SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 For the quarter ended June 30, 2001

                                       OR

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

                                                Commission File Number   0-25933


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


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



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


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


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

         [X] Yes    [ ] No

         State the number of shares  outstanding of each of the issuer's classes
of common  equity,  as of the latest  practicable  date:  Common  Stock - No Par
Value: 1,033,584 Shares Outstanding on June 30, 2001.

         Transitional Small Business Disclosure Format (Check one):

         [ ]  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,
                                                                                                      2001                 2000
                                                                                                      ----                 ----
ASSETS
<S>                                                                                              <C>                  <C>
   Cash and due from banks ...............................................................       $   2,935,104        $   3,942,566
   Federal funds sold ....................................................................           4,518,000            1,350,000
   Investment securities available for sale ..............................................           6,765,291            4,213,773
   Loans, net of allowance of $1,065,058
     and $940,758 ........................................................................          90,271,274           74,434,434
   Property and equipment - net ..........................................................           6,637,949            6,169,583
   Other assets ..........................................................................           2,636,295            2,017,975
                                                                                                 -------------        -------------
       Total assets ......................................................................       $ 113,763,913        $  92,128,331
                                                                                                 =============        =============

LIABILITIES
   Deposits
     Noninterest-bearing .................................................................       $  11,364,125        $   9,240,702
     Interest bearing ....................................................................          67,202,972           56,930,894
                                                                                                 -------------        -------------
       Total deposits ....................................................................          78,567,097           66,171,593

   Other borrowings ......................................................................          24,850,000           16,225,000

   Other liabilities .....................................................................             967,647              579,169
                                                                                                 -------------        -------------

       Total liabilities .................................................................         104,384,744           82,975,765
                                                                                                 -------------        -------------
SHAREHOLDERS' EQUITY
   Common stock (no par value;  20,000,000 shares  authorized;  1,033,584 shares
     outstanding at June 30, 2001 and
     947,872 at December 31, 2000) .......................................................           9,587,301            9,669,155
   Retained deficit ......................................................................            (247,621)            (503,796)
   Accumulated other comprehensive income (loss) .........................................              39,489              (12,793)
                                                                                                 -------------        -------------
       Total shareholders' equity ........................................................           9,379,169            9,152,566
                                                                                                 -------------        -------------
       Total liabilities and shareholders' equity ........................................       $ 113,763,913        $  92,128,331
                                                                                                 =============        =============
</TABLE>









         See notes to consolidated financial statements.




                                       2
<PAGE>


                        Southcoast Financial Corporation
                               Statement of Income
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        Six months      Six months      Three months   Three months
                                                                          Ended            Ended           Ended            Ended
                                                                      June 30, 2001    June 30, 2000   June 30, 2001   June 30, 2000
                                                                      -------------    -------------   -------------   -------------
INTEREST INCOME
<S>                                                                    <C>              <C>              <C>              <C>
    Loans, including fees ......................................       $3,937,887       $2,588,306       $1,974,948       $1,418,537
    Investment Securities ......................................          233,101          139,273          217,332           81,530
    Federal funds sold .........................................           53,628           35,817           24,216           19,153
                                                                       ----------       ----------       ----------       ----------

      Total interest income ....................................        4,214,616        2,763,396        2,126,496        1,519,220

INTEREST EXPENSE
    Deposits and borrowings ....................................        2,287,859        1,366,066        1,119,062          763,348
                                                                       ----------       ----------       ----------       ----------

      Net interest income ......................................        1,926,757        1,397,330        1,007,434          755,872

PROVISION FOR POSSIBLE LOAN LOSSES .............................          125,000           60,000           65,000           30,000
                                                                       ----------       ----------       ----------       ----------

    Net interest income after provision for loan losses ........        1,801,757        1,337,330          942,434          725,872
                                                                       ----------       ----------       ----------       ----------

NONINTEREST INCOME
    Service fees on deposit accounts ...........................          193,894           97,695           86,677           54,986
    Fees on loans sold .........................................          234,834           58,004          146,557           45,895
    Other ......................................................           69,651           58,558           32,770           25,342
                                                                       ----------       ----------       ----------       ----------

      Total non-interest income ................................          498,379          214,257          269,004          126,223
                                                                       ----------       ----------       ----------       ----------

NONINTEREST EXPENSES
    Salaries and employee benefits .............................        1,147,437          906,307          588,607          498,200
    Occupancy ..................................................          114,059           62,450           58,033           30,795
    Furniture and equipment ....................................          197,012          156,358           96,636           89,605
    Advertising and public relations ...........................           34,958           24,536           20,644            9,342
    Professional fees ..........................................           84,379           38,721           45,767           24,033
    Travel and entertainment ...................................          102,479           57,907           49,968           31,730
    Telephone, postage and supplies ............................          105,896           90,434           50,631           47,459
    Other operating ............................................          116,049           80,474           61,813           42,815
                                                                       ----------       ----------       ----------       ----------

      Total non-interest expenses ..............................        1,902,269        1,417,187          972,099          773,979
                                                                       ----------       ----------       ----------       ----------

      Income before income taxes ...............................          397,867          134,400          239,339           78,116

INCOME TAX .....................................................          141,692           44,096           87,186           24,959
                                                                       ----------       ----------       ----------       ----------

    Net income .................................................       $  256,175       $   90,304       $  152,153       $   53,157
                                                                       ==========       ==========       ==========       ==========

BASIC NET INCOME PER COMMON SHARE ..............................       $      .25       $      .08       $      .15       $      .05
DILUTED NET INCOME PER COMMON SHARE ............................       $      .24       $      .08       $      .14       $      .08

WEIGHTED AVERAGE SHARES OUTSTANDING

      Basic ....................................................        1,034,987        1,124,580        1,033,584        1,096,375
      Diluted ..................................................        1,064,576        1,126,692        1,065,177        1,098,375
</TABLE>

     See notes to consolidated financial statements.



                                       3
<PAGE>

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



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


<S>                                       <C>          <C>             <C>             <C>             <C>             <C>
BALANCE, JANUARY 1, 2000 ...........      1,047,987    $ 10,520,053               -    $   (714,147)   $    (85,108)   $  9,720,798

   Net income - ....................              -               -               -          90,304               -          90,304

   Other comprehensive income, net
     of tax:
     Unrealized holding losses on
       securities available for sale              -               -               -               -         (12,802)        (12,802)
                                                                                                                       ------------


   Comprehensive income ............              -               -               -               -               -          77,502

   Repurchase of common stock ......        (45,029)       (351,438)              -               -               -        (351,438)
                                       ------------    ------------    ------------    ------------    ------------    ------------

BALANCE, June 30, 2000 .............      1,002,958    $ 10,168,615    $          -    $   (623,843)   $    (97,919)   $  9,446,862
                                       ============    ============    ============    ============    ============    ============



BALANCE, JANUARY 1, 2001 ...........        947,872    $  9,669,155               -    $   (503,796)   $    (12,793)   $  9,152,566
   Stock dividend ..................         93,756

   Net income - ....................              -               -               -         256,175               -         256,175

   Other comprehensive income, net
     of tax:
     Unrealized holding gains on
       securities available for sale              -               -               -               -          52,282          52,282
                                                                                                                       ------------
   Comprehensive income ............              -               -               -               -               -         308,457
   Repurchase of stock .............        (11,775)       (109,102)                                                       (109,102)
   Employee stock purchase plan ....          3,731          27,248               -               -               -          27,248
                                          ---------    ------------    ------------    ------------    ------------    ------------

BALANCE, June 30, 2001 .............      1,033,584    $  9,587,301               -    $   (247,621)   $     39,489    $  9,379,169
                                          =========    ============    ============    ============    ============    ============
</TABLE>





           See notes to consolidated financial statements.






                                       4
<PAGE>


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


<TABLE>
<CAPTION>

OPERATING ACTIVITIES                                                                                    2001                  2000
                                                                                                        ----                  ----
<S>                                                                                                <C>                 <C>
         Net income ........................................................................       $    256,175        $     90,304
         Adjustments to reconcile net income to net
                  cash provided by operating activities:
                  Income tax ...............................................................             141,69             244,085
                  Provision for possible loan losses .......................................            125,000              60,000
                  Depreciation and amortization ............................................            210,347             150,922
                  Increase in other assets .................................................           (788,182)           (479,042)
                  Increase in other liabilities ............................................            388,478             236,661
                                                                                                   ------------        ------------
                           Net cash provided by operating activities .......................            333,510             102,930
                                                                                                   ------------        ------------

INVESTING ACTIVITIES
         Increase in federal funds sold ....................................................         (3,168,000)         (1,000,000)
         Purchase of investment securities available for sale ..............................         (2,480,816)         (1,097,500)
         Net increase in loans .............................................................        (15,961,840)        (16,975,524)
         Purchase of property and equipment ................................................           (668,963)         (1,445,193)
                                                                                                   ------------        ------------
             Net cash used for investing activities ........................................        (22,279,619)        (20,518,217)
                                                                                                   ------------        ------------

FINANCING ACTIVITIES
         Increase in Federal Home Loan Bank borrowing ......................................          8,625,000           3,950,000
         Purchase of common stock ..........................................................           (109,102)           (351,438)
         Proceeds from sale of stock, net ..................................................             27,248                   -
         Net increase in deposits ..........................................................         12,395,501          18,650,751
                                                                                                   ------------        ------------
            Net cash provided by financing activities ......................................         20,938,647          22,249,313
                                                                                                   ------------        ------------

            Increase (decrease) in cash and due from banks .................................         (1,007,462)          1,834,026


CASH AND DUE FROM BANKS, BEGINNING OF PERIOD ...............................................          3,942,566            1,786,41
                                                                                                   ------------        ------------

CASH AND DUE FROM BANKS, END OF PERIOD .....................................................       $  2,935,104        $  3,620,437
                                                                                                   ============        ============
</TABLE>






     See notes to consolidated financial statements.



                                       5
<PAGE>


                        SOUTHCOAST FINANCIAL CORPORATION
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

           The accompanying unaudited financial statements have been prepared in
accordance with 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 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 March, 2001, the Company declared a ten- percent stock dividend of
the Company's  common stock. The weighted average number of shares and all other
share data have been  restated  for all periods  presented to reflect this stock
dividend.

NOTE 4 - STOCK OFFERING

           In August,  2001,  the Company  commenced a public  offering of up to
1,000,000  shares of its common stock for a price of $12.00 per share with a 10%
discount for 4,700 or more shares purchased.



                                       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-KSB of
Southcoast  Financial  Corporation for the year ended December 31, 2000. Results
of operations for the period ending June 30, 2001 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,  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.

NET INTEREST INCOME

Net interest  income is the difference  between the interest  earned on interest
earning assets and the interest paid for funds acquired to support those assets.
Net  interest  income,  the  principal  source of the  Company's  earnings,  was
$1,926,757  for the six months ended June 30, 2001,  compared to $1,397,330  for
the six months  ended June 30,  2000.  For the quarter  ended March 31, 2001 net
interest income was $919,323 compared to $755,877 for the quarter ended June 30,
2000.

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 six months  ending June 30, 2001  increased  to
$93.3 million or 63.9 percent from the $56.9 million reported for the six months
ending June 30, 2000.  The increase was mainly  attributable  to the increase in
loans  supported by a $35.7  million  increase in interest  bearing  liabilities
which resulted from favorable economic conditions in the Charleston market area,
the opening of the bank's third  banking  office in the second  quarter of 2000,
and the Company's marketing efforts.

The following  table  represents  changes in the  Company's net interest  income
which are  primarily  a result of changes  in volume  and rates of its  interest
earning assets and interest  bearing  liabilities.  The increase in net interest
income is due to  increased  volume  of  earning  assets  and  interest  bearing
liabilities  offset by a 42 basis point  decrease in the  Company's net interest
spread.  The net interest spread is the difference  between the yield on earning
assets minus the average rate of interest bearing liabilities.





                                       7
<PAGE>



<TABLE>
<CAPTION>
                                                                   Six months ended                         Six months ended
                                                                    June 30, 2001                             June 30, 2000
                                                                    -------------                             -------------
                                                      Average         Income/      Yield/      Average          Income/       Yield/
ASSETS                                                balance         expense       rate       balance          expense        rate
                                                      -------         -------       ----       -------          -------        ----

<S>                                                <C>             <C>              <C>      <C>            <C>               <C>
Federal funds sold ...........................     $  2,068,135    $   53,628       5.19%      1,166,512     $   35,817        6.14%
Investments ..................................        6,589,711       223,101       6.77       4,248,592        139,273        6.56
                                                   ------------    ----------
Total investments and
    federal funds sold .......................        8,657,846       276,729       6.39       5,415,104        175,090        6.47
Loans ........................................       84,641,712     3,937,887       9.30      51,456,065      2,588,306       10.06
                                                   ------------    ----------                -----------     ----------
Total earning assets .........................       93,299,558     4,214,616       9.03      56,871,169      2,763,396        9.72
                                                                   ----------                                ----------
Other assets .................................        8,597,117                                7,006,597
                                                   ------------                              -----------
Total assets .................................     $101,896,675                              $63,877,766
                                                   ============                              ===========

LIABILITIES
Interest bearing deposits ....................     $ 64,802,982    $ 1770,520       5.46     $39,040,511     $1,110,743        5.69
Other borrowings .............................       18,076,647       517,339       5.72       8,147,977        255,323        6.27
                                                   ------------    ----------                -----------     ----------
Total interest bearing liabilities ...........       82,879,629     2,287,859       5.52      47,188,488      1,366,066        5.79
Non-interest bearing liabilities .............        9,633,081                                6,825,756
                                                   ------------    ----------                -----------     ----------

Total liabilities ............................       92,512,710     2,287,859       4.95      54,014,244      1,366,066        5.06
Equity .......................................        9,383,965                                 9,863,52
                                                   ------------                              -----------
Total liabilities and Equity .................     $101,896,675                              $63,877,766
                                                   ============                              ===========

Net interest income/margin ...................                     $1,926,757       4.13                     $1,397,330        4.91
                                                                   ==========                                ==========
Net interest spread ..........................                                      3.51                                       3.93
</TABLE>


As reflected  above, for the six months ended June 30, 2001 the average yield on
earning  assets was 9.03  percent,  while the average  cost of  interest-bearing
liabilities was 5.52 percent. For the six months ended June 30, 2000 the average
yield  on  earning   assets  was  9.72   percent   and  the   average   cost  of
interest-bearing  liabilities  was 5.79  percent.  The  decrease in the yield on
earning assets is attributable to the down trend of interest rates over the last
six months  partially  offset by the increased  volume of loans,  which give 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 six months ended June 30, 2001 was 4.13 percent compared
to 4.91  percent for the six months  ended June 30,  2000.  The  decrease in the
net-interest  margin is  attributable  to the decline of interest rates over the
last six months and the continued increase in interest bearing  liabilities as a
percentage of earning  assets which resulted in an increase in the cost of total
liabilities to support  earning assets.  The cost of total  liabilities was 4.95
percent for the six months ended June 30, 2001  compared to 5.06 percent for the
six months ended June 30, 2000.





                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                                 Three months ended                       Three months ended
                                                                    June 30, 2001                             June 30, 2000
                                                                    -------------                             -------------
                                                      Average         Income/      Yield/      Average          Income/       Yield/
ASSETS                                                balance         expense       rate       balance          expense        rate
                                                      -------         -------       ----       -------          -------        ----

<S>                                                <C>             <C>              <C>      <C>             <C>              <C>
Federal funds sold ............................    $  1,947,737    $   24,216       4.97%    $ 1,188,867     $   19,153        6.44%
Investments ...................................       7,222,014       127,232       7.05       5,029,710         81,530        6.48
Total investments and
    federal funds sold ........................       9,169,751       151,548       6.61       6,218,577        100,683        6.47
Loans .........................................      88,075,662     1,974,948       8.97      55,471,068      1,418,537       10.23
                                                   ------------    ----------                -----------     ----------
Total earning assets ..........................      97,245,413     2,126,496       8.75      61,689,645      1,519,220        9.85
                                                                   ----------                                ----------
Other assets ..................................       8,414,307                                7,171,910
                                                   ------------                              -----------
    Total assets ..............................    $105,659,720                              $68,861,555
                                                   ============                              ===========

LIABILITIES

Interest bearing deposits .....................    $ 66,985,601    $  861,580       5.14     $42,113,253     $  612,851        5.82
Other borrowings ..............................      18,974,405       257,482       5.43       9,348,746        150,497        6.44
                                                   ------------    ----------                -----------     ----------
Total interest bearing liabilities ............      85,960,006     1,119,062       5.21      51,461,999        763,348        5.93
Non-interest bearing liabilities ..............      10,338,941                                7,520,863
                                                   ------------    ----------                -----------     ----------
Total liabilities .............................      96,298,947     1,119,062       4.65      58,982,862        763,348        5.18
Equity ........................................       9,560,773                                9,878,693
                                                   ------------                              -----------
Total liabilities and Equity ..................    $105,859,720                              $68,861,555
                                                   ============                              ===========
Net interest income/margin ....................                    $1,007,434       4.14                     $  755,872        4.90
                                                                   ==========                                ==========
Net interest spread ...........................                                     3.54                                       3.92
</TABLE>


As reflected  above,  for the three months ended June 30, 2001 the average yield
on earning assets was 8.75 percent,  while the average cost of  interest-bearing
liabilities  was 5.21  percent.  For the three  months  ended June 30,  2000 the
average  yield on  earning  assets  was 9.85  percent  and the  average  cost of
interest-bearing  liabilities  was 5.93  percent.  The  decrease in the yield on
earning assets is  attributable to the downtrend of interest rates over the last
three months,  partially offset by the increased volume of loans, which give the
Company a  greater  return  than the  other  types of  earning  assets.  The net
interest  margin  for the three  months  ended  June 30,  2001 was 4.14  percent
compared to 4.90 percent for the three months ended June 30, 2000.  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 4.65 percent for the
three months  ended June 30, 2001  compared to 5.18 percent for the three months
ended June 30, 2000.




                                       9
<PAGE>


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.


<TABLE>
<CAPTION>
                                                                                  Analysis of Changes In Net Interest Income
                                                                                    For the six months ended June 30, 2001
                                                                                     versus six months ended June 30, 2000
                                                                                     -------------------------------------
                                                                               Volume                 Rate                Net change
                                                                               ------                 ----                ----------
<S>                                                                          <C>                   <C>                    <C>
Federal funds sold ..............................................            $   27,452            $   (9,641)            $   17,811
Investments .....................................................                76,158                 7,670                 83,828
                                                                             ----------            ----------             ----------
Total investments and federal funds sold ........................               103,610                (1,971)               101,639
Total loans .....................................................             1,655,518              (305,937)             1,349,581
                                                                             ----------            ----------             ----------
Total earning assets ............................................             1,759,128              (307,908)             1,451,220
Total interest-bearing liabilities ..............................             1,035,623               113,830                921,793
                                                                             ----------            ----------             ----------
Net interest income .............................................            $  723,505            $ (194,078)            $  529,427
                                                                             ==========            ==========             ==========
</TABLE>




<TABLE>
<CAPTION>
                                                                                  Analysis of Changes In Net Interest Income
                                                                                   For the three months ended June 30, 2001
                                                                                    versus three months ended June 30, 2000
                                                                                     -------------------------------------
                                                                             Volume                 Rate                  Net change
                                                                             ------                 ----                  ----------
<S>                                                                       <C>                    <C>                     <C>
Federal funds sold ...........................................            $    24,235            $   (19,172)            $     5,063
Investments ..................................................                 70,447                (24,645)                 45,802
                                                                          -----------            -----------             -----------
Total investments and federal funds sold .....................                 94,682                (43,817)                 50,865
Total loans ..................................................              1,653,860             (1,097,449)                556,411
                                                                                                 -----------             -----------
Total earning assets .........................................              1,748,542             (1,141,266)                607,276
Total interest-bearing liabilities ...........................              1,025,319               (669,605)                355,714
                                                                          -----------            -----------             -----------

Net interest income ..........................................            $   723,223            $  (471,661)            $   251,562
                                                                          ===========            ===========             ===========
</TABLE>


RESULTS OF OPERATIONS

The  Company's net income for the six months ended June 30, 2001 was $256,175 or
$.25 per basic share,  compared to $90,304 or $.08 per basic share,  for the six
months ended June 30, 2000. Net interest income  increased to $1,926,757 for the
six months ended June 30, 2001 compared to  $1,397,330  for the six months ended
June 30, 2000

The  Company's  net income for the three months ended June 30, 2001 was $152,153
or $.15 per basic share,  compared to $53,157 or $.05 per basic  share,  for the
three months ended June 30, 2000.  Net interest  income  increased to $1,007,434
for the three  months  ended June 30, 2001  compared  to $755,872  for the three
months ended June 30, 2000. See net interest  income analysis for an explanation
of the increase.




                                       10
<PAGE>


NON-INTEREST INCOME AND EXPENSES



Non-interest  income  for the six  months  ended  June 30,  2001  was  $498,379,
compared to $214,257 for the six months ended June 30, 2000. The increase is due
to the  greater  volume of loans sold and the  increase in the number of deposit
accounts resulting in increased fees on deposits.


Non-interest  expenses for the six months  ended June 30, 2001 were  $1,902,269,
compared to $1,417,187  for the six months ended June 30, 2000.  The increase of
$485,082 is mainly attributable to increases in salaries and benefits, occupancy
cost,  furniture  and  equipment  expenses and  administrative  expenses.  These
increases  primarily  relate to expenditures  associated with the opening of the
Moncks Corner branch in May 2000, preparation for the anticipated opening of the
Coleman  Boulevard  branch in October 2001, the formation of a sales staff,  and
the increase in administrative cost to support the growth.



Non-interest  income  for the three  months  ended June 30,  2001 was  $269,004,
compared to $126,223 for the three  months ended June 30, 2000.  The increase is
due to the  greater  volume  of loans  sold and the  increase  in the  number of
deposit accounts resulting in increased fees on deposits.


Non-interest  expenses for the three  months ended June 30, 2001 were  $972,099,
compared to $773,979 for the three  months ended June 30, 2000.  The increase of
$198,120 is mainly attributable to increases in salaries and benefits, occupancy
cost,  furniture  and  equipment  expenses and  administrative  expenses.  These
increases  primarily relate to expenditures  associated with the preparation for
the  anticipated  opening of the Coleman  Boulevard  branch in October 2001, the
formation of a sales staff, and the increase in  administrative  cost to support
the growth.


LIQUIDITY

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


LOANS

Commercial  loans made up 44 percent of the total loan  portfolio as of June 30,
2001, totaling $39.8 million.  Loans secured by real estate for construction and
land  development  totaled  $0.1 million  while all other loans  secured by real
estate  totaled  $48.3  million or 53 percent of the total loan  portfolio as of
June 30,  2001.  Installment  loans  and  other  consumer  loans to  individuals
comprised $3.1 million or 3 percent of the total loan  portfolio.  The allowance
for loan losses was 1.17  percent of loans as of June 30, 2001  compared to 1.25
percent as of December 31, 2000. In management's opinion, the allowance for loan
losses is adequate.  At June 30,  2001,  the Company had $4,000 of loans 90 days
delinquent and still accruing interest and $160,000 of non-accruing loans.


CAPITAL RESOURCES

The capital base for the Company  increased by $226,603 for the first six months
of  2001,  due to  operating  income,  unrealized  gains on  available  for sale
securities and capital  raised through the Employee Stock Purchase Plan,  offset
by a $109,102  decrease of capital  resulting from repurchases of stock pursuant
to the Stock  Repurchase  Plan approved in 2000. In 2000,  the Company  approved
plans to repurchase up to 110,000 shares of its common stock, and 113,426 shares
has been repurchased as of June 30, 2001. Repurchases had the effect of reducing
the Company's  equity capital by the amount paid. The Company's  equity to asset
ratio  was 9.2  percent  as of June 30,  2001  compared  to 10.8  percent  as of
December 31, 2000.


                                       11
<PAGE>

The Federal Deposit  Insurance  Corporation has established  risk-based  capital
requirements  for banks.  As of June 30, 2001,  the  Company's  subsidiary  bank
exceeds the capital requirement levels that are to be maintained.

                                 Capital Ratios
<TABLE>
<CAPTION>
                                                                                        Well Capitalized     Adequately Capitalized
                                                               Actual                     Requirement               Requirement
                                                               ------                     -----------               -----------
                                                       Amount           Ratio       Amount           Ratio      Amount         Ratio
                                                       ------           -----       ------           -----      ------         -----
<S>                                                   <C>              <C>        <C>              <C>        <C>              <C>
Total capital to risk weighted
   assets ....................................        $11,280          13.61%     $ 8,286          10.00%     $ 6,628          8.00%
Tier 1 capital to risk weighted
   assets ....................................         10,244          12.36        4,971           6.00        3,314          4.00
Tier 1 capital to average assets .............         10,244           9.70        5,283           5.00        4,226          4.00
</TABLE>

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2001, the SEC issued Staff  Accounting  Bulletin (SAB) No.102-  Selected
Loan Loss Allowance  Methodology and Documentation Issues. This staff accounting
bulletin defines the required development,  documentation,  and application of a
systematic  methodology for  determining  allowance for loan and lease losses in
accordance with generally accepted accounting  principles.  The Company believes
that it is in compliance with SAB 102.


















                                       12
<PAGE>


                           PART II - OTHER INFORMATION

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

a)       Exhibits.                      None.

b)       Reports on form 8-K.           None.




























                                       13
<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:   8/13/01                              s/L. Wayne Pearson
     ----------------                   By:-------------------------------------
                                           L. Wayne Pearson
                                           President and Chief Executive Officer


Date:   8/13/01                              s/Robert M. Scott
     -----------------                  By:-------------------------------------
                                           Robert M. Scott
                                           Executive Vice President and Chief
                                             Financial Officer

































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