UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

      ( X )    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934

               For the Quarter Ended June 30, 1999

      (   )    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934

               For the transition period from ________ to __________

                         Commission File Number: 0-19684

                          COASTAL FINANCIAL CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


State of Delaware                                57-0925911
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer
incorporation or organization)              Identification Number)


2619 N. OAK STREET, MYRTLE BEACH, S. C.                29577
--------------------------------------------------------------------------------
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code  (843) 448-5151

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                           YES    [   ]        NO    [ X ]


         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of June 30, 1999.

Common Stock $.01 Par Value Per Share                         6,438,694 Shares
--------------------------------------------------------------------------------
     (Class)                                                 (Outstanding)
<PAGE>
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999

TABLE OF CONTENTS
-----------------

PART I-      Consolidated Financial Information

Item
     1.Consolidated Financial Statements (unaudited):

             Consolidated Statements of Financial Condition
             as of September 30, 1998 and June 30, 1999

             Consolidated Statements of Operations for the three
             months ended June 30, 1998 and 1999

             Consolidated Statements of Operations for the nine
             months ended June 30, 1998 and 1999

             Consolidated Statements of Cash Flows for the nine
             months ended June 30, 1998 and 1999

             Consolidated Statements of Stockholders' Equity
             and Comprehensive Income

             Notes to Consolidated Financial Statements

     2.Management's Discussion and Analysis of
             Financial Condition and Results of Operations

     3.Quantitative and Qualitative Disclosures about
       Market Risk


Part II - Other Information

Item
     1.Legal Proceedings

     2.Changes in Securities and Use of Proceeds

     3.Defaults Upon Senior Securities

     4.Submission of Matters to a Vote of Securities Holders

     5.Other information

     6.Exhibits and Reports on Form 8-K

Signatures
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                      September 30,     June 30,
                                                          1998           1999
                                                       ---------      ---------
                                                              (Unaudited)
                                                            (In thousands)
<S>                                                    <C>            <C>
ASSETS:
Cash & amounts due from banks ...................      $  11,978      $  14,581
Short-term interest-bearing deposits ............          3,688          1,345
Investment securities available for sale ........          9,841          4,873
Mortgage-backed securities available for sale ...        170,181        170,325
Loans receivable (net of allowance for
   loan losses of $5,668 at September 30,
   1998 and $6,267 at June 30, 1999) ............        414,264        437,345
Loans receivable held for sale ..................         10,486         23,785
Real estate acquired through foreclosure ........             35            140
Office property and equipment, net ..............          9,001         10,554
Federal Home Loan Bank stock, at cost ...........          7,266          7,576
Accrued interest receivable on loans ............          2,546          2,726
Accrued interest receivable on investments ......          1,324          1,222
Other assets and deferred charges ...............          2,950          2,565
                                                       ---------      ---------
                                                       $ 643,560      $ 677,037
                                                       =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
Deposits ........................................      $ 386,321      $ 390,822
Securities sold under agreements to
   repurchase ...................................         59,214         89,418
Advances from Federal Home Loan Bank ............        144,909        144,524
Other borrowings ................................          6,437          2,569
Drafts outstanding ..............................          1,615          1,213
Advances by borrowers for property taxes
  and insurance .................................          1,329          1,144
Accrued interest payable ........................          1,352          1,029
Other liabilities ...............................          4,532          5,602
                                                       ---------      ---------
  Total liabilities .............................        605,709        636,321
                                                       ---------      ---------
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(continued)

                                                      September 30,     June 30,
                                                          1998           1999
                                                       ---------      ---------
                                                              (Unaudited)
                                                         (Dollars in thousands)
<S>                                                    <C>            <C>
STOCKHOLDERS' EQUITY:
Serial preferred stock, 1,000,000 shares
   authorized and unissued ......................           --             --
Common stock, $.01 par value, 15,000,000
   shares authorized; 6,263,777 shares at
   September 30, 1998 and 6,438,694 shares
   at June 30, 1999 issued and outstanding ......             63             64
Additional paid-in capital ......................          8,983          9,323
Retained earnings ...............................         28,369         32,739
Treasury stock, at cost (14,300 shares) .........           --             (226)
Accumulated other comprehensive
  income, net of tax ............................            436         (1,184)
                                                       ---------      ---------
  Total stockholders' equity ....................         37,851         40,716
                                                       ---------      ---------
                                                       $ 643,560      $ 677,037
                                                       =========      =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1999

                                                         1998              1999
                                                     -----------      -----------
                                                              (Unaudited)
                                                         (Dollars in thousands,
                                                         except per share data)
<S>                                                  <C>              <C>
Interest income:
    Loans receivable ...........................     $     9,169      $     9,641
    Investment securities ......................             241              466
     Mortgage-backed securities ................           1,793            2,232
     Other .....................................              91               95
                                                     -----------      -----------
     Total interest income .....................          11,294           12,434
                                                     -----------      -----------

Interest expense:
   Deposits ....................................           3,612            3,552
   Securities sold under agreements to
     repurchase ................................           1,068            1,055
   Advances from Federal Home Loan Bank ........           1,649            2,034
                                                     -----------      -----------
     Total interest expense ....................           6,329            6,641
                                                     -----------      -----------
   Net interest income .........................           4,965            5,793
Provision for loan losses ......................             240              190
                                                     -----------      -----------
   Net interest income after provision
     for loan losses ...........................           4,725            5,603
                                                     -----------      -----------

Other income:
   Fees and service charges ....................             469              466
   Income (loss) from real estate owned ........             (22)              (7)
   Gain on sale of loans receivable, net .......             279              245
   Gain on sale of securities available for sale             242               24
   Other income ................................             553              588
                                                     -----------      -----------
                                                           1,521            1,316
                                                     -----------      -----------
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1999 (continued)

                                                         1998              1999
                                                     -----------      -----------
                                                              (Unaudited)
                                                         (Dollars in thousands,
                                                         except per share data)
<S>                                                  <C>              <C>
General and administrative expenses:
   Salaries and employee benefits ..............           1,898            2,166
   Net occupancy, furniture and fixtures
     and data processing expense ...............             837              861
   FDIC insurance premium ......................              53               57
   Other expenses ..............................             656              691
                                                     -----------      -----------
                                                           3,444            3,775
                                                     -----------      -----------
Earnings before income taxes ...................           2,802            3,144

Income taxes ...................................           1,040            1,159
                                                     -----------      -----------
Net income .....................................     $     1,762      $     1,985
                                                     ===========      ===========

Earnings per common share
  Basic ........................................     $       .28      $       .31
                                                     ===========      ===========
  Diluted ......................................     $       .27      $       .30
                                                     ===========      ===========

Weighted average common shares
  outstanding - basic ..........................       6,256,000        6,439,000
                                                     ===========      ===========

Weighted average common shares
  outstanding - diluted ........................       6,581,000        6,577,000
                                                     ===========      ===========

Dividends per share ............................     $       .07      $       .07
                                                     ===========      ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999

                                                         1998             1999
                                                     -----------      -----------
                                                              (Unaudited)
                                                         (Dollars in thousands,
                                                          except per share data)
<S>                                                  <C>              <C>
Interest income:
    Loans receivable ...........................     $    27,182      $    28,780
    Investment securities ......................           1,095            1,033
     Mortgage-backed securities ................           3,732            6,731
     Other .....................................             236              274
                                                     -----------      -----------
     Total interest income .....................          32,245           36,818
                                                     -----------      -----------

Interest expense:
   Deposits ....................................          10,645           11,037
   Securities sold under agreements to
     repurchase ................................           2,338            2,706
   Advances from Federal Home Loan Bank ........           4,748            6,418
                                                     -----------      -----------
     Total interest expense ....................          17,731           20,161
                                                     -----------      -----------
   Net interest income .........................          14,514           16,657
Provision for loan losses ......................             680              600
                                                     -----------      -----------
   Net interest income after provision
     for loan losses ...........................          13,834           16,057
                                                     -----------      -----------

Other income:
   Fees and service charges ....................           1,292            1,530
   Loss from real estate owned .................             (76)             (21)
  Income from real estate held for investment ..             221             --
   Gain on sale of loans receivable, net .......             976              822
   Gain on sale of securities available for sale             510              249
   Other income ................................           1,519            1,732
                                                     -----------      -----------
                                                           4,442            4,312
                                                     -----------      -----------
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999 (continued)

                                                         1998             1999
                                                     -----------      -----------
                                                              (Unaudited)
                                                         (Dollars in thousands,
                                                          except per share data)
<S>                                                  <C>              <C>
General and administrative expenses:
   Salaries and employee benefits ..............           5,605            6,326
   Net occupancy, furniture and fixtures
     and data processing expense ...............           2,395            2,661
   FDIC insurance premium ......................             158              163
   Other expenses ..............................           2,100            2,223
                                                     -----------      -----------
                                                          10,258           11,373
                                                     -----------      -----------
Earnings before income taxes ...................           8,018            8,996

Income taxes ...................................           2,949            3,282
                                                     -----------      -----------
Net income .....................................     $     5,069      $     5,714
                                                     ===========      ===========

Earnings per common share
  Basic ........................................     $       .81      $       .90
                                                     ===========      ===========
  Diluted ......................................     $       .77      $       .87
                                                     ===========      ===========

Weighted average common shares
  outstanding - basic ..........................       6,245,000        6,363,000
                                                     ===========      ===========

Weighted average common shares
  outstanding - diluted ........................       6,560,000        6,574,000
                                                     ===========      ===========

Dividends per share ............................     $       .14      $       .14
                                                     ===========      ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999
                                                          1998            1999
                                                       ---------      ---------
                                                               (Unaudited)
                                                             (In thousands)
<S>                                                    <C>            <C>
Cash flows from operating activities:
  Net income .....................................     $   5,069      $   5,714
  Adjustments to reconcile net earnings
       to net cash provided by (used in)
      operating activities:
       Income from real estate
        held for investment ......................          (221)          --
       Depreciation ..............................           753            876
       Provision for loan losses .................           680            600
Origination of loans receivable
         held for sale ...........................       (50,611)       (41,749)
Proceeds from sales of loans receivable
         held for sale ...........................        52,436         28,451
(Increase) decrease in:
      Other assets and deferred charges ..........           159            385
      Accrued interest receivable ................          (627)           (78)
Increase (decrease) in:
      Accrued interest payable ...................           216           (323)
     Other liabilities ...........................          (211)         1,070
                                                       ---------      ---------
        Net cash provided by (used in)
             operating activities ................         7,643         (5,054)
                                                       ---------      ---------
Cash flows from investing activities:
  Purchases of investment securities
       available for sale ........................       (15,167)       (10,147)
  Proceeds from sales of investment
       securities available for sale .............         4,500          9,735
 Proceeds from maturities of investment
      securities available for sale ..............        22,596          5,165
  Purchases of mortgage-backed securities
       available for sale ........................      (226,852)      (153,961)
 Proceeds from sales of mortgage-backed
       securities available for sale .............        77,947         88,090
  Origination of loans receivable, net ...........       (99,314)      (168,679)
  Purchase of loans receivable ...................       (10,442)        (1,710)
  Principal collected on loans receivable, net ...       102,963        146,602
  Principal collected on mortgage-backed
       securities, net ...........................        21,201         62,783
  Proceeds from sale of real estate
       acquired through foreclosure, net .........            27           --
  Purchases of office properties and
      equipment ..................................        (1,629)        (2,429)
  Purchases of FHLB stock, net ...................          (743)          (310)
                                                       ---------      ---------
      Net cash used in
             investing activities ................      (124,913)       (24,861)
                                                       ---------      ---------
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999 (Continued)

                                                                               1998           1999
                                                                            ---------      ---------
                                                                                  (Unaudited)
                                                                                 (In thousands)
<S>                                                                         <C>            <C>
Cash flows from financing activities:
  Increase in deposits, net ...........................................     $  20,806      $   4,501
  Increase in securities sold
   under agreement to repurchase, net .................................        73,560         30,204
  Proceeds from FHLB advances .........................................       176,025        204,850
  Repayment of FHLB advances ..........................................      (154,294)      (205,235)
 Proceeds(repayments)from other
    borrowings, net ...................................................         2,993         (3,868)
 Decrease in advance payments by borrowers
     for property taxes and insurance, net ............................          (321)          (185)
  Increase (decrease) in drafts outstanding, net ......................           123           (402)
  Dividends to stockholders ...........................................        (1,271)        (1,344)
  Other financing activities, net .....................................           430          1,654
                                                                            ---------      ---------
  Net cash provided by financing ......................................       118,051         30,175
                                                                            ---------      ---------
    activities

Net increase in cash and cash equivalents .............................           781            260
                                                                            ---------      ---------
Cash and cash equivalents at beginning
  of the period .......................................................        13,411         15,666
                                                                            ---------      ---------
Cash and cash equivalents at end
  of the period .......................................................     $  14,192      $  15,926
                                                                            =========      =========

Supplemental information:
  Interest paid .......................................................     $  17,515      $  20,484
                                                                            =========      =========

  Income taxes paid ...................................................     $   2,872      $   1,675
                                                                            =========      =========

Supplemental schedule of non-cash investing and financing transactions:

  Transfer of mortgage loans to real estate
     acquired through foreclosure .....................................     $      48      $     105
                                                                            =========      =========
Securitization of mortgage loans into
     mortgage-backed securities .......................................     $    --        $  15,825
                                                                            =========      =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                                                                                          Accumulated
                                                                                             Other
                                                                                            Compre-
                                               Additional                                   hensive       Total
                                    Common       Paid-In     Treasury      Retained        Income     stockholders'
                                    Stock        Capital       Stock       Earnings         (Loss)       Equity
                                    -----        -------       -----       --------        ------        ------
                                                                   (Unaudited)
                                                                 (In thousands)
<S>                                <C>          <C>          <C>           <C>           <C>           <C>
Balance at September
  30, 1997 ...................     $     62     $  8,682     $   (182)     $ 23,402      $    427      $ 32,391
Net income ...................         --           --           --           5,069          --           5,069
Other comprehensive
 income, net of tax:
Unrealized gains arising
 during period, net of
 taxes of $203,000 ...........         --           --           --            --             305          --
Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $204,000 ....         --           --           --            --            (306)         --
                                                                                         --------      --------
Other comprehensive income - -         --           --           --            --              (1)           (1)
                                                                                         --------      --------
Comprehensive income .........         --           --           --            --            --           5,068
                                                                                                       --------
Exercise of stock
  options ....................         --            191          182          (183)         --             190
Cash dividends ...............         --           --           --          (1,271)         --          (1,271)

Balance at June
  30, 1998 ...................     $     62     $  8,873     $      0      $ 27,017      $    426      $ 36,378
                                   ========     ========     ========      ========      ========      ========

</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (continued)
                                                                                          Accumulated
                                                                                             Other
                                                                                            Compre-
                                               Additional                                   hensive     Total
                                    Common       Paid-In     Treasury      Retained         Income  Stockholders'
                                    Stock        Capital       Stock       Earnings         (Loss)      Equity
                                    -----        -------       -----       --------        ------      ------
                                                                   (Unaudited)
                                                                 (In thousands)
<S>                                <C>          <C>          <C>           <C>           <C>           <C>
Balance at September
  30, 1998 ...................     $     63     $  8,983     $      0      $ 28,369      $    436      $ 37,851
Net income ...................         --           --           --           5,714          --           5,714
Other comprehensive
 income, net of tax:
Unrealized losses arising
 during period, net of
 taxes of $588,400 ...........         --           --           --            --          (1,471)         --
Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $99,600 .....         --           --           --            --            (149)         --
                                                                                         --------      --------
Other comprehensive loss .....         --           --           --            --          (1,620)       (1,620)
                                                                                         --------      --------
Comprehensive income .........         --           --           --            --            --           4,094
                                                                                                       --------
Treasury stock repurchases ...         --           --           (226)         --            --            (226)
Exercise of stock
  options ....................            1          340         --            --            --             341
Cash dividends ...............         --           --           --          (1,344)         --          (1,344)

Balance at June
  30, 1999 ...................     $     64     $  9,323     $   (226)     $ 32,739      $ (1,184)     $ 40,716
                                   ========     ========     ========      ========      ========      ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  BASIS OF PRESENTATION

The accompanying  unaudited  consolidated  financial statements were prepared in
accordance with  instructions for Form 10-Q and,  therefore,  do not include all
disclosures  necessary  for a  complete  presentation  of  financial  condition,
results  of  operations,  cash  flows and  changes  in  stockholders'  equity in
conformity  with generally  accepted  accounting  principles.  All  adjustments,
consisting only of normal recurring accruals, which in the opinion of management
are necessary for fair  presentation of the interim financial  statements,  have
been  included.  The results of operations  for the three and nine month periods
ended June 30, 1999 are not  necessarily  indicative of the results which may be
expected for the entire fiscal year.  These  consolidated  financial  statements
should be read in conjunction with the Company's audited consolidated  financial
statements and related notes for the year ended September 30, 1998,  included in
the Company's 1998 Annual Report to Stockholders.  The principal business of the
Company is conducted by its  wholly-owned  subsidiary,  Coastal  Federal Savings
Bank  (the  "Bank").  The  information  presented  hereon,  therefore,   relates
primarily to the Bank.


(2)  LOANS RECEIVABLE, NET

Loans receivable, net consists of the following:
<TABLE>
<CAPTION>
                                                     September 30,     June 30,
                                                          1998           1999
                                                      ---------       ---------
                                                             (Unaudited)
                                                           (In thousands)
<S>                                                   <C>             <C>
First mortgage loans:
   Single family to 4 family units .............      $ 248,781       $ 244,046
   Other, primarily commercial
    real estate ................................         95,420         113,048
   Construction loans ..........................         31,261          36,295
Consumer and commercial loans:
   Installment consumer loans ..................         19,489          19,962
   Mobile home loans ...........................            990             888
   Deposit account loans .......................          1,078           1,408
   Equity lines of credit ......................         18,655          20,419
   Commercial and other loans ..................         14,848          24,162
                                                      ---------       ---------
                                                        430,522         460,228
Less:
   Allowance for loan losses ...................          5,668           6,267
   Deferred loan fees (costs), net .............           (702)           (290)
   Undisbursed portion of loans in process .....         11,292          16,906
                                                      ---------       ---------
                                                      $ 414,264       $ 437,345
                                                      =========       =========
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The changes in the  allowance  for loan losses  consist of the following for the
nine months ended:
<TABLE>
<CAPTION>
                                                      Nine Months Ended June 30,
                                                      --------------------------
                                                        1998              1999
                                                       ------            ------
                                                        (Dollars in thousands)
<S>                                                    <C>               <C>
Allowance at beginning of
 period ....................................           $4,902            $5,668
Allowance recorded on
 acquired loans ............................              109                21
Provision for loan losses ..................              680               600
                                                       ------            ------
Recoveries:
 Residential real estate ...................                4                 2
 Commercial real estate ....................               --               137
 Consumer ..................................               30                65
                                                       ------            ------
   Total recoveries ........................               34               204
                                                       ------            ------

Charge-offs:
 Residential real estate ...................             --                --
 Commercial real estate ....................             --                --
 Consumer ..................................              206               226
                                                       ------            ------
   Total charge-offs .......................              206               226
                                                       ------            ------
   Net charge-offs .........................              172                22
                                                       ------            ------
 Allowance at end of period ................           $5,519            $6,267
                                                       ======            ======

Ratio of allowance to net
 loans outstanding at the
 end of the period .........................             1.34%             1.36%
                                                       ======            ======

Ratio of net charge-offs
 to average loans outstanding
 during the period .........................              .06%              .01%
                                                       ======            ======
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>



ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES


                                                                          At June 30, 1999
                                                                          Percent of Loans in each
Balance at end of period applicable to:                    Amount         category to total loans
                                                           ------         -----------------------
<S>                                                        <C>                     <C>
Residential Real Estate...........................         $1,591                  71.52%
Commercial Real Estate............................          4,110                  27.61
Consumer..........................................            566                    .87
                                                           ------                 ------
                                                           $6,267                 100.00%
                                                           ======                 ======

</TABLE>

Non-accrual loans, which were over ninety days delinquent, totaled approximately
$465,000 at June 30, 1999.  For the nine months  ended June 30,  1999,  interest
income, which would have been recorded, would have been approximately $7,000 had
non-accruing loans been current in accordance with their original terms.


(3)  DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>



                                    September 30, 1998               June 30, 1999
                                   -----------------------      ------------------------
                                                  Weighted                      Weighted
                                                  Average                       Average
                                   Amount           Rate         Amount           Rate
                                   ------           ----         ------           ----
                                                       (Unaudited)
                                                     (In thousands)
<S>                               <C>               <C>         <C>               <C>
Transaction accounts .......      $193,926          3.12%       $215,679          3.00%
Passbook accounts ..........        37,242          2.52          37,958          2.61
Certificate accounts .......       155,153          5.38         137,185          5.02
                                  --------       ----           --------       ----
                                  $386,321          3.96%       $390,822          3.67%
                                  ========       ====           ========       ====
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4)  ADVANCES FROM FEDERAL HOME LOAN BANK

Advances from Federal Home Loan Bank ("FHLB") consist of the following:
<TABLE>
<CAPTION>
                                    September 30, 1998                    June 30, 1999
                                  ------------------------         ------------------------
                                                   Weighted                        Weighted
                                                   Average                          Average
                                    Amount          Rate            Amount           Rate
                                    ------          ----            ------           ----
Maturing within:                                          (Unaudited)
                                                         (In thousands)
<S>                               <C>               <C>            <C>               <C>
1 year .....................      $ 28,235          5.74%          $ 53,061          5.98%
2 years ....................         6,961          6.19             10,046          5.84
3 years ....................        32,146          4.83              3,742          6.77
4 years ....................         4,261          6.62             38,375          5.32
5 years and thereafter .....        73,306          5.21             39,300          4.99
                                  --------          ----           --------          ----
                                  $144,909          5.13%          $144,524          5.55%
                                  ========          ====           ========          ====
</TABLE>

At September 30, 1998,  and June 30, 1999,  the Bank had pledged first  mortgage
loans with unpaid balances of  approximately  $231.2 million and $206.8 million,
respectively, as collateral for FHLB advances. At June 30, 1999, included in the
two, four and five years and thereafter  maturities  were $60 million subject to
call  provisions.  Call  provisions  are more likely to be exercised by the FHLB
when rates rise.

(5)  EARNINGS PER SHARE

Basic  earnings  per share for the three and nine month  periods  ended June 30,
1998 and 1999,  are  computed by  dividing  net income by the  weighted  average
common shares  outstanding during the respective  periods.  Diluted earnings per
share for the three and nine month  periods  ended June 30,  1998 and 1999,  are
computed by  dividing  net  earnings by the  weighted  average  dilutive  shares
outstanding  during the  respective  periods.  All share and per share data have
been retroactively restated for all common stock splits.

(6)  COMMON STOCK DIVIDENDS

On May 6, 1998, the Company declared a four-for-three  stock split,  aggregating
approximately  1,562,000 shares. All share and per share data were retroactively
restated to give effect to the common stock split.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7)  COMPREHENSIVE INCOME

In June 1997, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income
(Statement 130). SFAS No. 130 establishes standards for reporting and display of
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial  statements.  Enterprises  are  required to  classify  items of "other
comprehensive income" by their nature in the financial statement and display the
balance of other  comprehensive  income  separately  in the equity  section of a
statement of  financial  position.  SFAS No. 130 is  effective  for fiscal years
beginning after December 15, 1997. Earlier application is permitted. Comparative
financial   statements   provided  for  earlier   periods  are  required  to  be
reclassified  to reflect the provisions of this  statement.  The Company adopted
Statement 130 in the first quarter of fiscal 1999 and the required disclosure is
presented in the accompanying  consolidated  statements of stockholders'  equity
and comprehensive income.
<PAGE>
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

FORWARD LOOKING STATEMENTS
--------------------------

This report may contain certain "forward-looking  statements" within the meaning
of  Section  27A of the  Securities  Exchange  Act of  1934,  as  amended,  that
represent the Company's  expectations or beliefs concerning future events.  Such
forward-looking  statements  are about  matters that are  inherently  subject to
risks and  uncertainties.  Factors that could influence the matters discussed in
certain  forward-looking  statements  include  the timing and amount of revenues
that may be  recognized  by the  Company,  continuation  of current  revenue and
expense trends (including trends affecting  charge-offs),  absence of unforeseen
changes in the Company's markets, legal and regulatory changes,  general changes
in the economy  (particularly  in the markets  served by the  Company),  and the
impact of the Year 2000 computer issue.

DISCUSSION OF FINANCIAL  CONDITION  CHANGES FROM  SEPTEMBER 30, 1998 TO JUNE 30,
1999
--------------------------------------------------------------------------------

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
In accordance with Office of Thrift Supervision (OTS)  regulations,  the Company
is required to maintain  specific  levels of cash and  "liquid"  investments  in
qualifying  types  of  United  States  Treasury,   Federal  Agency   Securities,
mortgage-backed securities, and certain other investments. The required level of
such  investments  is  calculated  on  a  "liquidity  base"  consisting  of  net
withdrawable accounts and short-term borrowings, and is currently equal to 4% of
such  amount.  At June 30,  1999,  the  Bank's  regulatory  liquidity  level was
approximately 11%.

Historically,  the Company has  maintained  its liquidity at levels  believed by
management  to be  adequate  to meet  the  requirements  of  normal  operations,
potential  deposit  out-flows and strong loan demand and still allow for optimal
investment of funds and return on assets.

The principal  sources of funds for the Company are cash flows from  operations,
consisting  mainly of mortgage,  consumer and commercial  loan payments,  retail
customer deposits,  advances from the FHLB, and loan sales. The principal use of
cash flows is the  origination  of loans  receivable and purchase of securities.
The Company  originated  loans  receivable of $149.9 million for the nine months
ended June 30, 1998,  compared to $210.4  million for the nine months ended June
30, 1999. The majority of these loan originations were financed through loan and
mortgage-backed  securities  principal  repayments,  which  amounted  to  $124.2
million and $209.4  million for the nine month  periods  ended June 30, 1998 and
1999,  respectively.  In  addition,  the  Company  sells  certain  loans  in the
secondary  market to finance future loan  originations.  Generally,  these loans
have consisted only of mortgage loans, which have been originated in the current
period.  For the nine month period  ended June 30, 1998,  the Company sold $52.4
million in  mortgage  loans  compared to $28.5  million  sold for the nine month
period ended June 30, 1999.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
-------------------------------------------

For the nine month  period  ended June 30, 1998,  the Company  purchased  $242.0
million in investment and mortgage-backed  securities. For the nine month period
ended June 30, 1999,  the Company  purchased  $164.1  million in investment  and
mortgage-backed securities.  These purchases were funded primarily by repayments
within the securities  portfolio,  short-term reverse repurchase  agreements and
FHLB advances.

The Bank  experienced an increase of $4.5 million in deposits for the nine month
period  ended June 30,  1999.  For the nine month  period  ended June 30,  1999,
transaction  accounts increased $21.8 million.  This was offset by a decrease in
certificate accounts of $18.0 million.

At June 30,  1999,  the Company had  commitments  to  originate  $7.7 million in
mortgage  loans,  and $29.9 million in  undisbursed  lines of credit,  which the
Company expects to fund from normal operations.

At June 30, 1999,  the Company had $105.5 million of  certificates  of deposits,
which were due to mature within one year.  Based upon previous  experience,  the
Company  believes  that a major portion of these  certificates  will be renewed.
Additionally,  at June 30, 1999, the Company had repurchase  agreement  lines of
credit  and  available  collateral   consisting  of  investment  securities  and
mortgage-backed  securities of $78.7 million as well as federal funds  available
of $15.0 million.

OTS  regulations  require  that  the  Bank  calculate  and  maintain  a  minimum
regulatory capital requirement on a quarterly basis and satisfy such requirement
as of the calculation  date and throughout the quarter.  The Bank's capital,  as
calculated  under OTS regulations,  is  approximately  $43.0 million at June 30,
1999, exceeding the core capital requirement by $15.9 million. At June 30, 1999,
the Bank's  risk-based  capital of  approximately  $47.5  million  exceeded  its
current   risk-based  capital   requirement  by  $17.4  million.   (For  further
information see Regulatory Capital Matters).
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE THREE MONTHS ENDED
-----------------------------------------------------------------------------
JUNE 30, 1998 AND 1999
----------------------

GENERAL
-------
Net income increased from $1.8 million for the three months ended June 30, 1998,
to $2.0 million for three months  ended June 30,  1999,  or 12.7%.  Net interest
income increased  $828,000  primarily as a result of an increase of $1.1 million
in interest income offset by a $312,000 increase in interest expense.  Provision
for loan losses decreased from $240,000 for three months ended June 30, 1998, to
$190,000 for the three months  ended June 30, 1999.  General and  administrative
expense increased from $3.4 million for the quarter ended June 30, 1998, to $3.8
million for the quarter ended June 30, 1999.

INTEREST INCOME
---------------
Interest  income for the three months  ended June 30,  1999,  increased to $12.4
million as compared to $11.3  million for the three  months ended June 30, 1998.
The earning  asset yield for the three  months  ended June 30,  1999,  was 7.80%
compared  to a yield of 8.07% for the three  months  ended  June 30,  1998.  The
average yield on loans  receivable for the three months ended June 30,  1999,was
8.39%  compared to 8.83% for the three months ended June 30, 1998.  The yield on
investments  decreased to 6.21% for the three  months ended June 30, 1999,  from
6.77%  for the  three  months  ended  June 30,  1998.  The  yield on  investment
securities   decreased  due  to  increased   amortization  of  premiums  on  ARM
mortgage-backed  securities,  which had higher than expected prepayments.  Total
average  interest-earning  assets were $645.6 million for the quarter ended June
30, 1999 as compared to $565.5  million for the quarter ended June 30, 1998. The
increase  in average  interest-earning  assets is due to an  increase in average
loans receivable of approximately  $44.1 million and securities of approximately
$34.3 million.

INTEREST EXPENSE
----------------
Interest expense on interest-bearing  liabilities was $6.6 million for the three
months ended June 30, 1999,  as compared to $6.3 million for June 30, 1998.  Due
to increased  transaction  deposits and reduced interest rates in the first half
of 1999,  the average cost of deposits for the three months ended June 30, 1999,
was 3.70%  compared to 4.05% for the three months ended June 30, 1998.  The cost
of  interest-bearing  liabilities  was 4.30% for the three months ended June 30,
1999, as compared to 4.57% for the three months ended June 30, 1998. The cost of
FHLB  advances  and  reverse   repurchase   agreements   was  5.24%  and  5.40%,
respectively,  for the three months  ended June 30,  1999.  For the three months
ended June 30, 1998, the cost was 5.57% and 5.67%,  respectively.  Total average
interest-bearing  liabilities  increased from $538.2 million at June 30, 1998 to
$617.9  million at June 30,  1999.  The  increase  in  average  interest-bearing
liabilities  is due to an increase in average  deposits of  approximately  $27.2
million,  FHLB  advances of $36.8 million and reverse  repurchase  agreements of
$15.8 million.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS - CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1998 AND 1999

NET INTEREST INCOME
-------------------
Net  interest  income was $5.8 million for the three months ended June 30, 1999,
as compared to $5.0 million for the three  months  ended June 30, 1998.  The net
interest margin was 3.50% for the three months ended June 30, 1999, and 1998.

PROVISION FOR LOAN LOSSES
-------------------------
The provision for loan losses  decreased from $240,000 for the period ended June
30, 1998,  to $190,000  for the three months ended June 30, 1999.  For the three
months  ended June 30,  1999,  net  charge-offs  were  $83,000  compared  to net
charge-offs  of $80,000 for the three months ended June 30, 1998.  The allowance
for loan  losses as a  percentage  of total  loans  was 1.36% at June 30,  1999,
compared to 1.33% at September 30, 1998.  Loans  delinquent 90 days or more were
 .10% of total loans at June 30, 1999,  compared to .54% at  September  30, 1998.
The allowance for loan losses was 1,348% of loans  delinquent  more than 90 days
at June 30, 1999, as compared to 251% at September 30, 1998. Management believes
that the current  level of  allowances  is adequate  considering  the  Company's
current loss experience and delinquency trends, among other criteria.

OTHER INCOME
------------
For the three months ended June 30, 1999, other income was $1.3 million compared
to $1.5 million for the quarter  ended June 30, 1998.  Gain on sale of loans was
$245,000  for the quarter  ended June 30,  1999,  compared  to $279,000  for the
quarter ended June 30, 1998. The Company  experienced  lower gains on sales as a
result of rising  interest  rates during the period.  Gain on sale of securities
was $24,000 for the three  months  ended June 30, 1999  compared to $242,000 for
the three months ended June 30, 1998.  Other income was $588,000 for the quarter
ended June 30, 1999 compared to $553,000 for the quarter ended June 30, 1998.

GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------
General and  administrative  expenses  increased from $3.4 million for the three
months ended June 30, 1998,  to $3.8 million for the three months ended June 30,
1999.  Salaries and employee benefits  increased from $1.9 million for the three
months ended June 30, 1998,  to $2.2 million for the three months ended June 30,
1999 primarily due to increased lending Associates. Net occupancy, furniture and
fixtures and data processing  expenses  increased $24,000 when comparing the two
periods.  Other  expenses  were  $691,000  for the quarter  ended June 30, 1999,
compared to $656,000 for the quarter ended June 30, 1998.

INCOME TAXES
------------
Income  taxes  increased  from $1.0  million for the three months ended June 30,
1998,  to $1.2 million for the three months ended June 30, 1999,  as a result of
increased income before taxes.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999


MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE NINE MONTHS ENDED
----------------------------------------------------------------------------
JUNE 30, 1998 AND 1999
----------------------

GENERAL
-------
Net income  increased from $5.1 million for the nine months ended June 30, 1998,
to $5.7  million for nine months  ended June 30,  1999,  or 12.7%.  Net interest
income  increased $2.1 million  primarily as a result of an increase in interest
income of $4.6  million  offset  by an  increase  of $2.4  million  in  interest
expense.  Provision for loan losses  decreased from $680,000 for the nine months
ended June 30, 1998, to $600,000 for the nine months ended June 30, 1999.  Other
income decreased  $130,000.  General and administrative  expenses increased $1.1
million.

INTEREST INCOME
---------------
Interest  income for the nine months  ended June 30,  1999,  increased  to $36.8
million as compared to $32.2  million for the nine months  ended June 30,  1998.
The  earning  asset  yield for the nine months  ended June 30,  1999,  was 7.79%
compared  to a yield of 8.19%  for the nine  months  ended  June 30,  1998.  The
average yield on loans  receivable  for the nine months ended June 30, 1999, was
8.56%  compared to 8.75% for the nine months ended June 30,  1998.  The yield on
investments  decreased to 5.85% for the nine months  ended June 30,  1999,  from
6.69% for the nine months ended June 30, 1998. Total average earning assets were
$638.6  million for the nine month period  ended June 30,  1999,  as compared to
$530.6 million for the nine month period ended June 30, 1998.

INTEREST EXPENSE
----------------
Interest expense on interest-bearing  liabilities was $20.2 million for the nine
months  ended June 30,  1999,  as compared to $17.7  million for the nine months
ended June 30, 1998. The average cost of deposits for the nine months ended June
30, 1999,  was 3.80%  compared to 4.08% for the nine months ended June 30, 1998.
The cost of  interest-bearing  liabilities  was 4.34% for the nine months  ended
June 30,  1999,  as compared to 4.57% for the nine months  ended June 30,  1998.
Total average interest-bearing liabilities increased from $511.7 million at June
30, 1998 to $613.3 million at June 30, 1999.

NET INTEREST INCOME
-------------------
Net interest  income was $16.7  million for the nine months ended June 30, 1999,
as compared to $14.5  million for the nine months ended June 30,  1998.  The net
interest margin  decreased to 3.44% for the six months ended June 30, 1999, from
3.62% for the nine months ended June 30, 1998.  Since a high  percentage  of the
Company's  assets are adjustable  rate mortgage  loans,  which reprice  annually
versus many of the  Company's  liabilities,  which  reprice  more  quickly,  the
Company may  experience a decrease in its interest rate spread  should  interest
rates increase rapidly.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999

PROVISION FOR LOAN LOSSES
-------------------------
The provision for loan losses  decreased from $680,000 for the period ended June
30, 1998,  to $600,000  for the nine months  ended June 30,  1999.  For the nine
months  ended June 30,  1999,  net  charge-offs  were  $22,000  compared  to net
charge-offs  of $172,000 for the nine months ended June 30, 1998.  The allowance
for loan  losses as a  percentage  of total  loans  was 1.36% at June 30,  1999,
compared to 1.33% at September  30, 1998.  Management  believes that the current
level  of  allowances  is  adequate   considering  the  Company's  current  loss
experience and delinquency trends, among other criteria.

OTHER INCOME
------------
For the nine months ended June 30, 1999, other income decreased $130,000 to $4.3
million  compared to $4.4 million for the nine months ended June 30, 1998.  Fees
and service  charges for the nine months  ended June 30, 1999 were $1.5  million
compared to $1.3 million for the nine months ended June 30, 1999  primarily  due
to growth in core checking  accounts.  Other income  increased from $1.5 million
for the nine months  ended June 30, 1998  compared to $1.7  million for the nine
months  ended June 30,  1999.  Gain on sale of loans was  $976,000  for the nine
months ended June 30, 1998,  compared to $822,000 for the nine months ended June
30,  1999.  The Company  experienced  lower gains on sales as a result of rising
interest rates during the period and reduced  sales.  Gain on sale of securities
was $510,000  for the nine months ended June 30, 1998,  compared to $249,000 for
the nine months ended June 30, 1999.


GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------
General and  administrative  expenses  increased from $10.3 million for the nine
months ended June 30, 1998,  to $11.4 million for the nine months ended June 30,
1999.  Salaries and employee benefits increased $721,000 or 12.9% primarily as a
result of increased lending personnel. Net occupancy, furniture and fixtures and
data processing  expense increased  $266,000  primarily as a result of increased
maintenance,  lease expense and depreciation  expense due to the addition of the
Coastal  Federal  University  facility and the North  Carolina  Office in Sunset
Beach,  NC.  Other  expense was $2.1  million for the nine months ended June 30,
1998, compared to $2.2 million for the nine months ended June 30, 1999.


INCOME TAXES
------------
Income  taxes  increased  from $2.9  million for the nine months  ended June 30,
1998,  to $3.3 million for the nine months  ended June 30, 1999,  as a result of
increased income before taxes.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999


REGULATORY CAPITAL MATTERS
--------------------------
To be  categorized  as "Well  Capitalized"  under the prompt  corrective  action
regulations  adopted by the Federal Banking  Agencies,  the Bank must maintain a
total  risk-based  capital ratio as set forth in the following  table and not be
subject to a capital directive order.
<TABLE>
<CAPTION>





                                                                      Categorized as "Well                   Capitalized" Under
                                                                           For Capital                       Prompt Corrective
                                            Actual                      Adequacy Purposes                     Action Provision
                                   ----------------------         ----------------------------            ----------------------
                                    Amount          Ratio           Amount              Ratio              Amount         Ratio
                                    ------          -----           ------              -----              ------         -----
                                                                     (Dollars In Thousands)
<S>                                <C>             <C>             <C>                   <C>               <C>            <C>
As of June 30, 1999:
 Total Capital:                    $47,509         12.62%          $30,109               8.00%             $37,636        10.00%
   (To Risk Weighted Assets)
 Tier 1 Capital:                   $42,969         11.42%             $N/A                N/A%             $22,581         6.00%
   (To Risk Weighted Assets)
 Tier 1 Capital:                   $42,969          6.35%          $27,081               4.00%             $33,852         5.00%
   (To Total Assets)
 Tangible Capital:                 $42,969          6.35%          $10,156               1.50%                $N/A          N/A%
   (To Total Assets)

</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999


IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
---------------------------------------
In June 1997,  the FASB issued SFAS No. 131,  Disclosures  about  Segments of an
Enterprise and Related  Information  (Statement  131).  SFAS No. 131 establishes
standards  for the way public  business  enterprises  are to report  information
about  operating  segments in annual  financial  statements  and requires  those
enterprises to report selected  information about operating  segments in interim
financial  reports  issued  to  shareholders.  SFAS  No.  131 is  effective  for
financial statements for fiscal years beginning after December 15, 1997. Earlier
application  is  encouraged.  In the initial  year of  application,  comparative
information for earlier years is to be restated,  unless it is impractical to do
so.  SFAS No. 131 need not be applied to  interim  financial  statements  in the
initial year of its application, but comparative information for interim periods
in the initial year of application shall be reported in financial statements for
interim periods in the second year of application.  The Company is reviewing the
standard to determine if additional disclosure is required.

SFAS  133,   Accounting  for  Derivative   Instruments  and  Hedging  Activities
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative instruments embedded in other contracts and hedging
activities.  It requires  that an entity  recognize  all  derivatives  as either
assets or liabilities in the statement of financial position,  and measure those
instruments  at fair value.  If certain  conditions are met, a derivative may be
specifically  designated  as (a) a hedge of the  exposure to changes in the fair
value of a recognized asset and liability or a firm  commitment,  (b) a hedge of
the exposure to variable cash flows of a forecasted transaction,  or (c) a hedge
of the foreign currency  exposure of a net investment in a foreign  corporation.
This  statement is effective for fiscal  quarters of all fiscal years  beginning
after June 15, 2000 with earlier  adoption  permitted as amended by SFAS 137. It
is not anticipated that this standard will materially affect the Company.

EFFECT ON INFLATION AND CHANGING PRICES
---------------------------------------
The accompanying  unaudited consolidated financial statements have been prepared
in accordance with generally  accepted  accounting  principles which require the
measurement  of  financial  position  and  results  of  operations  in  terms of
historical dollars,  without  consideration of change in the relative purchasing
power over time due to inflation.  Unlike most industrial  companies,  virtually
all of the assets and  liabilities  of a financial  institution  are monetary in
nature.  As a  result,  interest  rates  have a  more  significant  impact  on a
financial  institution's  performance  than the effects of  inflation.  Interest
rates do not necessarily  change in the same magnitude as the price of goods and
services.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999

YEAR 2000 COMPLIANCE
--------------------
The Company is a user of computers,  computer  software and equipment  utilizing
embedded  microprocessors that will be affected by the year 2000 issue. The year
2000 issue exists because many computer  systems and  applications use two-digit
date  fields  to  designate  a  year.   As  the  century  date  change   occurs,
date-sensitive  systems may recognize the year 2000 as 1900, or not at all. This
inability  to  recognize  or  properly  treat the year 2000 may cause  erroneous
results, ranging from system malfunctions to incorrect or incomplete processing.

The Company's year 2000 committee consists of the Chief Executive Officer, three
Executive  Vice  Presidents,  two Vice  Presidents,  and one Associate  from the
Internal Audit Group. The committee makes a monthly progress report to the Board
of Directors.  The committee has developed and is  implementing a  comprehensive
plan to make all information  and  non-information  technology  assets year 2000
compliant. The plan is comprised of the following phases:

1.   Awareness - Educational  initiatives on year 2000 issues and concerns. This
     phase is ongoing,  especially  as it relates to informing  customers of the
     Company's year 2000 preparedness.

2.   Assessment  - Inventory  of all  technology  assets and  identification  of
     third-party vendors vendors and service providers. This phase was completed
     as of August 31, 1998.

3.   Renovation  - Review of  vendor  and  service  providers  responses  to the
     Company's  year 2000  inquiries  and development  of a  follow-up  plan and
     timeline. This phase was completed as of October 15, 1998.

4.   Validation - Testing all systems and third-party vendors for year 2000
     compliance.  The Company is currently in this phase of its plan.  A third-
     party service bureau processes all customer transactions and has completed
     upgrades to its systems to be year 2000 compliant.  The Company will test
     the third-party systems by reviewing the results of transactions at six
     different test dates before and after the year 2000 date change covering
     all of the applications used by the Company.  Testing was completed as of
     November 16, 1998.  The results of the test were all positive.

     Other parties whose year 2000 compliance may effect the Company include the
     FHLB of Atlanta, brokerage firms, the operator of the Company's ATM network
     and the Company's 401K  administrator.  These  third-parties have indicated
     their compliance or intended compliance. Where it is possible to do so, the
     Company  scheduled  testing  with  these  third-parties.  The  testing  was
     completed by June 30, 1999.  All of the test results were  positive.  Where
     testing is not  possible,  the  Company  will rely on  certifications  from
     vendors and service providers.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999

5.   Implementation - Replacement or repair of non-compliant  technology. As the
     Company  progresses  through the validation  phase,  the Company expects to
     determine necessary remedial actions and provide for their  implementation.
     The Company has already implemented a new year 2000 compliant  computerized
     teller  system and has  verified the year 2000  compliance  of its computer
     hardware  and other  equipment  containing  embedded  microprocessors.  The
     Company's plan for year 2000 readiness was completed by June 30, 1999.

     The  Company  estimates  its  total  cost to  replace  computer  equipment,
     software programs or other equipment  containing  embedded  microprocessors
     that was not year 2000 compliant to be $228,000, of which $188,369 has been
     incurred as of June 30, 1999. System  maintenance or modification costs are
     charged to expense as incurred, while the cost of new hardware, software or
     other equipment is capitalized  and amortized over their  estimated  useful
     lives.  The Company does not  separately  track the internal costs and time
     that its own Associates  spend on year 2000 issues,  which are  principally
     payroll costs.

     Because the Company depends substantially on its computer systems and those
     of  third-parties,  the failure of these systems to be year 2000  compliant
     could cause substantial disruption of the Company's business and could have
     a material adverse financial impact on the Company. Failure to resolve year
     2000 issues  presents the following  risks to the Company;  (1) the Company
     could lose customers to other financial  institutions,  resulting in a loss
     of  revenue,  if the  Company's  third-party  service  bureau  is unable to
     properly process customer transactions;  (2) governmental agencies, such as
     the Federal Home Loan Bank, and  correspondent  institutions  could fail to
     provide funds to the Company,  which could materially  impair the Company's
     liquidity  and affect  the  Company's  ability  to fund  loans and  deposit
     withdrawals;  (3) concern on the part of  depositors  that year 2000 issues
     could impair access to their deposit  account  balances could result in the
     Company  experiencing  deposit outflows prior to December 31, 1999; and (4)
     the Company could incur increased  personnel  costs if additional  staff is
     required to perform functions that inoperative systems would have otherwise
     performed.  Management  believes  that it is not  possible to estimate  the
     potential  lost  revenue  due to the year 2000  issue,  as the  extent  and
     longevity  of  any  potential   problem   cannot  be   predicted.   Because
     substantially  all  of the  Company's  loan  portfolio  consists  of  loans
     primarily secured by real estate management  believes that year 2000 issues
     will not  significantly  impair the ability of the  Company's  borrowers to
     repay their debt.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1998 AND 1999


     There  can  be no  assurances  that  the  Company's  year  2000  plan  will
     effectively  address the year 2000 issues,  that the Company's estimates of
     the timing and costs of completing the plan will  ultimately be accurate or
     that the impact of any  failure of the Company or its  third-party  vendors
     and service  providers to be year 2000  compliant  will not have a material
     adverse effect on the Company's business, financial condition or results of
     operations.

     The Company has  developed  a  contingency  plan for year 2000 in the event
     there is a malfunction  in any of the critical  application  software.  The
     plan provides for alternative methods to conduct business until application
     problems can be rectified.

     The Company has  recognized  that its  commercial  borrowers  may also face
     risks from year 2000 issues.  The Company has  identified its material loan
     relationships  and completed year 2000 surveys of those customers to assess
     their vulnerability to year 2000 problems and their readiness for year 2000
     compliance.  The Company is continuing to monitor its commercial  borrowers
     for year 2000 risk and feels that its commercial  relationships do not pose
     an inordinate risk at this time.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

At June 30, 1999, no material  changes have occurred in market risk  disclosures
included  in the  Company's  Annual  Report to  Stockholders  for the year ended
September 30, 1998.
<PAGE>
PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

Item 1.  Legal Proceedings
         -----------------

     The Company is not a party to any legal  proceedings at this time. The Bank
is a defendant in one significant  lawsuit.  The action commenced on December 1,
1997,  and the  Plaintiffs  are  seeking  approximately  $1.5  million in actual
damages  as well as  punitive  damages.  The  causes  of  action  are  breach of
fiduciary  duties,  negligence,  fraud,  civil conspiracy and breach of contract
arising out of a lending  relationship.  At this date, the Bank does not know if
or when the action will go to trial.  The Bank will vigorously  defend this suit
and does not anticipate any settlement discussions.

Item 2.  Changes In Securities and Use of Proceeds
         -----------------------------------------

     Not Applicable.

Item 3.  Defaults Upon Senior Securities
         -------------------------------

     Not Applicable.

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

     Not Applicable.

Item 5.  Other Information
         -----------------

     Not Applicable.

<PAGE>
PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

                  3  (a)   Certificate of Incorporation of Coastal Financial
                           Corporation**

                  3  (b)   Certificate of Amendment to Certificate of
                           Incorporation of Coastal Financial Corporation*******

                     (c)   Bylaws of Coastal Financial Corporation**

                  10 (a)   Employment Agreement with Michael C. Gerald***

                     (b)   Employment Agreement with Jerry L. Rexroad***

                     (c)   Employment Agreement with Phillip G. Stalvey*****

                     (d)   Employment Agreement with Allen W. Griffin***

                     (e)   Employment Agreement with Jimmy R. Graham***

                     (f)   Employment Agreement with Steven J. Sherry*******

                     (g)   1990 Stock Option Plan***

                     (h)   Directors Performance Plan****

                     (i)   Loan Agreement with Bankers Bank******

                  27                Financial Data Schedule

(b)    No reports on Form 8-K have been filed during the quarter covered by this
       report.
-------------
<PAGE>
PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES


*        Incorporated  by reference from the Annual Report to  Stockholders  for
         the fiscal  year  ended  September  30,  1997,  attached  as an exhibit
         hereto.

**       Incorporated by reference to  Registration  Statement on Form S-4 filed
         with the Securities and Exchange Commission on November 26, 1990.

***      Incorporated  by reference to 1995 Form 10-K filed with the  Securities
         and Exchange Commission on December 29, 1995.

****     Incorporated  by reference to the proxy  statement  for the 1996 Annual
         Meeting of Stockholders.

*****    Incorporated  by reference to 1997 Form 10-K filed with the  Securities
         and Exchange Commission on January 2, 1998.

******   Incorporated  by  reference  to December  31, 1997 Form 10-Q filed with
         Securities and Exchange Commission on February 13, 1998.

*******  Incorporated  by  reference  to June 30,  1998  Form  10-Q  filed  with
         Securities and Exchange Commission on May 15, 1998.

******** Incorporated  by reference to 1998 Form 10-K filed with  Securities and
         Exchange Commission on December 29, 1998.


<PAGE>
                                   SIGNATURES


Pursuant to the  requirement  of the  Securities  and Exchange Act of 1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                           COASTAL FINANCIAL CORPORATION

August 16, 1999                            /s/Michael C. Gerald
---------------                            --------------------
Date                                       Michael C. Gerald
                                           President and Chief Executive Officer

August 16, 1999                            /s/Jerry L. Rexroad
---------------                            -------------------
Date                                       Jerry L. Rexroad
                                           Executive Vice President and
                                           Chief Financial Officer