**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


___________________





**FORM
      10-QSB**


**__________________**





(Mark
      One)


x QUARTERLY
      REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
      THE
      QUARTERLY PERIOD ENDED MARCH 31, 2006





o TRANSITION
      REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
      THE
      TRANSITION PERIOD FROM _____________ TO _____________.





**Commission
      File Number** **000-51155**





**Coastal
      Bancshares Acquisition Corp.**


___________________


(Exact
      Name of Small Business Issuer as Specified in Its Charter)






**Delaware**
              (State
                or other Jurisdiction of incorporation)
            **20-1191778**
              (I.R.S.
                Employer Identification No.)




**9821
      Katy Freeway, Suite 500**


**Houston,
      Texas**


(Address
      of Principal Executive Office)





**(713)
      827-2104**


(Issuer’s
      Telephone Number, Including Area Code)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x  No o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes x No o





As
      of
      March 31, 2006, 6,520,000 **** shares
      of
      common stock, par value $.01 per share, were issued and
      outstanding.





Transitional
      Small Business Disclosure Format (check one):


Yes
o
      No x








**Index**
            **Page
                No.****Part
                I: Condensed Financial Information**Item
                1 -Financial Statements
            3Condensed
                Balance Sheets
            3Condensed
                Unaudited Statements of Operations
            4Condensed
                Unaudited Statements of Cash Flows
            5Notes
                to Condensed Financial Statements
            6Item
                2 - Management’s Discussion and Analysis or Plan of
                Operation
            9Item
                3 - Controls and Procedures
            10**Part
                II. Other Information**Item
                2 - Unregistered Sales of Equity Securities and Use of Proceeds
            11Item
                6 - Exhibits and Reports on Form 8-K
            11Signatures
            13Exhibit
                Index
            14




2


**PART
      I. CONDENSED FINANCIAL INFORMATION**


**Item
      1. Condensed Financial Statements**





**COASTAL
      BANCSHARES ACQUISITION CORP.**


**(A
      Corporation in the Development Stage)**


**CONDENSED
      BALANCE SHEETS**





**ASSETS**
            
            **December
                31,**
              **2005**
            
            **March
                31,**
              **2006**
              **(Unaudited)****Current
                assets:**Cash
                and cash equivalents
            
            $
            925,643
            
            $
            530,636Trust
                Fund
            
            
            29,269,727
            
            
            29,561,533Prepaid
                expensesTrust Fund
            
            
            19,630
            
            
            47,598Total
                current assets
            
            
            30,215,000
            
            
            30,139,767Deferred
                acquisition costs
            
            
            —
            
            
            322,638**Total
                Assets**
            
            $
            30,215,000
            
            $
            30,462,405**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****Current
                Liabilities:**Accounts
                payable and accrued expenses
            
            $
            95,550
            
            $
            275,929Federal
                income tax payable
            
            
            123,000
            
            
            64,000**Total
                Liabilities**
            
            
            218,550
            
            
            339,929**Common
                stock subject to shareholders’ right to conversion; 1,103,448 shares at
                conversion value**
            
            
            5,851,018
            
            
            5,909,350**Commitment
                - Note 6****Stockholders’
                Equity:**Preferred
                stock, $0.01 par value Authorized 5,000,000 shares; none
                issued
            
            
            —
            
            
            —Common
                stock, $0.01 par valueAuthorized
                50,000,000 sharesIssued
                and outstanding: 1,000,000 shares in 2004, 6,520,000 in 2005 (including
                the 1,103,448 shares subject to possible conversion)
            
            
            54,166
            
            
            54,166Additional
                paid-in capital
            
            
            24,012,761
            
            
            23,954,429Deferred
                compensation
            
            
            (93,506
            )
            
            (57,542
            )Earnings
                accumulated during the development stage
            
            
            172,011
            
            
            262,073**Total
                Stockholders’ Equity**
            
            
            24,145,432
            
            
            24,213,126**Total
                Liabilities and Stockholders’ Equity**
            
            $
            30,215,000
            
            $
            30,462,405




*See
        accompanying notes to condensed financial statements* .




3


**COASTAL
      BANCSHARES ACQUISITION CORP.**


**(A
      Corporation in the Development Stage)**


**CONDENSED
      UNAUDITED STATEMENTS OF OPERATIONS**











**Period
                from**
              **May
                19,**
            
            **Three
                Months Ended March 31,****2004
                (inception) to March 31, 2006**
            
            **2005**
            
            **2006**Formation
                and operating costs
            
            $
            653,825
            
            $
            67,935
            
            $
            143,413Operating
                loss
            
            
            (653,825
            )
            
            (67,935
            )
            
            (143,413
            )Interest
                income:Received
                and accrued
            
            
            754,798
            
            
            2,526
            
            
            4,771Market
                value adjustment
            
            
            347,202
            
            
            78,490
            
            
            291,806Total
                interest income
            
            
            1,102,000
            
            
            81,016
            
            
            296,577Pre-tax
                income
            
            
            448,175
            
            
            13,081
            
            
            153,164Provision
                for income taxes
            
            
            186,102
            
            
            3,600
            
            
            63,102Net
                income
            
            $
            262,073
            
            $
            9,481
            
            $
            90,062Weighted
                average shares outstanding (basic and diluted)
            
            
            4,290,925
            
            
            3,576,000
            
            
            6,520,000Net
                income per share (basic and diluted)
            
            $
            0.06
            
            $
            0.00
            
            $
            0.01




*See
        accompanying notes to condensed financial statements* .




4


**COASTAL
      BANCSHARES ACQUISITION CORP.**


**(A
      Corporation in the Development Stage)**


**CONDENSED
      UNAUDITED STATEMENTS OF CASH FLOWS**




**Period
                from May 19,**
            
            **Three
                Months Ended****March 31,****2004
              (inception) to March 31, 2006**
            
            **2005**
            
            **2006**CASH
                FLOW FROM OPERATING ACTIVITIESNet
                income
            
            $
            262,073
            
            $
            9,481
            
            $
            90,062Adjustments
                to reconcile net income to net cash provided by operating
                activities:Increase
                in market value of treasury bill
            
            
            (347,203
            )
            
            (78,492
            )
            
            (291,806
            )Amortization
                of deferred compensation
            
            
            141,458
            
            
            —
            
            
            35,964Changes
                in operating assets and liabilities:Increase
                in prepaid expenses
            
            
            (47,598
            )
            
            (114,505
            )
            
            (27,968
            )Increase
                (decrease) in accounts payable and accrued expenses
            
            
            62,874
            
            
            24,803
            
            
            (32,676
            )Increase
                (decrease) in income taxes payable
            
            
            64,000
            
            
            3,600
            
            
            (59,000
            )Net
                cash provided by (used in) operating activities
            
            
            135,604
            
            
            (155,113
            )
            
            (285,424
            )CASH
                FLOW FROM INVESTING ACTIVITIESPurchases
                of treasury bill in trust account
            
            
            (29,214,330
            )
            
            (28,483,200
            )
            
            —Net
                cash used in investing activities
            
            
            (29,214,330
            )
            
            (28,483,200
            )
            
            —CASH
                FLOW FROM FINANCING ACTIVITIESProceeds
                from private sale of common stock
            
            
            25,000Gross
                proceeds from public offering
            
            
            33,120,000
            
            
            33,120,000
            
            
            —Costs
                of public offering
            
            
            (3,426,055
            )
            
            (3,362,523
            )
            
            —Deferred
                acquisition costs, net
            
            
            (109,583
            )
            
            
            
            
            (109,583
            )Proceeds
                from stockholder loan
            
            
            75,000
            
            
            20,000
            
            
            —Repayment
                of stockholder loan
            
            
            (75,000
            )
            
            (75,000
            )
            
            —Net
                cash provided by (used in) financing activities
            
            
            29,609,362
            
            
            29,702,477
            
            
            (109,583
            )NET
                INCREASE (DECREASE) IN CASH
            
            
            530,636
            
            
            1,064,164
            
            
            (395,007
            )CASH
                AT BEGINNING OF PERIOD
            
            
            —
            
            
            21,711
            
            
            925,643CASH
                AT END OF PERIOD
            
            $
            530,636
            
            $
            1,085,875
            
            $
            530,636**Supplemental
                disclosure of cash flow information:**Income
                taxes paid
            
            $
            122,102
            
            $
            —
            
            $
            122,102**Supplemental
                disclosure of non-cash financing activities:**Deferred
                acquisition costs included in accounts payable
            
            $
            213,055
            
            
            
            
            $
            $213,055




*See
        accompanying notes to condensed financial statements* .




5




**COASTAL
      BANCSHARES ACQUISITION CORP.**


**(A
      Corporation in the Development Stage)**


**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**





**1.**  **BASIS
      OF PRESENTATION**





The
      financial statements included herein as of December 31, 2005 and March 31,
      2006,
      and for the three month periods ended March 31, 2005 and 2006, and the period
      since inception (May 19, 2004) through March 31, 2006, have been prepared by
      Coastal Bancshares Acquisition Corp. (the “Company”) without audit pursuant to
      the rules and regulations of the United States Securities and Exchange
      Commission (“SEC”). Accordingly, these statements reflect all adjustments
      (consisting only of normal recurring entries), which are, in the opinion of
      the
      Company, necessary for a fair presentation of the financial results for the
      interim periods. Certain information and notes normally included in financial
      statements prepared in accordance with accounting principles generally accepted
      in the United States of America have been condensed or omitted pursuant to
      such
      rules and regulations, although the Company believes that the disclosures are
      adequate to make the information presented not misleading. Operating results
      for
      the interim periods presented are not necessarily indicative of the results
      that
      may be expected for the full fiscal year.  These
      financial statements should be read in conjunction with the financial statements
      that were included in the Company’s Annual Report on Form 10-KSB for the year
      ended December 31, 2005. The Company had no operating activity for the period
      from inception on May 19, 2004 through August 5, 2004.





**2.**  **ORGANIZATION,
      BUSINESS OPERATIONS**





Coastal
      Bancshares Acquisition Corp. (the “Company”) was incorporated in Delaware on May
      19, 2004 as a blank check company whose objective is to acquire or merge with
      an
      operating commercial bank or bank holding company. The Company’s initial
      stockholders’ purchased 1,000,000 shares of common stock, $0.01 par value, for
      $25,000 on August 6, 2004.





The
      registration for the Company’s initial public offering (the “Offering”) of
      4,800,000 units was declared effective on February 14, 2005. The Company
      consummated the Offering on February 18, 2005. The underwriters also exercised
      their over-allotment option to purchase an additional 720,000 units on February
      18, 2005. The Company received proceeds, net of the underwriters’ discount and
      offering expenses of approximately $29.9million. The Company’s management has
      broad discretion with respect to the specific application of the net proceeds
      of
      the Offering, although substantially all of the net proceeds of the Offering
      are
      intended to be generally applied toward consummating a merger with or
      acquisition of an operating commercial bank or bank holding company (“Business
      Combination”). There is no assurance that the Company will be able to
      successfully affect a Business Combination. Using proceeds from the Offering,
      the amount of $28,483,200 was placed in an interest bearing trust account
      (“Trust Fund”) to be held until the earlier of (i) the consummation of its first
      Business Combination or (ii) liquidation of the Company. Under the agreement
      governing the Trust Fund, funds may only be invested in United States government
      securities with a maturity of 180 days or less. The remaining proceeds may
      be
      used to pay for business, legal and accounting due diligence on prospective
      mergers or acquisitions and continuing general and administrative
      expenses.





The
      Company has signed a definitive agreement for the merger with a target business
      (See Note 9) and will submit such transaction for stockholder approval. In
      the
      event that stockholders owning 20% or more of the outstanding stock excluding,
      for this purpose, those persons who were stockholders immediately prior to
      the
      Offering, vote against the Business Combination, the Business Combination will
      not be consummated. All of the Company’s stockholders prior to the Offering,
      including all of the officers and directors of the Company (“Initial
      Stockholders”), have agreed to vote their founding shares of common stock in
      accordance with the vote of the majority in interest of all other stockholders
      of the Company (“Public Stockholders”) with respect to the Business Combination.
      The Business Combination will not be completed unless more than 50% of the
      Public Stockholders vote in favor of the transaction. After consummation of
      the
      Company’s first Business Combination, these voting safeguards no longer apply.




6


With
      respect to the first Business Combination which is approved and consummated,
      any
      Public Stockholder who voted against the Business Combination may demand that
      the Company redeem his or her shares. The per share redemption price will equal
      the amount in the Trust Fund as of the record date for determination of
      stockholders entitled to vote on the Business Combination divided by the number
      of shares of common stock held by Public Stockholders at the consummation of
      the
      Offering. Accordingly, Public Stockholders holding 19.99% of the aggregate
      number of shares owned by all Public Stockholders may seek redemption of their
      shares in the event of a Business Combination. Such Public Stockholders are
      entitled to receive their per share interest in the Trust Fund computed without
      regard to the shares held by Initial Stockholders.





The
      Company’s Certificate of Incorporation provides for the mandatory liquidation of
      the Company, without stockholder approval, in the event that the Company does
      not consummate a Business Combination within 18 months from the date of the
      consummation of the Offering (August 18, 2006), or 24 months from the
      consummation of the Offering (February 18, 2007) if certain extension criteria
      have been satisfied. In the event of liquidation, it is likely that the per
      share value of the residual assets remaining available for distribution
      (including Trust Fund assets) will be less than the initial public offering
      price per share in the Offering (assuming no value is attributed to the Warrants
      contained in the Units to be offered in the Offering as described in
      Note 3).





**3.**  **PUBLIC
      OFFERING**





On
      February 18, 2005, the Company sold 4,800,000 units (“Units”) in a public
      offering, which included granting the underwriters’ an over-allotment option to
      purchase up to an additional 720,000 Units. On February 18, 2005, the
      underwriters exercised the entire amount of the option. Each Unit consists
      of
      one share of the Company’s common stock, $0.01 par value, and two Redeemable
      Common Stock Purchase Warrants (“Warrants”). Each Warrant will entitle the
      holder to purchase from the Company one share of common stock at an exercise
      price of $5.00 commencing on the later of the completion of a Business
      Combination or February 13, 2006, and expiring February 13, 2010. The Warrants
      will be redeemable by the Company at a price of $0.01 per Warrant upon 30 days’
notice after the Warrants become exercisable, only in the event that the last
      sale price of the common stock is at least $8.50 per share for any 20 trading
      days within a 30 trading day period ending on the third day prior to the date
      on
      which notice of the redemption is given. In connection with the Offering, the
      Company issued an option for $100 to the underwriters to purchase 325,000 Units
      at an exercise price of $7.50 per Unit. The Units issuable upon exercise of
      this
      option are identical to those included in the Offering except that the exercise
      price of the Warrants included in the Units will be $6.65 per
      share.





**4.**  **TREASURY
      SECURITIES**





Treasury
      securities are classified as trading securities and are carried at fair value,
      with gains or losses resulting from changes in fair value are recognized
      currently in earnings.





**5.**  **DEFERRED
      COMPENSATION**





On
      April
      7, 2005, the Company made a restricted stock grant of 40,000 shares to a
      director. The shares are subject to forfeiture in the event that the Company
      does not consummate a Business Combination within 18 months from the date of
      the
      consummation of the Offering, or 24 months from the consummation of the Offering
      if certain extension criteria have been satisfied. The grant was recorded based
      on the closing price of the Company’s common stock on the date of the grant and
      is being amortized as compensation expense over the period from the date of
      the
      grant through the date that is 18 months after consummation of the
      Offering.





**6.**  **COMMITMENT**





The
      Company presently occupies office space provided by an affiliate of an Initial
      Stockholder. Such affiliate has agreed that, until the acquisition of a target
      business by the Company, it will make such office space, as well as certain
      office and secretarial services, available to the Company, as may be required
      by
      the Company from time to time. The Company has agreed to pay such affiliate
      $7,500 per month for such services commencing on the effective date of the
      Offering.




7


**7.**  **COMMON
      STOCK**




At
      December 31, 2005 and March 31, 2006, 50,000,000 shares of $0.01 par value
      common stock were authorized and 6,520,000 shares were outstanding. Of the
      common stock outstanding, 1,103,448 shares are subject to the right by
      stockholders to convert their shares into cash. The conversion amount per share
      is determined by dividing the balance in the trust account on the date when
      the
      right of conversion occurs by 5,520,000 shares. As of December 31, 2005 and
      March 31, 2006, the conversion amount would have been $5.30 and $5.36 per share,
      respectively.





**8.**  **PREFERRED
      STOCK**





The
      Company is authorized to issue 5,000,000 shares of preferred stock with such
      designations, voting and other rights and preferences as may be determined
      from
      time to time by the Board of Directors.





**9.**  **SUBSEQUENT
      EVENT**





On
      April 5, 2006, the
      Company and its wholly-owned subsidiary Coastal Merger Corp., a Texas
      corporation (“Merger Sub”), entered into a definitive Agreement
      and Plan of Merger with Intercontinental
      Bank Shares Corporation, a Texas corporation (“Intercontinental”), pursuant to
      which Merger Sub will merge with and into Intercontinental in a cash-for-stock
      trans action
      (the “Merger”). At the effective time of the Merger, Intercontinental will be
      the surviving corporation and become a wholly-owned subsidiary of Coastal.
      Intercontinental is the parent company of Intercontinental National Bank, based
      in San Antonio, Texas (the "Bank"). At
      the
      effective time and as a result of the Merger ,
      the
      holders of Intercontinental
      common stock will
      receive approximately $16.8 million in cash in exchange for their shares, subject to adjustment
      based on certain conditions. Consummation
      of the Merger is subject to the approval of the Company’s shareholders and
      certain other conditions, including that the Merger cannot be consummated if
      holders of 20% or more of the Company’s common stock vote against the merger and
      demand that their shares of common stock of the Company be converted to cash.




8


**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation**





The
      following discussion should be read in conjunction with the financial statements
      and footnotes thereto incorporated by reference in this report.





**Forward
      Looking Statements**




Certain
      statements contained in this interim report that are not historical facts,
      including, but not limited to, statements that can be identified by the use
      of
      forward-looking terminology such as “may,” “expect,” “anticipate,” “predict,”
“believe,” “plan,” “estimate” or “continue” or the negative thereof or other
      variations thereon or comparable terminology, are forward-looking statements
      within the meaning of the Private Securities Litigation Reform Act of 1995,
      and
      involve a number of risks and uncertainties. The actual results of the future
      events described in such forward-looking statements in this interim report
      could
      differ materially from those stated in such forward-looking statements due
      to
      various factors, including but not limited to, our being a development stage
      company with no operating history, our dependence on key personnel some of
      whom
      may join us following a business combination, our personnel allocating their
      time to other businesses and potentially having conflicts of interest with
      our
      business, our potentially being unable to obtain additional financing to
      complete a business combination, the ownership of our securities being
      concentrated, risks associated with the banking industry and those other risks
      and uncertainties detailed in the Company’s filings with the Securities and
      Exchange Commission, including our Registration Statement on Form S-1 that
      was
      declared effective February 14, 2005 and the definitive Prospectus thereunder,
      our annual report on Form 10-KSB filed with the Securities and Exchange
      Commission on March 17, 2006, and the uncertainties set forth from time to
      time
      in the Company’s filings and other public statements.





**Plan
      of Operation:**





We
      were
      incorporated on May 19, 2004, to serve as a vehicle to effect a merger, capital
      stock exchange, asset acquisition or other similar business combination with
      an
      operating commercial bank or bank holding company. We consummated our initial
      public offering (the “Offering”) on February 18, 2005. The
      net
      proceeds, after deducting the underwriters discount and offering expenses,
      and
      including the sale of 720,000 units in the underwriters over-allotment option,
      was $29,693,945. $28,483,200 of these net proceeds has been placed in a trust
      fund and invested in United States government securities. The funds held in
      the
      trust account will not be released until the earlier of the date on which we
      consummate a business combination or liquidate our assets. We intend to utilize
      cash derived from the proceeds of the Offering, our capital stock, debt or
      a
      combination of these in effecting a business combination.





**Results
      of Operations:**





For
      the
      three months ended March 31, 2006, we had net income of $90,062. We earned
      interest income of $4,771 on our money market account. The unrealized
      appreciation in the value of our trust account was $291,806. We incurred
      operating expenses of $143,413. Our expenses consisted primarily of professional
      fees, overhead fees, amortization of prepaid insurance, amortization of deferred
      compensation, franchise taxes and certain other expenses associated with being
      a
      public company. We recorded an income tax provision of $63,102.





**Liquidity
      and Capital Resources:**





The
      net
      proceeds from the Offering and the capital contributed by our Initial
      Stockholders amounted to approximately $29.7 million. As of March 31, 2006,
      we
      had cash of approximately $530,636. The net proceeds of our IPO and initial
      capitalization reduced by the amount we placed in the trust account was
      approximately $1.236 million. The difference of approximately $705 thousand
      is
      the amount of cash we have used since inception. We have used $172,040 to pay
      for our Directors’ & Officers liability insurance policies, $109,583 for
      costs associated with our pending merger, $185,877 for income and franchise
      taxes, $100,180 for monthly overhead fees to Coastal Acquisition, LLC., $52,300
      for financial advisory fees, and $58,330 for professional fees. The balance
      of
      approximately $27 thousand was used to pay general and administrative expenses,
      public company expenses and other expenses.


9





As
      of
      March 31, 2006, we had cash of $530,636. In 2006, we will generate interest
      income on our cash outside of the trust account which can also be used to pay
      part of our costs and expenses. From January 1, 2006 through the August 15,
      2006, the date we expect to consummate a business combination, we currently
      estimate our use of cash as follows:





Accounts
                payable and accrued expenses as of March 31, 2006
            
            $
            276,000Overhead
                fee to Coastal Acquisition, LLC.
            
            
            37,500Legal
                and accounting fees for SEC related purposes
            
            
            15,000Legal
                and other professional fees related to a business
                combination
            
            
            50,000Other
            
            
            50,000$
            428,500





Our
      cash
      requirements could change based on the timing, nature and outcome of our pending
      business combination. In addition, depending on the outcome of the business
      combination we are pursuing, we could incur a Delaware franchise tax liability
      and a federal income tax liability for 2006 and those liabilities could become
      due before we have completed a business combination or generated the capital
      from other sources to pay the liability. If we do obtain the requisite
      shareholder approval to complete our pending business combination, we will
      be
      responsible for a termination fee of $200,000 plus certain expenses. We do
      not
      believe we will need to raise additional funds in order to meet the expenditures
      required for operating our business or to complete our pending business
      combination. However, circumstances could change and we could need to raise
      additional funds through a private offering of debt or equity securities.





We
      are
      obligated, commencing February 14, 2005, to pay to Coastal Acquisition, LLC,
      an
      affiliate of several of our directors and executive officers, a monthly fee
      of
      $7,500 for general and administrative services.





**Recent
      Developments:**





On
      April 5, 2006, the Company and its wholly-owned subsidiary Coastal Merger
      Corp., a Texas corporation (“Merger Sub”), entered into a definitive Agreement
      and Plan of Merger with Intercontinental Bank Shares Corporation, a Texas
      corporation (“Intercontinental”), pursuant to which Merger Sub will merge with
      and into Intercontinental in a cash-for-stock transaction (the “Merger”). At the
      effective time of the Merger, Intercontinental will be the surviving corporation
      and become a wholly-owned subsidiary of Coastal. Intercontinental is the parent
      company of Intercontinental National Bank, based in San Antonio, Texas (the
      "Bank").


At
      the
      effective time and as a result of the Merger, the holders of Intercontinental
      common stock will receive approximately $16.8 million in cash in exchange
      for their shares, subject to adjustment based on certain conditions.
      Consummation of the Merger is subject to the approval of the Company’s
      shareholders and certain other conditions, including that the Merger cannot
      be
      consummated if holders of 20% or more of the Company’s common stock vote against
      the merger and demand that their shares of common stock of the Company be
      converted to cash. .





For
      a
      more complete discussion of our proposed business combination, see our Current
      Report on Form 8-K, dated April 5, 2006 and filed with the Securities and
      Exchange Commission on April 10, 2006, and our preliminary proxy statement
      filed
      with the Securities and Exchange Commission on May 2, 2006.




**Item
      3. Controls and Procedures**





An
      evaluation of the effectiveness of our disclosure controls and procedures as
      of
      March 31, 2006 was made under the supervision and with the participation of
      our
      management, including our chief executive officer and our principal financial
      officer. Based on that evaluation, they concluded that our disclosure controls
      and procedures are effective as of the end of the period covered by this report
      to ensure that information required to be disclosed by us in reports that we
      file or submit under the Securities Exchange Act of 1934 is recorded, processed,
      summarized and reported within the time periods specified in Securities and
      Exchange Commission rules and forms. During the most recently completed fiscal
      quarter, there has been no significant change in our internal control over
      financial reporting that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial
      reporting.


10





**PART
      II. OTHER INFORMATION**





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





(a)
      Unregistered Sales of Equity Securities by Small Business Issuer.




None.





(b)  Use
      of
      Proceeds.





On
      February 18, 2005, we closed the Offering of 4,800,000 units, with each unit
      consisting of one share of our common stock and two warrants, each to purchase
      one share of our common stock at an exercise price of $5.00 per share. The
      units
      were sold at an offering price of $6.00 per unit, generating gross proceeds
      of
      $28,800,000. Additionally, the underwriters’ purchased 720,000 units, pursuant
      to the exercise of the over-allotment option granted in connection with the
      Offering, generating gross proceeds of $4,320,000. The representatives of the
      underwriters in the Offering were I-Bankers Securities Incorporated and
      Newbridge Securities Corporation. The securities sold in the Offering were
      registered under the Securities Act pursuant to a registration statement on
      Form
      S-1 (No. 333-118294). The Securities and Exchange Commission declared the
      registration statement effective on February 14, 2005.





We
      paid a
      total of $3,081,600 in underwriting discounts and commissions, including
      $432,000 for the underwriters’ non-accountable expense allowance, and incurred
      approximately $344,500 for other costs and expenses related to the
      Offering.





After
      deducting the underwriting discounts and commissions and the Offering expenses,
      the total net proceeds to us from the Offering were approximately $29,694,000,
      of which $28,483,200 was deposited into a trust fund and the remaining proceeds
      are available to be used to provide for business, legal and accounting due
      diligence on prospective business combinations and continuing general and
      administrative expenses.





(c)  Purchases
      of Equity Securities by Small Business Issuer.





None.





**Item
      6: Exhibits and Reports on Form 8-K**





(a)  Exhibits:




2.1  Agreement
      and Plan of Merger dated as of April 5, 2006 among Coastal Bancshares
      Acquisition Corp., Coastal Merger Corp. and Intercontinental Bank Shares
      Corporation (the schedules have been omitted pursuant to Item 601(b)(2) of
      Regulation S-B).





10.1  Employment
      Agreement dated as of April 5, 2006 among Coastal Bancshares Acquisition Corp.,
      Intercontinental Bank Shares Corporation, Intercontinental National Bank and
      Richard E. Burciaga





10.2  Employment
      Agreement dated as of April 5, 2006 among Coastal Bancshares Acquisition Corp.,
      Intercontinental Bank Shares Corporation, Intercontinental National Bank and
      Steven J. Pritchard





10.3  Subscription
      Agreement dated as of April 5, 2006 by and between Coastal Bancshares
      Acquisition Corp. and Steven J. Pritchard





31.1  Section
      302 Certification by CEO




11




31.2  Section
      302 Certification by President





32.1  Section
      906 Certification by CEO





32.2  Section
      906 Certification by President




(b) Reports
      on Form 8-K:




Form
      8-K
      filed on February 2, 2006, including item 4.02


Form
      8-K
      filed on February 6, 2006, including items 4.02 and 9.01


Form
      8-K
      filed on April 10, 2006, including items 1.01, 5.02 and 9.01




12




SIGNATURES




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





Dated:
              May 12,
              2006COASTAL
              BANCSHARES
              ACQUISITION CORP.By:
            /s/
              Cary
              M. GrossmanCary M. Grossman
              Chief Executive
                Officer




13


**EXHIBIT
        INDEX**
 
 Number    Description
  (a) Exhibits:
  2.1  Agreement
        and Plan of Merger dated as of April 5, 2006 among Coastal Bancshares
        Acquisition Corp., Coastal Merger Corp. and Intercontinental Bank Shares
        Corporation (the schedules have been omitted pursuant to Item 601(b)(2) of
        Regulation S-B).
 
 10.
        1 Employment
        Agreement dated as of April 5, 2006 among Coastal Bancshares Acquisition
        Corp.,
        Intercontinental Bank Shares Corporation, Intercontinental National Bank
        and
        Richard E. Burciaga
 
 10.2  Employment
        Agreement dated as of April 5, 2006 among Coastal Bancshares Acquisition
        Corp.,
        Intercontinental Bank Shares Corporation, Intercontinental National Bank
        and
        Steven J. Pritchard
 
 10.3  Subscription
        Agreement dated as of April 5, 2006 by and between Coastal Bancshares
        Acquisition Corp. and Steven J. Pritchard
 
 31.1  Section
        302 Certification by CEO
 
 31.2  Section
        302 Certification by President
 
 32.1  Section
        906 Certification by CEO
 
 32.2 Section
        906 Certification by President