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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 25049



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FORM 10-QSB



|þ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



For the quarterly period ended September 30, 2003



OR



| ̈ | 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 000-23465



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Coddle Creek Financial Corp.

(Exact name of registrant as specified in its charter)



|North Carolina                                                |  | 56-2045998                         
|------------------------------------------------------------- |  | -----------------------------------
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)



347 North Main
Street/Post Office Box 117

Mooresville, North Carolina 28115

(Address of principal executive offices) (Zip code)



(704) 664-4888

(Issuers telephone number)



N/A

(Former name, former address and former fiscal year, if changed since last report)



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Indicate by check þ whether the issuer (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  þ    No ̈



As of November 6, 2003 there were issued and outstanding 699,156 shares of the Registrants common stock, no par value.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



INDEX



|                              |  |                                                                                                                                             |  |                                                                                       |  | Page   
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | -------
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                            
|                              |  |                                                                                                                                             | 
|                              |  | Item 1.                                                                                                                                     |  | Financial Statements                                                                  |  |        
|                              |  |                                                                                                                                            
|                              |  | Condensed Consolidated Statements of Financial Condition as of September 30, 2003 (Unaudited) and December 31, 2002                         |  | 1  2                                                                                
|                              |  |                                                                                                                                            
|                              |  | Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended September 30, 2003 and 2002 (Unaudited) |  | 3                                                                                    
|                              |  |                                                                                                                                            
|                              |  | Condensed Consolidated Statements of Operations and Comprehensive Income for the Nine Months Ended September 30, 2003 and 2002 (Unaudited)  |  | 4                                                                                    
|                              |  |                                                                                                                                            
|                              |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002 (Unaudited)                           |  | 5  7                                                                                
|                              |  |                                                                                                                                            
|                              |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                            |  | 8  11                                                                               
|                              |  |                                                                                                                                             | 
|                              |  | Item 2.                                                                                                                                     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12  19
|                              |  |                                                                                                                                             | 
|                              |  | Item 3.                                                                                                                                     |  | Controls and Procedures                                                               |  | 19     
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                                            
|                              |  |                                                                                                                                             | 
|                              |  | Item 1.                                                                                                                                     |  | Legal Proceedings                                                                     |  | 20     
|                              |  |                                                                                                                                             | 
|                              |  | Item 2.                                                                                                                                     |  | Changes in Securities and Use of Proceeds                                             |  | 20     
|                              |  |                                                                                                                                             | 
|                              |  | Item 3.                                                                                                                                     |  | Defaults Upon Senior Securities                                                       |  | 20     
|                              |  |                                                                                                                                             | 
|                              |  | Item 4.                                                                                                                                     |  | Submission of Matters to a Vote of Security Holders                                   |  | 20     
|                              |  |                                                                                                                                             | 
|                              |  | Item 5.                                                                                                                                     |  | Other Information                                                                     |  | 20     
|                              |  |                                                                                                                                             | 
|                              |  | Item 6.                                                                                                                                     |  | Exhibits and Reports on Form 8-K                                                      |  | 20  23
|                              |  |                                                                                                                                            
|                              |  | Signatures and Exhibits 31.1, 31.2 and 32                                                                                                   |  | 24  27                                                                              



This Form 10-QSB contains
forward-looking statements consisting of estimates with respect to the financial condition, results of operations and other business of Coddle Creek Financial Corp. that are subject to various factors which could cause actual results to differ
materially from those estimates. Factors which could influence the estimates include changes in the national, regional and local market conditions, legislative and regulatory conditions, and an adverse interest rate environment.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

September 30, 2003 and December 31, 2002



|ASSETS                                        |  | September 30,2003 |             | December 31,2002
|--------------------------------------------- |  | ----------------- | ----------- | ----------------
|                                              |  | (Unaudited)       |             | (Note)          
|Cash:                                         |  |                   |             |                 
|Interest-bearing deposits                     |  | $                 | 24,275,000  |                 
|Noninterest-bearing deposits and cash on hand |  |                   | 654,000     |                 
|Certificates of deposit                       |  |                   | 200,000     |                 
|Securities available for sale                 |  |                   | 3,573,000   |                 
|Securities held to maturity                   |  |                   | 525,000     |                 
|Federal Home Loan Bank stock                  |  |                   | 1,040,000   |                 
|Loans receivable, net                         |  |                   | 104,431,000 |                 
|Office properties and equipment, net          |  |                   | 832,000     |                 
|Accrued interest receivable:                  |  |                   |             |                 
|Investment securities                         |  |                   | 196,000     |                 
|Loans receivable                              |  |                   | 736,000     |                 
|Cash value of life insurance                  |  |                   | 1,695,000   |                 
|Deferred income taxes                         |  |                   | 1,196,000   |                 
|Prepaid expenses and other assets             |  |                   | 179,000     |                 
|                                              |  |                   |             |                 
|Total assets                                  |  | $                 | 139,532,000 |                 
|                                              |  |                   |             |                 



|NOTE: | The Condensed Consolidated Statement of Financial Condition as of December 31, 2002 has been taken from the audited financial statements at that date.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------



See Notes to Condensed Consolidated Financial Statements.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

September 30, 2003 and December 31, 2002



|LIABILITIES AND STOCKHOLDERS EQUITY                                            |  | September 30,2003 |             |   | December 31,2002 |  
|------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ---------------- | -
|                                                                                |  | (Unaudited)       |             |   | (Note)           |  
|Liabilities:                                                                    |  |                   |             |   |                  |  
|Deposits                                                                        |  | $                 | 113,706,000 |   |                  | $
|Advances from borrowers for taxes and insurance                                 |  |                   | 252,000     |   |                  |  
|Accounts payable and other liabilities                                          |  |                   | 1,283,000   |   |                  |  
|Income taxes payable                                                            |  |                   | 66,000      |   |                  |  
|Deferred compensation                                                           |  |                   | 2,721,000   |   |                  |  
|                                                                                |  |                   |             |   |                  |  
|Total liabilities                                                               |  |                   | 118,028,000 |   |                  |  
|                                                                                |  |                   |             |   |                  |  
|Commitments                                                                     |  |                   |             |   |                  |  
|Stockholders Equity:                                                           |  |                   |             |   |                  |  
|Preferred stock, authorized 5,000,000 shares; none issued                       |  |                   |            |   |                  |  
|Common stock, no par value, authorized 20,000,000 shares; issued 699,156 shares |  |                   |            |   |                  |  
|Additional paid-in capital                                                      |  |                   | 9,465,000   |   |                  |  
|Accumulated other comprehensive income                                          |  |                   | 102,000     |   |                  |  
|Unearned ESOP shares                                                            |  |                   | (2,898,000  | ) |                  |  
|Unearned compensation                                                           |  |                   | (1,496,000  | ) |                  |  
|Retained earnings, substantially restricted                                     |  |                   | 16,331,000  |   |                  |  
|                                                                                |  |                   |             |   |                  |  
|Total stockholders equity                                                      |  |                   | 21,504,000  |   |                  |  
|                                                                                |  |                   |             |   |                  |  
|Total liabilities and stockholders equity                                      |  | $                 | 139,532,000 |   |                  | $
|                                                                                |  |                   |             |   |                  |  



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

For the Three Months Ended September 30, 2003 and
2002



|                                                                                           |  | 2003        |           | 2002
|------------------------------------------------------------------------------------------ |  | ----------- | --------- | ----
|                                                                                           |  | (Unaudited)
|Interest income:                                                                           |  |             |           |     
|Loans                                                                                      |  | $           | 1,957,000 |     
|Investment securities                                                                      |  |             | 30,000    |     
|Other                                                                                      |  |             | 57,000    |     
|                                                                                           |  |             |           |     
|                                                                                           |  |             | 2,044,000 |     
|Interest expenses:                                                                         |  |             |           |     
|Deposits                                                                                   |  |             | 699,000   |     
|Federal Home Loan Bank advances and note payable                                           |  |             |          |     
|                                                                                           |  |             |           |     
|                                                                                           |  |             | 699,000   |     
|                                                                                           |  |             |           |     
|Net interest income                                                                        |  |             | 1,345,000 |     
|Provision for loan losses                                                                  |  |             | 9,000     |     
|                                                                                           |  |             |           |     
|Net interest income after provision for loan losses                                        |  |             | 1,336,000 |     
|                                                                                           |  |             |           |     
|Noninterest income                                                                         |  |             | 144,000   |     
|                                                                                           |  |             |           |     
|Noninterest expenses:                                                                      |  |             |           |     
|Compensation and employee benefits                                                         |  |             | 646,000   |     
|Net occupancy                                                                              |  |             | 78,000    |     
|Data processing                                                                            |  |             | 61,000    |     
|Other                                                                                      |  |             | 193,000   |     
|                                                                                           |  |             |           |     
|                                                                                           |  |             | 978,000   |     
|                                                                                           |  |             |           |     
|Income before income taxes                                                                 |  |             | 502,000   |     
|Income taxes                                                                               |  |             | 165,000   |     
|                                                                                           |  |             |           |     
|Net income                                                                                 |  |             | 337,000   |     
|Other comprehensive income, unrealized holding gains arising during the period, net of tax |  |             | 27,000    |     
|                                                                                           |  |             |           |     
|Comprehensive income                                                                       |  | $           | 364,000   |     
|                                                                                           |  |             |           |     
|Basic earnings per share                                                                   |  | $           | 0.54      |     
|                                                                                           |  |             |           |     
|Diluted earnings per share                                                                 |  | $           | 0.53      |     
|                                                                                           |  |             |           |     
|Dividends per share                                                                        |  | $           | 0.50      |     
|                                                                                           |  |             |           |     



See Notes to Condensed Consolidated
Financial Statements.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

For the Nine Months Ended September 30, 2003 and
2002



|                                                                                          |  | 2003        |           | 2002
|----------------------------------------------------------------------------------------- |  | ----------- | --------- | ----
|                                                                                          |  | (Unaudited)
|Interest income:                                                                          |  |             |           |     
|Loans                                                                                     |  | $           | 5,775,000 |     
|Investment securities                                                                     |  |             | 112,000   |     
|Other                                                                                     |  |             | 187,000   |     
|                                                                                          |  |             |           |     
|                                                                                          |  |             | 6,074,000 |     
|                                                                                          |  |             |           |     
|Interest expenses:                                                                        |  |             |           |     
|Deposits                                                                                  |  |             | 2,236,000 |     
|Federal Home Loan Bank advances and note payable                                          |  |             |          |     
|                                                                                          |  |             |           |     
|                                                                                          |  |             | 2,236,000 |     
|                                                                                          |  |             |           |     
|Net interest income                                                                       |  |             | 3,838,000 |     
|Provision for loan losses                                                                 |  |             | 27,000    |     
|                                                                                          |  |             |           |     
|Net interest income after provision for loan losses                                       |  |             | 3,811,000 |     
|                                                                                          |  |             |           |     
|Noninterest income                                                                        |  |             | 294,000   |     
|                                                                                          |  |             |           |     
|Noninterest expenses:                                                                     |  |             |           |     
|Compensation and employee benefits                                                        |  |             | 1,957,000 |     
|Net occupancy                                                                             |  |             | 231,000   |     
|Deposit insurance premiums                                                                |  |             | 14,000    |     
|Data processing                                                                           |  |             | 176,000   |     
|Other                                                                                     |  |             | 541,000   |     
|                                                                                          |  |             |           |     
|                                                                                          |  |             | 2,919,000 |     
|                                                                                          |  |             |           |     
|Income before income taxes                                                                |  |             | 1,186,000 |     
|Income taxes                                                                              |  |             | 389,000   |     
|                                                                                          |  |             |           |     
|Net income                                                                                |  |             | 797,000   |     
|Other comprehensive income, unrealized holding gain arising during the period, net of tax |  |             | 63,000    |     
|                                                                                          |  |             |           |     
|Comprehensive income                                                                      |  | $           | 860,000   |     
|                                                                                          |  |             |           |     
|Basic earnings per share                                                                  |  | $           | 1.27      |     
|                                                                                          |  |             |           |     
|Diluted earnings per share                                                                |  | $           | 1.27      |     
|                                                                                          |  |             |           |     
|Dividends per share                                                                       |  | $           | 1.75      |     
|                                                                                          |  |             |           |     



See
Notes to Condensed Consolidated Financial Statements.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2003 and 2002



|                                                                                  |  | 2003        |           |   | 2002 |  
|--------------------------------------------------------------------------------- |  | ----------- | --------- | - | ---- | -
|                                                                                  |  | (Unaudited) |          
|Cash Flows From Operating Activities                                              |  |             |           |   |      |  
|Net income                                                                        |  | $           | 797,000   |   |      | $
|Adjustments to reconcile net income to net cash provided by operating activities: |  |             |           |   |      |  
|Provision for loan losses                                                         |  |             | 27,000    |   |      |  
|Provision for depreciation                                                        |  |             | 78,000    |   |      |  
|Loss on sale of real estate                                                       |  |             | 8,000     |   |      |  
|Provision for deferred income taxes                                               |  |             | (57,000   | ) |      |  
|Vesting of management recognition plan                                            |  |             |          |   |      |  
|ESOP contribution, net of tax benefit                                             |  |             | (138,000  | ) |      |  
|Amortization of unearned compensation                                             |  |             | 122,000   |   |      |  
|Changes in assets and liabilities:                                                |  |             |           |   |      |  
|(Increase) decrease in:                                                           |  |             |           |   |      |  
|Interest receivable                                                               |  |             | (104,000  | ) |      |  
|Cash value of life insurance                                                      |  |             | 31,000    |   |      |  
|Income tax refund claim receivable                                                |  |             |          |   |      |  
|Prepaid expenses and other assets                                                 |  |             | (142,000  | ) |      |  
|Increase (decrease) in:                                                           |  |             |           |   |      |  
|Interest payable                                                                  |  |             | 2,000     |   |      |  
|Accounts payable and other liabilities                                            |  |             | 453,000   |   |      |  
|Income taxes payable                                                              |  |             | 29,000    |   |      |  
|Deferred compensation                                                             |  |             | (77,000   | ) |      |  
|                                                                                  |  |             |           |   |      |  
|Net cash provided by operating activities                                         |  |             | 1,029,000 |   |      |  
|                                                                                  |  |             |           |   |      |  



(Continued)



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Nine Months Ended September 30, 2003 and 2002



|                                                               |  | 2003        |            |   | 2002 |  
|-------------------------------------------------------------- |  | ----------- | ---------- | - | ---- | -
|                                                               |  | (Unaudited) |           
|Cash Flows From Investing Activities                           |  |             |            |   |      |  
|Proceeds from maturities of certificates of deposit            |  | $           | 200,000    |   |      | $
|Purchases of certificates of deposit                           |  |             | (200,000   | ) |      |  
|Purchases of securities available for sale                     |  |             | (2,534,000 | ) |      |  
|Proceeds from maturities of securities available for sale      |  |             | 950,000    |   |      |  
|Proceeds from maturities of securities held to maturity        |  |             | 505,000    |   |      |  
|Proceeds from sale of Federal Home Loan Bank Stock             |  |             | 201,000    |   |      |  
|(Originations) and principal payments on loans receivable, net |  |             | 6,378,000  |   |      |  
|Purchases of office properties and equipment                   |  |             | (60,000    | ) |      |  
|                                                               |  |             |            |   |      |  
|Net cash provided by investing activities                      |  |             | 5,440,000  |   |      |  
|                                                               |  |             |            |   |      |  
|Cash Flows From Financing Activities                           |  |             |            |   |      |  
|Net increase in deposits                                       |  |             | 71,000     |   |      |  
|Proceeds from Federal Home Loan Bank advances                  |  |             |           |   |      |  
|Payments on note payable                                       |  |             |           |   |      |  
|Increase in advances from borrowers for taxes and insurance    |  |             | 181,000    |   |      |  
|Cash dividends paid                                            |  |             | (921,000   | ) |      |  
|                                                               |  |             |            |   |      |  
|Net cash used in financing activities                          |  |             | (669,000   | ) |      |  
|                                                               |  |             |            |   |      |  
|Increase (decrease) in cash and cash equivalents               |  |             | 5,800,000  |   |      |  
|Cash and cash equivalents:                                     |  |             |            |   |      |  
|Beginning                                                      |  |             | 19,129,000 |   |      |  
|                                                               |  |             |            |   |      |  
|Ending                                                         |  | $           | 24,929,000 |   |      | $
|                                                               |  |             |            |   |      |  



(Continued)



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Nine Months Ended September 30, 2003 and 2002



|                                                                                  |  | 2003        |            | 2002
|--------------------------------------------------------------------------------- |  | ----------- | ---------- | ----
|                                                                                  |  | (Unaudited)
|Supplemental Schedule of Cash and Cash Equivalents                                |  |             |            |     
|Interest-bearing                                                                  |  | $           | 24,275,000 |     
|Noninterest-bearing                                                               |  |             | 654,000    |     
|                                                                                  |  |             |            |     
|                                                                                  |  | $           | 24,929,000 |     
|                                                                                  |  |             |            |     
|Supplemental Schedule of Cash Flow Information                                    |  |             |            |     
|Cash payments for:                                                                |  |             |            |     
|Interest                                                                          |  | $           | 2,234,000  |     
|Income taxes                                                                      |  |             | 416,000    |     
|                                                                                  |  |            
|Supplemental Disclosures of Noncash Transactions                                  |  |             |            |     
|Change in unrealized gain on available for sale securities, net of deferred taxes |  | $           | 63,000     |     
|Real estate acquired in the settlement of loans                                   |  |             | 107,000    |     
|Origination of loans to facilitate sale of real estate                            |  |             | 99,000     |     



See
Notes to Condensed Consolidated Financial Statements.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 1. Nature of Business



On December
30, 1997, pursuant to a Plan of Conversion which was approved by its members and regulators, Mooresville Savings Bank, Inc., SSB (the Bank or Mooresville Savings) converted from a North Carolina-chartered mutual savings bank
to a North Carolina-chartered stock savings bank (the Conversion) and became a wholly-owned subsidiary of Coddle Creek Financial Corp. (the Company). Coddle Creek was formed to acquire all of the common stock of the Bank upon
its conversion to stock form. The Company has no operations and conducts no business of its own other than owning Mooresville Savings, investing its portion of the net proceeds received in the Conversion, and lending funds to the Employee Stock
Ownership Plan (the ESOP), which was established in connection with the Conversion.



Mooresville Savings results of operations depend primarily on its net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing
liabilities. The Banks operations are also affected by non-interest income, such as miscellaneous income from loans, customer deposit account service charges, and other sources of revenue. The Banks principal operating expenses, aside
from interest expense, consist of compensation and associated benefits, occupancy costs, furniture and fixture expense, data processing charges, and other general and administrative expenses.



Concurrent with the Conversion, and pursuant to North Carolina regulations, the Bank
established a liquidation account in an amount equal to its net worth as reflected in its statement of financial condition, contained in the prospectus used in connection with the Companys initial public offering. The liquidation account is
maintained for the benefit of eligible deposit account holders who continue to maintain their deposit accounts in the Bank after Conversion. Only in the event of a complete liquidation of the Company will each deposit account holder be entitled to
receive a liquidation distribution from the liquidation account in the amount of the then current adjusted subaccount balance for deposit accounts then held before any liquidation distribution may be made with respect to common stock. Dividends paid
by the Bank cannot be paid from this liquidation account.



The Company must
obtain Federal Reserve approval prior to repurchasing Common Stock in excess of 10% of its net worth during any twelve-month period unless the Company (i) both before and after the redemption satisfies capital requirements for well
capitalized state member banks, (ii) received a one or two rating in its last examination, and (iii) is not the subject of any unresolved supervisory issues.



Although the payment of dividends and repurchase of stock by the Company are subject to certain requirements and limitations of North
Carolina corporate law, except as set forth in this discussion, neither the Commissioner nor the FDIC have promulgated any regulations specifically limiting the right of the Company to pay dividends and repurchase shares. However, the ability of the
Company to pay dividends or repurchase shares may be dependent upon the Companys receipt of dividends from the Bank.



A North Carolina-chartered stock savings bank may not declare or pay a cash dividend on or repurchase any of its capital stock if the effect of such transaction would be
to reduce the net worth of the institution to an amount which is less than the minimum amount required by applicable federal and state regulations. Also, an insured depository institution, such as the Bank, is prohibited from making capital
distributions, including the payment of dividends, if, after making such distributions, the institution would become undercapitalized (as such term is defined in the applicable law and regulations).



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 1. Nature of Business (Continued)



In addition, the Bank is not permitted to declare or pay a cash dividend on or repurchase any of its capital stock if the effect thereof
would be to cause its net worth to be reduced below the amount required for the liquidation account established in connection with the Banks conversion from mutual to stock ownership. Under FDIC regulations, stock repurchases may be made by
the savings bank only upon receipt of FDIC approval.



Note 2. Basis of
Presentation



The accompanying unaudited financial statements (except for
the statement of financial condition at December 31, 2002, which was derived from audited financial statements as of that date) have been prepared in accordance with accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (none of which were other than normal recurring accruals) necessary for a fair presentation of the financial position and results of operations for the periods presented have been included.
The results of operations for the three month and nine month periods ended September 30, 2003 are not necessarily indicative of the results of operations that may be expected for the year ended December 31, 2003. The accounting policies followed are
as set forth in Note 1 of the Notes to Consolidated Financial Statements in the 2002 Annual Report to Shareholders of the Company.



Note 3. Earnings Per Share



Earnings per share has been calculated in accordance with Financial Accounting Standards Board Statement No. 128, Earnings Per Share, and Statement of Position
93-6, Employers Accounting for Employee Stock Ownership Plans. Statement No. 128 requires the presentation of earnings per share by all entities that have common stock or potential common stock, such as options, warrants and convertible
securities, outstanding that trade in a public market. Those entities that have only common stock outstanding are required to present basic earnings per share amounts. Basic per share amounts are computed by dividing net income (the numerator) by
the weighted-average number of common shares outstanding (the denominator). All other entities are required to present basic and diluted per share amounts. Diluted per share amounts assume the conversion, exercise or issuance of all potential common
stock instruments unless the effect is to reduce the loss or increase the income per common share from continuing operations. For purposes of this computation, the number of shares of common stock purchased by the Banks ESOP which have not
been allocated to participant accounts are not assumed to be outstanding. Options to purchase 58,131 shares of common stock at $31.00 per share were outstanding during the first, second and third quarters of 2003 and 2002. The average market price
during the third quarter of 2003 was higher than the exercise price of $31.00; therefore incremental shares were included in computing dilutive earnings per share for the three and nine month periods ending September 30, 2003. The average market
price during the third quarter of 2002 was higher than the exercise price of $31.00; therefore, incremental shares were included in computing dilutive earnings per share for the three and nine month periods ending September 30, 2002.



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##### Table of Contents

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 3. Earnings Per Share (Continued)



The following are reconciliations of the amounts used in the per share calculations for 2003 and 2002:



|                     |  | For the Nine Months EndedSeptember 30, 2003 and 2002
|-------------------- |  | ----------------------------------------------------
|                     |  | Income(Numerator)                                   
|Basic EPS for 2003   |  | $                                                   
|Diluted EPS for 2003 |  | $                                                   
|Basic EPS for 2002   |  | $                                                   
|Diluted EPS for 2002 |  | $                                                   



|                     |  | For the Three Months EndedSeptember 30, 2003 and 2002
|-------------------- |  | -----------------------------------------------------
|                     |  | Income(Numerator)                                    
|Basic EPS for 2003   |  | $                                                    
|Diluted EPS for 2003 |  | $                                                    
|Basic EPS for 2002   |  | $                                                    
|Diluted EPS for 2002 |  | $                                                    



Note 4. Stock Option and Management
Recognition Plans



The Companys stockholders approved the
Companys Stock Option Plan and the Banks Management Recognition Plan (the MRP) on January 26, 2000. The Stock Option Plan reserves for issuance of up to 67,447 stock options to officers, directors, and employees at the time
of the adoption either in the form of incentive stock options or non-incentive stock options. The exercise price of the stock options may not be less than the fair value of the Companys common stock at date of grant, as adjusted for the stock
splits and dividends affecting market value. As permitted under generally accepted accounting principles, grants under the Stock Option Plan will be accounted for following the provisions of APB Opinion No. 25 and its related interpretations. At
September 30, 2003, 58,131 options had been granted at an exercise price of $31.00, and all are currently exercisable. No options have been exercised to date, and all options granted are outstanding at September 30, 2003. No options were granted
during the three or nine month periods ending September 30, 2003 and 2002. The options outstanding have a weighted-average remaining life of 6 years, and the income effect of the options determined based on the fair value method under SFAS 123 is
immaterial.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Note 4. Stock Option and Management Recognition Plans (Continued)



The MRP reserved for issuance 26,979 shares of common stock to officers, directors, and
employees at the time of its adoption. The Bank issued 24,281 shares and 400 shares from authorized but unissued common stock to fund the MRP on January 26, 1999 and January 26, 2000, respectively. The restricted common stock awarded to participants
under the MRP vests 25% at the date of grant and 25% annually beginning on the one-year anniversary of the date of grant. The expense related to the vesting of the MRP totaled $-0- and $1,000 for the nine-month periods ended September 30, 2003 and
2002, respectively.



Note 5. Tender Offer



On October 1, 2003, the Company commenced a tender offer for the purchase of all shares of
its common stock held by stockholders who own 99 or fewer shares as of the close of business on September 19, 2003. The Company has offered to pay $38.00 per share for each share properly tendered by an eligible stockholder. The offer is made
pursuant to the Offer to Purchase dated October 1, 2003, as amended October 28, 2003, and related materials and will expire at 12:00 p.m. Eastern Standard Time on November 10, 2003, unless otherwise extended or earlier terminated. If after
completion of the offer there are fewer than 300 shareholders of record, the Company intends to deregister its common stock with the Securities and Exchange Commission and become a private company. If, after the completion of the offer, the Company
does not have fewer than 300 shareholders, the Board of Directors of the Company has expressed its intention to initiate a second step transaction in which eligible shares of common stock not purchased in the offer would be exchanged for cash.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Comparison of Financial Condition at September 30, 2003 and December 31, 2002:



At September 30, 2003 and December 31, 2002 total assets amounted to $139.5 million and $139.0 million, respectively. Loans receivable, net,
decreased from $110.8 million at December 31, 2002 to $104.4 million at September 30, 2003, a $6.4 million decrease. Deposits increased $.1 million from $113.6 million at December 31, 2002 to $113.7 million at September 30, 2003. Investment
securities increased $.9 million from $4.4 million at December 31, 2002 to $5.3 million at September 30, 2003 due to maturities and sales of securities amounting to $1.8 million and purchases of securities in the amount of $2.7 million.
Stockholders equity decreased by $252,000 for the nine months ended September 30, 2003. This decrease is primarily due to net income of $797,000 offset by the payment of a dividend of $1,096,000. All but $175,000 of the dividend was paid
during the first nine months of 2003. The Companys liquidity position improved during the nine months as cash and cash equivalents increased $5.8 million to $24.9 million at September 30, 2003 from $19.1 million at December 31, 2002. This
increase is primarily the result of the decrease in loans.



The Banks
level of nonperforming loans, defined as loans past due 90 days or more, has historically been and continues to be low, as a percentage of total loans outstanding. The Bank had $3.1 million of loans outstanding which were delinquent more than 90
days at September 30, 2003, compared to $2.3 million at December 31, 2002. This increase is due to slower customer payments and the addition of a few large dollar loans to this delinquency category. Based on managements analysis of the
adequacy of the allowance for loan losses, the composition of the loan portfolio, the credit risk inherent in the portfolio and historical loan loss experience, the allowance for loan losses was $868,000 and $865,000 at September 30, 2003 and
December 31, 2002, respectively. Management believes the allowance to be adequate to absorb any future losses in the portfolio. See loan analysis on pages 15 and 16.



At September 30, 2003, the Companys capital amounted to $21.5 million, which as a percentage of total consolidated assets was 15%, and
was in excess of the regulatory capital requirements at such date.



Comparison of Operating Results for the Three and Nine Months Ended September 30, 2003 and 2002:



General. Net income for the three and nine months ended September 30, 2003 was $337,000 and $797,000, respectively, compared to $224,000 and $733,000 during the
same quarters in 2002.



The increase in earnings was partially attributable to
a decrease in compensation expense which was offset by a reduction in the interest rate spread for the three and nine-month period ended September 30, 2003. Compensation expense decreased during the nine months ended September 30, 2003, due to a
reduction in deferred compensation expense, as one of the retirement plans is now fully funded.



Interest income. Interest income decreased by $.3 million to $2.0 million for the three months ended September 30, 2003 from $2.3 million for the three months ended September 30, 2002 and decreased $1.0 million
to $6.1 million for the nine months ended September 30, 2003 from $7.1 million for the nine months ended September 30, 2002. The decrease is due primarily to both a decrease in the interest rate earned on interest-earning assets during the first
nine months of 2003 as compared to 2002 and a reduction in the average balance of loans receivable. Approximately 96% of the Banks assets were interest earning at September 30, 2003, and approximately 78% of such interest-earning assets were
held in the form of loans receivable. See rate/volume table on page 14.



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##### Table of Contents

CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Interest expense. Interest expense decreased by $.3 million from $1.0 million during the three months ended
September 30, 2002 to $.7 million for the three months ended September 30, 2003. Interest expense decreased by $.8 million from $3.0 million for the nine months ended September 30, 2002 to $2.2 million for the nine months ended September 30, 2003.
These decreases are due primarily to lower interest rates paid on interest-bearing liabilities outstanding during the first nine months of 2003 in comparison to the same nine-month period a year earlier. See the rate/volume table on page 14.



Net interest income. Net interest income increased by $.1 million from
$1.2 million for the three months ended September 30, 2002 to $1.3 for the three months ended September 30, 2003. Net interest income decreased by $.3 million from $4.1 million for the nine months ended September 30, 2002 to $3.8 million for the
nine months ended September 30, 2003. The decrease is due primarily to both a reduction in the average outstanding balance of loans receivable and a reduction in the interest rate earned on interest-earning assets offset substantially by a decrease
in interest rates on interest-bearing liabilities.



Provision for loan
losses. The Bank made provisions for loan losses amounting to $27,000 and $-0- during the nine months ended September 30, 2003 and 2002, respectively. Provisions, which are charged to operations, and the resulting loan loss allowances, are
amounts that the Banks management believes will be adequate to absorb losses on existing loans that may become uncollectible. Loans are charged off against the allowance when management believes that collectibility is unlikely. The evaluation
to increase or decrease the provision and resulting allowances is based both on prior loan loss experience and other factors, such as changes in the nature and volume of the loan portfolio, overall portfolio quality, and current economic conditions.



The Banks level of nonperforming loans has remained consistently low in
relation to prior periods and total loans outstanding. At September 30, 2003, the Banks level of general valuation allowances for loan losses amounted to $868,000, which management believes is adequate to absorb potential losses in its loan
portfolio.



Non-interest expense. Non-interest expense remained stable
at $1.0 million for the three months ended September 30, 2003 and 2002. Non-interest expense decreased by $.2 million from $3.1 million for the nine months ended September 30, 2002 to $2.9 million for the nine months ended September 30, 2003.
Specifically, compensation expense decreased by $.2 million from 2002 to 2003 due primarily to the decrease in deferred compensation. All other categories of non-interest expense fluctuated by insignificant amounts between the two periods.



Income taxes. The effective income tax rate for the three and nine
months ended September 30, 2003 is lower than expected as a result of adjustments reflecting over-accrued income tax at December 31, 2002. The effective income tax rate reflects normal expected rates on taxable income in 2002.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Rate/Volume Analysis



|                                                 |  | Nine Months Ended September 30,2003 vs 2002Increase (Decrease) Due to |     
|------------------------------------------------ |  | --------------------------------------------------------------------- | ----
|                                                 |  | Volume                                                                |     
|                                                 |  | (In Thousands)                                                        |     
|Interest Income:                                 |  |                                                                       |     
|Interest-bearing deposits                        |  | $                                                                     | 208 
|Investments                                      |  |                                                                       | 2   
|Loans receivable                                 |  |                                                                       | (941
|                                                 |  |                                                                       |     
|Total interest income                            |  |                                                                       | (731
|                                                 |  |                                                                       |     
|Interest Expense:                                |  |                                                                       |     
|Deposits                                         |  |                                                                       | 134 
|Note payable and Federal Home Loan Bank advances |  |                                                                       | (118
|                                                 |  |                                                                       |     
|Total interest expense                           |  |                                                                       | 16  
|                                                 |  |                                                                       |     
|Net Interest Income                              |  | $                                                                     | (747
|                                                 |  |                                                                       |     



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Loans Receivable Breakdown



|                               |  | September 30, 2003 |             |   | December 31, 2002  |       
|------------------------------ |  | ------------------ | ----------- | - | ------------------ | ------
|                               |  | Amount             |             |   | Percentageof Total |       
|Real estate loans:             |  |                    |             |   |                    |       
|One-to-four family residential |  | $                  | 87,828,000  |   |                    | 84.10 
|Multi-family residential       |  |                    | 1,070,000   |   |                    | 1.03  
|Nonresidential                 |  |                    | 4,259,000   |   |                    | 4.08  
|Construction                   |  |                    | 1,652,000   |   |                    | 1.58  
|Equity line                    |  |                    | 9,985,000   |   |                    | 9.56  
|                               |  |                    |             |   |                    |       
|Total real estate loans        |  |                    | 104,794,000 |   |                    | 100.35
|                               |  |                    |             |   |                    |       
|Consumer Loans:                |  |                    |             |   |                    |       
|Installment loans              |  |                    | 2,441,000   |   |                    | 2.34  
|Other                          |  |                    | 1,751,000   |   |                    | 1.67  
|                               |  |                    |             |   |                    |       
|Total consumer loans           |  |                    | 4,192,000   |   |                    | 4.01  
|                               |  |                    |             |   |                    |       
|Total gross loans              |  |                    | 108,986,000 |   |                    | 104.36
|                               |  |                    |             |   |                    |       
|Less:                          |  |                    |             |   |                    |       
|Construction loans in process  |  |                    | (2,865,000  | ) |                    | (2.74 
|Net deferred loan fees         |  |                    | (822,000    | ) |                    | (0.79 
|Allowance for loan losses      |  |                    | (868,000    | ) |                    | (0.83 
|                               |  |                    |             |   |                    |       
|                               |  |                    | (4,555,000  | ) |                    | (4.36 
|                               |  |                    |             |   |                    |       
|                               |  | $                  | 104,431,000 |   |                    | 100.00
|                               |  |                    |             |   |                    |       



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Analysis of Loan Losses



|                                                      |  | Nine MonthsEndedSeptember 30,2003 |         |   | Year EndedDecember 31,2002 |  
|----------------------------------------------------- |  | --------------------------------- | ------- | - | -------------------------- | -
|Balance at beginning of period                        |  | $                                 | 865,000 |   |                            | $
|                                                      |  |                                   |         |   |                            |  
|Loans charged off:                                    |  |                                   |         |   |                            |  
|Real Estate                                           |  |                                   | (16,000 | ) |                            |  
|Consumer                                              |  |                                   | (8,000  | ) |                            |  
|                                                      |  |                                   |         |   |                            |  
|Total loans charged off                               |  |                                   | (24,000 | ) |                            |  
|                                                      |  |                                   |         |   |                            |  
|Recoveries:                                           |  |                                   |         |   |                            |  
|Real Estate                                           |  |                                   |        |   |                            |  
|Consumer                                              |  |                                   |        |   |                            |  
|                                                      |  |                                   |         |   |                            |  
|Total recoveries                                      |  |                                   |        |   |                            |  
|                                                      |  |                                   |         |   |                            |  
|Provision for loan losses                             |  |                                   | 27,000  |   |                            |  
|                                                      |  |                                   |         |   |                            |  
|Balance at end of period                              |  | $                                 | 868,000 |   |                            | $
|                                                      |  |                                   |         |   |                            |  
|Ratio of net charge-offs to average loans outstanding |  |                                   | 0.02    | % |                            |  
|                                                      |  |                                   |         |   |                            |  



|                                         |  | AtSeptember 30,2003 |             |   | AtDecember 31,2002 |  
|---------------------------------------- |  | ------------------- | ----------- | - | ------------------ | -
|Nonaccrual loans                         |  | $                   | 2,863,000   |   |                    | $
|Accruing loans past due 90 days or more  |  |                     | 256,000     |   |                    |  
|Troubled debt restructuring              |  |                     |            |   |                    |  
|Foreclosed real estate                   |  |                     |            |   |                    |  
|                                         |  |                     |             |   |                    |  
|Total nonperforming assets               |  | $                   | 3,119,000   |   |                    | $
|                                         |  |                     |             |   |                    |  
|Nonperforming loans to total gross loans |  |                     | 2.86        | % |                    |  
|                                         |  |                     |             |   |                    |  
|Nonperforming assets to total assets     |  |                     | 2.24        | % |                    |  
|                                         |  |                     |             |   |                    |  
|Total assets                             |  | $                   | 139,532,000 |   |                    | $
|                                         |  |                    
|Total gross loans                        |  | $                   | 108,986,000 |   |                    | $



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Net Interest Income



The following table provides information concerning the Banks yields on interest-earning assets and cost of funds on interest-bearing liabilities for the nine
months ended September 30, 2003 and the year ended December 31, 2002.



|                                                                                 |  | At September 30,2003 |   |  | For the Nine Months EndedSeptember 30, 2003 |         |          | For the Year EndedDecember 31, 2002 |                   
|-------------------------------------------------------------------------------- |  | -------------------- | - |  | ------------------------------------------- | ------- | -------- | ----------------------------------- | ------------------
|                                                                                 |  | AverageYield/Rate    |   |  | AverageBalance                              |         | Interest |                                     | AverageYield/Rate*
|                                                                                 |  |                      |   |  | (Dollars in Thousands)                      |        
|Interest-earning assets:                                                         |  |                      |   |  |                                             |         |          |                                     |                   
|Interest-bearing deposits                                                        |  | 1.00                 | % |  | $                                           | 24,260  |          | $                                   | 187               
|Investments                                                                      |  | 3.70                 | % |  |                                             | 3,461   |          |                                     | 112               
|Loans receivable, net                                                            |  | 6.46                 | % |  |                                             | 106,416 |          |                                     | 5,775             
|                                                                                 |  |                      |   |  |                                             |         |          |                                     |                   
|Total interest-earning assets                                                    |  | 5.40                 | % |  |                                             | 134,137 |          |                                     | 6,074             
|Other assets                                                                     |  |                      |   |  |                                             | 6,708   |          |                                     |                   
|                                                                                 |  |                      |   |  |                                             |         |          |                                     |                   
|Total assets                                                                     |  |                      |   |  | $                                           | 140,845 |          |                                     |                   
|                                                                                 |  |                      |   |  |                                             |         |          |                                     |                   
|Interest-bearing liabilities:                                                    |  |                      |   |  |                                             |         |          |                                     |                   
|NOW and Money market                                                             |  | 0.83                 | % |  | $                                           | 28,658  |          | $                                   | 272               
|Passbook accounts                                                                |  | 1.05                 | % |  |                                             | 10,717  |          |                                     | 92                
|Certificates of deposit                                                          |  | 3.08                 | % |  |                                             | 75,833  |          |                                     | 1,872             
|Note payable and Federal Home Loan Bank advances                                 |  | n/a                  |   |  |                                             |         |          |                                     |                   
|                                                                                 |  |                      |   |  |                                             |         |          |                                     |                   
|Total interest-bearing liabilities                                               |  | 2.33                 | % |  |                                             | 115,208 |          |                                     | 2,236             
|Other liabilities                                                                |  |                      |   |  |                                             | 4,297   |          |                                     |                   
|Stockholders equity                                                             |  |                      |   |  |                                             | 21,340  |          |                                     |                   
|                                                                                 |  |                      |   |  |                                             |         |          |                                     |                   
|Total liabilities and stockholders equity                                       |  |                      |   |  | $                                           | 140,845 |          |                                     |                   
|                                                                                 |  |                      |   |  |                                             |         |          |                                     |                   
|Net interest income and interest rate spread                                     |  | 3.07                 | % |  |                                             |         |          | $                                   | 3,838             
|                                                                                 |  |                      |   |  |                                             |         |          |                                     |                   
|Net yield on interest-earning assets                                             |  |                      |   |  |                                             |         |          |                                     |                   
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                      |   |  |                                             |         |          |                                     |                   

---

|* | Annualized
|- | ----------



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Critical Accounting Policies:



In the ordinary course of business, the Company has made a number of estimates and assumptions related to the reporting of results of
operations and financial condition in preparing its financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different
assumptions and conditions. The Company believes the following discussion addresses the Companys most critical accounting policies, which are those that are most important to the portrayal of the Companys financial condition and results
of operations and require managements most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.



Allowance for Loan Losses. The allowance for loan losses is a material
estimate that is particularly susceptible to significant changes in the near term, and is established through a provision for loan losses. The allowance is based upon past loan loss experience and other factors which, in managements judgment,
deserve current recognition in estimating loan losses. The evaluation includes a review of all loans on which full collectibility may not be reasonably assured. Other factors considered by management include the size and character of the loan
portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions and historical losses on each portfolio category. In connection with the determination of the allowance for loan losses, management obtains
independent appraisals for significant properties that collateralize loans. With respect to loans that are deemed impaired, if any, the calculation of allowance for loan losses is based upon the discounted present value of expected cash flows to be
received from the debtor, or other measures of market prices or collateral values. Management believes that it uses the best information available to make such determinations. If actual circumstances differ substantially from the assumptions used in
making determinations, future adjustments to the allowance for loan losses may be necessary, and results of operations will be affected. For example, a prolonged economic turndown will negatively impact customers abilities to repay their loans
in a timely manner and could result in an adverse effect on the Companys net income. While the Company believes it has established its existing allowance for loan losses in conformity with accounting principles generally accepted in the United
States of America, there can be no assurance that regulators, in reviewing the Banks loan portfolio, will not request an increase in the allowance for loan losses. Because future events affecting the borrowers and collateral cannot be
predicted with certainty, there can be no assurance that increases to the allowance will not be necessary if loan quality deteriorates.



The above is not intended to be a comprehensive list of all the Companys accounting policies.



Capital Resources and Liquidity:



The term liquidity generally refers to an organizations ability to generate adequate amounts of funds to meet its needs for cash. More specifically for
financial institutions, liquidity ensures that adequate funds are available to meet deposit withdrawals, fund loan and capital expenditure commitments, maintain reserve requirements, pay operating expenses, and provide funds for debt service,
dividends to stockholders, and other institutional commitments. Funds are primarily provided through financial resources from operating activities, expansion of the deposit base, borrowings, the sale or maturity of investments, the ability to raise
equity capital, or maintenance of shorter-term interest-bearing deposits.



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CODDLE CREEK FINANCIAL CORP. AND SUBSIDIARY



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Mooresville Savings must maintain liquidity in the form of cash, cash equivalents and investment securities,
including mortgage-backed securities, equal to at least 10% of total assets. The Banks liquidity ratio at September 30, 2003 was considerably in excess of such requirements. The Banks liquidity has increased from December 31, 2002 in
order to fund the Banks expected loan growth. Given its excess liquidity and its ability to borrow from the Federal Home Loan Bank, the Bank believes that it will have sufficient funds available to meet anticipated future loan commitments,
unexpected deposit withdrawals, and other cash requirements.



Impact of the
Inflation and Changing Prices:



The financial statements and accompanying
footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars without consideration
for changes in the relative purchasing power of money over time due to inflation. The assets and liabilities of the Bank are primarily monetary in nature, and changes in market interest rates have a greater impact on the Banks performance than
do the effects of inflation.



ITEM 3. CONTROLS AND PROCEDURES



The Company
maintains a system of internal controls and procedures designed to provide reasonable assurance as to the reliability of the Companys published financial statements and other disclosures included in this report. The Companys Board of
Directors, operating through its audit committee which is composed entirely of independent outside directors, provides oversight to the Banks financial reporting process.



The Companys management, under the supervision and with the participation of its President/CEO and Controller (its principal executive
officer and principal financial officer, respectively), have concluded based on their evaluation as of the end of the period covered by this report that the Companys disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in its reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and
include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Companys management, including the President/CEO and Controller of the Company,
as appropriate to allow timely decisions regarding required disclosure.



There
were no significant changes in the internal controls or in other factors that could significantly affect internal controls subsequent to the date of evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses. Without limiting the foregoing, there have been no significant changes in internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION



Item 1. Legal Proceedings



The
Company is not engaged in any material legal proceedings at the present time. From time to time, the Company is a party to legal proceedings within the normal course of business wherein it enforces its security interest in loans made by it and other
matters of a like kind.



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



| |  |                
| |  | ---------------
| |  | Exhibit (3)(i) 
| |  |                
| |  | Exhibit (3)(ii)
| |  |                
| |  | Exhibit (4)    
| |  |                
| |  | Exhibit (10)(a)
| |  |                
| |  | Exhibit (10)(b)
| |  |                
| |  | Exhibit (10)(c)



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##### Table of Contents

| |  |                
| |  | ---------------
| |  | Exhibit (10)(d)
| |  |                
| |  | Exhibit (10)(e)
| |  |                
| |  | Exhibit (10)(f)
| |  |                
| |  | Exhibit (10)(g)
| |  |                
| |  | Exhibit (10)(h)
| |  |                
| |  | Exhibit (10)(i)
| |  |                
| |  |                
| |  |                
| |  |                
| |  |                
| |  |                



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| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 
| |  | 



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| |  |                
| |  | ---------------
| |  |                
| |  |                
| |  | Exhibit (10)(j)
| |  |                
| |  | Exhibit 31.1   
| |  |                
| |  | Exhibit 31.2   
| |  |                
| |  | Exhibit 32     



(b) No reports on Form
8-K were filed during the three months ended September 30, 2003.



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SIGNATURES



In accordance with the
requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|      |  |                  |  |  |  |     |  | Coddle Creek Financial Corp.
|----- |  | ---------------- |  |  |  | --- |  | ----------------------------
|      |  |                  |  | 
|Dated |  | November 7, 2003 |  |  |  | By: |  | /s/ George W. Brawley, Jr.  
|      |  |                  |  |  |  |     |  | George W. Brawley           
|      |  |                  |  |  |  |     |  | President and CEO           
|      |  |                  |  | 
|Dated |  | November 7, 2003 |  |  |  | By: |  | /s/ Billy R. Williams       
|      |  |                  |  |  |  |     |  | Billy R. Williams           
|      |  |                  |  |  |  |     |  | Secretary/Controller        



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