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

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

                                    FORM 10-Q

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

               For the Quarter Ended June 30, 1997

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

               For the transition period from ________ to __________

                         Commission File Number: 0-19684

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


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


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

Registrant's telephone number, including area code  (803) 448-5151

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

                           YES    [ X ]        NO    [   ]


         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of (June 30, 1997).

Common Stock $.01 Par Value Per Share                         4,640,751 Shares
--------------------------------------------------------------------------------
(Class)                                                           (Outstanding)
<PAGE>
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER AND NINE MONTHS ENDED JUNE 30, 1997

                               TABLE OF CONTENTS

PART 1-      Consolidated Financial Statements

Item
       1.    Financial Statements (unaudited):

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

             Consolidated Statements of Operations for the three
             months ended June 30, 1996 and 1997                     

             Consolidated Statements of Operations for the nine
             months ended June 30, 1996 and 1997                     

             Consolidated Statements of Cash Flows for the nine
             months ended June 30, 1996 and 1997                     

             Consolidated Statements of Stockholders' Equity         

             Notes to Consolidated Financial Statements              

       2.    Management's Discussion and Analysis of
             Financial Condition                                     

       3.    Management's Discussion and Analysis of Operations
             for the three months ended June 30, 1996 and 1997       

       3.    Management's Discussion and Analysis of Operations
             for the nine months ended June 30, 1996 and 1997        

Part II - Other Information

Item
       1.    Legal Proceedings                                       

       2.    Changes in Securities                                   

       3.    Default Upon Senior Securities                          

       4.    Submission of Matters to a Vote of Securities Holders   

       5.    Other Materially Important Events                       

       6.    Exhibits and Reports on Form 8-K                        

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

                                                      September 30,     June 30,
                                                           1996           1997
                                                       ---------      ---------
                                                              (Unaudited)
                                                         (Dollars in thousands)
<S>                                                    <C>            <C>
ASSETS:
Cash & amounts due from banks ....................     $  15,639      $  14,057
Short-term interest-bearing deposits .............         5,222          2,597
Investment securities held to maturity
   (market value of $332 at September 30, 1996....           330           --
Investment securities available for sale .........        17,141         29,330
Mortgage-backed securities available for sale ....        27,029         42,939
Loans receivable (net of allowance for
   loan losses of $4,172 at September 30,
   1996 and $4,600 at June 30, 1997) .............       370,368        389,423
Loans receivable held for sale ...................         6,803          5,332
Real estate acquired through foreclosure .........           323            545
Office property and equipment, net ...............         5,736          5,981
Federal Home Loan Bank stock, at cost ............         5,228          4,737
Accrued interest receivable on loans .............         2,444          2,965
Accrued interest receivable on investments .......           526            880
Other assets and deferred charges ................         2,923          3,975
                                                       ---------      ---------
                                                       $ 459,712      $ 502,761
                                                       =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
Deposits .........................................     $ 313,430      $ 331,996
Securities sold under agreements to
   repurchase ....................................         5,333         40,256
Advances from Federal Home Loan Bank .............       104,553         92,329
Drafts outstanding ...............................         1,922          1,046
Advances by borrowers for property taxes
  and insurance ..................................         1,435          1,103
Accrued interest payable .........................           798            848
Other liabilities ................................         4,560          4,159
                                                       ---------      ---------
  Total liabilities ..............................       432,031        471,737
                                                       ---------      ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 
(CONTINUED)

                                                      September 30,     June 30,
                                                           1996           1997
                                                       ---------      ---------
                                                              (Unaudited)
                                                         (Dollars in thousands)
<S>                                                    <C>            <C>
STOCKHOLDERS' EQUITY:
Serial preferred stock, 1,000,000 shares
   authorized and unissued .......................          --             --
Common stock, $.01 par value, 5,000,000
   shares authorized;  4,589,007 shares at
   September 30, 1996 and 4,640,751 shares
   at June 30, 1997 issued and outstanding .......            46             46
Additional paid-in capital .......................         8,698          8,698
Retained earnings ................................        20,015         22,351
Treasury stock, at cost (54,161 and 15,543
  shares, respectively) ..........................        (1,185)          (390)
Unrealized gain (loss) on securities available
  for sale, net of income taxes ..................           107            319
                                                       ---------      ---------
  Total stockholders' equity .....................        27,681         31,024
                                                       ---------      ---------
                                                       $ 459,712      $ 502,761
                                                       =========      =========



SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997

                                                         1996            1997
                                                     -----------     -----------
                                                             (Unaudited)
                                                        (Dollars in thousands)
<S>                                                  <C>             <C>
Interest income:
   Loans receivable ............................     $     7,890     $     8,542
   Investment securities .......................             235             513
   Mortgage-backed securities ..................             546             713
   Other .......................................              77              38
                                                     -----------     -----------
   Total interest income .......................           8,748           9,806
                                                     -----------     -----------

Interest expense:
   Deposits ....................................           2,833           3,410
   Securities sold under agreement to
     repurchase ................................             101             523
   Advances from Federal Home Loan Bank ........           1,727           1,280
                                                     -----------     -----------
   Total interest expense ......................           4,661           5,213
                                                     -----------     -----------
   Net interest income .........................           4,087           4,593
Provision for loan losses ......................             300             190
                                                     -----------     -----------
   Net interest income after provision
     for loan losses ...........................           3,787           4,403
                                                     -----------     -----------

Other income:
   Fees and service charges ....................             379             367
   Income (loss) from real estate owned ........             183             (33)
   Income from real estate held for investment .              79            --
   Gain on sale of loans receivable, net .......             212             225
   Gain on sale of securities available for sale            --                 3
   Other income ................................             438             432
                                                     -----------     -----------
                                                           1,291             994
                                                     -----------     -----------

General and administrative expenses:
   Salaries and employee benefits ..............           1,578           1,714
   Net occupancy, furniture and fixtures
     and data processing expense ...............             722             677
   FDIC insurance premium ......................             156              52
   Other expenses ..............................             659             556
                                                     -----------     -----------
                                                           3,115           2,999
                                                     -----------     -----------

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997
(CONTINUED)

                                                         1996            1997
                                                     -----------     -----------
                                                             (Unaudited)
                                                        (Dollars in thousands)
<S>                                                  <C>             <C>

Earnings before income taxes ...................           1,963           2,398

Income taxes ...................................             729             882
                                                     -----------     -----------

Net income .....................................     $     1,234     $     1,516
                                                     ===========     ===========

Earnings per common share ......................     $       .26     $       .31
                                                     ===========     ===========

Weighted average common equivalent
  shares outstanding ...........................       4,797,000       4,898,000
                                                     ===========     ===========

Dividends per share ............................     $      .075     $       .09
                                                     ===========     ===========



SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

                                                      1996              1997
                                                   -----------      -----------
                                                           (Unaudited)
                                                      (Dollars in thousands)
<S>                                                <C>              <C>
Interest income:
   Loans receivable ..........................     $    23,636      $    24,939
   Investment securities .....................             451            1,123
   Mortgage-backed securities ................           1,259            1,761
   Other .....................................             387              209
                                                   -----------      -----------
   Total interest income .....................          25,733           28,032
                                                   -----------      -----------

Interest expense:
   Deposits ..................................           8,621           10,116
   Securities sold under agreement to
     repurchase ..............................             228              854
   Advances from Federal Home Loan Bank ......           5,254            3,906
                                                   -----------      -----------
   Total interest expense ....................          14,103           14,876
                                                   -----------      -----------
   Net interest income .......................          11,630           13,156
Provision for loan losses ....................             640              540
                                                   -----------      -----------
   Net interest income after provision
     for loan losses .........................          10,990           12,616
                                                   -----------      -----------

Other income:
   Fees and service charges ..................           1,023            1,209
   Income (loss) from real estate owned ......             201             (106)
   Income from real estate held for investment             148              278
   Gain on sale of loans receivable, net .....             809              628
   Gain (loss) on sale of securities
    available for sale .......................             (12)              33
   Other income ..............................           1,189            1,287
                                                   -----------      -----------
                                                         3,358            3,329
                                                   -----------      -----------

General and administrative expenses:
   Salaries and employee benefits ............           4,641            5,051
   Net occupancy, furniture and fixtures
     and data processing expense .............           2,086            2,133
   FDIC insurance premium ....................             461              231
   Other expenses ............................           1,674            1,955
                                                   -----------      -----------
                                                         8,862            9,370
                                                   -----------      -----------

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997
(CONTINUED)

                                                      1996              1997
                                                   -----------      -----------
                                                           (Unaudited)
                                                      (Dollars in thousands)
<S>                                                <C>              <C>
Earnings before income taxes .................           5,486            6,575

Income taxes .................................           2,027            2,405
                                                   -----------      -----------

Net income ...................................     $     3,459      $     4,170
                                                   ===========      ===========

Earnings per common share ....................     $       .72      $       .86
                                                   ===========      ===========

Weighted average common equivalent
  shares outstanding .........................       4,781,000        4,865,000
                                                   ===========      ===========

Dividends per share ..........................     $      .225      $       .24
                                                   ===========      ===========






SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997
                                                                       1996           1997
                                                                   ---------      ---------
                                                                          (Unaudited)
                                                                         (In thousands)
<S>                                                                <C>            <C>
Cash flows from operating activities:
  Net earnings ...............................................     $   3,459      $   4,170
  Adjustments to reconcile net earnings
       to net cash provided by (used in) operating activities:
       Income from real estate
        held for investment ..................................          (148)          (278)
       Depreciation ..........................................           540            643
       Provision for loan losses .............................           640            540
Origination of loans receivable
         held for sale .......................................       (34,600)       (29,652)
Proceeds from sales of loans receivable
         held for sale .......................................        31,366         31,123
(Increase) decrease in:
      Other assets and deferred charges ......................        (1,277)        (1,052)
      Accrued interest receivable ............................          (952)          (875)
Increase (decrease) in:
      Accrued interest payable ...............................           (14)            50
      Other liabilities ......................................           628           (401)
                                                                   ---------      ---------
        Net cash provided by (used in)
             operating activities ............................          (358)         4,268
                                                                   ---------      ---------
Cash flows from investing activities:
  Purchases of investment securities
       available for sale ....................................       (21,535)       (20,023)
  Proceeds from sales of investment
       securities available for sale .........................         7,000          2,399
 Proceeds from maturities of investment
      securities available for sale ..........................         1,000          5,936
 Proceeds from maturities of mortgage-backed
      securities available for sale ..........................          --              949
  Purchases of mortgage-backed securities
       available for sale ....................................       (10,686)       (24,636)
 Proceeds from sales of mortgage-backed
       securities available for sale .........................         8,068          4,712
  Origination of loans receivable, net .......................       (95,238)      (103,523)
  Purchase of loans receivable ...............................       (12,448)        (3,065)
  Principal collected on loans receivable
       and mortgage-backed securities, net ...................        76,356         89,517
  Proceeds from sale of real estate
       acquired through foreclosure, net .....................           946            135
  Purchases of office properties and
      equipment ..............................................          (787)          (888)
  Purchases of FHLB stock, net ...............................        (1,508)           491
  Other investing activities, net ............................            96             51
                                                                   ---------      ---------
      Net cash used in
             investing activities ............................       (48,736)       (47,945)
                                                                   ---------      ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART 1.  FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997 
(CONTINUED)

                                                         1996             1997
                                                      ---------       ---------
                                                              (Unaudited)
                                                            (In thousands)
<S>                                                   <C>             <C>
Cash flows from financing activities:
  Increase in deposits, net ....................      $  18,795       $  18,566
  Increase in securities sold
   under agreement to repurchase, net ..........          3,188          34,923
  Proceeds from FHLB advances ..................         75,850         122,470
  Repayment of FHLB advances ...................        (48,352)       (134,694)
  Decrease in advance payments by borrowers
     for property taxes and insurance ..........           (509)           (332)
  Decrease in drafts outstanding, net ..........           (801)           (876)
  Dividend to stockholders .....................         (1,059)         (1,198)
  Other financing activities, net ..............            281             611
                                                      ---------       ---------
  Net cash provided by financing activities ....         47,393          39,470
                                                      ---------       ---------

Net decrease
   in cash and cash equivalents ................         (1,701)         (4,207)
                                                      ---------       ---------
Cash and cash equivalents at beginning
  of the period ................................         11,201          20,861
                                                      ---------       ---------
Cash and cash equivalents at end
  of the period ................................      $   9,500       $  16,654
                                                      =========       =========

Supplemental information:
  Interest paid ................................      $  25,747       $  14,826
                                                      =========       =========

  Income taxes paid ............................      $   2,237       $   1,410
                                                      =========       =========

Supplemental schedule of non-cash investing
  and financing transactions:
  Transfer of mortgage loans to real estate
     acquired through foreclosure ..............      $     471       $     357
                                                      =========       =========

Collateralization of mortgage loans to FHLMC
     participation certificates ................      $  19,366       $    --
                                                      =========       =========

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

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

COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                          Additional                                                      Total
                             Common         Paid-In        Retained       Treasury                    Stockholders'
                              Stock         Capital        Earnings         Stock          Other          Equity
                           -----------    -----------     -----------    -----------    -----------    -----------
                                                                  (Unaudited)
                                                                 (In thousands)
<S>                        <C>            <C>             <C>            <C>            <C>            <C>
Balance at September
   30, 1995                $        46    $     8,698     $    18,674    $   (2,598)    $       - -    $    24,820
Exercise of stock
   options                         - -            - -           (863)            970            - -            107
Issuance of shares
     in acquisition
     of Coastal Federal
  Mortgage                         - -            - -            (67)            443            - -            376
Cash paid for
  fractional shares                - -            - -            (17)            - -            - -           (17)
Cash dividends                     - -            - -         (1,433)            - -            - -        (1,433)
Unrealized gain on
  securities available
  for sale, net of
  income taxes                     - -            - -             - -            - -            107            107
Net income                         - -            - -           3,721            - -            - -          3,721
                           -----------    -----------     -----------    -----------    -----------    -----------

Balance at September
  30, 1996                 $        46    $     8,698     $    20,015    $   (1,185)    $       107    $    27,681
Exercise of stock
  options                          - -            - -           (636)            795            - -            159
Cash dividends                     - -            - -         (1,198)            - -            - -        (1,198)
Change in unrealized gain
  on securities available
  for sale, net of
  income taxes                     - -            - -             - -            - -            212          (212)
Net income                         - -            - -           4,170            - -            - -          4,170
                           -----------    -----------     -----------    -----------    -----------    -----------

Balance at June
   30, 1997                $        46    $     8,698     $    22,351    $     (390)    $       319    $    31,024
                            ==========     ==========      ==========          =====     ==========     ==========



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

COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  BASIS OF PRESENTATION

The accompanying  unaudited  consolidated  financial statements were prepared in
accordance with  instructions for Form 10-Q and,  therefore,  do not include all
disclosures  necessary  for a  complete  presentation  of  financial  condition,
results  of  operations,  cash  flows and  changes  in  stockholders'  equity in
conformity  with generally  accepted  accounting  principles.  All  adjustments,
consisting only of normal recurring accruals, which in the opinion of management
are necessary for fair  presentation of the interim financial  statements,  have
been  included.  The results of operations  for the three and nine month periods
ended June 30, 1997 are not  necessarily  indicative of the results which may be
expected for the entire fiscal year.  These  consolidated  financial  statements
should be read in conjunction with the Company's audited consolidated  financial
statements and related notes for the year ended September 30, 1996,  included in
the Company's 1996 Annual Report to Stockholders.  The principal business of the
Company is conducted by its  wholly-owned  subsidiary,  Coastal  Federal Savings
Bank  ("the  Bank").  The  information  presented  hereon,  therefore,   relates
primarily to the Bank.

(2)  LOANS RECEIVABLE, NET

Loans receivable, net consist of the following:
<TABLE>
<CAPTION>

                                                     September 30,     June 30,
                                                          1996           1997
                                                      ---------       ---------
                                                              (Unaudited)
                                                            (In thousands)
<S>                                                   <C>             <C>
First mortgage loans:
   Single family to 4 family units .............      $ 228,192       $ 232,409
   Other, primarily commercial
    real estate ................................         66,335          77,822
   Construction loans ..........................         34,566          38,870
Consumer and commercial loans:
   Installment consumer loans ..................         28,600          30,772
   Mobile home loans ...........................          1,103           1,401
   Deposit account loans .......................            436           1,211
   Equity lines of credit ......................         12,441          13,736
   Commercial and other loans ..................         21,170          17,995
                                                      ---------       ---------
                                                        392,843         414,216
Less:
   Allowance for loan losses ...................          4,172           4,600
   Deferred loan fees (costs) ..................           (286)           (370)
   Undisbursed portion of loans in process .....         18,589          20,563
                                                      ---------       ---------
                                                      $ 370,368       $ 389,423
                                                      =========       =========
</TABLE>
<PAGE>
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in the  allowance  for loan losses  consist of the following for the
nine months ended:
<TABLE>
<CAPTION>
                                                              June 30,
                                                       1996               1997
                                                     -------            -------
                                                            (Unaudited)
                                                          (In thousands)
<S>                                                  <C>                <C>
Beginning allowances .....................           $ 3,578            $ 4,173
Provision for loan losses ................               640                540
Allowance on acquired loans ..............              --                   25
Loan recoveries ..........................                70                 57
Loan charge-offs .........................              (251)              (195)
                                                     -------            -------

Ending allowance .........................           $ 4,037            $ 4,600
                                                     =======            =======

</TABLE>

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

(3)  DEPOSITS

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

                                    September 30, 1996            June 30, 1997
                                  ---------------------     ------------------------ 
                                               Weighted                     Weighted
                                    Amount       Rate         Amount          Rate
                                  --------       ----       --------          ----
                                                   (Unaudited)
                                                 (In thousands)
<S>                               <C>            <C>        <C>               <C>
Transaction accounts .......      $140,577       3.24%      $155,150          3.26%
Passbook accounts ..........        42,840       2.66         37,790          2.64
Certificate accounts .......       130,013       5.64        139,056          5.67
                                  --------       ----       --------          ----
                                  $313,430       4.12%      $331,996          4.19%
                                  ========       ====       ========          ====
</TABLE>
<PAGE>
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4)  ADVANCES FROM FEDERAL HOME LOAN BANK

Advances from Federal Home Loan Bank ("FHLB") consist of the following:
<TABLE>
<CAPTION>
                                    September 30, 1996           June 30, 1997
                                  ---------------------    ------------------------
                                               Weighted                    Weighted
                                   Amount        Rate        Amount          Rate
Maturing within:                                    (Unaudited)
                                                   (In thousands)
<S>                               <C>            <C>       <C>               <C>
1 year .....................      $ 54,404       5.68%     $ 58,400          5.96%
2 years ....................        20,120       5.90        15,505          6.28
3 years ....................        13,105       6.35         5,661          6.21
4 years ....................         6,861       6.46         3,746          6.44
5 years and thereafter .....        10,063       6.90         9,017          6.87
                                  --------       ----      --------          ----
                                  $104,553       5.97%     $ 92,329          6.15%
                                  ========       ====      ========          ====
</TABLE>

At September 30, 1996,  and June 30, 1997,  the Bank had pledged first  mortgage
loans with unpaid balances of  approximately  $223.4 million and $217.2 million,
respectively, as collateral for FHLB advances.

(5)  EARNINGS PER SHARE

Earnings per share for the three and nine month  periods ended June 30, 1996 and
1997,  are  computed by dividing net  earnings by the  weighted  average  common
equivalent  shares  outstanding  during the  respective  periods.  Common  share
equivalents include dilutive common stock option share equivalents determined by
using  the  treasury  stock  method.  All  share  and per  share  data have been
retroactively restated for all common stock dividends.

(6)  COMMON STOCK DIVIDENDS

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

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

DISCUSSION OF FINANCIAL  CONDITION  CHANGES FROM  SEPTEMBER 30, 1996 TO JUNE 30,
1997

GENERAL

The Company reported $4.2 million in net earnings for the nine months ended June
30,  1997,  compared to net  earnings of $3.5  million for the nine months ended
June 30, 1996. Net interest income increased $1.5 million  primarily as a result
of an  increase  in  interest  income of $2.3  million  which  was  offset by an
increase in interest  expense of $773,000.  Provision for loan losses  decreased
from  $640,000 for the nine months ended June 30, 1996, to $540,000 for the nine
months ended June 30, 1997.  Other  income  decreased  from $3.4 million for the
nine months ended June 30, 1996,  to $3.3 million for the nine months ended June
30, 1997.  General and  administrative  expenses increased from $8.9 million for
the nine months ended June 30,  1996,  to $9.4 million for the nine months ended
June 30, 1997.

Liquid assets,  consisting of cash,  interest-bearing  deposits,  and investment
securities  available  for sale,  increased  from $38.3 million at September 30,
1996, to $46.0 million at June 30, 1997.


LIQUIDITY AND CAPITAL RESOURCES

In accordance with Office of Thrift Supervision (OTS)  regulations,  the Company
is required to maintain  specific  levels of cash and  "liquid"  investments  in
qualifying  types of United States  Treasury and Federal  Agency  Securities and
other  investments  generally  having  maturities  of five  years or  less.  The
required  level  of  such  investments  is  calculated  on  a  "liquidity  base"
consisting of net withdrawable accounts and short-term borrowings,  and is equal
to 5% of such amount.  Short-term  liquid  assets must be 1.0% of the  liquidity
base.

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

The Company's  liquidity  was 8.0% and 7.0% at September 30, 1996,  and June 30,
1997, respectively as calculated in accordance with OTS regulations.

The principal  sources of funds for the Company are cash flows from  operations,
consisting  mainly of mortgage,  consumer and commercial  loan payments,  retail
customer deposits, advances from the FHLB, and loan sales.

The  principal use of cash flows is the  origination  of loans  receivable.  The
Company  originated loans receivable of $129.8 million for the nine months ended
June 30,  1996,  compared to $133.2  million for the nine months  ended June 30,
1997.  The majority of these loan  originations  were financed  through loan and
mortgage-backed  securities principal repayments which amounted to $76.4 million
and $89.5  million  for the nine month  periods  ended  June 30,  1996 and 1997,
respectively.  In addition,  the Company  sells  certain  loans in the secondary
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997

LIQUIDITY AND CAPITAL RESOURCES- CONTINUED

market  to  finance  future  loan  originations.  Generally,  these  loans  have
consisted  only of  mortgage  loans  which have been  originated  in the current
period.  For the nine month period  ended June 30, 1996,  the Company sold $31.4
million in  mortgage  loans  compared to $31.1  million  sold for the nine month
period ended June 30, 1997.

The Bank experienced an increase of $18.6 million in deposits for the nine month
period ended June 30, 1997,  primarily as a result of increased  certificate  of
deposit  growth.  During fiscal 1997,  the Company  funded a portion of its loan
growth and increase in securities available for sale with advances from the FHLB
and reverse repurchase agreements.

At June 30,  1997,  the Company had  commitments  to  originate  $3.6 million in
mortgage  loans,  and $30.2 million in  undisbursed  lines of credit,  which the
Company expects to fund from normal operations.

At June 30, 1997,  the Company had $113.7  million of  certificates  of deposits
which were due to mature within one year.  Based upon previous  experience,  the
Company  believes  that a major portion of these  certificates  will be renewed.
Additionally,  at June 30, 1997, the Company had pledged first mortgage loans in
the amount of $217.4 million to the FHLB which could support approximately $70.6
million in additional advances.

As  a  condition  of  deposit  insurance,   current  Federal  Deposit  Insurance
Corporation(FDIC)  regulations  require that the Bank  calculate  and maintain a
minimum  regulatory  capital  requirement on a quarterly  basis and satisfy such
requirement as of the  calculation  date and throughout the quarter.  The Bank's
capital is approximately $30.4 million at June 30, 1997,  exceeding tangible and
core capital requirements by $22.9 million and $15.4 million,  respectively.  At
June 30, 1997,  the Bank's  risk-based  capital of  approximately  $33.9 million
exceeded its current risk-based capital requirement by $9.1 million.
(For further information see Regulatory Matters).

MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF OPERATIONS  FOR THE THREE MONTHS ENDED
JUNE 30, 1996 AND 1997

GENERAL

Net income increased from $1.2 million for the three months ended June 30, 1996,
to $1.5 million for three months  ended June 30,  1997,  or 22.9%.  Net interest
income increased  $506,000  primarily as a result of an increase of $1.1 million
in interest income offset by a $552,000 increase in interest expense.  Provision
for loan losses decreased from $300,000 for three months ended June 30, 1996, to
$190,000  for the three  months  ended June 30,  1997.  Other  income  decreased
$297,000 primarily as a result of losses from real estate owned.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997

INTEREST INCOME

Interest  income for the three  months  ended June 30,  1997,  increased to $9.8
million as compared to $8.7  million for the three  months  ended June 30, 1996.
The earning  asset yield for the three  months  ended June 30,  1997,  was 8.51%
compared  to a yield of 8.34% for the three  months  ended  June 30,  1996.  The
average yield on loans  receivable for the three months ended June 30, 1997, was
8.77%  compared to 8.44% for the three months ended June 30, 1996.  The increase
in yield primarily resulted from repricing of adjustable-rate  mortgage loans as
a result of higher  general market rates during the second and third quarters of
fiscal  year 1997.  The yield on  investments  increased  to 6.90% for the three
months ended June 30, 1997,  from 6.55% for the three months ended June 30, 1996
as a result of higher  general  market  rates.  Total  average  interest-earning
assets were $464.6  million for the quarter  ended June 30, 1997, as compared to
$424.9 million for the quarter ended June 30, 1996.

INTEREST EXPENSE

Interest expense on interest-bearing  liabilities was $5.2 million for the three
months ended June 30, 1997,  as compared to $4.7 million for June 30, 1996. As a
result of increased  general market rates,  the average cost of deposits for the
three  months  ended June 30,  1997,  was 4.13%  compared to 3.95% for the three
months ended June 30, 1996. The cost on  interest-bearing  liabilities was 4.60%
for the three  months  ended June 30,  1997,  as compared to 4.52% for the three
months ended June 30,  1996.  The cost of FHLB  advances and reverse  repurchase
agreements  was 5.96% and 5.69%,  respectively,  for the three months ended June
30, 1997. For the three months ended June 30, 1996, the cost was 5.86% and 5.75%
respectively.  Total average interest-bearing  liabilities increased from $412.7
million at June 30, 1996 to $453.3 million at June 30, 1997.

NET INTEREST INCOME

Net  interest  income was $4.6 million for the three months ended June 30, 1997,
as compared to $4.1 million for the three  months  ended June 30, 1996.  The net
interest  margin  increased  to 4.02% for the three  months ended June 30, 1997,
from 3.82% for the three months ended June 30, 1996.

PROVISION FOR LOAN LOSSES

The provision for loan losses  decreased from $300,000 for the period ended June
30, 1996,  to $190,000  for the three months ended June 30, 1997.  For the three
months  ended June 30,  1997,  net  charge-offs  were  $68,000  compared  to net
charge-offs  of $119,000 for the three months ended June 30, 1996. The allowance
for loan  losses as a  percentage  of total  loans  was 1.17% at June 30,  1997,
compared to 1.11% at September 30, 1996.  Loans  delinquent 90 days or more were
 .13% of total loans at June 30, 1997,  compared to .12% at  September  30, 1996.
The allowance for loan losses was 905% of loans  delinquent more than 90 days at
June 30, 1997,  as compared to 938% at September 30, 1996.  Management  believes
that the current  level of  allowances  is adequate  considering  the  Company's
current loss experience and delinquency trends, among other criteria.
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997

OTHER INCOME

For the three  months  ended June 30,  1997,  other  income  decreased  23.0% to
$994,000  compared to $1.3  million for the three  months  ended June 30,  1996.
Losses from real estate owned were $33,000 for the quarter  ended June 30, 1997,
compared  to  income  of  $183,000   for  the  quarter   ended  June  30,  1996.
Additionally,  income from real estate held for  investment  was $79,000 for the
quarter  ended June 30, 1996.  There was no sales of real estate for the quarter
ended June 30, 1997.

GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses  decreased from $3.1 million for the three
months ended June 30, 1996,  to $3.0 million for the three months ended June 30,
1997.  Salaries and employee benefits  increased  slightly from $1.6 million for
the three months ended June 30, 1996, to $1.7 million for the three months ended
June 30,  1997.  Net  occupancy,  furniture  and  fixtures  and data  processing
expenses  decreased  $45,000  when  comparing  the two periods.  FDIC  insurance
premiums were $156,000 for the quarter ended June 30, 1996,  compared to $52,000
for the quarter ended June 30, 1997 as a result of the  recapitalization  of the
SAIF during 1996.  As a result of the  recapitalization  the  Company's  deposit
insurance  premiums  decreased from .23% of insured deposits to .065% of insured
deposits.  Other  expenses  were  $556,000 for the quarter  ended June 30, 1997,
compared to $659,000 for the quarter ended June 30, 1996.

INCOME TAXES

Income taxes  increased  from $729,000 for the three months ended June 30, 1996,
to $882,000 for the three  months ended June 30, 1997,  as a result of increased
income before taxes.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION FOR THE NINE MONTHS ENDED JUNE
30, 1996 AND 1997

GENERAL

Net income  increased from $3.5 million for the nine months ended June 30, 1996,
to $4.2  million for nine months  ended June 30,  1997,  or 20.6%.  Net interest
income  increased $1.5 million  primarily as a result of an increase in interest
income of $2.3  million  offset by an increase of $773,000 in interest  expense.
Provision for loan losses decreased from $640,000 for nine months ended June 30,
1996,  to  $540,000  for the nine  months  ended  June 30,  1997.  Other  income
increased $29,000. General and administrative expenses increased $508,000.

INTEREST INCOME

Interest  income for the nine months  ended June 30,  1997,  increased  to $28.0
million as compared to $25.7  million for the nine months  ended June 30,  1996.
The  earning  asset  yield for the nine months  ended June 30,  1997,  was 8.44%
compared  to a yield of 8.45%  for the nine  months  ended  June 30,  1996.  The
<PAGE>
PART 1. FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

INTEREST INCOME - CONTINUED

average yield on loans  receivable  for the nine months ended June 30, 1997, was
8.65%  compared to 8.54% for the nine months ended June 30,  1996.  The yield on
investments  increased to 6.80% for the nine months  ended June 30,  1997,  from
6.47% for the nine months ended June 30, 1996. Total average earning assets were
$445.7  million for the nine month period  ended June 30,  1997,  as compared to
$409.7 million for the nine month period ended June 30, 1996.

INTEREST EXPENSE

Interest expense on interest-bearing  liabilities was $14.9 million for the nine
months  ended June 30,  1997,  as compared to $14.1  million for the nine months
ended June 30, 1996. The average cost of deposits for the nine months ended June
30, 1997,  was 4.15%  compared to 4.10% for the nine months ended June 30, 1996.
The cost of  interest-bearing  liabilities  was 4.57% for the nine months  ended
June 30,  1997,  as compared to 4.70% for the nine months  ended June 30,  1996.
Total average interest-bearing liabilities increased from $398.7 million at June
30, 1996 to $432.3 million at June 30, 1997.

NET INTEREST INCOME

Net interest  income was $13.2  million for the nine months ended June 30, 1997,
as compared to $11.6  million for the nine months ended June 30,  1996.  The net
interest margin increased to 3.87% for the nine months ended June 30, 1997, from
3.75%  for the nine  months  ended  June 30,  1996.  Since the  majority  of the
Company's  assets are  adjustable  rate mortgage  loans which  reprice  annually
versus many of the Company's liabilities which reprice more quickly, the Company
may  experience a decrease in its interest  rate spread  should  interest  rates
increase rapidly.

PROVISION FOR LOAN LOSSES

The provision for loan losses  decreased from $640,000 for the period ended June
30, 1996,  to $540,000  for the nine months  ended June 30,  1997.  For the nine
months  ended June 30,  1997,  net  charge-offs  were  $138,000  compared to net
charge-offs  of $181,000 for the nine months ended June 30, 1996.  The allowance
for loan  losses as a  percentage  of total  loans  was 1.17% at June 30,  1997,
compared to 1.11% at September  30, 1996.  Management  believes that the current
level  of  allowances  is  adequate   considering  the  Company's  current  loss
experience and delinquency trends, among other criteria.

OTHER INCOME

For the nine months ended June 30, 1997, other income decreased slightly to $3.3
million compared to $3.4 million for the nine months ended June 30, 1996. Fees &
service  charges  for the nine  months  ended  June 30,  1996 were $1.0  million
compared to $1.2 million for the nine months  ended June 30,  1997.  Income from
real estate held for  investment  increased by $130,000  when  comparing the two
periods. This is the result of a land sale that occurred in the first quarter of
fiscal 1997.  Other income increased from $1.2 million for the nine months ended
June 30, 1996  compared to $1.3 million for the nine months ended June 30, 1997.
These were partially offset by a decrease in gain on sale of loans of $181,000 &
an increase in losses from real estate owned of $307,000.
<PAGE>
PART 1. FINANCIAL INFORMATION

COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION
COMPARISONS OF THE NINE MONTHS ENDED JUNE 30, 1996 AND 1997

GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses  increased  from $8.9 million for the nine
months ended June 30,  1996,  to $9.4 million for the nine months ended June 30,
1997. Salaries and employee benefits increased $410,000, or 8.8%. Net occupancy,
furniture and fixtures and data  processing  expense  increased  $47,000.  Other
expense was $1.7 million for the nine months  ended June 30,  1996,  compared to
$2.0  million  for the nine  months  ended  June  30,  1997.  This is  primarily
attributed to increased marketing expenses of $49,000, checking related expenses
of $88,000, expenses related to ATM and debit cards of $45,000 and legal fees of
$26,000. These were partially offset by a decrease in FDIC premiums of $230,000.

INCOME TAXES

Income  taxes  increased  from $2.0  million for the nine months  ended June 30,
1996,  to $2.4 million for the nine months  ended June 30, 1997,  as a result of
increased income before taxes.

REGULATORY MATTERS

 Under the FDICIA prompt corrective action provisions applicable to banks, to be
categorized  as  "Well  Capitalized",  the  institution  must  maintain  a total
risk-based  capital ratio as set forth in the following table and not be 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
                                  ------      -----        ------      -----       ------      -----
<S>                              <C>          <C>         <C>          <C>        <C>          <C>
As of June 30, 1997:
 Total Capital: ............     $33,924      10.94%      $24,803      8.00%      $31,004      10.00%
   (To Risk Weighted Assets)
 Tier 1 Capital: ...........     $30,391       9.80%      $   N/A       N/A%      $18,602       6.00%
   (To Risk Weighted Assets)
 Tier 1 Capital: ...........     $30,391       6.08%      $15,006      3.00%      $25,010       5.00%
   (To Total Assets)
 Tangible Capital: .........     $30,391       6.08%      $ 7,503      1.50%      $   N/A        N/A%
   (To Total Assets)

</TABLE>

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

In October  1995,  the FASB  issued SFAS No.  123,  "Accounting  for Stock Based
Compensation"  which is effective  for  financial  statements  issued for fiscal
years beginning  after December 15, 1995. SFAS No. 123 provides  guidance on the
<PAGE>
PART 1. FINANCIAL INFORMATION

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

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED

valuation of compensation  costs arising from both fixed and  performance  stock
compensation  plans.  SFAS No. 123 encourages  but does not require  entities to
account for stock compensation awards based on their estimated fair value on the
date they are  granted.  Entities  can  continue  to follow  current  accounting
requirements,  which  generally  do not  result in an  expense  charge  for most
options. However, they must disclose in a footnote to their financial statements
what the effect on net income and  earnings  per share  would have been had they
used the  fair  value  model.  The  Company  expects  to  continue  its  current
accounting  practice.  Therefore,  this  statement  will  generally  not  have a
material effect on future operating results.

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

In February  1997,  the FASB issued SFAS No. 128,  Earnings per Share,  which is
effective for both interim and annual  periods  ending after  December 15, 1997.
This statement supersedes  Accounting  Principles Board Opinion No. 15, Earnings
per Share.  The purpose of this statement is to simplify  current  reporting and
make  U.S.  reporting  comparable  to  international  standards.  The  statement
requires  dual  presentation  of basic and diluted EPS by entities  with complex
capital structures (as defined by the statement).  The Company  anticipates that
adoption of this standard will not have a material affect on EPS.

Also, in February 1997, the FASB issued SFAS No. 129,  Disclosure of information
about Capital Structure, which is effective for financial statements for periods
ending  after  December  15,  1997.  This  statement  applies to both public and
nonpublic entities. The new statement requires no change for entities subject to
the existing requirements. The Company anticipates that adoption of the standard
will not have a material affect on the Company.

In June 1997, the Financial  Accounting  Standards Board (FASB) issued Statement
of  Financial  Accounting  Standards  No. 130,  Reporting  Comprehensive  Income
(Statement 130).  Statement 130 establishes  standards for reporting and display
of  comprehensive  income and its  components  in a full set of general  purpose
financial  statements.  Enterprises  are  required to  classify  items of "other
comprehensive income" by their nature in the financial statement and display the
balance of other  comprehensive  income  separately  in the equity  section of a
statement of financial position. Statement 130 is effective for both interim and
annual  periods  beginning  after  December 15,  1997.  Earlier  application  is
permitted.  Comparative  financial  statements  provided for earlier periods are
required to be  reclassified  to reflect the provisions of this  statement.  The
Company will adopt  Statement 130 effective March 31, 1998, and will provide the
required disclosures in the Company's Form 10-Q.
<PAGE>
PART 1. FINANCIAL INFORMATION

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

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED

In June 1997, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting  Standards No. 131,  Disclosures  about  Segments of an
Enterprise and Related  Information  (Statement 131).  Statement 131 establishes
standards  for the way public  business  enterprises  are to report  information
about  operating  segments in annual  financial  statements  and requires  those
enterprises to report selected  information about operating  segments in interim
financial  reports  issued  to  shareholders.  Statement  131 is  effective  for
financial  statements for periods  beginning  after  December 15, 1997.  Earlier
application  is  encouraged.  In the initial  year of  application,  comparative
information for earlier years is to be restated,  unless it is impractical to do
so.  Statement  131 need not be applied to interim  financial  statements in the
initial year of its application, but comparative information for interim periods
in the initial year of application shall be reported in financial statements for
interim  periods in the second year of application.  It is not anticipated  that
this standard will materially effect the Company.

EFFECT ON INFLATION AND CHANGING PRICES

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with generally  accepted  accounting  principles which require the
measurement  of  financial  position  and  results  of  operations  in  terms of
historical dollars,  without  consideration of change in the relative purchasing
power over time due to inflation.  Unlike most industrial  companies,  virtually
all of the assets and  liabilities  of a financial  institution  are monetary in
nature.  As a  result,  interest  rates  have a  more  significant  impact  on a
financial  institution's  performance  than the effects of  inflation.  Interest
rates do not necessarily  change in the same magnitude as the price of goods and
services.

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

Item 1.  Legal Proceedings

     Not Applicable.

Item 2.  Changes In Securities

     Not Applicable.

Item 3.  Defaults Upon Senior Securities

     Not Applicable.

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

     Not Applicable.

Item 5.  Other Information

     Not Applicable.

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

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

               3  (b)   Bylaws of Coastal Financial Corporation*

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

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

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

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

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

                  (f)   Employment Agreement with Richard L. Granger**

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

                  (h)   1990 Stock Option Plan**

                  (i)   Directors Performance Plan***

                  (j)   Credit agreement between Coastal Financial Corporation 
                        and Bank  South  dated as of December 19, 1995****


               27       Financial Data Schedule

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

*         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 1997 Annual
          Meeting of Stockholders.

****      Incorporated  by reference to current report on Form 8-K dated January
          17, 1996.
<PAGE>


                                   SIGNATURES

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



                                           COASTAL FINANCIAL CORPORATION

August 13, 1997                            /s/Michael C. Gerald  
---------------                            --------------------     
Date:                                      Michael C. Gerald
                                           President and Chief Executive Officer

August 13, 1997                            /s/Jerry L. Rexroad  
---------------                            -------------------  
Date:                                      Jerry L. Rexroad
                                           Executive Vice President and
                                           Chief Financial Officer