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, 1998




      (   )    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, 1998.

Common Stock $.01 Par Value Per Share                         6,272,569 Shares
--------------------------------------------------------------------------------
(Class)                                                        (Outstanding)
<PAGE>
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1998

TABLE OF CONTENTS                                                  

PART I-      Consolidated Financial Information

Item  1.     Consolidated Financial Statements (unaudited):

             Consolidated Statements of Financial Condition
             as of September 30, 1998 and December 31, 1998        

             Consolidated Statements of Operations for the three
             months ended December 31, 1997 and 1998               

             Consolidated Statements of Cash Flows for the three
             months ended December 31, 1997 and 1998               

             Consolidated Statements of Stockholders' Equity       

             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.     Default Upon Senior Securities                              

      4.     Submission of Matters to a Vote of Securities Holders       

      5.     Other information                                           

      6.     Exhibits and Reports on Form 8-K                            

Signatures     

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

                                                       September 30,   December 31,
                                                            1998           1998
                                                          --------      --------
                                                                (Unaudited)
                                                          (Dollars in thousands)
<S>                                                       <C>           <C>     
ASSETS:
Cash & amounts due from banks ......................      $ 11,978      $ 11,690
Short-term interest-bearing deposits ...............         3,688         4,400
Investment securities available for sale ...........         9,841         4,048
Mortgage-backed securities available for sale ......       170,181       173,552
Loans receivable (net of allowance for
   loan losses of $5,668 at September 30,
   1998 and $5,795 at December 31, 1998) ...........       414,264       431,648
Loans receivable held for sale .....................        10,486        15,448
Real estate acquired through foreclosure ...........            35            35
Office property and equipment, net .................         9,001         9,821
Federal Home Loan Bank stock, at cost ..............         7,266         8,651
Accrued interest receivable on loans ...............         2,546         2,726
Accrued interest receivable on investments .........         1,324         1,248
Other assets and deferred charges ..................         2,950         2,819
                                                          --------      --------
                                                          $643,560      $666,086
                                                          ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
Deposits ...........................................      $386,321      $391,038
Securities sold under agreements to
   repurchase ......................................        59,214        50,941
Advances from Federal Home Loan Bank ...............       144,909       173,025
Other borrowings ...................................         6,437         3,503
Drafts outstanding .................................         1,615         1,746
Advances by borrowers for property taxes
  and insurance ....................................         1,329           470
Accrued interest payable ...........................         1,352           969
Other liabilities ..................................         4,532         5,155
                                                          --------      --------
  Total liabilities ................................       605,709       626,847
                                                          --------      --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(continued)

                                                       September 30,   December 31,
                                                            1998           1998
                                                          --------      --------
                                                                (Unaudited)
                                                          (Dollars in thousands)
<S>                                                       <C>           <C>     
STOCKHOLDERS' EQUITY:
Serial preferred stock, 1,000,000 shares
   authorized and unissued .........................          --            --
Common stock, $.01 par value, 15,000,000
   shares authorized; 6,263,777 shares at
   September 30, 1998 and 6,272,569 shares
   at December 31, 1998 issued and outstanding .....            63            63
Additional paid-in capital .........................         8,983         9,031
Retained earnings ..................................        28,369        29,715
Accumulated other comprehensive
  income, net of tax ...............................           436           430
                                                          --------      --------
  Total stockholders' equity .......................        37,851        39,239
                                                          --------      --------
                                                          $643,560      $666,086
                                                          ========      ========

</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998

                                                         1997              1998
                                                     -----------      -----------
                                                              (Unaudited)
                                                         (Dollars in thousands,
                                                         except per share data)
<S>                                                  <C>              <C>        
Interest income:
    Loans receivable ...........................     $     8,977      $     9,339
    Investment securities ......................             468              168
     Mortgage-backed securities ................             652            2,322
     Other .....................................              80              102
                                                     -----------      -----------
     Total interest income .....................          10,177           11,931
                                                     -----------      -----------
Interest expense:
   Deposits ....................................           3,602            3,854
   Securities sold under agreements to
     repurchase ................................             369              755
   Advances from Federal Home Loan Bank ........           1,476            2,219
                                                     -----------      -----------
     Total interest expense ....................           5,447            6,828
                                                     -----------      -----------
   Net interest income .........................           4,730            5,103
Provision for loan losses ......................             190              185
                                                     -----------      -----------
   Net interest income after provision
     for loan losses ...........................           4,540            4,918
                                                     -----------      -----------
Other income:
   Fees and service charges ....................             403              470
   Loss from real estate owned .................             (20)             (17)
  Income from real estate held for investment ..             218             --
   Gain on sale of loans receivable, net .......             357              361
   Gain on sale of securities available for sale              16              182
   Other income ................................             461              486
                                                     -----------      -----------
                                                           1,435            1,482
                                                     -----------      -----------
General and administrative expenses:
   Salaries and employee benefits ..............           1,884            2,028
   Net occupancy, furniture and fixtures
     and data processing expense ...............             789              892
   FDIC insurance premium ......................              52               53
   Other expenses ..............................             673              631
                                                     -----------      -----------
                                                           3,398            3,604
                                                     -----------      -----------
Earnings before income taxes ...................           2,577            2,796

Income taxes ...................................             950            1,006
                                                     -----------      -----------
Net income .....................................     $     1,627      $     1,790
                                                     ===========      ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998
(continued)

                                                         1997              1998
                                                     -----------      -----------
                                                              (Unaudited)
                                                         (Dollars in thousands,
                                                         except per share data)
<S>                                                  <C>              <C>        
Earnings per common share
  Basic ........................................     $       .26      $       .29
                                                     ===========      ===========
  Diluted ......................................     $       .25      $       .27
                                                     ===========      ===========

Weighted average common shares
  outstanding - basic ..........................       6,232,000        6,273,000
                                                     ===========      ===========

Weighted average common shares
  outstanding - diluted ........................       6,548,000        6,602,000
                                                     ===========      ===========

Dividends per share ............................     $     .0675      $       .07
                                                     ===========      ===========

</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998

                                                         1997            1998
                                                       --------        --------
                                                              (Unaudited)
                                                            (In thousands)
<S>                                                    <C>             <C>     
Cash flows from operating activities:
  Net earnings .................................       $  1,627        $  1,790
  Adjustments to reconcile net earnings
       to net cash provided by
      operating activities:
       Income from real estate
        held for investment ....................           (218)           --
       Depreciation ............................            239             279
       Provision for loan losses ...............            190             185
Origination of loans receivable
         held for sale .........................        (12,661)        (23,612)
Proceeds from sales of loans receivable
         held for sale .........................         14,214          18,650
(Increase) decrease in:
      Other assets and deferred charges ........           (179)            131
      Accrued interest receivable ..............           (217)           (104)
Increase (decrease) in:
      Accrued interest payable .................            119            (383)
     Other liabilities .........................            300             623
                                                       --------        --------
        Net cash provided by (used in)
             operating activities ..............          3,414          (2,441)
                                                       --------        --------
Cash flows from investing activities:
  Purchases of investment securities
       available for sale ......................         (8,808)           (640)
  Proceeds from sales of investment
       securities available for sale ...........          1,000           2,000
 Proceeds from maturities of investment
      securities available for sale ............          3,113           4,400
  Purchases of mortgage-backed securities
       available for sale ......................        (58,306)        (47,609)
 Proceeds from sales of mortgage-backed
       securities available for sale ...........          7,151          17,533
  Origination of loans receivable, net .........        (50,946)        (46,770)
  Purchase of loans receivable .................         (2,068)           --
 Principal collected on loans receivable
       and mortgage-backed securities, net .....         46,088          55,491
  Proceeds from sale of real estate
       acquired through foreclosure, net .......              4            --
  Purchases of office properties and
      equipment ................................           (542)         (1,099)
  Purchases of FHLB stock, net .................           (900)         (1,385)
                                                       --------        --------

      Net cash used in
             investing activities ..............        (64,214)        (18,079)
                                                       --------        --------
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998 (CONTINUED)

                                                            1997           1998
                                                         --------      --------
                                                               (Unaudited)
                                                             (In thousands)
<S>                                                      <C>           <C>     
Cash flows from financing activities:
  Increase (decrease) in deposits, net .............     $ (3,368)     $  4,717
  Increase (decrease) in securities sold
   under agreement to repurchase, net ..............       42,830        (8,273)
  Proceeds from FHLB advances ......................       82,080        82,600
  Repayment of FHLB advances .......................      (53,200)      (54,484)
 Proceeds(repaymments)from other borrowings,net ....          472        (2,934)
 Decrease in advance payments by borrowers
     for property taxes and insurance, net .........         (914)         (859)
  Increase in drafts outstanding, net ..............          247           131
  Dividend to stockholders .........................         (416)         (444)
  Other financing activities, net ..................          230           490
                                                         --------      --------
  Net cash provided by financing ...................       67,961        20,944
                                                         --------      --------
    activities

Net increase
   in cash and cash equivalents ....................        7,161           424
                                                         --------      --------
Cash and cash equivalents at beginning
  of the period ....................................       13,411        15,666
                                                         --------      --------
Cash and cash equivalents at end
  of the period ....................................     $ 20,572      $ 16,090
                                                         ========      ========

Supplemental information:
  Interest paid ....................................     $ 10,058      $  7,211
                                                         ========      ========

  Income taxes paid ................................     $    216      $     12
                                                         ========      ========

Supplemental schedule of non-cash investing
  and financing transactions:
  Transfer of mortgage loans to real estate
     acquired through foreclosure ..................     $      8      $   --
                                                         ========      ========

</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                                        Accumulated
                                                                                          Other
                                              Additional                                 Compre-        Total
                                  Common        Paid-In     Treasury       Retained     hensive     Stockholders'
                                   Stock        Capital        Stock       Earnings      Income         Equity
                                   -----        -------        -----       --------      ------         ------
                                                                    (Unaudited)
                                                                  (In thousands)
<S>                               <C>          <C>          <C>           <C>           <C>           <C>     
Balance at September
  30, 1997 ..................     $     46     $  8,698     $   (182)     $ 23,402      $    427      $ 32,391
Net income ..................         --           --           --           1,627          --           1,627
Other comprehensive
 income, net of tax:
Unrealized gains arising
 during period, net of
 taxes of $29,000 ...........         --           --           --            --              48          --
Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $9,000 .....         --           --           --            --             (16)         --
                                                                                        --------
Other comprehensive income --         --           --           --                            32            32
                                                                                        --------      --------
Comprehensive income ........         --           --           --            --            --           1,659
                                                                                                      --------
Exercise of stock
  options ...................         --             32          182          (160)         --              54
Cash dividends ..............         --           --           --            (416)         --            (416)

Balance at December
  31, 1997 ..................     $     46     $  8,730     $      0      $ 24,453      $    459      $ 33,688
                                  ========     ========     ========      ========      ========      ========

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY   
(continued)

                                                                                      Accumulated
                                                                                          Other
                                              Additional                                 Compre-        Total
                                  Common        Paid-In     Treasury       Retained     hensive     Stockholders'
                                   Stock        Capital        Stock       Earnings      Income         Equity
                                   -----        -------        -----       --------      ------         ------
                                                                    (Unaudited)
                                                                  (In thousands)
<S>                               <C>          <C>          <C>           <C>           <C>           <C>     
Balance at September
  30, 1998 ..................     $     63     $  8,983     $      0      $ 28,369      $    436      $ 37,851
Net income ..................         --           --           --           1,790          --           1,790
Other comprehensive
 income, net of tax:
Unrealized gains arising
 during period, net of
 taxes of $106,000 ..........         --           --           --            --             176          --
Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $109,000 ...         --           --           --            --            (182)         --
                                                                                        --------
Other comprehensive income --         --           --           --                            (6)           (6)
                                                                                        --------      --------
Comprehensive income ........         --           --           --            --            --           1,784
                                                                                                      --------
Exercise of stock
  options ...................         --             48         --            --            --              48
Cash dividends ..............         --           --           --            (444)         --            (444)

Balance at December
  31, 1998 ..................     $     63     $  9,031     $      0      $ 29,715      $    430      $ 39,239
                                  ========     ========     ========      ========      ========      ========

</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, 1998 are not  necessarily  indicative  of the results  which may be
expected for the entire fiscal year.  These  consolidated  financial  statements
should be read in conjunction with the Company's audited consolidated  financial
statements and related notes for the year ended September 30, 1998,  included in
the Company's 1998 Annual Report to Stockholders.  The principal business of the
Company is conducted by its  wholly-owned  subsidiary,  Coastal  Federal Savings
Bank  (the  "Bank").  The  information  presented  hereon,  therefore,   relates
primarily to the Bank.

(2)  LOANS RECEIVABLE, NET

Loans receivable, net consist of the following:
<TABLE>
<CAPTION>
                                                    September 30,    December 31,
                                                        1998             1998
                                                      ---------       ---------
                                                            (Unaudited)
                                                           (In thousands)
<S>                                                   <C>             <C>      
First mortgage loans:
   Single family to 4 family units .............      $ 248,781       $ 242,762
   Other, primarily commercial
    real estate ................................         95,420         112,071
   Construction loans ..........................         31,261          37,650
Consumer and commercial loans:
   Installment consumer loans ..................         19,489          20,717
   Mobile home loans ...........................            990           1,013
   Deposit account loans .......................          1,078           1,103
   Equity lines of credit ......................         18,655          18,771
   Commercial and other loans ..................         14,848          14,310
                                                      ---------       ---------
                                                        430,522         448,397
Less:
   Allowance for loan losses ...................          5,668           5,795
   Deferred loan fees (costs) ..................           (702)           (937)
   Undisbursed portion of loans in process .....         11,292          11,891
                                                      ---------       ---------
                                                      $ 414,264       $ 431,648
                                                      =========       =========
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -  CONTINUED 

The changes in the  allowance  for loan losses  consist of the following for the
three months ended:
<TABLE>
<CAPTION>
                                                              December 31,
                                                       1997                1998
                                                     -------            -------
                                                             (Unaudited)
                                                           (In thousands)
<S>                                                  <C>                <C>    
Beginning allowances .....................           $ 4,902            $ 5,668
Provision for loan losses ................               190                185
Allowance on acquired loans ..............                29               --
Loan recoveries ..........................                 2                  9
Loan charge-offs .........................               (51)               (67)
                                                     -------            -------

Ending allowance .........................           $ 5,072            $ 5,795
                                                     =======            =======

</TABLE>

(3)  DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
                                      September 30, 1998              December 31, 1998
                                  -----------------------          -----------------------
                                                 Weighted                         Weighted
                                                  Average                          Average
                                   Amount           Rate             Amount          Rate
                                  --------          ----           --------          ----     
                                                       (Unaudited)
                                                      (In thousands)
<S>                               <C>               <C>            <C>               <C>      
Transaction accounts .......      $193,926          3.12%          $205,262          2.97%    
Passbook accounts ..........        37,242          2.52             36,182          2.52     
Certificate accounts .......       155,153          5.38            149,594          5.24     
                                  --------          ----           --------          ----     
                                  $386,321          3.96%          $391,038          3.79%    
                                  ========          ====           ========          ====     
</TABLE>
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -  CONTINUED 
                                                                
(4)  ADVANCES FROM FEDERAL HOME LOAN BANK

Advances from Federal Home Loan Bank ("FHLB") consist of the following:
<TABLE>
<CAPTION>
                                        September 30, 1998              December 31, 1998    
                                      ----------------------         ----------------------
                                                     Weighted                      Weighted
                                                     Average                        Average
                                       Amount          Rate            Amount         Rate
Maturing within:                                             (Unaudited)
                                                           (In thousands)
<S>                                   <C>              <C>           <C>              <C>     
1 year .........................      $ 28,235         5.74 %        $ 57,101         5.22 %  
2 years ........................         6,961         6.19            39,706         5.09    
3 years ........................        32,146         4.83             8,761         6.35    
4 years ........................         4,261         6.62            32,457         5.15    
5 years and thereafter .........        73,306         5.21            35,000         5.09    
                                      --------         ----          --------         ----    
                                      $144,909         5.13 %        $173,025         5.21 %  
                                      ========         ====          ========         ====    
</TABLE>
                                                                    
At September  30,  1998,  and  December  31,  1998,  the Bank had pledged  first
mortgage loans with unpaid balances of  approximately  $231.2 million and $171.4
million, respectively, as collateral for FHLB advances.

(5)  EARNINGS PER SHARE

Basic earnings per share for the three month periods ended December 31, 1997 and
1998,  are  computed by dividing net  earnings by the actual  common  equivalent
shares outstanding during the respective periods. Diluted earnings per share for
the three  month  periods  ended  December  31, 1997 and 1998,  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 6, 1998, the Company declared a four-for-three stock split in the form of
a 33% stock dividend,  aggregating approximately 1,562,000 shares. All share and
per share  data has been  retroactively  restated  to give  effect to the common
stock dividends.

(7)  COMPREHENSIVE INCOME

In June 1997, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income
(Statement 130). SFAS No. 130 establishes standards for reporting and display of
comprehensive  income  and  its  components  in a full  set of  general  purpose
financial  statements.  Enterprises  are  required to  classify  items of "other
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -  CONTINUED 

comprehensive income" by their nature in the financial statement and display the
balance of other  comprehensive  income  separately  in the equity  section of a
statement of  financial  position.  SFAS No. 130 is  effective  for fiscal years
beginning after December 15, 1997. Earlier application is permitted. Comparative
financial   statements   provided  for  earlier   periods  are  required  to  be
reclassified  to reflect the provisions of this  statement.  The Company adopted
Statement 130 in the first quarter of fiscal 1999.
<PAGE>
PART I.  FINANCIAL INFORMATION
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 economy (particularly in the markets served by the Company).

DISCUSSION OF FINANCIAL  CONDITION  CHANGES FROM  SEPTEMBER 30, 1998 TO DECEMBER
31, 1998

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
withdrawlable accounts and short-term  borrowings,  and is currently equal to 4%
of such amount.

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 $63.6 million for the three months
ended  December 31, 1997,  compared to $70.4  million for the three months ended
December 31, 1998. The majority of these loan originations were financed through
loan and mortgage-backed securities principal repayments which amounted to $46.1
million and $55.5 million for the three month  periods  ended  December 31, 1997
and 1998,  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
$14.2  million in mortgage  loans  compared to $18.7  million sold for the three
month period ended December 31, 1998.

For the three month period ended December 31, 1997, the Company  purchased $67.1
million in investment and mortgage-backed securities. For the three month period
ended December 31, 1998, the Company  purchased  $48.2 million in investment and
mortgage-backed  securities.  The securities purchased generally reprice in less
than five years.  A majority of the  mortgage-backed  securities  purchased were
primarily  secured by one year ARMs.  These purchases were funded primarily with
short-term reverse repurchase agreements and FHLB advances.
<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)

The Bank experienced an increase of $4.7 million in deposits for the three month
period ended December 31, 1998,  primarily as a result of increased  transaction
accounts of $11.3 million.  This was offset by decreases in passbook accounts of
$1.1 million and certificate accounts of $5.6 million.

At December 31, 1998,  the Company had  commitments to originate $5.3 million in
mortgage  loans,  and $29.5 million in  undisbursed  lines of credit,  which the
Company expects to fund from normal operations.

At December 31, 1998, the Company had $121.8 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, 1998, the Company had repurchase  agreement lines
of credit and  available  collateral  consisting of  investment  securities  and
mortgage-backed securities of $ 109.3 million as well as federal funds available
of $15.0 million.

OTS  regulations  require  that  the  Bank  calculate  and  maintain  a  minimum
regulatory capital requirement on a quarterly basis and satisfy such requirement
as of the calculation  date and throughout the quarter.  The Bank's capital,  as
calculated under OTS regulations, is approximately $40.3 million at December 31,
1998,  exceeding  tangible and core capital  requirements  by $30.3  million and
$13.6 million, respectively. At December 31, 1998, the Bank's risk-based capital
of  approximately   $44.8  million  exceeded  its  current   risk-based  capital
requirement by $15.2 million.  (For further  information see Regulatory  Capital
Matters).

MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF OPERATIONS  FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1998

GENERAL

Net income  increased  from $1.6 million for the three months ended December 31,
1997, to $1.8 million for three months ended  December 31, 1998,  or 10.0%.  Net
interest income increased  $373,000 primarily as a result of an increase of $1.8
million  in  interest  income  offset by a $1.4  million  increase  in  interest
expense.  Provision for loan losses  decreased  slightly from $190,000 for three
months ended  December 31, 1997, to $185,000 for the three months ended December
31, 1998. General and administrative expense increased from $3.4 million for the
quarter ended  December 31, 1997, to $3.6 million for the quarter ended December
31, 1998.

INTEREST INCOME

Interest income for the three months ended December 31, 1998, increased to $11.9
million as compared to $10.2  million for the three  months  ended  December 31,
1997.  The earning asset yield for the three months ended December 31, 1998, was
7.77% compared to a yield of 8.41% for the three months ended December 31, 1997.
The average yield on loans  receivable  for the three months ended  December 31,
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

1998 was 8.82%  compared to 8.71% for the three months ended  December 31, 1997.
The yield on investments  decreased to 6.49% for the three months ended December
31, 1998,  from 6.72% for the three months ended  December 31, 1997. At December
31, 1997,  the prime rate was 8.50%  compared to 7.75% at December 31, 1998. The
Bank expects that its yield on both loans and  mortgage-backed  securities  will
continue to decline as certain loans which adjust annually  continue to reprice.
Total average  interest-earning assets were $622.3 million for the quarter ended
December 31, 1998, as compared to $487.3  million for the quarter ended December
31, 1997. The increase in average  interest-earning assets is due to an increase
in average loans receivable of approximately  $12.4 million and  mortgage-backed
securities of  approximately  $134.5 million.  Over the last twelve months,  the
Company has increased it's  portfolio of  mortgage-backed  securities  funded by
advances and other borrowed money.

INTEREST EXPENSE

Interest expense of interest-bearing  liabilities was $6.8 million for the three
months ended  December  31,  1998,  as compared to $5.4 million for December 31,
1997. The average cost of deposits for the three months ended December 31, 1998,
was 3.93% compared to 4.18% for the three months ended December 31, 1997.

The cost of  interest-bearing  liabilities  was 4.45% for the three months ended
December 31, 1998, as compared to 4.61% for the three months ended  December 31,
1997. The cost of FHLB advances and reverse repurchase  agreements was 5.32% and
5.79%, respectively, for the three months ended December 31, 1998. For the three
months  ended  December 31,  1997,  the cost was 5.82% and 5.77%,  respectively.
Total average  interest-bearing  liabilities  increased  from $470.3  million at
December  31,  1997 to $613.4  million at December  31,  1998.  The  increase in
average  interest-bearing  liabilities is due to an increase in average deposits
of  approximately  $47.7  million,  FHLB  advances of $65.5  million and reverse
repurchase agreements of $28.8 million.

NET INTEREST INCOME

Net interest  income was $5.1  million for the three  months ended  December 31,
1998, as compared to $4.7 million for the three months ended  December 31, 1997.
The net interest  margin was 3.32% for the three months ended December 31, 1998,
and 3.80% for the three  months  ended  December  31,  1997.  During  the second
quarter of fiscal 1998, the Bank entered into a leverage  strategy by purchasing
ARM  mortgage-backed  securities which were funded by repurchase  agreements and
short-term advances. This strategy has an expected spread of approximately fifty
basis points during the first year.

PROVISION FOR LOAN LOSSES

The  provision for loan losses  decreased  slightly from $190,000 for the period
ended  December  31, 1997,  to $185,000 for the three months ended  December 31,
1998. For the three months ended December 31, 1998, net charge-offs were $58,000
compared to net  charge-offs  of $49,000 for the three months ended December 31,
1997.  The allowance for loan losses as a percentage of total loans was 1.30% at
December 31, 1998,  compared to 1.33% at September 30, 1998. Loans delinquent 90
days or more were .73% of total loans at December 31, 1998,  compared to .54% at
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

September 30, 1998.  The allowance for loan losses was 178% of loans  delinquent
more than 90 days at December  31, 1998,  as compared to 251% at  September  30,
1998.  Non-performing  loans as of December 31, 1998,  included one  significant
loan with a balance of  approximately  $2.0  million.  Subsequent to the quarter
ended  December  31,  1998,  the  loan  was paid in full on  February  9,  1999.
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 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, 1997 AND 1998

OTHER INCOME

For the three  months ended  December  31,  1998,  other income was $1.4 million
compared to $1.5 million for the quarter ended  December 31, 1997.  Gain on sale
of securities was $182,000 for the quarter ended December 31, 1998,  compared to
$16,000 for the quarter  ended  December 31, 1997.  This was offset by decreased
income from real estate held for  investment  which was $218,000 for the quarter
ended  December  31,  1997.  This  was due to a land  sale by one of the  Bank's
subsidiaries.  There was no income  from land  sales  during the  quarter  ended
December 31, 1998.

GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses  increased from $3.4 million for the three
months  ended  December  31,  1997,  to $3.6  million for the three months ended
December 31, 1998.  Salaries and employee  benefits  increased from $1.9 million
for the three  months ended  December  31,  1997,  to $2.0 million for the three
months ended  December 31, 1998 primarily due to increased  lending  Associates.
Net occupancy,  furniture and fixtures and data  processing  expenses  increased
$103,000 when comparing the two periods. This is primarily a result of increased
maintenance,  lease expense and depreciation  expense due to the addition of the
Coastal  Federal  University  facility and the North  Carolina  Office in Sunset
Beach, NC. Other expenses were $631,000 for the quarter ended December 31, 1998,
compared to $673,000 for the quarter ended December 31, 1997.

INCOME TAXES

Income taxes  increased  from  $950,000 for the three months ended  December 31,
1997, to $1.0 million for the three months ended  December 31, 1998, 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, 1998:                                                                                                     
 Total Capital:                    $44,800         12.09%          $29,646           8.00%             $37,058       10.00%  
   (To Risk Weighted Assets)                                                                                                 
 Tier 1 Capital:                   $40,301         10.88%             $N/A            N/A%             $22,235        6.00%  
   (To Risk Weighted Assets)                                                                                                 
 Tier 1 Capital:                   $40,301          6.05%          $19,983           3.00%             $33,404        5.00%  
   (To Total Assets)                                                                                                         
 Tangible Capital:                 $40,301          6.05%           $9,991           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, 1997 AND 1998


IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

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

SFAS  133,   Accounting  for  Derivative   Instruments  and  Hedging  Activities
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative instruments embedded in other contracts and hedging
activities.  It requires  that an entity  recognize  all  derivatives  as either
assets or liabilities in the statement of financial position,  and measure those
instruments  at fair value.  If certain  conditions are met, a derivative may be
specifically  designated  as (a) a hedge of the  exposure to changes in the fair
value of a recognized asset and liability or a firm  commitment,  (b) a hedge of
the exposure to variable cash flows of a forecasted transaction,  or (c) a hedge
of the foreign currency  exposure of a net investment in a foreign  corporation.
This statement is effective for fiscal  quarters in fiscal years beginning after
June 15, 1999. It is not anticipated  that this standard will materially  affect
the Company.

EFFECT ON INFLATION AND CHANGING PRICES

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

YEAR 2000 COMPLIANCE

The Company is a user of computers,  computer  software and equipment  utilizing
embedded  microprocessors that will be affected by the year 2000 issue. The year
2000 issue exists because many computer  systems and  applications use two-digit
date  fields  to  designate  a  year.   As  the  century  date  change   occurs,
date-sensitive  systems may recognize the year 2000 as 1900, or not at all. This
inability  to  recognize  or  properly  treat the year 2000 may cause  erroneous
results, ranging from system malfunctions to incorrect or incomplete processing.
<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, 1997 AND 1998

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

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

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

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

4.   Validation  - Testing  all systems  and  third-party  vendors for year 2000
     compliance.  The Company is  currently  in this phase of its plan. A third-
     party service bureau processes all customer  transactions and has completed
     upgrades to its systems to be year 2000  compliant.  The Company  will test
     the  third-party  systems by reviewing the results of  transactions  at six
     different  test dates  before and after the year 2000 date change  covering
     all of the  applications  used by the Company.  Testing was completed as of
     November 16, 1998. In the event that testing  reveals that the  third-party
     systems are not year 2000 compliant,  the Company's  service bureau intends
     to  either  transfer  the  Company  to other  systems  that  are year  2000
     compliant and provide additional resources to resolve the year 2000 issues.

     Other parties whose year 2000 compliance may effect the Company include the
     FHLB of Atlanta, brokerage firms, the operator of the Company's ATM network
     and the Company's 401K  administrator.  These  third-parties have indicated
     their compliance or intended compliance. Where it is possible to do so, the
     Company has scheduled  testing with these  third-parties.  Where testing is
     not  possible,  the Company  will rely on  certifications  from vendors and
     service providers.

5.   Implementation - Replacement or repair of non-compliant  technology. As the
     Company  progresses  through the validation  phase,  the Company expects to
     determine necessary remedial actions and provide for their  implementation.
     The Company has already implemented a new year 2000 compliant  computerized
     teller  system and has  verified the year 2000  compliance  of its computer
     hardware  and other  equipment  containing  embedded  microprocessors.  The
     Company's plan provides for year 2000 readiness to be completed by February
     28, 1999.

     The  Company  estimates  its  total  cost to  replace  computer  equipment,
     software programs or other equipment  containing  embedded  microprocessors
     that were not year 2000 compliant to be $118,000, of which $64,385 has been
     incurred as of December 31, 1998. System  maintenance or modification costs
     are  charged  to  expense  as  incurred,  while  the cost of new  hardware,
<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, 1997 AND 1998

5.   Implementation - (continued)

     software  or other  equipment  is  capitalized  and  amortized  over  their
     estimated  useful lives. The Company does not separately track the internal
     costs and time that its own Associates spend on year 2000 issues, which are
     principally payroll costs.


     Because the Company depends substantially on its computer systems and those
     of  third-parties,  the failure of these systems to be year 2000  compliant
     could cause substantial disruption of the Company's business and could have
     a material adverse financial impact on the Company. Failure to resolve year
     2000 issues  presents the following  risks to the Company;  (1) the Company
     could lose customers to other financial  institutions,  resulting in a loss
     of  revenue,  if the  Company's  third-party  service  bureau  is unable to
     properly process customer transactions;  (2) governmental agencies, such as
     the Federal Home Loan Company, and correspondent institutions could fail to
     provide funds to the Company,  which could materially  impair the Company's
     liquidity  and affect  the  Company's  ability  to fund  loans and  deposit
     withdrawals;  (3) concern on the part of  depositors  that year 2000 issues
     could impair access to their deposit  account  balances could result in the
     Company  experiencing  deposit outflows prior to December 31, 1999; and (4)
     the Company could incur increased  personnel  costs if additional  staff is
     required to perform functions that inoperative systems would have otherwise
     performed.  Management  believes  that it is not  possible to estimate  the
     potential  lost  revenue  due to the year 2000  issue,  as the  extent  and
     longevity  of  any  potential   problem   cannot  be   predicted.   Because
     substantially  all of the  Company's  loan  portfolio  consists of loans to
     individuals rather than commercial  enterprises,  management  believes that
     year 2000 issues will not impair the ability of the Company's  borrowers to
     repay their debt.

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

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


Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At  December  31,  1998,  no  material  changes  have  occurred  in market  risk
disclosures included in the Company's Annual Report to Stockholders for the year
ended September 30, 1998.
<PAGE>
PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

Item 1.  Legal Proceedings

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

Item 2.  Changes In Securities and Use of Proceeds

     Not Applicable.

Item 3.  Defaults Upon Senior Securities

     Not Applicable.

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

     Not Applicable.

Item 5.  Other Information

     Not Applicable.




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

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

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

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

                     (c)   Bylaws of Coastal Financial Corporation**

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

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

                     (c)   Employment Agreement with Phillip G. Stalvey*****
 
                     (d)   Employment Agreement with Allen W. Griffin***

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

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

                     (g)   1990 Stock Option Plan***

                     (h)   Directors Performance Plan****

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

                  27       Financial Data Schedule

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

*                 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.
<PAGE>
PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
(continued)


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

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