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 December 31, 1999

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

               For the transition period from ________ to __________

                         Commission File Number: 0-19684

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


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


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

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

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

                           YES    [   ]        NO    [ X ]


     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of December 31, 1999.

Common Stock $.01 Par Value Per Share                         6,712,008 Shares
--------------------------------------------------------------------------------
               (Class)                                          (Outstanding)
<PAGE>
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1999

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

PART I-      Consolidated Financial Information

Item
     1. Consolidated Financial Statements (unaudited):

             Consolidated Statements of Financial Condition
             as of September 30, 1999 and December 31, 1999

             Consolidated Statements of Operations for the three
             months ended December 31, 1998 and 1999

             Consolidated Statements of Cash Flows for the three
             months ended December 31, 1998 and 1999

             Consolidated Statements of Stockholders' Equity
             and Comprehensive Income as of December 31, 1998 and
             December 31, 1999

             Notes to Consolidated Financial Statements

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

     3. Quantitative and Qualitative Disclosures about
             Market Risk


Part II - Other Information

Item
     1. Legal Proceedings

     2. Changes in Securities and Use of Proceeds

     3. Defaults Upon Senior Securities

     4. Submission of Matters to a Vote of Securities Holders

     5. Other information

     6. Exhibits and Reports on Form 8-K

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

<TABLE>
<CAPTION>
                                                     September 30,   December 31,
                                                         1999           1999
                                                       ---------      ---------
                                                             (Unaudited)
                                                            (In thousands)
<S>                                                    <C>            <C>
ASSETS:
Cash & amounts due from banks                          $  21,988      $  22,092
Short-term interest-bearing deposits                       2,245         11,447
Investment securities available for sale                   6,063          8,987
Mortgage-backed securities available for sale            182,115        180,191
Loans receivable (net of allowance for
   loan losses of $6,430 at September 30,
   1999 and $6,616 at December 31, 1999)                 455,351        476,202
Loans receivable held for sale                            16,636         19,171
Real estate acquired through foreclosure                      96           --
Office property and equipment, net                        11,236         11,647
Federal Home Loan Bank stock, at cost                      8,201          7,639
Accrued interest receivable on loans                       2,861          2,709
Accrued interest receivable on investments                 1,333          1,434
Other assets and deferred charges                          4,888          2,600
                                                       ---------      ---------
                                                       $ 713,013      $ 744,119
                                                       =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
Deposits                                               $ 399,673      $ 418,258
Securities sold under agreements to
   repurchase                                             96,948        121,143
Advances from Federal Home Loan Bank                     164,024        152,774
Other borrowings                                           1,569          1,569
Drafts outstanding                                         1,383          1,837
Advances by borrowers for property taxes
  and insurance                                            1,346            412
Accrued interest payable                                   1,156          2,655
Other liabilities                                          5,677          4,593
                                                       ---------      ---------
  Total liabilities                                      671,776        703,241
                                                       ---------      ---------

STOCKHOLDERS' EQUITY:
Serial preferred stock, 1,000,000 shares
   authorized and unissued                                  --             --
Common stock, $.01 par value, 15,000,000
   shares authorized; 6,751,389 shares at
   September 30, 1999 and 6,712,008 shares
   at December 31, 1999 issued and outstanding                67             67
Additional paid-in capital                                 9,320         14,114
Retained earnings                                         34,288         31,289
Treasury stock, at cost (23,100 and 62,950
   shares, respectively)                                    (356)          (866)
Accumulated other comprehensive
  loss, net of tax                                        (2,082)        (3,726)
                                                       ---------      ---------
  Total stockholders' equity                              41,237         40,878
                                                       ---------      ---------
                                                       $ 713,013      $ 744,119
                                                       =========      =========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
                                                         1998             1999
                                                     -----------      -----------
                                                              (Unaudited)
                                                        (Dollars in thousands,
                                                        except per share data)
<S>                                                  <C>              <C>
Interest income:
    Loans receivable                                 $     9,339      $    10,273
    Investment securities                                    168              525
     Mortgage-backed securities                            2,322            2,584
     Other                                                   102              261
                                                     -----------      -----------
     Total interest income                                11,931           13,643
                                                     -----------      -----------

Interest expense:
   Deposits                                                3,854            3,758
   Securities sold under agreements to
     repurchase                                              755            1,569
   Advances from Federal Home Loan Bank                    2,219            2,292
                                                     -----------      -----------
     Total interest expense                                6,828            7,619
                                                     -----------      -----------
   Net interest income                                     5,103            6,024
Provision for loan losses                                    185              245
                                                     -----------      -----------
   Net interest income after provision
     for loan losses                                       4,918            5,779
                                                     -----------      -----------

Other income:
   Fees and service charges                                  470              567
   Income (loss) from real estate owned                      (17)             (20)
   Gain on sale of loans receivable, net                     361              191
   Gain on sale of securities available for sale             182               11
   Other income                                              486              714
                                                     -----------      -----------
                                                           1,482            1,463
                                                     -----------      -----------
General and administrative expenses:
   Salaries and employee benefits                          2,028            2,297
   Net occupancy, furniture and fixtures
     and data processing expense                             892              979
   FDIC insurance premium                                     53               58
   Other expenses                                            631              775
                                                     -----------      -----------
                                                           3,604            4,109
                                                     -----------      -----------
Earnings before income taxes                               2,796            3,133

Income taxes                                               1,006            1,128
                                                     -----------      -----------
Net income                                           $     1,790      $     2,005
                                                     ===========      ===========

Earnings per common share
  Basic                                              $       .27      $       .30
                                                     ===========      ===========
  Diluted                                            $       .26      $       .29
                                                     ===========      ===========

Weighted average common shares
  outstanding - basic                                  6,587,000        6,742,000
                                                     ===========      ===========

Weighted average common shares
  outstanding - diluted                                6,932,000        6,851,000
                                                     ===========      ===========

Dividends per share                                  $      .067      $       .07
                                                     ===========      ===========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
                                                           1998          1999
                                                         --------      --------
                                                               (Unaudited)
                                                             (In thousands)
<S>                                                      <C>           <C>
Cash flows from operating activities:
  Net income                                             $  1,790      $  2,005
  Adjustments to reconcile net earnings
       to net cash provided by (used in)
      operating activities:
       Depreciation                                           279           335
       Provision for loan losses                              185           245
Origination of loans receivable
         held for sale                                    (23,612)       (8,826)
Proceeds from sales of loans receivable
         held for sale                                     18,650         6,291
(Increase) decrease in:
      Other assets and deferred charges                       131         2,288
      Accrued interest receivable                            (104)           51
Increase (decrease) in:
      Accrued interest payable                               (383)        1,499
     Other liabilities                                        623        (1,084)
                                                         --------      --------
        Net cash provided by (used in)
             operating activities                          (2,441)        2,804
                                                         --------      --------
Cash flows from investing activities:
  Purchases of investment securities
       available for sale                                    (640)       (5,015)
  Proceeds from sales of investment
       securities available for sale                        2,000         2,000
 Proceeds from maturities of investment
      securities available for sale                         4,400          --
  Purchases of mortgage-backed securities
       available for sale                                 (47,609)      (27,300)
 Proceeds from sales of mortgage-backed
       securities available for sale                       17,533        20,031
  Origination of loans receivable, net                    (46,770)      (37,838)
  Purchase of loans receivable                               --          (4,027)
  Principal collected on loans receivable, net             29,673        20,769
  Principal collected on mortgage-backed
       securities, net                                     25,818         6,612
  Proceeds from sale of real estate
       acquired through foreclosure, net                     --              96
  Purchases of office properties and
      equipment                                            (1,099)         (746)
  Sales (purchases) of FHLB stock, net                     (1,385)          562
                                                         --------      --------
      Net cash used in
             investing activities                         (18,079)      (24,856)
                                                         --------      --------
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1999 (CONTINUED)
<TABLE>
<CAPTION>
                                                           1998          1999
                                                         --------      --------
                                                               (Unaudited)
                                                             (In thousands)
<S>                                                      <C>           <C>
Cash flows from financing activities:
  Increase in deposits, net                              $  4,717      $ 18,585
  Increase (decrease) in securities sold
   under agreement to repurchase, net                      (8,273)       24,195
  Proceeds from FHLB advances                              82,600        86,650
  Repayment of FHLB advances                              (54,484)      (97,900)
 Repayments from other
    borrowings, net                                        (2,934)         --
 Decrease in advance payments by borrowers
     for property taxes and insurance, net                   (859)         (934)
  Increase in drafts outstanding, net                         131           454
  Repurchase of treasury stock, at cost                      --            (569)
  Dividends to stockholders                                  (444)         (473)
  Other financing activities, net                             490         1,350
                                                         --------      --------
  Net cash provided by financing
    activities                                             20,944        31,358
                                                         --------      --------

Net increase in cash and cash equivalents                     424         9,306
                                                         --------      --------
Cash and cash equivalents at beginning
  of the period                                            15,666        24,233
                                                         --------      --------
Cash and cash equivalents at end
  of the period                                          $ 16,090      $ 33,539
                                                         ========      ========

Supplemental information:
  Interest paid                                          $  7,211      $  6,120
                                                         ========      ========

  Income taxes paid                                      $     12      $    276
                                                         ========      ========

Supplemental schedule of non-cash investing and
  financing transactions:

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

Securitization of mortgage loans into
     mortgage-backed securities                          $   --        $  6,205
                                                         ========      ========

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
                                                                                      Accumulated
                                                                                     Other Compre-
                                              Additional                               hensive         Total
                                 Common        Paid-In       Treasury     Retained      Income      Stockholders'
                                  Stock        Capital         Stock      Earnings      (Loss)         Equity
                                 ---------    ------------   --------     --------  --------------- ------------
                                                      (Unaudited In thousands)
<S>                              <C>             <C>          <C>         <C>             <C>         <C>
Balance at September
  30, 1998                       $    64         $ 8,982      $  - -      $28,369         $   436     $37,851
Net income                           - -             - -         - -        1,790             - -       1,790
Other comprehensive
 income, net of tax:
Unrealized gains arising
 during period, net of
 taxes of $41,000                    - -             - -         - -          - -             107         - -
Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $69,000             - -             - -         - -          - -            (113)        - -
                                                                                          -------
Other comprehensive income           - -             - -         - -          - -              (6)         (6)
                                                                                          -------     -------
Comprehensive income                 - -             - -         - -          - -             - -       1,784
                                                                                                      -------
Exercise of stock
  options                            - -              48         - -          - -             - -          48
Cash dividends                       - -            - -          - -         (444)            - -        (444)

Balance at December
  31, 1998                       $    64         $ 9,030      $  - -      $29,715         $   430     $39,239
                                 =======         =======      ======      =======         =======     =======


Balance at September
  30, 1999                       $    64         $ 9,323      $ (356)     $34,288         $(2,082)    $41,237
Net income                           - -             - -         - -        2,005             - -       2,005
Other comprehensive
 income, net of tax:
Unrealized losses arising
 during period, net of
 taxes of $622,000                   - -             - -         - -          - -          (1,637)        - -
Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $4                  - -             - -         - -          - -            (7)          - -
                                                                                          -------
Other comprehensive loss             - -             - -         - -          - -          (1,644)     (1,644)
                                                                                          -------     -------
Comprehensive income                 - -             - -         - -          - -             - -         361
Treasury stock repurchases           - -             - -        (569)         - -             - -        (569)
Exercise of stock
  options                            - -             300          59          (37)            - -         322
Cash dividends                       - -             - -         - -         (473)            - -        (473)
Common stock dividend                  3           4,491         - -       (4,494)            - -         - -
                                 -------         -------      ------      -------         -------     -------
Balance at December
  31, 1999                       $    67         $14,114      $ (866)     $31,289         $(3,726)    $40,878
                                 =======         =======      ======      =======         =======     =======
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  BASIS OF PRESENTATION

The accompanying  unaudited  consolidated  financial statements were prepared in
accordance with  instructions for Form 10-Q and,  therefore,  do not include all
disclosures  necessary  for a  complete  presentation  of  financial  condition,
results  of  operations,  cash  flows and  changes  in  stockholders'  equity in
conformity  with generally  accepted  accounting  principles.  All  adjustments,
consisting only of normal recurring accruals, which in the opinion of management
are necessary for fair  presentation of the interim financial  statements,  have
been  included.  The  results of  operations  for the three month  period  ended
December 31, 1999 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, 1999,
included in the  Company's  1999 Annual  Report to  Stockholders.  The principal
business of the Company is conducted  by its  wholly-owned  subsidiary,  Coastal
Federal Savings Bank (the "Bank"). The information presented hereon,  therefore,
relates primarily to the Bank.


(2)  LOANS RECEIVABLE, NET

Loans receivable, net consists of the following:

                                                     September 30,  December 31,
                                                         1999           1999
                                                      ---------       ---------
                                                             (Unaudited)
                                                            (In thousands)
First mortgage loans:
   Single family to 4 family units                    $ 248,433       $ 263,281
   Other, primarily commercial
    real estate                                         114,931         118,341
   Construction loans                                    46,766          48,382
Consumer and commercial loans:
   Installment consumer loans                            20,026          18,366
   Mobile home loans                                      1,166           1,130
   Deposit account loans                                  1,521           1,552
   Equity lines of credit                                21,081          21,969
   Commercial and other loans                            22,818          26,553
                                                      ---------       ---------
                                                        476,742         499,574
Less:
   Allowance for loan losses                              6,430           6,616
   Deferred loan fees (costs), net                         (354)           (437)
   Undisbursed portion of loans in process               15,315          17,193
                                                      ---------       ---------
                                                      $ 455,351       $ 476,202
                                                      =========       =========
<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
three months ended:

                                                 Three Months Ended December 31,
                                                 -------------------------------
                                                         1998             1999
                                                        ------           ------
                                                        (Dollars in thousands)
Allowance at beginning of
 period ......................................          $5,668           $6,430
Allowance recorded on
 acquired loans ..............................            --                 50
Provision for loan losses ....................             185              245
                                                        ------           ------
Recoveries:
 Residential real estate .....................               4             --
 Commercial real estate ......................            --               --
 Consumer ....................................               5               21
                                                        ------           ------
   Total recoveries ..........................               9               21
                                                        ------           ------

Charge-offs:
 Residential real estate .....................            --                 10
 Commercial real estate ......................            --               --
 Consumer ....................................              67              120
                                                        ------           ------
   Total charge-offs .........................              67              130
                                                        ------           ------
   Net charge-offs ...........................              58              109
                                                        ------           ------
 Allowance at end of period ..................          $5,795           $6,616
                                                        ======           ======

Ratio of allowance to net
 loans outstanding at the
 end of the period ...........................            1.30%            1.34%
                                                        ======           ======

Ratio of net charge-offs
 to average loans outstanding
 during the period (annualized) ..............             .05%             .09%
                                                        ======           ======

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
                                                      At December 31, 1999
                                                    Percent of Loans in each
Balance at end of period applicable to:     Amount  category to total loans
                                            ------  -----------------------

Residential Real Estate..................... $1,871        71.00%
Commercial Real Estate......................  4,308        26.69
Consumer....................................    437         2.31
                                             ------       ------
                                             $6,616       100.00%
                                             ======       ======
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Non-accrual loans, which were over ninety days delinquent, totaled approximately
$2.3 million at December 31, 1999. For the three months ended December 31, 1999,
interest income,  which would have been recorded,  would have been approximately
$44,000 had  non-accruing  loans been current in accordance  with their original
terms.

(3)  DEPOSITS

Deposits consist of the following:

                                    September 30, 1999        December 31, 1999
                                  ----------------------    --------------------
                                                Weighted                Weighted
                                                Average                  Average
                                   Amount        Rate        Amount        Rate
                                  --------       ----       --------       ----
                                                    (Unaudited)
                                                  (In thousands)
Transaction accounts              $226,218       2.85%      $215,020       2.88%
Passbook accounts                   39,212       2.65         34,390       2.44
Certificate accounts               134,243       4.94        168,848       5.00
                                  --------       ----       --------       ----
                                  $399,673       3.54%      $418,258       3.70%
                                  ========       ====       ========       ====

At  September  30, 1999 and December  31,  1999,  respectively,  there were $5.3
million and $37.6 million of certificate  accounts originated by brokers.  These
accounts generally mature within 90 days of origination.

(4)  ADVANCES FROM FEDERAL HOME LOAN BANK

Advances from Federal Home Loan Bank ("FHLB") consist of the following:

                                    September 30, 1999        December 31, 1999
                                  ----------------------    --------------------
                                                Weighted                Weighted
                                                Average                  Average
                                   Amount        Rate        Amount        Rate
                                  --------       ----       --------       ----
                                                    (Unaudited)
                                                  (In thousands)
Maturing within:
1 year                            $ 15,461       5.85%      $ 30,661       5.92%
2 years                             38,946       5.56         34,245       6.12
3 years                              4,761       6.82          8,911       6.44
4 years                             37,357       5.28          2,457       6.39
5 years and thereafter              67,499       5.00         76,500       5.22
                                  --------       ----       --------       ----
                                  $164,024       5.33%      $152,774       5.65%
                                  ========       ====       ========       ====
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


At September  30,  1999,  and  December  31,  1999,  the Bank had pledged  first
mortgage loans with unpaid balances of  approximately  $212.1 million and $246.0
million,  respectively,  as collateral for FHLB advances.  At September 30, 1999
and  December  31,  1999,  included  in the four and five  years and  thereafter
maturities  were $101.5  million and $76.5 million  subject to call  provisions.
Call provisions are more likely to be exercised by the FHLB when rates rise.

(5)  EARNINGS PER SHARE

Basic earnings per share for the three month periods ended December 31, 1998 and
1999, are computed by dividing net income by the weighted  average common shares
outstanding  during the respective  periods.  Diluted earnings per share for the
three month periods ended  December 31, 1998 and 1999,  are computed by dividing
net earnings by the weighted  average  dilutive  shares  outstanding  during the
respective  periods.  All  share and per  share  data  have  been  retroactively
restated for all common stock splits and dividends.

(6)  COMMON STOCK DIVIDENDS

On May 6, 1998, the Company declared a four-for-three  stock split,  aggregating
approximately 1,562,000  shares. On November 10, 1999, the company declared a 5%
stock dividend aggregating approximately 321,000 shares.

(7)  DISCLOSURES REGARDING SEGMENTS

The Company adopted SFAS No. 131,  "Disclosures  about Segments of an Enterprise
and Related Information" in fiscal year 1999. SFAS No. 131 established standards
for the way that public businesses report  information about operating  segments
in annual  financial  statements  and  requires  that those  enterprises  report
selected  information  about  operating  segments in interim  financial  reports
issued to shareholders.  It also establishes  standards for related  disclosures
about products and services,  geographic areas, and major customers. The Company
adopted  SFAS  No.  131  without  any  impact  on their  consolidated  financial
statements.

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.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1999 TO
DECEMBER 31, 1999

LIQUIDITY AND CAPITAL RESOURCES

In accordance with Office of Thrift Supervision (OTS)  regulations,  the Company
is required to maintain  specific  levels of cash and  "liquid"  investments  in
qualifying  types  of  United  States  Treasury,   Federal  Agency   Securities,
mortgage-backed securities, and certain other investments. The required level of
such  investments  is  calculated  on  a  "liquidity  base"  consisting  of  net
withdrawable accounts and short-term borrowings, and is currently equal to 4% of
such amount.  At December 31, 1999, the Bank's  regulatory  liquidity  level was
approximately 12%.

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

The principal  sources of funds for the Company are cash flows from  operations,
consisting  mainly of mortgage,  consumer and commercial  loan payments,  retail
customer deposits,  advances from the FHLB, and loan sales. The principal use of
cash flows is the  origination  of loans  receivable and purchase of securities.
The Company  originated  loans  receivable of $70.4 million for the three months
ended  December 31, 1998,  compared to $46.7  million for the three months ended
December 31, 1999. A portion of these loan  originations  were financed  through
loan and  mortgage-backed  securities  principal  repayments,  which amounted to
$55.5 million and $27.4  million for the three month periods ended  December 31,
1998 and 1999, respectively. In addition, the Company sells certain loans in the
secondary  market to finance future loan  originations.  Generally,  these loans
have consisted only of mortgage loans, which have been originated in the current
period.  For the three month  period ended  December 31, 1998,  the Company sold
$18.7  million in mortgage  loans  compared to $6.3  million  sold for the three
month period ended December 31, 1999.

For the three month period ended December 31, 1998, the Company  purchased $48.2
million in investment and mortgage-backed securities. For the three month period
ended December 31, 1999, the Company  purchased  $32.3 million in investment and
mortgage-backed securities.  These purchases were funded primarily by repayments
of $6.6  million  within  the  securities  portfolio,  sales of  mortgage-backed
securities of $20.0 million,  short-term reverse repurchase  agreements and FHLB
advances.

The Bank  experienced  an  increase of $18.6  million in deposits  for the three
month period ended  December 31, 1999. For the three month period ended December
31, 1999,  transaction  accounts  decreased $11.2 million and passbook  accounts
decreased $4.8 million.  This was offset by an increase in certificate  accounts
of $34.6  million.  The increase in  certificate  accounts is primarily due to a
$32.3 million growth in brokered deposits.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES -- CONTINUED

At December 31, 1999,  the Company had  commitments to originate $4.1 million in
mortgage  loans,  and $33.0 million in  undisbursed  lines of credit,  which the
Company expects to fund from normal operations.

At  December  31,  1999,  the  Company  had $146.3  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 December  31,  1999,  the Company had  repurchase
agreement  lines of credit and  available  collateral  consisting  of investment
securities  and  mortgage-backed  securities of $48.8 million as well as federal
funds available of $15.0 million.

As a result of $2.0 million in net  earnings,  less the cash  dividends  paid to
stockholders  of   approximately   $473,000,   treasury  stock   repurchases  of
approximately  $569,000  and the net  change in  unrealized  loss on  securities
available  for sale,  net of income tax of $1.6  million,  stockholders'  equity
decreased  from $41.2 million at September 30, 1999 to $40.9 million at December
31, 1999.

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 $46.0 million at December 31,
1999,  exceeding the core capital  requirement by $16.1 million. At December 31,
1999, the Bank's risk-based capital of approximately  $51.0 million exceeded its
current   risk-based  capital   requirement  by  $18.2  million.   (For  further
information see Regulatory Capital Matters)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999

GENERAL

Net income  increased  from $1.8 million for the three months ended December 31,
1998, to $2.0 million for three months ended  December 31, 1999,  or 12.0%.  Net
interest income increased  $921,000 primarily as a result of an increase of $1.7
million in interest  income offset by a $791,000  increase in interest  expense.
Provision  for loan  losses  increased  from  $185,000  for three  months  ended
December  31, 1998,  to $245,000  for the three months ended  December 31, 1999.
General and  administrative  expense increased from $3.6 million for the quarter
ended  December 31, 1998,  to $4.1  million for the quarter  ended  December 31,
1999.
<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 DECEMBER 31, 1998 AND 1999

INTEREST INCOME

Interest income for the three months ended December 31, 1999, increased to $13.6
million as compared to $11.9  million for the three  months  ended  December 31,
1998.  The earning asset yield for the three months ended December 31, 1999, was
8.00% compared to a yield of 7.77% for the three months ended December 31, 1998.
The average yield on loans  receivable  for the three months ended  December 31,
1999,was  8.51%  compared to 8.82% for the three months ended December 31, 1998.
The yield on investments  increased to 6.83% for the three months ended December
31, 1999, from 6.49% for the three months ended December 31, 1998. Total average
interest-earning  assets were $690.6  million for the quarter ended December 31,
1999 as compared to $622.3  million for the quarter ended December 31, 1998. The
increase  in average  interest-earning  assets is due to an  increase in average
loans   receivable  of   approximately   $59.8  million  and  cash  in  FHLB  of
approximately $11.0 million.

INTEREST EXPENSE

Interest expense on interest-bearing  liabilities was $7.6 million for the three
months ended  December  31,  1999,  as compared to $6.8 million for December 31,
1998. Due to increased average transaction  deposits balances,  the average cost
of deposits for the three months ended  December 31, 1999, was 3.74% compared to
3.93% for the three months ended December 31, 1998. The cost of interest-bearing
liabilities  was 4.48% for the three months ended December 31, 1999, as compared
to 4.45% for the three months ended December 31, 1998. The cost of FHLB advances
and reverse  repurchase  agreements was 5.42% and 5.88%,  respectively,  for the
three months ended  December 31, 1999.  For the three months ended  December 31,
1998, the cost of FHLB advances and reverse repurchase  agreements was 5.32% and
5.79%, respectively.  Total average interest-bearing  liabilities increased from
$613.4  million at December 31, 1998 to $677.6 million at December 31, 1999. The
increase  in  average  interest-bearing  liabilities  is due to an  increase  in
average  deposits of approximately  $9.8 million,  FHLB advances of $2.2 million
and reverse repurchase agreements of $51.8 million.

NET INTEREST INCOME

Net interest  income was $6.0  million for the three  months ended  December 31,
1999, as compared to $5.1 million for the three months ended  December 31, 1998.
The net interest  margin was 3.52% for the three months ended December 31, 1999,
compared to 3.32% for the three months ended  December 31, 1998. At December 31,
1998,  the prime rate of interest  was 7.75%  compared to 8.50% at December  31,
1999. Should interest rates continue to increase, the Bank's net interest margin
will decline.
<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 DECEMBER 31, 1998 AND 1999

PROVISION FOR LOAN LOSSES

Due to growth in loans  receivable  of $20.9  million,  the  provision  for loan
losses  increased  from  $185,000  for the period ended  December  31, 1998,  to
$245,000  for the three months  ended  December  31, 1999.  For the three months
ended  December  31,  1999,  net  charge-offs  were  $109,000  compared  to  net
charge-offs  of $58,000  for the three  months  ended  December  31,  1998.  The
allowance  for loan losses as a percentage  of total loans was 1.34% at December
31,  1999,  compared to 1.36% at  September  30, 1999 and 1.30% at December  31,
1998.  Loans delinquent 90 days or more were .47% of total loans at December 31,
1999,  compared to .30% at September 30, 1999. The allowance for loan losses was
283% of loans  delinquent more than 90 days at December 31, 1999, as compared to
449% at  September  30,  1999.  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  December  31, 1999 and 1998,  other income was $1.5
million.  Fees and service  charges  were  $567,000  for the three  months ended
December 31, 1999,  compared to $470,000 for the three months ended December 31,
1998. During the quarter ended December 31, 1998, interest rates for thirty year
conforming loans were generally  ranging from 7.25% to 7.50% with no origination
fee.  These compare to rates ranging from 8.25% to 8.50% for the quarter  ending
December 31, 1999.  Given the rise in interest rates mortgage loan  refinancings
were greatly reduced. In addition,  adjustable rate, conforming loans increased.
Generally ARM conforming  loans have a smaller margin than fixed rate conforming
loans when sold in the secondary market.  As a result of these factors,  gain on
sale of loans was $191,000 for the quarter ended December 31, 1999,  compared to
$361,000 for the quarter ended December 31, 1998. Should interest rates continue
to  increase,  gain  on sale  of  loans  may  decline  further.  Gain on sale of
securities  was $11,000 for the three months ended December 31, 1999 compared to
$182,000 for the three months ended December 31, 1998. Other income was $714,000
for the quarter  ended  December  31, 1999  compared to $486,000 for the quarter
ended December 31, 1998. This is primarily due to increased commissions from the
sale of non-depository products and rental income.

GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses  increased from $3.6 million for the three
months  ended  December  31,  1998,  to $4.1  million for the three months ended
December 31, 1999.  Salaries and employee  benefits  increased from $2.0 million
for the three  months ended  December  31,  1998,  to $2.3 million for the three
months  ended  December  31, 1999  primarily  due to staffing  for two new Sales
Centers and a loan production office in Wilmington,  NC. Also as a result of the
three  office  additions,  net  occupancy,   furniture  and  fixtures  and  data
processing  expenses  increased  $87,000 when  comparing the two periods.  Other
expenses  were  $775,000 for the quarter  ended  December 31, 1999,  compared to
$631,000  for the quarter  ended  December 31,  1998.  This is primarily  due to
increased marketing expenses and professional fees.
<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 DECEMBER 31, 1998 AND 1999

INCOME TAXES

Income  taxes  increased  slightly  from $1.0 million for the three months ended
December 31, 1998, to $1.1 million for the three months ended December 31, 1999,
as a result of increased income before taxes.

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 December 31, 1999:
 Total Capital:                    $51,008         12.44%          $32,804             8.00%               $41,005          10.00%
   (To Risk Weighted Assets)
 Tier 1 Capital:                   $46,040         11.23%             $N/A              N/A%               $24,603           6.00%
   (To Risk Weighted Assets)
 Tier 1 Capital:                   $46,040          6.19%          $29,768             4.00%               $37,210           5.00%
   (To Total Assets)
 Tangible Capital:                 $46,040          6.19%          $11,163             1.50%                  $N/A            N/A%
   (To Total Assets)
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1999


IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards  ("SFAS") 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS 133 changes the previous  accounting
definition of a derivative and discusses the appropriateness of hedge accounting
for various forms of hedging  activities.  Under this standard,  all derivatives
are measured at fair value and recognized in the statement of financial position
as assets or liabilities.  As amended by SFAS 137, SFAS 133 is effective for all
fiscal  quarters of all fiscal years beginning after June 15, 2000, with earlier
adoption  permitted.  Management  does not expect that this standard will have a
material effect on the Company.

YEAR 2000

Before January 1, 2000, the Bank had  implemented  and  satisfactorily  tested a
comprehensive  plan to address  the  effect of the Year 2000 date  change on the
Bank's mission critical computer systems.  While there can be no assurances that
the Bank's Year 2000 plan has  effectively  addressed  the Year 2000 issue,  the
Bank has not been notified, and it is unaware of, any vendor or service provider
problems  related to Year 2000,  and all of the Bank's  systems  have  performed
properly since January 1, 2000.  Likewise,  the Bank is unaware of any Year 2000
issues that have materially impaired the ability of its borrowers to repay their
debts.

EFFECT ON INFLATION AND CHANGING PRICES

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with generally  accepted  accounting  principles which require the
measurement  of  financial  position  and  results  of  operations  in  terms of
historical dollars,  without  consideration of change in the relative purchasing
power over time due to inflation.  Unlike most industrial  companies,  virtually
all of the assets and  liabilities  of a financial  institution  are monetary in
nature.  As a  result,  interest  rates  have a  more  significant  impact  on a
financial  institution's  performance  than the effects of  inflation.  Interest
rates do not necessarily  change in the same magnitude as the price of goods and
services.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 3.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1999


Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At  December  31,  1999,  no  material  changes  have  occurred  in market  risk
disclosures included in the Company's Annual Report to Stockholders for the year
ended September 30, 1999.
<PAGE>
PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

Item 1.  Legal Proceedings

     The Company is not a party to any legal  proceedings at this time. The Bank
was a defendant in one significant  lawsuit. The action commenced on December 1,
1997,  and the  Plaintiffs  were  seeking  approximately  $1.5 million in actual
damages  as well as  punitive  damages.  The  causes  of  action  are  breach of
fiduciary  duties,  negligence,  fraud,  civil conspiracy and breach of contract
arising  out of a lending  relationship.  The  lawsuit  was  settled  during the
quarter ended December 31, 1999 with no material impact to the Bank's  financial
condition.

Item 2.  Changes In Securities and Use of Proceeds

     Not Applicable.

Item 3.  Defaults Upon Senior Securities

     Not Applicable.

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

     Not Applicable.

Item 5.  Other Information

     Not Applicable.

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

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

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

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

                     (c)   Bylaws of Coastal Financial Corporation**

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

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

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

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

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

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

                     (g)   1990 Stock Option Plan***

                     (h)   Directors Performance Plan****

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

                  27       Financial Data Schedule

     (b)  The  Company  filed a Form 8-K on  November  12,  1999 to  report  the
          signing of an agreement to sell its Florence,  South  Carolina  branch
          office to First Federal Savings and Loan Association of Cheraw. A copy
          of the agreement is filed as an exhibit to the Form 8-K.

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

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

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

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

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

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

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

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

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


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

                                           COASTAL FINANCIAL CORPORATION

February 14, 2000                           /s/ Michael C. Gerald
-----------------                          ----------------------
Date                                       Michael C. Gerald
                                           President and Chief Executive Officer

February 14, 2000                           /s/ Jerry L. Rexroad
-----------------                          ---------------------
Date                                       Jerry L. Rexroad
                                           Executive Vice President and
                                           Chief Financial Officer