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, 2002

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

                  For the transition period from ________ to __________

                         Commission File Number: 0-19684

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


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


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

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

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

                  YES [X]                     NO [_]

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)

                  YES [X]                     NO [_]

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of December 31, 2002.

Common Stock $.01 Par Value Per Share                         10,621,350 Shares
--------------------------------------------------------------------------------
(Class)                                                        (Outstanding)




                                       1

<PAGE>

<TABLE>
<CAPTION>



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

<S>  <C>                                                                            <C>
TABLE OF CONTENTS                                                                    PAGE
-----------------                                                                    ----

PART I-      Consolidated Financial Information

Item

     1.   Consolidated Financial Statements (unaudited):

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

          Consolidated Statements of Operations for the three months ended
          December 31, 2001 and 2002                                                    4

          Consolidated Statements of Stockholders' Equity and Comprehensive
          Income for the three months ended December 31, 2001 and 2002                  5

          Consolidated Statements of Cash Flows for the three months ended
          December 31, 2001 and 2002                                                  6-7

          Notes to Consolidated Financial Statements                                 8-10

     2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                                     11-16

     3.   Quantitative and Qualitative Disclosures About                               17
          Market Risk

     4.   Controls and procedures                                                      17


Part II - Other Information

Item

     1. Legal Proceedings                                                              18

     2. Changes in Securities and Use of Proceeds                                      18

     3. Defaults Upon Senior Securities                                                18

     4. Submission of Matters to a Vote of Securities Holders                          18

     5. Other information                                                              18

     6. Exhibits and Reports on Form 8-K                                            18-19

Signatures                                                                             20

Certifications                                                                      21-22
</TABLE>



                                       2



<PAGE>



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

                                                               September 30,      December 31,
                                                                  2002                 2002
                                                                  ----                 ----
                                                                          (Unaudited)
                                                                        (In thousands,
                                                                      except share data)
ASSETS:
<S>                                                            <C>                <C>
Cash and amounts due from banks                                $     25,802       $      23,461
Short-term interest-bearing deposits                                     --               6,617
Investment securities available for sale                              2,014                  --
Mortgage-backed securities available for sale                       331,808             354,522
Loans receivable (net of allowance for
   loan losses of $7,883 at September 30,
   2002 and $8,282 at December 31, 2002)                            536,851             572,026
Loans receivable held for sale                                       18,694              14,726
Real estate acquired through foreclosure                              1,046               1,179
Office property and equipment, net                                   13,713              14,185
Federal Home Loan Bank stock, at cost                                10,559              10,894
Accrued interest receivable on loans                                  2,232               2,134
Accrued interest receivable on securities                             2,019               2,088
Cash value of life insurance                                             --              15,508
Other assets                                                          6,058               7,048
                                                               ------------       -------------
                                                               $    950,976       $   1,024,388
                                                               ============       =============

LIABILITIES AND STOCKHOLDERS' EQUITY:

LIABILITIES:
Deposits                                                       $    637,081       $     636,224
Securities sold under agreements to repurchase                       36,884              99,614
Advances from Federal Home Loan Bank                                189,669             198,868
Other borrowings                                                      2,069               2,069
Drafts outstanding                                                    2,517               1,753
Advances by borrowers for property taxes
  and insurance                                                       1,386                 101
Accrued interest payable                                              1,473               1,240
Other liabilities                                                    13,331              14,754
                                                               ------------       -------------
  Total liabilities                                                 884,410             954,623
                                                               ------------       -------------

STOCKHOLDERS' EQUITY:
Serial preferred stock, 1,000,000 shares
   authorized and unissued                                              - -                 - -
Common stock, $.01 par value, 15,000,000
   shares authorized; 10,587,726 shares at
   September 30, 2002 and 10,621,350 shares
   at December 31, 2002 issued and outstanding                          106                 106
Additional paid-in capital                                            9,944               9,944
Retained earnings                                                    54,954              56,982
Treasury stock, at cost (430,082 shares at
   September 30, 2002 and 396,458 shares at
   December 31, 2002)                                                (4,376)             (4,044)
Accumulated other comprehensive income,
 net of tax                                                           5,758               6,777
                                                               ------------       -------------
  Total stockholders' equity                                         66,386              69,765
                                                               ------------       -------------
                                                               $    950,796       $   1,024,388
                                                               ============       =============

</TABLE>

                                       3

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>



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

                                                                     2001                2002
                                                                     ----                ----
                                                                             (Unaudited)
                                                                           (In thousands,
                                                                         except share data)
<S>                                                            <C>                <C>
Interest income:
   Loans receivable                                            $     10,252       $      10,112
   Investment securities                                                575                 506
   Mortgage-backed securities                                         2,473               4,087
   Other                                                                 68                  35
                                                               ------------       -------------
   Total interest income                                             13,368              14,740
                                                               ------------       -------------

Interest expense:
   Deposits                                                           3,609               3,355
   Securities sold under agreements to
     repurchase                                                         127                 304
   Advances from Federal Home Loan Bank                               1,926               2,148
                                                               ------------       -------------
   Total interest expense                                             5,662               5,807
                                                               ------------       -------------
   Net interest income                                                7,706               8,933
   Provision for loan losses                                            250                 435
                                                               ------------       -------------
   Net interest income after provision
     for loan losses                                                  7,456               8,498
                                                               ------------       -------------

Other income:
   Fees and service charges                                             768                 886
   Loss from real estate owned                                         (106)                (52)
   Gain on sales of loans held for sale                                 556                 776
   Gain on sales of investment securities
      available for sale and mortgage-backed
      securities available for sale                                     131                 214
   Other income                                                         824                 843
                                                               ------------       -------------
                                                                      2,173               2,667
                                                               ------------       -------------
General and administrative expenses:
   Salaries and employee benefits                                     3,002               3,192
   Net occupancy, furniture and fixtures
     and data processing expense                                      1,112               1,477
   FDIC insurance premium                                                23                  26
   Prepayment penalties on FHLB advances                                480               1,114
   Other expenses                                                     1,113               1,055
                                                               ------------       -------------
                                                                      5,730               6,864
                                                               ------------       -------------
Income before income taxes                                            3,899               4,301
Income taxes                                                          1,439               1,551
                                                               ------------       -------------

Net income                                                     $      2,460       $       2,750
                                                               ============       =============

Earnings per common share
   Basic                                                       $        .23       $         .26
                                                               ============       =============
   Diluted                                                     $        .23       $         .25
                                                               ============       =============

Weighted average common shares outstanding
   Basic                                                         10,664,000          10,603,000
                                                               ============       =============
   Diluted                                                       10,927,000          11,102,000
                                                               ============       =============

Dividends per share                                            $        .05       $        .055
                                                               ============       =============

</TABLE>



SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       4

<PAGE>








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

                                                                                               Accumulated
                                                                                                 Other
                                                                                                 Compre-
                                                Additional                                       hensive          Total
                                  Common         Paid-In        Retained        Treasury         Income       Stockholders'
                                  Stock          Capital        Earnings         Stock           (Loss)          Equity
                                  -----          -------        --------         -----           ------          ------
                                                                     (Unaudited)
                                                                    (In thousands)
<S>                              <C>             <C>            <C>             <C>             <C>             <C>

Balance at September
  30, 2001                       $    107        $  9,744       $ 47,496        $ (3,620)       $  3,521        $ 57,248
Net income                           --              --            2,460            --              --             2,460
Other comprehensive
 loss:
 Unrealized losses arising
 during period, net of
 taxes of $536                       --              --             --              --              (875)           --
 Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $50                 --              --             --              --               (81)           --
                                                                                                --------
Other comprehensive loss             --              --             --              --              (956)           (956)
                                                                                                --------        --------
Comprehensive income                 --              --             --              --              --             1,504
                                                                                                                --------
Treasury stock repurchases             (1)           --             --              (697)           --              (698)
Exercise of stock
  options                            --              --              (75)            134            --                59
Cash dividends                       --              --             (530)           --              --              (530)
                                 --------        --------       --------         -------        --------        --------
Balance at December
31, 2001                         $    106        $  9,744       $ 49,351         $(4,183)       $  2,565        $ 57,583
                                 ========        ========       ========         =======        ========        ========


Balance at September
  30, 2002                       $    106        $  9,944       $ 54,954        $ (4,376)       $  5,758        $ 66,386
Net income                           --              --            2,750            --              --             2,750
Other comprehensive
 income:
 Unrealized gains arising
 during period, net of
 taxes of $704                       --              --             --              --             1,152            --
 Less: reclassification
 adjustment for gains
 included in net income,
 net of taxes of $81                 --              --             --              --              (133)           --
                                                                                                --------
Other comprehensive income           --              --             --              --             1,019           1,019
                                                                                                --------        --------
Comprehensive income                 --              --             --              --              --             3,769
Exercise of stock                                                                                               --------
  options                            --              --             (138)            332            --               194
Cash dividends                       --              --             (584)           --              --              (584)
Balance at December              --------        --------       --------         -------        --------        --------
  31, 2002                       $    106        $  9,944       $ 56,982        $ (4,044)       $  6,777        $ 69,765
                                 ========        ========       ========         =======        ========        ========

</TABLE>



SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2002
<TABLE>
<CAPTION>

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

<S>                                                               <C>             <C>
Cash flows from operating activities:
  Net earnings                                                  $   2,460         $   2,750
  Adjustments to reconcile net income to net
       cash provided by operating activities:
  Depreciation                                                        458               587
  Provision for loan losses                                           250               435
  Gain on sale of investment securities
        available for sale and mortgage-backed
         securities available for sale                               (131)             (214)
  Loss on write-down of real estate acquired
        through foreclosure                                            --                38
  Origination of loans receivable held for sale                   (31,968)          (34,141)
  Proceeds from sales of loans receivable held for sale            28,408            38,109
  Impairment loss from write-down of mortgage
        servicing rights                                               --                45
  (Increase) decrease in:
        Cash value of life insurance                                   --                (8)
        Accrued interest receivable                                   276                29
       Other assets                                                  (886)           (1,035)
  Increase in:
       Accrued interest payable                                        93              (233)
       Other liabilities                                            1,654               800
                                                                ---------         ---------


       Net cash provided by operating activities                      614             7,162
                                                                ---------         ---------


 Cash flows from investing activities:
  Issuer exercise of call of investment
        securities available for sale                                  --             2,000
  Origination of loans receivable, net                            (67,302)         (158,590)
  Principal collected on loans receivable, net                     62,085           122,809
  Purchases of mortgage-backed securities
       available for sale                                         (39,803)          (84,609)
  Proceeds from sales of mortgage-backed
       securities available for sale                               14,020            23,932
  Principal collected on mortgage-backed
       securities, net                                             18,960            39,833
  Proceeds from sale of real estate
       acquired through foreclosure, net                              529                --
  Purchases of office properties and equipment                       (833)           (1,059)
  Purchase of FHLB stock, net                                        (140)             (335)
  Purchase of bank-owned life insurance                                --           (15,500)
                                                                ---------         ---------


       Net cash used in investing activities                      (12,484)          (71,519)
                                                                ---------         ---------

</TABLE>





                                                                     (CONTINUED)


                                       6


<PAGE>



PART I.  FINANCIAL INFORMATION
Item 1.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2002 (CONTINUED)
<TABLE>
<CAPTION>

                                                                     2001             2002
                                                                     ----             ----
                                                                           (Unaudited)
                                                                          (In thousands)
<S>                                                               <C>            <C>

Cash flows from financing activities:
  Decrease in deposits, net                                     $  (9,232)        $    (857)
  Increase in securities sold under
   agreement to repurchase, net                                     8,457            62,730
  Proceeds from FHLB advances                                      55,762           169,869
  Repayment of FHLB advances                                      (51,223)         (160,670)
  Decrease in advance payments by borrowers
   for property taxes and insurance, net                             (967)           (1,285)
  Decrease in drafts outstanding, net                                (616)             (764)
  Repurchase of treasury stock, at cost                              (698)              --
  Dividends to stockholders                                          (530)             (584)
  Exercise of stock options                                            59               194
                                                                ---------         ---------

  Net cash provided by financing activities                         1,012            68,633
                                                                ---------         ---------

  Net (decrease) increase in cash and cash equivalents            (10,858)            4,276
Cash and cash equivalents at beginning
  of the period                                                    34,320            25,802
                                                                ---------         ---------
Cash and cash equivalents at end
  of the period                                                 $  23,462         $  30,078
                                                                =========         =========

Supplemental information:
  Interest paid                                                 $   5,569         $   6,040
                                                                =========         =========
  Income taxes paid                                             $   1,330         $      23
                                                                =========         =========

Supplemental schedule of non-cash investing
  and financing transactions:

  Transfer of mortgage loans to real estate
     acquired through foreclosure                               $     135         $     171
                                                                =========         =========

  Stock options exercised by the surrender
      of outstanding common shares                              $      --         $      77
                                                                =========         =========
</TABLE>


                                       7



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 accounting principles generally accepted in the United States of
America. All adjustments, consisting only of normal recurring accruals, which in
the opinion of management are necessary for fair presentation of the interim
financial statements, have been included. The results of operations for the
three-month period ended December 31, 2002 are not necessarily indicative of the
results which may be expected for the entire fiscal year. These unaudited
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements and related notes for the
year ended September 30, 2002, included in the Company's 2002 Annual Report to
Stockholders. The principal business of the Company is conducted by its
wholly-owned subsidiary, Coastal Federal Bank (the "Bank"). The information
presented hereon, therefore, relates primarily to the Bank.

Certain prior year amounts have been reclassified to conform to current year
presentation.


(2)  LOANS RECEIVABLE, NET

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

                                                                September 30,   December 31,
                                                                    2002            2002
                                                                ------------    -----------
                                                                         (Unaudited)
                                                                        (In thousands)
<S>                                                               <C>             <C>
First mortgage loans:
   Single family to 4 family units                              $ 233,571         $ 246,713
   Other, primarily commercial real estate                        202,117           218,179
   Residential construction loans                                  17,771            15,800
   Commercial construction loans                                   30,439            34,049

Consumer and commercial loans:
   Installment consumer loans                                      12,882            15,276
   Mobile home loans                                                3,446             3,597
   Savings account loans                                            1,613             2,178
   Equity lines of credit                                          24,273            24,276
   Commercial and other loans                                      18,377            20,055
                                                                ---------         ---------
                                                                  544,489           580,123
Less:
   Allowance for loan losses                                        7,883             8,282
   Deferred loan costs, net                                          (245)             (185)
                                                                ---------         ---------
                                                                  536,851         $ 572,026
                                                                =========         =========

</TABLE>

                                       8


<PAGE>

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

The changes in the allowance for loan losses consist of the following
for the three months ended:
<TABLE>
<CAPTION>

                                                              Three Months Ended December 31,
                                                              -------------------------------
                                                                    2001             2002
                                                                    ----             ----
                                                                        (Unaudited)
                                                                   (Dollars in thousands)

<S>                                                             <C>               <C>
Allowance at beginning of period                                $     7,159       $   7,883
Provision for loan losses                                               250             435
                                                                -----------       ---------
Recoveries:
 Residential real estate                                                - -             - -
 Commercial real estate                                                 - -               1
 Consumer                                                                 4               9
                                                                -----------       ---------
   Total recoveries                                                       4              10
                                                                -----------       ---------

Charge-offs:
 Residential real estate                                                 57             - -
 Commercial real estate                                                 - -             - -
 Consumer                                                               112              46
                                                                -----------       ---------
   Total charge-offs                                                    169              46
                                                                -----------       ---------
   Net charge-offs                                                      165              36
                                                                -----------       ---------
 Allowance at end of period                                     $     7,244       $   8,282
                                                                ===========       =========

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

Ratio of net charge-offs to average
 total loans outstanding during the period (annualized)                 .13%            .02%
                                                                        ===             ===
</TABLE>


Non-accrual loans, which were over ninety days delinquent, totaled approximately
$4.7 million and $5.4 million at December 31, 2002 and 2001, respectively. For
the three months ended December 31, 2002 and 2001, interest income, which would
have been recorded, would have been approximately $172,000 and $131,000,
respectively, had non-accruing loans been current in accordance with their
original terms.

At December 31, 2002, impaired loans totaled $3.4 million. There were $3.2
million in impaired loans at December 31, 2001. Included in the allowance for
loan losses at December 31, 2002 was $238,000 related to impaired loans compared
to $236,000 at December 31, 2001. The average recorded investment in impaired
loans for the three months ended December 31, 2002 was $3.3 million compared to
$3.3 million for the quarter ended December 31, 2001. Interest income of $16,000
was recognized on impaired loans for the quarter ended December 31, 2002. No
interest income was recognized on impaired loans for the quarter ended December
31, 2001.


(3)  DEPOSITS
<TABLE>
<CAPTION>

Deposits consist of the following:

                                                    September 30, 2002                 December 31, 2002
                                                    ------------------                 -----------------
                                                                  Weighted                        Weighted
                                                                   Average                         Average
                                                      Amount        Rate        Amount              Rate
                                                      ------        ----        ------              ----
                                                                        (Unaudited)
                                                                       (In thousands)

<S>                                               <C>               <C>         <C>                <C>
Transaction accounts                              $   343,308       1.41%       $   351,861        1.31%
Passbook accounts                                      39,092       1.12             39,034        1.07
Certificate accounts                                  254,681       3.46            245,329        3.05
                                                  -----------                   -----------
                                                  $   637,081       2.21%       $   636,224        1.97%
                                                  ===========                   ===========
</TABLE>




                                        9

<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, 2002                     December 31, 2002
                                ------------------                     -----------------
                                              Weighted                            Weighted
                                               Average                             Average
                                    Amount      Rate                    Amount      Rate
                                    ------      ----                    ------      ----
Maturing within:                                      (Unaudited)
                                                    (In thousands)
<C>                            <C>               <C>                <C>              <C>
1 year                         $     32,350      2.14%              $     32,882     1.42%
2 years                              11,235      2.34                        235     4.92
3 years                              25,500      6.24                     17,500     6.08
4 years                               3,270      4.98                      1,270     4.62
5 years                               6,223      3.39                      6,223     3.39
After 5 years                       111,091      5.23                    140,758     4.77
                               ------------                         ------------
                               $    189,669      4.61%              $    198,868     4.29%
                               ============                         ============
</TABLE>


At September 30, 2002, and December 31, 2002, the Bank had pledged first
mortgage loans and mortgage-backed securities with unpaid balances of
approximately $219.8 million and $239.4 million, respectively, as collateral for
FHLB advances. At September 30, 2002, included in the three, four, five and
after five years maturities were $109.0 million of advances subject to call
provisions. At December 31, 2002, included in the three, four and after five
years maturities were $134 million, with a weighted average rate of 4.94%, of
advances subject to call provisions. Callable advances at December 31, 2002 are
summarized as follows: $68 million callable in fiscal 2003, with a weighted
average rate of 5.37%; $29 million callable in fiscal 2005, with a weighted
average weight of 6.28%; $2 million callable in fiscal 2006, with a weighted
average rate of 4.72%; and $35 million callable in fiscal 2007, with a weighted
average rate of 3.00%. Call provisions are more likely to be exercised by the
FHLB when rates rise.

(5)  EARNINGS PER SHARE

Basic earnings per share for the three months ended December 31, 2001 and 2002,
are computed by dividing net income by the weighted average common shares
outstanding during the respective periods. Diluted earnings per share for the
three months ended December 31, 2001 and 2002, are computed by dividing net
earnings by the weighted average dilutive shares outstanding during the
respective periods.


RECONCILIATION OF AVERAGE SHARES OUTSTANDING
(Unaudited)
<TABLE>
<CAPTION>

                                                  For the Quarter Ended December 31,

                                        2001               2001      2002                2002
                                        -----------------------     ------------------------
                                        BASIC           DILUTED      BASIC            DILUTED
                                        -----------------------      ------------------------

<S>                                     <C>          <C>             <C>           <C>
Weighted average shares outstanding     10,664,000   10,664,000      10,603,000    10,603,000
                                        -----------------------      ------------------------
Effect of dilutive securities:
  Stock options                                 --      263,000              --       499,000
                                        -----------------------      ------------------------
                                        10,664,000   10,927,000      10,603,000    11,102,000
                                        -----------------------      ------------------------
</TABLE>

(6)  COMMON STOCK DIVIDENDS

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


                                       10
<PAGE>



PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


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).
Except as required by applicable law and regulations, the Company disclaims any
obligation to update such forward looking statements.


CRITICAL ACCOUNTING POLICIES
----------------------------

The Company considers its policy regarding the allowance for loan losses to be
its most critical accounting policy due to the significant degree of management
judgment. The Company has developed policies and procedures for assessing the
adequacy of the allowance, recognizing that this process requires a significant
number of assumptions and estimates with respect to its loan portfolio. The
Company assessments of future loan losses may be impacted in future periods by
changes in economic and market conditions, the impact of regulatory
examinations, weather related events such as hurricanes or major storms, and the
discovery of information with respect to certain borrowers and or guarantors,
which is not known to management at the time of the issuance of the consolidated
financial statements. Further, a significant portion of the Company's loans are
supported by collateral which is significantly affected by changes in the
tourism industry. The tourism industry is the major economic force in many of
the markets the Company serves and future changes in tourism could significantly
impact collateral value.


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

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

The Bank's off-balance sheet arrangements, which principally include lending
commitments and derivatives, are described below. At December 31, 2002 and
September 30, 2002, the Bank had no interests in non-consolidated special
purpose entities.

Lending Commitments. Lending Commitments include loan commitments, standby
letters of credit, unused business and consumer credit card lines, and unused
business and consumer lines of credit. These instruments are not recorded in the
consolidated balance sheet until funds are advanced under the commitments. The
Bank provides these lending commitments to customers in the normal course of
business. Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of these commitments expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank applies essentially the same credit
policies and standards as it does in the lending process when making these
loans.

For commercial customers, loan commitments generally take the form of revolving
credit arrangements to finance customers' working capital requirements. For
retail customers, loan commitments are generally lines of credit secured by
residential property. At December 31, 2002, commercial and retail loan
commitments totaled $42.2 million. Unused business credit card lines, which
totaled $1.1 million at December 31, 2002, are generally for short-term
borrowings.

Standby letters of credit obligate the Company to meet certain financial
obligations of its customers, if, under the contractual terms of the agreement,
the customers are unable to do so. The financial standby letters of credit
issued by the Company are irrevocable, and totaled $3.1 million at December 31,
2002. Payment is only guaranteed under these letters of credit upon the
borrower's failure to perform its obligations to the beneficiary. As such, there
are no "stand-ready obligations" in any of the letters of credit issued by the
Company and the contigent obligations are accounted for in accordance with SFAS
NO. 5, "Accounting for Contingencies."

Derivatives. The Bank originates certain fixed rate residential loans with the
intention of selling these loans. Between the time that the Bank enters into an
interest rate lock or a commitment to originate a fixed rate residential loan
with a potential borrower and the time the closed loan is sold, the Bank is
subject to variability in the market prices

                                       11
<PAGE>

PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-CONTINUED

related to these commitments. The Bank believes that it is prudent to limit the
variability of expected proceeds from the sales through forward sales of "to be
issued" mortgage-backed securities and loans ("forward sales commitments"). The
commitment to originate fixed rate residential loans and forward sales
commitments are freestanding derivative instruments. When such instruments do
not qualify for hedge accounting treatment, their fair value adjustments are
recorded through the income statement in net gains on sale of loans. The
commitments to originate fixed rate conforming loans totaled $15.5 million at
December 31, 2002. The fair value of the loan commitments was an asset of
approximately $281,000 at December 31, 2002. As of December 31, 2002, the Bank
had sold $16 million in forward commitments to deliver fixed rate
mortgage-backed securities, which was recorded as a derivative liability of
$200,000.


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

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

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 loan payments, customer deposits, advances from the FHLB,
securitization of loans and subsequent sales, and loan sales. The principal use
of cash flows is the origination of loans receivable and purchase of investment
securities. The Company originated loans receivable of $99.3 million for the
three months ended December 31, 2001, compared to $192.7 million for the three
months ended December 31, 2002, primarily as a result of increased business
banking lending activity and increased residential lending activity which
included significant refinancing activities due to decreased interest rates. A
portion of these loan originations were financed through loan principal
repayments, which amounted to $62.1 million and $122.8 million for the three
month periods ended December 31, 2001 and 2002, respectively. In addition, the
Company sells certain loans in the secondary market to finance future loan
originations. Generally, these loans have consisted only of mortgage loans,
which have been originated within the previous year. For the three month period
ended December 31, 2001, the Company sold $28.4 million in mortgage loans held
for sale, compared to $38.1 million sold for the three month period ended
December 31, 2002. Loan originations increased as a result of falling interest
rates over the last two years. Consequently, the Bank has experienced prepayment
of a portion of its mortgage and commercial loan portfolio. A portion of the
Bank's adjustable rate residential mortgage loans were refinanced into
conforming fixed rate mortgage loans. A significant portion of these fixed rate
loans were then sold into the secondary market.

During the three-month period ended December 31, 2002, the Company securitized
$28.7 million of mortgage loans and concurrently sold these mortgage-backed
securities to outside third parties and recognized a gain on sale of $899,000,
which included $511,000 related to Mortgage Servicing Rights. The gain is
included in gains on sales of loans held for sale in the consolidated statement
of operations. The proceeds from sale are included in proceeds from sales of
loans receivable held for sale in the consolidated statement of cash flows. The
Company has no retained interest in the securities that were sold.

For the three-month period ended December 31, 2001, the Company purchased $39.8
million in investment and mortgage-backed securities. For the three-month period
ended December 31, 2002, the Company purchased $84.6 million in investment and
mortgage-backed securities. These purchases during the three-month period ended
December 31, 2002 were funded primarily by repayments of $39.8 million within
the securities portfolio, sales of investment securities of $23.9 million, and
sales of loans receivable held for sale of $38.1 million.

Overall the Bank experienced a decrease of $857,000 in deposits for the
three-month period ended December 31, 2002. For the three-month period ended
December 31, 2002, transaction accounts increased $8.6 million and certificate
accounts decreased $9.4 million. At

                                       12
<PAGE>


PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-CONTINUED

December 31, 2002, the Company had $174.1 million of certificates of deposits,
which were due to mature within one year. The Company believes that the majority
of these certificates of deposits will renew with the Bank. At December 31,
2002, the Company had commitments to originate $23.9 million in mortgage loans,
and $42.2 million in undisbursed lines of credit, which the Company expects to
fund from normal operations. Additionally, at December 31, 2002, the Company had
federal funds available of $10 million. Effective January 1, 2003, the Company
had federal funds available of $20 million.

As a result of $2.75 million in net income, less the cash dividends paid to
stockholders of approximately $584,000, proceeds of $194,000 from the exercise
of stock options, and the net change in unrealized gain on securities available
for sale, net of income tax of $1.02 million, stockholders' equity increased
from $66.4 million at September 30, 2002 to $69.8 million at December 31, 2002.

OTS regulations require that the Bank calculate and maintain a minimum
regulatory capital requirement on a quarterly basis and satisfy such requirement
as of the calculation date and throughout the quarter. The Bank's capital, as
calculated under OTS regulations, is approximately $64.7 million at December 31,
2002, exceeding the core capital requirement by $34.2 million. At December 31,
2002, the Bank's risk-based capital of approximately $71.7 million exceeded its
current risk-based capital requirement by $24.6 million. (For further
information see Regulatory Capital Matters).


MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS FOR THE THREE MONTHS ENDED
-----------------------------------------------------------------------------
DECEMBER 31, 2001 AND 2002
--------------------------

GENERAL
-------

Net income increased from $2.5 million for the three months ended December 31,
2001, to $2.8 million for three months ended December 31, 2002, or 11.8%. Net
interest income increased $1.2 million primarily as a result of an increase of
$1.4 million in interest income and a $145,000 increase in interest expense.
Provision for loan losses was $250,000 for the three months ended December 31,
2001 compared to $435,000 for the quarter ended December 31, 2002. Other income
increased $494,000. General and administrative expense was $5.7 million for the
quarter ended December 31, 2001 compared to $6.9 million for the quarter ended
December 31, 2002.

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

Interest income for the three months ended December 31, 2002, increased to $14.7
million as compared to $13.4 million for the three months ended December 31,
2001. The earning asset yield for the three months ended December 31, 2002, was
6.24% compared to a yield of 7.55% for the three months ended December 31, 2001.
As a result of significant declining interest rates over the last two years, the
Bank's yield on assets and cost of funds has declined. At December 31, 2000,
2001 and 2002, the one year treasury rate of interest was approximately 5.34%,
2.28% and 1.41%, respectively. At December 31, 2000, 2001 and 2002, the prime
rate of interest was approximately 9.5%, 4.75% and 4.25%, respectively. The
average yield on loans receivable for the three months ended December 31,
2002,was 6.82% compared to 8.01% for the three months ended December 31, 2001.
The yield on investments decreased to 5.34% for the three months ended December
31, 2002, from 6.43% for the three months ended December 31, 2001. Total average
interest-earning assets were $952.3 million for the quarter ended December 31,
2002 as compared to $714.6 million for the quarter ended December 31, 2001. The
increase in average interest-earning assets is primarily due to an increase in
average loans receivable of approximately $81.5 million and investment
securities of approximately $154.7 million.

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

Interest expense on interest-bearing liabilities was $5.8 million for the three
months ended December 31, 2002, as compared to $5.7 million for the three months
ended December 31, 2001. The average cost of deposits for the three months ended
December 31, 2002, was 2.09% compared to 2.73% for the three months ended
December 31, 2001. The cost of

                                       13
<PAGE>


PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-CONTINUED

interest-bearing liabilities was 2.58% for the three months ended December 31,
2002, as compared to 3.28% for the three months ended December 31, 2001. The
cost of FHLB advances and reverse repurchase agreements was 4.43% and 1.90%,
respectively, for the three months ended December 31, 2002. For the three months
ended December 31, 2001, the cost of FHLB advances and reverse repurchase
agreements was 5.38% and 2.85%, respectively. Total average interest-bearing
liabilities increased from $691.2 million at December 31, 2001 to $897.4 million
at December 31, 2002. The increase in average interest-bearing liabilities is
due to an increase in average deposits of approximately $113.2 million. This was
accompanied by an increase in reverse repurchase agreements of $41.9 million and
FHLB advances of $50.8 million.

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

Net interest income was $8.9 million for the three months ended December 31,
2002, as compared to $7.7 million for the three months ended December 31, 2001.
The net interest margin was 3.67% for the three months ended December 31, 2002,
compared to 4.27% for the three months ended December 31, 2001. With the
reduction in interest rates, resulting from the Federal Reserve Board's decision
to reduce the discount rate, it is expected that the Bank's yield on interest
earning assets and cost of deposits and borrowings will decline. Consequently,
it is expected that a portion of the Bank's loan portfolio will be subject to
refinancing at lower rates. It is expected that refinancing of loans at lower
rates and repricing of loans tied to prime or treasury rates will outpace the
repricing of deposits and borrowings. Should interest rates remain at these
historically low levels, the Bank expects to experience a reduced margin for the
remainder of fiscal 2003.

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

As a result of the growth in the loan portfolio, the growth coming primarily
from commercial real estate loans, the provision for loan losses was $435,000
for the three months ended December 31, 2002 compared to $250,000 for the three
months ended December 31, 2001. For the three months ended December 31, 2002,
net charge-offs were $36,000 compared to net charge-offs of $165,000 for the
three months ended December 31, 2001. The allowance for loan losses as a
percentage of total loans was 1.41% at December 31, 2002, compared to 1.42% at
September 30, 2002 and 1.41% at December 31, 2001. Loans delinquent 90 days or
more were .81% of total loans at December 31, 2002, compared to .63% at
September 30, 2002. The allowance for loan losses was 175% of loans delinquent
more than 90 days at December 31, 2002, as compared to 224% at September 30,
2002. Management believes that the current level of allowance is adequate
considering the Company's current loss experience and delinquency trends, among
other criteria.

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

For the three months ended December 31, 2002, other income was $2.7 million
compared to $2.2 million for the three months ended December 31, 2001. As a
result of increased transaction account balances of $284.9 million at December
31, 2001 to $351.9 million at December 31, 2002, fees and service charges from
deposit accounts were $886,000 for the three months ended December 31, 2002,
compared to $768,000 for the three months ended December 31, 2001. As a result
of increased loan sales and securitizations, gain on sale of loans was $776,000
for the quarter ended December 31, 2002, compared to $556,000 for the quarter
ended December 31, 2001. The Bank's margin on loans sold in the secondary market
has improved as a result of the low interest rate environment. Gain on sales of
securities was $214,000 for the quarter ended December 31, 2002, compared to
$131,000 for the quarter ended December 31, 2001. Other income was $843,000 for
the three months ended December 31, 2002, as compared to $824,000 for the three
months ended December 31, 2001.

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

General and administrative expenses were $5.7 million for the quarter ended
December 31, 2001 compared to $6.9 million for the quarter ended December 31,
2002. Salaries and employee benefits were $3.0 million for the three months
ended December 31, 2001, as compared to $3.2 million for the three months ended
December 31, 2002, an increase of 6.3%, primarily due to the addition of new
Banking Centers and additional business banking Associates. Also as a result of
new Banking Centers, net occupancy, furniture and

                                       14

<PAGE>

PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-CONTINUED


fixtures and data processing expenses increased $365,000 when comparing the two
periods. General and administrative expenses also include prepayment penalties
on FHLB advances of $1.1 million and $480,000 for the quarter ended December 31,
2002 and 2001, respectively. Other expenses were approximately $1.1 million for
each of the quarters ended December 31, 2002 and 2001.


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

Income taxes were $1.4 million for the three months ended December 31, 2001,
compared to $1.6 million for the three months ended December 31, 2002.


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

To be categorized as "Well Capitalized" under the prompt corrective action
regulations adopted by the Federal Banking Agencies, the Bank must maintain a
total risk-based capital ratio as set forth in the following table and not be
subject to a capital directive order.
<TABLE>
<CAPTION>

                                                                                       Categorized as "Well
                                                                                       Capitalized" Under
                                                                For Capital             Prompt Corrective
                                         Actual               Adequacy Purposes          Action Provision
                                         ------               -----------------          ----------------


                                  Amount        Ratio         Amount       Ratio       Amount        Ratio
                                  ------        -----         ------       -----       ------        -----

                                                              (Dollars In Thousands)

<S>                               <C>             <C>        <C>              <C>      <C>           <C>
As of December 31, 2002:
Total Capital:                    $71,740         12.17%     $47,157          8.00%    $58,947       10.00%
  (To Risk Weighted Assets)
Tier 1 Capital:                   $64,729         10.98%         N/A           N/A     $35,368        6.00%
  (To Risk Weighted Assets)
Tier 1 Capital:                   $64,729          6.36%     $30,516          3.00%    $51,199        5.00%
  (To Total Assets)
Tangible Capital:                 $64,729          6.36%     $15,360          1.50%        N/A         N/A
  (To Total Assets)
</TABLE>


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

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

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145 (Statement 145), "Rescission of FASB Statements No. 4, 44 and 64, Amendment
of FASB 4, "Reporting Gains and Losses from Extinguishment of Debt Made to
Satisfy Sinking-Fund Intangible Assets of Motor Carriers". This statement amends
FASB Statement No. 13, "Accounting for Leases", to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. This Statement also amends other
existing authoritative pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under changed conditions. The
Company reclassified losses on early extinguishment of debt of $480,000 which
were incurred in the three months ended December 31, 2001, to prepayment
penalties on FHLB advances.

In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146 (Statement 146), "Accounting for Costs Associated with Exit or Disposal
Activities," which addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." This Statement applies to costs associated
with an exit activity that does not involve an entity newly acquired in a
business combination or with a disposal activity covered by FASB Statement No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets. Those costs
include, but are not limited to, the following: a) termination benefits provided
to current employees that are involuntarily terminated under the terms of a
benefit arrangement that, in substance, is not an ongoing benefit arrangement or
an individual

                                       15
<PAGE>


PART I.  FINANCIAL INFORMATION
Item 2.  COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-CONTINUED



deferred compensation contract (hereinafter referred to as one-time termination
benefits), b) costs to terminate a contract that is not a capital lease and c)
costs to consolidate facilities or relocate employees. This Statement does not
apply to costs associated with the retirement of a long-lived asset covered by
FASB Statement No. 143, Accounting for Asset Retirement Obligations. A liability
for a cost associated with an exit or disposal activity shall be recognized and
measured initially at its fair value in the period in which the liability is
incurred. A liability for a cost associated with an exit or disposal activity is
incurred when the definition of a liability is met. The provisions of this
Statement are effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. The Company adopted SFAS
146 on October 1, 2002 and its adoption did not have a material effect on the
Company's consolidated financial statements.

In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148 (Statement 148), "Accounting for Stock-Based Compensation-Transition and
Disclosure, an amendment of FASB Statement No. 123". Statement 148 amends FASB
Statement 123, "Accounting for Stock-Based Compensation" (Statement 123) to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, Statement 148 amends the disclosure requirements of Statement 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The Company will adopt the
disclosure provisions of Statement 148 for the three months ended March 31,
2003.


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.

                                       16
<PAGE>



PART I.  FINANCIAL INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES



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

At December 31, 2002, no material changes have occurred in market risk
disclosures included in the Company's Annual Report to Stockholders for the year
ended September 30, 2002, filed as an exhibit to the Company's Annual Report on
Form 10-K.


Item 4.  CONTROLS AND PROCEDURES
--------------------------------

(a)  Evaluation of Disclosure Controls and Procedures. The Company maintains
     controls and procedures designed to ensure that information required to be
     disclosed in the reports that the Company files or submits under the
     Securities and Exchange Act of 1934 is recorded, processed, summarized and
     reported within the time periods specified in the rules and forms of the
     Securities and Exchange Commission. Based upon their evaluation of those
     controls and procedures performed within 90 days of the filing date of this
     report, the Company's Chief Executive Officer and its Chief Financial
     Officer concluded that the Company's disclosure controls and procedures
     were adequate.

(b)  Changes in Internal Controls. The Company made no significant changes in
     its internal controls or other factors that could significantly affect
     these controls subsequent to the date of the evaluation of those controls
     by the Chief Executive Officer and Chief Financial Officer.


                                       17
<PAGE>



PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES

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

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

Item 2.  Changes In Securities and Use of Proceeds
         -----------------------------------------
     Not Applicable.

Item 3.  Defaults Upon Senior Securities
         --------------------------------
     Not Applicable.

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------
     Not Applicable.

Item 5.  Other Information
         -----------------
     Not Applicable.

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------
     (a)  Exhibits

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

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

                     (c)   Bylaws of Coastal Financial Corporation (1)

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

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

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

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

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

                     (f)   1990 Stock Option Plan (2)

                     (g)   Directors Performance Plan (3)

                     (h)   Loan Agreement with Bankers Bank (5)

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


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

_____________

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

                                       18
<PAGE>




PART II.  OTHER INFORMATION
COASTAL FINANCIAL CORPORATION AND SUBSIDIARIES


(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.

(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.


                                       19

<PAGE>



                                   SIGNATURES


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

                                          COASTAL FINANCIAL CORPORATION

February 14, 2003                         /s/ Michael C. Gerald
------------------                        ---------------------
Date                                      Michael C. Gerald
                                          President and Chief Executive Officer

February 14, 2003                         /s/ Jerry L. Rexroad
------------------                        ---------------------
Date                                      Jerry L. Rexroad
                                          Executive Vice President and
                                          Chief Financial Officer

                                       20
<PAGE>

                                  CERTIFICATION

I, Michael C. Gerald, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Coastal Financial
         Corporation;

2.       Based on my  knowledge,  this  quarterly  report does not contain any
         untrue  statement of a material  fact or omit to state a material fact
         necessary to make the statements  made, in light of the  circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge,  the financial  statements,  and other financial
         information included in this quarterly report, fairly present in all
         material  respects the financial  condition,  results of operations
         and cash flows of the  registrant as of, and for, the periods presented
         in this quarterly report;

4.       The registrant's  other certifying  officers and I are responsible for
         establishing and maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
         and we have:

         a)  designed such disclosure  controls and procedures to ensure that
             material  information  relating to the registrant,  including its
             consolidated  subsidiaries,  is made known to us by others  within
             those  entities,  particularly  during the  period in which this
             quarterly report is being prepared;

         b)  evaluated the effectiveness of the registrant's  disclosure
             controls and procedures as of a date within 90 days prior to the
             filing date of this quarterly report (the "Evaluation Date"); and

         c)  presented in this quarterly report our conclusions  about the
             effectiveness  of the disclosure  controls and procedures based
             on our evaluation as of the Evaluation Date;

5.       The registrant's  other certifying  officers and I have disclosed,
         based on our most recent  evaluation,  to the registrant's auditors and
         the audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         a)  all significant deficiencies in the design or operation of internal
             controls which could adversely  affect the  registrant's ability to
             record, process, summarize and report financial data and have
             identified for the registrant's auditors any material weaknesses in
             internal controls; and

         b)  any fraud, whether or not material, that involves management or
             other employees who have a  significant role in the registrant's
             internal controls; and

6.       The registrant's  other  certifying  officers and I have  indicated in
         this quarterly  report whether there were  significant changes in
         internal controls or in other factors that could  significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.



         Date: February 14, 2003               /s/Michael C. Gerald
               -----------------               ---------------------
                                               Michael C. Gerald
                                               President/Chief Executive Officer

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<PAGE>


                                  CERTIFICATION


I, Jerry L. Rexroad, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Coastal Financial
         Corporation;

2.       Based on my  knowledge,  this  quarterly  report does not contain any
         untrue  statement of a material  fact or omit to state a material fact
         necessary to make the statements  made, in light of the  circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge,  the financial  statements,  and other financial
         information included in this quarterly report, fairly present in all
         material  respects the financial  condition, results of operations and
         cash flows of the  registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's  other certifying  officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a.  designed such disclosure controls and procedures to ensure that
             material information relating to the registrant, including its
             consolidated subsidiaries, is made known to us by others within
             those entities, particularly  during the  period in which this
             quarterly report is being prepared;

         b.  evaluated the effectiveness of the registrant's disclosure controls
             and procedures as of a date within 90 days prior to the filing date
             of  this quarterly report (the "Evaluation Date"); and

         c.  presented in this quarterly report our conclusions about the
             effectiveness of the disclosure controls and procedures based on
             our evaluation as of the Evaluation Date;

5.       The registrant's  other certifying  officers and I have disclosed,
         based on our most recent  evaluation,  to the registrant's auditors and
         the audit committee of registrant's board of directors (or persons
         performing the equivalent functions):

         a.  all significant deficiencies in the design or operation of internal
             controls which could adversely  affect the  registrant's ability to
             record, process, summarize and report financial data and have
             identified for the registrant's auditors any material weaknesses in
             internal controls; and

         b.  any fraud, whether or not material,  that involves management or
             other employees who have a significant role in the registrant's
             internal controls; and

6.       The  registrant's  other  certifying  officers and I have  indicated in
         this quarterly report whether there were significant changes in
         internal controls or in other factors that could  significantly  affect
         internal controls subsequent to the date of our most recent evaluation,
         including  any  corrective  actions with regard to  significant
         deficiencies  and material weaknesses.



         Date: February 14, 2003               /s/Jerry L. Rexroad
               -----------------               ------------------
                                               Jerry L.Rexroad
                                               Executive Vice President/
                                               Chief Financial Officer

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