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

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

                                    FORM 10-Q

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

               For the Quarter Ended March 31, 2000

      (   )    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    [ X ]        NO    [   ]

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of March 31, 2000.

Common Stock $.01 Par Value Per Share                         7,379,556 Shares

--------------------------------------------------------------------------------
(Class)                                                        (Outstanding)
<PAGE>



COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000

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

PART I-      Consolidated Financial Information

Item
     1.Consolidated Financial Statements (unaudited):

             Consolidated Statements of Financial Condition
             as of September 30, 1999 and March 31, 2000                  3

             Consolidated Statements of Operations for the three
             months ended March 31, 1999 and 2000                         4

             Consolidated Statements of Operations for the six months     5
             ended March 31, 1999 and 2000.

             Consolidated Statements of Cash Flows for the six           6-7
             months ended March 31, 1999 and 2000

             Consolidated Statements of Stockholders' Equity
             and Comprehensive Income as of March 31, 1999 and 2000       8

             Notes to Consolidated Financial Statements
                                                                         9-11
     2.Management's Discussion and Analysis of
             Financial Condition and Results of Operations              12-20

     3.Quantitative and Qualitative Disclosures about                    21
       Market Risk


Part II - Other Information

Item
     1.Legal Proceedings                                                 22

     2.Changes in Securities and Use of Proceeds                         22

     3.Defaults Upon Senior Securities                                   22

     4.Submission of Matters to a Vote of Securities Holders             22

     5.Other information                                                 22

     6.Exhibits and Reports on Form 8-K                                23-24

Signatures                                                               25


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

                                                  September 30,    March 31,
                                                     1999            2000
                                                  ------------    ----------
                                                          (Unaudited)
                                                         (In thousands)
<S>                                                <C>           <C>
ASSETS:
Cash and amounts due from banks ...............    $  21,988     $  14,724
Short-term interest-bearing deposits ..........        2,245         2,225
Investment securities available for sale ......        6,063         8,112
Mortgage-backed securities available for sale .      182,115       184,052
Loans receivable (net of allowance for
   loan losses of $6,430 at September 30,
   1999 and $6,675 at March 31, 2000) .........      455,351       479,678
Loans receivable held for sale ................       16,636        19,310
Real estate acquired through foreclosure ......           96            89
Office property and equipment, net ............       11,236        11,525
Federal Home Loan Bank stock, at cost .........        8,201         9,509
Accrued interest receivable on loans ..........        2,861         2,866
Accrued interest receivable on investments ....        1,333         1,470
Other assets and deferred charges .............        4,888         3,323
                                                   ---------     ---------
                                                   $ 713,013     $ 736,883
                                                   =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
Deposits ......................................    $ 399,673     $ 398,965
Securities sold under agreements to
   repurchase .................................       96,948       104,799
Advances from Federal Home Loan Bank ..........      164,024       179,182
Other borrowings ..............................        1,569         2,069
Drafts outstanding ............................        1,383         1,677
Advances by borrowers for property taxes
  and insurance ...............................        1,346           716
Accrued interest payable ......................        1,156         1,786
Other liabilities .............................        5,677         4,674
                                                   ---------     ---------
  Total liabilities ...........................      671,776       693,868
                                                   ---------     ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<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; 7,426,528 shares at
   September 30, 1999 and 7,379,556 shares
   at March 31, 2000 issued and outstanding ...           67            74
Additional paid-in capital ....................        9,320        17,236
Retained earnings .............................       34,288        29,504
Treasury stock, at cost (23,100 and 68,535
   shares, respectively) ......................         (356)         (797)
Accumulated other comprehensive
  loss, net of tax ............................       (2,082)       (3,002)
                                                   ---------     ---------
  Total stockholders' equity ..................       41,237        43,015
                                                   ---------     ---------
                                                   $ 713,013     $ 736,883
                                                   =========     =========

</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                     3
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000

                                              1999             2000
                                            -----------    -----------
                                                  (Unaudited)
                                            (Dollars in thousands,
                                             except per share data)
<S>                                         <C>            <C>
Interest income:
    Loans receivable ...................    $     9,800    $    10,742
    Investment securities ..............            398            602
     Mortgage-backed securities ........          2,177          2,644
     Other .............................             77            110
                                            -----------    -----------
     Total interest income .............         12,452         14,098
                                            -----------    -----------

Interest expense:
   Deposits ............................          3,631          3,695
   Securities sold under agreements to
     repurchase ........................            896          1,790
   Advances from Federal Home Loan Bank           2,165          2,481
                                            -----------    -----------
     Total interest expense ............          6,692          7,966
                                            -----------    -----------
   Net interest income .................          5,760          6,132
Provision for loan losses ..............            225            225
                                            -----------    -----------
   Net interest income after provision
     for loan losses ...................          5,535          5,907
                                            -----------    -----------

Other income:
   Fees and service charges ............            594            517
   Income (loss) from real estate owned               3            (15)
   Gain on sale of loans receivable, net            216            157
   Gain (loss) on sale of securities
     available for sale ................             43         (1,774)
   Gain on sale of deposits ............           --            1,746
   Other income ........................            659            838
                                            -----------    -----------
                                                  1,515          1,469
                                            -----------    -----------

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                         <C>            <C>
General and administrative expenses:
   Salaries and employee benefits ......          2,131          2,400
   Net occupancy, furniture and fixtures
     and data processing expense .......            909            964
   FDIC insurance premium ..............             54             21
   Other expenses ......................            900            748
                                            -----------    -----------
                                                  3,994          4,133
                                             -----------    -----------
Earnings before income taxes ...........          3,056          3,243

Income taxes ...........................          1,117          1,153
                                            -----------    -----------
Net income .............................    $     1,939    $     2,090
                                            ===========     ===========

Earnings per common share
  Basic ................................    $       .26     $       .28
                                            ===========     ===========
  Diluted ..............................    $       .26     $       .28
                                            ===========     ===========

Weighted average common shares
  outstanding - basic ..................      7,367,000      7,384,000
                                            ===========     ===========

Weighted average common shares
  outstanding - diluted ................      7,557,000      7,471,000
                                            ===========     ===========

Dividends per share ....................    $      .061     $      .065
                                            ===========     ===========

</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       4
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000

                                                      1999              2000
                                                   -----------      -----------
                                                           (Unaudited)
                                                     (Dollars in thousands,
                                                      except per share data)
<S>                                                <C>              <C>
Interest income:
    Loans receivable .........................     $    19,139      $    21,014
    Investment securities ....................             566            1,127
     Mortgage-backed securities ..............           4,499            5,228
     Other ...................................             180              372
                                                   -----------      -----------
     Total interest income ...................          24,384           27,741
                                                   -----------      -----------

Interest expense:
   Deposits ..................................           7,484            7,452
   Securities sold under agreements to
     repurchase ..............................           1,651            3,359
   Advances from Federal Home Loan Bank ......           4,386            4,773
                                                   -----------      -----------
     Total interest expense ..................          13,521           15,584
                                                   -----------      -----------
   Net interest income .......................          10,863           12,157
Provision for loan losses ....................             410              470
                                                   -----------      -----------
   Net interest income after provision
     for loan losses .........................          10,453           11,687
                                                   -----------      -----------

Other income:
   Fees and service charges ..................           1,064            1,084
   Loss from real estate owned ...............             (14)             (35)
   Gain on sale of loans receivable, net .....             577              348
   Gain (loss) on sale of securities
      available for sale .....................             225           (1,763)
   Gain on sale of deposits ..................            --              1,746
   Other income ..............................           1,145            1,552
                                                   -----------      -----------
                                                         2,997            2,932
                                                   -----------      -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                <C>              <C>
General and administrative expenses:
   Salaries and employee benefits ............           4,160            4,698
   Net occupancy, furniture and fixtures
     and data processing expense .............           1,801            1,943
   FDIC insurance premium ....................             106               79
   Other expenses ............................           1,531            1,522
                                                   -----------      -----------
                                                         7,598            8,242
                                                   -----------      -----------
Earnings before income taxes .................           5,852            6,377

Income taxes .................................           2,123            2,281
                                                   -----------      -----------
Net income ...................................     $     3,729      $     4,096
                                                   ===========      ===========

Earnings per common share
  Basic ......................................     $       .51      $       .55
                                                   ===========      ===========
  Diluted ....................................     $       .49      $       .55
                                                   ===========      ===========

Weighted average common shares
  outstanding - basic ........................       7,302,000        7,400,000
                                                   ===========      ===========

Weighted average common shares
  outstanding - diluted ......................       7,592,000        7,504,000
                                                   ===========      ===========

Dividends per share ..........................     $       .12      $       .13
                                                   ===========      ===========
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       5
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000

                                                        1999             2000
                                                       ---------      ---------
                                                              (Unaudited)
                                                            (In thousands)
<S>                                                    <C>            <C>
Cash flows from operating activities:
  Net earnings ...................................     $   3,729      $   4,096
  Adjustments to reconcile net earnings
       to net cash provided by (used in)
      operating activities:
       Depreciation ..............................           565            691
       Provision for loan losses .................           410            470
  (Gain) loss on sale of mortgage-backed
       securities available for sale .............           (43)         1,774
Origination of loans receivable
         held for sale ...........................       (41,337)       (11,552)
Proceeds from sales of loans receivable
         held for sale ...........................        27,006          8,878
(Increase) decrease in:
      Other assets and deferred charges ..........          (258)         1,565
      Accrued interest receivable ................            49           (142)
Increase (decrease) in:
      Accrued interest payable ...................          (100)           630
     Other liabilities ...........................         1,189         (1,003)
                                                       ---------      ---------
        Net cash provided by (used in)
             operating activities ................        (8,790)         5,407
                                                       ---------      ---------
Cash flows from investing activities:
  Purchases of investment securities
       available for sale ........................        (4,718)        (6,154)
  Proceeds from sales of investment
       securities available for sale .............         5,200          4,000
  Proceeds from maturities of investment
      securities available for sale ..............         4,895           --
  Purchases of mortgage-backed securities
       available for sale ........................      (104,047)       (95,897)
  Proceeds from sales of mortgage-backed
       securities available for sale .............        59,147         78,699
  Origination of loans receivable, net ...........       (98,111)       (77,986)
  Purchase of loans receivable ...................        (1,710)        (4,027)
  Principal collected on loans receivable, net ...       105,252         46,230
  Principal collected on mortgage backed
       securities, net ...........................        30,056         12,087
  Disposition of Florence office
       assets and liabilities, net ...............          --          (13,619)
  Proceeds from sale of real estate
       acquired through foreclosure, net .........          --               96
  Purchases of office properties and
      equipment ..................................        (1,431)        (1,317)
  Purchases of FHLB stock, net ...................        (1,335)        (1,308)
                                                       ---------      ---------
      Net cash used in
             investing activities ................        (6,802)       (59,196)
                                                       ---------      ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       6
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000 (CONTINUED)

                                                         1999            2000
                                                      ---------       ---------
                                                              (Unaudited)
                                                             (In thousands)

<S>                                                   <C>             <C>
Cash flows from financing activities:
  Increase (decrease) in deposits, net .........      $    (924)      $  24,145
  Increase in securities sold
   under agreement to repurchase, net ..........         13,178           7,851
  Proceeds from FHLB advances ..................        105,150         249,606
  Repayment of FHLB advances ...................        (88,046)       (234,448)
  Proceeds(repayments)from other
    borrowings, net ............................         (3,868)            500
  Decrease in advance payments by borrowers
     for property taxes and insurance, net .....           (485)           (630)
  Increase in drafts outstanding, net ..........           (101)            294
  Repurchase of treasury stock, at cost ........           --              (973)
  Dividends to stockholders ....................           (894)           (949)
  Exercise of stock options ....................            242             524
  Other financing activities, net ..............            497             585
                                                      ---------       ---------
  Net cash provided by financing activities.....         24,749          46,505
                                                      ---------       ---------


Net increase(decrease) in cash and cash equivalents .     9,157          (7,284)
                                                      ---------       ---------
Cash and cash equivalents at beginning
  of the period ................................         15,666          24,233
                                                      ---------       ---------
Cash and cash equivalents at end
  of the period ................................      $  24,823       $  16,949
                                                      =========       =========

Supplemental information:
  Interest paid ................................      $  13,621       $  14,954
                                                      =========       =========

  Income taxes paid ............................      $   1,076       $   2,069
                                                      =========       =========

Supplemental schedule of non-cash investing
 and financing transactions:

  Transfer of mortgage loans to real estate
     acquired through foreclosure ..............      $    --         $      89
                                                      =========       =========

Securitization of mortgage loans into
     mortgage-backed securities ................      $   4,498       $   9,669
                                                      =========       =========

</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       7
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

                                                                                       Accumulated
                                                                                         Other
                                              Additional                                 Compre-           Total
                                  Common        Paid-In     Treasury      Retained       hensive       Stockholders'
                                  Stock         Capital       Stock       Earnings    Income (Loss)        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 ...................        --          --           --          3,729         --                  3,729
Other comprehensive
 income, net of tax:
Unrealized gains arising
 during period, net of
 taxes of $18,400 ............        --          --           --           --             46                 --
Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $90,000 .....        --          --           --           --           (135)                --
                                                                                     --------             --------
Other comprehensive loss .....        --          --           --           --            (89)                 (89)
                                                                                     --------             --------
Comprehensive income .........        --          --           --           --           --                  3,640
                                                                                                          --------
Exercise of stock
  options ....................           1         241         --           --           --                    242
Cash dividends ...............        --          --           --           (894)        --                   (894)
                                  --------    --------     --------     ---------      ------             --------
Balance at March
  31, 1999 ...................    $     64    $  9,224     $      0     $ 31,204     $    347             $ 40,839
                                  ========    ========     ========     ========     ========             ========

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                <C>         <C>          <C>          <C>          <C>                  <C>
Balance at September
  30, 1999 ...................    $     67    $  9,320     $   (356)    $ 34,288     $ (2,082)            $ 41,237
Net income ...................        --          --           --          4,096         --                  4,096
Other comprehensive
 income, net of tax:
Unrealized losses arising
 during period, net of
 taxes of $837,000 ...........        --          --           --           --         (2,206)                --
Less: reclassification
 adjustment for losses
 included in net income,
 net of taxes of $488,000 ....        --          --           --           --          1,286                 --
                                                                                     --------             --------
Other comprehensive loss .....        --          --           --           --           (920)                (920)
                                                                                     --------             --------
Comprehensive income .........        --          --           --           --           --                  3,176
                                                                                                          --------
Treasury stock repurchases - -        --          --           (973)        --           --                   (973)
Exercise of stock
  options ....................        --           300          532         (308)        --                    524
Cash dividends ...............        --          --           --           (949)        --                   (949)
Common stock dividends .......           7       7,616         --         (7,623)        --                   --
                                  --------    --------     --------     ---------      ------             --------
Balance at March
  31, 2000 ...................    $     74    $ 17,236     $   (797)    $  29,504      (3,002)            $ 43,015
                                  ========    ========     ========     ========     ========             ========

</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       8
<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 and six month periods
ended March 31, 2000 are not necessarily  indicative of the results which may be
expected for the entire  fiscal year.  These  unaudited  consolidated  financial
statements should be read in conjunction with the Company's audited consolidated
financial  statements  and related notes for the year ended  September 30, 1999,
included in the  Company's  1999 Annual  Report to  Stockholders.  The principal
business of the Company is conducted  by its  wholly-owned  subsidiary,  Coastal
Federal Savings Bank (the "Bank"). The information presented hereon,  therefore,
relates primarily to the Bank.


(2)  LOANS RECEIVABLE, NET

Loans receivable, net consists of the following:
<TABLE>
<CAPTION>
                                                   September 30,       March 31,
                                                        1999             2000
                                                      ---------       ---------
                                                              (Unaudited)
                                                             (In thousands)
<S>                                                   <C>             <C>
First mortgage loans:
   Single family to 4 family units .............      $ 248,433       $ 257,116
   Other, primarily commercial
    real estate ................................        114,931         123,519
   Construction loans ..........................         46,766          47,636
Consumer and commercial loans:
   Installment consumer loans ..................         20,026          17,895
   Mobile home loans ...........................          1,166           1,337
   Deposit account loans .......................          1,521           1,104
   Equity lines of credit ......................         21,081          21,645
   Commercial and other loans ..................         22,818          28,783
                                                      ---------       ---------
                                                        476,742         499,035
Less:
   Allowance for loan losses ...................          6,430           6,675
   Deferred loan costs , net ...................           (354)           (497)
   Undisbursed portion of loans in process .....         15,315          13,179
                                                      ---------       ---------
                                                      $ 455,351       $ 479,678
                                                      =========       =========
</TABLE>
                                       9
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in the  allowance  for loan losses  consist of the following for the
six months ended:
<TABLE>
<CAPTION>
                                                      Six Months Ended March 31,
                                                        1999              2000
                                                      -------           -------
                                                        (Dollars in thousands)

<S>                                                   <C>               <C>
Allowance at beginning of
 period .....................................         $ 5,668           $ 6,430
Allowance recorded on
 acquired loans .............................              21                50
Disposition of Florence office ..............            --                 (75)
Provision for loan losses ...................             410               470
                                                      -------           -------
Recoveries:
 Residential real estate ....................            --                  10
 Commercial real estate .....................             137              --
 Consumer ...................................              44                35
                                                      -------           -------
   Total recoveries .........................             181                45
                                                      -------           -------

Charge-offs:
 Residential real estate ....................            --                  28
 Commercial real estate .....................            --                --
 Consumer ...................................             120               217
                                                      -------           -------
   Total charge-offs ........................             120               245
                                                      -------           -------
   Net charge-offs (recoveries)..............             (61)              200
                                                      -------           -------
 Allowance at end of period .................         $ 6,160           $ 6,675
                                                      =======           =======
Ratio of allowance to net
 loans outstanding at the
 end of the period ..........................            1.36%             1.34%
                                                      =======           =======
Ratio of net charge-offs (recoveries)........
 to average loans outstanding
 during the period (annualized) .............            (.03%)             .07%
                                                      =======           =======

</TABLE>
<PAGE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
                                                         At March 31, 2000
                                                        Percent of Loans in each
Balance at end of period applicable to:        Amount    category to total loans
                                               ------    -----------------------

<S>                                            <C>                <C>
Residential Real Estate....................    $1,911             70.27%
Commercial Real Estate.....................    4,467              27.18
Consumer...................................      297               2.55
                                              ------             ------
                                              $6,675             100.00%
                                              ======             ======
</TABLE>
Non-accrual loans, which were over ninety days delinquent, totaled approximately
$2.6  million  at March 31,  2000.  For the six  months  ended  March 31,  2000,
interest income,  which would have been recorded,  would have been approximately
$101,000 had  non-accruing  loans been current in accordance with their original
terms.


                                       10
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


(3)  DEPOSITS

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

                                   September 30, 1999        March 31, 2000
                                   ------------------     ------------------
                                             Weighted               Weighted
                                             Average                 Average
                                   Amount      Rate       Amount      Rate
                                   ------      ----       ------      ----
                                                 (Unaudited)
                                               (In thousands)
<S>                               <C>          <C>     <C>            <C>
Transaction accounts .......      $226,218     2.85%    $213,441       3.04%
Passbook accounts ..........        39,212     2.65       35,852       2.51
Certificate accounts .......       134,243     4.94      149,672       5.32
                                  --------     ----     --------       ----
                                  $399,673     3.54%    $398,965       3.85%
                                  ========     ====     ========       ====
</TABLE>

At September 30, 1999 and March 31, 2000, respectively,  included in certificate
accounts  there were $5.3  million  and $36.1  million of  certificate  accounts
originated  by  brokers.  These  accounts  generally  mature  within  90 days of
origination.

(4)  ADVANCES FROM FEDERAL HOME LOAN BANK

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

                                   September 30, 1999        March 31, 2000
                                   ------------------     ------------------
                                             Weighted               Weighted
                                             Average                 Average
                                   Amount      Rate       Amount      Rate
                                   ------      ----       ------      ----
Maturing within:                                   (Unaudited)
                                                (In thousands)
<S>                               <C>          <C>     <C>            <C>
1 year                            $ 15,461      5.85%  $ 119,343       6.55%
2 years                             38,946      5.56      34,190       6.12
3 years                              4,761      6.82       9,049       6.45
4 years                             37,357      5.28       1,600       6.39
5 years and thereafter              67,499      5.00      15,000       5.51
                                  --------     -----   ---------       ----
                                  $164,024      5.33%  $ 179,182       6.38%
                                  ========     =====   =========       =====
</TABLE>
<PAGE>
At September 30, 1999,  and March 31, 2000,  the Bank had pledged first mortgage
loans with unpaid balances of  approximately  $212.1 million and $259.4 million,
respectively,  as collateral for FHLB advances.  At September 30, 1999 and March
31, 2000,  included in the four and five years and  thereafter  maturities  were
$101.5 million and $16.5 million subject to call provisions. Call provisions are
more  likely to be  exercised  by the FHLB when rates  rise.  For the six months
ended March 31, 2000, the FHLB called advances of $85 million.

(5)  EARNINGS PER SHARE

Basic  earnings  per share for the three and six month  periods  ended March 31,
1999 and 2000,  are  computed by  dividing  net income by the  weighted  average
common shares  outstanding during the respective  periods.  Diluted earnings per
share for the three and six month  periods  ended March 31,  1999 and 2000,  are
computed by  dividing  net  earnings by the  weighted  average  dilutive  shares
outstanding  during the  respective  periods.  All share and per share data have
been retroactively restated for all common stock splits and dividends.

(6)  COMMON STOCK DIVIDENDS

On May 6, 1998, the Company declared a four-for-three  stock split,  aggregating
approximately  1,562,000 shares. On November 10, 1999, the Company declared a 5%
stock dividend aggregating  approximately 321,000 shares. On March 14, 2000, the
Company declared a 10% stock dividend aggregating approximately 671,000 shares.

                                       11
<PAGE>
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

FORWARD LOOKING STATEMENTS
--------------------------

This report may contain certain "forward-looking  statements" within the meaning
of  Section  27A of the  Securities  Exchange  Act of  1934,  as  amended,  that
represent the Company's  expectations or beliefs concerning future events.  Such
forward-looking  statements  are about  matters that are  inherently  subject to
risks and  uncertainties.  Factors that could influence the matters discussed in
certain  forward-looking  statements  include  the timing and amount of revenues
that may be  recognized  by the  Company,  continuation  of current  revenue and
expense trends (including trends affecting  charge-offs),  absence of unforeseen
changes in the Company's  markets,  legal and  regulatory  changes,  and general
changes in the economy (particularly in the markets served by the Company).  The
Company disclaims any obligation to update such forward looking statements.

DISCUSSION OF FINANCIAL CONDITION CHANGES FROM SEPTEMBER 30, 1999 TO
MARCH 31, 2000
--------------------------------------------------------------------------------

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

In accordance with Office of Thrift Supervision (OTS)  regulations,  the Bank is
required  to  maintain  specific  levels  of cash and  "liquid"  investments  in
qualifying  types  of  United  States  Treasury,   Federal  Agency   Securities,
mortgage-backed securities, and certain other investments. The required level of
such  investments  is  calculated  on  a  "liquidity  base"  consisting  of  net
withdrawable accounts and short-term borrowings, and is currently equal to 4% of
such  amount.  At March 31,  2000,  the Bank's  regulatory  liquidity  level was
approximately 10%.

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



                                       12
<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 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 $139.4  million for the six months
ended March 31, 1999,  compared to $89.5  million for the six months ended March
31, 2000. A portion of these loan  originations  were financed  through loan and
mortgage-backed  securities  principal  repayments,  which  amounted  to  $135.3
million  and $58.3  million for the six month  periods  ended March 31, 1999 and
2000,  respectively.  In  addition,  the  Company  sells  certain  loans  in the
secondary  market to finance future loan  originations.  Generally,  these loans
have consisted only of mortgage loans, which have been originated in the current
period.  For the six month period  ended March 31, 1999,  the Company sold $27.0
million in mortgage  loans held for sale  compared to $8.9  million sold for the
six month period ended March 31, 2000.

For the six month  period  ended March 31, 1999,  the Company  purchased  $108.8
million in investment and mortgage-backed  securities.  For the six month period
ended March 31, 2000,  the Company  purchased  $102.1  million in investment and
mortgage-backed securities.  These purchases were funded primarily by repayments
of $12.1  million  within the  securities  portfolio,  sales of  mortgage-backed
securities of $80.5 million,  securities sold under agreements to repurchase and
FHLB advances.

Overall the Bank  experienced  a decrease  of  $708,000 in deposits  for the six
month  period  ended March 31,  2000.  For the six month  period ended March 31,
2000,  transaction  accounts  decreased  $12.8  million  and  passbook  accounts
decreased $3.4 million.  This was offset by an increase in certificate  accounts
of $15.4  million.  The increase in  certificate  accounts is primarily due to a
$30.8 million growth in brokered deposits.

In the second fiscal quarter, the Bank sold its Florence,  South Carolina office
to First Federal Savings Association of Cheraw ("First Federal"). The office had
deposits of $24.9  million.  The Bank  received a premium for the deposits  from
First Federal and recorded a gain, net of selling expenses, of $1.7 million. The
Bank funded the sale of the deposits through the sale of loans,  associated with
this  office,  of $10.9  million and  increased  borrowings,  primarily  through
brokered deposits.  The Bank recorded a gain on sale of loans of $60,000 related
to this sale. In conjunction with the sale of the Florence office,  the Bank has
agreed not to compete in the Florence market for a period of four years.

Also in the second  quarter,  the Bank  restructured a portion of its investment
security portfolio.  The Bank sold approximately $52.7 million in securities and
recorded a net loss of $1.8 million. The proceeds from this sale were reinvested
in securities  which generally had a slightly  reduced duration than that of the
securities  which  were sold.  As a result of this sale the Bank's  yield on its
security portfolio was increased by approximately 28 basis points.

At March 31, 2000,  the Company had  commitments  to  originate  $8.2 million in
mortgage  loans,  and $35.2 million in  undisbursed  lines of credit,  which the
Company expects to fund from normal operations.
<PAGE>
At March 31, 2000, the Company had $133.5 million of  certificates  of deposits,
which were due to mature within one year.  Based upon previous  experience,  the
Company  believes  that a  substantial  portion  of these  certificates  will be
renewed.  Additionally,  at March 31, 2000, the Company had repurchase agreement
lines of credit and available collateral consisting of investment securities and
mortgage-backed  securities of $89.4 million as well as federal funds  available
of $10.0 million.

                                       13
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


LIQUIDITY AND CAPITAL RESOURCE - CONTINUED
------------------------------------------

As a result of $4.1 million in net  earnings,  less the cash  dividends  paid to
stockholders  of   approximately   $949,000,   treasury  stock   repurchases  of
approximately  $973,000  and the net  change in  unrealized  loss on  securities
available  for  sale,  net of  income  tax  of  $920,000,  stockholders'  equity
increased from $41.2 million at September 30, 1999 to $43.0 million at March 31,
2000.  During the six months ended March 31, 2000,  the Company has  repurchased
85,185 shares at $11.39 per share, adjusted for stock dividends.

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  $48.1 million at March 31,
2000,  exceeding the core capital  requirement  by $18.5  million.  At March 31,
2000, the Bank's risk-based capital of approximately  $53.1 million exceeded its
current   risk-based  capital   requirement  by  $20.0  million.   (For  further
information see Regulatory Capital Matters)



                                       14
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION
COMPARISONS OF THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000


MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE THREE MONTHS ENDED
-----------------------------------------------------------------------------
MARCH 31, 1999 AND 2000
-----------------------

GENERAL
-------

Net income  increased  from $1.9  million for the three  months  ended March 31,
1999,  to $2.1  million for three  months  ended March 31,  2000,  or 7.8%.  Net
interest income increased  $372,000 primarily as a result of an increase of $1.6
million  in  interest  income  offset by a $1.3  million  increase  in  interest
expense.  Provision  for loan losses were  $225,000 for three months ended March
31, 1999 and 2000. Other income decreased  $46,000.  General and  administrative
expense  increased  from $4.0 million for the quarter  ended March 31, 1999,  to
$4.1 million for the quarter ended March 31, 2000.

During the quarter  ended March 31, 2000,  the Bank sold its Florence  office to
First  Federal.  The office had  deposits  of $24.9  million  and loans of $10.9
million. (For further information see Other Income.)

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

     Interest  income for the three months  ended March 31,  2000,  increased to
   $14.1  million as compared to $12.5  million for the three months ended March
   31, 1999.  The earning asset yield for the three months ended March 31, 2000,
   was 8.09%  compared to a yield of 7.86% for the three  months ended March 31,
   1999. The average yield on loans  receivable for the three months ended March
   31,  2000,was  8.56%  compared to 8.66% for the three  months ended March 31,
   1999. The yield on investments  increased to 6.84% for the three months ended
   March 31, 2000,  from 5.83% for the three months ended March 31, 1999.  Total
   average  interest-earning  assets were $705.2  million for the quarter  ended
   March 31, 2000 as compared to $641.7  million for the quarter ended March 31,
   1999. The increase in average  interest-earning  assets is due to an increase
   in average loans receivable of approximately  $49.2 million and securities of
   approximately $13.1 million.

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

     Interest expense on  interest-bearing  liabilities was $8.0 million for the
   three months ended March 31, 2000,  as compared to $6.7 million for March 31,
   1999. Due to increased average  transaction  deposits  balances,  the average
   cost of  deposits  for the  three  months  ended  March 31,  2000,  was 3.65%
   compared  to 3.77% for the three  months  ended March 31,  1999.  The cost of
   interest-bearing  liabilities  was 4.61% for the three months ended March 31,
   2000,  as compared to 4.33% for the three months  ended March 31,  1999.  The
   cost of FHLB advances and reverse repurchase  agreements was 5.92% and 6.10%,
   respectively, for the three months ended March 31, 2000. For the three months
   ended  March 31,  1999,  the cost of FHLB  advances  and  reverse  repurchase
   agreements was 5.19% and 5.46%, respectively.  Total average interest-bearing
   liabilities increased from $619.0 million at March 31, 1999 to $691.5 million
   at March 31, 2000.  The increase in average  interest-bearing  liabilities is
   due to an increase in average  deposits of  approximately  $20.2  million and
   reverse repurchase agreements of $52.0 million.

                                       15
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 2000

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

    Net  interest  income was $6.1  million for the three months ended March 31,
   2000,  as compared to $5.8 million for the three months ended March 31, 1999.
   The net interest  margin was 3.48% for the three months ended March 31, 2000,
   compared to 3.54% for the three months ended March 31, 1999.

    During calendar year 2000, interest rates have increased  significantly.  It
   is generally believed that the Federal Reserve may increase the Federal Funds
   target rate by fifty basis points in its May meeting.  Should  interest rates
   continue to increase,  certain of the Bank's  adjustable rate loans may reach
   their lifetime  interest rate change cap. In addition,  a high  percentage of
   the  Company's  assets are  adjustable  rate  mortgage  loans  which  reprice
   annually;  whereas,  many of the Company's  liabilities  reprice in 90 to 180
   days. The Company  expects that as a result of this rapidly  rising  interest
   rate environment, its net interest margin will decrease in the second half of
   fiscal 2000.  Should  interest rates continue to increase,  the Company would
   most likely  continue to  experience a further  decrease in its interest rate
   spread.

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

The  provision for loan losses was $225,000 for the three months ended March 31,
1999 and 2000. For the three months ended March 31, 2000, net  charge-offs  were
$91,000  compared to net recoveries of $119,000 for the three months ended March
31, 1999. The allowance for loan losses as a percentage of total loans was 1.34%
at March 31, 2000,  compared to 1.36% at September 30, 1999. Loans delinquent 90
days or more were .52% of total  loans at March 31,  2000,  compared  to .30% at
September 30, 1999.  The allowance for loan losses was 261% of loans  delinquent
more than 90 days at March 31, 2000,  as compared to 449% at September 30, 1999.
Management believes that the current level of allowance is adequate  considering
the  Company's  current loss  experience  and  delinquency  trends,  among other
criteria.

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

For the three  months  ended  March 31,  2000 and 1999,  other  income  was $1.5
million. Fees and service charges were $517,000 for the three months ended March
31, 2000,  compared to $594,000 for the three months ended March 31, 1999.  Gain
on sale of loans was $157,000 for the quarter ended March 31, 2000,  compared to
$216,000 for the quarter ended March 31, 1999. Should interest rates continue to
increase, gain on sale of loans may decline further. Loss on sales of securities
was $1.8  million for the quarter  ended  March 31,  2000,  compared to gains of
$43,000  for the  quarter  ended  March 31,  1999.  This is a result of the Bank
restructuring  a portion of its available for sale  investment  portfolio in the
second  quarter of fiscal 2000.  The losses were offset by a gain on the sale of
the Florence office deposits of $1.7 million.  Other income was $838,000 for the
three months ended March 31, 2000,  as compared to $659,000 for the three months
ended March 31, 1999.  The increase is  primarily  due to increased  commissions
from the sale of non-depository products and rental income.


                                       16
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE SIX MONTHS ENDED
MARCH 31, 1999 AND 2000


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

General and  administrative  expenses  increased from $4.0 million for the three
months  ended March 31,  1999,  to $4.1 million for the three months ended March
31, 2000.  Salaries and employee  benefits  increased  from $2.1 million for the
three months  ended March 31,  1999,  to $2.4 million for the three months ended

March 31, 2000  primarily  due to staffing for two new full  service  offices in
Horry County,  South Carolina and a loan production office in Wilmington,  North
Carolina.  Also,  primarily  as a result  of the  three  office  additions,  net
occupancy, furniture and fixtures and data processing expenses increased $55,000
when  comparing  the two periods.  Other  expenses were $748,000 for the quarter
ended March 31, 2000, compared to $900,000 for the quarter ended March 31, 1999.

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

Income  taxes  increased  slightly  from $1.1 million for the three months ended
March 31, 1999,  to $1.2 million for the three months ended March 31, 2000, as a
result of increased income before taxes.

GENERAL
-------

Net income  increased from $3.7 million for the six months ended March 31, 1999,
to $4.1 million for six months ended March 31, 2000, or 9.8%.  Diluted  earnings
per  share   increased  12.2%  as  a  result  of  earnings  and  reduced  shares
outstanding. Net interest income increased $1.3 million primarily as a result of
an  increase in interest  income of $3.4  million  offset by an increase of $2.1
million in interest expense.  Provision for loan losses increased  slightly from
$410,000 for the six months ended March 31, 1999, to $470,000 for the six months
ended March 31, 2000. Other income decreased $65,000. General and administrative
expenses  increased  $644,000.  During the six months ended March 31, 2000,  the
Bank sold its Florence office to First Federal. The office had deposits of $24.9
million and loans of $10.9 million. (For further information, see Other Income).

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

Interest  income for the six months  ended March 31,  2000,  increased  to $27.7
million as compared to $24.4  million for the six months  ended March 31,  1999.
The earning  asset  yield for the six months  ended  March 31,  2000,  was 8.01%
compared  to a yield of 7.79%  for the six  months  ended  March 31,  1999.  The
average yield on loans  receivable  for the six months ended March 31, 2000, was
8.53%  compared to 8.65% for the six months ended March 31,  1999.  The yield on
investments  increased to 6.73% for the six months  ended March 31,  2000,  from
5.68% for the six months ended March 31, 1999. Total average earning assets were
$701.0  million for the six month period  ended March 31,  2000,  as compared to
$634.0 million for the six month period ended March 31, 1999.

                                       16
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE SIX MONTHS ENDED
MARCH 31, 1999 AND 2000

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

Interest expense on  interest-bearing  liabilities was $15.6 million for the six
months  ended March 31,  2000,  as compared to $13.5  million for the six months
ended March 31,  1999.  The average  cost of deposits  for the six months  ended
March 31, 2000,  was 3.67%  compared to 3.85% for the six months ended March 31,
1999.  The cost of  interest-bearing  liabilities  was 4.52% for the six  months
ended March 31,  2000,  as compared to 4.40% for the six months  ended March 31,
1999. Total average  interest-bearing  liabilities increased from $614.0 million
at March 31, 1999 to $686.9 million at March 31, 2000.

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

Net interest  income was $12.2  million for the six months ended March 31, 2000,
as compared to $10.9  million for the six months ended March 31,  1999.  The net
interest margin increased to 3.49% for the six months ended March 31, 2000, from
3.39% for the six months ended March 31, 1999.

During calendar year 2000,  interest rates have increased  significantly.  It is
generally  believed  that the Federal  Reserve may  increase  the Federal  Funds
target rate by fifty basis  points in its May  meeting.  Should  interest  rates
continue  to  increase,  certain of the Bank's  adjustable  rate loans may reach
their lifetime  interest rate change cap. In addition,  a high percentage of the
Company's  assets are  adjustable  rate mortgage  loans which reprice  annually;
whereas,  many of the  Company's  liabilities  reprice  in 90 to 180  days.  The
Company  expects  that  as  a  result  of  this  rapidly  rising  interest  rate
environment,  its net interest margin will decrease in the second half of fiscal
2000. Should interest rates continue to increase,  the Company would most likely
continue to experience a further decrease in its interest rate spread.

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

The  provision for loan losses  increased  slightly from $410,000 for the period
ended March 31, 1999,  to $470,000 for the six months ended March 31, 2000.  For
the six months ended March 31, 2000, net charge-offs  were $200,000  compared to
net  recoveries  of $ 61,000  for the six  months  ended  March  31,  1999.  The
allowance  for loan losses as a percentage of total loans was 1.34% at March 31,
2000,  compared to 1.36% at September  30, 1999.  Management  believes  that the
current level of allowance is adequate  considering  the Company's  current loss
experience and delinquency trends, among other criteria.



                                       17
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE SIX MONTHS ENDED
MARCH 31, 1999 AND 2000

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

For the six months ended March 31, 2000, other income decreased  $65,000 to $2.9
million  compared to $3.0 million for the six months ended March 31, 1999.  Fees
and service  charges for the six months  ended March 31, 2000 and 1999 were $1.1
million.  Gain on sale of loans was  $577,000 for the six months ended March 31,
1999,  compared to $348,000 for the six months ended March 31, 2000. The Company
experienced lower gains on sales as a result of rising interest rates during the
period and reduced sales.  With interest rates continuing to increase,  the Bank
expects  that  this  trend may  continue.  Loss on sale of  securities  was $1.8
million for the six months ended March 31,  2000,  compared to gains of $225,000
for the six  months  ended  March  31,  1999.  This is the  result  of the  Bank
restructuring  a portion of its available  for sale  investment  portfolio.  The
losses were offset by a gain on the sale of the Florence office deposits of $1.7
million  which is  included in other  income for the six months  ended March 31,
2000.  Other  income was $1.6  million for the six months  ended March 31, 2000,
compared  to $1.1  million  for the six months  ended  March 31,  1999.  This is
primarily due to increased  commissions on the sale of  non-depository  products
and rental income.


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

General and  administrative  expenses  increased  from $7.6  million for the six
months ended March 31, 1999,  to $8.2 million for the six months ended March 31,
2000. Salaries and employee benefits increased $538,000,  or 12.9% primarily due
to  staffing  for  two  new  Sales  Centers  and a  loan  production  office  in
Wilmington,  NC. Also as a result of the three office additions,  net occupancy,
furniture and fixtures and data processing  expense  increased  $142,000.  Other
expense was $1.5 million for the six months ended March 31, 1999 and 2000.


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

Income  taxes  increased  from $2.1  million for the six months  ended March 31,
1999,  to $2.3 million for the six months  ended March 31, 2000,  as a result of
increased income before taxes.

                                       18
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000


REGULATORY CAPITAL MATTERS
--------------------------

To be  categorized  as "Well  Capitalized"  under the prompt  corrective  action
regulations  adopted by the Federal Banking  Agencies,  the Bank must maintain a
total  risk-based  capital ratio as set forth in the following  table and not be
subject to a capital directive order.
<TABLE>
<CAPTION>
                                                                                      Categorized as "Well
                                                                                        Capitalized" Under
                                                                For Capital              Prompt Corrective
                                         Actual              Adequacy Purposes           Action Provision
                                         ------              -----------------           ----------------
                                   Amount       Ratio        Amount       Ratio         Amount       Ratio
                                   ------       -----        ------       -----         ------       -----
                                                             (Dollars In Thousands)
<S>                                <C>          <C>         <C>            <C>           <C>          <C>
As of March 31, 2000:
 Total Capital:                    $53,109      12.83%      $33,114        8.00%         $41,394      10.00%
   (To Risk Weighted Assets)
 Tier 1 Capital:                   $48,094      11.62%         $N/A         N/A%         $24,837       6.00%
   (To Risk Weighted Assets)
 Tier 1 Capital:                   $48,094       6.50%      $29,596        4.00%         $36,995       5.00%
   (To Total Assets)
 Tangible Capital:                 $48,094       6.50%      $11,099        1.50%
   (To Total Assets)

</TABLE>
                                       19

<PAGE>
PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000


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

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


                                       20
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 3.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATION- CONTINUED
COMPARISONS OF THE SIX MONTHS ENDED MARCH 31, 1999 AND 2000


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

At March 31, 2000, no material  changes have occurred in market risk disclosures
included  in the  Company's  Annual  Report to  Stockholders  for the year ended
September 30, 1999.






                                       21
<PAGE>
PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

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

     Not Applicable.

Item 2.  Changes In Securities and Use of Proceeds
         -----------------------------------------

     Not Applicable.

Item 3.  Defaults Upon Senior Securities
         -------------------------------

     Not Applicable.

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

At the  Company's  annual  stockholders  meeting held on January 24,  2000,  the
following items were ratified:

     (a) The election as directors of all nominees:  G. David  Bishop,  James T.
Clemmons and Frank A. Thompson, II.

  At the meeting, a total of 6,433,193 votes were entitled to be cast. Votes for
  Bishop were 5,036,900 with 126,520 withheld;  votes for James T. Clemmons were
  5,032,900  with  131,330  withheld;  and votes for  Frank A. Thompson  II were
  5,033,630 with 129,790 withheld.

  James C. Benton, James P. Creel, James H. Dusenbury  and Michael C. Gerald are
  directors whose terms continued after the meeting.

     (b)  Ratification of the Coastal  Financial  Corporation  2000 Stock Option
Plan.

  At the  meeting,  a  total  of  6,433,193  votes  were  entitled  to be  cast.
(Percentages are based on the 5,163,420 shares that were voted at the meeting.)

  For: 3,329,530 64.5%     Against: 212,822 4.1%     Abstain: 12,545 0.02%
     Non-Vote 1,608,522 31.2%

  Accordingly,  the Coastal  Financial  Corporation  2000 Stock  Option Plan was
adopted as presented.

Item 5.  Other Information
         -----------------

     Not Applicable.
                                       22
<PAGE>
PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

     (a)  Exhibits

              3  (a)   Certificate of Incorporation of Coastal Financial
                       Corporation (1)

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

                 (c)   Bylaws of Coastal Financial Corporation (1)

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

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

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

                 (d)   Employment Agreement with Allen W. Griffin (2)

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

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

                 (g)   1990 Stock Option Plan (2)

                 (h)   Directors Performance Plan (3)

                 (i)   Loan Agreement with Bankers Bank (5)

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

              27       Financial Data Schedule

     (b) The Company filed a Form 8-K on March 13, 2000 to report the completion
         of the sale of its  Florence,  South  Carolina  branch  office to First
         Federal  Savings and Loan  Association  of Cheraw.  A copy of the press
         release announcing the sale is filed as an exhibit to the Form 8-K.
----------------
(1)      Incorporated by reference to  Registration  Statement on Form S-4 filed
         with the Securities and Exchange Commission on November 26, 1990.

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

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

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

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

                                       23
<PAGE>
PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

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

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

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



                                       24

<PAGE>




                                   SIGNATURES


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

                                       COASTAL FINANCIAL CORPORATION

May 15, 2000                           /s/ Michael C. Gerald
------------                           ----------------------
Date                                   Michael C. Gerald
                                       President and Chief Executive Officer

May 15, 2000                           /s/ Jerry L. Rexroad
------------                           ---------------------
Date                                   Jerry L. Rexroad
                                       Executive Vice President and
                                       Chief Financial Officer



                                       25