EXHIBIT 10.5

         FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE

          THIS  SECURITY HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF
 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
 APPLICABLE   SECURITIES  LAW.   NEITHER  THIS  SECURITY  NOR  ANY  INTEREST  OR
 PARTICIPATION HEREIN MAY BE REOFFERED,  SOLD, ASSIGNED,  TRANSFERRED,  PLEDGED,
 ENCUMBERED  OR  OTHERWISE  DISPOSED OF IN THE ABSENCE OF SUCH  REGISTRATION  OR
 UNLESS SUCH  TRANSACTION  IS EXEMPT FROM,  OR NOT SUBJECT TO, THE  REGISTRATION
 REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE  STATE  SECURITIES  LAWS.
 THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE  HEREOF AGREES TO OFFER,  SELL OR
 OTHERWISE  TRANSFER THIS  SECURITY  ONLY (A) TO THE COMPANY,  (B) PURSUANT TO A
 REGISTRATION  STATEMENT THAT HAS BEEN DECLARED  EFFECTIVE  UNDER THE SECURITIES
 ACT,  (C) TO A PERSON  WHOM  THE  SELLER  REASONABLY  BELIEVES  IS A  QUALIFIED
 INSTITUTIONAL  BUYER IN A TRANSACTION  MEETING THE REQUIREMENTS OF RULE 144A SO
 LONG  AS THIS  SECURITY  IS  ELIGIBLE  FOR  RESALE  PURSUANT  TO  RULE  144A IN
 ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S.  PERSON IN AN OFFSHORE TRANSACTION
 IN ACCORDANCE  WITH RULE 903 OR RULE 904 (AS  APPLICABLE) OF REGULATION S UNDER
 THE SECURITIES ACT, (E) TO AN  INSTITUTIONAL  "ACCREDITED  INVESTOR" WITHIN THE
 MEANING  OF  SUBPARAGRAPH  (A) OF RULE 501  UNDER  THE  SECURITIES  ACT THAT IS
 ACQUIRING  THIS  SECURITY  FOR ITS OWN  ACCOUNT,  OR FOR THE ACCOUNT OF SUCH AN
 INSTITUTIONAL  ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
 TO, OR FOR OFFER OR SALE IN CONNECTION  WITH, ANY  DISTRIBUTION IN VIOLATION OF
 THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER  AVAILABLE  EXEMPTION FROM THE
 REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT
 PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION
 OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM
 IN  ACCORDANCE  WITH THE  INDENTURE,  A COPY OF WHICH MAY BE OBTAINED  FROM THE
 COMPANY.

         THE HOLDER OF THIS  SECURITY  BY ITS  ACCEPTANCE  HEREOF  ALSO  AGREES,
 REPRESENTS  AND  WARRANTS  THAT  IT IS  NOT  AN  EMPLOYEE  BENEFIT,  INDIVIDUAL
 RETIREMENT  ACCOUNT  OR OTHER  PLAN OR  ARRANGEMENT  SUBJECT  TO TITLE I OF THE
 EMPLOYEE  RETIREMENT  INCOME  SECURITY ACT OF 1974,  AS AMENDED  ("ERISA"),  OR
 SECTION  4975 OF THE  INTERNAL  REVENUE  CODE OF 1986,  AS AMENDED (THE "CODE")
 (EACH A "PLAN"),  OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY
 REASON OF ANY PLAN'S  INVESTMENT IN THE ENTITY,  AND NO PERSON  INVESTING "PLAN
 ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN,
 UNLESS SUCH  PURCHASER OR HOLDER IS ELIGIBLE  FOR  EXEMPTIVE  RELIEF  AVAILABLE
 UNDER U.S.  DEPARTMENT OF LABOR PROHIBITED  TRANSACTION  CLASS EXEMPTION 96-23,
 95-60, 91-38, 90-l OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND
 HOLDING OF THIS  SECURITY IS NOT  PROHIBITED BY SECTION 406 OF ERISA OR SECTION
 4975 OF THE CODE WITH  RESPECT TO SUCH  PURCHASE OR HOLDING.  ANY  PURCHASER OR
 HOLDER  OF THE  SECURITIES  OR ANY  INTEREST  THEREIN  WILL BE  DEEMED  TO HAVE
 REPRESENTED  BY ITS PURCHASE  AND HOLDING  THEREOF THAT EITHER (i) IT IS NOT AN
 EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO
 WHICH SECTION 4975 OF THE CODE IS APPLICABLE,  A TRUSTEE OR OTHER PERSON ACTING
 ON BEHALF OF AN EMPLOYEE  BENEFIT  PLAN OR PLAN,  OR ANY OTHER PERSON OR ENTITY


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 USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE,
 OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION
 406 OF ERISA OR  SECTION  4975 OF THE CODE  FOR  WHICH  THERE IS NO  APPLICABLE
 STATUTORY OR ADMINISTRATIVE EXEMPTION.

         THIS  SECURITY  WILL BE ISSUED  AND MAY BE  TRANSFERRED  ONLY IN BLOCKS
HAVING AN AGGREGATE  PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES
OF $1,000.00 IN EXCESS  THEREOF.  ANY  ATTEMPTED  TRANSFER OF THIS SECURITY IN A
BLOCK HAVING AN AGGREGATE  PRINCIPAL  AMOUNT OF LESS THAN  $100,000.00  SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

         THE  HOLDER  OF THIS  SECURITY  AGREES  THAT IT WILL  COMPLY  WITH  THE
FOREGOING RESTRICTIONS.

         IN  CONNECTION  WITH ANY  TRANSFER,  THE  HOLDER  WILL  DELIVER  TO THE
REGISTRAR AND TRANSFER AGENT SUCH  CERTIFICATE  AND OTHER  INFORMATION AS MAY BE
REQUIRED  BY THE  INDENTURE  TO  CONFIRM  THAT THE  TRANSFER  COMPLIES  WITH THE
FOREGOING RESTRICTIONS.

         Floating Rate Junior Subordinated Deferrable Interest Debenture

                                       of

                        SOUTHCOAST FINANCIAL CORPORATION

                                   May 3, 2002

         Southcoast  Financial  Corporation,  a South Carolina  corporation (the
"Company"  which  term  includes  any  successor   Person  under  the  Indenture
hereinafter  referred  to),  for value  received  promises to pay to Wells Fargo
Bank,  National  Association,  not in its  individual  capacity  but  solely  as
Institutional   Trustee  for  Southcoast  Capital  Trust  I  (the  "Holder")  or
registered  assigns,  the principal  sum of Four Million and One Hundred  Twenty
Five Thousand Dollars ($4,125,000) on June 30, 2032, and to pay interest on said
principal  sum from May 3, 2002, or from the most recent  interest  payment date
(each such date, an "Interest  Payment Date") to which interest has been paid or
duly provided for quarterly (subject to deferral as set forth herein) in arrears
on March 31, June 30,  September 30 and December 31 of each year commencing June
30, 2002, at an annual rate equal to 5.67% beginning on (and including) the date
of original issuance and ending on (but excluding) July 1, 2002 and at an annual
rate for each successive  period  beginning on (and including) July 1, 2002, and
each  succeeding  Interest  Payment Date, and ending on (but excluding) the next
succeeding  Interest  Payment  Date  (each a  "Distribution  Period"),  equal to
3-Month LIBOR  determined as described  below,  plus 3.75% (the "Coupon  Rate");
provided,  however, that prior to July 1, 2007, the Coupon Rate shall not exceed
12.00%,  applied to the principal  amount hereof,  until the principal hereof is
paid or duly  provided for or made  available  for  payment,  and on any overdue
principal and (without  duplication)  on any overdue  installment of interest at
the same rate per annum,  compounded quarterly,  from the dates such amounts are
due until they are paid or made  available  for payment.  The amount of interest
payable for any period  will be  computed  on the basis of the actual  number of
days in such period divided by 360. In the event that any date on which interest
is  payable  on this  Debenture  is not a  Business  Day,  then a payment of the
interest payable on such date will be made on the next succeeding day which is a
Business Day (and  without any interest or other  payment in respect of any such
delay),  except that,  if such Business Day is in the next  succeeding  calendar
year, such payment shall be made on the immediately  preceding  Business Day, in
each case with the same force and effect as if made on the date the  payment was
originally payable.  Interest and any Additional Interest on this Debenture that
is payable, and is punctually paid or duly provided for, on any Interest Payment

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Date will,  as  provided in the  Indenture,  be paid to the Person in whose name
this  Debenture  (or one or more  Predecessor  Securities)  is registered at the
close of  business on the regular  record  date for such  interest  installment,
which  shall be  fifteen  days prior to the day on which the  relevant  Interest
Payment Date occurs, except that (a) interest and Additional Interest payable on
the Maturity Date shall be paid to the Person to whom the principal is paid, and
(b) in the event  that  this  Debenture  or any  portion  hereof  is called  for
redemption and the  redemption  date is subsequent to a regular record date with
respect to any Interest  Payment Date and prior to such  Interest  Payment Date,
interest on this Debenture will be paid upon  presentation and surrender of this
Debenture. Any interest on this Debenture,  other than Additional Interest, that
is payable  but is not  punctually  paid or duly  provided  for on any  Interest
Payment Date shall  forthwith  cease to be payable to the Holder on such regular
record date and shall be paid to the Person in whose name this Debenture (or one
or more  Predecessor  Securities)  is  registered  at the close of business on a
special record date.  Any such interest  installment  not so punctually  paid or
duly  provided  for shall  forthwith  cease to be  payable to the Holder on such
regular  record date and may be paid to the Person in whose name this  Debenture
(or one or more  Predecessor  Securities) is registered at the close of business
on a special record date.

          "3-Month  LIBOR" as used herein,  means the London  interbank  offered
rate for  three-month  Eurodollar  deposits  determined  by the  Trustee  in the
following order of priority:  (i) the rate (expressed as a percentage per annum)
for Eurodollar  deposits having a three-month  maturity that appears on Telerate
Page 3750 as of 11:00 a.m. (London time) on the particular Determination Date ("
Telerate Page 3750" means the display designated as "Page 3750" on the Dow Jones
Telerate  Service or such other page as may replace Page 3750 on that service or
such other  service or services  as may be  nominated  by the  British  Bankers'
Association  as the  information  vendor for the  purpose of  displaying  London
interbank  offered rates for U.S. dollar  deposits);  (ii) if such rate does not
appear on Telerate Page 3750 as of 11:00 a.m. (London time) on the Determination
Date,  3-Month  LIBOR will be the  arithmetic  mean of the rates  (expressed  as
percentages  per annum) for Eurodollar  deposits  having a three-month  maturity
that appear on Reuters  Monitor Money Rates Page LIBOR ("Reuters Page LIBOR") as
of 11:00 a.m. (London time) on such Determination  Date; (iii) if such rate does
not appear on Reuters Page LIBOR as of 11:00 a.m.  (London  time) on the related
Determination  Date,  the Trustee will request the principal  London  offices of
four leading banks in the London interbank market to provide such banks' offered
quotations  (expressed  as  percentages  per annum) to prime banks in the London
interbank  market for Eurodollar  deposits  having a three-month  maturity as of
1l:00 a.m. (London time) on such Determination  Date. If at least two quotations
are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iv)
if fewer than two such  quotations  are  provided as  requested  in clause (iii)
above,  the Trustee  will request four major New York City banks to provide such
banks'  offered  quotations  (expressed  as  percentages  per  annum) to leading
European banks for loans in  Eurodollars as of 1l:00 a.m.  (London time) on such
Determination Date. If at least two such quotations are provided,  3-Month LIBOR
will be the arithmetic mean of such  quotations;  and (v) if fewer than two such
quotations are provided as requested in clause (iv) above, 3-Month LIBOR will be
a 3-Month LIBOR determined with respect to the Distribution  Period  immediately
preceding such current  Distribution Period. If the rate for Eurodollar deposits
having a three-month  maturity that  initially  appears on Telerate Page 3750 or
Reuters Page LIBOR,  as the case may be, as of 11:00 a.m.  (London  time) on the
related  Determination  Date is  superseded on the Telerate Page 3750 or Reuters
Page LIBOR,  as the case may be, by a corrected rate by 12:00 noon (London time)
on such  Determination  Date,  then the corrected  rate as so substituted on the
applicable  page will be the  applicable  3-Month  LIBOR for such  Determination
Date.  As used  herein,  "Determination  Date" means the date that is two London
Banking  Days (i.e.,  a day in which  dealings in  deposits in  Eurodollars  are
transacted in the London  interbank  market)  preceding the  commencement of the
relevant Distribution Period.

         The Coupon Rate for any  Distribution  Period will at no time be higher
than the maximum rate then permitted by New York law as the same may be modified
by United States law.
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         All percentages  resulting from any calculations on the Debentures will
be rounded, if necessary,  to the nearest one hundred-thousandth of a percentage
point,  with five  one-millionths  of a percentage  point rounded  upward (e.g.,
9.876545% or .09876545) being rounded to 9.87655% (or .0987655),  and all dollar
amounts  used in or  resulting  from such  calculation  will be  rounded  to the
nearest cent (with one half cent being rounded upward).

         The principal of and interest on this Debenture shall be payable at the
office or agency of the Trustee (or other paying agent appointed by the Company)
maintained  for that  purpose in any coin or  currency  of the United  States of
America  that at the time of payment is legal  tender for  payment of public and
private debts; provided,  however, that payment of interest may be made by check
mailed to the registered holder at such address as shall appear in the Debenture
Register if a request for a wire  transfer by such holder has not been  received
by the Company or by wire transfer to an account appropriately designated by the
holder  hereof.  Notwithstanding  the  foregoing,  so long as the holder of this
Debenture  is the  Institutional  Trustee,  the payment of the  principal of and
interest on this Debenture will be made in immediately  available  funds at such
place and to such account as may be designated by the Trustee.

         So long as no Event of Default  has  occurred  and is  continuing,  the
Company shall have the right, from time to time, and without causing an Event of
Default,  to defer  payments of  interest on the  Debentures  by  extending  the
interest  payment  period  on the  Debentures  at any time and from time to time
during the term of the Debentures,  for up to 20 consecutive  quarterly  periods
(each such extended  interest  payment period,  an "Extension  Period"),  during
which Extension Period no interest (including  Additional Interest) shall be due
and  payable.  No  Extension  Period may end on a date  other  than an  Interest
Payment Date. At the end of any such Extension  Period the Company shall pay all
interest then accrued and unpaid on the  Debentures  (together  with  Additional
Interest thereon); provided, however, that no Extension Period may extend beyond
the Maturity Date; provided,  further,  however,  that during any such Extension
Period,  the Company shall not and shall not permit any Affiliate to (i) declare
or pay any dividends or distributions on, or redeem, purchase,  acquire, or make
a liquidation  payment with respect to, any of the Company's or such Affiliate's
capital stock (other than payments of dividends or distributions to the Company)
or make any  guarantee  payments  with respect to the foregoing or (ii) make any
payment of principal of or interest or premium, if any, on or repay,  repurchase
or redeem any debt  securities of the Company or any  Affiliate  that ranks pari
passu in all respects with or junior in interest to the Debentures  (other than,
with  respect to clauses (i) and (ii) above,  (a)  repurchases,  redemptions  or
other  acquisitions of shares of capital stock of the Company in connection with
any employment  contract,  benefit plan or other similar arrangement with or for
the benefit of one or more employees,  officers,  directors or  consultants,  in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection  with the  issuance of capital  stock of the  Company (or  securities
convertible  into or exercisable for such capital stock) as  consideration in an
acquisition  transaction entered into prior to the applicable  Extension Period,
(b) as a result  of any  exchange  or  conversion  of any class or series of the
Company's  capital  stock (or any capital  stock of a subsidiary of the Company)
for any class or series of the Company's capital stock or of any class or series
of the Company's  indebtedness for any class or series of the Company's  capital
stock,  (c) the  purchase of  fractional  interests  in shares of the  Company's
capital stock pursuant to the conversion or exchange  provisions of such capital
stock or the security  being  converted or exchanged,  (d) any  declaration of a
dividend in connection  with any  stockholders'  rights plan, or the issuance of
rights,  stock or other  property  under any  stockholders'  rights plan, or the
redemption  or repurchase of rights  pursuant  thereto,  (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock  issuable upon exercise of such  warrants,  options or other rights is the
same stock as that on which the  dividend is being paid or ranks pari passu with
or  junior to such  stock and any cash  payments  in lieu of  fractional  shares
issued in connection  therewith,  or (f) payments  under the Capital  Securities

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Guarantee).  Prior to the termination of any Extension  Period,  the Company may
further  extend such period,  provided  that such period  together with all such
previous  and  further  consecutive  extensions  thereof  shall  not  exceed  20
consecutive  quarterly  periods,  or extend beyond the Maturity  Date.  Upon the
termination  of any  Extension  Period and upon the  payment of all  accrued and
unpaid  interest  and  Additional  Interest,  the  Company  may  commence  a new
Extension  Period,  subject  to  the  foregoing  requirements.  No  interest  or
Additional Interest shall be due and payable during an Extension Period,  except
at the end thereof,  but each  installment of interest that would otherwise have
been  due and  payable  during  such  Extension  Period  shall  bear  Additional
Interest.  The Company must give the Trustee  notice of its election to begin or
extend such  Extension  Period at least 5 Business  Days prior to the earlier of
(i) the date interest on the  Debentures  would have been payable except for the
election  to begin  such  Extension  Period  or (ii) the date such  interest  is
payable,  but in any event not less than 5 Business  Days  prior to such  record
date.

          The  indebtedness  evidenced  by  this  Debenture  is,  to the  extent
 provided in the  Indenture,  subordinate  and junior in right of payment to the
 prior payment in full of all Senior Indebtedness,  and this Debenture is issued
 subject to the provisions of the Indenture with respect thereto. Each holder of
 this Debenture, by accepting the same, (a) agrees to and shall be bound by such
 provisions, (b) authorizes and directs the Trustee on his or her behalf to take
 such action as may be necessary or appropriate to acknowledge or effectuate the
 subordination   so  provided   and  (c)   appoints   the  Trustee  his  or  her
 attorney-in-fact  for any and all such purposes.  Each holder hereof, by his or
 her  acceptance  hereof,  hereby  waives  all notice of the  acceptance  of the
 subordination  provisions  contained herein and in the Indenture by each holder
 of Senior  Indebtedness,  whether now  outstanding or hereafter  incurred,  and
 waives reliance by each such holder upon said provisions.

          This  Debenture  shall  not be  entitled  to  any  benefit  under  the
 Indenture  hereinafter  referred  to,  be valid or  become  obligatory  for any
 purpose until the certificate of  authentication  hereon shall have been signed
 by or on behalf of the Trustee.

          Capitalized  terms used and not defined in this  Debenture  shall have
 the  meanings  assigned  in the  Indenture  dated  as of the  date of  original
 issuance of this Debenture between the Trustee and the Company.

          IN WITNESS WHEREOF, the Company has duly executed this certificate.

                                    SOUTHCOAST FINANCIAL CORPORATION


                                     By:  ___________________________
                                          Name:
                                          Title:



                          CERTIFICATE OF AUTHENTICATION

          This  is one of the  Debentures  referred  to in the  within-mentioned
Indenture.

                                     Wells Fargo Bank, National  Association,
                                     not in its individual capacity but solely
                                     as Trustee


                                     By:__________________________________
                                        Authorized Officer