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 March 31, 1997

      (   )    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  (803) 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    [ X ]        NO    [   ]

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of (March 31, 1997).  Shares outstanding reflect the
four for three stock split declared on April 30, 1997.

Common Stock $.01 Par Value Per Share                         4,636,696 Shares

(Class)                                                        (Outstanding)
<PAGE>
                 COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
                         QUARTERLY REPORT ON FORM 10-Q
              FOR THE QUARTER AND SIX MONTHS ENDED MARCH 31, 1997

                               TABLE OF CONTENTS

PART 1-      Consolidated Financial Statements

Item
       1.    Financial Statements (unaudited):

             Consolidated Statements of Financial Condition
             as of September 30, 1996 and March 31, 1997                       

             Consolidated Statements of Operations for the three
             months ended March 31, 1996 and 1997                              

             Consolidated Statements of Operations for the six
             months ended March 31, 1996 and 1997                              

             Consolidated Statements of Cash Flows for the six
             months ended March 31, 1996 and 1997                              

             Consolidated Statements of Stockholders' Equity                   

             Notes to Consolidated Financial Statements                        

       2.    Management's Discussion and Analysis of
             Financial Condition                                               

       3.    Management's Discussion and Analysis of Operations
             for the three months ended March 31, 1996 and 1997                

       3.    Management's Discussion and Analysis of Operations
             for the six months ended March 31, 1996 and 1997                  

Part II - Other Information

Item
       1.    Legal Proceedings                                                 

       2.    Changes in Securities                                             

       3.    Default Upon Senior Securities                                    

       4.    Submission of Matters to a Vote of Securities Holders             

       5.    Other Materially Important Events                                 

       6.    Exhibits and Reports on Form 8-K                                  

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

                                                      September 30,     March 31,
                                                          1996           1997
                                                       ---------      ---------
                                                             (Unaudited)
                                                         (Dollars in thousands)
<S>                                                    <C>            <C>
ASSETS:
Cash & amounts due from banks ....................     $  15,639      $  12,446
Short-term interest-bearing deposits .............         5,222          1,948
Investment securities held to maturity
   (market value of $332 at September 30,1996)....           330           --
Investment securities available for sale .........        17,141         25,839
Mortgage-backed securities available for sale ....        27,029         38,837
Loans receivable (net of allowance for
   loan losses of $4,172 at September 30,
   1996 and $4,477 at March 31, 1997) ............       370,368        382,277
Loans receivable held for sale ...................         6,803          5,048
Real estate acquired through foreclosure .........           323            518
Office property and equipment, net ...............         5,736          5,915
Federal Home Loan Bank stock, at cost ............         5,228          4,612
Accrued interest receivable on loans .............         2,444          2,582
Accrued interest receivable on investments .......           526            609
Other assets and deferred charges ................         2,923          3,979
                                                       ---------      ---------
                                                       $ 459,712      $ 484,610
                                                       =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
Deposits .........................................     $ 313,430      $ 332,193
Securities sold under agreements to
   repurchase ....................................         3,365          1,431
Advances from Federal Home Loan Bank .............       104,553         85,944
Other borrowings .................................         1,968         28,402
Drafts outstanding ...............................         1,922          1,597
Advances by borrowers for property taxes
  and insurance ..................................         1,435            798
Accrued interest payable .........................           798            731
Other liabilities ................................         4,560          3,978
                                                       ---------      ---------
  Total liabilities ..............................       432,031        455,074
                                                       ---------      ---------
<PAGE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)

                                                      September 30,     March 31,
                                                          1996           1997
                                                       ---------      ---------
                                                              (Unaudited)
                                                         (Dollars in thousands)
<S>                                                    <C>            <C>
STOCKHOLDERS' EQUITY:
Serial preferred stock, 1,000,000 shares
   authorized and unissued .......................          --             --
Common stock, $.01 par value, 5,000,000
   shares authorized;  4,589,007 shares at
   September 30, 1996 and 4,636,696 shares
   at March 31, 1997 issued and outstanding ......            46             46
Additional paid-in capital .......................         8,698          8,698
Retained earnings ................................        20,015         21,319
Treasury stock, at cost (54,161 and 19,255
  shares, respectively) ..........................        (1,185)          (461)
Unrealized gain (loss) on securities available
  for sale, net of income taxes ..................           107            (66)
                                                       ---------      ---------
  Total stockholders' equity .....................        27,681         29,536
                                                       ---------      ---------
                                                       $ 459,712      $ 484,610
                                                       =========      =========

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

                                                         1996             1997
                                                     -----------      -----------
                                                     (Unaudited)
                                                        (Dollars in thousands)
<S>                                                  <C>              <C>
Interest income:
   Loans receivable ............................     $     7,891      $     8,275
   Investment securities .......................             130              322
   Mortgage-backed securities ..................             414              560
   Other .......................................             142               72
                                                     -----------      -----------
   Total interest income .......................           8,577            9,229
                                                     -----------      -----------

Interest expense:
   Deposits ....................................           2,805            3,365
   Securities sold under agreement to
     repurchase ................................              91              214
   Advances from Federal Home Loan Bank ........           1,789            1,273
                                                     -----------      -----------
   Total interest expense ......................           4,685            4,852
                                                     -----------      -----------
   Net interest income .........................           3,892            4,377
Provision for loan losses ......................             225              120
                                                     -----------      -----------
   Net interest income after provision
     for loan losses ...........................           3,667            4,257
                                                     -----------      -----------

Other income:
   Fees and service charges ....................             331              417
   Income (loss) from real estate owned ........              55              (18)
   Loss from real estate held for investment ...             (27)            --
   Gain on sale of loans receivable, net .......             318              175
   Gain on sale of securities available for sale               6               12
   Other income ................................             449              433
                                                     -----------      -----------
                                                           1,132            1,019
                                                     -----------      -----------

General and administrative expenses:
   Salaries and employee benefits ..............           1,629            1,649
   Net occupancy, furniture and fixtures
     and data processing expense ...............             697              696
   FDIC insurance premium ......................             156               50
   Other expenses ..............................             473              715
                                                     -----------      -----------
                                                           2,955            3,110
                                                     -----------      -----------

<PAGE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 (CONTINUED)

                                                         1996             1997
                                                     -----------      -----------
                                                     (Unaudited)
                                                        (Dollars in thousands)
<S>                                                  <C>              <C>
Earnings before income taxes ...................           1,844            2,166

Income taxes ...................................             676              790
                                                     -----------      -----------

Net income .....................................     $     1,168      $     1,376
                                                     ===========      ===========

Earnings per common share ......................     $       .24      $       .28
                                                     ===========      ===========

Weighted average common equivalent
  shares outstanding ...........................       4,793,000        4,855,000
                                                     ===========      ===========

Dividends per share ............................     $     .0825      $     .0825
                                                     ===========      ===========



          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1997

                                                       1996             1997
                                                   -----------      -----------
                                                            (Unaudited)
                                                        (Dollars in thousands)
<S>                                                <C>              <C>
Interest income:
   Loans receivable ..........................     $    15,746      $    16,397
   Investment securities .....................             217              611
   Mortgage-backed securities ................             713            1,048
   Other .....................................             309              170
                                                   -----------      -----------
   Total interest income .....................          16,985           18,226
                                                   -----------      -----------

Interest expense:
   Deposits ..................................           5,788            6,706
   Securities sold under agreement to
     repurchase ..............................             127              330
   Advances from Federal Home Loan Bank ......           3,527            2,626
                                                   -----------      -----------
   Total interest expense ....................           9,442            9,662
                                                   -----------      -----------
   Net interest income .......................           7,543            8,564
Provision for loan losses ....................             340              350
                                                   -----------      -----------
   Net interest income after provision
     for loan losses .........................           7,203            8,214
                                                   -----------      -----------

Other income:
   Fees and service charges ..................             645              843
   Income (loss) from real estate owned ......              18              (74)
   Income from real estate held for investment              69              278
   Gain on sale of loans receivable, net .....             597              403
   Gain (loss) on sale of securities
    available for sale .......................             (12)              30
   Other income ..............................             750              853
                                                   -----------      -----------
                                                         2,067            2,333
                                                   -----------      -----------

General and administrative expenses:
   Salaries and employee benefits ............           3,063            3,337
   Net occupancy, furniture and fixtures
     and data processing expense .............           1,365            1,456
   FDIC insurance premium ....................             305              179
   Other expenses ............................           1,014            1,398
                                                   -----------      -----------
                                                         5,747            6,370
                                                   -----------      -----------

<PAGE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1997 (CONTINUED)

                                                       1996             1997
                                                   -----------      -----------
                                                           (Unaudited)
                                                    (Dollars in thousands)
<S>                                                <C>              <C>
Earnings before income taxes .................           3,523            4,177

Income taxes .................................           1,297            1,523
                                                   -----------      -----------

Net income ...................................     $     2,226      $     2,654
                                                   ===========      ===========

Earnings per common share ....................     $       .47      $       .55
                                                   ===========      ===========

Weighted average common equivalent
  shares outstanding .........................       4,767,000        4,848,000
                                                   ===========      ===========

Dividends per share ..........................     $      .165      $      .165
                                                   ===========      ===========






          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1997

                                                           1996           1997
                                                         --------      --------
                                                               (Unaudited)
                                                              (In thousands)
<S>                                                      <C>           <C>
Cash flows from operating activities:
  Net earnings .....................................     $  2,226      $  2,654
  Adjustments to reconcile net earnings
       to net cash provided by operating activities:
       Income from real estate
        held for investment ........................          (69)         (278)
       Depreciation ................................          357           427
       Provision for loan losses ...................          340           350
Origination of loans receivable
         held for sale .............................      (21,936)      (17,979)
Proceeds from sales of loans receivable
         held for sale .............................       19,014        19,734
(Increase) decrease in:
      Other assets and deferred charges ............         (276)       (1,056)
      Accrued interest receivable ..................         (594)         (221)
Increase (decrease) in:
      Accrued interest payable .....................          149           (67)
      Other liabilities ............................          329          (582)
                                                         --------      --------
        Net cash provided by (used in)
             operating activities ..................         (460)        2,982
                                                         --------      --------
Cash flows from investing activities:
  Purchases of investment securities
       available for sale ..........................      (15,996)      (14,177)
  Proceeds from sales of investment
       securities available for sale ...............        7,000          --
 Proceeds from maturities of investment
      securities available for sale ................         --           5,686
 Proceeds from maturities of mortgage-backed
      securities available for sale ................         --             949
  Purchases of mortgage-backed securities
       available for sale ..........................       (8,952)      (15,167)
 Proceeds from sales of mortgage-backed
       securities available for sale ...............        8,068          --
  Origination of loans receivable, net .............      (67,824)      (59,956)
  Purchase of loans receivable .....................      (12,448)       (3,065)
  Principal collected on loans receivable
       and mortgage-backed securities, net .........       57,617        52,712
  Proceeds from sale of real estate
       acquired through foreclosure, net ...........           20            75
  Purchases of office properties and
      equipment ....................................         (623)         (606)
  Purchases of FHLB stock, net .....................         (986)          616
  Other investing activities, net ..................           82            51
                                                         --------      --------
      Net cash used in
             investing activities ..................      (34,042)      (32,882)
                                                         --------      --------
<PAGE>
<CAPTION>
PART 1.  FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1997 (CONTINUED)

                                                             1996         1997
                                                         ---------     --------
                                                               (Unaudited)
                                                              (In thousands)
<S>                                                      <C>           <C>
Cash flows from financing activities:
  Increase in deposits, net                              $  10,814     $ 18,763
  Decrease in securities sold
   under agreement to repurchase, net                          (36)      (1,934)
  Proceeds from FHLB advances                               56,650       62,500
  Repayment of FHLB advances                               (35,742)     (81,109)
  Proceeds from other borrowings                             7,435       26,434
  Decrease in advance payments by borrowers
     for property taxes and insurance                         (843)        (637)
  Decrease in drafts outstanding, net                         (768)        (325)
  Dividend to stockholders                                    (682)        (769)
  Other financing activities, net                              208          510
                                                         ---------     --------
  Net cash provided by financing activities                 37,036       23,433
                                                         ---------     --------

Net increase (decrease)
   in cash and cash equivalents                              2,534      (6,467)
                                                         ---------     --------
Cash and cash equivalents at beginning
  of the period                                             11,201       20,861
                                                         ---------     --------
Cash and cash equivalents at end
  of the period                                          $  13,735     $ 14,394
                                                          ========      =======

Supplemental information:
  Interest paid                                          $  16,837     $  9,729
                                                          ========      =======

  Income taxes paid                                      $   1,492     $    270
                                                          ========      =======
Supplemental schedule of non-cash investing
  and financing transactions:
  Transfer of mortgage loans to real estate
     acquired through foreclosure                        $      40     $    270
                                                          ========      =======

Collateralization of mortgage loans to FHLMC
     participation certificates                          $  11,692     $    --
                                                          ========      =======

Transfer of investment securities held to
    maturity to available for sale                       $  14,775     $    - -
                                                          ========      =======

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION

COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                             Additional                                                   Total
                              Common          Paid-In       Retained        Treasury                   Stockholders'
                               Stock          Capital       Earnings         Stock         Other          Equity
                               -----          -------       --------         -----         -----          ------
                                                                    (Unaudited)
                                                                   (In thousands)
<S>                        <C>            <C>             <C>            <C>            <C>            <C>            

Balance at September
   30, 1995                $        46    $     8,698     $    18,674    $   (2,598)    $       - -    $    24,820
Exercise of stock
   options                         - -            - -           (863)            970            - -            107
Issuance of shares
     in acquisition
     of Coastal Federal
  Mortgage                         - -            - -            (67)            443            - -            376
Cash paid for
  fractional shares                - -            - -            (17)            - -            - -           (17)
Cash dividends                     - -            - -         (1,433)            - -            - -        (1,433)
Unrealized gain on
  securities available
  for sale, net of
  income taxes                     - -            - -             - -            - -            107            107
Net income                         - -            - -           3,721            - -            - -          3,721
                           -----------    -----------     -----------    -----------    -----------    -----------

Balance at September
  30, 1996                 $        46    $     8,698     $    20,015    $   (1,185)    $       107    $    27,681
Exercise of stock
  options                          - -            - -           (581)            724            - -            143
Cash dividends                     - -            - -           (769)            - -            - -          (769)
Change in unrealized gain
  on securities available
  for sale, net of
  income taxes                     - -            - -             - -            - -          (173)          (173)
Net income                         - -            - -           2,654            - -            - -          2,654
                           -----------    -----------     -----------    -----------    -----------    -----------

Balance at March
   30, 1997                $        46    $     8,698     $    21,319    $     (461)    $      (66)    $    29,536
                            ==========     ==========      ==========          =====     ==========     ==========


                           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
PART 1.  FINANCIAL INFORMATION
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  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 six month periods ended March 31, 1997
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, 1996,  included in the Company's
1996 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 consist of the following:
<TABLE>
<CAPTION>

                                                     September 30,     March 31,
                                                         1996            1997
                                                      ---------       ---------
                                                             (Unaudited)
                                                            (In thousands)
<S>                                                   <C>             <C>
First mortgage loans:
   Single family to 4 family units .............      $ 224,570       $ 230,734
   Other, primarily commercial
    real estate ................................         64,181          73,753
   Construction loans ..........................         34,566          31,488
Consumer and commercial loans:
   Installment consumer loans ..................         28,600          25,829
   Mobile home loans ...........................          1,103           1,426
   Deposit account loans .......................            436           1,074
   Equity lines of credit ......................         12,441          13,109
   Commercial and other loans ..................         26,946          24,824
                                                      ---------       ---------
                                                        392,843         402,237
Less:
   Allowance for loan losses ...................          4,172           4,477
   Deferred loan fees (costs) ..................           (286)           (378)
   Undisbursed portion of loans in process .....         18,589          15,861
                                                      ---------       ---------
                                                      $ 370,368       $ 382,277
                                                      =========       =========
</TABLE>
<PAGE>
PART 1.  FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(2)  LOANS RECEIVABLE, NET (CONTINUED)

The changes in the  allowance  for loan losses  consist of the following for the
six months ended:
<TABLE>
<CAPTION>
                                                              March 31,
                                                      1996                1997
                                                     -------            -------
                                                              (Unaudited)
                                                            (In thousands)
<S>                                                  <C>                <C>
Beginning allowances .....................           $ 3,578            $ 4,172
Provision for loan losses ................               340                375
Loan recoveries ..........................                11                 43
Loan charge-offs .........................               (73)              (113)
                                                     -------            -------

Ending allowance .........................           $ 3,856            $ 4,477
                                                     =======            =======
</TABLE>
 
(3)  DEPOSITS

Deposits consist of the following:
<TABLE>
<CAPTION>

                                     September 30, 1996             March 31, 1997
                                  ------------------------     -----------------------
                                                  Weighted                    Weighted
                                   Amount           Rate        Amount           Rate
                                  --------          ----       --------          ----

                                                       (Unaudited)
                                                      (In thousands)
<S>                               <C>               <C>        <C>               <C>
Transaction accounts .......      $140,577          3.24%      $151,255          3.34%
Passbook accounts ..........        42,840          2.66         38,890          2.60
Certificate accounts .......       130,013          5.64        142,048          5.71
                                  --------          ----       --------          ----
                                  $313,430          4.12%      $332,193          4.25%
                                  ========          ====       ========          ====
</TABLE>
<PAGE>
PART 1.  FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(4)  ADVANCES FROM FEDERAL HOME LOAN BANK

Advances from Federal Home Loan Bank ("FHLB") consist of the following:
<TABLE>
<CAPTION>

                                     September 30, 1996             March 31, 1997
                                  ------------------------     -----------------------
                                                Weighted                     Weighted
                                    Amount        Rate        Amount           Rate
                                   --------       ----       --------          ----

                                                       (Unaudited)
                                                      (In thousands)
<S>                               <C>            <C>         <C>               <C>
1 year                            $ 54,404       5.68 %      $ 41,506           6.12%
2 years                             20,120       5.90           3,898           5.30
3 years                             13,105       6.35          20,577           6.35
4 years                              6,861       6.46           1,926           6.47
5 years and thereafter              10,063       6.90          18,037           6.68
                                  --------       ----        --------           ----
                                  $104,553       5.97%       $ 85,944           6.26%
                                  ========       ====          ======           ====
</TABLE>

At September 30, 1996,  and March 31, 1997,  the Bank had pledged first mortgage
loans with unpaid balances of  approximately  $223.4 million and $216.7 million,
respectively, as collateral for FHLB advances.

(5)  EARNINGS PER SHARE

Earnings per share for the three and six month  periods ended March 31, 1996 and
1997,  are  computed by dividing net  earnings by the  weighted  average  common
equivalent  shares  outstanding  during the  respective  periods.  Common  share
equivalents include dilutive common stock option share equivalents determined by
using  the  treasury  stock  method.  All  share  and per  share  data have been
retroactively restated for all common stock dividends.


(6)  COMMON STOCK DIVIDENDS

On May 30, 1995,  the Company  declared a 5% common stock  dividend  aggregating
102,003  shares.  On January 9, 1996 and June 20, 1996,  the Company  declared a
five for four  stock  split in the  form of a 25%  stock  dividend,  aggregating
approximately  542,000 and 687,000 shares  respectively.  On April 30, 1997, the
Company  declared  a four for  three  stock  split  in the  form of a 33%  stock
dividend,  aggregating  approximately  1,160,000 shares. All share and per share
data  has  been  retroactively  restated  to give  effect  to the  common  stock
dividends.
<PAGE>
PART 1.  FINANCIAL INFORMATION

COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
DISCUSSION OF FINANCIAL CONDITION CHANGES 
FROM SEPTEMBER 30, 1996 TO MARCH 31, 1997

GENERAL

The Company reported $2.7 million in net earnings for the six months ended March
31,  1997,  compared to net  earnings of $2.2  million for the six months  ended
March 31, 1996. Net interest income increased $1.0 million primarily as a result
of an  increase  in  interest  income of $1.2  million  which  was  offset by an
increase in interest  expense of $220,000.  Provision for loan losses  increased
from  $340,000 for the six months ended March 31, 1996,  to $350,000 for the six
months ended March 31, 1997.  Other income  increased  from $2.1 million for the
six months ended March 31, 1996,  to $2.3 million for the six months ended March
31, 1997.  General and  administrative  expenses increased from $5.7 million for
the six months  ended March 31,  1996,  to $6.4 million for the six months ended
March 31, 1997.

Liquid assets,  consisting of cash,  interest-bearing  deposits,  and investment
securities  available  for sale,  increased  from $38.3 million at September 30,
1996, to $40.2 million at March 31, 1997.


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 and Federal  Agency  Securities and
other  investments  generally  having  maturities  of five  years or  less.  The
required  level  of  such  investments  is  calculated  on  a  "liquidity  base"
consisting of net withdrawable accounts and short-term borrowings,  and is equal
to 5% of such amount.  Short-term  liquid  assets must be 1.0% of the  liquidity
base.

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 Company's  liquidity was 8.0% and 6.6% at September 30, 1996,  and March 31,
1997, respectively as calculated in accordance with OTS regulations.

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.  The
Company  originated  loans  receivable of $89.8 million for the six months ended
March 31,  1996,  compared to $77.9  million for the six months  ended March 31,
1997.  The majority of these loan  originations  were financed  through loan and
mortgage-backed  securities principal repayments which amounted to $57.6 million
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

LIQUIDITY AND CAPITAL RESOURCES- CONTINUED

and $52.7  million  for the six month  periods  ended  March 31,  1996 and 1997,
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 six month period  ended March 31, 1996,  the Company sold $19.0
million in  mortgage  loans  compared  to $19.7  million  sold for the six month
period ended March 31, 1997.

The Bank  experienced an increase of $18.8 million in deposits for the six month
period ended March 31, 1997,  primarily as a result of increased  certificate of
deposit  growth.  During fiscal 1997,  the Company  funded a portion of its loan
growth and increase in securities available for sale with advances from the FHLB
and reverse repurchase agreements.

At March 31, 1997,  the Company had  commitments  to  originate  $3.9 million in
mortgage  loans,  and $29.8 million in  undisbursed  lines of credit,  which the
Company expects to fund from normal operations.

At March 31, 1997,  the Company had $117.1 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 March 31, 1997, the Company had pledged first mortgage loans in
the amount of $216.7 million to the FHLB which could support approximately $76.6
million in additional advances.

As  a  condition  of  deposit  insurance,   current  Federal  Deposit  Insurance
Corporation(FDIC)  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 is approximately $29.3 million at March 31, 1997, exceeding tangible and
core capital requirements by $22.0 million and $14.8 million,  respectively.  At
March 31, 1997, the Bank's  risk-based  capital of  approximately  $32.7 million
exceeded  its current  risk-based  capital  requirement  by $8.8  million.  (For
further information see Regulatory Matters).

MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF  OPERATION  FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1997

GENERAL

Net income  increased  from $1.2  million for the three  months  ended March 31,
1996,  to $1.4  million for three months  ended March 31,  1997,  or 17.8%.  Net
interest  income  increased  $485,000  primarily  as a result of an  increase of
$652,000 in interest income offset by a $167,000  increase in interest  expense.
Provision for loan losses  decreased  from $225,000 for three months ended March
31, 1996,  to $120,000  for the three months ended March 31, 1997.  Other income
decreased $113,000 primarily as a result of decreased income from the subsidiary
companies.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

INTEREST INCOME

Interest  income for the three months  ended March 31,  1997,  increased to $9.2
million as compared to $8.6  million for the three  months ended March 31, 1996.
The earning  asset yield for the three months  ended March 31,  1997,  was 8.45%
compared  to a yield of 8.48% for the three  months  ended March 31,  1996.  The
average yield on loans receivable for the three months ended March 31, 1997, was
8.66%  compared to 8.58% for the three months ended March 31, 1996. The increase
in yield primarily resulted from repricing of adjustable-rate  mortgage loans as
a result of higher  general  market rates during fiscal year 1997.  The yield on
investments  increased to 6.69% for the three months ended March 31, 1997,  from
6.55% for the three months ended March 31, 1996. Total average  interest-earning
assets were $440.6  million for the quarter ended March 31, 1997, as compared to
$409.8 million for the quarter ended March 31, 1996.

INTEREST EXPENSE

Interest expense on interest-bearing  liabilities was $4.9 million for the three
months ended March 31, 1997, as compared to $4.7 million for March 31, 1996. The
average cost of deposits  for the three  months ended March 31, 1997,  was 4.14%
compared to 4.03% for the three months  ended March 31,  1996.  As a result of a
greater  portion  of the  Bank's  balance  sheet  being  funded by lower cost of
deposits,   rather  than  outside  borrowings,   the  cost  on  interest-bearing
liabilities  was 4.51% for the three months ended March 31, 1997, as compared to
4.68% for the three months ended March 31, 1996.  The cost on FHLB  advances and
reverse repurchase agreements was 5.79% and 5.50%,  respectively,  for the three
months ended March 31, 1997. For the three months ended March 31, 1996, the cost
was 6.27% and 5.45%  respectively.  Total average  interest-bearing  liabilities
increased  from $398.3  million at March 31, 1996 to $426.1 million at March 31,
1997.

NET INTEREST INCOME

Net interest  income was $4.4 million for the three months ended March 31, 1997,
as compared to $3.9 million for the three  months ended March 31, 1996.  The net
interest  margin  increased  to 3.94% for the three months ended March 31, 1997,
from 3.80% for the three months ended March 31, 1996.

PROVISION FOR LOAN LOSSES

The provision for loan losses decreased from $225,000 for the period ended March
31, 1996,  to $120,000 for the three months ended March 31, 1997.  For the three
months  ended March 31,  1997,  net  charge-offs  were  $45,000  compared to net
charge-offs  of $53,000 for the three months ended March 31, 1996. The allowance
for loan  losses as a  percentage  of total  loans was 1.16% at March 31,  1997,
compared to 1.11% at September 30, 1996.  Loans  delinquent 90 days or more were
 .20% of total loans at March 31, 1997,  compared to .12% at September  30, 1996.
The allowance for loan losses was 590% of loans  delinquent more than 90 days at
March 31, 1997, as compared to 938% at September 30, 1996.  Management  believes
that the current  level of  allowances  is adequate  considering  the  Company's
current loss experience and delinquency trends, among other criteria.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

OTHER INCOME

For the three months ended March 31, 1997,  other income decreased 10.0% to $1.0
million  compared to $1.1  million for the three  months  ended March 31,  1996.
Losses from real estate owned were $18,000 for the quarter ended March 31, 1997,
compared to income of $55,000 for the quarter ended March 31, 1996. Gain on sale
of loans was  $175,000  for the three  months  ended March 31, 1997  compared to
$318,000  for  the  three  months  ended  March  31,  1996.  This  is  primarily
attributable to lower volume in the Coastal Federal Mortgage  subsidiary.  These
were partially offset by increased fees & services charges of $86,000.


GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses  increased from $3.0 million for the three
months  ended March 31,  1996,  to $3.1 million for the three months ended March
31, 1997.  Other  expenses  were  $715,000 for the quarter ended March 31, 1997,
compared to $473,000  for the quarter  ended March 31,  1996.  This is primarily
attributable to increased  marketing  expenses of $95,000,  expenses  related to
checking accounts of $29,000 and miscellaneous expenses of $27,000. The increase
in other expenses were partially  offset by lower FDIC premiums of $106,000 as a
result  of the  recapitalization  of the SAIF  during  1996.  As a result of the
recapitalization the Company's deposit insurance premiums decreased from .23% of
insured deposits to .065% of insured deposits.

INCOME TAXES

Income taxes  increased from $676,000 for the three months ended March 31, 1996,
to $790,000 for the three months ended March 31, 1997,  as a result of increased
income before taxes.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION FOR THE SIX MONTHS ENDED MARCH
31, 1996 AND 1997

GENERAL

Net income  increased from $2.2 million for the six months ended March 31, 1996,
to $2.7  million for six months  ended March 31,  1997,  or 19.2%.  Net interest
income  increased $1.0 million  primarily as a result of an increase in interest
income of $1.2  million  offset by an increase of $220,000 in interest  expense.
Provision for loan losses increased from $340,000 for six months ended March 31,
1996,  to  $350,000  for the six  months  ended  March 31,  1997.  Other  income
increased $266,000. General and administrative expenses increased $623,000.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

INTEREST INCOME

Interest  income for the six months  ended March 31,  1997,  increased  to $18.2
million as compared to $17.0  million for the six months  ended March 31,  1996.
The earning  asset  yield for the six months  ended  March 31,  1997,  was 8.43%
compared  to a yield of 8.52%  for the six  months  ended  March 31,  1996.  The
average yield on loans  receivable  for the six months ended March 31, 1997, was
8.63%  compared to 8.61% for the six months ended March 31,  1996.  The yield on
investments  increased to 6.72% for the six months  ended March 31,  1997,  from
6.41% for the six months ended March 31, 1996. Total average earning assets were
$436.2  million for the six month period  ended March 31,  1997,  as compared to
$402.5 million for the six month period ended March 31, 1996.

INTEREST EXPENSE

Interest  expense on  interest-bearing  liabilities was $9.7 million for the six
months  ended March 31,  1997,  as  compared to $9.4  million for the six months
ended March 31,  1996.  The average  cost of deposits  for the six months  ended
March 31, 1997,  was 4.16%  compared to 4.18% for the six months ended March 31,
1996.  As a result of a greater  portion of the balance  sheet  being  funded by
lower cost deposit accounts rather than advances and other borrowings,  the cost
of  interest-bearing  liabilities  was 4.48% for the six months  ended March 31,
1997,  as  compared  to 4.80% for the six months  ended  March 31,  1996.  Total
average interest-bearing  liabilities increased from $392.1 million at March 31,
1996 to $429.1 million at March 31, 1997.

NET INTEREST INCOME

Net interest income was $8.6 million for the six months ended March 31, 1997, as
compared  to $7.5  million  for the six months  ended  March 31,  1996.  The net
interest margin increased to 3.95% for the six months ended March 31, 1997, from
3.72% for the six  months  ended  March 31,  1996.  Since  the  majority  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.

PROVISION FOR LOAN LOSSES

The provision for loan losses increased from $340,000 for the period ended March
31,  1996,  to $350,000  for the six months  ended March 31,  1997.  For the six
months  ended March 31,  1997,  net  charge-offs  were  $70,000  compared to net
charge-offs  of $62,000 for the six months ended March 31, 1996.  The  allowance
for loan  losses as a  percentage  of total  loans was 1.16% at March 31,  1997,
compared to 1.11% at September  30, 1996.  Management  believes that the current
level  of  allowances  is  adequate   considering  the  Company's  current  loss
experience and delinquency trends, among other criteria.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

OTHER INCOME

For the six months ended March 31, 1997,  other income  increased  12.9% to $2.3
million compared to $2.1 million for the six months ended March 31, 1996. Fees &
service  charges for the six months ended March 31, 1996 were $645,000  compared
to $843,000  for the six months  ended March 31,  1997.  Income from real estate
held for investment  increased by $209,000 when comparing the two periods.  This
is the result of a land sale that  occurred in the first quarter of fiscal 1997.
Other  income  increased  from  $750,000 for the six months ended March 31, 1996
compared to $853,000 for the six months ended March 31, 1997,  primarily from an
increase  of $96,000 in ATM & debit card fees.  These were  partially  offset by
decreased gain on sale of loans of $194,000 & increased  losses from real estate
owned of $92,000.

GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses  increased  from $5.7  million for the six
months ended March 31, 1996,  to $6.4 million for the six months ended March 31,
1997. Salaries and employee benefits increased $274,000, or 8.9%. Net occupancy,
furniture and fixtures and data  processing  expense  increased  $91,000.  Other
expense was $1.0 million for the six months  ended March 31,  1996,  compared to
$1.4 million for the six months ended March 31, 1997.  This is primarily  due to
increased  marketing expense of $79,000,  checking related expenses of $102,000,
ATM & debit card  expenses of $38,000,  legal fees of $18,000 and  miscellaneous
expenses  of  $39,000.  These were  partially  offset by lower FDIC  premiums of
$126,000.

INCOME TAXES

Income  taxes  increased  from $1.3  million for the six months  ended March 31,
1996,  to $1.5 million for the six months  ended March 31, 1997,  as a result of
increased income before taxes.

REGULATORY MATTERS

Under the FDICIA prompt corrective action provisions  applicable to banks, to be
categorized  as  well  capitalized,   the  institution  must  maintain  a  total
risk-based  capital ratio as set forth in the following  table and not be subect
to a capital directive order.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

REGULATORY MATTERS - CONTINUED
<TABLE>
<CAPTION>
                                                                                                            Categorized as "Well
                                                                                                             Capitalized" Under
                                                                           For Capital                        Prompt Corrective
                                            Actual                       Adequacy Purposes                    Action Provision
                                   ----------------------           -------------------------             ------------------------
                                    Amount         Ratio            Amount              Ratio             Amount             Ratio
                                    ------         -----            ------              -----             ------             -----
<S>                                <C>             <C>              <C>                 <C>               <C>                <C>
As of March 31, 1997:
 Total Capital:                    $32,709         10.95%           $32,709             8.00%             $29,872            10.00%
   (To Risk Weighted Assets)

 Tier 1 Capital:                   $29,259          9.79%           $29,259             N/A               $17,923             6.00%
   (To Risk Weighted Assets)

 Tier 1 Capital:                   $29,259          6.06%           $29,259             3.00%             $24,135             5.00%
   (To Total Assets)

 Tangible Capital:                 $29,259          6.06%           $29,259             1.50%             $24,135              N/A
   (To Total Assets)
</TABLE>

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

In May 1995, the FASB issued SFAS No. 122,  "Accounting  for Mortgage  Servicing
Rights, an amendment of SFAS No. 65" which is effective prospectively for fiscal
years beginning after December 15, 1995. The statement  requires the recognition
of an asset for the right to service  mortgage  loans for others,  regardless of
how those rights were acquired  (either  purchased or originated).  Further,  it
amends SFAS 65 to require  assessment of impairment  based on fair value.  Based
upon the Company's present mortgage lending  operations,  this statement did not
have a material effect on the Company.

In October  1995,  the FASB  issued SFAS No.  123,  "Accounting  for Stock Based
Compensation"  which is effective  for  financial  statements  issued for fiscal
years beginning  after December 15, 1995. SFAS No. 123 provides  guidance on the
valuation of compensation  costs arising from both fixed and  performance  stock
compensation  plans.  SFAS No. 123 encourages  but does not require  entities to
account for stock compensation awards based on their estimated fair value on the
date they are  granted.  Entities  can  continue  to follow  current  accounting
requirements,  which  generally  do not  result in an  expense  charge  for most
options. However, they must disclose in a footnote to their financial statements
what the effect on net income and  earnings  per share  would have been had they
used the  fair  value  model.  The  Company  expects  to  continue  its  current
accounting  practice.  Therefore,  this  statement  will  generally  not  have a
material effect on future operating results.
<PAGE>
PART 1. FINANCIAL INFORMATION

COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED

In June,  1996,  the FASB issued SFAS No. 125,  "Accounting  for  Transfers  and
Servicing of Financial Assets and Extinguishment of Liabilities." This statement
will become  effective for  transactions  occurring  after December 31, 1996 and
supersedes  SFAS No. 122. The Statement uses a "financial  components"  approach
that focuses on control to determine the proper  accounting for financial  asset
transfers.  Under that approach,  after  financial  assets are  transferred,  an
entity  would  recognize  on its  balance  sheet  all  assets  it  controls  and
liabilities  it has  incurred.  The entity would  remove from the balance  sheet
those  assets  it no longer  controls  and  liabilities  it has  satisfied.  The
adoption  of this  standard  did not have a  material  effect  on the  Company's
financial statements in fiscal 1997.

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.

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 befiefs 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 and general changes in economy (particularly in
the markets served by the Company).
<PAGE>
PART 2.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

Item 1.  Legal Proceedings

The Bank was a defendant in two significant lawsuits as summarized below.

The first  action  commenced  on August 9, 1993,  and the  Plaintiff  is seeking
approximately  $400,000  in  damages.  The  Plaintiff  contended  that  the Bank
breached its fiduciary  duties in handling of their accounts.  The Bank defended
this  suit and was  found  without  damages  on  October  28,  1996 by the South
Carolina  Circuit  Court.  The  Plaintiff  appealed this lawsuit on November 12,
1996. On February 11, 1997 the appeal of this lawsuit was denied.

The  second  lawsuit  involves a  wholly-owned  subsidiary  of Coastal  Mortgage
Bankers & Realty  Company,  Inc. An answer to this suit was filed on October 29,
1993 on behalf of the Joint Venture.  The  Plaintiff's  complaint was amended to
add additional  Defendants on June 25, 1994. The Plaintiff alleged  construction
deficiencies and was seeking damages in excess of $15.0 million. A subsidiary of
the Bank is a one-third owner in the joint venture company which was being sued.
On April 11, 1997 this  lawsuit was settled and did not have a material  adverse
effect on the Company.


Item 2.  Changes In Securities

     Not Applicable.

Item 3.  Defaults Upon Senior Securities

     Not Applicable.

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

     At the annual stockholders  meeting held on January 27, 1997, the following
items were ratified.

     (a) The election of  directors of all  nominees:  J.T.  Clemmons,  G. David
Bishop, Samuel A. Smart and James H. Dusenbury.

A total of  3,447,187  votes were  entitled  to be cast.  Votes for Bishop  were
2,821,396  with 6,024  withheld;  votes for J. T. Clemmons were  2,823,082  with
4,337  withheld;  votes for Samuel A. Smart were  2,826,579  with 840  withheld;
James H. Dusenbury were 2,826,579 with 8410 votes withheld.

J. T. Clemmons,  G. David Bishop,  and Samuel A. Smart are directors whose terms
continued after the meeting. New Director, James H. Dusenbury was elected.

     (b)Ratification  of an amendment to Coastal  Financial  Corporation's  1990
Stock Option and Incentive Plan.

A total of  3,447,187  votes were  entitled to be cast.  Votes for the Plan were
2,792,865 and votes against were 23,621 and votes abstained were 10,933.
<PAGE>
PART 2.  OTHER INFORMATION - CONTINUED
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

Item 5.  Other Information

     Not Applicable.

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

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

                  3  (b)   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 Richard L. Granger**

                     (g)   Employment Agreement with Robert S. O'Harra**

                     (h)   1990 Stock Option Plan**

                     (i)   Directors Performance Plan***

                  27                Financial Data Schedule

     (b) The  Company  did not file any  current  reports on Form 8-K during the
quarter under report.

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

*    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 10K filed with the  Securities  and
     Exchange Commission on December 29, 1995.

***  Incorporated  by  reference  to the  proxy  statement  for the 1997  Annual
     Meeting of Stockholders.
<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

 
Date                                       /s/Michael C. Gerald
                                           --------------------
                                           Michael C. Gerald
                                           President and Chief Executive Officer

 
Date                                       /s/Jerry L. Rexroad
                                           -------------------
                                           Jerry L.Rexroad
                                           Executive Vice President and
                                           Chief Financial Officer