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, 2002

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

Registrant's telephone number, including area code  (843) 205-2000

     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, 2002.

Common Stock $.01 Par Value Per Share                         10,578,483 Shares
-------------------------------------                         ------------------
            (Class)                                              (Outstanding)



<PAGE>

COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2002

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

PART I-      Consolidated Financial Information

Item
     1.      Consolidated Financial Statements (unaudited):

             Consolidated Statements of Financial Condition
             as of September 30, 2001 and March 31, 2002                   3

             Consolidated Statements of Operations for the three
             months ended March 31, 2001 and 2002                        4-5

             Consolidated Statements of Operations for the six           6-7
             months ended March 31, 2001 and 2002

             Consolidated Statements of Cash Flows for the six
             months ended March 31, 2001 and 2002                        8-9

             Consolidated Statements of Stockholders' Equity
             and Comprehensive Income for the six months ended
             March 31, 2001 and 2002                                      10

             Notes to Consolidated Financial Statements                11-14

     2.Management's Discussion and Analysis of
             Financial Condition and Results of Operations             15-23

     3.Quantitative and Qualitative Disclosures About                     24
       Market Risk


Part II - Other Information

Item
     1.Legal Proceedings                                                  25

     2.Changes in Securities and Use of Proceeds                          25

     3.Defaults Upon Senior Securities                                    25

     4.Submission of Matters to a Vote of Securities Holders              25

5.       Other information                                                25

     6.Exhibits and Reports on Form 8-K                                26-27

Signatures                                                                28


                                       2


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                       September 30,March 31,
                                                       2001              2002
                                                       ----              ----
                                                             (Unaudited)
                                                            (In thousands,
                                                          except share data)
ASSETS:
Cash and amounts due from banks                     $  24,966         $  16,597
Short-term interest-bearing deposits                    9,354             2,251
Investment securities available for sale              192,553           221,789
Loans receivable (net of allowance for
   loan losses of $7,159 at September 30,
   2001 and $7,428 at March 31, 2002)                 488,754           513,612
Loans receivable held for sale                         16,274            11,794
Real estate acquired through foreclosure                2,363             1,988
Office property and equipment, net                     13,150            13,999
Federal Home Loan Bank stock, at cost                   7,624             8,309
Accrued interest receivable on loans                    2,783             2,411
Accrued interest receivable on investments              1,341             1,401
Other assets and deferred charges                       4,052             4,543
                                                    ---------         ---------
                                                    $ 763,214         $ 798,694
                                                    =========         =========

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
Deposits                                            $ 530,364         $ 556,186
Securities sold under agreements to
   repurchase                                          18,703            17,927
Advances from Federal Home Loan Bank                  140,036           152,282
Other borrowings                                        2,069             2,069
Drafts outstanding                                      2,577             1,218
Advances by borrowers for property taxes
  and insurance                                         1,250               645
Accrued interest payable                                1,184             1,392
Other liabilities                                       9,783             8,579
                                                    ---------         ---------
  Total liabilities                                   705,966           740,298
                                                    ---------         ---------

STOCKHOLDERS' EQUITY:
Serial preferred stock, 1,000,000 shares
   authorized and unissued                                 --                --
Common stock, $.01 par value, 15,000,000
   shares authorized; 10,693,325 shares at
   September 30, 2001 and 10,578,483 shares
   at March 31, 2002 issued and outstanding               107               106
Additional paid-in capital                              9,744             9,744
Retained earnings                                      47,496            51,033
Treasury stock, at cost (324,483 and 439,325
   shares, respectively)                               (3,620)           (4,392)
Accumulated other comprehensive income,
 net of tax                                             3,521             1,905
                                                    ---------         ---------
  Total stockholders' equity                           57,248            58,396
                                                    ---------         ---------
                                                    $ 763,214         $ 798,694
                                                    =========         =========


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       3


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2002

                                                  2001             2002
                                                  ----             ----
                                                         (Unaudited)
                                                       (In thousands,
                                                     except share data)
Interest income:
   Loans receivable                             $ 11,665         $  9,869
   Investment securities                             633              556
   Mortgage-backed securities                      2,913            2,550
   Other                                             198               12
                                                --------         --------
   Total interest income                          15,409           12,987
                                                --------         --------

Interest expense:
   Deposits                                        5,142            3,217
   Securities sold under agreements to
     repurchase                                      907               96
   Advances from Federal Home Loan Bank            2,997            1,840
                                                --------         --------
   Total interest expense                          9,046            5,153
                                                --------         --------
   Net interest income                             6,363            7,834
   Provision for loan losses                         225              255
                                                --------         --------
   Net interest income after provision
     for loan losses                               6,138            7,579
                                                --------         --------

Other income:
   Fees and service charges                          667              743
   Loss from real estate owned                       (48)             (44)
   Gain on sale of loans receivable, net             330              256
   Gain (loss) on sale of securities
     available for sale                              327              (60)
   Other income                                      971              808
                                                --------         --------
                                                   2,247            1,703
                                                --------         --------
General and administrative expenses:
   Salaries and employee benefits                  2,653            3,068
   Net occupancy, furniture and fixtures
     and data processing expense                   1,026            1,170
   FDIC insurance premium                             20               24
   Other expenses                                    856              964
                                                --------         --------
                                                   4,555            5,226
                                                --------         --------
Income before income taxes and
     extraordinary item                            3,830            4,056

Income taxes                                       1,344            1,467
                                                --------         --------

Income before extraordinary item                   2,486            2,589
                                                --------         --------

                                                               (CONTINUED)


                                       4


<PAGE>



PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2002

                                               2001          2002
                                               ----          ----
                                                    (Unaudited)
                                                  (In thousands,
                                                except share data)

Extraordinary loss on extinguishment of
     debt, net of income taxes of $137 and
      $74, respectively                           256            122
                                           ----------     ----------
Net income                                 $    2,230     $    2,467
                                           ==========     ==========

Earnings per common share
   before extraordinary item
   Basic                                   $      .23     $      .24
                                           ==========     ==========
   Diluted                                 $      .23     $      .24
                                           ==========     ==========

Effect of extraordinary item on
   earnings per common share
   Basic                                   $     (.02)    $     (.01)
                                           ===========    ==========
   Diluted                                 $     (.03)    $     (.01)
                                           ===========    ==========

Earnings per common share
   after extraordinary item
   Basic                                   $       .21           .23
                                           ===========    ==========
   Diluted                                 $       .20           .23
                                           ===========    ==========

Weighted average common shares
   outstanding - basic                      10,839,000    10,584,000
                                           ===========    ==========

Weighted average common shares
   outstanding - diluted                    10,964,000    10,826,000
                                           ===========    ==========


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       5


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2001 AND 2002

                                                  2001             2002
                                                  ----             ----
                                                        (Unaudited)
                                                       (In thousands,
                                                     except share data)
Interest income:
   Loans receivable                             $ 23,663         $ 20,121
   Investment securities                           1,256            1,131
   Mortgage-backed securities                      5,789            5,023
   Other                                             355               80
                                                --------         --------
   Total interest income                          31,063           26,355
                                                --------         --------

Interest expense:
   Deposits                                        9,897            6,826
   Securities sold under agreements to
     repurchase                                    2,097              222
   Advances from Federal Home Loan Bank            6,497            3,767
                                                --------         --------
   Total interest expense                         18,491           10,815
                                                --------         --------
   Net interest income                            12,572           15,540
   Provision for loan losses                         495              505
                                                --------         --------
   Net interest income after provision
     for loan losses                              12,077           15,035
                                                --------         --------

Other income:
   Fees and service charges                        1,219            1,510
   Loss from real estate owned                      (138)            (150)
   Gain on sale of loans receivable, net             480              812
   Gain on sale of securities
     available for sale                              356               71
   Other income                                    1,968            1,634
                                                --------         --------
                                                   3,885            3,877
                                                --------         --------
General and administrative expenses:
   Salaries and employee benefits                  5,068            6,070
   Net occupancy, furniture and fixtures
     and data processing expense                   1,954            2,281
   FDIC insurance premium                             40               47
   Other expenses                                  1,593            2,079
                                                --------         --------
                                                   8,655           10,477
                                                --------         --------
Income before income taxes and
     extraordinary item                            7,307            8,435

Income taxes                                       2,605            3,089
                                                --------         --------

Income before extraordinary item                   4,702            5,346
                                                --------         --------


                                                              (CONTINUED)


                                       6


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2001 AND 2002

                                                 2001           2002
                                                 ----           ----
                                                       (Unaudited)
                                                     (In thousands,
                                                   except share data)

Extraordinary loss on extinguishment of
     debt, net of income taxes of $137 and
      $257, respectively                              256             419
                                              -----------     -----------
Net income                                    $     4,446     $     4,927
                                              ===========     ===========

Earnings per common share
   before extraordinary item
   Basic                                      $       .43     $       .50
                                              ===========     ===========
   Diluted                                    $       .43     $       .49
                                              ===========     ===========

Effect of extraordinary item on
   earnings per common share
   Basic                                      $      (.02)    $      (.04)
                                              ===========     ===========
   Diluted                                    $      (.03)    $      (.04)
                                              ===========     ===========

Earnings per common share
   after extraordinary item
   Basic                                      $       .41     $       .46
                                              ===========     ===========
   Diluted                                    $       .40     $       .45
                                              ===========     ===========

Weighted average common shares
   outstanding - basic                         10,911,000      10,657,000
                                              ===========     ===========

Weighted average common shares
   outstanding - diluted                       11,012,000      10,913,000
                                              ===========     ===========


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       7


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2001 AND 2002

                                                     2001         2002
                                                     ----         ----
                                                        (Unaudited)
                                                      (In thousands)

Cash flows from operating activities:
  Net income                                      $   4,446     $   4,927
  Adjustments to reconcile net income
       to net cash provided by
      operating activities:
  Depreciation                                          737           955
  Provision for loan losses                             495           505
 Gain on sale of mortgage-backed
      securities available for sale                    (356)          (71)
  Origination of loans receivable
       held for sale                                (14,882)      (48,468)
  Proceeds from sales of loans receivable
       held for sale                                 13,187        52,948
(Increase) decrease in:
       Other assets and deferred charges               (710)         (491)
       Accrued interest receivable                     (217)          312
 Increase (decrease)in:
       Accrued interest payable                       1,041           208
       Other liabilities                             (2,726)         (213)
                                                  ---------     ---------

       Net cash provided by
             operating activities                     1,015        10,612
                                                  ---------     ---------

Cash flows from investing activities:
  Purchases of investment securities
       available for sale                           (99,501)      (94,647)
  Proceeds from sales of investment
       securities available for sale                 86,396        71,876
 Origination of loans receivable, net              (100,445)     (203,532)
  Principal collected on loans receivable, net       92,818       128,873
  Principal collected on mortgage-backed
       securities, net                               15,181        39,990
  Proceeds from sale of real estate
       acquired through foreclosure, net                430           680
  Purchases of office properties and
       equipment                                     (1,406)       (1,804)
  Sales (purchases) of FHLB stock, net                  863          (685)
                                                  ---------     ---------

       Net cash used in
             investing activities                    (5,664)      (59,249)
                                                  ---------     ---------


                                                               (CONTINUED)


                                       8


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2001 AND 2002 (CONTINUED)

                                                     2001               2002
                                                     ----               ----
                                                           (Unaudited)
                                                          (In thousands)

Cash flows from financing activities:
  Increase in deposits, net                        $ 104,071         $  25,822
  Decrease in securities sold
   under agreement to repurchase, net                (53,254)             (776)
  Proceeds from FHLB advances                        242,655           171,762
  Repayment of FHLB advances                        (268,278)         (159,516)
  Decrease in advance payments by borrowers
   for property taxes and insurance, net                (642)             (605)
  Decrease in drafts outstanding, net                   (307)           (1,359)
  Repurchase of treasury stock, at cost               (1,069)           (1,287)
  Dividends to stockholders                             (939)           (1,058)
  Exercise of stock options                               20               182
                                                   ---------         ---------
  Net cash provided by financing activities           22,257            33,165
                                                   ---------         ---------

 Net increase(decrease)in cash and cash
     equivalents                                      17,608           (15,472)
                                                   ---------         ---------
Cash and cash equivalents at beginning
  of the period                                       17,167            34,320
                                                   ---------         ---------
Cash and cash equivalents at end
  of the period                                    $  34,775         $  18,848
                                                   =========         =========

Supplemental information:
  Interest paid                                    $  17,450         $  10,607
                                                   =========         =========

  Income taxes paid                                $   3,001         $   4,030
                                                   =========         =========

Supplemental schedule of non-cash investing
  and financing transactions:

Transfer of mortgage loans to real estate
     acquired through foreclosure                  $     806         $     305
                                                   =========         =========

Securitization of mortgage loans into
     mortgage-backed securities                    $   7,566         $  48,991
                                                   =========         =========


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                        9


<PAGE>


<TABLE>
<CAPTION>


PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
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, 2000                          $    109       $  9,744       $ (1,702)      $ 40,319       $ (1,525)      $ 46,945
Net income                                --             --             --          4,446             --          4,446
Other comprehensive
 income, net of tax:
 Unrealized gains arising
 during period, net of
 taxes of $2,434                          --             --             --             --          3,971             --
 Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $135                     --             --             --             --           (221)            --
                                                                                                --------         ------
Other comprehensive income                --             --             --             --          3,750          3,750
                                                                                                --------         ------
Comprehensive income                      --             --             --             --             --          8,196
Treasury stock repurchases                (1)            --         (1,068)            --             --         (1,069)
Exercise of stock
  options                                 --                            37            (17)            --             20
Cash dividends                            --             --             --           (939)            --           (939)
                                    --------       --------       --------       --------       --------       --------
Balance at March 31, 2001           $    108       $  9,744       $ (2,733)      $ 43,809       $  2,225       $ 53,153
                                    ========       ========       ========       ========       ========       ========


Balance at September
  30, 2001                          $    107       $  9,744       $ (3,620)      $ 47,496       $  3,521       $ 57,248
Net income                                --             --             --          4,927             --          4,927
Other comprehensive
 loss, net of tax:
 Unrealized losses arising
 during period, net of
 taxes of $1,018                          --             --             --             --         (1,660)            --
 Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $27                      --             --             --             --             44             --
                                                                                                --------         ------
Other comprehensive loss                  --             --             --             --         (1,616)        (1,616)
                                                                                                --------         ------
Comprehensive income                      --             --             --             --             --          3,311
Treasury stock repurchases                (1)            --         (1,286)            --             --         (1,287)
Exercise of stock
  options                                 --             --            514           (332)            --            182
Cash dividends                            --             --             --         (1,058)            --         (1,058)
                                    --------       --------       --------       --------       --------       --------
Balance at March 31, 2002           $    106       $  9,744       $ (4,392)      $ 51,033       $  1,905       $ 58,396
                                    ========       ========       ========       ========       ========       ========


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


</TABLE>


                                       10


<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 accounting principles generally accepted in the United States of
America. 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, 2002 are not necessarily  indicative
of the results which may be expected for the entire fiscal year. These unaudited
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, 2001,  included in the Company's 2001 Annual Report to
Stockholders.  The  principal  business  of  the  Company  is  conducted  by its
wholly-owned  subsidiary,  Coastal  Federal Bank (the "Bank").  The  information
presented hereon, therefore, relates primarily to the Bank.


(2)  LOANS RECEIVABLE, NET

Loans receivable, net consists of the following:

                                               September 30,    March 31,
                                                  2001            2002
                                                  ----            ----
                                                        (Unaudited)
                                                       (In thousands)
First mortgage loans:
   Single family to 4 family units              $ 252,396       $ 251,939
   Other, primarily commercial
    real estate                                   137,282         160,649
   Construction loans                              60,765          64,187
Consumer and commercial loans:
   Installment consumer loans                      14,539          13,970
   Mobile home loans                                2,056           2,313
   Deposit account loans                            1,221           1,087
   Equity lines of credit                          22,379          22,839
   Commercial and other loans                      18,886          16,264
                                                ---------       ---------
                                                  509,524         533,248
Less:
   Allowance for loan losses                        7,159           7,428
   Deferred loan costs, net                          (372)           (230)
   Undisbursed portion of loans in process         13,983          12,438
                                                ---------       ---------
                                                $ 488,754       $ 513,612
                                                =========       =========


                                       11


<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 six months ended:

                                   Six Months Ended March 31,
                                       2001        2002
                                          (Unaudited)
                                     (Dollars in thousands)

Allowance at beginning of period      $7,064      $7,159
Provision for loan losses .........      495         505
                                      ------      ------
Recoveries:
 Residential real estate ..........       --          --
 Commercial real estate ...........       --          --
 Consumer .........................       41          18
                                      ------      ------
   Total recoveries ...............       41          18
                                      ------      ------

Charge-offs:
 Residential real estate ..........      105          57
 Commercial real estate ...........       51          --
 Consumer .........................      285         197
                                      ------      ------
   Total charge-offs ..............      441         254
                                      ------      ------
   Net charge-offs ................      400         236
                                      ------      ------
 Allowance at end of period .......   $7,159      $7,428
                                      ======      ======

Ratio of allowance to net
 loans outstanding at the
 end of the period ................     1.37%       1.41%
                                      ======      ======

Ratio of net charge-offs
 to average loans outstanding
 during the period (annualized)...       .17%        .09%
                                      ======      ======

Non-accrual loans, which were over ninety days delinquent, totaled approximately
$5.5 million at March 31, 2002 and 2001.  For the quarter  ended March 31, 2001,
interest income,  which would have been recorded,  would have been approximately
$108,000.  For the quarter ended March 31, 2002,  interest  income,  which would
have been recorded,  would have been approximately  $131,000. For the six months
ended March 31, 2001 and 2002, interest income,  which would have been recorded,
would  have  been  approximately  $175,000  and  $262,000,   respectively,   had
non-accruing loans been current in accordance with their original terms.

At March 31, 2002, impaired loans totaled $3.2 million.  There were $4.4 million
in impaired  loans at March 31, 2001.  Included in the allowance for loan losses
at March 31, 2002 was $225,000 related to impaired loans compared to $333,000 at
March 31, 2001.  The average  recorded  investment in impaired loans for the six
months  ended March 31, 2002 was $3.3  million  compared to $4.4 million for the
six months ended March 31, 2001.  Interest  income of $7,000 was  recognized  on
impaired  loans for the quarter and six months  ended March 31,  2002.  Interest
income of $32,000 was  recognized on impaired  loans for the quarter ended March
31, 2001.  Interest  income of $88,000 was  recognized on impaired loans for the
six months ended March 31, 2001.


(3)  DEPOSITS

Deposits consist of the following:

                             September 30, 2001              March 31, 2002
                             ----------------------------------------------
                                           Weighted                     Weighted
                                           Average                       Average
                            Amount          Rate         Amount           Rate
                            ------          ----         ------           ----
                                               (Unaudited)
                                              (In thousands)
Transaction accounts      $298,655          1.96%       $296,547          1.40%
Passbook accounts           33,317          1.70          35,368          1.22
Certificate accounts       198,392          4.82         224,271          3.47
                          --------          ----        --------          ----
                          $530,364          3.01%       $556,186          2.22%
                          ========          ====        ========          ====




                                       12


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  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:

                                September 30, 2001        March 31, 2002
                                ----------------------------------------
                                             Weighted                   Weighted
                                             Average                     Average
                                Amount        Rate        Amount          Rate
                                ------        ----        ------          ----
Maturing within:                                   (Unaudited)
                                                 (In thousands)
1 year                         $  1,400       4.15%      $ 25,100          2.47%
2 years                          23,231       4.30         16,762          2.96
3 years                           2,220       5.21            235          4.92
4 years                             400       5.24         27,970          6.20
5 years and thereafter          112,785       5.73         82,215          5.47
-                              --------       ----       --------          ----
                               $140,036       5.46%      $152,282          4.89%
                               ========       ====       ========          ====


At September 30, 2001,  and March 31, 2002,  the Bank had pledged first mortgage
loans and  mortgage-backed  securities  with unpaid  balances  of  approximately
$204.0  million  and  $191.3  million,  respectively,  as  collateral  for  FHLB
advances.  At  September  30,  2001,  included  in the one,  two and five  years
maturities were $109.0 million of advances subject to call provisions.  At March
31, 2002,  included in the four and five years and  thereafter  maturities  were
$106.0 million of advances 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 six month  periods  ended March 31,
2001 and 2002,  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 six month  periods  ended March 31,  2001 and 2002,  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 and dividends.


RECONCILIATION OF AVERAGE SHARES OUTSTANDING
(Unaudited in thousands)

<TABLE>
<CAPTION>

                                                            For the Quarter Ended March 31,

                                              2001             2001              2002               2002
                                           ----------------------------------------------------------------
                                              BASIC           DILUTED            BASIC             DILUTED
                                           ----------------------------------------------------------------
<S>                                        <C>               <C>               <C>               <C>
Weighted average shares outstanding        10,839,000        10,839,000        10,584,000        10,584,000
                                           ----------------------------------------------------------------

Effective of Dilutive Securities:
Stock options                                      --           125,000                --           242,000
                                           10,839,000        10,964,000        10,584,000        10,826,000
                                           ----------------------------------------------------------------

<CAPTION>
                                                            For the Six Months Ended March 31,

                                              2001             2001              2002               2002
                                           ----------------------------------------------------------------
                                              BASIC           DILUTED            BASIC             DILUTED
                                           ----------------------------------------------------------------
<S>                                        <C>               <C>               <C>               <C>
Weighted average shares outstanding        10,911,000        10,911,000        10,657,000        10,657,000
                                           ----------------------------------------------------------------

Effective of Dilutive Securities:
Stock options                                      --           101,000                --           256,000
                                           10,911,000        11,012,000        10,657,000        10,913,000
                                           ----------------------------------------------------------------

</TABLE>


                                       13


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


(6)  COMMON STOCK DIVIDENDS

On July 31,  2001,  the Company  declared a 3 for 2 stock split in the form of a
50% stock dividend aggregating approximately 3,579,000 shares. All share and per
share data have been  retroactively  restated  for all common  stock  splits and
dividends.

(7)  EXTRAORDINARY ITEM

The  extraordinary  item for the  quarter and six months  ended March 31,  2001,
relates to prepayment  penalties on advances from FHLB of $256,000 net of income
taxes of $137,000.

The  extraordinary  item for the  quarter  ended  March  31,  2002,  relates  to
prepayment  penalties on advances from FHLB of $196,000,  net of income taxes of
$74,000.  For the six months  ended  March 31,  2002,  prepayment  penalties  on
advances from FHLB were $676,000 net of income taxes of $257,000.


                                       14

<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,  and general
changes in the economy (particularly in the markets served by the Company).  The
Company disclaims any obligation to update such forward looking statements.

SIGNIFICANT ACCOUNTING POLICIES
-------------------------------

The Bank considers its policy  regarding the allowance for loan losses to be its
most  critical  accounting  policy due to the  significant  degree of management
judgment.  The Bank has  developed  policies and  procedures  for  assessing the
adequacy of the Allowance,  recognizing  that this process  requires a number of
assumptions  and  estimates  with  respect  to  its  loan  portfolio.  The  Bank
assessments may be impacted in future periods by changes in economic conditions,
the impact of regulatory  examinations,  and the discovery of  information  with
respect  to  borrowers,  which  is not  known to  management  at the time of the
issuance of the consolidated financial statements.

OFF-BALANCE SHEET ARRANGEMENTS
------------------------------

In the normal course of  operations,  the Bank engages in a variety of financial
transactions that, in accordance with generally accepted accounting  principles,
or are  recorded  in  amounts  that  differ  from the  notional  amounts.  These
transactions involve, to varying degrees, elements of credit, interest rate, and
liquidity risk.  Such  transactions  are used by the Bank for general  corporate
purposes or for customer needs.  Corporate purpose transactions are used to help
manage customers' requests for funding.

The Bank's  off-balance sheet  arrangements,  which principally  include lending
commitments and  derivatives,  are described  below. At March 31, 2002 and 2001,
the Bank had no interests in non-consolidated special purpose entities.

Lending  Commitments.  Lending  Commitments  include loan  commitments,  standby
letters of credit, unused business credit card lines, and documentary letters of
credit.  These  instruments are not recorded in the  consolidated  balance sheet
until funds are advanced under the commitments.  The Bank provides these lending
commitments to customers in the normal course of business.

For commercial customers,  loan commitments generally take the form of revolving
credit  arrangements to finance  customers'  working capital  requirements.  For
retail  customers,  loan  commitments  are generally  lines of credit secured by
residential  property. At March 31, 2002, commercial and retail loan commitments
totaled $60.5 million.  Standby letters of credit are conditional commitments to
guarantee performance,  typically contract or financial integrity, of a customer
to a third party and totaled  $3.6 million at March 31,  2002.  Unused  business
credit card lines,  which totaled  $733,000 at March 31, 2002, are generally for
short-term borrowings. The Bank applies essentially the same credit policies and
standards as it does in the lending process when making these commitments.

Derivatives.  The Bank originates  certain fixed rate residential loans with the
intention of selling these loans.  Between the time that the Bank enters into an
interest  rate lock or a commitment to originate a fixed rate  residential  loan
with a  potential  borrower  and the time the closed  loan is sold,  the Bank is
subject to variability in the market prices  related to these  commitments.  The
Bank believes that it is prudent to limit the  variability of expected  proceeds
from  the  sales  through  forward  sales  of "to  be  issued"  mortgage  backed
securities and loans ("forward sales commitments").


                                       15

<PAGE>





Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

The  commitment  to originate  fixed rate  residential  loans and forward  sales
commitments  are  freestanding  derivative  instruments.  They do not  generally
qualify  for hedge  accounting  treatment  so their fair value  adjustments  are
recorded  through  the  income  statement  in net  gains on sale of  loans.  The
commitments  to originate  fixed rate  conforming  loans totaled $6.2 million at
March 31, 2002. The fair value of the  commitments  was a gain of  approximately
$10,000 at March 31,2002. The forward sales commitments totaled $12.0 million at
March 31, 2002. The fair value of these  commitments was a gain of approximately
$2,000.




                                       16
<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 2001 TO MARCH 31,
--------------------------------------------------------------------------------
2002
----

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

Historically,  the Bank 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 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 investment  securities.  The Company originated
loans  receivable  of $115.3  million for the six months  ended March 31,  2001,
compared to $252.0 million for the six months ended March 31, 2002, primarily as
a result of reduced  interest rates. A portion of these loan  originations  were
financed through loan principal repayments,  which amounted to $92.8 million and
$128.9  million  for the six  month  periods  ended  March  31,  2001 and  2002,
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 within the previous
year.  For the six month  period  ended March 31,  2001,  the Company sold $13.2
million in mortgage loans held for sale,  compared to $52.9 million sold for the
six month period ended March 31, 2002.  Loan  originations  have  increased as a
result of falling interest rates over the last twelve months. Consequently,  the
Bank has  experienced  prepayment of a portion of its mortgage  loan  portfolio.
Many  of  the  Bank's  adjustable  rate  mortgage  loans  were  refinanced  into
conforming fixed rate mortgage loans. A significant  portion of these fixed rate
loans were sold into the secondary market.

For the six month  period  ended March 31,  2001,  the Company  purchased  $99.5
million in investment and mortgage-backed  securities.  For the six month period
ended March 31, 2002,  the Company  purchased  $94.6 million in  investment  and
mortgage-backed securities.  These purchases were funded primarily by repayments
of $40.0  million  within  the  securities  portfolio  and  sales of  investment
securities of $71.9 million.

Overall the Bank  experienced  an increase of $25.8  million in deposits for the
six month period ended March 31, 2002.  For the six month period ended March 31,
2002,  transaction  accounts  decreased  $2.1 million  which the Bank  primarily
believes is due to seasonal  effects of customer  withdrawals  during the winter
months.  During the same period,  certificate  accounts  increased $25.9 million
primarily  due to special  offers in many of the Bank's  new Sales  Centers.  At
March 31,  2002,  the Company had $188.9  million of  certificates  of deposits,
which were due to mature within one year. The Company believes that the majority
of these certificates of deposits will renew with the Bank.

As a result of $4.9  million  in net  income,  less the cash  dividends  paid to
stockholders  of  approximately  $1.1 million,  treasury  stock  repurchases  of
approximately  $1.3 million and the net change in unrealized  gain on securities
available  for sale,  net of income tax of $1.6  million,  stockholders'  equity
increased from $57.2 million at September 30, 2001 to $58.4 million at March 31,
2002.

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  $58.1 million at March 31,
2002,  exceeding the core capital  requirement  by $26.2  million.  At March 31,
2002, the Bank's risk-based capital of approximately  $64.0 million exceeded its
current   risk-based  capital   requirement  by  $25.3  million.   (For  further
information see Regulatory Capital Matters)






                                       17
<PAGE>





PART1.     FINANCIAL INFORMATION
Item 2.    COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE THREE MONTHS ENDED
-----------------------------------------------------------------------------
MARCH 31, 2001 AND 2002
-----------------------

GENERAL
-------

Net income  increased from the $2.2 million for the three months ended March 31,
2001, to $2.5 million for the three months ended March 31, 2002,  or 10.6%.  Net
interest  income  increased $1.5 million  primarily as a result of a decrease of
$2.4 million in interest income and a $3.9 million decrease in interest expense.
Provision for loan losses was $225,000 for the three months ended March 31, 2001
compared  to  $255,000  for the  quarter  ended  March 31,  2002.  Other  income
decreased $544,000.  General and administrative expense was $4.6 million for the
quarter  ended March 31, 2001  compared  to $5.2  million for the quarter  ended
March 31, 2002.

INTEREST INCOME
---------------

Interest  income for the three months  ended March 31, 2002,  decreased to $13.0
million as compared to $15.4  million for the three months ended March 31, 2001.
The earning  asset yield for the three months  ended March 31,  2002,  was 7.24%
compared  to a yield of 8.31% for the three  months  ended March 31,  2001.  The
average yield on loans  receivable for the three months ended March 31, 2002,was
7.65%  compared to 8.90% for the three months ended March 31, 2001. The yield on
investments  decreased to 6.30% for the three months ended March 31, 2002,  from
7.00% for the three months ended March 31, 2001. Total average  interest-earning
assets were $724.4  million for the quarter  ended March 31, 2002 as compared to
$751.2  million for the quarter  ended March 31,  2001.  The decrease in average
interest-earning  assets  is  primarily  due  to a  decrease  in  average  loans
receivable of approximately $8.1 million, investment securities of approximately
$5.4 million and cash in FHLB of approximately $10.4 million.

INTEREST EXPENSE
----------------

Interest expense on interest-bearing  liabilities was $5.2 million for the three
months ended March 31, 2002, as compared to $9.0 million for March 31, 2001. The
average cost of deposits  for the three  months ended March 31, 2002,  was 2.38%
compared  to 4.45% for the  three  months  ended  March  31,  2001.  The cost of
interest-bearing  liabilities  was 2.92% for the three  months  ended  March 31,
2002,  as compared to 4.99% for the three months ended March 31, 2001.  The cost
of FHLB  advances  and  reverse  repurchase  agreements  was  4.99%  and  2.18%,
respectively,  for the three months  ended March 31, 2002.  For the three months
ended  March  31,  2001,  the  cost  of FHLB  advances  and  reverse  repurchase
agreements  was 5.91% and 6.07%,  respectively.  Total average  interest-bearing
liabilities decreased from $725.6 million at March 31, 2001 to $706.8 million at
March 31, 2002. The decrease in average  interest-bearing  liabilities is due to
an increase in average deposits of approximately $77.9 million.  This was offset
primarily by a decrease in reverse  repurchase  agreements  of $43.6 million and
FHLB advances of $55.2 million.

NET INTEREST INCOME
-------------------

Net interest  income was $7.8 million for the three months ended March 31, 2002,
as compared to $6.4 million for the three  months ended March 31, 2001.  The net
interest margin was 4.32% for the three months ended March 31, 2002, compared to
3.32% for the three months ended March 31, 2001.  With the reduction in interest
rates, it is expected that the Bank's yield on interest  earning assets and cost
of  deposits  and  borrowings  will  continue to  decline.  Consequently,  it is
expected that a substantial portion of the Bank's loan portfolio will be subject
to refinancing at lower rates.  It is expected that the  refinancing of loans at
lower rates and repricing of loans tied to prime or treasury  rates will outpace
the repricing of deposits and borrowings.  Should interest rates remain at these
historically  low  levels,  the Bank could  experience  a reduced  margin in the
second half of fiscal 2002.



                                       18
<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 MARCH 31, 2001 AND 2002

PROVISION FOR LOAN LOSSES
-------------------------

The  provision for loan losses was $225,000 for the three months ended March 31,
2001  compared to $255,000 for the three  months  ended March 31, 2002.  For the
three months ended March 31, 2002, net charge-offs  were $71,000 compared to net
charge-offs of $227,000 for the three months ended March 31, 2001. The allowance
for loan  losses as a  percentage  of total  loans was 1.41% at March 31,  2002,
compared  to 1.42% at  September  30,  2001 and 1.37% at March 31,  2001.  Loans
delinquent 90 days or more were 1.06% of total loans at March 31, 2002, compared
to .64% at September  30, 2001.  The allowance for loan losses was 134% of loans
delinquent more than 90 days at March 31, 2002, as compared to 220% at September
30, 2001.  Management  believes  that the current level of allowance is adequate
considering the Company's current loss experience and delinquency trends,  among
other criteria.

OTHER INCOME
------------

For the three  months  ended  March 31,  2002,  other  income  was $1.7  million
compared to $2.2 million for the three months ended March 31, 2001.  As a result
of increased  transaction account balances of approximately $37.5 million,  fees
and service  charges from deposit  accounts  were  $743,000 for the three months
ended March 31, 2002,  compared to $667,000 for the three months ended March 31,
2001.  Gain on sale of loans was $256,000 for the quarter  ended March 31, 2002,
compared to  $330,000  for the quarter  ended March 31,  2001.  Loss on sales of
securities was $60,000 for the quarter ended March 31, 2002,  compared to a gain
of $327,000 for the quarter ended March 31, 2001.  Other income was $808,000 for
the three  months  ended March 31,  2002,  as compared to $971,000 for the three
months ended March 31, 2001.

GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------

General and  administrative  expenses  were $4.6  million for the quarter  ended
March 31, 2001  compared to $5.2  million for the quarter  ended March 31, 2002.
Salaries  and  employee  benefits  were $2.7  million for the three months ended
March 31, 2001, as compared to $3.1 million for the three months ended March 31,
2002 primarily due to the addition of new Sales Centers and additional  business
banking  Associates.  Also as a result  of new  Sales  Centers,  net  occupancy,
furniture  and fixtures and data  processing  expenses  increased  $144,000 when
comparing  the two periods.  The Bank had eleven,  twelve and sixteen  operating
Sales  Centers  at  September  30,  1999,   2000,   2001  and  March  31,  2002,
respectively. Other expenses were $964,000 for the quarter ended March 31, 2002,
compared to $856,000  for the quarter  ended March 31,  2001.  This  increase is
primarily attributed to the Bank's name change from Coastal Federal Savings Bank
to Coastal  Federal  Bank.  As a result of this  change,  the Bank has  incurred
additional  marketing  expenses  of $38,000  and a loss on the  disposal  of old
signage of $60,000.

INCOME TAXES
------------

Income  taxes were $1.3  million  for the three  months  ended  March 31,  2001,
compared to $1.5 million for the three months ended March 31, 2002.

EXTRAORDINARY ITEM
-------------------

The extraordinary item for the quarter ended March 31, 2002 relates to penalties
incurred  from the early  repayment of advances  from FHLB of  $196,000,  net of
income taxes of $74,000.


                                       19
<PAGE>



PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS - CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 2001 AND 2002

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE SIX MONTHS ENDED
---------------------------------------------------------------------------
MARCH 31, 2001 AND 2002.
------------------------

GENERAL
-------

Net income  increased from $4.4 million for the six months ended March 31, 2001,
to $4.9 million for the six months ended March 31, 2002, or 10.8%.  Net interest
income  increased  $3.0 million  primarily as a result of a decrease in interest
income of $4.7 million offset by a decrease of $7.7 million in interest expense.
Provision  for loan losses  increased  slightly from $495,000 for the six months
ended March 31, 2001, to $505,000 for the six months ended March 31, 2002. Other
income decreased  $8,000.  General and  administrative  expenses  increased $1.8
million.

INTEREST INCOME
---------------

Interest  income for the six months  ended March 31,  2002,  decreased  to $26.4
million as compared to $31.1  million for the six months  ended March 31,  2001.
The earning  asset  yield for the six months  ended  March 31,  2002,  was 7.39%
compared  to a yield of 8.45%  for the six  months  ended  March 31,  2001.  The
average yield on loans  receivable  for the six months ended March 31, 2002, was
7.83%  compared to 9.02% for the six months ended March 31,  2001.  The yield on
investments  decreased to 6.36% for the six months  ended March 31,  2002,  from
7.06% for the six months ended March 31, 2001. Total average earning assets were
$719.5  million for the six months  period ended March 31, 2002,  as compared to
$725.6 million for the six month period ended March 31, 2001.

INTEREST EXPENSE
----------------

Interest expense on  interest-bearing  liabilities was $10.8 million for the six
months  ended March 31,  2002,  as compared to $18.5  million for the six months
ended March 31,  2001.  The average  cost of deposits  for the six months  ended
March 31, 2002,  was 2.54%  compared to 4.28% for the six months ended March 31,
2001.  The cost of  interest-bearing  liabilities  was 3.08% for the six  months
ended March 31,  2002,  as compared to 5.07% for the six months  ended March 31,
2001. Total average  interest-bearing  liabilities decreased from $725.6 million
at March 31, 2001 to $702.0 million at March 31, 2002.

NET INTEREST INCOME
-------------------

Net interest  income was $15.5  million for the six months ended March 31, 2002,
as compared to $12.6  million for the six months ended March 31,  2001.  The net
interest margin increased to 4.31% for the six months ended March 31, 2002, from
3.38% for the six months ended March 31, 2001.




                                       20
<PAGE>





PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS - CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 2001 AND 2002

PROVISIONS FOR LOAN LOSSES
--------------------------

The provisions for loan losses  increased  slightly from $495,000 for the period
ended March 31, 2001,  to $505,000 for the six months ended March 31, 2002.  For
the six months ended March 31, 2002, net charge-offs  were $236,000  compared to
net  charge-offs  of  $400,000  for the six months  ended  March 31,  2001.  The
allowance  for loan losses as a percentage of total loans was 1.41% at March 31,
2002,  compared to 1.42% at September  30, 2001.  Management  believes  that the
current level of allowance is adequate  considering  the Company's  current loss
experience and delinquency trends, among other criteria.

OTHER INCOME
------------

For the six months ended March 31, 2002 and 2001, other income was $3.9 million.
Fees and  service  charges  for the six months  ended  March 31,  2002 were $1.5
million  compared to $1.2 million for the six months ended March 31, 2001.  As a
result of falling  interest  rates,  particularly in the first quarter of fiscal
2002, the Bank experienced  significant  refinancing of its adjustable  mortgage
loans.  The majority of these loans were  refinanced  into fixed rate mortgages,
which were sold to the secondary market. As a result,  gain on sale of loans was
$480,000 for the six months  ended March 31, 2001,  compared to $812,000 for the
six months ended March 31, 2002. Gain on sale of securities was $356,000 for the
six months ended March 31, 2001, compared to gains of $71,000 for the six months
ended March 31,  2002.  Other  income was $1.6  million for the six months ended
March 31,  2002,  compared to $2.0  million  for the six months  ended March 31,
2001.

GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------

General and  administrative  expenses  increased  from $8.7  million for the six
months ended March 31, 2001 to $10.5  million for the six months ended March 31,
2002.  Salaries and employee benefits increased $1.0 million, or 19.8% primarily
due  to  staffing  for  new  Sales  Centers  and  additional   business  banking
Associates.  Other expenses were $2.1 million for the six months ended March 31,
2002,  compared to $1.6 million for the six months  ended March 31,  2001.  This
increase is primarily  attributed to the Bank's name change from Coastal Federal
Savings Bank to Coastal  Federal Bank. As a result of this change,  the Bank has
incurred  additional  marketing expenses of $83,000 and a loss from the disposal
of old signage of $60,000. In addition, the Bank disposed of telephone equipment
and incurred a loss of $120,000.

INCOME TAXES
------------

Income  taxes  increased  from $2.6  million for the six months  ended March 31,
2001,  to $3.1 million for the six months  ended March 31, 2002,  as a result of
increased income before taxes.

EXTRAORDINARY ITEM
------------------

The  extraordinary  item for the six  months  ended  March 31,  2002  relates to
prepayment  penalties on advances from FHLB of $676,000,  net of income taxes of
$257,000.


                                       21
<PAGE>

PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 2001 AND 2002


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 March 31, 2002:
 Total Capital:                    $63,953     13.25%          $38,609       8.00%         $48,261     10.00%
   (To Risk Weighted Assets)
 Tier 1 Capital:                   $58,093     12.04%              N/A        N/A          $28,957      6.00%
   (To Risk Weighted Assets)
 Tier 1 Capital:                   $58,093      7.30%          $31,937       4.00%         $39,921      5.00%
   (To Total Assets)
 Tangible Capital:                 $58,093      7.30%          $11,976       1.50%             N/A        N/A
   (To Total Assets)

</TABLE>



                                      22
<PAGE>


PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 2001 AND 2002


IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
---------------------------------------

In July 2001,  the FASB issued  Statement No. 141,  Business  Combinations,  and
Statement No. 142, Goodwill and Other Intangible Assets.  Statement 141 requires
that the purchase  method of  accounting  be used for all business  combinations
initiated  after  June  30,  2001  as  well  as  all  purchase  method  business
combinations  completed  after  June 30,  2001.  Statement  141  also  specifies
criteria  intangible  assets acquired in a purchase method business  combination
must meet to be recognized and reported apart from goodwill.  Statement 142 will
require that  goodwill and  intangible  assets with  indefinite  useful lives no
longer be amortized,  but instead  tested for  impairment  at least  annually in
accordance  with the  provisions of Statement  142.  Statement 142 also requires
that  intangible  assets with  estimable  useful lives be  amortized  over their
respective  estimated  useful  lives to their  estimated  residual  values,  and
reviewed for  impairment in accordance  with  Statement No. 121,  Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The
Company adopted  Statement 141 in July 2001 and adopted Statement 142 on October
1, 2001.  The  Company  does not have any  intangible  assets  affected by these
standards.

In August  2001,  the  Financial  Accounting  Standards  Board  issued SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived  Assets which  addresses
the  financial  accounting  and  reporting  for the  impairment  or  disposal of
long-lived  assets.  While  SFAS 144  supersedes  SFAS 121,  Accounting  for the
Impairment of Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of, it
retains many of the fundamental provisions of that Statement.  The provisions of
SFAS  144 are  effective  for  financial  statements  issued  for  fiscal  years
beginning  after  December 15,  2001,  and interim  periods  within those fiscal
years.  The Company will adopt SFAS 144 on October 1, 2002 and does not expect a
material impact from its adoption.


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.



                                       23
<PAGE>




PART I.  FINANCIAL INFORMATION
Item 3.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 2001 AND 2002


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

At March 31, 2002, the Company does not believe there are material changes which
have occurred in market risk disclosures included in the Company's Annual Report
to Stockholders  for the year ended  September 30, 2001,  filed as an exhibit to
the Company's Annual Report on form 10-K.


                                       24

<PAGE>





PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

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

     The  Company is not a  defendant  in any  lawsuits.  The  subsidiaries  are
defendants in lawsuits arising out of the normal course of business.  Based upon
current information received from counsel representing the subsidiaries in these
matters,  the Company believes none of the lawsuits would have a material impact
on the Company's financial status.

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
         ---------------------------------------------------
At the Company's annual stockholders meeting held on January 30, 2002 the
following items were ratified:

(a)      The election as directors of all nominees:  James C. Benton and
     James P. Creel.

At the meeting,  a total of 10,643,646 votes were entitled to be cast. Votes for
Benton were 8,465,939 with 22,672  withheld;  and votes for Creel were 8,465,700
with 23,850 withheld.

The  directors  whose terms  continued  and the years their terms  expire are as
follows:  James H. Dusenbury (2004), Michael C. Gerald (2004), James T. Clemmons
(2003), Frank A. Thompson, II (2003) and G. David Bishop (2003).

Item 5.  Other Information

     Not Applicable.



                                       25
<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 (1)

                (b)   Certificate of Amendment to Certificate of
                      Incorporation of Coastal Financial Corporation (6)

                (c)   Bylaws of Coastal Financial Corporation (1)

             10 (a)   Employment Agreement with Michael C. Gerald (2)

                (b)   Employment Agreement with Jerry L. Rexroad (2)

                (c)   Employment Agreement with Phillip G. Stalvey (4)

                (d)   Employment Agreement with Jimmy R. Graham (2)

                (e)   Employment Agreement with Steven J. Sherry (7)

                (f)   1990 Stock Option Plan (2)

                (g)   Directors Performance Plan (3)

                (h)   Loan Agreement with Bankers Bank (5)

                (i)   Coastal Financial Corporation 2000 Stock Option Plan (8)


     (b)  No reports on Form 8-K have been filed during the quarter covered by
          this report.


_____________


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

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

(3)  Incorporated by reference to the definitive proxy statement for the 1996
     Annual Meeting of Stockholders.

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

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



                                       26
<PAGE>




PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

(6)  Incorporated by reference to March 31, 1998 Form 10-Q filed with Securities
     and Exchange Commission on May 15, 1998.

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

(8)  Incorporated by reference to the definitive proxy statement for the 2000
     Annual Meeting of Stockholders filed December 22, 1999.




                                       27
<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

May 15, 2002                          /s/ Michael C. Gerald
------------                          ---------------------
Date                                  Michael C. Gerald
                                      President and Chief Executive Officer



May 15, 2002                          /s/ Jerry L. Rexroad
------------                          --------------------
Date                                  Jerry L. Rexroad
                                      Executive Vice President and
                                      Chief Financial Officer






                                       28