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 September 30, 2000

                                                        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: 954,074, Shares Outstanding on October 31, 2000.

         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)
                                                                                               September 30,           December 31,
                                                                                                   2000                    1999
                                                                                                   ----                    ----
ASSETS
<S>                                                                                            <C>                     <C>
   Cash and due from banks .........................................................           $  4,519,072            $  1,786,411
   Federal funds sold ..............................................................              2,660,000               1,310,000
   Investment securities available for sale ........................................              4,271,420               3,121,049
   Loans, net of allowance of $910,758 and $835,000 ................................             67,147,936              43,153,421
   Property and equipment - net ....................................................              5,889,645               4,513,284
   Other assets ....................................................................              1,978,407               1,364,381
                                                                                               ------------            ------------
       Total assets ................................................................           $ 86,466,480            $ 55,248,546
                                                                                               ============            ============

LIABILITIES
   Deposits
     Noninterest-bearing ...........................................................           $  8,339,142            $  5,667,155
     Interest bearing ..............................................................             55,341,170              32,577,797
                                                                                               ------------            ------------
       Total deposits ..............................................................             63,680,312              38,244,952
   Other borrowings ................................................................             12,950,000               6,899,904
   Other liabilities ...............................................................                492,897                 382,892
                                                                                               ------------            ------------
       Total liabilities ...........................................................             77,123,209              45,527,748
                                                                                               ------------            ------------
SHAREHOLDERS' EQUITY
   Common stock (no par value; 20,000,000 shares authorized;
     977,541 shares outstanding at September 30, 2000
     and 1,047,987 outstanding at December 31, 1999) ...............................              9,950,819              10,520,053
   Retained deficit ................................................................               (562,081)               (714,147)
   Accumulated other comprehensive (loss) ..........................................                (45,467)                (85,108)
                                                                                               ------------            ------------
       Total shareholders' equity ..................................................              9,343,271               9,720,798
                                                                                               ------------            ------------
       Total liabilities and shareholders' equity ..................................           $ 86,466,480            $ 55,248,546
                                                                                               ============            ============
</TABLE>









         See notes to consolidated financial statements.




                                       2
<PAGE>



                        SOUTHCOAST FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                        Nine months     Nine months    Three Months    Three months
                                                                           ended           ended           ended           ended
                                                                       Sept. 30,2000   Sept 30, 1999   Sept. 30,2000   Sept. 30,1999
                                                                       -------------   -------------   -------------   -------------
INTEREST INCOME
<S>                                                                     <C>             <C>              <C>             <C>
   Loans, including fees ..........................................     $ 4,205,871     $ 1,791,833      $ 1,617,565     $   816,752
   Investment securities ..........................................         239,740         192,624          100,467          80,146
    Federal funds sold ............................................          90,824         107,318           55,007          22,855
                                                                        -----------     -----------      -----------     -----------
       Total interest income ......................................       4,536,435       2,091,775        1,773,039         919,753

INTEREST EXPENSE
   Deposits and borrowings ........................................       2,389,542         768,129        1,023,476         370,709
                                                                        -----------     -----------      -----------     -----------
       Net interest income ........................................       2,146,893       1,323,646          749,563         549,044

PROVISION FOR POSSIBLE LOAN LOSSES ................................          90,000         480,000           30,000          30,000
                                                                        -----------     -----------      -----------     -----------
     Net interest income after provision for loan losses ..........       2,056,893         843,646          719,563         519,044
                                                                        -----------     -----------      -----------     -----------

NONINTEREST INCOME
   Service fees on deposit accounts ...............................         159,955          65,283           62,260          22,981
   Fees on loans sold .............................................         166,877          42,163          108,873          11,719
   Other ..........................................................          96,526          58,530           37,968          21,104
                                                                        -----------     -----------      -----------     -----------
       Total non interest income ..................................         423,358         165,976          209,101          55,804
                                                                        -----------     -----------      -----------     -----------

NONINTEREST EXPENSE
   Salaries and employee benefits .................................       1,416,017         913,089          509,710         336,725
   Occupancy ......................................................         101,014          44,756           38,564          14,669
   Furniture and equipment ........................................         251,931         115,630           95,573          47,864
     Advertising and public relations .............................          46,081          63,315           21,545          24,460
   Professional fees ..............................................          64,468          95,433           25,747          35,568
   Travel and entertainment .......................................          88,499          69,821           30,592          30,406
   Telephone, postage and supplies ................................         144,624         104,721           54,190          51,945
   Other operating ................................................         138,733          33,030           58,259          11,716
       Total noninterest expenses .................................       2,251,367       1,439,795          834,180         553,353
                                                                        -----------     -----------      -----------     -----------
       Income (loss) before income taxes ..........................         228,884        (430,171)          94,484          21,495
INCOME TAX  (BENEFIT) .............................................          76,818        (147,296)          32,722           7,172

       Net income (loss) ..........................................     $   152,066     $  (282,875)     $    61,762     $    14,323
                                                                        ===========     ===========      ===========     ===========

NET INCOME (LOSS)  PER COMMON SHARE ...............................     $       .15     $     (0.27)     $      0.06     $      0.01
                                                                        ===========     ===========      ===========     ===========

WEIGHTED AVERAGE SHARES OUTSTANDING ...............................       1,023,581       1,047,987          993,616       1,047,987
                                                                        ===========     ===========      ===========     ===========
</TABLE>



       See notes to consolidated financial statements.







                                       3
<PAGE>




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



<TABLE>
<CAPTION>
                                                                                                         Accumulated        Total
                                                   Common stock                                              other          share-
                                                   ------------            Paid-in         Retained       comprehensive     holders'
                                               Shares         Amount       capital         deficit        income (loss)      equity
                                               ------         ------       -------         -------        -------------      ------
<S>                                          <C>          <C>             <C>          <C>             <C>             <C>
BALANCE, JANUARY 1, 1999 .................   1,047,987    $  5,239,935    $5,280,118   $   (451,147)   $      5,678    $ 10,074,584

   Net loss ..............................           -               -             -       (282,875)              -        (282,875)

   Other comprehensive income, net of tax:
     Unrealized holding losses on
       securities available for sale .....           -               -             -              -         (89,134)        (89,134)
                                                                                                                       ------------

   Comprehensive income (loss) ...........           -               -             -              -               -        (372,009)
                                                                                                                       ------------

   Par value conversion upon
     exchange of stock ...................                   5,280,118    (5,280,118)             -               -               -
                                                          ------------    ----------   ------------    ------------    ------------

BALANCE, Sept 30,1999 ....................   1,047,987    $ 10,520,053                     (734,022)        (83,456)   $  9,702,575
                                             =========    ============    ==========   ============    ============    ============

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

   Net income ............................           -               -             -        152,066               -         152,066

   Other comprehensive loss, net of tax:
     Unrealized holding gains on
       securities available for sale .....           -               -             -              -          39,641          39,641
                                                                                                                       ------------

   Comprehensive income ..................           -               -             -              -               -         191,707

   Repurchase of common stock ............     (70,446)       (569,234)            -              -               -        (569,234)
                                             ---------    ------------    ----------   ------------    ------------    ------------

BALANCE, Sept. 30, 2000 ..................     977,541    $  9,950,819    $        -   $   (562,081)   $    (45,467)      9,343,271
                                             =========    ============    ==========   ============    ============    ============
</TABLE>









           See notes to consolidated financial statements.






                                       4
<PAGE>




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



<TABLE>
<CAPTION>
                                                                                                    2000                     1999
                                                                                                    ----                     ----
<S>                                                                                           <C>                      <C>
OPERATING ACTIVITIES .............................................................            $    152,066             $   (282,875)
   Net income (loss)
   Adjustments to reconcile net income (loss) to net
     cash provided for operating activities:
       Income tax (benefit) ......................................................                  76,818                 (184,611)
       Provision for possible loan losses ........................................                  90,000                  480,000
       Depreciation and amortization .............................................                 240,760                   61,687
       Increase in other assets ..................................................                (711,264)                (211,165)
       Increase in other liabilities .............................................                 110,005                  173,510
                                                                                              ------------             ------------
         Net cash (used) provided by operating activities ........................                 (41,615)                  36,546
                                                                                              ------------             ------------

INVESTING ACTIVITIES
   Increase (decrease) in federal funds sold .....................................              (1,350,000)               2,810,000
   Purchase of investment securities available for sale ..........................              (1,096,810)              (2,057,314)
   Net increase in loans .........................................................             (24,084,515)             (25,426,182)
   Purchase of property and equipment ............................................              (1,610,621)              (2,637,748)
                                                                                              ------------             ------------
         Net cash used for investing activities ..................................             (28,141,946)             (27,311,244)
                                                                                              ------------             ------------

FINANCING ACTIVITIES
   Increase in Federal Home Loan Bank borrowing ..................................               6,050,096                3,950,000
   Purchase of corporate stock ...................................................                (569,234)                       -
   Net increase in deposits ......................................................              25,435,360               23,673,610
                                                                                              ------------             ------------
         Net cash provided by financing activities ...............................              30,916,222               27,623,610
                                                                                              ------------             ------------

         Increase in cash and due from banks .....................................               2,732,661                  348,912

CASH AND DUE FROM BANKS, BEGINNING OF PERIOD .....................................               1,786,411                1,211,451
                                                                                              ------------             ------------

CASH AND DUE FROM BANKS, END OF PERIOD ...........................................            $  4,519,072             $  1,560,363
                                                                                              ============             ============
</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.  The results for the period ending September 30, 1999, reflect
the previous filing of Southcoast Community Bank.

NOTE 3 - NET INCOME (LOSS) PER SHARE

           Net income per share is computed on the basis of the weighted average
number of common shares  outstanding  in accordance  with Statement of Financial
Accounting  Standards No. 128,  "Earnings per Share".  The Company does not have
any instruments which are dilutive;  therefore,  only basic net income per share
of common stock is presented.

           In March, 1999, the Company declared an eleven-for-ten stock split of
the Company's  common stock. The weighted average number of shares and all other
share data have been  restated  for all periods  presented to reflect this stock
split.




                                       6
<PAGE>


ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

           The following  discussion and analysis  should be read in conjunction
with the financial  statements and related notes appearing in the Form 10-KSB of
Southcoast  Financial  Corporation.  This  discussion  concentrates  on the nine
months of  operations  ending  September  30, 2000,  compared to the same period
ending  September 30, 1999 and the three months of operations  ending  September
30, 2000,  compared to the same quarter  ending  September 30, 1999.  Results of
operations  for the  period  ending  September  30,  2000  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
$2,146,893 for the nine months ended September 30, 2000,  compared to $1,323,646
for the nine months ended  September 30, 1999.  For the quarter ended  September
30, 2000, net interest income was $749,563  compared to $549,094 for the quarter
ended September 30, 1999.

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

Average  earning assets for the nine months ending  September 30, 2000 increased
to $62.6 million,  or 108 percent,  from the $30.1 million reported for the nine
months ending  September 30, 1999. The increase was mainly  attributable  to the
increase in loans,  supported by a $32.2  million  increase in interest  bearing
liabilities,   which  resulted  from  favorable   economic   conditions  in  the
Charleston, South Carolina market; the opening of the bank's first branch in the
third  quarter  of 1999;  its  second  branch  in May  2000;  and the  Company's
marketing efforts.

Average  earning assets for the quarter  ending  September 30, 2000 increased to
$73.9 million,  or 92 percent,  from the $38.5 million  reported for the quarter
ended September 30, 1999. Average loans increased $32.6 million, supported by an
increase in average interest bearing funds of $ 35.0 million.

The following  table reflects  changes in the Company's net interest income that
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,
slightly  offset by a 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>
                                                    Nine months ended                          Nine months ended
                                                     Sept. 30, 2000                             Sept. 30, 1999
                                                     --------------                             --------------
                                          Average        Income/        Yield/       Average       Income/        Yield/
                                          Balance        expense         rate        balance       expense         rate
                                          -------        -------         ----        -------       -------         ----
ASSETS

<S>                                      <C>             <C>              <C>       <C>            <C>               <C>
Federal funds sold ................      $ 1,871,087     $   90,824        6.47%    $ 2,973,461    $  107,318         4.81%
Investments .......................        4,868,540        239,740        6.57       4,215,322       192,624         6.09
                                         -----------     ----------                 -----------    ----------        -----
Total investments and
   federal funds sold .............        6,739,627        330,564        6.54       7,188,783       299,942         5.56
Loans .............................       55,821,113      4,205,871       10.05      22,949,769     1,791,833        10.41
                                         -----------     ----------                 -----------    ----------
Total earning assets ..............       62,560,740      4,536,435        9.67      30,138,552     2,091,775         9.25
                                                         ----------                                ----------        -----
Other assets ......................        7,272,203                                  3,327,468
                                         -----------                                -----------
Total assets ......................      $69,832,943                                $33,466,020
                                         ===========                                ===========

LIABILITIES
Interest bearing deposits .........      $43,806,806     $1,939,268        5.90     $18,450,878    $  680,869         4.92
FHLB advances .....................        9,119,391        450,274        6.58       2,233,810        87,260         5.21
                                         -----------     ----------                 -----------    ----------
Total interest bearing liabilities        52,926,197      2,389,542        6.02      20,684,688       768,129         4.95

Non-interest bearing liabilities ..        7,222,433                                  2,863,374
                                         -----------                                -----------

Total liabilities .................       60,148,630      2,389,542        5.30      23,548,062       768,129         4.35
Equity ............................        9,684,313     ----------                   9,917,958     ---------
                                         -----------                                -----------
Total liabilities and equity ......      $69,832,943                                $33,466,020
                                         ===========                                ===========

Net interest income/margin ........                      $2,146,893        4.58                    $1,323,646         5.86
                                                         ==========                                ==========

Net interest spread ...............                                        3.65                                       4.30
</TABLE>


As reflected  above,  for the nine months ended  September 30, 2000, the average
yield  on  earning   assets  was  9.67  percent,   while  the  average  cost  of
interest-bearing  liabilities  was  6.02  percent.  For the  nine  months  ended
September 30, 1999 the average yield on earning  assets was 9.25 percent and the
average cost of interest-bearing  liabilities was 4.95 percent.  The increase in
the yield on earning assets is  attributable  to the increased  volume of loans,
which gives the Company a greater return than the other types of earning assets.
The decrease in the yield on loans from 10.41% at  September  30, 1999 to 10.05%
at September 30, 2000 is attributable to the change in the mix of higher earning
loans as a percent of the total loans.  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, 2000 was 4.58 percent  compared to 5.86 percent for
the nine months  ended  September  30,  1999.  The  decrease in the net interest
margin is attributable to the increase in interest  bearing  liabilities,  which
resulted  in an  increase in the cost of total  liabilities  to support  earning
assets. The cost of total liabilities was 5.30 percent for the nine months ended
September 30, 2000 compared to 4.35 percent for the nine months ended  September
30, 1999.



                                       8
<PAGE>






<TABLE>
<CAPTION>

                                                   Three months ended                            Three months ended
                                                     Sept. 30, 2000                                Sept. 30, 1999
                                                     --------------                                --------------
                                          Average        Income/        Yield/       Average          Income/        Yield/
                                          Balance        expense         rate        balance          expense         rate
                                          -------        -------         ----        -------          -------         ----
ASSETS

<S>                                      <C>             <C>              <C>       <C>             <C>              <C>
Federal funds sold                       $ 3,280,237     $   55,007        6.71%    $ 1,839,262     $  22,855         4.97%
Investments                                6,108,437        100,467        6.58       4,646,234        80,146         6.90
                                         -----------     ----------                 -----------     ---------         ----
Total investments and
   federal funds sold                      9,388,674        155,474        6.62       6,485,496       103,001         6.35
Loans                                     64,551,209      1,617,565       10.02      31,968,913       816,752        10.22
                                         -----------     ----------                 -----------     ---------
Total earning assets                      73,939,883      1,773,039        9.59      38,454,409       919,753         9.57
                                                         ----------                                 ---------         ----
Other assets                               7,803,415                                  4,533,611
                                         -----------                                -----------
Total assets                             $81,743,298                                $42,988,020
                                         ===========                                ===========

LIABILITIES
Interest bearing deposits                $53,339,395     $  828,525        6.21     $24,962,825      $323,747         5.03
FHLB advances                             11,062,220        194,951        7.05       4,388,849        56,962         5.19
                                         -----------     ----------                 -----------      --------
Total interest bearing liabilities        64,401,615      1,023,476        6.36      29,351,674       370,709         5.05

Non-interest bearing liabilities           8,015,788                                  3,846,897
                                         -----------                                -----------

Total liabilities                         72,417,403      1,023,476        5.65      33,198,571       370,709         4.47
Equity                                     9,325,895     ----------                   9,789,499      --------
                                         -----------                                -----------
Total liabilities and equity             $81,743,298                                $42,988,020
                                         ===========                                ===========

Net interest income/margin                               $  749,563        4.05                      $549,044         5.71
                                                         ==========                                  ========

Net interest spread                                                        3.23                                       4.52
</TABLE>


As reflected  above,  for the three months ended September 30, 2000, the average
yield  on  earning   assets  was  9.59  percent,   while  the  average  cost  of
interest-bearing  liabilities  was 6.36  percent.  For the  three  months  ended
September 30, 1999 the average yield on earning  assets was 9.57 percent and the
average cost of interest-bearing  liabilities was 5.05 percent.  The increase in
the yield on earning assets is  attributable  to the increased  volume of loans,
which gives the Company a greater return than the other types of earning assets.
The decrease in the yield on loans from 10.22% at  September  30, 1999 to 10.02%
at September 30, 2000 is attributable to the change in the mix of higher earning
loans as a percent of the total  loans.  The net  interest  margin for the three
months ended  September  30, 2000 was 4.05 percent  compared to 5.71 percent for
the three months  ended  September  30,  1999.  The decrease in the net interest
margin is attributable to the increase in interest  bearing  liabilities,  which
resulted  in an  increase in the cost of total  liabilities  to support  earning
assets.  The cost of total  liabilities  was 5.65  percent for the three  months
ended  September  30, 2000  compared to 4.47  percent for the nine months  ended
September 30, 1999.





                                       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.

                   Analysis of Changes in Net Interest Income

<TABLE>
<CAPTION>
                                                                                      For the nine months ended Sept. 30, 2000
                                                                                       versus nine months ended Sept. 30, 1999
                                                                                       ---------------------------------------
                                                                              Volume                  Rate               Net change
                                                                              ------                  ----               ----------
<S>                                                                       <C>                    <C>                    <C>
Federal funds sold ............................................           $   (39,768)           $    23,274            $   (16,494)

Investments ...................................................                29,836                 17,280                 47,116

Total investments and federal funds sold ......................                (9,932)                40,554                 30,622

Total loans ...................................................             2,566,430               (152,392)             2,414,038

Total earning assets ..........................................             2,556,498               (111,838)             2,444,660

Total interest-bearing liabilities ............................             1,204,688                416,725              1,621,413

Net interest income ...........................................           $ 1,351,810            $  (528,563)           $   823,247
</TABLE>






                   Analysis of Changes in Net Interest Income


<TABLE>
<CAPTION>
                                                                                      For the three months ended Sept. 30, 2000
                                                                                       versus nine months ended Sept. 30, 1999
                                                                                       ---------------------------------------
                                                                                   Volume               Rate             Net change
                                                                                   ------               ----             ----------

<S>                                                                             <C>                  <C>                   <C>
Federal funds sold .................................................            $  17,904            $  14,248             $  32,152

Investments ........................................................               25,223               (4,902)               20,321
                                                                                ---------            ---------             ---------
Total investments and federal funds sold ...........................               43,127                9,346                52,473

Total loans ........................................................              832,478              (31,665)              800,813
                                                                                ---------            ---------             ---------
Total earning assets ...............................................              875,605              (22,319)              853,286

Total interest-bearing liabilities .................................              443,422              209,345               652,767
                                                                                ---------            ---------             ---------
Net interest income ................................................            $ 432,183            $(231,664)            $ 200,519
</TABLE>




                                       10
<PAGE>


RESULTS OF OPERATIONS

The  Company's  net income for the nine  months  ended  September  30,  2000 was
$152,066  or $.15 per share,  compared  to a loss of $282,875 or $.27 per share,
for the nine  months  ended  September  30,1999.  The  amount  of the  Company's
provision  for loan  losses for the nine  months  ended  September  30, 2000 was
$90,000,  which was  substantially  less than the $480,000  provided in the same
period of 1999.  Since opening the bank in July 1998,  management  has sought to
have an allowance for loan losses adequate to cover the level of loss management
believed to be inherent in the  portfolio  as a whole,  taking into  account the
relative size of the allowance and the size of the Company's  largest loans.  In
the third  quarter of 1999,  management  concluded  that the  allowance for loan
losses  was  large  enough  to  allow  for the risk of loss of one or two of the
Company's  largest  loans,  while  maintaining a reserve  allowance for the loan
portfolio as a whole. Consequently,  the Company started in the third quarter of
1999 making  quarterly  provisions that were less than in prior quarters.  As of
September 30, 2000,  the reserve for loan losses as a percent of total loans was
1.34%.


Non-interest  income for the nine months ended  September 30, 2000 was $423,358,
compared  to  $165,976  for the nine  months  ended  September  30,  1999.  Fees
generated from the increase in deposit  accounts and fees on loans sold were the
main reason for the increase in non-interest income.


Non-interest  expenses  for the  nine  months  ended  September  30,  2000  were
$2,251,367,  compared to $1,439,795 for the nine months ended September 30,1999.
The  increase of $811,572 is mainly  attributable  to  increases in salaries and
benefits,  occupancy cost and furniture and equipment expenses.  These increases
primarily  relate to expenses  associated with the preparation of and opening of
the bank's first two branches  and increase in  administrative  staff to support
the  growth.  The West Ashley  branch  opened in  September  1999 and the Moncks
Corner branch opened in May 2000.



The Company's net income for the quarter  ending  September 30, 2000 was $61,762
or $ .06 per  share,  compared  to $ 14,323  or $ .01 per  share,  for the three
months ending  September 30, 1999. The provision for loan losses recorded in the
quarter ending  September 30, 2000, was $30,000,  which was the same as recorded
for the quarter ending September 30, 1999.

Non-interest  income for the three months ended  September 30, 2000 was $209,101
compared to $55,904 for the three months  ended  September  30, 1999.  Increased
deposit accounts,  resulting in increased fees on deposits and increased fees on
loans sold, account for the major portion of the increase.

Non-interest  expenses  for the three  months ended  September  30,  2000,  were
$834,180,  compared to $ 553,353 for the three months ended  September 30, 1999.
The  increase of $280,827 is mainly  attributable  to  increases in salaries and
benefits,  occupancy cost and furniture and equipment expenses.  These increases
primarily  relate to the opening of the two new branches and the related cost to
support the bank's 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.


                                       11
<PAGE>

Management  believes that the Company's  liquidity  sources are adequate to meet
its operating needs.


LOANS

Commercial financial and agricultural loans made up 34 percent of the total loan
portfolio as of September 30, 2000,  totaling  $23.3  million.  Loans secured by
real estate for  construction and land  development  totaled $1.0 million,  or 2
percent of the total loan portfolio while all other loans secured by real estate
totaled $40.7 million, or 60 percent of the total loan portfolio as of September
30, 2000.  Installment  loans and other consumer loans to individuals  comprised
$3.0 million,  or 4 percent of the total loan portfolio.  The allowance for loan
losses was 1.34  percent of loans as of  September  30,  2000  compared  to 1.90
percent as of December 31, 1999. In management's opinion, the allowance for loan
losses is adequate. At September 30, 2000, the Company had no loans that were 90
days or more past due or non-accruing.


CAPITAL RESOURCES

The capital  base for the  Company  decreased  by  $377,527  for the nine months
ending  September 30, 2000,  due to the $569,234 paid out for the  repurchase of
70,446 shares of stock,  offset by the operating  income and unrealized gains on
available for sale securities. On March 17, 2000, the Company announced plans to
repurchase up to 100,000 shares of its common stock.  Any  repurchase  will have
the effect of reducing the  Company's  equity  capital by the amount  paid.  The
Company's  equity to asset  ratio was 10.8  percent  as of  September  30,  2000
compared to 17.6 percent as of December 31, 1999.


The Federal Deposit  Insurance  Corporation has established  risk-based  capital
requirements for banks. As of September 30, 2000, 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 ..............      $10,695       18.72%      $ 5,713       10.00%      $ 4,570          8.00%
Tier 1 capital to risk weighted  assets ............        9,978       17.46         3,428        6.00         2,285          4.00
Tier 1 capital to average assets ...................        9,978       12.21         4,087        5.00         3,269          4.00
</TABLE>

IMPACT OF INFLATION

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







                                       12
<PAGE>


                           PART II - OTHER INFORMATION


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

a)       Exhibits

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

          27                        Financial Data Schedule

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


                                             /s/L. Wayne Pearson
Date:  November 14, 2000                 By:------------------------------------
                                              L. Wayne Pearson
                                              President and Chief Executive
                                              Officer

                                             /s/Robert M. Scott
Date: November 14, 2000                  By:------------------------------------
                                              Robert M. Scott
                                              Executive Vice President and Chief
                                              Financial Officer