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, 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: 995,368, Shares Outstanding on July 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)
                                                                                                        June 30,        December 31,
                                                                                                         2000               1999
                                                                                                         ----               ----
ASSETS
<S>                                                                                                <C>                 <C>
   Cash and due from banks .................................................................       $  3,620,437        $  1,786,411
   Federal funds sold ......................................................................          2,310,000           1,310,000
   Investment securities available for sale ................................................          4,191,835           3,121,049
   Loans, net of allowance of $895,000 and $835,000 ........................................         60,068,945          43,153,421
   Property and equipment - net ............................................................          5,809,180           4,513,284
   Other assets ............................................................................          1,811,625           1,364,381
                                                                                                   ------------        ------------
       Total assets ........................................................................       $ 77,812,022        $ 55,248,546
                                                                                                   ============        ============

LIABILITIES
   Deposits
     Noninterest-bearing ...................................................................       $  8,094,096        $  5,667,155
     Interest bearing ......................................................................         48,801,607          32,577,797
                                                                                                   ------------        ------------
       Total deposits ......................................................................         56,895,703          38,244,952
   Other borrowings ........................................................................         10,849,904           6,899,904
   Other liabilities .......................................................................            619,553             382,892
                                                                                                   ------------        ------------

       Total liabilities ...................................................................         68,365,160          45,527,748
                                                                                                   ------------        ------------
SHAREHOLDERS' EQUITY
   Common stock (no par value;  20,000,000 shares  authorized;  1,002,958 shares
     outstanding at June 30, 2000 and 1,047,987
     at December 31, 1999) .................................................................         10,168,615          10,520,053
   Retained deficit ........................................................................           (623,843)           (714,147)
   Accumulated other comprehensive (loss) ..................................................            (97,910)            (85,108)
                                                                                                   ------------        ------------
       Total shareholders' equity ..........................................................          9,446,862           9,720,798
                                                                                                   ------------        ------------
       Total liabilities and shareholders' equity ..........................................       $ 77,812,022        $ 55,248,546
                                                                                                   ============        ============
</TABLE>









         See notes to consolidated financial statements.





                                       2
<PAGE>


                        SOUTHCOAST FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        Six months      Six months      Three Months    Three months
                                                                          ended            ended           ended            ended
                                                                      June 30, 2000    June 30, 1999   June 30, 2000   June 30, 1999
                                                                      -------------    -------------   -------------   -------------
INTEREST INCOME
<S>                                                                    <C>             <C>              <C>             <C>
   Loans, including fees .........................................     $ 2,588,306     $   975,081      $ 1,418,537     $   608,935
   Investment securities .........................................         139,273         112,478           81,530          65,335
   Federal funds sold ............................................          35,817          84,463           19,153          35,715
                                                                       -----------     -----------      -----------     -----------
       Total interest income .....................................       2,763,396       1,172,022        1,519,220         709,985
INTEREST EXPENSE
   Deposits and borrowings .......................................       1,366,066         397,420          763,348         257,878
       Net interest income .......................................       1,397,330         774,602          755,872         452,107

PROVISION FOR POSSIBLE LOAN LOSSES ...............................          60,000         450,000           30,000         225,000
                                                                       -----------     -----------      -----------     -----------
       Net interest income after provision for loan losses .......       1,337,330         324,602          725,872         227,107

NONINTEREST INCOME
   Service fees on deposit accounts ..............................          97,695          42,302           54,986          24,025
   Fees on loans sold ............................................          58,004          30,444           45,895          15,274
   Other .........................................................          58,558          37,426           25,342          12,816
                                                                       -----------     -----------      -----------     -----------
       Total non interest income .................................         214,257         110,172          126,223          52,115
NONINTEREST EXPENSES
   Salaries and employee benefits ................................         906,307         576,364          498,200         324,211
   Occupancy .....................................................          62,450          30,087           30,795          16,103
   Furniture and equipment .......................................         156,358          67,766           89,605          35,189
   Advertising and public relations ..............................          24,536          38,855            9,342          21,232
   Professional fees .............................................          38,721          59,865           24,033          44,150
   Travel and entertainment ......................................          57,907          39,415           31,730          24,374
   Telephone, postage and supplies ...............................          90,434          52,776           47,549          29,719
   Other operating ...............................................          80,474          21,314           42,815          12,316
                                                                       -----------     -----------      -----------     -----------
       Total noninterest expenses ................................       1,417,187         886,442          773,979         507,294
                                                                       -----------     -----------      -----------     -----------
       Income (loss) before income taxes .........................         134,400        (451,668)          78,116        (228,072)

INCOME TAX  (BENEFIT) ............................................          44,096        (154,468)          24,959         (78,472)
                                                                       -----------     -----------      -----------     -----------

       Net income (loss) .........................................     $    90,304     $  (297,200)     $    53,157     $  (149,600)
                                                                       ===========     ===========      ===========     ===========

NET INCOME (LOSS)  PER COMMON SHARE ..............................     $       .09     $     (0.28)     $       .05     $     (0.14)
                                                                       ===========     ===========      ===========     ===========

WEIGHTED AVERAGE SHARES OUTSTANDING ..............................       1,038,898       1,047,987        1,029,807       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
                                                                                                           other            share-
                                                  Common stock              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 ...........................              -               -             -       (297,200)              -        (297,200)

   Other comprehensive income, net
     of tax:
     Unrealized holding losses on
       Securities available for sale ..              -               -             -              -         (64,205)        (64,205)

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

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

BALANCE, June 30, 1999 ................      1,047,987    $ 10,520,053             -       (748,347)        (58,527)   $  9,713,179
                                          ============    ============    ==========   ============    ============    ============

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 loss, 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)   $    (97,910)   $  9,446,862
                                          ============    ============    ==========   ============    ============    ============
</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>
                                                                                                  2000                     1999
                                                                                                  ----                     ----

<S>                                                                                          <C>                       <C>
OPERATING ACTIVITIES ...........................................................             $     90,304              $   (297,200)
   Net income (loss)
   Adjustments to reconcile net income (loss) to net
   Cash provided by operating activities:
     Income tax (benefit) ......................................................                   44,085                  (154,468)
     Provision for possible loan losses ........................................                   60,000                   450,000
     Depreciation and amortization .............................................                  150,922                    50,794
     Increase in other assets ..................................................                 (479,042)                  (64,272)
     Increase in other liabilities .............................................                  236,661                   261,364
                                                                                             ------------              ------------
         Net cash provided by operating activities .............................                  102,930                   246,218
                                                                                             ------------              ------------

INVESTING ACTIVITIES
   Increase (decrease) in federal funds sold ...................................               (1,000,000)                2,160,000
   Purchase of investment securities available for sale ........................               (1,097,500)               (1,961,130)
   Net increase in loans .......................................................              (16,975,524)              (16,934,032)
   Purchase of corporate stock .................................................                 (351,438)                        -
   Purchase of property and equipment ..........................................               (1,445,193)               (1,965,811)
                                                                                             ------------              ------------
         Net cash used for investing activities ................................              (20,869,655)              (18,700,973)
                                                                                             ------------              ------------

FINANCING ACTIVITIES
   Increase in Federal Home Loan Bank borrowing ................................                3,950,000                 3,050,000
   Net increase in deposits ....................................................               18,650,751                17,479,062
                                                                                             ------------              ------------
         Net cash provided by financing activities .............................               22,600,751                20,529,062
                                                                                             ------------              ------------

         Increase in cash and due from banks ...................................                1,834,026                 2,074,307

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

CASH AND DUE FROM BANKS, END OF PERIOD .........................................             $  3,620,437              $  3,285,758
                                                                                             ============              ============
</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 June 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.  It will  concentrate  on the six  months of
operations  ending June 30,  2000,  compared to the same period  ending June 30,
1999 and the three months of  operations  ending June 30, 2000,  compared to the
same quarter  ending June 30, 1999.  Results of operations for the period ending
June 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
$1,397,330 for the six months ended June 30, 2000,  compared to $774,602 for the
six months  ended June 30,  1999.  For the  quarter  ended  June 30,  2000,  net
interest  income was $755,872  compared to $ 452,107 for the quarter  ended June
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 six months  ending June 30, 2000  increased  to
$56.9 million or 119 percent from the $25.6 million  reported for the six months
ending June  30,1999.  The increase was mainly  attributable  to the increase in
loans  supported by a $30.8  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 June 30, 2000 increased to $61.7
million or 102 percent from the $30.6  million  reported  for the quarter  ended
June 30, 1999.  Average loans increased $32.5 million,  supported by an increase
in average interest bearing funds of $ 30.3 million.

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  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>



                       Average Balances, Yields and Rates

<TABLE>
<CAPTION>
                                                  Six months ended                                Six months ended
                                                   June 30, 2000                                   June 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                   $ 1,166,512     $   35,817          6.14%       $ 3,540,561    $   84,463          4.77%
Investments                            4,248,592        139,273          6.56%         3,999,865       112,478          5.62%
                                     -----------     ----------                      -----------    ----------
Total investments and
   federal funds sold                  5,415,104        175,090          6.47%         7,540,426       196,941          5.22%
Loans                                 51,456,065      2,588,306         10.06%        18,440,198       975,081         10.58%
                                     -----------     ----------                      -----------    ----------
Total earning assets                  56,871,169      2,763,396          9.72%        25,980,624     1,172,022          9.02%
                                     -----------     ----------                      -----------    ----------
Other assets                           7,006,597                                       2,724,396
                                     -----------                                     -----------
Total assets                         $63,877,766                                     $28,705,020
                                     ===========                                     ===========
LIABILITIES
Interest bearing deposits            $39,040,511     $1,110,743          5.69%       $15,194,905    $  367,122          4.83%
FHLB advances                          8,147,977        255,323          6.27%         1,156,291        30,298          5.24%
                                     -----------     ----------                      -----------    ----------
Total interest bearing liabilities    47,188,488      1,366,066          5.79%        16,351,196       397,420          4.86%
Non-interest bearing liabilities       6,825,756                                       2,371,612
                                     -----------     ----------                      -----------    ----------

Total liabilities                     54,014,244      1,366,066          5.06%        18,722,808       397,420          4.25%
Equity                                 9,863,522                                       9,982,212
                                     -----------     ----------                      -----------    ----------

Total liabilities and equity         $63,877,766                                     $28,705,020
                                     ===========                                     ===========

Net interest income/margin                           $1,397,330          4.91%                      $  774,602          5.96%
                                                     ==========                                     ==========

Net interest spread                                                      3.93%                                          4.16%
</TABLE>

As reflected  above, for the six months ended June 30, 2000 the average yield on
earning   assets   amounted  to  9.72   percent,   while  the  average  cost  of
interest-bearing  liabilities  was 5.79  percent.  For the six months ended June
30,1999 the  average  yield on earning  assets was 9.02  percent and the average
cost of interest-bearing liabilities was 4.86 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 average loans from 10.58% to 10.06% is  attributable to
the change in mix of higher  earning loans as a percent of 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 six months ended June 30, 2000 was 4.91 percent compared
to 5.96  percent for the six months  ended June 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 5.06 percent for the
six months ended June 30, 2000 compared to 4.25 percent for the six months ended
June 30, 1999.







                                       8
<PAGE>



<TABLE>
<CAPTION>
                                                 Three months ended                              Three months ended
                                                   June 30, 2000                                   June 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                   $ 1,188,867     $   19,153          6.44%       $ 2,910,713      $ 35,715          4.91%
Investments                            5,029,710         81,530          6.48%         4,632,690        65,335          5.64%
                                     -----------     ----------                      -----------      --------
Total investments and
   federal funds sold                  6,218,577        100,683          6.47%         7,543,403       101,050          5.36%
Loans                                 55,471,068      1,418,537         10.23%        23,014,557       608,935         10.58%
                                     -----------     ----------                      -----------      --------
Total earning assets                  61,689,645      1,519,220          9.85%        30,557,960       709,985          9.29%
                                     -----------     ----------                      -----------      --------
Other assets                           7,171,910                                       3,370,376
                                     -----------                                     -----------
Total assets                         $68,861,555                                     $33,928,336
                                     ===========                                     ===========
LIABILITIES
Interest bearing deposits            $42,113,253        612,851          5.82%       $19,313,760      $233,794          4.84%
FHLB advances                          9,348,746        150,497          6.44%         1,873,656        24,084          5.14%
                                     -----------     ----------                      -----------      --------
Total interest bearing liabilities    51,461,999        763,348          5.93%        21,187,416       257,878          4.87%
Non-interest bearing liabilities       7,520,863                                       2,839,435
                                     -----------     ----------                      -----------      --------

Total liabilities                     58,982,862        763,348          5.18%        24,026,851       257,878          4.29%
Equity                                 9,878,693                                       9,901,485
                                     -----------     ----------                      -----------      --------

Total liabilities and equity         $68,861,555                                     $33,928,336
                                     ===========                                     ===========

Net interest income/margin                           $  755,872          4.90%                        $452,107          5.92%
                                                     ==========                                       ========

Net interest spread                                                      3.92%                                          4.42%
</TABLE>

As reflected  above,  for the three months ended June 30, 2000 the average yield
on  earning  assets  amounted  to  9.85  percent,  while  the  average  cost  of
interest-bearing  liabilities was 5.93 percent.  For the three months ended June
30,1999 the  average  yield on earning  assets was 9.29  percent and the average
cost of interest-bearing liabilities was 4.87 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 average loans from 10.58% to 10.23% is  attributable to
the change in mix of higher  earning loans as a percent of 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 three  months  ended  June 30,  2000 was 4.90  percent
compared to 5.92 percent for the three months ended June 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 5.18 percent for the
three months  ended June 30, 2000  compared to 4.29 percent for the three months
ended June 30, 1999.

The following  tables  represent  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.



                                       9
<PAGE>


                   Analysis of Changes in Net Interest Income

<TABLE>
<CAPTION>
                                                                                  For the six months ended June 30 2000
                                                                                   versus six months ended June 30 1999
                                                                                   ------------------------------------
                                                                             Volume                 Rate                Net change
                                                                             ------                 ----                ----------
<S>                                                                       <C>                    <C>                    <C>
Federal funds sold ............................................           $   (56,621)           $     7,975            $   (48,646)
Investments ...................................................                 6,989                 19,806                 26,795
                                                                          -----------            -----------            -----------
Total investments and federal funds sold ......................               (49,632)                27,781                (21,851)
Total loans ...................................................             1,746,539               (133,314)             1,613,225
                                                                          -----------            -----------            -----------
Total earning assets ..........................................             1,696,908               (105,534)             1,591,374
Total interest-bearing liabilities ............................               759,054                209,592                968,646
                                                                          -----------            -----------            -----------
Net interest income ...........................................           $   937,854            $  (315,126)           $   622,728
                                                                          ===========            ===========            ===========
</TABLE>





                   Analysis of Changes in Net Interest Income

<TABLE>
<CAPTION>
                                                                                     For the three months ended June 30 2000
                                                                                      versus three months ended June 30 1999
                                                                                      --------------------------------------
                                                                                Volume                 Rate               Net change
                                                                                ------                 ----               ----------
<S>                                                                           <C>                   <C>                   <C>
Federal funds sold ...............................................            $ (21,136)            $   4,574             $ (16,562)
Investments ......................................................                5,598                10,597                16,195
                                                                              ---------             ---------             ---------
Total investments and federal funds sold .........................              (15,538)               15,171                  (367)
Total loans ......................................................              858,475               (48,873)              809,602
                                                                              ---------             ---------             ---------
Total earning assets .............................................              842,937               (33,702)              809,235
Total interest-bearing liabilities ...............................              371,929               133,541               505,470
                                                                              ---------             ---------             ---------
Net interest income ..............................................            $ 471,008             $(167,243)            $ 303,765
                                                                              =========             =========             =========
</TABLE>



RESULTS OF OPERATIONS

The  Company's  net income for the six months ended June 30, 2000 was $90,304 or
$.09 per share,  compared to a loss of  $297,200 or $.28 per share,  for the six
months ended June 30,1999. The amount of the Company's provision for loan losses
for the six month was $60,000,  which was  substantially  less than the $450,000
provided  in the  first  half of 1999.  Since  opening  the  bank in July  1998,
management  has sought to have an allowance for loan losses that was adequate to
cover the level of loss that 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 third quarter of 1999 making quarterly provisions that were less than
in prior quarters. As of June 30, 2000, the reserve for loan losses as a percent
of total loans was 1.47%.


                                       10
<PAGE>

Non-interest  income  for the six  months  ended  June 30,  2000  was  $214,257,
compared to $110,172 for the six months ended June 30, 1999. Fees generated from
the increase in deposit accounts and fees on loans sold were the main reason for
the 94% increase in non-interest income.

Non-interest  expenses for the six months  ended June 30, 2000 were  $1,417,187,
compared to $886,442  for the six months  ended June  30,1999.  The  increase of
$530,745 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 June 30, 2000 was $53,157 or $
 .05 per share, compared to a loss of $ 149,600 or $ .14 per share, for the three
months  ending June 30,  1999.  The  provision  for loan losses  recorded in the
quarter  ending June 30, 2000 was $30,000  compared to $ 225,000 for the quarter
ending June 30, 1999.

Non-interest  income  for the three  months  ended  June 30,  2000 was  $126,223
compared to $52,115 for the three months ended June 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 June 30, 2000 were  $773,979,
compared to $ 507,294 for the three months ended June 30, 1999.  The increase of
$266,685 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.
Management  believes that the Company's  liquidity  sources are adequate to meet
its operating needs.

LOANS

Commercial financial and agricultural loans made up 30 percent of the total loan
portfolio as of June 30, 2000,  totaling  $18.0  million.  Loans secured by real
estate for construction  and land development  totaled $2.4 million or 4 percent
of the total loan portfolio while all other loans secured by real estate totaled
$38.1  million or 62 percent of the total loan  portfolio  as of June 30,  2000.
Installment loans and other consumer loans to individuals comprised $2.5 million
or 4 percent of the total loan portfolio. The allowance for loan losses was 1.47
percent of loans as of June 30, 2000 compared to 1.90 percent as of December 31,
1999. In  management's  opinion,  the allowance for loan losses is adequate.  At
June  30,  the  Company  had no  loans  that  were 90 days or more  past  due or
non-accruing.



                                       11
<PAGE>

CAPITAL RESOURCES

The capital base for the Company decreased by $273,936 for the six months ending
June 30, 2000,  due to the $351,438 paid out for the repurchase of 45,029 shares
of stock,  offset by the operating income and unrealized losses 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 12.1  percent as of June 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 June 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 ....................................        $10,549        20.57%     $ 5,128           10.00%     $ 4,103        8.00%
Tier 1 capital to risk weighted
   assets ....................................          9,905        19.31        3,077            6.00        2,051        4.00
Tier 1 capital to average assets .............          9,905        14.38        3,443            5.00        2,754        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 4.  Submission of Matters to a Vote of Security Holders.

     (a)  The Company held its annual meeting of shareholders on May 11, 2000.

     (b)  and (c) The following persons were elected as directors with the votes
          shown:


         NAME                                         FOR              WITHHOLD
         ----                                         ---              --------

William A. Coates ..........................        945,398             4,159

Thomas E. Hamer, Sr ........................        945,398             4,159

Paul D. Hollen, III ........................        945,398             4,159

L. Wayne Pearson ...........................        945,398             4,159

Norman T. Russell ..........................        945,398             4,159

Robert M. Scott ............................        945,398             4,159

James H. Sexton, Jr ........................        945,398             4,159

James P. Smith .............................        945,398             4,159


       The following other matters were voted on as shown:

Approval of the Adoption of the Employee Stock Purchase Plan

  FOR                398,056 shares

  AGAINST             41,049 shares

  ABSTAIN              3,030 shares


 Approval of the 1999 Stock Option Plan

   FOR               397,896 shares

   AGAINST            42,259 shares

   ABSTAIN             1,980 shares





                                       13
<PAGE>




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

a)       Exhibits

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

                      10.1              Southcoast     Financial     Corporation
                                        Employee     Stock     Purchase     Plan
                                        (incorporated  by  reference to appendix
                                        to proxy  statement  filed in connection
                                        with  May 11,  2000  Annual  Meeting  of
                                        Shareholders)


                      10.2              Southcoast  Financial  Corporation  1999
                                        Stock  Option  Plan   (incorporated   by
                                        reference to appendix to proxy statement
                                        filed in  connection  with May 11,  2000
                                        Annual Meeting of Shareholders)


                      27                Financial Data Schedule

b)       Reports on form 8-K.      None.

-------------------






<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:  August 14, 2000             By:  s/L. Wayne Pearson

                                   ---------------------------------------------
                                        L. Wayne Pearson
                                        President and Chief Executive Officer


Date:  August 14, 2000             By: s/ Robert M. Scott

                                   ---------------------------------------------
                                        Robert M. Scott
                                        Executive Vice President and Chief
                                         Financial Officer































                                       14
<PAGE>


                                  Exhibit Index

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

                      10.1              Southcoast     Financial     Corporation
                                        Employee     Stock     Purchase     Plan
                                        (incorporated  by  reference to appendix
                                        to proxy  statement  filed in connection
                                        with  May 11,  2000  Annual  Meeting  of
                                        Shareholders)


                      10.2              Southcoast  Financial  Corporation  1999
                                        Stock  Option  Plan   (incorporated   by
                                        reference to appendix to proxy statement
                                        filed in  connection  with May 11,  2000
                                        Annual Meeting of Shareholders)


                      27                Financial Data Schedule