
<PAGE>


NONINTEREST INCOME AND EXPENSES



Noninterest  income for the nine months ended  September 30, 2003 was $1,422,365
compared to  $1,333,681  for the nine  months  ended  September  30,  2002.  The
increase  is  attributable  to a $133,116  increase  in service  fees on deposit
accounts  attributable to additional deposit accounts generating additional fees
on deposits,  and $178,088 increase in fees on loans sold generated by increased
volume of loans  sold,  offset by a  decrease  in other  non-interest  income of
$322,520 reflecting security gains taken in 2002.

Noninterest  expenses  for  the  nine  months  ended  September  30,  2003  were
$4,589,723, compared to $3,609,491 for the nine months ended September 30, 2002.
The  increase of $980,232 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,  and  the  anticipated  openings  of the
Summerville  and Goose Creek  branches in the fourth quarter of 2003, as well as
the  increase in  administrative  staff to support  the growth of the  Company's
operations.

Noninterest  income for the three months ended  September  30, 2003 was $438,074
compared to $458,575 for the three months ended September 30, 2002. The increase
is  attributable  to a $77,151  increase  in service  fees on  deposit  accounts
attributable  to growth  in  deposit  accounts,  generating  additional  fees on
deposits,  and $45,032  increase in fees on loans sold  generated  by  increased
volume of loans  sold,  offset by a decrease  in  noninterest  income of $82,482
reflecting security gains taken in 2002.

Noninterest  expenses  for the  three  months  ended  September  30,  2003  were
$1,667,775,  compared to  $1,240,303  for the three months ended  September  30,
2002. The increase of $427,472 is mainly  attributable  to increases in salaries
and benefits, furniture and equipment expense and administrative expenses. These
increases  primarily  relate to the anticipated  openings of the Summerville and
Goose Creek  branches in the fourth  quarter of 2003, 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 $5.3 million line of credit with the Bankers Bank of Atlanta
and a $6 million line of credit with First Tennessee Bank. The Company is in the
process of opening two new branch  offices,  the total cost of these  facilities
will be  $1,750,000.  The  funding  for these  offices  will  come  from  normal
operations.  Management  believes  that  the  Company's  liquidity  sources  are
adequate to meet its normal operating needs.


LOANS

Commercial  loans  made  up 48.5  percent  of the  total  loan  portfolio  as of
September 30, 2003,  totaling  $92.8  million.  Loans secured by real estate for
construction and land  development  totaled $27.4 million or 14.3 percent of the
portfolio  while all other loans secured by real estate totaled $67.2 million or
35.2 percent of the total loan portfolio,  as of September 30, 2003. Installment
loans and other  consumer  loans to  individuals  comprised  $3.9 million or 2.0
percent of the total loan  portfolio.  The  allowance  for loan  losses was 1.18
percent  of loans as of  September  30,  2003  compared  to 1.22  percent  as of
December 31, 2002.  In  management's  opinion,  the allowance for loan losses is
adequate.  At  September  30,  2003,  the Company did not have any loans 90 days
delinquent  and still  accruing  interest and had $.07  million of  non-accruing
loans and $.07 of other real estate owned.



                                       13
<PAGE>




CAPITAL RESOURCES

The capital  base for the Company  increased  by  $1,047,832  for the first nine
months of 2003,  due to operating  income,  capital  raised through the Employee
Stock Purchase Plan and exercise of stock options,  offset by unrealized  losses
on available for sale  securities  and the  redemption of 6,000 shares of common
stock.  The  Company's  tier one capital to asset ratio was 7.88%  percent as of
September 30, 2003 compared to 9.35% percent as of December 31, 2002.

On November 6, 2003, the Company signed an underwriting  agreement to sell up to
1,104,000  shares of its  common  stock to the public at $18.50 per share with a
price to the  underwriters of $17.21 per share.  All of the shares were sold and
settled on November 12, 2003.  The proceeds will be used to support  future loan
production  and asset  growth,  branch  expansion in new and  existing  markets,
potential acquisitions and for other general corporate purposes.


The Federal Deposit  Insurance  Corporation has established  risk-based  capital
requirements for banks. As of September 30, 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 ........     $18,936        10.84%         $17,475        10.00%         $13,980        8.00%
Tier 1 capital to risk weighted assets .......     $16,751         9.59%         $10,485         6.00%         $ 6,990        4.00%
Tier 1 capital to average assets .............     $16,751         7.68%         $10,907         5.00%         $ 8,726        4.00%
</TABLE>







                                       14
<PAGE>


Off-Balance Sheet Risk

The Company makes  contractual  commitments  to extend credit and issues standby
letters  of credit in the  ordinary  course of its  business  activities.  These
commitments  are  legally  binding  agreements  to lend  money to  customers  at
predetermined  interest  rates for a specified  period of time. At September 30,
2003, the Company had issued  commitments  to extend credit of  $27,506,000  and
standby  letters  of credit of  $460,000  through  various  types of  commercial
lending arrangements.  Approximately  $21,695,000 of these commitments to extend
credit had variable rates.

The  following  table sets forth the  length of time until  maturity  for unused
commitments  to extend  credit and standby  letters of credit at  September  30,
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 ..........................        $ 2,516        $ 2,038        $ 9,052        $13,606        $16,149        $29,755
Standby letters of credit ................             23             70            360            453              7            460
                                                  -------        -------        -------        -------        -------        -------
  Totals .................................        $ 2,539        $ 2,108        $ 9,412        $14,059        $16,156        $30,215
                                                  =======        =======        =======        =======        =======        =======
</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 upon extension of
credit, is based on the company's credit evaluation of the borrower.  Collateral
varies but may  include  accounts  receivable,  inventory,  property,  plant and
equipment, commercial and residential real estate.




                                       15
<PAGE>


Item 3.  Controls and Procedures.


Based  on  the  evaluation  required  by 17  C.F.R.  Sections  240.13a-15(d)  or
240.15d-15(b) of the Company's  disclosure  controls and procedures ( as defined
in 17  C.F.R.  Section  240.13a-15(e)  and  240.15d-15(e)  the  Company's  chief
executive  officer and chief financial  officer concluded that the effectiveness
of such  controls and  procedures,  as of the end of the period  covered by this
quarterly report, was adequate.


No disclosure is required under 17 C.F.R. Section 228.308 (c).





















                                       16
<PAGE>


                                                   PART II - OTHER INFORMATION





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

     a)   Exhibits:

             31-1     Rule 13a-14(a) Certifications of CEO
             31-2     Rule 13a-14(a) Certifications of CFO
               32     Section 1350 Certification



     b)   Reports on Form 8-K. The Company  filed a Form 8-K dated July 17, 2003
          pursuant to Items 7 and 12 of that form to report the second quarter's
          2003 earnings.








                                       17
<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:      November 12, 2003          By: s/L. Wayne Pearson
                                          --------------------------------------
                                          L. Wayne Pearson
                                          President and Chief Executive Officer


Date:      November 12, 2003          By:  s/Robert M. Scott
                                          --------------------------------------
                                          Robert M. Scott
                                          Executive Vice President and Chief
                                          Financial Officer


























                                       18