---

|UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10QSB


(Mark One)
|---------------------------------------------------------------------------------------------------

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

|For the quarterly period ended June 30, 1999
|--------------------------------------------

|[_] |  | TRANSITION REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- |  | ----------------------------------------------------------------------------------------

|For the transition period from

Commission file number: 33368207

FIRST COASTAL BANCSHARES
|-------------------------------------------------------------------------------------------

|                                               | 
|---------------------------------------------- | 
|CALIFORNIA                                     | 
|(State of other jurisdiction of incorporation) | 

| | 
| | 
| | 
| | 

|                                         | 
|---------------------------------------- | 
|275 Main Street, El Segundo, California  | 
|(Address of principal executive offices) | 

|Registrants telephone number, including area code: (310)
3222222

Not applicable (Former name or former address, if changed since
last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(c) of the Securities Exchange Act of
1934 during the preceding 12 months (of 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 [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

On August 2, 1999, there were 1,250,241 shares of First Coastal Bancshares
Common Stock outstanding.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|First Coastal Bancshares 
June 30, 1999


INDEX


PART I  FINANCIAL INFORMATION
|--------------------------------------------------------------------------------

|        |  | PAGE                                                                
|------- |  | --------------------------------------------------------------------
|Item 1 |  | Financial Statements                                                
|        |  | Condensed Consolidated Balance Sheets at June 30, 1999 and          
|        |  | December 31, 1998                                                   
|        |  | Condensed Consolidated Statements of Income for the three           
|        |  | months and six months ended June 30, 1999 and 1998                  
|        |  | Condensed Consolidated Statements of Changes in Shareholders Equity
|        |  | from January 1, 1998 through June 30, 1999                          
|        |  | Condensed Consolidated Statements of Cash Flows for the six         
|        |  | months ended June 30, 1999 and 1998                                 
|        |  | Notes to Consolidated Financial Statements                          
|Item 2 |  | Managements Discussion and Analysis of Financial Condition and     
|        |  | Results of Operations                                               

|PART II  OTHER INFORMATION
|---------------------------

|                                                              | 
|------------------------------------------------------------- | 
|Item 1   Legal Proceedings                                   | 
|Item 2   Changes in Securities                               | 
|Item 3   Defaults upon Senior Securities                     | 
|Item 4   Submission of Matters to a Vote of Security Holders | 
|Item 5   Other Information                                   | 
|Item 6   Exhibits and Reports on Form 8K                    | 

---

|Item 1. Financial Statements


First Coastal Bancshares and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited  Dollar Amounts in Thousands)
|--------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 | June 30,1999 | December 31, 1998
|------------------------------------------------ | ------------ | -----------------
|Cash and Due From Bank                           |              | $     9,071      
|Short Term Investments                           |              | 11,500           
|                                                
|CASH AND CASH EQUIVALENTS                        |              | 20,571           
|Investment Securities, net                       |              | 33,600           
|Loans                                            |              | 68,961           
|Allowance for Loan Losses                        |              | (960             
|                                                
|NET LOANS                                        |              | 68,001           
|Premises and Equipment, net                      |              | 664              
|Other Real Estate Owned, net                     |              | 58               
|Goodwill, net                                    |              | 5,404            
|Issuance Costs, net  Trust Preferred Securities |              | 1,009            
|Accrued Interest and Other Assets                |              | 1,987            
|                                                
|                                                 |              | $ 131,294        
|                                                
|NoninterestBearing Deposits                     |              | $   29,044       
|InterestBearing Deposits                        |              | 59,698           
|                                                
|TOTAL DEPOSITS                                   |              | 88,742           
|Other Borrowings                                 |              | 27,800           
|Company Obligated Mandatorily Redeemable         |             
|Preferred Securities of Subsidiary Trust Holding |             
|Solely Junior Subordinated Debentures            |              | 6,600            
|Accrued Interest and Other Liabilities           |              | 564              
|                                                
|TOTAL LIABILITIES                                |              | 123,706          
|Preferred Stock                                  |              | 1,993            
|Common Shares                                    |              | 6,643            
|Accumulated Deficit                              |              | (361             
|Accumulated Other Comprehensive Income           |              | (687             
|                                                
|TOTAL SHAREHOLDERS EQUITY                       |              | 7,588            
|                                                
|                                                 |              | $ 131,294        
|                                                

|The accompanying notes are an integral part of the consolidated financial
statements.
|-------------------------------------------------------------------------------------

---

|Item 1.   Financial Statements  Continued


First Coastal Bancshares and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited  Dollar Amounts in
Thousands, Except Per Share Data)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  | For the Three Months EndedJune 30, | For the Six Months EndedJune 30, |   |         
|--------------------------------- | ---------------------------------- | -------------------------------- | - | --------
|
|Interest Income                   |                                    | $ 2,019                          |   | $1,336  
|Interest Expense                  |                                    | 886                              |   | 560     
|                                 
|Net Interest Income               |                                    | 1,133                            |   | 776     
|Provision for Loan Losses         |                                    | 50                               |   |        
|                                 
|Net Interest Income after         |                                   
|Provision for Loan Losses         |                                    | 1,083                            |   | 776     
|Noninterest Income                |                                    | 312                              |   | 129     
|Noninterest Expense               |                                    | 1,404                            |   | 718     
|                                 
|(Loss) Income before Income Taxes |                                    | (9                               | ) | 187     
|Income Taxes                      |                                    | 36                               |   | 93      
|                                 
|Net (Loss) Income                 |                                    | $   (45                          | ) | $     94
|                                 
|Per Share Data:                   |                                   
|Net Loss  Basic                  |                                    | $(0.08                           | ) | $   .03 
|Net Loss  Diluted                |                                    | $(0.08                           | ) | $   .03 

|The accompanying notes are an integral part of
the consolidated financial statements.
|-------------------------------------------------------------------------------------

---

|Item 1. Financial Statements  Continued


First Coastal Bancshares and Subsidiaries
Condensed Consolidated Statements of Changes in Shareholders Equity
 (Unaudited  Dollar Amounts in Thousands)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | PreferredStock | CommonShares | ComprehensiveIncome | AccumulatedDeficit | AccumulatedOtherComprehensiveIncome | Total   
|----------------------------- | -------------- | ------------ | ------------------- | ------------------ | ----------------------------------- | --------
|January 1, 1998               |                | $ 2,658      |                     | $ 3,360            |                                     |         
|Dividends - Preferred Stock   |                |              |                     |                    |                                     |         
|Common Stock Repurchased      |                |              |                     | (78                | )                                   |         
|Exercise of Warrants          |                |              |                     | 250                |                                     |         
|Recognition of Deferred Tax   |               
|Assets Generated Prior to     |               
|Quasi-Reorganization          |                |              |                     | 141                |                                     |         
|Comprehensive Income          |               
|Net Income                    |                |              |                     |                    |                                     | $    259
|Change in Unrecognized Loss   |               
|of Securities Available for   |               
|Sale, net of Taxes            |                |              |                     |                    |                                     | (36     
|                             
|Comprehensive Income          |                |              |                     |                    |                                     | $    223
|                             
|December 31, 1998             |                | 2,658        |                     | 3,673              |                                     |         
|Proceeds from Stock Offering  |                |              |                     | 1,901              |                                     |         
|Redemption of Preferred Stock |                | (586         | )                   |                    |                                     |         
|Conversion of Preferred to    |               
|Common Stock                  |                | (79          | )                   | 79                 |                                    
|Dividends - Preferred Stock   |                |              |                     |                    |                                     |         
|Exercise of Warrants          |                |              |                     | 875                |                                     |         
|Common Shares Reissued        |                |              |                     | 115                |                                     |         
|Comprehensive Income          |               
|Net Loss                      |                |              |                     |                    |                                     | $  (138 
|Change in Unrecognized Loss   |               
|of Securities Available for   |               
|Sale, net of Taxes            |                |              |                     |                    |                                     | (656    
|                             
|Comprehensive Loss            |                |              |                     |                    |                                     | $  (794 
|                             
|June 30, 1999                 |                | $ 1,993      |                     | $ 6,643            |                                     |         
|                             

|The accompanying notes are an integral part of the consolidated financial
statements.
|-------------------------------------------------------------------------------------

---

|Item 1. Financial Statements - Continued


First Coastal Bancshares and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited - Dollar Amounts in
Thousands)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                              | For the Six Months EndedJune 30,
|------------------------------------------------------------- | --------------------------------
|
|OPERATING ACTIVITIES                                          |                                 
|Net (Loss) Income                                             |                                 
|Adjustments to Reconcile Net (Loss) Income to                 |                                 
|Net Cash (used) Provided by Operating Activities:             |                                 
|Depreciation and Amortization                                 |                                 
|Provision for Loan Losses                                     |                                 
|Other Items - Net                                             |                                 
|                                                             
|NET CASH (USED) PROVIDED BY                                   |                                 
|OPERATING ACTIVITIES                                          |                                 
|INVESTING ACTIVITIES                                          |                                 
|Purchases of Investment Securities                            |                                 
|Sale and Maturities of Investment Securities                  |                                 
|Net Cash and Cash Equivalents from AIB Acquisition            |                                 
|Net Change in Loans                                           |                                 
|Purchase of Premises and Equipment                            |                                 
|                                                             
|NET CASH USED                                                 |                                 
|BY INVESTING ACTIVITIES                                       |                                 
|FINANCING ACTIVITIES                                          |                                 
|Net Change in Deposits                                        |                                 
|Net Change in Other Borrowings                                |                                 
|Trust Preferred Securities, net of Costs                      |                                 
|Proceeds from Supplemental Stock Offering, net of Costs       |                                 
|Proceeds from Exercise of Warrants and Common Shares Reissued |                                 
|Redemption of Preferred and Common Stock                      |                                 
|Dividends                                                     |                                 
|                                                             
|NET CASH PROVIDED                                             |                                 
|BY FINANCING ACTIVITIES                                       |                                 
|                                                             
|INCREASE IN CASH                                              |                                 
|AND CASH EQUIVALENTS                                          |                                 
|Cash and Cash Equivalents at Beginning of Period              |                                 
|                                                             
|CASH AND CASH EQUIVALENTS                                     |                                 
|AT END OF PERIOD                                              |                                 
|                                                             

|The accompanying notes are an integral part of the consolidated financial
statements.
|-------------------------------------------------------------------------------------

---

|Item 1. Financial Statements - Continued


First Coastal Bancshares and Subsidiaries Notes to Consolidated
Financial Statements

Note 1 - Basis of Presentation and Management
Representation

The accompanying financial information has been prepared in accordance with
the Securities and Exchange Commission rules and regulations for quarterly
reporting and therefore does not necessarily include all information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles. This information
should be read in conjunction with the Companys Form 10KSB filed on May 10,
1999 and Form SB2 filed on February 12, 1999.

The consolidated financial statements include First Coastal Bancshares and
its wholly owned subsidiaries, First Coastal Bank, N.A. (the Bank) and First
Coastal Capital Trust.

Operating results for interim periods are not necessarily indicative of
operating results for an entire fiscal year. In the opinion of management, the
unaudited financial information for the three month period ended June 30, 1999
and 1998, reflect all adjustments, consisting only of normal recurring accruals
and provisions, necessary for a fair presentation thereof.

Some matters discussed in this Form 10QSB may be forwardlooking
statements within the meaning of the Private Litigation Reform Act of 1995 and
therefore may involve risks, uncertainties and other factors which may cause
our actual results to be materially different from the results expressed or
implied by our forwardlooking statements. These statements generally appear
with words such as anticipate, believe, estimate, may, intend, and
expect.


Note 2  Acquisition of American Independent Bank,
N.A. (AIB)

On March 8, 1999, the Bank acquired 100% of the outstanding common stock of
American Independent Bank, N.A. for approximately $6.5 million in cash.
AIB had total assets of approximately $38 million on March 8, 1999. The
acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16. Business
Combinations. Under this method of accounting, the purchase price was
allocated to the assets, deposits and liabilities assumed based on their fair
values as of the acquisition date, which were not materially different from
their book values. The financial statements include the operations of AIB from
the date of the acquisition. Goodwill arising from the transaction totaled
approximately $3.7 million and is being amortized over fifteen years on a
straightline basis.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Note 2  Acquisition of American Independent Bank,
N.A.  Continued


The following table sets forth selected pro forma unaudited combined
financial results of the Company and AIB. The pro forma operating data reflects
the effect of the acquisition of AIB as if it was consummated at the beginning
of each period presented. The pro forma results are not indicative of the
results that would have occurred had the acquisition been in effect for the
full periods presented, nor are they indicative of the results of future
operations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       | Three Months EndedJune 30, | Six Months EndedJune 30,
|-------------------------------------- | -------------------------- | ------------------------
|
|
|Interest and Noninterest Income:       |                            |                         
|The Company                            |                            | $ 2,331                 
|AIB - Pre-Merger                       |                            |                        
|                                      
|Total                                  |                            | $ 2,331                 
|                                      
|Net (Loss) Income:                     |                           
|The Company                            |                            | $   (45                 
|AIB  PreMerger                       |                            |                        
|Interest Costs  Pro Forma, net of Tax |                            |                        
|Goodwill Amortization Pro Forma       |                            |                        
|                                      
|Total                                  |                            | $   (45                 
|                                      
|Per Share Data:                        |                           
|Basic                                  |                            | $(0.08                  
|Diluted                                |                            | $(0.08                  

|These pro forma disclosures include adjustment to interest expense from the
funds borrowed to fund a portion of the purchase as well as adjustments to per
share data to reflect the issuance of common stock to fund the balance of the
purchase. No adjustments have been reflected in these amounts for the
anticipated cost savings to be derived from this merger.


Note 3  Earnings Per Share

Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings per Share. Accordingly, basic earnings
per share are computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding during each period.
The computation of diluted earnings per share also considers the number of
shares issuable upon the assumed exercise of outstanding common stock options
and the number of shares issuable upon the assumed conversion of the
convertible preferred stock. These items were antidilutive for the periods
reported and therefore dilutive earnings per shares is reported as the same as
basic earnings per share.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations


Income Summary

For the three months ended June 30, 1999, the Company reported a net loss of
$45,000, or $(0.08) basic loss per share compared to a net income of $94,000,
or $ 0.03 basic income per share for the same three month period in 1998. For
the six months ended June 30, 1999, the Company reported a net loss of
$138,000, or $(0.31) basic loss per share compared to a net income of $162,000,
or $0.03 basic income per share for the same six month period in 1998.

The annualized return on average assets was (0.14)% for the first half of
1999 compared to 0.23% for 1998. Annualized return on average shareholders
equity for the first half of 1999 and 1998 was (1.99)% and 2.68%, respectively.

Net Interest Income

Net interest income is the amount by which the interest and amortization of
fees generated from loans and other earning assets exceeds the cost of funding
those assets, usually deposit account interest expense. Net interest income
depends on the difference (the interest rate spread) between gross interest
and fees earned on the loans and investment portfolios and the interest rates
paid on deposits and borrowings. Net interest income was $1,133,000 for the
quarter ended June 30, 1999, compared to $776,000 for the quarter ended June
30, 1998. Net interest income was $2,030,000 for the six months ended June 30,
1999, compared to $1,513,000 for the six months ended June 30, 1998.

The total amount of net interest income increased for the quarter and six
months ended June 30, 1999 compared to the same periods in 1998 due to the
significant increase in interestearning assets. This increase was due to the
combined effect of the acquisition of AIB as well as overall growth in
investments funded by shortterm borrowings.


The following table sets forth the components of net interest income,
average earning assets and net interest margin (dollar amounts in thousands):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        | Three Months EndedJune 30, | Six Months EndedJune 30, | Year EndedDecember 31,
|----------------------- | -------------------------- | ------------------------ | ----------------------
|
|Interest Income         |                            | $    2,019               |                       
|Interest Expense        |                            | 886                      |                       
|                       
|Net Interest Income     |                            | $    1,133               |                       
|                       
|Average Earning Assets  |                            | $100,639                 |                       
|Net Interest Margin (1) |                            | 4.50                     | %                     

|(1) |  | Interim periods are
presented on an annualized basis.
|--- |  | -----------------------------------------------------

---

|Net Interest Income  Continued

The net interest margin declined in the first quarter of 1999 compared to
the same quarter in 1998 due to the 75 basis point decline in the prime rate
during the fourth quarter of 1998. The majority of the Banks loans and its
investments in federal funds sold reprice daily with changes in the prime rate.
This decline continued into the second quarter of 1999, but had a lesser effect
due to the increase in interestearning assets from the acquisition of AIB in
early March 1999, investments acquired during the second quarter of 1999 which were funded
by shortterm borrowings and the gradual repricing of interestbearing deposits.

Further contributing to the decrease in net interest margin was the interest
expense relating to the recently issued $6.6 million in preferred securities.
Interest expense incurred on these securities, net of tax effect, was $116,000
in the second quarter of 1999 and $37,000 in the first quarter of 1999.

The prime rate was 8.50% for the first nine months of 1998, and then
experienced 25 basis point declines in September, October and November to end
the year at 7.75%. The prime rate increased 25 basis points to 8.0% on July 1,
1999.

Provision for Loan Losses

During the second quarter of 1999, the Company contributed $50,000 to the
allowance for loan losses. The Company made no contribution to the allowance
for loan losses in the first quarter of 1999. Total contributions to the
allowance for loan losses in the first six months of 1998 were $10,000.
Management believes that the allowance, which stands at 1.4% of total loans at
June 30, 1999, is adequate to cover future losses.

Changes in the allowance for loan losses for the quarter and six months
ended June 30, 1999 and 1998 are as follows (dollar amounts in thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      | Three Months EndedJune 30, | Six Months EndedJune 30,
|------------------------------------- | -------------------------- | ------------------------
|
|Allowance, Beginning of Period        |                            | $901                    
|Provision for Loan Losses             |                            | 50                      
|Loans Charged Off - net of Recoveries |                            | 9                       
|Allowance from AIB Acquisition        |                            |                        
|                                     
|Allowance, End of Period              |                            | $960                    
|                                     

|Noninterest Income

Noninterest Income represents deposit account service charges and other
types of non-loan related fee income. Noninterest income for the quarter ended
June 30, 1999 totaled $312,000 compared to $129,000 for the same period ended
1998. Noninterest income for the six months ended June 30, 1999 totaled
$452,000 compared to $262,000 for the same period ended 1998. The increase is
primarily the result of the additional noninterest income related to operations
of the AIB branches after the acquisition on March 8, 1999 and the gain on sale
of $58,000 on an OREO property in June 1999.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Noninterest Expense

Noninterest Expenses represent salaries, occupancy expenses, professional
expenses, outside services and other miscellaneous expenses necessary to
conduct business. Noninterest expense for the quarter ended June 30, 1999
totaled $1,404,000 compared to $718,000 for the same period during 1998.
Noninterest expense for the six months ended June 30, 1999 totaled $2,561,000
compared to $1,440,000 for the same period during 1998.

The increase in noninterest expense is due to primarily to the acquisition of AIB on
March 8, 1999.The
Company experienced an increased salary and related expense as well as occupancy expense with the addition
of two branch locations with accompanying staff and facilities. The acquisition
also resulted in additional goodwill amortization of $83,000
year to date and non-capitalizable costs of approximately $53,000.

The Company expanded its marketing capabilities in the second quarter of 1999
by investing in two additional business development officers in each of its two new locations.
Each individual brings many years of experience and is well known to the community he or she is based in.
In addition, the Company had the opportunity to augment its lending staff with a very strong
construction/real estate lender who joined the Bank in the second quarter. The expense of establishing
this sales force has resulted in an increase of approximately $30,000 per month
in salary related expense and $32,000 year to date in advertising.

Other nonrecurring costs incurred during the first half of 1999 include an
increase of $67,000 in professional fees related to operational audits and Y2K
costs and a $78,000 writedown in the carrying value of its OREO.

Income Taxes

The Companys income tax benefit for the first half of 1999 was $9,000
resulting in an effective rate of 40.0% on income before taxes and goodwill
amortization. The tax provision for the first half of 1998 was $163,000,
resulting in an effective rate of 41.5% on income before taxes and goodwill
amortization.

Balance Sheet Analysis

Total assets at June 30, 1999 totaled $131.3 million, up 71% from the $76.7
million reported at December 31, 1998. A portion of this increase was the
result of the first quarter acquisition of AIB, which had total assets of $38
million at the acquisition date of March 8, 1999. To fund this increase, the
Company increased shareholders equity $1.9 million through a supplemental
stock offering and issued $6.6 million in Trust Preferred Securities.

During the second quarter of 1999, total assets increased another $17.5
million. This increase was centered primarily in investments. This increase, including a
decrease of $6.1 million in interestbearing deposits and other changes, was
funded by an increase in shortterm borrowings of $26.8 million
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Asset Quality

The following table sets forth the components of nonperforming assets and
related ratios: (dollar amounts in thousands)
|---------------------------------------------------------------------------------------------------------------------------------------

|                                          | June 30. |        
|----------------------------------------- | -------- | -------
|
|Loans 90 Days Past Due and Still Accruing |          | $   339
|Loans on Nonaccrual                       |          | 665    
|                                         
|Nonperforming Loans                       |          | 1,004  
|Other Real Estate Owned                   |          | 58     
|                                         
|Nonperforming Assets                      |          | $1,062 
|                                         
|Nonperforming Loans as a Percent          |         
|of Total Loans                            |          | 1.46   
|Allowance for Loan Losses as a Percent    |         
|of Nonperforming Loans                    |          | 95.62  
|Nonperforming Assets as a Percent         |         
|of Total Assets                           |          | 0.81   

|The primary ratios of loan quality have generally improved in the first half
of 1999. One exception is the ratio of nonperforming loans as a percent of
total loans, which increased slightly to 1.46% at June 30, 1999, compared to
1.33% at December 31, 1998. A primary factor in the deterioration of this ratio
was the significant increase during the second quarter of 1999 in loans past
due and still accruing. Two loans make up the majority of this increase. Both
loans are well secured by real estate and are expected to return to the current
category in the near future. Absent these two loans the ratio of nonperforming
loans to total loans would decrease to 1.03%.

The allowance for loan losses as a percent of nonperforming loans increased
to 95.62% at June 30, 1999, up from 74.80% at December 31, 1998. Likewise, the
ratio of nonperforming assets as a percent of total assets has declined to
0.81% as of June 30, 1999 compared to 1.11% at December 31, 1998. These two
ratios would also improve substantially if the two past due loans discussed
above were disregarded.


Other Borrowings

Other borrowings at June 30, 1999 consist of $14.8 million in federal funds
purchased, $12.0 million in shortterm borrowings from the Federal Home Loan
Bank and $1.0 million in longterm borrowings from a correspondent bank. The
Company uses these sources to fund asset growth and offset fluctuations in
demand for deposits.


Trust Preferred Securities

During the first quarter of 1999 the Company completed an offering of $6.6
million in 11 7/8% Cumulative Preferred Securities through a whollyowned
subsidiary, First Coastal Capital Trust. Under generally accepted accounting
policies, the securities are reported as liabilities of the Company. The
interest payments are reported as interest expense and the amortization of the
related costs of the offering ($1.0 million) are reported as other noninterest
expense. The Trust Preferred Securities mature on December 31, 2028.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Capital

Total shareholders equity at June 30, 1999 totaled $7.6 million, which
represented a 20.6% increase from $6.3 million at December 31, 1998. This
increase was primarily attributable to the supplemental stock offering
completed in March 1999.

The Bank maintains capital ratios above the Federal regulatory guidelines
for a wellcapitalized bank. The ratios are as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                         | RegulatoryMinimum RatioforWellCapitalized | June 30,1999 | December 31,1998
|---------------------------------------- | -------------------------------------------- | ------------ | ----------------
|Tier 1 Capital (to Average Assets)       |                                              | 5.00         | %               
|Tier 1 Capital (to Risk Weighted Assets) |                                              | 6.00         | %               
|Total Capital (to Risk Weighted Assets)  |                                              | 10.00        | %               

|The Companys ratios at June 30, 1999 were 4.45% for Tier 1 capital to
average assets, 6.33% for Tier 1 capital to riskweighted assets and 13.28% for
Total capital to riskweighted assets.

Liquidity

Management is not aware of any future capital expenditures or other
significant demands on commitments which would severely impair liquidity.


Year 2000 Compliance

The Company has completed the Assessment and Renovation phases of the Year
2000 Compliance, as defined under FFIEC guidelines, and is currently in the
Validation phase. A few of its computer software applications were modified or
replaced in order to maintain their functionality as the year 2000 approaches.
A comprehensive plan was developed and all system conversions and testing were
substantially completed as of December 31, 1998. The Company estimates its
total costs over the threeyear period 1998  2000 will be approximately
$136,000, of which $116,000 has been incurred through June 30, 1999. None of
these costs, however, are expected to materially impact the results of
operations in any one reporting period. The Company believes that its plans for
dealing with the year 2000 issue will result in timely and adequate
modifications of its systems and technology.

Ultimately, the potential impact of the year 2000 issue will depend not only
on the corrective measures the Company undertakes, but also on the way in which
the year 2000 issue is addressed by governmental agencies, businesses, and
other entities who provide data to, or receive data from the Bank or whose
financial condition or operational capability is important to the Company such
as suppliers or customers. Communications with significant customers and
vendors have been initiated to determine the extent of risk created by those
third parties failure to remediate their own year 2000 issues. However, it is
not possible, at present, to determine the financial effect if significant
customer and/or vendor remediation efforts are not resolved in a timely manner.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|PART II - OTHER INFORMATION

Item 1  Legal Proceedings
|-------------------------------------------------------

| | Due to the nature of the
banking business, the Company is at times party to various legal actions; all
such actions are of a routine nature and arise in the normal course of business.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 2  Changes in Securities

None

Item 3  Defaults upon Senior Securities

None

Item 4  Submission of Matters to a Vote of Security Holders
|--------------------------------------------------------------------------------------------------------------------------------------------------

| | On May 21, 1999, the
Company held its annual meeting. At that meeting Charles Brooks, Carole LaCaze,
Paul Deters, Clifford Einstein, Charles Fullerton, Don Griffith, Mako Higuchi,
Deborah Marsten, Thomas Spears and Joseph Wender were elected directors of the
Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 5  Other Items

None

Item 6  Exhibits and Reports on Form 8K
|---------------------------------------------------------------------

|A) | Financial Data Schedule
 Exhibit 27
|-- | ------------------------------------

|B) | Reports on Form 8K
|-- | -------------------

|None
|----

---

|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 thereunto duly authorized.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | First Coastal Bancshares
| | ------------------------

|Date:  August 13, 1999 | _________________________ 
 Don M. Griffith
 Chief Executive Officer,
 Chairman and Director
|---------------------- | --------------------------------------------------------------------------------------------

|Date:  August 13, 1999 | _________________________ 
Deborah A. Marsten
Chief Financial Officer,
Secretary and Director
|---------------------- | ---------------------------------------------------------------------------------------------